Coming on the heals of General Electric Corporation’s departure from Connecticut, the GE-Xit, AETNA may be soon to follow. If GE’s departure was a “punch to the gut,” then AETNA’s departure could be considered a blow to the head. Simple descriptive analyses are not enough.
A recent report issued by the CT Data Collaborative seeks to “confirm or reject the prevailing narrative, as echoed through the media, of a ‘mass exodus” from Connecticut.” [A summary of the findings can be found here and the full report here. ] Its key findings include: The largest driver for Connecticut’s declining population is an increase in the number of people leaving the state for other states, an increase of 55%, approximately, 9,200 individuals over the current period (2013 – 2016) compared to the mid-2000s. The report also notes declining births and increasing deaths have played a factor. The authors of the report specifically note that their “study does not make any assertions towards why people are migrating in and out of Connecticut.” They assume from the Census Population Survey that the top reason for moving (inter and intra-state) are housing (48%), family (30%), employment (20%), and other (2%) are equally applicable to Connecticut, but add that the “report does not address the question.” The fundamental flaw of the report is a failure to address the obvious question: why?
This flaw brings to mind the best remembered feature of the Sherlock Holmes mystery Silver Blaze “the curious incident of the dog in the night.” Holmes deduces that the watch dog made no noise because a stranger was not present. Inspector Gregory conducted a thorough investigation of the crime; but failed in his analysis of the case. According to Holmes, the inspector is “an extremely good officer,” but alas, “the only quality he lacks is imagination – the ability to imagine what might have happened on a given occasion, and act on this intuition.”
While descriptive analysis provides some insight, such analyses cannot be the basis for policy; it does not provide enough insight into the root cause. The Data Collaborative Report is prepared by extremely good officers who can only state the obvious: “The recent declines in Connecticut’s total population are primarily driven by increasing rates of net domestic out-migration and to a smaller degree a declining birth rate.” Would reversing the declining birth rate really provide a solution to the narrative that Connecticut lacks the population to serve the needs of GE or AETNA?
The Spring, 2017 Greater New Haven Economic Activity Report provided insight into the impact of the GE-Xit. To soften the blow, the oft-repeated mantra that GE’s departure only involves a loss of 200 jobs and, such loss is de minimus, given the overall Connecticut employment numbers is flawed. [A copy of the Greater New Haven Economic Activity Report can be found here.] We find the loss of jobs could be magnitudes greater; it could rise to approximately 70,000 jobs in Fairfield County alone. Like Holmes, we examined the counterfactual: how would Fairfield County have fared in terms of employment had GE not exited? We measure the difference between what happened and what should have happened. Only, then, can we examine the underlying causes of the GE-Xit. While it may be too late to forestall AETNA’s departure, if GE is any barometer, the magnitude of the loss extends beyond the relocation of senior executive positions. Such a loss indicates a systematic problem for Connecticut that can only be addressed by fully understanding the complexities of the situation.
To that end, the Data Collaborative should also take Holmes’ approach to heart by understanding what did not happen is chockful of clues and equally as important as what did happen. Therefore, it is time to not only provide descriptive statistics of what happened, but also examine what should have happened. And, then, proceed to examine the root cause in order to provide thoughtful policy guidance. GE’s departure and AETNA’s looming departure, if it occurs, is not simply about a lack of population or taxes; it is the ecosystem and its complexities. If we are to encourage entrepreneurship and innovation, and foster economic development and growth, we need greater insight into the complexities.
A.E. Rodriguez and B.A. Marks
Department of Economics and Department of Entrepreneurship & Innovation
Rodriguez is corresponding author.