(Bloomberg Opinion) -- In the world according to Gina Raimondo, corporate America is most successful when every household has health insurance, day care, early child education, broadband, job training and access to a growing supply of semiconductors made in the U.S. The former Rhode Island governor, treasurer and venture capitalist, who became the 40th secretary of Commerce a year ago in March at the age of 50, "bristles" when data shows these "investments in American productivity" are misjudged as "social programs."
Although the national unemployment rate is hovering at a 53-year low of 3.6%, the labor force participation rate is still below its pre-pandemic levels at 62.4% and remains far off the peak of 67.3% in 2000. “We as a nation need to get really serious about child care, public pre-K, job training and basic supports, so people who are not now in the labor force can participate," Raimondo said during a recent interview at the Commerce Department's eight-acre Herbert C. Hoover Federal Building in Washington.
“The only way we're going to be able to help CEOs,” many of whom “agree with me,” is figuring out “how to get women, people of color, people without college degrees and people with lower incomes, who have dropped out, back into the labor force. Our greatest strength as a nation is our diversity, which means we've got to empower everybody to participate in this economy.”
Raimondo surprised her colleagues at Commerce when she launched “a competition called the good jobs challenge, investing half a billion dollars in a nationwide skill training initiative, all with public-private partnerships,” she said. “People looked at me a little funny and said, ‘We're the Commerce Department, not the Labor Department,' and I said, ‘No, no, no, you have to start with business. We get businesses to the table, committing to hire.'”
As the first woman elected and re-elected chief executive officer of her native Rhode Island, Raimondo wound up mending a pension system on the brink of collapse, fixing the state's crumbling transportation infrastructure, forgiving student-loan debt, tripling the number of pre-kindergarten classes and guaranteeing that every child can attend all-day kindergarten. She recruited more than 30 companies to Rhode Island, where the unemployment rate plummeted to a record low 3.4%, or 3.1 percentage points below its 30-year average, from 6.6% when she took office in 2015.
Raimondo's affinity for public-private partnerships derives from an education steeped in economics (a bachelor's degree from Harvard), sociology (masters and doctorate degrees at Oxford, where she was a Rhodes Scholar) and personal experience working in housing and poverty clinics, prompting her legal training (Juris Doctor degree from Yale). She was valedictorian in high school, graduated magna cum laude from Harvard and founded Rhode Island's first venture-capital firm, Point Judith Capital.
Although the U.S. job market recouped much of its early losses from the pandemic, women and Black people still lag behind, mostly from a combination of inadequate skills, and inaccessible child and medical care. The 10 states doing the most in providing child care, measured by cost, quality and availability, experienced superior job growth with non-farm employment expanding 4.9%, or 0.7 percentage point more than the national average since 2021, according to data compiled by Bloomberg. The 10 states with the worst ranking in child care produced an inferior average growth rate of 4.1%.
States that embraced the Medicaid expansion of the Affordable Care Act, giving people access to health care who otherwise couldn't afford it, similarly outperformed the states that continue to reject the expansion. Since April 2020, when the U.S. job market started to recover, the average employment growth for 38 states and the District of Columbia is 14.9%, compared with 12.9% for the holdout states, according to data compiled by Bloomberg. The same disparity exists for personal income, with states embracing the Medicaid expansion showing an average gain of more than 10%, compared with 9.6% for the holdouts.
Corporate America shows a similar dichotomy. The more than 1,700 companies in the Russell 3000 Index that disclose specific improvements in employee health and safety show a superior 66% total return and lower volatility during the past two years and 203% over five years, according to data compiled by Bloomberg. That compares with 48% and 163% to go along with higher volatility for the companies that make no annual disclosures about the health and safety of their employees.
Raimondo isn't surprised because “the CEOs making these decisions are probably making other smart decisions that are contributing to less volatility and better performance,” she said. “I bet the bottom states also have low marginal tax rates because anyone who says all you have to do is cut taxes and you'll get good job creation” is belied by the data that shows the opposite.
Sure enough, nine of the 10 best states for child care are the states with higher tax rates, while seven of the 10 worst are states with lower tax rates, according to data compiled by Bloomberg. “It turns out if you invest in children, you can have a good economy,” said Raimondo. States and companies that commit to child care, health and safety of their workers “have to make these investments in this knowledge-based economy if they want to thrive,” she said.
When Raimondo sees data showing the world's largest maker of semiconductors, Taiwan Semiconductor Manufacturing Co., reporting the biggest increase in sales to the U.S. since 2013, she also isn't surprised. “We're making progress but it's really slow,” she said. “No one predicted the spike that we're seeing in demand for semiconductors because as the whole world went virtual, that requires chips at an unprecedented level. As the whole world is becoming more sophisticated with digital, artificial intelligence, cloud computing -- all of these innovations are massive consumers of chips and the world just isn't producing enough.”
“The challenge,” she said, is “we're asking Congress for $50 billion so we can incentivize domestic chip production here in America” when “China's done $160 billion and you see the results in your data: China is becoming less dependent on the U.S. and Taiwan, which is China industrial policy.”
Yet, for all that and the increasing polarization of American politics, Raimondo is “more optimistic than I've ever been” because true to her own experience in government, she asks, “Okay, how do we meet in the middle and get something passed? It should happen and I'm hopeful.”
This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.
Matthew A. Winkler is Co-founder of Bloomberg News (1990) and Editor-in-Chief Emeritus; Bloomberg Opinion Columnist since 2015; Co-founder of Bloomberg Business Journalism Diversity Program in 2017. During his 25 years as Editor-in-Chief, Bloomberg News was a three-time finalist and winner of the Pulitzer Prize for Explanatory Reporting and received numerous George Polk, Gerald Loeb, Overseas Press Club and Society of Professional Journalists and Editors (Sabew) awards.
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