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rail system that goes through Illinois gives us access to the East and West Coast better than Michigan and Wisconsin. When
you take a look at the combined productivity cost index, Illinois doesn't look as bad as it does just on the cost side. I
think that's an advantage, although I think as you look at the report, we appear to be losing that advantage of
productivity," he added.
According to Lewis, there are several reasons that Illinois is losing its productivity advantage. Generally speaking,
manufacturing plants and equipment in Illinois are aging and not much reinvestment is taking place. Lewis says companies
tend to spend their capital dollars building new plants in the south or offshore. Aging plants and equipment reduces labor
productivity.
What can be done about it? Lewis says the state should concentrate its efforts more on rewarding companies for investing
in infrastructure in Illinois as opposed to rewarding companies for creating jobs. Most states, he says, focus on job
creation and that's not necessarily the best way to create wealth.
"To some extent employment growth in manufacturing is not necessarily going to happen, no matter how hard we try," said
Lewis, "so what we really should be doing is thinking about what types of public policy we can use to increase labor
productivity that will retain the jobs that we have."
Lewis said the state of Minnesota, for example, did a study about five years ago regarding the amount of money that the
state had been spending on attracting companies.
"The average salary for the employees that it attracted was like $12 per hour," Lewis said. "Is that wealth creation? It
created a lot of jobs, but if the average wage is $12, I don't think so. What would happen if the state spent that same
amount of money on upscale business services, high-end manufacturing, creation of new businesses, technology transfer, if it
spent those incentives for businesses to invest in new plant and equipment, would it have gotten a better return on that
money? That's what I mean by wealth creation versus job creation."
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Lewis is not necessarily opposed to Gov. Rod Blagojevich's proposed gross receipts tax, but he does have some
reservations. He said he understands that the state needs to generate more revenue but worries that the GRT may have a
negative impact on the state's economy - particularly in cases where the supply chain is several layers deep.
Doug Whitley, president and chief executive officer of the Illinois State Chamber of Commerce, is an unabashed critic of
the governor's tax proposal. He says this is just the latest in a long line of tax, fee and cost increases on Illinois
businesses - including two hikes to the minimum wage, raises to workers' compensation benefits and costs, an increased
unemployment insurance levy and raises on more than 350 fees that are paid by employers.
The gross receipts tax is particularly devastating, according to Whitley, for a couple of reasons - the main one being
competitiveness. Whitley says he fears that Illinois businesses will be forced to buy products from suppliers outside the
state of Illinois just to stay competitive, and he cites a real-life example.
Whitley has been traveling the state meeting with citizens and business owners. He said he was recently at a meeting in
Downers Grove and a manufacturer stood up, holding a product in his hand and said he manufactures and sells the product for
seven cents per unit. The businessman proceeded to identify half a dozen different suppliers from whom he buys to make his
product - all are Illinois companies. According to Whitley, the man said that if each of these suppliers adds the 2 percent
gross receipts tax to his cost, he will be unable to compete and will have to close his Illinois plant and move all his
production to his plants in Iowa and Tennessee.
Whitley said he's heard similar stories around the state and that he's trying to convey to the Illinois legislature how
devastating the governor's tax proposal would be.
"I think the governor has bitten off more than he can chew," Whitley said. "The governor has tried to characterize this
as a Big Business vs Everybody Else battle, but everybody who owns or manages a business understands what their cost
structure is and they're all talking to their accountants, they're all pushing a pencil and they all recognize what the
implications are for their businesses. We've seen more activism on the part of businesses, particularly privately held,
family-owned businesses. They understand it, they get it and I think employers in Illinois truly feel threatened by this
proposal."
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