Guest Opinion: Education, not taxes, should be N.H.’s advantage

There is no question that the state’s economy has benefited from a tax advantage, helping to attract into the state businesses, entrepreneurs and highly educated workers. The evidence is substantial. Over the last quarter-century, New Hampshire had the highest employment growth in the Northeast, second-fastest increase in per capita income in the nation (improving in rank among the 50 states from 25th to sixth) and is well-positioned in leading technology industries (ranked ninth in the nation in employment concentration in high technology industries).

At the foundation of New Hampshire’s economic success are the skills and capabilities of the state’s residents. Of all the factors affecting states’ economic performance – including tax burden – the factor with the strongest correlation to high level and growth in state per capita income is the percentage of the adult population with a four-year college degree.

New Hampshire and all states and businesses compete in a knowledge-based global economy for which human capital is the key to economic success. All of the top-ranked states in per capita income – Connecticut, Massachusetts, Maryland – are ranked at the top in the percentage of adults with a college degree.

In the past, New Hampshire has been able to use its tax advantage – as one of only two states without either a broad-based personal income or sales tax – to entice into the state many highly educated, hard-working and entrepreneurial adults.

In the last quarter of the 20th century, New Hampshire led the Northeast in net domestic in-migration (as a percentage of total population).

A survey in 2000 revealed that three of four adults in New Hampshire with bachelor’s degrees or higher were born in another state.

According to 2000 data on educational attainment by age, less than 25 percent of 30-year-olds in New Hampshire have a four-year college degree, compared to approximately 30 percent in the nation and more than 40 percent in Massachusetts. The “crossover” age cohort for which the percentage of New Hampshire residents with a four-year college degree is higher than the U.S. average is 35.

This indicates that the state is relying on “older” adults (older than early 30s) who have been educated elsewhere to move into the state for its education advantage. And they have created an educational advantage in the state.

By the end of the 20th century New Hampshire improved to rank ninth in the percentage of adults with at least a four-year college degree. The percentage increased from 18 to 29 percent between 1980 and 2000. In many respects, the state imported a highly educated work force and a high per capita income, high-technology economy.

However, the state’s ability to use a tax advantage for economic advantage required specific demographic factors be in place that were outside the state’s influence. The key was the large pool of young and mobile baby boomers coming of age and starting families. New Hampshire’s tax advantage, as the leading source of economic advantage, required the nation’s baby boom generation to be at a particular age and phase in life.

That unique set of circumstances is not expected to occur again. As a result, what has worked in the past will not continue to work in the future for New Hampshire’s economy.

As many of us know first-hand, baby boomers are aging and not as mobile. The generational cohorts following the baby boomers are significantly smaller. In addition, rising housing costs make the state less attractive to potential in-migrants, particularly younger adults. All of this results in the pool of potential in-migrants shrinking.

In some respects, the decline of in-migration is good news. There are concerns about too much growth and the impact of in-migration on sprawl and the character of New Hampshire. But who is going to work in the high-technology and other industries requiring skilled workers in New Hampshire in the future, especially as the older baby boomers start to retire?

There is an economic need to focus economic policy on investing in our children to sustain New Hampshire’s economic advantage. Nearly two of every three new jobs in the nation will require some college education. In New Hampshire, with a high concentration of technology jobs, the need is expected to be even higher. Yet the reality is that currently no county in the state has two of three graduates going on to college, and in three of the state’s counties – Coos, Belknap and Strafford – fewer than four of 10 male high school graduates go on to college.

In dollar terms, every high school graduating class’ matriculation to college below peer states results in an approximate annual loss of $10 million to the state’s economy. With multiplier effects, each (20-year) generation loss from low matriculation to four-year colleges is about a half-billion dollars, or 1 percent of New Hampshire’s overall economy.

New Hampshire’s economic future depends on investment in our children even as it may require reducing the state’s tax advantage. Investment in children starts by ensuring that young children are members of healthy and well-functioning families. It also requires high quality education starting with preschool and continuing through graduate school. And it requires ensuring access for all our children to high quality and higher education.

Ross Gittell is professor at the University of New Hampshire.