Fry reports that the nonpartisan analysis, titled “Re-seeding the Garden State’s Economic Growth,” not only drew from the most current economic and business data but also from 70 influential business leaders across public, private and social sectors and a survey of the state’s business community.
“New Jersey’s economy always has been a very innovative and growth-oriented one, with many important assets and exciting capabilities,” Steve van Kuiken, senior partner, North American leader of Digital McKinsey, global leader of McKinsey’s Healthcare Information Technology work and co-author of the study, said.
“We as an institution invest more than $500 million each year in research (concerning) what impacts where we work and live,” van Kuiken said. “So, we wanted to know, what is holding back growth in the economy, and how do we unlock it?”
According to the study, U.S. gross domestic product advanced by 1.4 percent per year from 2005 to 2015, but growth in New Jersey averaged just 0.3 percent.
Additionally, as the cost of doing business in the state rose faster than the national average, growth in both employment and median income in New Jersey remained flat between 2006 and 2016.
“We discovered that the New Jersey economy has relatively fewer young companies that have grown into major employers; the aging infrastructure has continued to exact a toll on productivity; there is a growing mismatch in the skills profiles of our workers, with an oversupply of a highly-educated and low-skill workforce, and an undersupply of middle-skilled workers; and, we don’t have the incubators, innovation hubs and the incentives that drive growth for young businesses in other states,” van Kuiken said.
Understanding that startups and other small firms are the largest net job creators, according to U.S. Census data, the study found that some states have focused on creating better environments for fast-growing young companies by improving access to capital through angel investing tax credits, setting up business incubators and helping firms more easily navigate state and local regulations via public-private partnerships.
Due to New Jersey’s consistently low-ranked regulatory and business environment, only 5 percent of companies with 500 employees or more in the state are less than 10 years old, compared with 11 percent across the U.S.
Additionally, New Jersey has less than two dozen incubators and business accelerators statewide, compared with 179 in New York, for example.
Congestion and poor road conditions also have cost New Jersey motorists an estimated $5.2 billion a year in time, wasted fuel and repairs, the study said.
Aging transportation infrastructure, including two-thirds of New Jersey’s roads and 36 percent of its bridges, have continued to reduce workforce productivity and divert public funds from other uses for maintenance.
The study suggested that a focus on funding long-term infrastructure improvements, rebalancing traffic flows, and encouraging transit-oriented development, would be necessary to the growth of the economy in New Jersey.
Thirdly, with more than 85 percent of the people leaving New Jersey in 2015 falling within the millennial age bracket of 18 to 35, New Jersey has more high- and low-skill workers than employers need, and more middle-skill jobs, such as health technicians, construction service workers, heavy vehicle maintenance and retail managers, than qualified applicants.
In New Jersey, only 0.15 percent of the employed population was in an apprenticeship program in 2016, compared with 0.26 percent across the U.S., according to the study.
The study also stated that access to vocational training, partnerships with companies to tailor college and certification curricula, and training for workers in skills demanded by high-growth private industry sectors, all have proven to be successful in other states.
Lastly, the study found that New Jersey incentive programs have focused more on retaining major employers than creating new jobs and businesses within the state.
Though New Jersey spent, on average, $1.40 more than other states for every dollar of capital spending by the companies it targeted between 2010 and 2016, more than 80 percent of incentive deals were geared toward older, domestic companies, despite research finding that younger firms and foreign companies, on average, invest more capital in operations and create more jobs.
For Fry’s full story, click here.