The Cost of Leaving

Keeping people in the state is the possible dream for Michele Siekerka and Opportunity New Jersey.

Michele Siekerka tours the Falstrom Company in Passaic with president and CEO Clifford Lindholm III. The company (with 45 employees) has been based in New Jersey for almost 150 years.
Michele Siekerka tours the Falstrom Company in Passaic with president and CEO Clifford Lindholm III. The company (with 45 employees) has been based in New Jersey for almost 150 years.
Photo by Brad Trent

The refrain has become all too familiar to Michele Siekerka as she travels the state making presentations on behalf of Opportunity New Jersey. She hears it from people who were born here, who raised their children here and whose parents are buried here. She hears it from Jersey residents who are planning retirement and from those just starting out. They love New Jersey—but they need to find a state that’s friendlier to their wallets.

“No matter where I go,” says Siekerka, “no matter where I am presenting, at least one or two people come up to me at the end and say, ‘I’m contemplating leaving the state; I can’t afford to be here anymore.’”

The words are painful to Siekerka, whose Opportunity New Jersey mission is to increase the state’s competitiveness and affordability. Siekerka, the president and CEO of the New Jersey Business & Industry Association (NJBIA), co-chairs ONJ with Tom Bracken, president and CEO of the New Jersey Chamber of Commerce.

ONJ works on behalf of various trade groups and business associations, including BioNJ, the New Jersey Restaurant Association, the New Jersey Retail Merchants Association, the New Jersey Food Council, the National Federation of Independent Business, the NJ Society of CPAs, several local chambers of commerce, the African American Chamber of Commerce of New Jersey and the NJBIA.

“Our goal at the end of the day,” says Siekerka, “is to keep people in New Jersey.”

But how, in the face of an ebbing tide? In the 2016 National Movers Study by United Van Lines, which measures the number of trucks moving people into and out of each state, New Jersey topped the list of states losing people: 63 percent of all moves were outbound. (South Dakota had the highest percentage of inbound trucks, 68 percent.)

New Jersey’s population has actually grown at a slow, steady pace (from 8.635 million in 2004 to 8.944 million today, according to the U.S. Census Bureau), but the people leaving are taking more money with them than the people arriving are bringing in. Using data from the Internal Revenue Service, an NJBIA study found that, from 2004 to 2013, New Jersey lost $18 billion in net adjusted gross income. The retirees who pack up their cars and drive to points south are—statistically speaking—replaced by immigrants who may have no cars at all.

Businesses also come and go. One bright spot: Amazon recently opened a 1 million-square-foot warehouse in Carteret, creating 2,000 jobs. Drawn to New Jersey by the state’s proximity to the dense market of online shoppers in the Northeast, Amazon announced plans for three more such facilities. But after 45 years in Montvale, Mercedes-Benz USA is moving its corporate headquarters, and 800 jobs, to Georgia early in 2018, lured by lower taxes.

“Let’s be honest about who we want to be when we grow up as a state,” Siekerka says. “If we’re satisfied in being a state where people come to buy a home, raise a family, earn a great living and then move away, guess what? We’ve probably got that covered. If we’re a state that wants to have a cradle-to-grave experience and be generational, that’s not happening anymore.”

The Mercedes move—yet another regrettable chapter in a Southern exodus that has included Hertz and Sealed Air (the makers of Bubble Wrap, invented 60 years ago in New Jersey)—spurred state Senator Anthony Bucco (R-Morris) to try to understand more clearly what was behind this dynamic.

“Nobody had answers about why they were leaving—is it taxes, is it regulations, is it qualified personnel?” says Bucco, who sponsored a bill that requires the state Department of Labor to survey businesses that close or leave the state. (The state Senate passed the bill in February; it is awaiting a hearing in the Assembly.) “Everybody says, ‘Oh my God, we’re losing businesses, unemployment is up.’ Well, you know what? Do something about it. Let’s find out why, and when you find out why, let’s see if we can correct these problems.”

Bucco owns a business himself—Baker/Titan Adhesives in Paterson, which manufactures glues used by other manufacturers, like box fabricators and food packagers—and has watched many of his customers leave New Jersey in recent decades. He says he, too, would probably move his company were he not a state legislator. “I could move into Pennsylvania, which would be a little bit better, or move south to the Carolinas, which would be much better” in terms of business climate.

The top two reasons he cites—taxes and regulations—are at the top of Opportunity New Jersey’s policy agenda. The agenda also aims at improving the infrastructure that keeps people and products moving through the state and training the workers who fill its jobs.

“It used to be that we were the low-cost place of doing business in the New York region, so even though we may not have been competitive nationally, we were far cheaper than New York,” says James Hughes, dean of the Edward J. Bloustein School of Planning and Public Policy at Rutgers.

In recent years, rising taxes have undercut New Jersey’s regional advantage. “We’re not looking for tax reform to compare ourselves to Florida, because we’ll never do that, nor should we,” Siekerka says. “We can’t afford to do that, but darn it if we can’t compete with Pennsylvania and New York. We should be challenging ourselves as a state to be competitive to our two border states. That should be our number one goal.”

Siekerka grew up in North Bergen, graduated from Rutgers and has only lived outside New Jersey long enough to attend Temple University Law School in Philadelphia. Before she came to NJBIA in 2014, she was deputy commissioner of the state Department of Environmental Protection. NJBIA—founded in 1910 as an insurance company for manufacturers—now lobbies on behalf of its members, 20,000 businesses that employ 1.1 million people, mostly state residents.

A passionate advocate for her constituents, Siekerka is encouraged by some things that didn’t happen at the State House last fall (a $15 minimum wage and an earned sick-leave law, both of which NJBIA lobbied against), and by one big thing that did: the tax deal signed in October by Governor Chris Christie. The most visible part of the tax deal was the gas-tax hike, which is targeted at shoring up the state’s sagging infrastructure. The tax package also phased out the estate tax and raised the threshold at which retirement and pension income is taxed, moves designed to keep retirees from fleeing.

“We think that the comprehensive tax- reform package is a game changer for the state and sent a message to New Jersey residents that our policy makers are ready to take on complex issues, and they’re willing to be courageous and take some hits for it,” Siekerka says. “Now is the time to seize upon continuing that momentum and taking on some of these other big issues, because the political will is there to do more comprehensive reforms.”

As tax reform aims to keep older residents in New Jersey, Opportunity New Jersey has turned its attention this year to keeping younger residents here, too. Millennials have been leaving the state at an even higher rate than retirees. According to an NJBIA study, 800,000 people between the ages of 18 and 34 left New Jersey between 2007 and 2014.

“This is New Jersey’s future workforce we’re talking about,” says Siekerka. “When you think about what we spend in K-12 education, that we’re willing to make the investment to have the number one K-12 education in the nation, it’s not a good return on investment if they’re graduating high school and leaving the state not to come back.”

Keeping young people here requires more housing of the kind that they like and can afford. “New Jersey doesn’t have enough Hobokens and Jersey Citys that are attractive to millennials,” says the Bloustein School’s Hughes. The effort also requires more investment in higher education (about 30,000 residents leave New Jersey each year for college in other states), and more training for the kinds of jobs that don’t require a college degree.

“It’s very difficult not only for my company, but for virtually all manufacturers in New Jersey to find capable and qualified candidates,” says Robert Staudinger, president and CEO of National Manufacturing in Chatham, a 73-year-old company that makes precision metal components for pacemakers, satellites and other uses. He is seeking applicants for positions ranging from mechanical engineer manager to tool-and-die maker. “If we can’t find those people, it will be an impediment to growth, absolutely.”

More vocational training, partnerships with community colleges, apprenticeship programs—those are among the workforce development strategies ONJ supports. “Twenty-five years ago, if I was looking for a welder or two, I could put an ad in the paper and get five or 10 welders responding; same thing with painters or assemblers,” says Clifford Lindholm III, president and CEO of the Falstrom Company in Passaic, which was started by his great-granduncle in 1870.

Falstrom’s 45 employees make custom metal electronics enclosures and assemblies for Navy ships and submarines. It’s the kind of highly specialized manufacturing that can still thrive in New Jersey. “If we were spinning out hundreds of widgets, we might not be as competitive because the cost of doing business here is higher than for someone who’s spinning out hundreds of widgets in rural Pennsylvania,” says Lindholm, whose company pays $190,000 in annual property taxes for its 90,000-square-foot facility on 4-1/2 acres. “That’s not to say we haven’t been asked to consider leaving the state of New Jersey. When I get our property tax bill every quarter, I think about it pretty heavily.”

He doesn’t usually think too long, though. “Number one, to try to replicate what we have here somewhere else would be very expensive,” says Lindholm. “Number two, you can’t replace employees with 20 years of experience.”

But workers age, and younger ones need to be trained to take their places. “It looks like we’ll need another welder or two in the next couple of months, and potentially someone in the paint department,” he says. “They’re well-paying jobs. Our employees put their kids through college and provide for multiple generations—and they can pay property taxes in New Jersey.”

Kevin Coyne is a longtime New Jersey Monthly contributor and teacher at the Columbia University Graduate School of Journalism.

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