ILEPI Economic Commentary #23

ILEPI Economic Commentary #23

June 29, 2015

REALITY CHECK
Recent Illinois Policy
Institute Half-Truths

Frank Manzo IV

Policy Director

Illinois Economic Policy Institute

www.illinoisepi.org
(708) 375-1002
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ILEPI Economic Commentary #23

REALITY CHECK: RECENT ILLINOIS POLICY INSTITUTE HALF-TRUTHS

ILEPI Economic Commentary #23
INTRODUCTION
Month after month, the conservative-learning Illinois Policy Institute releases articles rebuking positive
news about the Illinois economy. Despite Illinois adding the fourth most jobs in 2014, the organization
singles out industries that are losing jobs in Illinois (without considering the growing high-paying sectors
of the economy) and cherry-picks timeframes to tell a consistent narrative about how Illinois is terrible
state to do business. This Illinois Economic Policy Institute (ILEPI) Economic Commentary fact-checks the
Illinois Policy Institutes most recent agenda-driven release.
Claims are evaluated and then assigned both a verdict and an explanation. The three verdicts used by
ILEPI are: 1.) True, 2.) Only Half True, and 3.) False. Accompanying each verdict is an explanation.
FACT-CHECK OF ILLINOIS POLICY INSTITUTE CLAIMS

Claim: Ranking No. 2 in businesses being created, when taken alone, is not an indicator of
economic health.
Verdict: Only Half True
This is a real claim in response to recent BLS data showing that Illinois ranked 2nd among all 50 states
where businesses are being created fastest. The Illinois Policy Institute cites previous BLS data as
evidence and says that small businesses are simply replacing larger businesses that are closing. The
problem, however, is that the actual BLS data do show that business creation is an indicator of job growth
and economic health. Using the most-recent quarterly data from 2010 through 2014, it is easy to see that
net establishment growth is highly related to net job growth. When business growth (in red) increases, job
growth (in blue) also increases: the correlation between the two variables is 93 percent (Figure 1). Thus,
business creation very likely translates into job creation.
FIGURE 1: ILLINOIS JOB GROWTH VS. ILLINOIS BUSINESS GROWTH, 2010-2014

Illinois Job Growth vs. Illinois Business Growth

15,000

Number of New:
Jobs and Businesses

(Correlation: 92.97%)
10,000
5,000
0
-5,000

Job Openings - Job Closings

2014Q3

2014Q2

2014Q1

2013Q4

2013Q3

2013Q2

2013Q1

2012Q4

2012Q3

2012Q2

2012Q1

2011Q4

2011Q3

2011Q2

2011Q1

2010Q4

2010Q3

2010Q2

2010Q1

-10,000

Establishment Openings - Establishment Closings

Source: Business Employment Dynamics (BDM) from the U.S. Bureau of Labor Statistics. All data are available here:
http://www.bls.gov/data/.
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ILEPI Economic Commentary #23

The only reason that this claim is half true instead of outright false is that correlation does not
necessarily imply causation. New business startups may be small and may not be hiring as many
employees as large companies that are closing. However, even if this were the case, the new startups may
grow over time Apple, Costco, and McDonalds were all once small businesses. Regardless, an increase in
businesses equals an increase in competition. More competition means that businesses must find
innovative ways to produce their good or service more efficiently. It also means that they must provide the
best wage and benefits package in order to attract workers to their firm over a competitor. Both of those
benefits from competition are good for the Illinois labor market and economy.

Claim: The growth in Illinois business establishments was not matched by jobs and wage
growth.
Verdict: False
According to BLS data, total private employment in Illinois has increased from 4.73 million workers to 5.10
million workers from January 2010 through May 2015. The overall gain in private employment totaled
373,300 new jobs, a 7.9 percent growth. Over the same time, average hourly earnings for private employees
in the state increased by $2.65 per hour. This increase from to $23.12 to $25.77 represents an 11.5 percent
growth higher than the 9.1 percent inflation in the national economy from 2010 to 2015. This assertion by
the Illinois Policy Institute is unsupported by the economic data (Figure 2).
FIGURE 2: ILLINOIS EMPLOYMENT AND ILLINOIS AVERAGE HOURLY EARNINGS, 2010-2015

$27.00

5,100,000

$26.00

5,000,000

$25.00

4,900,000

$24.00

4,800,000

$23.00

4,700,000

$22.00

4,600,000

$21.00

Jan-10
Apr-10
Jul-10
Oct-10
Jan-11
Apr-11
Jul-11
Oct-11
Jan-12
Apr-12
Jul-12
Oct-12
Jan-13
Apr-13
Jul-13
Oct-13
Jan-14
Apr-14
Jul-14
Oct-14
Jan-15
Apr-15

5,200,000

Private Wages

Private Employment

Total Private Employment and Average

Hourly Earnings of All Private Employees

All Private Employees

Average Hourly Earnings, All Private Employees

Source: State and Area Employment, Hours, and Earnings from the U.S. Bureau of Labor Statistics. Total Private
Employment is seasonally adjusted. Average Hourly Earnings of All Private Employees are not seasonally adjusted.
All data are available here: http://www.bls.gov/data/.

Claim: Illinois ranked 29th nationally in job creation, behind most neighboring states.
Verdict: Only Half True
The Illinois Policy Institute further asserts that Illinois was tied for 29th nationally in job creation from
December 2013 to December 2014. The timeline from December 2013 to December 2014 may be suspect,
given the unusually cold weathers that Illinois has recently experienced. On the other hand, an evaluation
of seasonally-adjusted BLS employment data from December 2013 to December 2014 finds that the state
added 66,800 workers during that time (Figure 3). This growth in jobs nearly matched similar employment
gains in Michigan (+72,500 jobs), Ohio (+72,000 jobs), and Pennsylvania (+70,900 jobs) but was
significantly ahead of Wisconsin (+47,100 jobs), Indiana (+45,000 jobs), Missouri (+25,800 jobs), and Iowa
(+22,800 jobs).
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ILEPI Economic Commentary #23

This Illinois Policy Institute claim may be true when looking at employment gains in terms of the
percentage growth rate and yes, the economy would be better if Illinois growth rate were higher from
December 2013 to December 2014 but why should Illinois residents care too much about percentage
increases when actual jobs are being created in Illinois? From December 2013 to December 2014, Illinois
added about 20,000 more jobs than Wisconsin and Indiana. Even if Indiana or Wisconsins rate of job
growth is higher, Illinois still has 20,000 more new workers adding to its economy, 20,000 more new
workers using its transportation infrastructure, and 20,000 more new workers contributing to its income
and sales tax revenues. The Illinois Policy Institute often tells an incomplete story.

#
1

FIGURE 3: STATE RANKING OF TOTAL NONFARM EMPLOYMENT (IN THOUSANDS), DEC. 2013 DEC. 2014
State
Dec.
Dec.
Job
#
State
Dec.
Dec.
Job
2013
2014
Growth
2013
2014
Growth
California
15,389,5 15,860.7
471.2
26
New Jersey
3,947.0
3,982.3
35.3

Texas

11,342.1

11,749.5

407.4

27

Louisiana

1,961.8

1,996.6

34.8

Florida

7,686.1

7,965.7

279.6

28

Alabama

1,913.1

1,942.8

29.7

Georgia

4,080.0

4,226.5

146.5

29

Arkansas

1,175.9

1,204.6

28.7

New York

9,012.6

9,156.3

143.7

30

Oklahoma

1,641.4

1,668.3

26.9

North Carolina

4,092.9

4,203.1

110.2

31

Missouri

2,718.8

2,744.6

25.8

Washington

3,027.4

3,122.6

95.2

32

Connecticut

1,653.0

1,678.1

25.1

Colorado

2,414.1

2,492.8

78.7

33

Iowa

1,536.3

1,559.1

22.8

Michigan

4,145.1

4,217.6

72.5

34

Kansas

1,382.5

1,401.9

19.4

10

Ohio

5,297.9

5,369.9

72.0

35

North Dakota

450.4

469.8

19.4

11

Pennsylvania

5,754.6

5,825.5

70.9

36

Idaho

645.1

659.1

14.0

12

Illinois

5,840.2

5,907.0

66.8

37

New Mexico

814.9

827.4

12.5

13

Tennessee

2,787.5

2,850.9

63.4

38

Delaware

433.0

442.8

9.8

14

Massachusetts

3,385.2

3,445.9

60.7

39

Nebraska

988.1

996.8

8.7

15

Arizona

2,548.5

2,607.3

58.8

40

New Hampshire

644.4

653.0

8.6

16

Oregon

1,694.9

1,750.8

55.9

41

Mississippi

1,117.8

1,124.5

6.7

17

South Carolina

1,926.2

1,975.2

49.0

42

Rhode Island

473.4

479.3

5.9

18

Wisconsin

2,824.9

2,872.0

47.1

43

Wyoming

289.9

295.0

5.1

19

Utah

1,307.5

1,353.6

46.1

44

South Dakota

420.7

424.7

4.0

20

Indiana

2,967.1

3,012.1

45.0

45

Alaska

337.0

340.6

3.6

21

Nevada

1,189.3

1,230.5

41.2

46

Vermont

308.3

311.7

3.4

22

Maryland

2,601.5

2,641.3

39.8

47

Montana

452.4

454.7

2.3

23

Virginia

3,759.2

3,797.4

38.2

48

Maine

602.8

604.7

1.9

24

Kentucky

1,842.1

1,880.0

37.9

49

Hawaii

624.5

626.0

1.5

25
Minnesota
2,795.8
2,831.4
35.6
50
West Virginia
763.6
763.1
-0.5
Source: State and Area Employment, Hours, and Earnings from the U.S. Bureau of Labor Statistics. Total Nonfarm
Employment is seasonally adjusted. All data are available here: http://www.bls.gov/data/.

Claim: Illinois ranked 42nd nationally for wage growth, well behind all neighboring states.
Verdict: False
This one is not even close. Figure 4 presents BLS information on average hourly earnings for private sector
employees by state from January 2014 through May 2015, the latest month for which data is available.
Over the previous 17 months, worker wages have increased from $25.05 per hour to $25.77 per hour in
Illinois. This equates to a growth of 72 cents per hour, or a 2.9 percent gain. Among neighboring states, the
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ILEPI Economic Commentary #23

next closest are Kentucky (+70 cents) and Iowa (+67 cents) while incomes have actually declined or
remained stagnant in Illinois other neighbors. Hourly wages fell by 14 cents per hour in Wisconsin, and
marginally improved by 4 cents per hour in Indiana and 9 cents per hour in Missouri.
The question Illinois residents need to ask is whether they really want the Illinois economy to become more
like the right-to-work states of Indiana or Wisconsin. As of May 2015, worker earnings were $3.16 per
hour higher in Illinois compared to Indiana and their wages have grown 68 cents faster since the beginning
of 2014. Similarly, worker earnings were $2.43 per hour higher in Illinois compared to Wisconsin and their
wages have grown 86 cents faster. As noted in the previous fact check, Illinois is also adding more jobs
overall than those two states.

#
1
2
3
4

FIGURE 4: STATE RANKING OF AVERAGE (PRIVATE) HOURLY EARNINGS, JAN. 2014 MAY 2015
State
Jan.
May
Growth Growth
#
State
Jan.
May
Growth
2014
2015
$
%
2014
2015
$
Washington
$28.14 $29.35
$1.21
4.3% 26
Florida
$22.14 $22.52
$0.38
Vermont
$23.08 $24.20
$1.12
4.9% 27
North Dakota
$24.89 $25.21
$0.32
South Dakota
$20.00 $21.00
$1.00
5.0% 28
North Carolina
$21.81 $22.10
$0.29
Texas
$23.46 $24.41
$0.95
4.0% 29
Delaware
$21.95 $22.21
$0.26

Growth
%
1.7%
1.3%
1.3%
1.2%

5
6
7
8
9
10

New Jersey
Connecticut
Colorado
Idaho
Nebraska
Illinois

$26.66
$27.84
$26.04
$21.10
$21.18
$25.05

$27.57
$28.70
$26.86
$21.92
$21.94
$25.77

$0.91
$0.86
$0.82
$0.82
$0.76
$0.72

3.4%
3.1%
3.1%
3.9%
3.6%
2.9%

30
31
32
33
34
35

Oregon
New Mexico
Michigan
Pennsylvania
Virginia
Alabama

$23.09
$20.34
$23.50
$23.79
$25.82
$20.51

$23.34
$20.54
$23.69
$23.98
$25.98
$20.60

$0.25
$0.20
$0.19
$0.19
$0.16
$0.09

1.1%
1.0%
0.8%
0.8%
0.6%
0.4%

11
12
13
14
15
16

Nevada
Kentucky
Massachusetts
Iowa
Montana
Alaska

$20.85
$20.36
$29.47
$21.92
$21.23
$27.10

$21.56
$21.06
$30.14
$22.59
$21.89
$27.74

$0.71
$0.70
$0.67
$0.67
$0.66
$0.64

3.4%
3.4%
2.3%
3.1%
3.1%
2.4%

36
37
38
39
40
41

Missouri
Ohio
Indiana
South Carolina
West Virginia
Louisiana

$22.12
$22.40
$22.57
$21.06
$20.60
$22.09

$22.21
$22.45
$22.61
$21.05
$20.58
$22.05

$0.09
$0.05
$0.04
-$0.01
-$0.02
-$0.04

0.4%
0.2%
0.2%
0.0%
-0.1%
-0.2%

17
18
19
20
21
22

New Hampshire
Oklahoma
California
New York
Kansas
Hawaii

$24.32
$21.14
$27.41
$28.02
$21.78
$23.98

$24.95
$21.77
$28.00
$28.53
$22.29
$24.48

$0.63
$0.63
$0.59
$0.51
$0.51
$0.50

2.6%
3.0%
2.2%
1.8%
2.3%
2.1%

42
43
44
45
46
47

Mississippi
Minnesota
Tennessee
Arkansas
Wisconsin
Arizona

$19.65
$26.00
$20.74
$19.55
$23.48
$23.25

$19.58
$25.87
$20.61
$19.41
$23.34
$22.96

-$0.07
-$0.13
-$0.13
-$0.14
-$0.14
-$0.29

-0.4%
-0.5%
-0.6%
-0.7%
-0.6%
-1.2%

23
24
25

Georgia
$23.07 $23.53
$0.46
2.0% 48
Maryland
$27.42 $27.11
-$0.31
-1.1%
Utah
$23.40 $23.86
$0.46
2.0% 49
Wyoming
$23.36 $22.98
-$0.38
-1.6%
Maine
$21.23 $21.63
$0.40
1.9% 50
Rhode Island
$25.79 $25.02
-$0.77
-3.0%
Source: State and Area Employment, Hours, and Earnings from the U.S. Bureau of Labor Statistics. Average Hourly
Earnings of All Private Employees are not seasonally adjusted. All data are available here: http://www.bls.gov/data/.

Claim: Three of the five worst U.S. counties for jobs growth are Illinois counties.
Verdict: True, but not the full story
This claim is based on a BLS news release. While Lake County, McLean County, and Peoria County lost
jobs from the fourth quarter of 2013 to the fourth quarter of 2014, year-to-year job growth was positive in
Illinois largest counties. For example, employment in Lake County declined by 0.9 percent, but rest of the
Chicago metropolitan area made up for the losses. Employment increased by 1.6 percent in Cook County,
1.7 percent in DuPage County, 1.1 percent in Will County, and 0.3 percent in Kane County. While job
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ILEPI Economic Commentary #23

losses in Lake County, McLean County, and Peoria County are obviously not desirable, the reality is that
the states economy is primarily driven by Cook County. Employment in that county grew at essentially the
same rate as the national average.
The Illinois Policy Institute also did not compare similar counties. An analysis of the largest counties in all
neighboring states reveals that Cook Countys employment growth was satisfactory. The year-over-year
employment growth of 1.6 percent in Cook County essentially matched the experiences of Marion County,
Indiana (1.6 percent), Polk County, Iowa (1.6 percent), Dane County, Wisconsin (1.5 percent), and the
independent city of St. Louis, Missouri (1.9 percent). Only Jefferson County, Kentucky (2.5 percent) and
Milwaukee County, Wisconsin (0.6 percent) diverged from the general 1.5 percent to 2.0 percent rate of
employment growth throughout these Midwestern counties.
Certainly the goal is to have Cook County (and every other Illinois county) exceed the regional or national
rate of employment growth. A 1.6-percent job growth is likely too low, which is a conclusion supported by
the data that the Illinois Policy Institute could have made. They did not, however, make that conclusion,
and the claim they did make told an incomplete story.
FIGURE 5: EMPLOYMENT GROWTH, SELECTED COUNTIES, 2013Q4 2014Q4
County
Major City
Employment Growth, %
Employment Growth, #
Cook County, IL
Marion County, IN
Milwaukee County, WI
Dane County, WI
St. Louis (City), MO
Jefferson County, KY

Chicago
Indianapolis
Milwaukee
Madison
St. Louis
Louisville

1.6%
1.6%
0.6%
1.5%
1.9%
2.5%

+39,600
+9,300
+2,900
+5,000
+4,200
+11,000

Polk County, IA

Des Moines

1.6%

+4,500

Source: County Employment and Wages: Economic News Release from the U.S. Bureau of Labor Statistics. All data
are available here: http://www.bls.gov/news.release/cewqtr.toc.htm.

THREE ADDITIONAL RECENT PROBLEMS WITH THE ILLINOIS POLICY INSTITUTE

Three additional assertions made by the Illinois Policy Institute are worth fact-checking. First, the Illinois
Policy Institute recently released The Anatomy of Influence: Government Unions in Illinois on the same
day that Governor Rauner issued an Executive Order prohibiting public sector unions from paying fairshare fees to fund union activities. The report complains that the $46 million spent by five major public
sector unions on Illinois political campaigns from 2002 to 2014 somehow increased government corruption
by unduly influencing the actions of politicians. However, the $46 million contributed represents just 3.6
percent of all campaign contributions during this period. Moreover, Bruce Rauner contributed $39.6
million over the exact same time. Which influence in politics has the potential for more corruption: $46
million from five labor unions representing approximately 414,000 members or a nearly-equivalent $39.6
million from one man to help elect himself as Governor? Regardless, the only true way to reduce the
influence of money in politics is to pass a constitutional amendment overturning Citizens United and allow
for a fair, publicly-funded system of campaign finance. Until then, both the public sector unions and
Governor Rauners campaign contributions are protected expressions of the constitutional right to free
speech.
Second, the Illinois Policy Institute often asserts that Illinois needs to adopt a right-to-work law, citing
the loss of manufacturing jobs to Indiana as evidence. While manufacturing jobs are indeed declining in
Illinois and growing in Indiana, the Illinois Policy Institute should provide the full stories about the labor
markets of both states. For example, Illinois construction industry added 13,700 jobs from May 2014
through May 2015, a growth of 6.9 percent over the year. At the same time, Indianas construction
employment declined by 100 workers, a 0.1 percent drop.
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ILEPI Economic Commentary #23

The BLS data demonstrates that Illinois is creating well-paying jobs in professional and business services,
education and health services, and construction. Average hourly earnings in these sectors range from
$24.61 per hour to $36.13 per hour. By contrast, the top three industries adding jobs in Indiana only pay
between $20.62 per hour and $24.71 per hour (Figure 6). The collective-bargaining state, Illinois, is
creating middle-class jobs while the right-to-work state, Indiana, is attracting lower-paying employers.
Manufacturing job growth in Indiana is a part of structural changes in the states economy, while growth
in middle-class service careers in Illinois reflects the states more productive and better educated
workforce. Additionally, the Illinois Policy Institutes position that Illinois should adopt a right-to-work
law ignores the data showing that, along the Illinois-Indiana border, Illinois counties actually have the
lower unemployment rate.
FIGURE 6: FIVE FASTEST GROWING SECTORS OF ILLINOIS AND INDIANA, MAY 2014 MAY 2015
Five Fastest Growing
Job
Hourly
Five Fastest Growing
Job
Hourly
Illinois Sectors
Growth Earnings
Indiana Sectors
Growth Earnings
Professional and Business Services
27,500
$28.75
Trade, Transportation, Utilities
25,000
$20.62
Education and Health Services

14,800

$24.61

Manufacturing

14,200

$24.69

Construction

13,700

$36.13

Education and Health Services

8,600

$24.71

Trade, Transportation, Utilities

10,700

$23.35

Leisure and Hospitality

7,200

$12.61

Leisure and Hospitality

8,000
$13.98
Financial Activities
1,300
$22.87
Source: State and Area Employment, Hours, and Earnings from the U.S. Bureau of Labor Statistics. Total Private
Employment is seasonally adjusted. Average Hourly Earnings of All Private Employees are not seasonally adjusted.
All data are available here: http://www.bls.gov/data/.
Finally, the Illinois Policy Institute has been espousing the policy changes proposed by Governor Bruce
Rauner. It is important to note that the unemployment rate fell from 8.2 percent in January 2014 to 6.1
percent in January 2015, a 2.1 percentage-point decline (Figure 7). In the months since the Governor
assumed office, however, the unemployment rate has been stagnant, declining by a marginal 0.1
percentage point. It is worth asking whether the confrontational approach taken by Governor Rauner
(supported by the Illinois Policy Institute) has done more harm or more good, given the divided Illinois
government.
FIGURE 7: ILLINOIS UNEMPLOYMENT RATE, JANUARY 2014 MAY 2015

Illinois Unemployment Rate:

Jan. 2014 through May 2015
9%
8.2%

Governor Rauner
assumes office

8%
7%

6.1%

6.0%

6%

May-15

Apr-15

Mar-15

Feb-15

Jan-15

Dec-14

Nov-14

Oct-14

Sep-14

Aug-14

Jul-14

Jun-14

May-14

Apr-14

Mar-14

Feb-14

Jan-14

5%

Source: Economy at a Glance: Illinois from the U.S. Bureau of Labor Statistics. All data are available here:
http://www.bls.gov/eag/eag.il.htm.
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ILEPI Economic Commentary #23

CONCLUSIONS (AND THE ALTERNATIVE)

The Illinois Economic Policy Institute (ILEPI) uses advanced statistics and reliable research techniques to
evaluate industries, labor-employment policies, fiscal conditions, proposed infrastructure investments, and
other economic policies. ILEPI with representation from business, labor, nonprofits, higher education,
taxpayers, and both a former Democratic member and a former Republican member of the Illinois General
Assembly is committed to conducting rigorous, objective, and academic analysis to advance high-quality
job growth and provide Illinois residents with the whole story. ILEPI also values the pursuit to bring the
field of economics closer to an actual science with testable claims and evidence that allows economists and
policy analysts to actually make predictions about the impacts of policy changes.
In the effort to promote accountability and to complete the picture, this ILEPI Economic Commentary fact
checked the most-recent Illinois Policy Institute article. Two of the claims made by the Illinois Policy
Institute were false, two were only half true, and one was true but did not tell the full story. Assertions
that Illinois is a bad place to do business, that Illinois job growth is lagging, and that labor unions have
too much political influence in Illinois all do a disservice to the residents of Illinois. Not only do these
claims give pause to potential businesses thinking about locating in Illinois, they are false.
The irony is that the Illinois Policy Institute concluded their most-recent article with the following two
statements: An increase in the number of businesses cannot be considered a positive without supporting
context and The people of Illinois should be told the truth about what is happening to their state.
Indeed, Illinois Policy Institute. Indeed.