Category Archives: Labor & workforce

Virginia’s Top 10 Stories (Told and Untold) of the Year

Phew! I finally made it through the all-consuming Christmas season, and I’m still alive to tell the tale. Christmas is a wonderful but grueling time of year for the Bacon family, marked by numerous feasts, expanding waistlines, excessive gift giving, shrinking bank accounts, and considerable out-of-town travel to distant relatives. But I’m back in the saddle at the Bacon’s Rebellion global command headquarters and eager to get the blog cranked back up.

Many publications publish a retrospective look at the “Top 10 Stories of the Year.” I have never done this at Bacon’s Rebellion, but perhaps it is time. A few obvious candidates for the Top 10 stories in Virginia’s political-public policy realm come to mind. Please feel free to add, subtract, modify or opine upon this list in the comments.

  1. Republican wipe-out in the November 2017 election. In a wave election driven largely by anti-Trumpism, voters obliterated the seemingly insurmountable Republican majority in the House of Delegates and elected Democrats to all three statewide offices. The Northam administration will look and act a lot like the McAuliffe administration, but it will have more friends in the legislature.
  2. Civil War statues and the Charlottesville riot. Virginia became the cockpit of U.S. culture wars and the debate on race as national and local media alike fixated on statues that memorialize Civil War generals. The controversy exploded as outsiders flocked to participate in, and oppose, the United the Right rally in Charlottesville.
  3. Virginia’s lagging economy. The U.S. economy gained momentum during the first year of the Trump administration, but Virginia’s economy, once a national growth leader, continues to under-perform. Caps on military spending have hobbled growth in Northern Virginia and Hampton Roads, while Virginia’s rural, mill-town economy continues to struggle. Governor Terry McAuliffe has shined as the superlative state salesman, but his policies have not budged economic fundamentals.
  4. Dominion on the defensive. Dominion Energy, a dominating political presence in Virginia, was a big loser from the election, as an unprecedented wave of anti-Dominion politicians was elected to the General Assembly. Despite making great progress toward solar energy, the electric utility found itself under attack for its rate freeze, the Atlantic Coast Pipeline, and coal ash disposal. In a dramatic, end-of-year gambit, Dominion proposed upgrading its transmission and distribution systems to a more resilient, renewable-friendly smart grid.
  5. Higher-ed mobilizes to defend status quo. The year began with sharp criticism of Virginia’s public colleges and universities for runaway costs, tuition and fees. The year closed with an industry P.R. blitz highlighting the link between higher ed and economic development. Virginia is nowhere near a consensus on how to balance the competing imperatives of affordability, access, workforce development, and R&D-driven innovation.
  6. Death spiral for Obamacare. The Affordable Care Act health insurance exchanges in Virginia entered the year in a slow-motion death spiral due to internal flaws and contradictions. Policies enacted by Congress and the Trump administration accelerated their swirl into oblivion, while offering nothing obvious to replace them. The election of Democrat Ralph Northam will renew the debate over expansion of Medicaid, all but guaranteeing that the focus in Virginia will be on the zero-sum question of who pays for health care rather than how can we improve productivity and outcomes in order to lower costs for the benefit of all.
  7. Interstate 66 and HOT lanes. The McAuliffe administration advanced its signature contribution to Virginia’s transportation infrastructure by developing major upgrades to Northern Virginia’s I-66 transportation corridor. The opening of HOT lanes inside the Beltway erupted in controversy over the fairness and effectiveness of using dynamically priced tolls to ration scarce highway capacity.
  8. Accountability in K-12 education. By some measures, Virginia’s system of public schools made progress in 2017 but by other measures it continued to struggle. One of the most important trends, neglected by the media, is the continued effort by state bureaucrats to use Standards of Learning tests to hold local schools accountable and the continued gaming of the rules by local officials to avoid accountability. Meanwhile, revisions to disciplinary policies to advance social justice concerns has undermined school discipline and made a difficult job — teaching disadvantaged kids — even more difficult. The breakdown in discipline makes it ever harder to recruit teachers to the most challenging schools.
  9. Salvaging the Metro. The Washington Metro heavy rail system needs billions of dollars to compensate for past failures to invest in maintenance, even as it struggles with union featherbedding, declining ridership, and an unwieldy governance structure. Representatives from Virginia, Maryland, Washington, D.C., and the federal government can’t seem to agree on much. Metro is critical for the functioning of the Northern Virginia economy, but Virginia wants to see labor and governance reforms before coughing up billions of dollars to prop up a failing system that, lacking those reforms, inevitably will come back and ask for more in the future.
  10. Turn-around at Virginia’s ports. This end-of-the-year list is gloomy, with an emphasis on crumbling and failing institutions. But there is at least one good news story (which I have neglected to cover on this blog): the revival of the Ports of Virginia. Traffic is booming and profitability has revived.

Fewer Young People, More Geezers Working These Days

Source: StatChat blog

The percentage of young people (ages 16 to 25) participating in Virginia’s workforce has been sliding over the past 15 years, while the percentage of old-timers (65 years or older) in the workforce has been increasing.

The percentage change of geezers in the workforce increased 59% between 2001 and 2016, according to data published by the Demographics Research Group of the University of Virginia on the StatChat blog. By contrast, the percentage of the working 20- to 24-year-olds slid 11%, while the percentage of teenagers (ages 16 to 19) tumbled 24%.

The percentage of young people (ages 16 to 24) enrolled in school has been rising steadily since 1960. The big change in Virginia has been a marked decline in the percentage of students who are working while in school, as seen in the graph below. StatChat sees this as a good thing:

A greater proportion of teens are now choosing not to work in order to dedicate more of their time to school studies and to non-work-related extracurricular activities, perhaps to gain a competitive advantage in admission to postsecondary educational programs.

That’s one explanation. Another is that young people today don’t have the same work ethic as their elders. Members of the most affluent generation in American history would prefer to spend more time finding themselves, “giving back,” or following their bliss than submitting to the grind of a regular job. That’s not true of all young people, some of whom work very hard, but I have a hunch that it’s fair as a generalization.

The Demographics group did not proffer an explanation of why more seniors are working, but I’ve got a hunch. Baby Boomers may have been a hard-working generation, but they weren’t very frugal. The cohort now reaching retirement age did not do a very good job of saving for retirement. Now Boomers are finding they have to work longer to make ends meet. Just a hunch.

Plugging “Mercy” into the Judicial System

O. Randolph Rollins, founder of Drive to Work.

Just when it looked like the country was so locked in partisan gridlock that no one could agree about anything, along came the Republican-dominated General Assembly, the Democratic governor, and the Virginia Supreme Court to put into place reforms that make it easier for people owing court fines to keep their drivers licenses and continue driving to work.

More than 600,000 Virginians have had their drivers’ licenses suspended for failure to pay court fines, and nearly 200,000 have had them suspended for drug offenses unrelated to driving. The penalties, which arose from war-against-drugs legislation in the 1980s, trapped people in a cycle of poverty. But over the past decade, the unintended consequences have grown too big to ignore.

As House Speaker William H. Howell described it during a panel discussion at the annual banquet of the Drive to Work non-profit Monday, the suspension of drivers licenses for failure to pay court costs is reminiscent of 18th-century debtor’s prison. If someone can’t pay his court debts, he can’t drive. If he can’t drive, he can’t work. If he can’t work, he can’t pay his court fines. And if he gets caught driving repeatedly with an unsuspended license, he goes to jail… where he can’t work or repay fines.

As it became increasingly clear that the license-suspension penalty was adding immeasurably to the hardship of poor Virginians — an awareness raised largely by the Drive to Work program — a bipartisan consensus emerged that the system needed to change. After picking at the edges of the problem for several years, the General Assembly passed six bills in the 2017 session addressing the drive-to-work issue.

Perhaps the most significant reform was the measure that gives judges more leeway to consider an individual’s circumstances before suspending his or her driver’s license. A law enacted in 2015 conveyed a policy message to the judiciary that they should apply the law more flexibility, but provided few specifics. The Judicial Council, which is charged with overseeing the rules and procedures of Virginia’s judicial system, issued guidelines to local judges on how to apply the law. In 2016, the chief justice of the Supreme Court appointed a panel to devise “rules of law” that carried greater weight than the guidelines. Early this year, Del. Manoli Loupassi, R-Richmond, introduced a bill that would embed the rules of court into state statute.

Speaking in the panel discussion, Loupassi described how he thought his bill had “zero percent” chance of passing until Governor Terry McAuliffe and Secretary of Public Safety Brian Moran made it an issue. Before he knew it, other key legislators fell in line. “It’s a great thing,” he said. “There is something inherently good and positive about people working.”

Associate Supreme Court Justice William C. Mims praised the bipartisan nature of the legislation. The reforms have occurred the right way, he said. They weren’t imposed by judicial decree but emerged organically from the interaction between the General Assembly, the Supreme Court and the McAuliffe administration, which added a key provision to the bill.

“The system worked, and it worked for all the right reasons,” he told Bacon’s Rebellion. The courts “plugged mercy into the equation.”

Related laws enacted this year created a uniform set of standards for people with suspended licenses to repay their court fees, and gave judges more discretion not to suspend the driver’s license of some one convicted of a first-time marijuana possess in offenses unrelated to their driving.

In a keynote speech, McAuliffe framed the drive-to-work initiatives as part of a larger effort to make it easier for felons to return to productive lives after their release from prison. He cited other programs such as transferring youths from central state-run facilities to locally based programs near their homes, cutting the cost for prisoners to make phone calls and maintain contact with family members, and starting programs that help felons get their state ID cards and drivers’ licenses before their release from prison. It’s no accident, he added, that Virginia has the lowest recidivism rate in the country.

“We want everyone back in society,” he said. “We want to help their re-entry. We want them providing for their families, and paying taxes.”

While great progress has been made, O Randolph Rollins, founder of Drive to Work, said more remains to be done. Looking ahead, he wants to decouple drug convictions from the loss of driving privileges. The law enacted in the 2017 session, which relaxed the penalty for marijuana possession, was a “baby step” in the right direction, he told Bacon’s Rebellion. He wants to break the link between all drugs — even including cocaine, heroin and meth — and driving privileges.

Roughly 185,000 Virginians have had their licenses suspended for drug offenses, he said. Only about 1,000 of those offenses were tied to driving, such as driving under the influence of drugs. If lawmakers want to put drug abusers in jail or go to treatment, that’s a different debate. But it makes no sense to take away their right to drive, he said. Taking away their license does little to deter them from abusing drugs. But it does interfere with their ability to make a living and support a family.

Corporations Tapping Virginia’s Under-Employed Labor Market

Hunter Willis, left, doubled his income by switching jobs from a call center to AvePoint in Richmond. Photo credit: Wall Street Journal.

A fascinating trend in the national job markets appears to be benefiting Virginia. A front-page Wall Street Journal article today is date-lined Richmond, Va.:

Pressed for workers, a New Jersey-based software company went hunting for a U.S. city with a surplus of talented employees stuck in dead-end jobs.

Brian Brown, chief operating officer at AvePoint, Inc., struck gold in Richmond. Despite the city’s low unemployment rate, the company had no trouble filling 70 jobs there, some at 20% below what it paid in New Jersey. New hires, meanwhile, got more interesting work and healthy raises.

As the unemployment rate approaches full employment, around 4%, companies are tapping the reservoir of under-employed — people working part-time, stringing together gig-economy work, or simply not fully utilizing the skills and capabilities they were trained for. It turns out there are a lot of those people in Virginia.

Here’s another example, which didn’t make it into the WSJ article: The Roanoke office of California-based PowerSchool will add 96 jobs and relocate to the former Norfolk Southern office building downtown.

PowerSchool’s expansion, announced Friday, will help offset the loss of more than 400 office jobs the railroad had eliminated in 2015, reports the Roanoke Times. The company expects the new jobs to pay an average annual salary of $68,116, 50% higher than today’s prevailing average wage in the city. The positions will include software development, customer service and administration and will filled during the next three years. 

Roanoke is shifting from being a “train city to a brain city,” said Roanoke Mayor Sherman Lea.

After years of sub-par economic growth since the 2008 recession, prosperity is finally trickling down from the millionaires and billionaires who benefited from booming stock and bond markets to everyday Americans. As the labor market tightens, corporations are still slow to raise general wages, but by tapping hidden corners of the economy they are creating better job opportunities for thousands.

The WSJ estimates the number of part-time workers who would prefer to work full time is about 5.3 million, or about 3.2% of the civilian workforce. That’s down from 6% at the depth of the recession but still high by historical standards.

AvePoint faced stiff competition for qualified workers in Jersey City, across the Hudson River from New York City, recounts the WSJ. Rather than increase worker pay in New Jersey, the company hired a site-selection consultant to review some 20 other locales. Richmond fit the bill. Although unemployment was only 4%, under-employment was pegged at 12%.

AvePoint pays its Richmond workers about 20% less than its New Jersey employees, but CEO Brian Brown says its Richmond workers enjoy more buying power. Median housing prices in the city are 40% cheaper. Indeed, AvePoint’s experience in Richmond has been so positive that Brown is making the city his operational headquarters. The company plans to have 200 employees there by the end of 2018.

I’ll take steady, incremental growth generated by a lot of midsize employers like Avepoint over a transformational investment by Amazon any day.

Hampton Roads the Dragging Anchor on Virginia Job Growth

We’ve talked a lot on this blog about Virginia’s ailing mill-town economy. But the real economic laggard is Hampton Roads. Based on July 2017 Bureau of Labor Statistics data, all but one of Virginia’s metropolitan regions achieved job growth compared to 12 months previously. Hampton Roads lost 0.4% of its jobs.

Harrisonburg showed the strongest job growth, followed by Washington (which includes Northern Virginia), Richmond, Charlottesville, and Blacksburg, at 2.6% job growth. University towns, it seems, are doing just fine, as are Northern Virginia and Richmond. The smaller metros without a major university are growing but at slower rate.

Then there’s Hampton Roads. Here’s the BLS chart showing how the region’s job creation, never strong since the end of the recession, has dipped below zero several months in the past year. Job losses are concentrated in the following occupational categories: trade, transportation and utilities; information; financial activities; and leisure and hospitality.

(I couldn’t find the numbers for non-metropolitan Virginia. If someone can point me to them, I will add that data.)

Should We Subsidize Rural Economies?

Last week I offered a point-by-point review of Democratic gubernatorial candidate Ralph Northam’s plan to revitalize rural Virginia. In rough summary, I concluded that the plan wouldn’t accomplish much, but on the other hand, it wouldn’t cost much either. The Northam proposals had considerably more merit than a lot of ideas — such as a $15-per-hour minimum wage — that he could have put forth.

Writing in the Richmond Times-Dispatch op-ed section, however, Bart Hinkle took issue with core assumptions of the Northam plan.

First, Hinkle noted that investing in job creation in Southwest Virginia is not necessarily the optimal solution for reducing unemployment. Perhaps people could better improve their circumstances by moving to urban areas that offered greater economic opportunity.

Of course, some people in Southwest Virginia might want to improve their economic circumstances and still stay put. But is it the state’s job to ensure that they can? And if the answer is yes, then what does that imply about, say, struggling economic sectors? Should the state help people stay in fading industries as well as fading regions? If not, why not?

Hinkle also questions the value of providing workers skill-specific training. He cites a Journal of Human Resources study that suggests technological and other changes often leave skill-trained workers behind, and that employers, rather than retrain them, often let them go and bring in new talent. The real need, the study suggests, is “for more general cognitive skills that give workers the ability to adapt to new circumstances and new jobs.”

On a more philosophical plane, Hinkle wonders why the job of providing specific workforce training has devolved to the state in the first place.

If companies need workers who are trained to perform specific tasks, then why don’t those companies do the training themselves? Why should the state — i.e. the taxpayers — shoulder the burden of doing it for them?

Labor, he suggests, is a production input just like raw materials. If Acme Semiconductors wanted to build a plant in Virginia, and it asked the state to ensure a steady supply of silicon, the state probably would tell Acme to pound sand. But if Acme says it wants workers trained to work in a clean room, Virginians feel compelled to help out.

Bacon’s bottom line: These are all good questions.

I am reminded of a Daily Signal article published last week about a federal-state-private job-training program set up in Kentucky coal country, practically next door to Virginia’s coal-mining counties, to teach people in 20 weeks of classroom training how to code. Under the banner of turning “coal country” into “code country,” the program paid interns $400 a week to learn how to write software code, and Interapt promised high-paying jobs to those who completed the course. But after a year and $20 million, the program has fallen far short of expectations. Only 17 people have found jobs in the tech sector.

The Kentucky program may or may not be typical of government-backed workforce training programs generally. Some programs deliver modestly positive results; others are scandalously, almost fraudulently bad. But even if they do help people find jobs, how long will skill sets from a 20-week training program stay relevant? How many graduates will have jobs requiring those skills three, four, or five years from now? Hinkle raises an important point: If companies require workers to possess certain skills, why don’t they train their own? Why has this obligation been fobbed off to government?

While acknowledging the value of Hinkle’s questions — I do lean libertarian, after all — I frame the issue differently. Rural Virginians do need help. If they can find local jobs through targeted training programs, great. If not, mastering new skills will make it easier, by making people more employable, for them to move to jobs in growing metropolitan areas, just as Hinkle thinks they should do.

If state government is going to subsidize anything under the banner of economic development, it should be education and training. Given that I favor continued state support for higher education mainly benefiting the upper middle-class, as noted here, how could I not endorse training expenditures to benefit those lower on the socio-economic ladder?

However, I am acutely cognizant of the dangers in turning job training over to untested government programs or public-private partnerships. Any program must be subjected to rigorous review to ensure that the benefits are commensurate with the costs. Resources are too scarce. We cannot afford to waste them.

Update: The obsession with rural economics is decades old. A couple of months ago, Garland Pollard penned a profile of Dr. Wilson Gee, a professor of Rural Economics and Rural Sociology at the University of Virginia beginning in 1923. His view, as Pollard puts it: “The United States is a rich country, even if we have nothing else but our land. Our farms and agriculture, worked properly and carefully, can provide riches for us, beyond measure, in health and well-being, as well as a decent, fair living. Compared to Europe, Africa and Asia, there is an abundance here, but we have have to work hard and make good use of it.”

Northam’s Affordable, Not-So-Ambitious Plan for Reviving Rural Virginia

Ralph Northam, Democratic Party candidate for governor, grew up on the Eastern Shore, so it’s not surprising that he has given considerable thought to the challenges of economic development in Virginia’s small towns and rural communities. Earlier this week, he unveiled his plan for economic growth in rural Virginia.

If you’re looking for a “Marshall Plan” to reinvigorate rural Virginia, this is not it. The plan is not ambitious, and there may not be enough in it to get rural Virginians especially excited about Northam’s candidacy. But it has this virtue: Proposals don’t require spending vast sums of money, so they are at least feasible from a budgetary perspective. This is a plan that Northam, if elected, has a realistic chance of implementing.

Personally, I distrust “Marshall Plan” approaches to chronic social and economic challenges. Instead, in our fiscally constrained era, I’m a fan of low-cost, low-risk initiatives that will likely yield a positive return on investment. In that spirit, I’ll start by illuminated the most promising ideas in the Northam plan and work my way down the list.

Virginia’s Rapid Readiness Program. Northam proposes a “rapid readiness program” similar to successful workforce training programs in Georgia and Louisiana. “We could get this program started here in Virginia with a ten million dollar investment, with funding tied to business participants, number of projects delivered, and individuals successful trained,” states his plan.

Assuming that Northam is drawing upon the thinking of Virginia Economic Development Partnership CEO Stephen Moret, who set up the Louisiana program, the program would function as a extension of Virginia’s economic development effort by offering a workforce-training solution as an incentive for corporations to invest in Virginia. The program would differ from existing educational/training offerings by creating a team capable of providing customized training within a time frame required by corporations to get their operations up and running.

While the rapid readiness program would be applied across the state, rural areas arguably would benefit the most because such training applies most frequently to light manufacturing projects that typically locate in smaller communities.

I’m not sure $10 million is sufficient to fund this program properly. Regardless, there is a readily available pot of money — Northam and Moret no doubt would disagree with me about this — and that is the Commonwealth Opportunity Fund, which the state dips into to provide “incentives” for economic development projects. But as Moret himself said in a presentation to the State Council of Higher Education for Virginia two days ago, workforce is one of the top three factors (and often the No. 1 factor) that corporations consider when deciding where to locate. Incentives are a secondary factor. Shifting money from incentives to workforce training looks like a no-brainer to me.

Expanding renewable energy. Expanding solar generation is viable rural economic development strategy. Solar farms may create few permanent jobs, but they do increase the tax base, and they often pay streams of royalties to landowners (depending on how particular deals are structured).

“In my home county of Accomack on the Eastern Shore,” says Northam, “the commonwealth’s largest solar farm is in the process of being built, which will ultimately power several data centers owned by Amazon.”

Northam says he is committed to working with Virginia’s electric utilities and the General Assembly to “remove barriers that stand in the way of developing and expanding clean energy efforts.” Note the phrase “remove barriers.” Northam is not asking for new subsidies or tax breaks. Solar doesn’t need subsidies; market forces increasingly favor solar. Rather, Northam wants to remove obstacles that inhibit businesses, entrepreneurs and homeowners from building rooftop solar and solar farms.

Utility-scale solar like the Amazon Web Services farms in Accomack need little help — Dominion Energy and Appalachian Power have ample incentive to deploy solar on a large scale. The barriers exist at two levels: local zoning codes and state regulatory policy. Local governments need to make their zoning codes more solar friendly. Meanwhile, state lawmakers need to craft “net metering” legislation that balances the interests of independent solar producers with those of electric utilities who maintain the electric power grid that everyone depends upon.

Broadband for all. Most people would accept the proposition that broadband Internet service is critical infrastructure for economic development today. The problem is that sparsely populated rural areas are not attractive markets to Virginia’s big broadband providers.

Northam points to a pilot project in Southside Virginia in which Virginia’s Tobacco Commission, Microsoft, and the Mid-Atlantic Broadband Company utilize unused portions of the television broadcast spectrum to push out high-quality wireless broadband. So far, more than 100 households have been connected, and the number could reach 1,000 by year’s end.

“Under this innovative public-private program, Virginia’s share of the cost is $500,000, leverage private investment for a total investment of $1 million,” states the Northam plan. “This commonwealth should look to replicate this successful program across rural Virginia.”

How so? He would pull together disparate broadband initiatives across the commonwealth under the direction of a cabinet official “who will be responsible for getting more people connected.” Northam also advocates legislation similar to that adopted in Minnesota that creates a clear set of metrics, including upload and download speeds, to evaluate broadband access. Whatever else you say about these proposals, it doesn’t sound like they will break the bank.

Expanding the University of Virginia-Wise. Northam proposes increasing the educational offerings of the University of Virginia-Wise to encompass high-need, high-growth disciplines such as cybersecurity, unmanned aerial systems, energy, and computer engineering and programs. Expanding UVa-Wise would cost about $15 million initially, Northam says, with a possibility of scaling up funding over time.

We have a unique opportunity … to transform UVA-Wise into an international destination for students and researchers. This will have a tremendous effect on the regional economy because when you can attract students and top talent from around the world for research and development, grants will follow. And with grants and applied research, business opportunities will soon follow. And structured correctly, these businesses will not only start up in Southwest Virginia, but they will remain and grow.

The idea of creating “innovation districts” around college campuses is a hot one right now, and anyone who has seen the Virginia Tech Corporate Research Center can readily understand the potential for economic development near college campuses. But Tech is the top research university in the state. Whether its success can be replicated on even a modest scale by a tiny, largely unknown newcomer is questionable. Tech has invested hundreds of millions, maybe billions, of dollars, over decades building academic programs, hiring star faculty, recruiting graduate students, and assembling the administrative infrastructure it takes to win research contracts.

Competing for research dollars is tough. Well established institutions such as Old Dominion University and the College of William & Mary have seen their research programs falter in recent years. It is a stretch to suggest that a $15 million investment in Wise would spark the miraculous transformation that Northam describes.

Startup tax plan. To help attract and retain new business in rural and economically depressed regions of Virginia, Northam proposes a “zero BPOL and merchant’s capital tax for new startup and small businesses .. for the first two years. This will drive economic activity and startups to rural areas, and result in no loss in existing revenue to local governments.” Once local businesses take root, they will start paying taxes — a win-win.

It’s good to see a Democratic Party candidate advocating tax cuts! But the proposal lacks crucial detail. BPOL and merchant’s capital taxes are local taxes. How does Northam propose eliminating those taxes for two years? Will the state just command localities to change their ordinances? Will the state reimburse them for lost revenue? Does he have the remotest idea of what the initiative would cost? Finally, while the BPOL and merchant’s capital taxes are near the top of the list of things that small businesses in Virginia hate, is there any body of evidence suggesting that a mere two-year reprieve will stimulate more startups?

There’s more to Northam’s plan, but the other proposals, which address workforce development, are statewide in nature and don’t address peculiarly rural issues. So, I won’t dwell on them here.

Perhaps the best thing that can be said about this plan is that Northam isn’t making extravagant promises that he can’t keep. These narrow-bore proposals won’t exactly spark a rural Renaissance, but for the most part, they seem politically and fiscally feasible.

Taking a Peek Behind the CNBC Best-State-for-Business Ranking

Click for more legible image.

Governor Terry McAuliffe said yesterday that he was “thrilled” Virginia had moved up six spots to 7th place in CNBC’s Best States for Business 2017 rankings — and when McAuliffe says he’s thrilled, you can take that to the bank. Whatever else you think about the job he’s done as governor, there is no denying his ardor for his job as Virginia’s chief economic-development salesman and his enthusiasm for every Virginia accomplishment large and small.

In a prepared statement issued yesterday, McAuliffe put his spin on what the news said about his leadership as governor.

“The effects from federal sequestration in 2013 did substantial damage to our economy. When I took office, we came in with a clear and simple plan to diversify our industries and make Virginia less dependent on the whims of Washington. Thanks to significant reforms and historic investments in our education system, innovative workforce development strategies and the record-breaking recruitment of new business capital and jobs, we are mitigating the damage of federal dysfunction and building an economy that works better for everyone.”

McAuliffe isn’t doing anything that any other governor wouldn’t do — taking credit for good news — but the public should take assertions like this with a grain of salt. Dramatic rises and falls in CNBC’s rankings could reflect changes in the economy and CNBC’s scoring methodology as much as anything that McAuliffe (or his peers and predecessors) did.

Take a look at the chart above, which breaks down CNBC’s overall score by 10 categories. Virginia performs worse in five categories since McAuliffe took office in 2014: infrastructure, cost of business, technology & innovation, education and business friendliness. Despite what McAuliffe terms the state’s “historic investment in education,” Virginia’s education rank is lower than when he became governor.

McAuliffe can claim credit for improvements in access to capital, cost of living, and quality of life if he wants to, but it strains credulity to suggest that the incremental policy changes he made as governor had much effect on them. 

Virginia’s gain as a best state to do business – from No. 8 to No. 7 — over McAuliffe’s tenure can be attributed mainly to the Old Dominion’s higher rankings for “workforce” and “economy.”

CNBC gives “workforce” the heaviest weight in its ranking — 425 out of 2,200 points, reflecting the increasing emphasis that businesses give the attribute. Fortunately for us, that is Virginia’ top-performing category. The Old Dominion ranked No. 2 in the country this year. As a bonus, the weight that CNBC assigned the category increased from 400 points last year. To some degree, Virginia owes its better best-place-for-business rank to changes in the way the network calculates its scores.

Now, it’s also true that Virginia’s workforce rating improved as well. Here’s what goes into CNBC’s scoring for that category (my emphasis):

We rate states based on the education level of their workforce, the numbers of available employees and the states’ demonstrated abilities to retain college-educated workers. We consider each state’s concentration of STEM (science, technology, engineering, and math) workers, increasingly in demand by business. We measure workforce productivity based on each state’s economic output per job. We look at the relative success of each state’s worker training programs in placing their participants in jobs. We also consider union membership and the states’ right-to-work laws.

Virginia scores well in the “workforce” ranking in large part because of the state’s ability — or perhaps I should say Northern Virginia’s ability — to recruit educated workers from outside the state. It is true that Virginia’s higher-ed system is producing more STEM degrees than ever before, but producing STEM degrees is no guarantee of keeping STEM degrees in the state — just ask the state of Michigan. It is also true that McAuliffe signed the Virginia GO workforce legislation, but that program has not been in effect long enough to have a material influence on workforce training programs.

Clearly, Virginia is doing something right when it comes to building a 21st-century workforce, but it’s far from clear that recent actions emanating from Richmond can explain the short-term fluctuations in the CNBC scoring for the workforce indicator.

Virginia’s “economy” rank has improved as well in the past year, accounting for 300 points in CNBC’s 2,200-point ranking. McAuliffe has done an effective job as Virginia super-salesman. And he has worked to diversify Virginia’s economy from its reliance upon federal defense spending, touting everything from drones and cyber-security to Virginia’s ports and renewable energy. But have his actions been so extraordinary as to move the needle on Virginia’s “economy” score?

Here’s how CNBC computes its score for that category:

We look at economic growth, job creation, consumer spending, and the health of the residential real estate market. We measure each state’s fiscal health by looking at its credit ratings and outlook, as well as its overall budget picture. Because of their own economic impact as well as the ripple effect, we consider the number of major corporations headquartered in each state.

Consumer spending and the residential real estate market are not sectors that state policy affects. Overall economic growth is influenced mainly by (a) the level of federal spending and (b) Virginia’s mix of fast- and slow-growth industries. As for the state’s fiscal health, well, the governor shares responsibility for that with the General Assembly.

Bacon’s bottom line: My purpose is not to discredit McAuliffe’s performance as economic-development chieftain, which has been pretty good overall, but to dampen expectations that this governor (or any governor) has much impact on year-to-year changes in Virginia’s business climate. Burnishing a state’s business climate takes a long-term commitment from governors, legislators, business and civic leaders, and local government officials. I’ll have more to say about that in my next post.

How Computer Games Are Sapping the Initiative of Young Men and Shrinking the Workforce

We’re all familiar with the stereotype of the young male slacker, disinterested in looking for work and holed up in his parents’ basement, wiling away the time surfing the Web or playing computer games. Many of us have observed such behavior in our own homes. (I’m not mentioning any names.)

Now four economists writing for the National Bureau of Economic Research have quantified how computer gaming has led to a decline in workforce participation.

Writing in “Leisure Luxuries and the Labor Supply of Young Men,” Mark Aquiar, Mark Bils, Kerwin Kofi Charles, and Erik Hurst start with the observation that younger men, ages 21 to 30, have experienced a larger decline in hours worked over the past 15 years than women and older men.

Time-use studies show a dramatic shift since 2004 in the amount of time that 21- to 30-year-olds have devoted to leisure — video gaming and recreational computer activities in particular. On average, the age cohort dedicated 2.3 hours more to leisure activities in 2012-2015 than in 2004-2007. Of that increase, recreational computing and video gaming accounted for 82% of the increase.

The big question: Are young men spending more time playing computer games because they are working less? Or are they working less because they are playing computer games more?

The authors argue that the declining cost of computer and gaming hardware, along with a revolution in online gaming, made gaming late in the decade of the 2000s more appealing to young men.

This chart shows how between 2009 and 2010, the employment rate for young men plunged much more than for those over 30.

Examining the data, the authors rule out differential changes in wages for the shift. Changes in real hourly wages for men with less than 16 years of education tracks that of their elders almost exactly. Rather, in the tradeoff between gaming/video watching and other daily activities (eating, sleeping, personal care; working, job searching, home chores, child care and education), leisure became more attractive. On average, young men spent more time with computers and less time on other things, because they found gaming to be so much more enjoyable.

To some degree, this behavior is subsidized indirectly by parents. In 2000, 23%  of  younger men and 34% of less educated younger men lived with a close relative, the authors write. By 2015, 35% of all younger men, and 49% of those with less education, lived with a close relative.

Young men found this working-less/freeloading-on-parents arrangement to be largely satisfactory, according to happiness responses in the federal General Social Survey. Write the authors:

The happiness of younger non-college men actually increased by 7 percentage points since the early 2000s, from 81 to 88 percent. So, in conjunction with a steep decline in employment, reported satisfaction has increased for these younger men. … Among non-college younger men, both the employed and non-employed exhibit increases in happiness. This pattern stands in stark contract to that for older workers.

After crunching a large volume of numbers and running them through indecipherable equations, the authors estimate that the computer-recreation revolution, by increasing the value of leisure, accounts for 23 to 46 percent of the decline in market work for younger me during the 2000s. “Innovations to computer and gaming leisure may have dynamic effects on labor supply. It is possible that individuals develop a habit (or addiction) for such activities.”

Bacon’s bottom line: Yes, computer gaming and web surfing can be addictive — especially for young men, who seem to be wired differently than women or older men. If you’re down on your luck and can’t find work, it’s easy to get lost in World of Warcraft instead of looking for a job or earning workforce credentials — especially if Mom and Dad are covering the room and board. Some people seek escapism through alcohol and drugs, others through computer games. I’m willing to bet that the underlying brain chemistry — triggering the release of dopamine — is the same. I know from personal experience that it’s entirely possible to blink your eyes and shake your  head, and realize, “holy mackerel, it’s three o’clock in the morning!”

In the ongoing debate over joblessness and income inequality, it is helpful to understand that what many people assume to be a problem of structural rigidities in the economy reflects, in fact, in part a sociological problem. Many young men — enough to affect the workforce participation numbers — would rather spend their time playing games than getting serious about earning a living.

Drip… Drip… Drip… Another Richmond Company Moves from the Burbs to Downtown

Bob Hilb

The Hilb Group, a fast-growing insurance brokerage with more than $125 million in revenue, has made the decision to move its headquarters from the suburban Stony Point office to the Riverfront Plaza in downtown Richmond.

CEO Bob Hilb told Richmond BizSense that he had been looking for a new location for a year in anticipation of the lease expiring on his 5,000-square feet office in 2017. “While it’s a great building, it has turned into very much a medical office space,” he said. “There’s nothing wrong with that; it just doesn’t fit our vibe.”

And what’s that vibe? It’s all about the Millennials.

The downtown office will have a more modern, open layout — “a little less wood and more glass,” said Hilb. The company will move only 17 of its 800 employees into the new 9,000-square-foot digs, but he expects the number to grow as the company continues to roll up smaller, independent insurance agencies around the country.

“A lot of a people in our business, you walk into their office and it’s like you’ve walked into a hunting lodge,” he said. “As we grow, there’s no question that being able to attract millennials and having a really nice progressive office makes a difference.”

Bacon’s bottom line: Technically, the Hilb Group’s relocation is a Richmond-to-Richmond move. But Stony Point, located on the far western edge of the City of Richmond, was developed as a classic suburban office park surrounded by parking lots and trees. Walking to the nearby “pedestrian” mall is impractical. The office park is accessible only by automobile. The Hilb Group’s new location in the Riverfront Plaza will be in the heart of downtown near the James River.

Meanwhile, the urbanization of the City of Richmond continues apace. Union Presbyterian Seminary is moving ahead with the development of a $50 million, 301-unit apartment complex in Ginter Park, a single-family neighborhood, despite stiff opposition by neighboring property owners.

And the city planning commission has signaled its intention to rezone Scott’s Addition, a light industrial area transitioning to mixed-use residential and commercial, under a new, more urban zoning classification. Local businesses, says the T-D, would see changes to parking regulations, square footage restrictions and the allowance of small-scale manufacturing.