In the past decade, Minnesota has added only 35,000 jobs, compared to 440,000 jobs the decade before. While Minnesota’s 7.1 percent unemployment rate is lower than the national rate of 9.6, job seekers still outnumber job openings by nearly 5 to 1, and full-time openings by 8 to 1, according to the most recent numbers from the Minnesota Department of Employment and Economic Development.
With no relief in sight for Minnesota’s jobless, labor expert Kris Jacobs, executive director of the JOBS NOW Coalition, suggests it’s time to bring back Minnesota Emergency Employment Development (MEED).
MEED was a wage subsidy program from the 1980s that has been credited with helping the state come out that decade’s recession, and laying the foundation for some of the state’s best job creation years.
“I think the State of Minnesota needs to own its responsibility to exploit what it has done so well in the past, and that is to honor and invest in its work force and its business community. We’ve got the system to do it; it’s easily delivered; and the cost benefit for the state is excellent,” said Jacobs.
In place from 1983 – 1989, MEED paid a wage subsidy of up to $4 an hour (or $10 in current dollars), and up to a $1 in benefits to employers to fill new positions. To qualify, job seekers had to be on public assistance, have exhausted their unemployment assistance benefits, or be displaced from the farm economy.
Senator Larry Pogemiller (D-Minneapolis), who authored the original state legislation, said the program worked, was seen as very successful, and there was robust participation from employers.
“It could work pretty much in any industry. It worked for all types of jobs. It depends on where the growth sectors of the economy are at the time,” he said.
In the program’s first two years, 30,547 job seekers were enrolled in the program, and nearly half found permanent, unsubsidized work upon leaving the program, according to a December 31, 1985 MEED program report.
The program also had built in accountability measures. Employers were expected to keep workers on for a period of time beyond when the subsidy ended, or pay the state back. A 1989 state economic analysis report estimated the program’s ten-year return on investment was 11.9 percent per year, 80 percent higher than the Minnesota bond rate at the time of 6.6 percent.
“MEED proved itself by being bang-for-the-buck efficient. There are people around today, there are businesses alive today, because of it,” said Jacobs.
Still working after 27 years
One of those businesses is the JPG Group. During the 1980s recession Jim Glowacki found himself laid off with few good job prospects. As a PR professional in the mining industry, he didn’t want to leave his home in Minnesota’ Iron Range in search of work in his field. So Glowacki dialed up the entrepreneurial spirit and started his own PR and advertising business.
“I applied the skills that I learned on the job – writing, photography, communications – and started building up private clients. As more clients started coming on board, I needed to hire my first employee,” said Glowacki.
While he didn’t take a paycheck himself for the first three years he was in business, MEED made it possible for Glowacki to hire his first employee, and two others later.
“The MEED dollars were critical during that early stage of giving me the confidence to know that we’ll have enough money coming in to make payroll while we’re trying to grow the business,” he said.
By the time the MEED program ended and funds ran out, Glowacki said his business had made it over those difficult early growth years.
“We had a steady cadre of business activity, and enough clients with on-going needs to meet our continued salary and overhead expense.”
Twenty-seven years later, Glowacki’s business is going strong with 15 full-time staff. Just like the program expected of employers, he kept those original MEED hires on long-term, the first one for 20 years, and another one is still employed after 27 years.
“She’s 67 now and down to part-time, but she’s still here,” he said.
Jacobs says that Glowacki and the JPG Group is just one example of the many successes she’s heard over the years about MEED. “All of those people who kept working all of that time, and paid taxes, and were not a burden on society. It shows we do have solutions, and ordinary people thought of this.”
A national MEED?
Timothy Bartik, senior economist at the W.E. Upjohn Institute for Employment Research, says that MEED was an innovative program that he’d like to see developed nationally. He says MEED caught his attention because it has potential for creating jobs at a much lower cost than some of the other job creation alternatives.
“Tax cuts, for example, end up being like $130,000 – 140,000 per job created. And if you are doing an infrastructure job, they tend to be very capital intensive, so not as much money actually goes to the workers. Plus you’re paying for 100 percent of the cost of the workers,” he said.
MEED on the other hand, would cost about $30,000 per job created, according to Bartik. At the federal level, that’s about $30 billion per million jobs created.
“Now in my view, if the federal government spent $90 billion and created 3 million jobs, that would be great. The social benefits would pass any cost-benefit test,” he added.
Bartik says concern over the country’s long-term debt should not be a barrier in creating a program like MEED, and that the federal deficit is largely due to trying to control Medicare, Medicaid and health care costs.
“We need to address that, but I don’t think you’re doing much to address that by not creating jobs now,” he said.
Paying for it
Whether at the state or federal level, the biggest barrier to reviving MEED or a similar job creation program boils down to money.
A modern version of MEED was introduced at the state level in 2009 by Rep. Tom Rukavina (DFL-Virginia), but failed to gain traction.
Federal attempts met a similar fate. In January 2010, Senator Al Franken introduced legislation based on the MEED model called the Strengthening Our Economy Through Employment and Development Act, or SEED Act. Franken proposed using $10 billion from the Troubled Asset Relief Program (TARP) to subsidize or create 500,000 jobs in the private sector. The legislation stalled in committee.
“Sen. Franken will continue to focus on jobs in the upcoming Congress and is evaluating what legislation-including his SEED bill-he thinks will be the most effective for putting Minnesotans back to work,” said Franken staffer Ed Shelleby.
Jacobs believes the failure to pass legislation is due to the conventional wisdom of “leave the market alone.”
“Well, we’ve all seen the outcome of that. People don’t have jobs. With all this job loss, why aren’t politicians supporting a jobs program? Why aren’t they trying to get money into the pockets of small businesses that need help,” she said.
Pogemilller says he’d rather see job solutions addressed federally because that’s where he believes the state’s economic problems are rooted. But to the extent that MEED could “prime the pump” a little for Minnesota, he admits the program may be worth another look.
“I think it would be successful, [but] it’s a question of whether you can patch together enough resources to implement it at this time with a $6 billion dollar deficit – very challenging, very challenging,” he said.
Jacobs says Minnesota jobs should be a matter of priority, and she’s holding out hope that it will be addressed during this legislative session. She suggests bonding for the program as with other state infrastructure projects, and that investing in human capital ought to be part of the equation.
“This is an emergency and we need an emergency jobs program. And there is no reason why not to do it. It’s an investment. It’s time for Minnesota to lead the way as it did before, and I’m hoping that they step up this session. To not be talking about it is – well, crazy.”