Modernizing Ohio’s Economic System
As the 21st century economy takes shape, Ohio continues to struggle to structurally reform its outdated economic system, reverse troubling economic trends, and regain its leadership in innovation and economic prosperity.
Labor and manufacturing markets have been changing for decades, spurred by technological change and China’s economic rise, and Ohio public policy has largely failed to make the necessary adjustments to keep pace. Battered by automation, shifting technologies, and foreign labor markets, once-dynamic, industrial Ohio cities have suffered even more than many other American cities as “old economy” employers pulled up stakes and “new economy” industries declined to take their place.
Ohio’s persistent failure to adjust public policy to changing market conditions has left the state unprepared to thrive or even compete in a global, 21st century economy. Outdated regulations, unclear rules, and short-sighted tax schemes threaten many of the potential gains that new technologies can offer Ohio, and failing to adequately train, educate, upskill, and reskill workers has deterred new companies and emerging sectors from opening operations in Ohio.
To reverse these trends and return Ohio to economic prosperity and leadership, public policy must adapt.
Opportunities & Policy Solutions
Education & Workforce Development Reform to Upskill and Reskill Ohio’s Workers
Ohio should reform education policy to better prepare workers of all ages for the new economy and upskill and reskill its existing labor force to meet the needs and expectations of employers. Unfortunately, many state and federal job retraining programs have been notorious failures—either serving as cloaked corporate welfare or simply ineffectively equipping workers with the needed skills to re-enter the labor market.
Ohio should expand available high school skills training and coursework to include more computer science and adopt model computer science curriculum standards statewide. Post-high school education funding should reflect outcome-driven metrics such as loan repayment rates, debt-to-earnings ratios, degree completion, and post-graduation employment. Ohio should explore shifting funding toward worker retraining grants to empower prospective students to spend higher education funding how they see fit. And micro-credentials and other alternatives to traditional four-year degrees should be made more affordable and available.
Read more about Buckeye’s solutions to reform education and workforce development policies in Modernizing Ohio’s Policies to Seize New Economic Opportunities.
Rewrite & Reform Antiquated Regulatory Chokepoints
Ohio has already begun to improve its regulatory code—passing a number of Buckeye-championed policies, including universal occupational license recognition, Senate Bill 255 in 2019, strong regulatory reforms in the 2019 budget, and Senate Bill 7 in 2020. Unfortunately, despite these successes, Ohio’s regulatory regime far lags other states and state policymakers should explore improving regulatory policies across several key areas.
Ohio should do more to reduce barriers to employment and attract new workers and businesses to the state. Universal occupational license recognition, along with the Buckeye-championed expanded access to telehealth services, will make it easier for people to access medical services and get the care they need.
Read more about Buckeye’s work on regulatory reform at BuckeyeInstitute.org/RegReform.
Create Regulatory Sandboxes to Attract and Retain Jobs
Other states have already built “regulatory sandboxes” that allow companies to experiment with new technologies under regulatory supervision, giving regulators the chance to craft well-suited rules for broader use. Ohio has not.
Ohio needs to build regulatory sandboxes—which are controlled regulatory and consumer-centric environments in which approved firms may experiment, temporarily exempt from specified government regulations, while supervised by subject matter expert regulators. Regulatory sandboxes ease access to investment capital by removing regulatory ambiguities that make investments in startup firms more difficult. And they provide a learning period for lawmakers and regulators to better understand new technologies and services and therefore tailor a better fitting regulatory regime.
The financial technology or fintech sector would be a logical first regulatory sandbox for Ohio to construct. The state has a ready supply of labor market talent, a sophisticated network of universities and trade schools, and boasts one of the five largest financial services sectors in the country—all materials necessary for building a successful regulatory sandbox that will make it easier for fintech firms to call Ohio home, hire Ohio workers, and serve Ohio communities. Lawmakers can then build sandboxes for other sectors such as legal services, insurance, and drones.
Read more about Buckeye’s solutions to create a fintech regulatory sandbox in Build a Regulatory Sandbox for Financial Technology Innovators.
Electric & Autonomous Vehicles
To encourage private-sector innovation and attract private equity, Ohio should also build a regulatory sandbox for emerging electric and autonomous vehicle technologies. With its mix of different traffic and weather scenarios, Ohio has the potential to attract companies to take advantage of Ohio’s natural elements with well-designed regulatory sandbox, and lawmakers should seek other regulatory reforms outside of sandboxes to make it easier to do business in Ohio. Policymakers should also focus on proven transportation and infrastructure options with well-defined, near-term objectives, and allow private-sector entrepreneurs and innovators to experiment with ground-breaking projects and technologies. Policy changes should increase—not restrict—private-sector competition, and reward—not penalize—innovation.
Drone technology is another emerging technology where Ohio should leverage regulatory sandboxes to allow drone businesses to safely experiment with their promising new technology, and provide lawmakers an opportunity to tailor appropriate regulations, such as altitude restrictions and property rights within uncontrolled airspace. Drone technology can revolutionize package and medical supply delivery, advance American geopolitical interests, reshape travel, improve agricultural production, and much more.
Read more about Buckeye’s solutions to create regulatory sandboxes for electric and autonomous vehicle technologies, and drone technology in A Policy Primer for Emerging Technology in Ohio.
Use a Light Touch When Imposing Regulations
Technology is constantly and rapidly evolving. States must consistently adjust their regulatory codes to remove unnecessary barriers to innovation and entrepreneurship, while carefully crafting rules and guidelines to protect consumers. Wherever possible, Ohio should shift its regulatory regime away from strongly codified law and toward a “permissionless innovation” system of “soft law,” or informal rules and flexible guidelines more capable of regulating rapidly advancing technology. More stringent, codified laws and regulations—although sometimes necessary for consumer safety—are often ill-fitting and obsolete protective measures quickly outpaced by technological progress.
Improve Emerging Technology Regulations to Become a 21st Century Economic Leader
New policy choices arise as new technology develops, and some guiding principles and actionable policy ideas can help lawmakers keep pace. Policies governing emerging technologies should pursue three goals: transparent and shared data collection across jurisdictions; government coordination to reduce bureaucratic red tape; and limited regulatory burdens on businesses and technology entrepreneurs. Legislative efforts should be as transparent as possible and should encourage multi-jurisdictional data sharing at every level of government.
Successful policies will harmonize and streamline burdensome local, state, and federal rules to free innovators from needless restrictions. Following these guiding principles and adopting a flexible, “soft law” presumption for emerging technology will protect consumers without stifling valuable innovation.
Increase Access to Broadband to Close the Digital Divide
Nearly one million Ohioans still lack access to high-speed internet—a problem that has created a digital divide between urban centers and rural areas of the state. Without broadband or internet access, underserved communities lack access to telemedicine, online learning and education resources, and will continue to fall behind in other forms of technological skill development. State policymakers can help bridge this digital divide and bring broadband internet to more Ohio households in several ways.
Ohio should continue to resist government-owned and controlled networks (GON) that waste taxpayer money on low quality broadband that is difficult to upgrade. Lawmakers should place guardrails on GONs by, among other things, restricting them to truly unserved areas and requiring formal business plans for their use.
Read more about Buckeye’s solutions to protect taxpayers by limiting GONs in Broadband “GON” Wrong: Remembering Why Government-Owned Broadband Networks Are Bad for Taxpayers and Better Ways to Build & Expand Broadband Service in Ohio.
Other actions Ohio policymakers should take include:
- Use targeted public grants and other cost-saving measures to make it more affordable for broadband companies to extend internet access to rural areas.
- Make vouchers available to Ohioans in underserved areas to help them pay for broadband service that best meets their needs.
- Adopt a “dig once” policy to have plastic pipe conduits for fiber-optics installed during road construction activity.
- Re-examine state and local laws and regulations that affect how broadband companies provide internet access through utility poles.
- Streamline the application process of approving permit requests and exempt broadband service providers from unnecessary fees assessed on deploying their equipment.
- Consider the idea to deposit related right-of-way fees into a fund designated for bringing internet access to underserved areas.
- Expand internet access without laying fiber-optic cable by using the state’s sizable infrastructure to extend fixed wireless technology and explore more pilot programs like Starlink satellite broadband to bridge the digital divide with satellites.
Creative options for regulatory reforms to help extend broadband to underserved communities abound and Ohio policymakers would be wise to consider them.
Avoid Digital Service Taxes to Reduce Costs on Customers
Digital service taxes can take many forms, but they invariably create perverse pyramiding effects whereby businesses pay outsized taxes compared to the success of their company. These legally problematic and constitutionally dubious taxes should be abandoned completely as an inefficient tax burden on investment and innovation.
Although digital service taxes typically target corporate conglomerates, those firms shoulder little of the tax burden. Instead, the burden is passed along to the service users—often technology startups with thin profit margins, or consumers themselves.
Instead of levying new tax burdens on digital services, Ohio should reform its tax code—making it simpler, transparent, and fair—so that emerging technology firms can survive and grow in a rapidly evolving economy.
Avoid Onerous Data Privacy Laws That Stifle Innovation
As more and more personal information and data are stored and shared online, federal and state regulators have explored regulatory options for safeguarding data and securing data privacy for consumers. Some states have achieved better regulatory results than others, and Ohio should learn from other state and federal mistakes and prioritize securing its own data before rewriting regulations for voluntary interactions between technology companies and their users.
Data privacy compliance is expensive for technology companies, especially companies with operations spanning multiple states with competing or inconsistent regulatory codes. Ohio should work with other states to harmonize their data privacy laws and enforcement to minimize compliance costs for small businesses and consumers.
Harness the Benefits of Globalization to Attract Jobs and High-Skilled Workers
Economic growth in a community is attributable to how much labor and capital are deployed and how effectively they are used. As a community’s population declines, so does the flexibility for its workers to specialize in tasks, produce more, exchange the fruits of their labor, and thereby increase prosperity. Ohio’s anemic population growth, therefore, has cost its citizens the economic benefits of specialization that lead to growth.
Policies designed to attract new workers—from other states and other countries—are needed to spur population growth and regain economic benefits that Ohio has forfeited for decades. In Ohio’s Global Fight for Talent: The Case for State-Based Visas for High-Skill Immigrants, The Buckeye Institute demonstrates how a well-designed state-based visa program for high-skilled legal immigration would address urgent problems in the Buckeye State’s job market.
The policy outlined in Ohio’s Global Fight for Talent and those outlined in Modernizing Ohio’s Policies to Seize New Economic Opportunities provide state and federal policymakers a comprehensive road map to ensure Ohio’s workers and economy both thrive in the 21st century.
As Ohio upskills and reskills its existing labor force, state policymakers should also work with federal agencies to bring high-skilled immigrants to Ohio to help spur population growth, spark long-term growth in technological innovation, and provide relief for businesses battling labor shortages.
By adopting sensible policies, Ohio can catalyze its rightful place as the leader in the ongoing transformation of the Midwest from its rust belt roots into the Silicon Heartland.
Ohio has failed to adapt to a rapidly changing new global economy accelerated by China’s emergence as an economic challenger to the United States. Policy failures have weakened Ohio’s labor market, exposed an underperforming economy that struggles to compete in an increasingly international arena, exacerbated declining population trends, and left the state unprepared to thrive or even compete in a global, 21st century economy.
But prudent policy adjustments can and should be made to regain Ohio’s economic footing. Policymakers must first recognize the longstanding problems underlying Ohio’s economic struggles and the state’s failure to adequately adjust to shifting market conditions, and then make sound policy decisions—as outlined here—specifically designed to correct those mistakes and meet the new economic challenges of the 21st century. Failing to make such necessary policy adjustments risks a stagnant Ohio economy that the 21st century leaves further and further behind.