Two Paths for Oregon’s Economy: Innovation and Creative Leadership or Sustained Mediocrity and Lack of Will Power
Oregon stands at an economic crossroads. Changes sweeping the global marketplace and a disturbing set of economic and fiscal trends at home offer us a choice between two futures.
One path presents an Oregon defined by thriving businesses that lead their industries in ideas, innovation and design, market reach, and staying power. This path heralds a future of good paying jobs that resist migration and sustain local economies and communities.
On the other path, Oregon becomes strictly a regional consumer market and a branch-office outpost for industries whose key ideas, research, decisions, innovations, and initiatives occur elsewhere. It becomes a commodity producer whose industries pay average or lower wages and are always vulnerable to cheaper sources of labor and supply elsewhere.
Healthy Communities Initiative envisions the growth and success of leading edge, traded sector industries – clusters of allied businesses that ring up sales outside Oregon and create good paying jobs that buoy local communities. While all Oregon companies improve the state’s economic well-being and quality of life, we stress traded-sector industries because they pay high wages; and by selling their products and services outside Oregon they bring in fresh dollars that fuel local businesses and tax revenues.
Traded sector industries tend to cluster. They draw competitive advantage from their proximity to competitors, skilled workforces, specialized suppliers and a shared base of sophisticated knowledge about their industry. In the 1970s Oregon’s largest industry cluster was forestry and wood products. Oregonians, urban and rural, enjoyed high wage jobs in this industry. Today, while still a world leader in timber and agriculture, Oregon has an array of innovative industry clusters. These include natural resource industries, advanced manufacturing, high tech, footwear and sports apparel, and clean technology.
While the destiny of these industries is in their own hands, it is critical that Oregon’s leaders pursue initiatives to create the environment that helps our traded sector industries succeed. The initiatives we recommend and support can improve the culture of innovation. They can enhance the work skills of our people, boost the quality of life that drives talented people to Oregon, and strengthen business infrastructure needed for productivity and competitiveness.
Despite the remarkable economic diversification described above, in recent years Oregon has fallen off course. After a surge in the 1990s, Oregon’s per capita income has been declining compared to the national average for the past twelve years. Per capita income is the total income earned in the state divided by the population. It is a key measure of economic well-being and determines how much money is available to spend on schools and other public services.
In recent years Oregon’s unemployment rate has tracked well above the national average. Moreover, the boom and bust economic cycles have been particularly hard on Oregon companies and workers.
Declining per capita income, combined with exploding costs for health services and prisons, has crowded out investments in education – especially higher education. Because education and income are inextricably linked, this trend could push down personal incomes even further.
Looking forward, Oregon’s challenges are greater. An aging population will continue to put upward pressure on spending for human services. The legacy costs of a poorly conceived public pension system have come due. And the continued rise in health care costs is unsustainable for both the private and public sectors.
Our unbalanced and unstable tax system continues to be a drag on high-wage job growth. With the passage of Measure 66, Oregon has the dubious distinction of having the highest capital gains tax and second highest income taxes in the nation. This policy discourages investors and high wage earners from locating here. Yet without a sales tax or an adequate reserve fund Oregon still lacks the ability to provide stable funding for public services.
Oregon is trapped in a “Circle of Scarcity.” Breaking this circle is the single most important task for Oregon’s business, elected, and community leaders to tackle together.
The challenges Oregon faces are immense. They can only be addressed if Oregon’s business, elected, labor and community leaders work together.
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