Economic Loss East Hartford, Connecticut

Economic Loss

East Hartford, Connecticut currently has a thriving economic community. This should come as no surprise because East Hartford is the world headquarters for Pratt & Whitney Aircraft. Pratt & Whitney is a huge corporation and its economic health is highly linked to the economic health of East Hartford. To understand the impact that Pratt & Whitney has on the local economy, one needs to understand that Pratt & Whitney is the largest private employer in the entire state of Connecticut. Furthermore, the existence of a thriving business community has led to the development of several smaller, somewhat dependent businesses. For example, Pratt & Whitney recently opened a new customer training facility in East Hartford and invested just over $84 million in the local economy. Therefore, local hotels, motels, and restaurants would likely experience a severe negative economic impact if Pratt & Whitney were to close.

As of 2005, East Hartford Connecticut had 23,425 employed people and an unemployment rate of 6.5%. More importantly, the unemployment rate has not experienced a change greater than 3% since before the 1990's. As a result, it is fair to characterize the local economy as relatively stable, despite the fact that the unemployment rate is slightly higher than the national unemployment range. A stable economy means that the service sector portions of the economy have also had an opportunity to stabilize. Therefore, any fluctuations in the other portions of the economy are likely to have a dramatic across-the-board impact.

If Pratt & Whitney closed, the most immediate impact would be that 8,500 people in East Hartford would immediately be without jobs. These employees run the gamut of skills and wages, from maintenance workers to those who work in the manufacturing, to engineers and other research scientists. While some of these people may be able to find jobs in the East Hartford area, a look at the city's other major employers reveals that their economic prospects are grim. The next major employer in the city only employees just over 600 people, and the next few employers only have workforces ranging between 400 to 500 people. Therefore, it is extremely unlikely that any significant number of the East Hartford employees would be likely to find other employment in the East Hartford area. In addition, even if some people are able to find other employment, it is highly unlikely that the conditions of that employment would compare to their conditions at Pratt & Whitney; unlike the other major employers in East Hartford, Pratt & Whitney is a union business.

Furthermore, many employees in the service sector would also lose their jobs. For example, workers at hotels, restaurants, and motels would not have problems. Because these lower-wage workers, like the lower-wage workers that would lose their jobs with Pratt & Whitney, are less likely to have substantial savings or be home owners. Therefore, they are more likely to feel the immediate impact of losing a steady source of income. It is that segment of the population that is likely to seek out additional financial services above and beyond unemployment compensation.

Before looking at the impact on East Hartford's local economy, it is important to look at the impact on the national economy. The national unemployment average was 7,591,000 in 2005. Therefore, an addition of 8,500 people would represent a.11% change in unemployment. Factor in additional domestic job losses from the closing of that company, and it is very possible that the closing of Pratt & Whitney would be enough to cause a reversal in the current trend, which is a decline in unemployment rates.

Connecticut's unemployment compensation would experience the most immediate and dramatic impact. For example, if all of Pratt & Whitney's employees are entitled to full unemployment benefits, then the first unemployment cycle for those employees would result in over $4 million in unemployment benefit payments. If all of those employees remain eligible for unemployment for the full benefit period, those payments would total over $104 million. Those estimates may be high, because not all employees would qualify for the full benefit payment or for the entire benefit period. In addition, many of the employees might find other employment. However, even if the total payments are only half of the estimated totals, it is clear that the unemployment insurance system would experience a tremendous strain if Pratt & Whitney closed.

Unemployment is a state program, but local government finances would also suffer tremendously. Although Pratt & Whitney's local taxes were not available, it is clear that a multi-million dollar facility is going to have a property tax liability that exceeds the hundreds of thousands. In addition, if Pratt & Whitney is paying all of its 8,500 employees at least minimum wage, then it is paying out $2,516,000 in wages each week, which yields just under $1 million in federal, state, and local tax revenue. Therefore, it is clear that Pratt & Whitney's closing would have a dramatic impact on the state and local economy.