Another look-see into the makings of the U.S. economic has been released—the annual study prepared by Ernst & Young in conjunction with the Council on State Taxation on total taxes paid by U.S. businesses for fiscal year 2013.
The good news for businesses? The U.S. economy is still in recovery mode despite the year's weather-slammed start. The bad or at least dubious finding? E&Y comes to that conclusion because the level of U.S. state and local business taxes collected have risen 4.7% and 3.7%, respectively, for the third consecutive year of growth.
All together U.S. companies forked over $671 billion in total state and local taxes for the time period. The increases were largely due to property value increases, rise in business income, and transactions subject to the sales tax. The report also went on to note that businesses pay more in state and local taxes than governments spend on services that support said businesses. This is true every year and fiscal 2013 was no different--on average, the report found, businesses paid $3.26 for every dollar of government spending that benefited the corporate sector.
Here is where it gets really interesting: the report prepares two separate set of figures—one based on the assumption that education spending does not benefit local businesses and that it does.
As it happens, either way businesses still wind up paying 20% more in taxes than they receive in benefits.
But this foray into the value of local education expenditures for businesses is an eye-opener especially considering the desperate straits so many U.S. manufacturers are in. Simply put they cannot find qualified workers for their operations, a problem that is only growing as manufacturing operations become more and more complex and high-tech.
Back to the E&Y report:
While economic theory suggests that individuals are the primary beneficiaries of education due to higher wages, business owners can benefit if an educated workforce generates higher returns to capital.
A review of the literature finds that a 1% increase in the share of workers with a college education in a city increases output by 0.5 to 0.6 percentage points.
One estimate of the social returns of an educated workforce is that social benefits, in the form of lower government spending for police services and incarceration costs, are equal to 14% to 26% of the private return of education (higher wages) that accrues to individuals.
Unfortunately for businesses and society at large, our schools don’t seem to be up to the task for hitting these numbers.
Robert Atkinson, president of the Information Technology and Innovation Foundation, noted in a guest post for IndustryWeek that the Society of Manufacturing Engineers believes that the number of unfilled manufacturing jobs due to manufacturing employers being unable to find individuals with the skills they require could increase to 3 million by 2015.
Of course, it is not quite that black and white. A paper by Peter Cappelli, a management professor at the Wharton School (hat tip to BusinessWeek) says that it is the employers that are being unrealistic in their expectations and are not willing to provide the level of training they have in previous years.
Either way, something is seriously amiss and what that could be should be food for thought as we make our way through the back-to-school shopping season, which, incidentally, is going gangbusters this year for retailers. Which, of course, is yet another indicator of how the U.S. economy is performing – albeit a far more welcome one than the subject with which we started.
