Category Archives: Labor & workforce

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.

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.

Charts of the Day: Job Polarization

Virginia employment change since 2008. Source: StatChat

The good news in the ongoing evolution of Virginia’s economy is that employment in high-paying occupations has increased since 2008. The bad news is that employment in low-paying occupations has risen as well while employment in middle-class occupations is shrinking.

Kathryn Crespin with the Demographics Research Group at the University of Virginia published these charts from Bureau of Labor Statistics data in the StatChat blog.

“Job polarization is certainly not unique to Virginia,” she writes, but the trend has been more noticeable here since 2008 than in the rest of the country. … Although there has been an uptick in middle-wage job growth in Virginia over the past few years, job polarization is a nationwide, long-term trend that has developed over the past few decades and shows no signs of resolution any time soon.”

Virginia employment change since 2008. Source: StatChat

Marriage, Fertility and Male Earnings

North Dakota fracking: higher male incomes did not translate into higher rates of marriage.

One of the great debates in the social science of poverty asks what accounts for the decline in marriage and the increase in out-of-wedlock births. There is a broad consensus among scholars of diverse ideological persuasions that children born into stable marriages tend to fare better in life than those raised by single mothers. The question is why the institution of marriage has declined so precipitously among lower-income Americans even while it remains strong and vibrant among affluent Americans.

In a new paper, “Male Earnings, Marriageable Men, and Nonmartial Fertility: Evidence from the Fracking Boom,” Melisa S. Kearney and Riley Wilson frame the issue this way:

In 2014, over 40 percent of all births in the U.S. were to an unmarried mother, with an even higher rate of 62 percent among non-college educated mothers. A leading conjecture as to why so many less-educated women are choosing motherhood without marriage points to the weak economic prospects of their male partners. The idea is that changing labor market structures and economic conditions have adversely affected the economic prospects of less educated men, making them less “marriageable” from the perspective of the women with whom they sexually partner.

Kearney and Wilson have flipped that conjecture around and hypothesize that improving earnings prospects by non-college educated males would be associated with an increase in marriage and marital childbirth. They tested that hypothesis by examining family formation between 1997 and 2012 in Census micro-areas experiencing a natural gas fracking boom, where non-college educated males experienced a jump in earnings compared to their peers in the rest of the country.

The result: “This analysis does not indicate shift toward marriage in response to an increase in the potential wages of less-educated men associated with localized fracking booms. But both marital and non-marital births increase significantly.”

The authors compared the fracking boom of the 2000s to the Appalachian coal boom of the 1970s and 1980s. Back then, in a different cultural era, increased earnings led to an increase in marriage rates, an increase in the marital birth rate, and a decline in the non-marital birth rate.”

In other words, the conjecture linking men’s income with their marriage prospects may have been valid 4o years ago, but it’s less valid today. Write Kearney and Wilson: “As non-martial births have become increasingly common, individuals are more likely to respond to increased income with increased fertility, whether or not they are married, and not necessarily an increased likelihood of marriage.”

Bacon’s bottom line: The interplay of economics and culture is incredibly complex. But the findings suggest that among a large portion of the American population, marriage is increasingly viewed as optional — regardless of the father’s economic circumstances. Further, out-of-wedlock birth is no longer stigmatized. This research calls into question the idea that blue-collar male earnings are the main stumbling block to family stability. We have passed a cultural Rubicon, and there may be no going back without a major change in values.

The Marketplace is Speaking. Are the Counties Listening?

CoStar is occupying three floors of the Westrock building (on left) in downtown Richmond.

After CoStar Group, a provider of real estate market intelligence, announced last fall its intention to move its research division headquarters to downtown Richmond, the company offered employees from Washington, D.C., Atlanta, San Diego, and Columbia, Md., an opportunity to move to Virginia. A big concern of Senior Vice President Lisa Ruggles was how many would want to make the move. “I had no idea of how many people would be interested,” she said.

She was surprised that 150 applicants responded, Ruggles told Richmond BizSense. After they took part in three-day tours of the metropolitan area, she says, “I told them that they were all welcome to come to Richmond, and the place erupted. Everybody was clapping, people were crying; it was an amazing sight to see.”

AvePoint, a New Jersey provider of Microsoft cloud services, had a similar experience, according to BizSense. “We estimated that when we would be transferring people down here that we might not get a ton of people, because Richmond is very different from New York,” said AvePoint COO Brian Brown. “That’s proved absolutely not to be the case.”

Big selling points: a lower cost of living, shorter commutes and a high overall quality of life. “I think one of the things people are pleasantly finding, especially people who have families, is how cheap it is to find a really nice place to live and how easy the commute is,” Brown said.

Here’s the really interesting thing:

CoStar’s Ruggles said it has been interesting to see where employees have chosen to live in Richmond. Of the 120 employees who made the company’s initial move, she said the majority chose places such as Deco at CNB and other apartment communities in Tobacco Row and Manchester. Only two employees chose to live in Short Pump, said Ruggles, who herself just closed on a house in the West End.

“Coming from D.C., a lot of our employees don’t have cars, and that was not something they were wanting to run out and buy, so a lot of people ended up in locations where they could walk to work,” Ruggles said. “We have found that, because that group relocated from D.C., where they’re used to taking the Metro or walking or riding their bike, they’re continuing to do that here.

Bacon’s bottom line: Richmond’s urban core exerts a strong appeal to highly skilled and educated employees — the affluent, creative-class types who pay more in taxes and spend more in the local economy — from other cities. If the region wants to attract more employees like them, along with the companies that employ them, the city and counties need to facilitate the building of the kind of communities these people want to live in. That means more moderate density, more mixed-use development, more grid streets, more investment in streetscapes, and, where economically justified, more mass transit.

That’s an easy sell for Richmond, most of which was laid out according to the dicta of traditional city planning. It’s a harder sell for Henrico and Chesterfield Counties, built according to the principles of suburban sprawl. The marketplace is yelling loud and clear what it wants. As a Henrico resident with a vested interest in the county’s long-term fiscal viability, I hope county officials are listening. If they’re not the City of Richmond will kick our butts in the economic development game.

Business and Computer Science Majors are the Biggest Bargains in Higher Ed

Graphic credit: “Costs of and Net Return to College Major”

It is widely known that certain college majors offer better career prospects than others. Engineering and business majors earn more money on average than, say, art and English majors. Less well known is the fact that certain majors are more expensive to teach. As seen in the chart above, engineering graduates cost twice as much to educate as library graduates.

The data comes from a new study, “The Costs and Net Returns to College Major,” by Joseph G. Altonji and Seth D. Zimmerman, published by the National Bureau of Economic Research. They drew their cost data from the Florida State University System.

The insight that different majors have different costs has important implications for how state systems of higher education allocate their resources. In Virginia, there has been a big push since the “Top Jobs” legislation of 2011 to increase the number of STEM (science, technology, engineering and math) graduates at Virginia colleges and universities. The shift to higher-cost STEM majors, while arguably justified from an economic perspective, contributes to the rising cost of higher education.

Another way to slice and dice the data is to look on the return on investment for different majors based upon the cost of providing the education and the present value of graduates’ earnings. As seen in the chart below, business majors, who cost relatively little to educate but enjoy high lifetime earnings, represent an extraordinary bargain. By contrast, architects, who are expensive to educate but earn relatively little, are a Return on Investment disaster. Much to my surprise, even engineers don’t look like such a bargain.

Career earnings may not be the best way to measure the social value of a particular major. It is possible that architects contribute far more to social well being than their pay stubs would indicate. (It’s hard to imagine that genders-studies majors have anything worthwhile to contribute to the world, but, hey, that’s me.) But the present value of earnings is a pretty good proxy for a graduate’s economic value.

As lawmakers ponder how to allocate scarce higher-ed dollars, they would be well advised to take into account how much bang for the buck colleges are getting for their investment in different disciplines. Perhaps Virginia colleges need to promote enrollment in business schools and less in architecture. I never imagined myself saying this, but maybe we should be encouraging more kids to enroll in psychology and fewer in engineering!

Fudging Differences between Legal and Illegal Immigrants

Big difference in educational attainment between legal and illegal immigrants.

The big difference in educational attainment between legal and illegal immigrants doesn’t come through in this graph. Credit: Commonwealth Institute

Immigrants residing in Virginia are better educated and more entrepreneurial than commonly perceived, says a new report by the Commonwealth Institute (CI), “Virginia Immigrants in  the Economy.”

That’s true.

Yet immigrants’ contributions to the U.S. economy are often minimized by “some state and federal lawmakers,” adds a press release accompanying the report. In truth, immigrants make our communities and economy stronger, says Laura Goren, CI research director and co-author. “Too many politicians are using scare tactics and divisive rhetoric about immigrants to advance their own agendas.”

Grrrr. I must take issue.

In attributing “scare tactics and divisive rhetoric” to shadowy others, Goren is guilty of the very behavior she decries. Whether due to simple naivete or deliberate obfuscation, I don’t know, she conflates legal immigrants with illegal immigrants. Thus, legal immigrants, who make a large positive contribution to Virginia’s economy, provide statistical cover for illegal immigrants, whose net contribution is problematic.

That’s an turn-off to readers who otherwise might find value in the report, which does contain some useful information. Foreign-born inhabitants now constitute 12.2% of the state’s population, for instance, with the heaviest concentration in Northern Virginia. More than half the foreign-born population has become naturalized.

…Neither does the difference in entrepreneurial vitality.

Virginia immigrants are more likely than native-born Americans to hold a college degree, the report informs us. They have slightly higher incomes, and they are more likely to be self-employed or own a business.

“In sum, Virginia immigrants are relatively young, well educated, fluent in English, and more likely to participate in the workforce,” says the study. “This powerful combination reflects the substantial capacity for immigrants to contribute to the state’s economy.”

But average numbers obscure important differences between different categories of immigrants. Forty percent of Virginia immigrants are well educated (college or graduate degrees) and wind up working in professional and technology fields. But, according to CI’s data, 20% lack a high school degree, a much higher percentage than for the native-born population. In other words, we are looking at two very different groups — one highly educated and affluent (mostly legal) and one ill-educated and poor (mostly illegal).

I know of no respectable voices in Virginia who say we should clamp down on all immigrants. (There might be a tiny percentage of white nationalists who advance that argument, but their numbers are insignificant.) The controversy over immigration focuses on poor, ill-educated immigrants, mostly though not exclusively from Latin American countries, who compete with similarly poor, ill-educated native-born Americans. These immigrants (mostly illegal) drive down wages of unskilled occupations, and put a burden on educational and social services.

I’ve never heard anyone hint that there’s too darn many Indians, Chinese, Vietnamese or Koreans in Virginia. That’s because Asian-Americans quickly learn English, rapidly assimilate to mainstream norms, become educated, launch job-creating businesses, and place minimal stress on the welfare state. Their presence is indisputably a net benefit to society.

By contrast, the Commonwealth Institute concedes that there are “challenges” associated with between 275,000 and 300,000 unauthorized immigrants. Nearly one in five live below the poverty line, and 58% lack health insurance. When one calculates the impact of illegal immigrants on the wage levels of unskilled workers, on schools, on the welfare state, and on the criminal justice system, this sub-set does not look like a net benefit to American society.

The study contends that illegals make a positive contribution, contributing $250 million in state and local taxes. If provided a path to citizenship, they could generate an estimated $100 million more. To the Commonwealth Institute, the problem isn’t foreigners illegally entering the U.S., but the mean people who treat illegals as second-class citizens. Says the report: “Lack of access to health care and threats of deportation and discrimination all make unauthorized immigrants and their families less able to contribute to the communities in which they live.”

I don’t believe in demonizing illegal immigrants for the sin of wanting to build better lives in Virginia. I don’t bear them any animus. I think it is wrong to abuse or mistreat them. But I also believe that a sovereign state has the inherent right to choose who can enter the country and upon what terms and conditions they do so. Foreigners have no right to live in the United States. One can make an argument that the U.S. should expand opportunities for foreigners to enter the country legally, but only on the purely utilitarian grounds that their presence benefits the rest of us. Accordingly, I think we should give preferential treatment, as many other countries do, to those who can contribute to the national wealth and well being over those who cannot.

Having a rational conversation requires that we draw distinctions between immigrants on the basis of education, skills, wealth, age, ability to assimilate, and proclivity to become a burden on the state. It is difficult to have that conversation when we lump all “immigrants” together.