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The
real question in the debate about Gov. Mark R.
Warner's plan to restructure the state's finances is
not who will pay more or less taxes; it is whether
Virginia will do the things it must for its citizens
to survive and prosper in a new economic era.
Virginia's
loss of approximately 60,000 manufacturing jobs over
the past three years and the recent outsourcing of
many of high-tech and service jobs are signs of a
profound change in our economy. Virginia, along with
the rest of the country, is entering a new age
characterized by intense competition for almost
every job - not simply from U.S. workers but also
from new pools of highly skilled, lower priced labor
now easily accessible around the world.
Three
key factors are driving this new era:
(1)
Global
capital mobility. The end of the Cold War has opened
up enormous new opportunities for capital to be
deployed outside the traditional areas of North
America, Western Europe, and Japan. In addition,
China's move into the World Trade Organization and
further political stabilization in India and other
emerging economies have made it safe to invest
virtually anywhere, and consequently capital goes to
wherever it gets the biggest bang for the buck.
(2)
Massive new and talented labor pools. This political
stability, coupled with a strong educational system,
has also made vast new pools of skilled labor,
particularly in India and China, available on the
world markets. William Wolman, formerly the chief
economist of BusinessWeek magazine, estimates that
the labor population has risen from under 1 billion
in 1989 to over 5.5 billion today. In other words,
every American worker has gone from competing
against three to more than 20 workers around the
world.
(3)
Inexpensive, high bandwidth communications. Using
the Internet, fiber optic cable, and coordinating
technologies such as e-mail, the physical location
of employees has become much less important. The
result is that high-paying white-collar jobs -
customer service, loan and claims processing,
financial modeling, and software engineering - all
are being moved overseas.
It
is no longer just manufacturing jobs that are at
risk. Higher-end service jobs, in fact, are likely
to leave more rapidly than manufacturing jobs
because there is less weighing them down. Moving
manufacturing jobs first requires building plants
and moving equipment overseas. But with high-tech
and service jobs, the major factor is finding enough
workers proficient in English. And the payback from
"off-shoring" a high-paying job is
obviously much greater.
This
new economic era will pose enormous challenges to
Virginia and the nation. In the past, workers here
were paid more because they produced more, due to
higher skills and better equipment. Now, armed with
U.S. technology, equipment, and expertise, Chinese
or Indian workers can be just as productive as
Americans, and at a fraction of the cost. To survive
and prosper in this new era, Virginia will need a
strong educational infrastructure that builds
world-class human capital and gives Virginians the
skills to command high wages and the insight to
create new businesses. Virginia will also need a
robust physical infrastructure that makes it easy
and economically attractive for businesses to stay
and build operations in the state.
Unfortunately,
until recently, Virginia has been headed in the
wrong direction. Virginia's state government ranks
just below the national average in per-pupil public
school spending and ranks 46th in terms of
educational spending as a percentage of income.
According to the National Education Association,
approximately one-third of all Virginia public
schools are in need of major repair, and high school
class sizes are over 40 percent larger than the
national average.
And
Virginia's vaunted colleges and universities remain
significantly under-funded, despite the need to
enroll an estimated 38,000 additional students in
the coming decade. Likewise, the money allocated to
Virginia's infrastructure is inadequate to the
state's needs, forcing Virginia's Commonwealth
Transportation Board to cut almost $3 billion from
the state's six-year transportation plan last year,
and to enact a plan almost 30 percent smaller than
the program it had adopted in December, 2001.
In
response, Governor Warner has proposed a
common-sense plan to better match the state's
finances with the needs of the new era. Some want to
paint the proposal as nothing more than a tax
increase. While an honest debate about the
proposal's details is appropriate, the plan succeeds
in its main goal of providing funding for the key
services - education and infrastructure - that
Virginia will need to prosper in the new economic
age. Given the stakes involved, it is time to rise
above partisan politics and to start building our
state's strength before it is too late. James Socas,
a UVa graduate, serves as Minority Staff Director
for Economic Policy of the U.S. Senate Banking
Committee.
--
January 19, 2003
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