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5 recommendations for long-term economic recovery in Washington State

A bipartisan pair of members from the Senate Committee on Economic Recovery (SCER) have five core recommendations for catalyzing Washington State’s long-term economic recovery from the COVID-19 pandemic.

SCER Chair Sen. David Frockt (D – Seattle) and Sen. Shelly Short (R – Addy) outlined the recommendations in a Senate Ways & Means Committee hearing this week.

In May 2020, SCER was formed to focus on post-pandemic economic recovery, rather than prescribing immediate policy actions to mitigate for the short-term economic impacts of the pandemic.

The committee listened to 20 hours of testimony from economists, small and large businesses, public sector officials and equity experts over the course of four separate hearings. After the final hearing in October, the committee compiled a report titled A Blueprint for Recovery, which was released last week.

There are five core recommendations derived from the report.

1. Focus on people at risk of an immediate housing, food, childcare, or job crisis.

SCER recommends targeting workers in hard-hit sectors and strengthening unemployment insurance. One hard-hit sector evaluated by the committee was the childcare sector.

Based on their analysis, SCER members came away with the idea that Washington State does not have enough childcare businesses. Part of the reason why is that childcare businesses are more often thought of as social service providers rather than small businesses.

While childcare is a social service, providers expressed to SCER that there is not enough public understanding that when people stop patronizing their services, their balance sheets suffer like any other small business.

I think we need to not think about it always as a social service but as a service that needs to be provided within the context of multiple avenues of care,” said Frockt.

With a more robust network of childcare businesses, parents will have an easier time getting back to work.

2. Provide relief for small businesses and support hospitality and leisure.

To aid small businesses and the reeling hospitality industry, SCER recommends legislation to mitigate the burden of unemployment insurance tax rate increases. A bill to do just that is moving through the Senate and is expected to receive a floor vote next Wednesday.

The committee also recommends increasing funding for entrepreneurship programs and strengthening economic development across the state.

3. Invest in aerospace and manufacturing.

After the second and third quarters of 2020, Washington saw a 14% drop in in its aerospace employment.

In the wake of Boeing’s decision to consolidate its Dreamliner production in South Carolina, Frockt says Washington State needs to compete for more Boeing jobs.

We need to think about incentives for manufacturing and explore other avenues. We need to think of our state not just as Boeing state, but as a potential aerospace hub.”

In addition to tax incentives, these other avenues could include diversifying the aerospace manufacturing sector, investing in the Industry Sector Development Program and expanding export assistance.

4. Improve health care access.

Enrollment in Washington’s Medicaid program, Apple Health, has increased by two million people since the pandemic began. There was also an uptick in individuals purchasing, likely with additional household income from a spouse, plans on the individual market. Nevertheless, this portion of the health care market it still relatively small.

Frockt says the pandemic underscored the issues that arise from relying entirely on an employer-based health care system, as well as the need to make health care seamless and portable.

5. Expand internet access.

After years of agitating, Frockt says legislators need to act on the bipartisan consensus for expanding broadband access across the state.

When crafting a policy approach to expanding broadband access, Frockt and Short say it is essential for the Legislature to remain “technology neutral,” given that current available solutions may soon become outdated.

The economic context in which the recommendations exist

After a record low unemployment rate of 3.8% as the pandemic hit, the unemployment rate reached 16% just two months later. While the rate has dipped since then, sectors of the economy like hospitality remain in limbo.

Based on survey data presented to SCER from an analyst at Yelp, Washington State had the fifth highest business closure rate in the U.S. from March 1st to September 15th. Of the 4,975 businesses in the state that closed during this period, 3,062 (62%) closed permanently.

The challenge they had was the struggle in the constant change in what their level of expectations were, whether it was related to the closure or the additional guidance,” said Short. “They said that was the biggest struggle, not from a lack of commitment to keep their customers and employees safe … but the added cost of trying to do the things necessary to keep people safe.”

Frockt says that SCER also learned that the economic effects of the pandemic have fallen disproportionately on people of color, women, young workers and people who lack a buffer of education, wealth or high income. Racial minorities and women make up a larger share of active unemployment claims in Washington State.

Not overlooking the short-term entirely, SCER foregrounded all of their long-term recommendations with the “number one rules of virus economics,” as stated by the committee’s first guest speaker back in June.

The number one rule of virus economics is: the best thing you can do for economics is to contain the spread of the virus,” said Austin Goolsbee, Professor of Economics at the University of Chicago, at the first SCER hearing.”

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