Democratic gubernatorial candidate Terry McAuliffe, left, and his Republican rival, Glenn Youngkin, are hitting on national political themes in their race. (Virginia Mercury)
In a hotly contested gubernatorial race, few issues have been depicted in such stark contrast by the campaigns as jobs creation and Virginia’s business climate.
Democrat Terry McAuliffe, who was governor from 2014 to 2018, paints himself as the jobs guy. He claims that during his term he helped create 200,000 jobs, raised personal income by 14 percent and cut unemployment to 3.3 percent.
His campaign staff says he intends to defeat COVID-19, create more good-paying jobs, including ones in clean energy, and raise the state minimum wage to $15 an hour.
Republican Glenn Youngkin has a far gloomier view. “Virginia has had zero job growth from the day Terry McAuliffe took office until the end of 2020,” Youngkin wrote in an email to the Mercury. The former co-CEO of the large private equity firm Carlyle Group claims that Virginia has few job opportunities and more than 500,000 Virginians have left for work in other states.
So who’s right? It depends on which economist you ask.
Neither candidate’s statements reflect Virginia’s dependence upon federal spending, especially the military, which is beyond the authority of any governor.
The candidates’ statements lack nuance in other ways as well. Are they looking at jobs growth over the past decade going back to the days when the state was recovering from a major recession and cuts in federal spending hurt the state? Do they take into account the effects of the coronavirus pandemic, which cut jobs dramatically in 2020 only to see many come back this year?
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Bob McNab, an economics professor at Old Dominion University, can’t say which candidate is correct. “I believe the data and the data shows that Virginia has performed relatively well during the pandemic compared with other states,” he says.
Taking a long view, McNab says that from February 2010, the end of the job-killing Great Recession, to Feb. 2020, Virginia added 492,000 jobs.
The pandemic later snuffed out the majority of those gains, leaving a net addition of only 12,000 jobs in May 2020. “One might say there was a loss of 480,000 jobs temporarily as a result of social distance measures and severe declines in economic activity,” he says.
On the bright side, Virginia started to regain the lost jobs in the summer of 2020 and job growth has continued into 2021. From the bottom of the pandemic recession, the state has added 314,000 jobs. Job growth also appears to have picked up in the latter half of 2021.
“Virginia has fared better during the pandemic than many other states due to federal spending,” he says. The Revenue Stabilization Fund — set up by an amendment in the State Constitution as a rainy day fund that requires that extra revenue be saved when the state is experiencing strong economic growth — and unexpected resiliency of consumer spending helped the state weather the worst of the pandemic, he states.
Another economist, Fletcher Mangum of Mangum Economics, a consulting firm in Richmond, has a much starker view. He agrees that federal spending helped shield the state against job losses but adds that “Virginia once again falls behind the nation in recovery and the trend is getting worse,” he wrote in an email.
He estimates that the state ranked only 41st among states in year-over-year growth, and then gained some ground in June. But it fell back in July and in August when it slipped to 47th place, he states.
Mangum is especially critical of what he says is the state’s bad climate for business, a claim that the Youngkin campaign makes. To blame, he says, are the cost of doing business and a poor tax regime.
He notes that CNBC rated Virginia as number one in the country for its business climate in July. But he noted that CNBC also ranked Virginia 26th in terms of cost of doing business. Others have said that Virginia’s strong educational system, its good quality of life and its record of respecting diversity pushed the state to the top of the business outlet’s ratings after it tweaked its criteria to incorporate equity and inclusion.
Laura Goren, research director of the Commonwealth Institute for Fiscal Analysis, says that the state’s reliance on the federal sector means less job loss but also less job gain.
The state has a claim for a good business climate, but Goren, whose institute looks at the social justice aspect of economics, says it has a long way to go to improve the lot of workers.
Too many workers struggle with relatively low pay. The state’s minimum wage is only $9.50 an hour – “too low to afford living,” she said. Today’s wage should be $11.12 an hour if adjusted for inflation. If gains in worker productivity are taken into account, the wage should be $22.14 an hour, according to Goren.
Another point of contention for the candidates is Virginia’s right-to-work law, which prohibits paying union dues as a condition of employment and is designed to keep unions weak. Goren says it needs to be repealed.
Princess Blanding, who is on the gubernatorial ballot representing the Liberation Party. She backs right-to-work repeal and wants better protections for workers.
Youngkin is dead set against any right to work repeal. McAuliffe has dodged the issue saying he’s for repeal but getting the General Assembly to go along with it is unrealistic.
Brett Vassey, president of the Virginia Manufacturers Association, believes the state’s business climate could use improvement since Virginia is weak in jobs creation. “ Youngkin’s right,” he says.
He advocates pro-business policies that could help the state’s shrinking manufacturing center. They include more natural gas pipelines to fuel new factories, less regulation, lower business taxes and “no more monkeying with the (minimum) wage,” he says.
One important draw that the state could improve would be the creation of more large industrial sites that already have water, sewer and power, plus roads, permitting and other amenities. These can be offered to new businesses so they can move in faster. They can be about 250 acres, and “megasites” are typically 1,000 acres or more.
Vassey complains that there are only five megasites in the state. Stephen Moret, president and chief executive of the Virginia Economic Development Partnership, has pointed out in presentations that Virginia does need to develop more ready-to-go industrial sites. It also needs more industrial-scale water and natural gas.
The state has scored well on the technology side. Northern Virginia, the largest hub of Internet traffic in the world, also has the largest collection of data centers. These huge, air-conditioned facilities host long rows of data servers used by firms such as Amazon, Google, Facebook and others.
More such centers have spread to the Richmond area and also Southwest Virginia, which has struggled to overcome downturns in furniture and coal. While increasing local tax bases, they also employ fewer workers, although they tend to be well paid.
Another boost for Southwestern Virginia came in early October with the announcement that a $714 million joint venture of Blue Star Manufacturing and American Glove Innovations was locating near Wytheville. It will make medical products and will employ 2,500 people over the next five years, according to Gov. Ralph Northam’s office and company officials.
Curiously, neither the McAuliffe nor Youngkin campaigns have made much of the news. Meanwhile, getting a handle on the true jobs creation picture in Virginia remains murky.
Clarification: This article has been updated to clarify economist Fletcher Mangum’s view of CNBC’s Top States for Business rankings.
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