Education and Infrastructure Grow the Economy. Other Proposals Being Debated in Illinois Don’t.

With the State of Illinois finally having a new budget for the first time in two years, the Project for Middle Class Renewal at the University of Illinois at Urbana-Champaign and the Illinois Economic Policy Institute evaluated the economic research on policy measures currently under consideration by state lawmakers.

The full report is available here: Public Policies That Grow the Illinois Economy: An Evidence-Based Review of the Current Debate

Economic and social science research generally finds that investing in K-12 education and postsecondary education– “human capital development”– and investing in infrastructure– “physical capital development”– are the most effective public policies at improving economic growth. Fiscal sustainability through balanced budgets also allows governments to fund these investments and boosts business confidence.

illinois teacher

Investing in public education improves the economy.

  • A well-educated workforce raises median wages in a state.
  • An extra year of education increases a worker’s earnings by 7-10%.
  • A 10% increase in spending on public education leads children to complete more schooling and reduces their chances of living in poverty once they hit adulthood by 3.7% on average.
  • In a survey of economics professors and public policy academics from accredited universities in Illinois, 66% say that expanding enrollment in early childhood education programs would improve the state’s employment rate and grow the economy and a majority say the same about raising the share of the workforce with a bachelor’s degree.

construction workers on road

Investing in public infrastructure boosts economic growth.

  • For every dollar increase in infrastructure spending, the economy improves by $1.57 on average.
  • 67% of academic studies find that highway spending has positive impacts on the economy.
  • Improving an expanding highways, bridges, and public transportation statistically increases the working-age employment rate by increasing connectivity and improving productivity.
  • In a survey of economics professors and public policy academics from accredited universities in Illinois, 79% think Illinois should increase transportation infrastructure investment.

Other policy changes that have been proposed in Illinois have no, mixed, or limited economic impacts.

1. Peer-reviewed studies demonstrate that “right-to-work” laws have no statistical effect on overall employment in a state economy, but research does find that “right-to-work” tends to reduce wages, limit unionization, and redistribute income from workers to owners.

2. A repeal of prevailing wage would have no impact on construction costs but would reduce the earnings of middle-class construction workers, increase reliance on government assistance programs, and reduce apprenticeship training.

3. Reducing unemployment insurance and limiting program eligibility tends to reduce unemployment spells but also lowers the post-unemployment wages of workers because they have less time to find the “right” job match.

4. Reducing workers’ compensation benefits would have no role in boosting employment in Illinois.

5. Raising the minimum wage would have little to no effect on total employment, but would reduce inequality and make housing affordable for hundreds of thousands of workers in the state.

6. Providing business subsidies and incentives would have little effect on economic outcomes, and numerous studies conclude that they actually reduce employment in areas because they come at the expense of other public goods.

7. There is no evidence that a property tax freeze results in higher income growth, but it can negatively impact local economic development if it reduces the quality of public schools or causes cuts to protective services.

8. Studies on term limits for state legislators find that they are correlated with higher government spending and slower long-run economic growth, regardless of which party controls the legislature.

Elected officials in Illinois should consider these research findings in making policy decisions to improve the state’s economic performance and make Illinois an attractive place to work, do business, and live over the long term.

Please click here to read the full report.

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