Candidates for governor spar over jobs

Gov. Pawlenty held two news conferences this summer to tout the state's job growth. In June he said the state's unemployment rate hit a five-year low, and in August, he said Minnesota was adding jobs at a rate double the national average.

"What's unfolding and has unfolded over the last 12 months is an extraordinarily positive development for the state of Minnesota," Pawlenty said.

Pawlenty said the state added about 79,000 jobs between July 2005 and July 2006.

"If you put these numbers in context, on a July-to-July basis, this is the most jobs added in the state of Minnesota, we believe, ever," Pawlenty said.

While the numbers were impressive, they weren't anywhere close to a state record, either in raw numbers or on a percentage basis.

The state's top labor market analyst, Steve Hine, said Minnesota added more than 79,000 jobs five times from July to July during the 1970s and '80s, including one burst of more than 100,000 jobs. And Hine said during the boom years of the '90s, Minnesota had yearly increases of more than 79,000 jobs three more times, just not from July to July.

Hine frequently appears in the news media analyzing job numbers. But when MPR requested an interview with him, officials with the Department of Employment and Economic Development said acting commissioner Ward Einess, not Hine, would be available for an interview on the data (See sidebar). Einess, a political appointee, said he should answer questions arising from the campaign.

Einess acknowledges that Minnesota's current job growth isn't unprecedented. But Einess said it's clear that Minnesota's economy has rebounded from the 2001 recession.

"There was a valid criticism at one point, 2002-2003, that Minnesota was lagging behind the rest of the country," said Einess. "Our growth rate was less, we weren't adding jobs as fast, and many economists said, well, Minnesota is experiencing a jobless recovery. Well, that's really flipped around now and Minnesota is actually outpacing the rest of the national economy."

But figures from Einess' department indicate Minnesota's job growth has mostly lagged the U.S. through the end of last year.

Pawlenty's critics say even if the state is now creating jobs at a good clip, many of them are low-wage jobs that can't support a family. DFL candidate Mike Hatch describes it as a "fast- food economy."

"Fast foods is the fastest-growing sector, restaurants is the second-fastest-growing sector, and temporary help is, I believe, the fourth-largest sector," Hatch said. "So half of the jobs that have been produced are in categories that don't provide sustainable jobs or are a lag on the economy."

A check of the facts shows Hatch isn't exactly right either. Labor market analyst Steve Hine said the three industries of fast-food restaurants, full-service restaurants and employment services -- which includes temporary help -- did add more jobs than any other industry in the last four years. But they aren't the fastest growing. That distinction lies in the highly desirable technology sector. Medical equipment manufacturing grew by the largest percentage over the last four years. And in the past year, computer jobs and architectural and engineering jobs also grew at a faster rate than the fast-food industry.

Gov. Tim Pawlenty's marquee jobs program is Job Opportunity Building Zones -- or JOBZ. The program allows communities outside of the seven-county metro to establish tax-free zones. Businesses located in the zones pay no state or local taxes for up to 12 years.

Since the program began in January of 2004, businesses in the program have pledged to create more than 4,000 jobs. Pawlenty said the program has been effective at spurring job growth in economically-depressed parts of the state. But Independence Party candidate Peter Hutchinson said JOBZ is a terrible idea.

"It smacks of favoritism, it smacks of nepotism, it smacks of elitism, and it's not going to build the economy of the state," Hutchinson said.

Hutchinson said instead of targeting tax breaks to a handful of businesses -- 272 to be exact -- the state should try to improve the job climate for every employer. Health care is Hutchinson's foremost target. He said the soaring cost of health care is killing jobs, and slashing costs will spur job creation. Hutchinson also questions the legality of JOBZ because it provides preferential tax breaks. Pawlenty dismisses any legal concerns over the program he has championed since he was a state legislator.

"John James, who's the Independence Party's attorney general candidate, brought a nearly frivolous lawsuit that has subsequently been addressed by the U.S. Supreme Court in a related case coming out of Ohio, and so there's really no actual threat to the program," said Pawlenty.

Regardless of its legal status, economists are skeptical of JOBZ.

"Virtually every economist I know thinks it's a bad idea," said economist Ed Lotterman.

Lotterman considers JOBZ an economic gimmick, not sound tax policy because it puts government in the position of picking winners and losers. But more than 125 communities that have reaped the benefits of the program might disagree.

Pipestone in southwestern Minnesota has drawn four businesses to its tax-free zone, including the first U.S. factory of Suzlon, an Indian-based company that makes equipment for wind towers. Pipestone city administrator Jeff Jones said Suzlon has already created 180 jobs in the town of 4,400 people.

"We look at it as bringing a business to town that otherwise would not have come here, so we don't really look at it as a loss of revenue," Jones said. "It's brought a new business to town, and has had a lot of economic benefits already."

Pawlenty said JOBZ isn't his only economic development idea. He said if he's reelected, he'll push for tax breaks for people who invest in early stage companies in rural Minnesota.

For his part, DFLer Mike Hatch has two proposals that, he says, will spur job growth. He wants to spend $10 million a year for 10 years on stem cell research, and he wants to put more fiber optic cable in rural Minnesota.

"Fiber optic is being used in Gilbert, Minnesota, where they are processing dental claims on behalf of the country of Ireland. Think about that," Hatch said. "The country of Ireland is outsourcing, not to India, not to Asia, not to Tennessee, but to the Iron Range."

Hatch has not specified how much he wants to spend on fiber optics, but said the state should partner with the private sector to wire up regional cities.

The IP's Peter Hutchinson takes the broadest, but least specific approach to economic development. His campaign has focused on four issues -- health care, education, transportation and the environment. Hutchinson said as governor, he would work to lower health care costs, produce a well-educated workforce, fix the roads and make sure the state is a good place to live.

"If you do those four things, I think we're going to find that this state does incredibly well, not only compared to other states but also a global entity," Hutchinson said. "If you do all the job subsidy things in the world, but don't fix health care, education, transportation and the environment, it won't work."

Economist Ed Lotterman said no matter what the next governor does, he will have little affect on the overall state of Minnesota's economy.

"The Legislature of that state, or the governor, really has no effect on short-term things like what's the unemployment rate or what's the inflation rate in that state," Lotterman said.

Lotterman said a governor shouldn't take the credit when job numbers are good, or the blame when they're bad. And it appears that voters agree. The latest MPR-Pioneer Press poll found just five percent of voters listed the economy and jobs as the most important issue in the governor's race. So while jobs are important to the economy, they may be less important for winning the job as the state's chief executive.

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