Illinois manufacturing coasting on fumes

Once an industrial powerhouse, Illinois is economically draining its population, most notably in the manufacturing sector.

The Illinois Policy Institute, which has been monitoring the decline for a long time, shows how the Land of Lincoln is making its manufacturing sector pay as much as $3.4 million more in total workers’ compensation than its neighbors.

Their newest report shows that the state’s prevailing wage law makes manufacturing workers –who earn on average $35,426, the lowest pay among Midwest workers– subsidize their construction peers’ high salary–$60,366, the highest in the country. This law, a relic from the Great Depression, makes the state’s government-funded construction projects more expensive as they tend to favor unionized construction workers, 20-25 percent on average.

To pay for these inflated wages, the state government has to raise money somewhere, and in Illinois, it’s in the form of property taxes. The state’s property tax rates are among the highest in the country, second only to New Jersey. The rates affect the manufacturing sector disproportionately since they tend to own more property.

Illinois also has the highest workers’ compensation premium among its neighbors. Since the state’s compensation system “lacks standards for proving that an injury was primarily caused by the workplace, [it facilitates] judicial activism and trial lawyers treating businesses like piñatas,” according to the report. It is more than 2.65 times what an Indiana worker receives.

Speaking of neighbors, Illinois is losing manufacturing jobs at an accelerated pace,4,600 just for 2015 to Indiana, not to workers overseas. The Hoosier State’s manufacturing sector is flourishing. It gained nearly 40,000 manufacturing jobs since March 2012 while Illinois lost 3,500. In other words, South Holland’s recent move to Gary, Indiana (a mere 30 miles east of Chicago) will keep being the rule rather than the exception.

Even Michigan is faring better, as a whole, than Illinois. The state has nearly recovered all the manufacturing jobs it lost since February 2008, while Illinois is still 100,000 jobs short for the same period. Arguably, Michigan’s transformation into a right-to-work state was key to that comeback.

Illinois has lost the equivalent of Jacksonville, Florida in population since 1991. The only way to reverse Illinois’ slow emptying – is to thoroughly change state politics.

IPI suggests, among other things, to repel the Prevailing Wage Law on the state level [except when required by the federal government] but also the Project Labor Agreements, which also favor artificially higher wages for construction workers. The institute also proposes to reform the worker compensation system. They want workers to be compensated for injury only if work was“a ‘major contributing cause’” to the injury, rather than any contribution. At the moment, an employer has to compensate their employee for an injury if it can be related at all to work.

Unless Illinois learns a key French expression – laissez-faire – its manufacturing sector will keep shrinking like its population.

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