Why Would Maryland Lose Jobs to Virginia?

I received this afternoon an inquiry from a staff writer from The Towerlight, Towson University’s school newspaper. He writes,

I am currently working on article that focuses on the number of jobs Maryland lost in January, just under 10,000—9,800, as The [Baltimore] Sun reports.

… According to [the] article in The Sun one of the biggest reasons for that number of job losses is the fact the people are commuting to D.C. and Virginia. Is this something you agree with and what other factors could play into this?

What would you say is the state’s best way (or ways) to create new jobs?

Here is my answer:

Dear Jay,

Thanks for this inquiry. My main interest as an economist is the conditions necessary to allow people—not just lucky people like you and me, but all people, especially those who have not had good luck in the lottery of life—to flourish. I have strong opinions on this.

My first thought on receiving your question is the same as my thinking, now, after pondering it a while: Maryland, despite our name, is not a very free state, especially economically, so it is not surprising that we are losing jobs.

What’s necessary for a healthy economy, in which all sorts of people can flourish, is that all have the freedom to use their talents however they believe to be best for them, as long as they respect everyone else’s equal freedom, of course. The economy is so wonderfully complex and rapidly changing, and all of us in it have such widely varying talents and inclinations, that no one—no politician or regulator—can decide for someone what to spend his time and effort on better than can he himself. Freedom is key.

If Maryland is losing jobs, then, it is likely that Marylanders are not very free to choose and act in the economy. Is that conclusion backed up by data? Yes, it is.

Take a look at The Mercatus Center’s “Economic Freedom in the 50 States” index: http://freedominthe50states.org/overall, and then click on Maryland for some detail. You’ll see that in this particular data set (and though I trust the Mercatus Center, I urge you to look at all such data with skepticism, as indicative rather than dispositive), out of 50 states Maryland ranks 44th in regulatory freedom, 40th in economic freedom, 49th in property rights protection, 30th in freedom from tax burden, 39th in freedom to find a job, and 31st in freedom from occupational licensing. (Note that some of these overlap.)

You ask if I think The Sun is correct that “one of the biggest reasons for that number of job losses is the fact the people are commuting to D.C. and Virginia”? I have no numbers on commuting in particular, so to test the claim’s plausibility I compare Virginia’s rankings to Maryland’s in the Mercatus Center’s index. I find that in the categories I mention above, Virginia ranks 9th to our 44th, 6th to our 40th, 25th to our 49th,  13th to our 30th,  10th to our 39th, and  34th to our 31st. Maryland is less free than Virginia in each of these respects except freedom from occupational licensing. Accordingly, yes, I think it plausible that people are commuting from Maryland, where there is less economic freedom, to Virginia, where there is more.

You ask, “What … is the state’s best way (or ways) to create new jobs?” I assume you mean sustainable private-sector jobs, Jay. If so, the first thing to realize is that governments do not and cannot create those; governments can only get in the way or get out of the way of their creation by private-sector entrepreneurs. Now brace yourself, because what you’re about to read will probably contradict beliefs you have held long and strongly:

In order to foster new job creation, the government of Maryland should get out of entrepreneurs’ way, by eliminating restrictions (“regulations”) on enterprise and voluntary exchange, by protecting property rights, by reducing and flattening taxes, and by freeing up labor markets. This last means, primarily, repealing minimum wage laws, repealing occupational licensing requirements, and repealing labor laws that let unions block businesses from hiring non-union workers who would like to take the jobs and wages the union members spurn.

If you’d like to follow up with—or challenge—me on any of this, I’ll be glad to talk with you. Explaining how freedom makes disadvantaged people better off is what I do.

Yours truly,

Howard Baetjer

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