PROVIDENCE – Mary A. Burke, senior economist at the Federal Reserve Bank of Boston, was one of the featured headliners at TedX Providence on May 2 at the Columbus Theatre.

In her 15-minute talk, Burke detailed the analysis behind Rhode Island’s economic fall during the Great Recession in 2008, and identified the trends why the state’s recovery may have appeared to be slower than neighboring states in New England.

Among the economic reasons given by Burke were the fact that Rhode Island’s manufacturing base had been much more vulnerable to losing jobs exported to China, a trend that begun much earlier.

In the two decades before 2007, Rhode Island’s manufacturing sector lost some 22,000 jobs, a decline of 30 percent, according to Burke.

Burke also cited the steep climb of housing prices in Rhode Island in advance of the recession, followed then by a deeper plunge during the recession. These trends meant that Rhode Island’s climb back up to recovery had to travel up a more arduous incline.

Factoring out the loss of manufacturing jobs, which had begun much earlier than 2008, Burke demonstrated that Rhode Island’s recovery had actually been quite robust.

Finally, Burke pinpointed the fact that Rhode Island’s apparent reluctance – for unexplained reasons – to invest in the education and health industry sectors as a source for new job creation had also stunted the recovery, compared to the cities of New Bedford and Worcester, which had seen job creation grow in those two sectors.

Burke’s analysis had been presented before – to a council of economic advisors in December of 2014 as well as in an in-depth interview with WPRI’s Ted Nesi earlier this year.

What piqued ConvergenceRI’s curiosity, however, was the potential tie-in of health industry sector investment and job creation, and reasons for the apparent lack of investment. What kinds of research and data were available to analyze economic activity around investments in health care innovation? Were there good studies on the impact of increased health insurance premiums on small businesses in Rhode Island or elsewhere, beyond anecdotal information? And, given the wide disparity in arguments, often products of political ideology, around the costs and benefits of the Affordable Care Act, had the Federal Reserve Bank of Boston done any studies measuring its impact in New England?

ConvergenceRI interviewed Burke by telephone on May 12, asking these questions, as a follow-up to her TedX Providence talk.

Her answers and comments were her own, Burke stressed, and did not reflect the policies and views of the Federal Reserve Bank.

Quality of life index
The conversation with ConvergenceRI led to a remarkable convergence: the potential opportunity to create a new kind of economic metric, focused on quality of life.

In response to a question about measuring the long-term economic impacts of investments in better community health, Burke said: “Those kinds of investments, with long-term payoffs, [are the ones] that politicians are not good at. They don’t pay off in terms of when [the politicians] need to get re-elected.”

ConvergenceRI followed up, by asking: Did there need to be a different kind of economic metric, then, to benchmark the quality of health in a community?

Burke thought the idea had some merit, even though it was very difficult to discern numbers around quality-of-life dimensions.

At the national GDP level, she said, “It’s true that we’re spending more money on health [care delivery], but we’re not better off.”

A quality of life index, Burke continued, could be correlated with not just how much money we were spending, but on how well off we are. “You could point to this kind of spending [as a measure] of how it’s improving the quality of life.”

Intrigued by the idea of a quality of life index, ConvergenceRI brought it up during a conversation on May 14 at Brown University, hosted by Rich Overmoyer of The Fourth Economy, sponsored by the City of Providence as one of a number of industry cluster strategy sessions, this one focused on bioscience and medical sectors.

First, ConvergenceRI suggested that Rhode Island might want to create its own index of the state’s innovation economy, modeled on what Massachusetts had done, beginning in 1997. [Steven L. Metzger, president and CEO of Phoenix Medical Technologies, sitting next to ConvergenceRI, nudged him and pointed to a copy he had printed out of the 2014 Index of the Massachusetts Innovation Economy.]

Next, ConvergenceRI suggested the idea of a quality of life index for Providence and Rhode Island, as a distinct competitive advantage. The suggestion met with little feedback nor any apparent show of enthusiasm from the other 15 participants.

After the session ended, ConvergenceRI spoke briefly with Overmoyer, asking him what he thought of the idea. It turned out that Overmoyer’s firm had just completed work on a project in Indiana, focused on developing the metrics for an $84 million investment in promoting the quality of life standard in Indiana. Who knew? And, why was this information not being shared?

Here, then, is the interview with Mary Burke, senior economist with the Federal Reserve Bank of Boston. Once again, her opinions are her own and do not reflect the views, opinions or policies of the bank.

ConvergenceRI: The economic data available about the how the rising cost of health insurance for small businesses [firms with 50 or fewer employees] may have influenced hiring and expansion decisions in the last five-six years seems very sparse and anecdotal at best. Are there studies that could quantify this?
BURKE: This is one of those things, inherently, that is difficult to measure. The first reason is you need to be able to link, definitively, any given business outcome with the reason.

[You would need to have] amazing data that captures the change in health costs while you don’t change anything else in the environment.

You can ask businesses, but they can lie. They [often] have an incentive to lie about their data.

A third reason why [it’s difficult to measure] is because you [as the employer] could be firing people [rather than pay health insurance costs]. [Does that] result in slower expansion and stifling any job growth that we’re not seeing?

ConvergenceRI: In Rhode Island, the state-run health insurance benefits exchange, HealthSourceRI, has made the rates for small businesses more transparent and predictable, allowing businesses to see what their premium increases will be across an entire year, and not just upon getting a renewal notice with the rate increases a few weeks before the renewal data. They have also offered a full choice program for employers with fewer than 50 employees, allowing them to buy up or buy down with their health plans. It could provide some interesting data for studies.
BURKE: It sounds like a great idea. As a back-up question, I know that at the federal level, employers with fewer than 50 employees are not mandated to provide health insurance. How many have chosen not to offer insurance?

ConvergenceRI: The program allows for employers to get out of managing the business of buying health insurance for their employees. It’s scheduled to jump to 100 or fewer employees in 2016. Once again, have there been any economic studies about these initiatives that you know about?
BURKE: It sounds like a very good service, helping employers and employees relative to the alternative. But, nobody has done a study [that I know of] on such impacts.

It would nice if someone would conduct a poll of these businesses, how they themselves perceived the changes. Whether it has enabled them to hire more people, or better optimized their business expansion?

ConvergenceRI: Has the Federal Reserve Bank of Boston considered looking at these issues from a regional perspective, the impact of the Affordable Care Act on business growth and employment growth?
BURKE: Periodically, we put together proposals, strategic initiatives, looking at the region, by the research department, looking at different aspects of the economy. It would make an interesting research project. So far, it has not been deemed a top priority.

ConvergenceRI: One of the initiatives underway in Rhode Island is a program to structure investments in green and healthy homes, i.e., improvements in the older housing stock to reduce the causes of things such as the number of chronic asthma cases and with it, cutting the number of asthma ER visits and hospitalizations. It also seeks as well the removal of lead hazards in older housing, correlating them with improvements in educational achievement and economic attainment? Are you familiar with economic studies related to these kinds of investments, measuring the ROI?
BURKE: We have not done such studies. We have done some small work just centered on getting housing for people. It sounds like a fascinating initiative.

The questions I would pose would be about if there’s slippage in the system. You can have a green and healthy home, but what happens if you go to school in a different neighborhood? How much in a safe zone is not safe?

If you’re a worker, and the office air is dirty air, your entire world is not going to be in a green zone.

ConvergenceRI: Do you have any more insights into the apparent failure of Rhode Island and Providence to invest in the health and education sectors, as compared to other nearby neighbors?
BURKE: I’m not sure. We haven’t measured public investment, just employment. [Whether or not] public investment fuels job growth may be a backwards correlation. I’m not sure that’s the case; there are a lot of factors.

One of the [problems in Rhode Island] is the educational level of its workers – it has one of the least educated workforces.

In these sectors, it’s often winner takes all. Boston already has a cluster of hospitals; where do people in health want to go? To be near a cluster of other people doing the same thing. The haves stay with the haves; the rich grow richer. It’s agglomeration.

In Worcester, you have UMass Medical as a draw.

That said, New Bedford may not be a great comparison; I believe that there was one employer who moved in there. I don’t know if the state did anything to attract them.

I do want to look at this as an important piece for the future: how do you achieve growth in the sector that seems a natural, given that we’re spending more and more of our dollars on health?

It seems to me there was a missed opportunity in Rhode Island.

ConvergenceRI: Is there a way to measure the long-term investments in better community health, rather than just as in investment in the health care delivery system?
BURKE: Those kinds of investments, with long-term payoffs, [are the ones] that politicians are not good at. They don’t pay off in terms of when [the politicians] need to get re-elected.

ConvergenceRI: Do we need, then, to create a different kind of economic metric, to benchmark the quality of health in a community?
BURKE: Many people, now in their 40s and 50s, are beginning to look at [impacts of policies] 10-20 years down the line. They are much more future-minded.

It’s very hard to do that on the national level, to look at the issue of solvency of Social Security, cutting benefits, or keeping Medicare for the aging population at the same level of benefits.

There has been some work done in education, looking at reforms in education, the links to significant impacts on the dollar value, and the way [the reforms] can be beneficial with the kinds of outcomes. [The measure of] kids that do well in school have a more tangible [return] over the lifetime of a person’s entire earnings. That’s more convincing.

Qualitative estimates on the return [for health] may point to many different quality impacts. It would be very hard to correlate the numbers and the quality dimensions.

A quality index of life may have some merit. It’s true that, at the national GDP level, we’re spending more money on health [care delivery], but we’re not better off. We’re spending more on health and not really seeing the results. The focus has been on how much money we’re spending, not on how well off we are.

[The question is]: how would we measure that? You could point to this kind of spending [as a measure] of how it’s improving the quality of life, offset by damages?

It might be hard to develop the quality dimensions, to correlate the relationships, knowing it’s not one to one.