🔒Addressing workforce shortage seen as key issue this legislative session

As Connecticut’s workforce shortage continues to be a drag on the economy, state legislators this session will consider a spate of proposals that aim to get more people into in-demand jobs, particularly in sectors like manufacturing and health care.

The data is alarming: According to the Department of Labor, Connecticut has recovered just 75% of the 292,400 jobs lost to pandemic lockdowns and restrictions in March and April 2020, well behind the U.S. recovery rate.

Overall, there are 74,300 fewer people working in the state today than in February 2020. And employers reported 110,000 open positions at the end of December, according to U.S. Bureau of Labor Statistics data.

Toward the end of last summer, 80% of Connecticut businesses said they were having difficulty finding or retaining workers, according to the Connecticut Business & Industry Association’s 2021 Survey of Connecticut Businesses.

The CBIA has made addressing the workforce shortage a top priority this session, and while legislative leaders said there are political roadblocks to a number of workforce initiatives, there is also at least some bipartisan support for certain policy proposals.

Those include efforts to: Recognize out-of-state licenses for some industries; exempt workforce training programs from the state sales and use tax; expand the state’s manufacturing apprenticeship tax credit to include small and midsize manufacturers; ease regulatory burdens; and support a loan forgiveness program for medical students and residents.

Meantime, Gov. Ned Lamont recently proposed spending $87.4 million next fiscal year on workforce development efforts, including expanding career pathway programs for unemployed residents and providing more scholarships and training for in-demand healthcare jobs.

Still, lawmakers and business advocates admit any new legislation won’t be a cure-all, particularly in helping lower-paying industries like restaurants and retailers fill open positions.

“I don’t think legislation can really help in that area,” said Connecticut House Minority Leader Vincent Candelora, a Republican from North Branford.

What’s causing the shortage?

Kenneth Entenmann is an economist with New York-based NBT Bank who covers the Northeast region.

Across the country, he said there are about 8 million fewer people in the workforce today vs. pre-pandemic.

Many economists and others blamed enhanced government benefits for keeping some people, particularly those in lower-paying and higher-risk jobs, out of the workforce over the last year.

However, those extra jobless benefits have largely expired, even as the labor shortage persists.

Others left the job market due to lack of child care or because they feared getting or spreading the virus to more vulnerable family members. In some cases shortages are industry specific. For example, the healthcare industry has seen a workforce shortage made worse by the pain, suffering and demands created by the pandemic.

Entenmann said three factors continue to compound the shortage: early retirements, diminished legal immigration of workers and a significant increase in self-employment.

“While we are seeing improvements in the labor shortage, it is happening at a much slower pace than we would have predicted,” he said.

Entenmann said Connecticut should look at its tax and regulatory structure if it wants to jump-start economic activity.

“They need to look at ways to incentivize new businesses,” Entenmann said. “Connecticut is among the highest-taxed states in the country, in the top third. Analyze the tax structure and overall regulatory burdens you put on business and business creation.”

Laundry list of proposals

During his state of the state speech earlier this month, Lamont set the tone for making workforce development a key priority this legislative session.

“Our budget invests ten times more money than ever before in workforce development – with a hyper focus on trade schools, apprentice programs, and tuition-free certificate programs where students of all ages can earn an industry-recognized credential in half the time, with a full-time job all but guaranteed,” he said. “This investment will train over 10,000 students and job seekers this year in courses designed by businesses around the skills that they need.”

Among his proposals is investing an additional $15 million into the state’s CareerConneCT program, which is designed to help workers who lost or left jobs during the pandemic gain access to short-term training programs, where they can earn an industry-recognized credential and enter employment in in-demand sectors, including manufacturing, information technology, health care, infrastructure and clean energy.

Lamont also allocates $17 million to expand a student loan forgiveness program for healthcare workers, and $55 million to expand college scholarships and faculty for in-demand healthcare fields.

CBIA President and CEO Chris DiPentima said a major priority for his organization is getting legislators to support business tax relief measures to spur job growth.

“The premise behind these tax-relief measures — almost all of which are aimed at small businesses, which represent 99% of all Connecticut employers — is to free up cash that can be invested in workforce training and development,” DiPentima said.

CBIA’s asks include restoring the pass-through entity tax credit to its original 93% level, which would save small businesses $53 million annually; exempting safety apparel and personal protective equipment from the sales and use tax; and expanding the R&D tax credit to small businesses.

In many years, tax cuts wouldn’t be a focus at the state legislature, but Connecticut is projecting a $2.5 billion surplus this fiscal year, and has a $3.1 billion rainy day fund. That’s prompted Republicans and Democrats to propose hundreds of millions of dollars in tax cuts in recent weeks.

CBIA also wants to streamline state occupational licensing requirements, including having Connecticut recognize more out-of-state licenses.

“There are 351 different types of licenses in Connecticut,” DiPentima said. “We are overburdened with licensing.”

As an example, DiPentima said, Connecticut requires animal trainers to be licensed when 41 other states do not. Tree trimmers also need a license to operate in Connecticut, when 43 other states have no such requirement.

“We are also the only state in the country that requires a license for a home entertainment installer and a forest worker. It’s unreal and quite crazy,” he said.

CBIA has other proposals targeting workforce development. It wants to exempt workforce training programs from the state sales and use tax and enhance workforce development efforts for incarcerated and returning citizens.

CBIA also wants to expand the state’s manufacturing apprenticeship tax credit program to include small and midsize manufacturers, an initiative the group has pushed unsuccessfully for years.

But the measure could finally gain bipartisan support in 2022, according to state Sen. Joan Hartley (D-Waterbury), who co-chairs the Commerce Committee.

“That proposal to help expand apprenticeship programs is something we strongly support,” she said. “It was moved out of committee for three years and passed by both chambers, but was vetoed by [former Gov. Dannel P.] Malloy. Lamont supports it. Hopefully it can move past the finish line this time.”

Allowing small and midsize manufacturers access to the apprenticeship tax credit would cost the state about $1.4 million annually, according to the CBIA.

Senate Republican leader Kevin Kelly, who represents Monroe, Shelton, Seymour and Stratford, said he sees bipartisanship on the workforce shortage issue “in expanding apprenticeship incentives, looking at streamlining the licensing process and collaboration in the area of mental health.”