Workforce, Business Growth Key Topics at Economic Conference
Drawing 350 of the state’s top executives, The Connecticut Economy—CBIA’s annual fall economic conference—looked at how global events, workforce and education trends, and policymaking are shaping Connecticut’s economy.
Speakers representing major banks, government agencies, manufacturing, real estate, and accounting firms discussed the impact of foreign direct investment in the state, reasons behind the outmigration of millennials, housing as both a determiner and mirror of the state’s economic health, and how Brexit might play out in terms of businesses’ export capacity and bottom line.
In terms of new foreign investment in the U.S., Ireland accounted for the biggest first-year expenditure in 2015 (42%), followed by Canada (20%), Germany (11%), and Japan (6%).
In Connecticut, 99,400 people are employed by U.S. affiliates of multinational enterprises, the largest share of which are European manufacturers.
In 2015, new foreign direct investment alone brought $727 million to the state and employed 600 workers at acquired firms, along with a projected 300 employees at newly established or expanded businesses.
While all of this is good news for Connecticut, the exodus of millennials from Connecticut continues, says Shelly Saczynski, director of economic and community development for UIL Holdings.
Saczynski pointed out that young, educated people are seeking vibrant, transit-oriented communities with greater job opportunities—not only places where they can earn a living but where their dollar goes further.
Sadie Colcord, a UConn graduate student and public policy & economic research intern at CBIA, said a combination of the state’s high cost of living and shortage of jobs, public transportation, and bike-able, pedestrian-friendly urban environments are all factors in her generation’s decision to look elsewhere after graduation.
“It’s very difficult for millennials who are recent college grads to get jobs here,” she said. “It becomes even more difficult because the cost of living is very high in this state.
“Many of us have so much student debt, if we get a job here, can we afford all of these expenses? We value experiences a lot, so we like to go out to eat, go to concerts, and hang out outdoors with our friends.”
New Haven and West Hartford offer some of those perks, she said, but they are pricey places to live.
“So we live with our parents or move to a state that’s more affordable,” Colcord said.
Connecticut Economy’s Comeback Kids
By show of hands, dozens of conference attendees acknowledged having millennial children either living at home for lack of jobs or affordable housing, or out of state, where jobs and affordable housing are more plentiful.
Manisha Srivastava, budget analyst and economist with the Connecticut Office of Policy and Management, noted that millennials, who recently surpassed baby boomers in number, are now the largest living generation, and their consumer preferences and behaviors have a huge impact on the economy.
“They are the most educated generation ever,” she said.
However, unemployment among 18-to-34-year-olds (7.8%) is higher than average (6%). In Connecticut alone, 38% of the state’s millennials are living at home with their parents—higher than the national average of 33%, and significantly higher than states such as North Dakota, where only 15% of this group are living at home.
Millennials also are marrying later—by about six years—and the Pew Research Center estimates that 25% of this generation will never marry. They are also postponing the decision to have children and purchase homes.
Susan Coleman, professor of finance at the University of Hartford, said the three major determinants for where young families choose to live are their jobs, proximity to their families, and the availability of good schools.
Connecticut’s housing market, she said, is a mixed blessing in that the price of a single-family home has declined 1.9% year-to-date, with home sales up 9.9% in that same period.
While that’s good news for home buyers, it also means that home prices are not responding to an improving economy in Connecticut in the same way they are in other New England states.
July also saw a troubling combination of a fairly steep drop in both housing prices and sales.
Though education is traditionally an area of strength and pride in Connecticut, said Coleman, great disparities in performance—measured by high school and college graduation rates and earning potential—exist between the state’s poorest urban schools and their wealthier suburban counterparts.
The state’s cost of living, she said, is a major deterrent to millennials, pointing to a recent study by the Mercatus Center at George Mason University, which ranked Connecticut 50th in fiscal solvency and found that the country’s bottom five states—including Connecticut—shared the common problem of a massive debt obligation, including unfunded pension and healthcare benefits for state employees, driving them into fiscal peril.
Financial uncertainty discourages both businesses and households from locating, remaining, or investing in Connecticut.
"Major structural reform is needed to identify and fund the state’s priorities and put Connecticut on a sustainable financial path.”
Srivastava added that raising the exemption on gift and estate taxes in Connecticut from $2 million closer to the federal level of $5 million would help encourage young people to stay here.
Chris Ball, director of the Central European Institute and Istvan Szechenyi chair in international economics at Quinnipiac University, agreed that the state’s fiscal challenges are a drag on the economy.
After growing up in the South, living in Europe, and studying in Texas, Ball experienced what he called “sticker shock” when he, his wife, and their five-month-old baby moved to Connecticut in 2003.
He recalls not only the high price of groceries but also a property tax bill that he thought was a mistake. (He was renting an apartment and didn’t realize that the one piece of property he owned, a used Honda Civic, was subject to an annual tax.)
Ball noted that pitching Connecticut as a desirable business location is challenging “when everyone wants to incorporate in Delaware or locate to the Silicon Valley.”
He recommended programs that provide resources and incentives for international students to launch their businesses here—typically these are in the tech space, he says—rather than move back home.
He also said he hopes the U.S. “can go in a more free trade and less protectionist direction as a country.”
Brexit’s Domino Effect?
In addition to speaking about young workforce retention, Ball was part of a speakers’ panel on the implications of Brexit—the United Kingdom’s referendum to leave the European Union—where the general consensus was that the U.K.’s huge economy and London’s dominance as a financial center of Europe so far remain unchanged.
“They can’t be kicked around,” said John Shin, senior G10 FX strategist at Bank of America Merrill Lynch.
An anti-trade movement throughout Europe, however, could have troubling implications for the global economy, the panel agreed.
Brexit is a wakeup call. Each country has its own deposit insurance. That’s not really a good security.
“We have to watch the upcoming national elections and referendums in Europe.”
“The key issue would be if other countries tried to leave the Eurozone,” Shin agreed.
“That could lead to real panic. Brexit is a wakeup call. Each country has its own deposit insurance. That’s not really a good security.”
The Brexit panel was moderated by Laura Jaworski, international business development project manager for Connecticut’s Department of Economic and Community Development, and included insights from John Schuyler, chairman of the Connecticut District Export Council.
The Connecticut Economy also hosted the release of the CBIA/BlumShapiro 2016 Survey of Connecticut Businesses, which showed business profitability at a 10-year high but projected workforce investment in Connecticut at a troubling 47%.
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