How Misunderstanding Our Strengths Could Keep Rhode Island in Economic Decline

Rhode Island's Economic Stagnation: Insights from RIPEC's Annual Report

In this episode, we examine Rhode Island's economic challenges through the lens of RIPEC's latest report, addressing key issues like stagnating growth, over-reliance on certain sectors, and potential pathways forward. Michael DeBias, RIPEC's president and CEO, shares data-driven insights and practical strategies for revitalization.

Main topics:

• The current state of Rhode Island's economic indicators
• Long-term challenges and sector reliance
• The impact of housing policies and workforce development
• Strategies for fostering sustainable growth and improving affordability
• The importance of gradual, environment-driven incentives over quick fixes

In this episode:

• Rhode Island ranks 17th in median household income but falls to 36th when factoring in cost of living and taxes
• Lagging growth in GDP per capita and labor productivity, with Rhode Island trailing behind national averages
• Existing over-reliance on education, healthcare, and social services, which do not bring substantial revenue into the state
• The blue economy and emerging sectors like wind energy and autonomous tech remain underdeveloped
• Policy focus should shift from chasing companies to creating an environment that attracts and sustains them
• Opposition to rent stabilization policies, emphasizing supply-side solutions such as permitting and development incentives
• A cautious yet hopeful outlook, with DeBias rating his optimism at a 5 out of 10

Timestamps:
00:00 - Introduction to Rhode Island's economic stagnation and report overview

00:35 - Rhode Island's relative strengths and its position compared to other states

01:21 - The importance of understanding scope before identifying solutions

02:17 - The disparities in median income versus cost of living and taxes

03:38 - Contextualizing Rhode Island’s economic challenges within broader trends

04:53 - Overview of declining GDP per capita and labor productivity

05:42 - Long-term sector trends and underperformance of key industries like blue economy

07:20 - Over-reliance on low-wealth sectors and workforce gaps

08:53 - The need for sector growth, particularly in manufacturing and information tech

09:50 - Gaps in workforce skills and barriers to attracting larger companies

11:08 - Strategies for economic growth—regulation easing, tax incentives, workforce upskilling

12:34 - Housing policy debates, rent stabilization, and supply-side solutions

14:57 - Rhode Island’s future outlook and DeBias's optimism score

16:02 - Closing remarks and key takeaways

Resources & Links:

• RIPEC Annual Report
• Rhode Island Public Expenditures Council
• Gina Raimondo - LinkedIn
• Rhode Island Commerce Corporation

Connect with Michael DeBias:

• LinkedIn
• Twitter

This episode emphasizes that recognising areas of stagnation is the first step towards meaningful economic renewal. Strategic focus on fostering high-growth sectors, improving workforce skills, and adopting supply-side housing policies can steer Rhode Island toward a more resilient future. Stay tuned for actionable insights grounded in solid data and experienced leadership.

Transcript

Bill Bartholomew 0:00

We have been talking about Rhode Island from an economic development standpoint for years here on this show. Sometimes those concepts are really abstract, and we talk about what it wouldn't be great if X, Y, or Z happened. And sometimes they're really concrete. And that's exactly what we're doing today as we take a look at the Rhode Island Public Expenditures Council's essentially an annual report that has given us some information that signals a lot of what we're feeling is true when it comes to stagnation and what feels right now like a lot of dead ends in Rhode Island. Michael DeBias is the president and CEO of RIPEC and joins us here on Bartholomew. Michael, thanks so much for your time today. And before we get into talking about the economic report card for this year, just a little bit on your background and how you got into this work.

Michael Dibiase 0:56

Sure. So I've been with um RIPEC since 2020. Before that, I was director of administration under Gina Raimundo four or five years and had other uh you know other careers in um in government and also in the private sector.

Bill Bartholomew 1:17

When you take a look at holistically Rhode Island right now, again, before we even get into just the report card and uh what the indicators are there, when you take a look at Rhode Island right now as somebody who understands economic development and industries across the board, what do you think is Rhode Island's inherent strength that we may or may not be playing into right now?

Michael Dibiase 1:43

Yeah, that's a good question. This this report that we put out is um is a little different for RiPEC diving into economic development. We do do a quarterly key performance indicator report um that talks about the economy. But in general, we're we are doing our research on budgets and public expenditure. So this is this is a little bit outside of our core area. Um this this report, what we did was we used uh publicly available federal data and just tried to compare Rhode Island to the country and to other states in New England and also trend back five and ten years. So um, yeah, one thing a lot of people in Rhode Island, when I ask them where do you think we are on rank on median income, they will, you know, Rhode Islanders will typically say, I don't know, 40, but we're actually 17th. So we need to keep in mind that we're above the U.S. average in terms of our median household income. And that's a you know, that's a fortunate thing. Uh what this report points out though is once you start taking into account cost of living and um taxes, we fall pretty far down. So we fall from 17th to median income to 36. So um so that you know that has a big has a big impact. Um so I mean to your question, we're not, you know, we're compared to our neighbors, Massachusetts and Connecticut and and New Hampshire, we're not doing that well, but they're among the highest performing states in the country. Um so I think I think we need to start start out that you know things are not as bad as some Rhode Islanders think they are.

Bill Bartholomew 3:34

Right. No, I and that is such an important thing to start with. And that statistic right there is an important framework because when we look at the problems we're solving, it's important to understand the scope of them. And while there are major challenges we'll outline that you've outlined in the report, we'll go through right now, that doesn't mean that it's a lost cause. And when you start to look at the moment right now, paired with general affordability optimism about the state of the world, et cetera, it's easy to lose focus on making an impact because it seems so discouraging. And look, you just listen to you know some talk radio and take a look at some comment sections on our town take your pick on Facebook, and it's easy to feel discouraged, but we're not in horrendous shape, as you just point out. We we we have to start this discussion breaking down Rhode Island's economic stagnation. And this is something that we have we have seen lagging growth in GDP per capita, labor productivity, things like that. What's your general econom uh your general executive summary on Rhode Island's economic stagnation over the last decade or so?

Michael Dibiase 4:50

Yeah, I think what's, you know, we we have these six measures that we put forth in the report. And our rank um dropped in everyone except median household income, and many of them very significantly. And for every measure, our growth rate has lagged the U.S. Um significantly with something called gross domestic product and labor productivity. So I think the most troubling part of what we found, and we were surprised by it, was that our growth rates were lagging so much compared to the country. It doesn't mean we're going backward, it just means we're not growing, growing as fast. And um I think that's, you know, that's that's the more concerning part.

Bill Bartholomew 5:39

Is that because of the sectors that we're in, of which some are, as you point out, we have an over-reliance on certain sectors. But it seemed like for a long time the idea was, well, we're gonna be the blue economy super sector driver. We're gonna be the Rotterdam of the Western Hemisphere and all the connected pieces of whether it's offshore wind or even fisheries, sensors, et cetera. There's a lot of work happening there. There's money being raised in the private sector around, especially autonomous drones. But why would all that sort of hype on a super sector environment here in Rhode Island with the blue economy, have we not seen even in that one space the type of growth that could make up for some of that difference in loss that's led to stagnation?

Michael Dibiase 6:24

Yeah, so I mean these are it's important to point out that these are long-term trends, Bill, and not, you know, point to one governor or one legislature. I mean, we've we've come through, you know, deindustrialization a long time ago, and now we're in another period. And as a small metro um next to a larger metro, it is you know, it is challenging with with companies consolidating and we're relatively high cost. So we start out with some disadvantages. I think there's been a lot of good work focusing on areas that could be high productivity, high growth, like wind, life sciences, uh, blue economy. They have not yet become significant parts of our economy. But I think, you know, I think those efforts, um, those efforts do make some sense.

Bill Bartholomew 7:16

What where else are we seeing over-reliance, I should say? Where are we seeing over-reliance in in our job sector and sort of our workforce, and where are some of the major gaps that we have from a job training standpoint that could attract anybody, large-scale, mid-scale, small businesses that could expand our palette, so to speak?

Michael Dibiase 7:40

Yeah, I I've um I mean, what the report talks about is that we're we're first in the nation and you know, our alliance for our economy on a sector that includes education services, healthcare, and social services. Now, there's nothing wrong with those sectors, particularly some of them pay quite a bit, so they're high-paying jobs, but the over reliance is an issue because those industries don't, those sectors don't bring a lot of wealth into the state. So, you know, other than other than the research, they tend to be funded by revenues that come from in the state. And so they're different from information technology or manufacturing or other or companies that sell services regionally, globally, that that bring revenue into the state. So I think we get we have to, you know, we have to focus on growing those those sectors. We have some of those, you know, industries. We have financial services, we're pretty heavy in manufacturing, we're roughly just you know the US average. Um, so but the we we have to understand that those are the things that fuel an economy. And I think when you look at the what's happening, you know, what would be what's our focus, what's our policy focus of a statehouse? It tends to be more on the on the human services side. And I think we need to be thinking more um, you know, more about economic growth, economic development.

Bill Bartholomew 11:38

Where's the the major gap right now? Because if you look at some of the work that Commerce Rhode Island has done, if you look at some of the even on a micro level, I think we've seen an effort, if not, if not fulfilled, work to get Rhode Island to become more of a life science hub than it already is, in tandem with the academics, so on and so forth. But where's the gap? Why why do you think this isn't happening when these numbers aren't brand new?

Michael Dibiase 12:08

Um, we're going to, you know, we're interested in RIPEC in doing a longer-term effort because I don't think this is, you know, this is as simple as as it appears. And I think attracting companies have become harder and harder as they're consolidating. Um, so um, you know, to give you an example, we we can look at college attainment. Um, everyone assumes that that drives economic growth, but or is that simply a function of prosperity? So, but uh, but I do think our workforce, the skills and education of our workforce need to be upgraded. I think we need to, you know, we need to focus on affordability. I know the governor is focused on it, but you know, our our housing costs and we're starting starting to permit more housing, but that that eats into our our standard a little bit. And um, and by the way, housing production itself is a high GDP activity. So if we could just get more into that. But I think that the solutions are more difficult to come by, but I do think that we we need to lean in on how can we incentivize. I'm I'm not I'm not as big on chasing companies as much as creating an environment where companies want to come. So how can we how can we incentivize that through you know, through easing regulation, perhaps um, you know, making the tax climate better. But then I think we need to focus on um upgrading our skills of our of our workers, um, and um and also making uh making our state more affordable. I think those are kind of the three big things that we need to focus on. Once again, we have other urgent needs that we're dealing with, but what what it means is we're not really dealing with this. There's some you know, there's some things we see it as a bond issue and there's other efforts, but for you or anyone following the issues of the day that are being debated, this this does not seem to be that high.

Bill Bartholomew 14:22

No, it does not. Where it pops up is in sort of tributaries that are direct, actually direct tributaries, things like uh municipal tax caps. We now see uh frankly, fiscal issues in Cranston, in North Providence, so on and so forth. And once it starts to hit people's wallets directly, maybe that's when it becomes more of a mainstream conversation. I want to kind of close this on something you mentioned, which is housing. And you you note that rent stabilization is at minimum concerning and basically argue against it. And there are a lot of different arguments for and against this type of policy, but by and large, from an from a development, economic development standpoint, from a general growth standpoint, what's your argument against rent stabilization or rent controls in general versus a uh a supply side model?

Michael Dibiase 15:21

Yeah, we've you know, we did a report on this um that was commissioned by the Providence Foundation. We're you know, we're very much against the idea of rent stabilization. We think it hasn't worked and does not make sense. Um, but we do need a response for housing affordability. And um I think looking at rental assistance, which we have essentially none of in Rhode Island in terms of state programs, um we do, you know, we do we do administer federal programs and also um being more aggressive on um on allowing housing development. I mean, we're doing some good things. There's a lot of permits in the pipeline, but there's still a lot of resistance out there. So um so I think you know, it's not it's not good enough to just say no to rent stabilization. I think we've got to do some other things, but I don't think that's gonna work. I think I think it's gonna be disastrous, actually, um, with respect to, you know, there's so there's so many obstacles to development now in a city like Providence, um, particularly sky property taxes. I just I just think this could really chill um a lot of things and actually cause rents to go up because a lot of landlords don't raise rents, and if they think they're gonna not be able to do it once their tenant moves out, they're gonna probably take advantage of that.

Bill Bartholomew 16:50

Right. Yeah, that has been an argument that, for example, Joe Paolino has been making that he doesn't raise rents unless there's a turnover in his unit, even if that goes on for years or decades. So now he may be compelled to raise it 4%. It'll be interesting to see how that plays out for sure on the municipal level. Uh, Michael, thanks so much for your time today. Just in closing, your optimism meter, so to speak, on a 10-point scale, roughly, how optimistic are you for Rhode Island? I think this is an important thing right here because I know that there's a lot of sentiment right now amongst especially Gen Z and Millennials, really everybody, probably think Gen Z and millennials that are really literally asking the question, should they stay in Rhode Island? Your optimism meter?

Michael Dibiase 17:36

Yeah, I'm a I'm a Rhode Islander at heart. I think I think I would give us a five. I am concerned that you know we're we're now fighting a millionaires tax and trying to get the legislature to and and cities and towns to control spending. Um I don't think those trends are are very good for us raising taxes and raising spending. So um so I think that's where I'm I'm more at a five. But um I'm hoping that people will um will see that these these economic these economic issues as as being more important. Michael DBS, RiPek, thanks so much for your time. Thank you, Bill.