Oregon’s unemployment just spiked past 8 percent.  That means one out of every 12 members of the labor force is looking for a job.  Some economists predict that Oregon’s unemployment rate could hit 9.5 percent in the next year.

Over the 32 years between 1976 and 2007, Oregon has been in the top 10 for unemployment in 18 of those years.  The state has had the highest unemployment for 3 of those years.

Paul Krugman (PDF) explains how a welfare state and business regulations contribute to persistent high unemployment:

How might a welfare state create unemployment? Taxes (such as required employer contributions to social insurance funds) and regulations may raise the cost to firms of offering jobs, and thus reduce the wages they are willing to pay; simultaneously, benefits such as unemployment insurance may reduce the incentive for workers to accept jobs, and thus raise the wages they demand.

Other studies have found that a strong “sense of place” measured by things such a home ownership rates can contribute to higher unemployment.  Individuals with a strong “sense of place” are less likely to move out of state to find work.

Oregon’s home ownership rate is slightly lower than the national average.  Thus, it is not entirely clear that Oregonians have a stronger sense of place than anywhere else.

Studies have found that high levels of migration into an area contribute to higher unemployment.  Oregon’s ratio of employment growth to population growth is slightly lower than U.S. average.  This suggests that Oregon’s employment opportunities may not be keeping pace with population growth.

Oregon’s economic development policies tend to be focused on “picking winners” by offering tax credits and subsidies to whatever is the favored industry of the day.  A broader pro-business and pro-employment policy would better diversify Oregon’s industries and improve employment prospects.

Several states are considering a real estate transfer tax to help boost state and local budgets.  During the booming real estate market, such taxes were considered to be relatively low-cost: When a market is hot, everyone can get warm.  Now that housing is cooling down, the transfer tax throws a wet blanket on shivering sellers.

Earlier this year, Toronto imposed a land transfer tax on the sale of real estate within its municipal boundaries.  A recent study (PDF) published by the C.D. Howe Institute finds that the transfer tax caused a 16 percent decline in the number of single-family homes sold and a 1.5 percent reduction in house values. Unsurprisingly, the decline in house values is approximately equal to the amount of the tax.

In the upcoming 2009 session, the Oregon Legislature will consider plans to meet the state’s mandated greenhouse gas reduction goals. The goals were enacted in hopes that reducing the state’s greenhouse gas emissions would help halt global warming. Participation in the Western Climate Initiative’s proposed cap-and-trade program will be a cornerstone of the policies in front of the Legislature.

The Portland Tribune reports that Oregon’s business interests are recognizes that the state’s ambitious emissions goals will come at an economic cost. NW Natural president and Oregon Global Warming Commission member, Gregg Kantor, describes his concerns.

We need to protect workers of businesses in Oregon. You don’t want to create another reason to ship jobs offshore.

Mr. Kantor’s concerns are buttressed by a white paper written by Eric Fruits and Randall Pozdena.

The paper notes that the notion of capping emissions and providing market signals through a cap-and-trade scheme is not conceptually unreasonable or without precedent. However, the cap-and-trade mechanism has a history of implementation difficulties. The difficulties are due to the vulnerability of the caps and permit allocations to political influence and the tendency of permit values to be highly volatile. In the Oregon context, in which the portfolio of politically-acceptable, alternative energy sources is constrained, and the non-carbon technology options undeveloped, these problems may be aggravated.  The studies key findings include the following.

1. Economic output, energy use and carbon dioxide emissions have been tightly cointegrated historically, and energy strongly “causes” economic vitality. This is true both in studies over time and across countries. Of the OECD countries that display lower than average energy use relative to their economies, all have embraced nuclear power–a source that historically has been “off-the-table” in Oregon.
2. The cost to the Oregon economy of meeting the state’s emissions goals are large. Oregon’s economic growth to 2020 would be approximately cut in half, and gross output per capita would be reduced by 20 percent relative to the baseline case.
3. State and local revenues would be reduced by about 13 percent, relative to the baseline case.
4. Energy consumption and technology choices are strongly embedded in long-lived capital. This raises
   theoretical and practical obstacles to the economic development and adoption of low-carbon technology. In addition, because of the existing carbon intensity of the production of capital goods, too-rapid turnover of existing capital may actually accelerate atmospheric carbon accumulation.

Citation:

Fruits, E. and Pozdena, R. J. (2008). Oregon Greenhouse Gas Reduction Policies: The Economic and Fiscal Impact Challenges. Cascade Policy Institute.