A View From Glen Hill: Our state is actually a high-tech leader
General Electric’s announced departure has occasioned much bemoaning regarding our state’s asserted business unfriendliness, especially to technologically driven businesses. However, evidence shows that, to a remarkable extent, Connecticut is actually a leader in high-tech business.
This encouraging reality is reflected in a number of significant statistics. From data compiled by researchers working for Eversource and published in the 2015 Connecticut Economic Review: U.S. Census Bureau data show Connecticut to be the third-ranked state nationally in share of residents with master’s, doctorate, or professional degrees and fifth ranked for numbers of those holding science and engineering doctorates per 100,000 workers in the workforce; in fact, Connecticut’s percentage is almost 50% higher than the national average. Connecticut also ranks fourth highest among the states in productivity per person and fifth in private research-and-development investment per capita — more than twice the national average.
Private organizations that do state ranking nationally tell a similar story. Here are three illustrations: The Milken Institute’s 2014 State Technology and Science Index ranks Connecticut as the ninth state overall based on a mix of “technology and science workforce, technology concentration and dynamism, human capital investments, research-and-development inputs, and risk-capital and entrepreneurial infrastructure.” Similarly, Connecticut is ranked eighth in the 2014 New Economy Index published by the Washington, D.C.-based Information Technology and Innovation Foundation that “measures how states are positioned to drive economic evolution in today’s changing society.” This index covers such factors as “knowledge jobs, economic dynamism, globalization, and capacity for innovation.” Likewise, Bloomberg’s 2015 State Innovation Index ranks Connecticut fifth (behind Massachusetts, California, Washington, and New Jersey and way ahead of, for example, New York (#17) and Texas (#15)) based on Bloomberg’s assessment of such factors as “research-and-development intensity, high-tech density, productivity, and patent activity.”
Moreover, our state is also fourth in the nation in bio-science patents per capita. In fact, in the past few years, high-tech companies have chosen to relocate to Connecticut from places as varied as California, Florida, and Maryland. Connecticut is also a leader in the world in equity assets under management with, for example, a half-dozen of the world’s largest hedge funds located here, and it remains the largest state in insurance-industry employment.
This is not to suggest there aren’t major problems with how Connecticut treats its businesses but to indicate the pluses from an economic standpoint that are already present in our state. In fact, Connecticut has been outstanding at reinventing itself as the circumstances have required over the generations: In the 19th Century, Connecticut became — and remained throughout the Civil War and well beyond — the technological engine for our nation through invention and high-end manufacturing. Its development of these strengths was in direct response to the huge flow of its people (especially young people) westward to the “Western Reserve” of what is now Ohio (and beyond) when Connecticut’s arable land ran out even as life-expectancy, and hence population pressures, increased at the turn of the 18th into the 19th Century. That major shift in Connecticut’s economic base accomplished during the first half of the 19th Century led to Connecticut being the principal location for military and other manufacturing during the Civil War, a technological preeminence that continued right into the early 20th Century.
How do we keep reinventing ourselves? The answer has many dimensions. As our local political leaders have wisely underscored, our business-tax system and structure needs review. And it’s critical to take a careful look at our regulatory system: what is really necessary to accomplish legitimate state regulatory objectives and how can that be done in the least burdensome (including time-consuming) ways for business? Also, some states, like Massachusetts, offer lavish tax-forgiveness packages to attract new high-tech business. To what extent, and at what cost, should Connecticut similarly ramp up that expensive practice? As it is, according to Ernst & Young’s Total State and Local Business Taxes Report dated October 2015, Connecticut’s state and local business taxes as a percentage of private-sector gross state product are (with Oregon) lowest in the country at 3.4%.
The data above show that our state doesn’t start from a zero base in reinventing itself as it did at the turn of the 19th Century. And speaking of reinventing oneself, GE’s move seems frankly to be driven by its spinning off of major parts of its business — like GE Capital, Synchrony Financial, and its stake in NBCUniversal, totaling $200 billion in planned divestitures — such that a dramatic relocation and attendant personnel and other changes can appear as a positive step instead of simply a re-imagining effort on its part.
In short, the picture for our state is far from bleak, and there’s ample reason to see, even now, lots of light at the end of the GE tunnel!