Bacon's Rebellion

Democracy Thrives in Sunlight

Virginia’s Hidden Advantage

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by

James A. Bacon
in

With this week’s edition of the Bacon’s Rebellion e-zine, I’m stepping away from commentary on Virginia’s divisive culture wars to write about a topic that, hopefully, we all can relate to: how to build more prosperous, livable and sustainable communities for everyone. In “Hidden Advantage,” I hone in on one of Virginia’s most under-appreciated economic strengths: the flexibility of its labor markets.

Flexible labor markets are a crucial enabler of the process of economic transformation that Austrian economist Joseph Schumpeter termed “creative destruction.” The free movement of workers speeds the reallocation of labor from dying, low value-added sectors of the economy to growing, higher value-added sectors. The process provides opportunities for workers to improve their personal conditions, and it bolsters the productivity of the economy as a whole. Nations and states that retard worker mobility, either through excessive regulation of employment conditions or imposition of onerous social burdens on employers, damage the process of wealth creation.

In previous posts, I’ve enumerated the drawbacks of a political economy dominated by business interests. But Virginia’s business-friendly political climate has created highly flexible labor markets. The rate of unionization is low. Virginia has a fairly strong “employment-at-will” legal doctrine. And the burden of social overhead — unemployment insurance, workers compensation insurance and medical insurance — is lower than in almost any other state.

On the negative side, Virginia has proven all too receptive to the blandishments of professional and occupational groups, subjecting large chunks of the labor force to regulation by certification and licensure. The health care professions in particular have lobbied aggressively to protect their turf from competition from other professions, and have lobbied to require the public to engage their services by means of medical insurance mandates. This “craft unionization” of the health care economy hinders the re-engineering and restructuring of the health care industry.

But compared to other states, Virginia has pretty flexible labor markets. Workers have benefited as a result through low unemployment rates, more bargaining power with employers, and greater opportunities to shift to more lucrative careers. That’s one reason why incomes in Virginia have consistently increased faster than the national average.

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13 responses to “Virginia’s Hidden Advantage”

  1. Groveton Avatar
    Groveton

    Thomas Jefferson wrote his own epiath:

    HERE WAS BURIED THOMAS JEFFERSON
    AUTHOR OF THE DECLARATION OF AMERICAN INDEPENDENCE
    OF THE STATUTE OF VIRGINIA FOR RELIGIOUS FREEDOM
    AND FATHER OF THE UNIVERSITY OF VIRGINIA

    Oddly, the most brilliant man of his generation thought that founding the University of Virginia was more noteworthy than securing the Louisiana Purchase.

    Jim – You are a bright man who is missing the big picture.

    Virginia may be more flexible than Maryland. But is it as flexible as Mumbai? In the end – that will be the real question.

  2. Larry Gross Avatar
    Larry Gross

    leave it to Groveton…!!!

    The question is… are there things that we can produce in the US that will sell at a competitive price on the world markets?

    If you say no… everyone should start to practice holding on to our respective butts…

    What is it that the US can produce that other countries would buy from us?

  3. Jim Bacon Avatar
    Jim Bacon

    Groveton, You ask if Virginia is as flexible as Mumbai. I agree, that’s a great question! Indeed, the underlying premise of the entire “Economy 4.0” series is that Virginia has to develop sustainable competitive advantages if it wants to hang onto its standard of living.

    I tried to elevate the level of dialogue by raising the issue of labor market flexibility — not exactly a topic you hear discussed very often in the context of Virginia’s economic development.

    I wish I knew whether our labor markets were as flexible as Mumbai’s. But I don’t know. Maybe you know of a foundation that will underwrite me while I take a trip to India to find out!

    Next edition, I’ll address the issue of the development of human capital, and then later the recruitment and retention of human capital. I can’t pack it all into one column. The darn things are way too long as it is.

  4. Anonymous Avatar
    Anonymous

    Creative Destruction:

    “The Dulles area’s relatively inexpensive real estate became a draw for many businesses. In the latest quarter, for example, rents for the Dulles area were $29.81 per square foot, compared with $47.94 in downtown Washington.

    For some companies, the availability of more affordable housing for new workers west of the airport in Loudoun was what made the difference. Booz Allen Hamilton, a McLean consulting firm, began an expansion into Herndon in the fall of 2005. Its decision to expand in the Dulles Corridor was based largely where its growing workforce would live. Many employees have settled into new developments along Route 7 in Loudoun, according to Gary Lance, a senior director of facilities and administrative services for the firm.

    “We looked at the demographics of the people we were hiring, and that was kind of the center of gravity out there,” Lance said.

    Avoiding the heavy traffic of Tysons Corner and the District is another motivating factor for many who choose to work in the offices around Dulles, even though congestion there has worsened in recent years. ” —-Washington Post

    RH

  5. Larry Gross Avatar
    Larry Gross

    yeah I read this too.

    what does it mean – relative to settlement patterns?

    Does it mean that localities should outlaw zoning and just let whatever is going to happen – happen?

    or does it mean that planning infrastructure to serve businesses and multi-use residential… is a better path?

  6. Darrell -- Chesapeake Avatar
    Darrell — Chesapeake

    What is it that the US can produce that other countries would buy from us?

    Our debt?

  7. Anonymous Avatar
    Anonymous

    We’ve already done that. There is a big stink about what will happen if the Chinese shift to Euros.

    What will happen is that they will take a hit, selling the bonds at a lower price, just to get out.

    Meanwhile, with the dollar falling, we will pay those bonds off (eventually) with cheaper dollars.

    Of course, we will be able to buy less with those cheaper dollars, too, and then it might make sense to make things at home, again.

    In that event, EMR will be proven correct and we will all make do with less.

    RH

  8. Anonymous Avatar
    Anonymous

    I don’t think we should outlaw zoning, but it has gone way beyond its original intention of preventing lawsuits over creating a nuisance.

    It has now gone so far that if many of the things it is supposed to prevent had ever gone to court, they would have been thrown out themselves as nuisance lawsuits.

    Zoning has become nothing more than a power, money, status, and land grab, partially painted over with a phoney cosmetic veneer of environmentalism.

    I don’t see multi-use happening very much: people don’t want to live at the office. What I see happening is more and smaller business centers located on smaller radii.

    I think what we need to do is get away form planning yet more radial transportation systems and plan more polycentricly to take advantage of what we know is happening.

    Then, instead of planning conservation greenbelts to hem in the towns and force higher density than people want, or higher density than we can support with (modest sized) cars, we should plan interconnecting swaths of conservation and agricultural land to keep the places between distinct.

    We should start with deciding what land is best for those purposes and set it aside – through purchases, not easements. What we do now is build on the best land, and whatever is not buildable, we let the devlopers “give away” as proffers or conservation land. Frequently, it is the very land that is not worth conserving (except for waterways), and it is land that could be built on with sufficient engineering.

    We should give up on the idea of independent farms. No farmer can afford one, and as it stands now, most successful farmers work rented land. They might as well rent good land from the state as bad land from a land speculator.

    Zoning should be much more a generalized plan and much less of a homeowners association, and it should be managed far more equitably. As it stands now, planning and zoning boards are prohibited from considering the financial needs of an applicant, which means they are constrained to make judgements in favor of the county budget, absent any real consideration of the fact that individual budgets are what make the county budget possible.

    I think the only way to make it work is to create a market in development rights, so many per acre, and let those who cannot use them, because they are in an area slated for conservation or agriculture, sell them to those who can use them.

    This idea isn’t new, but it has been utterly hamstrung by those who don’t want growth at any price. On the other hand, if EMR is right, and we all wind up making do with a lot less, growth might not look so bad.

    RH

  9. Anonymous Avatar
    Anonymous

    “What is it that the US can produce that other countries would buy from us?”

    Financial services, banking, management, chemicals, airplanes, cars, university education, knowledge, research, biotech, anything that requires a good legal system, plus a number of other high tech industries. What do they all have in common; they require a very skilled and educated workforce. Yes eventually they could be off-shored, but it’s going to be a long time and a number of those require a very good legal and financial system behind them which outside very few countries will take a long time to implement overseas.

    The issue is the lower to mid tech items that are being produced overseas. It’s a complicated issue as moving those industries overseas benefits us in cheaper products and benefits the other nation by improving their quality of life and economy which should be a net positive. The problem is that not everyone is capable from the mental/intelligence/skill position from working in high tech industries. Even with a great education and training system it’s impossible to get everyone in those high skill jobs. The question is how do you make sure everyone gets by and maintain the benefits of a dynamic global economy.

    ZS

  10. Larry Gross Avatar
    Larry Gross

    well.. they say American kids are getting gypped in getting a world-class education.

    I see the US as the gold-standard for relatively safe investments because we have rule of law (I know, I know… it’s a relative terms but at least we can be trusted not to “nationalize” most industries).

    No.. not all kids will ever do high tech jobs but what about the kids that _could_ do High-Tech jobs?

    The one’s who have the horsepower but not the fuel?

    As Denna has said.. “education won’t save us” .. tis true.. but if our kids end up lacking the basic tools to be competitive.. from the get from.. we really are … screwed…

    If you really want a nightmare scenario.. take the things that we now have an advantage in.. and watch China and India take those away from us also..

    We are not focused in this country in my view.

    We have folks that are actually opposed to academic standards, opposed to SOLs and opposed to NCLB.

    We don’t “get it”. One kid getting a job .. will have to pay taxes for 3 kids who lack enough education to get ANY job other than tending to the needs of that one Kid…

    I just don’t think we have have our act together these days…because we spend all of our time looking back at long-gone textile jobs and outsourcing of user desk jobs.

  11. Anonymous Avatar
    Anonymous

    “We have folks that are actually opposed to academic standards, opposed to SOLs and opposed to NCLB.”

    Yes, and I am probably one of them.

    The only thing that testing gives you, is the score on the test.

    Our system is spending a collosal amount of money babysitting our kids, and failing to give them an opportunity to excel in what they choose.

    We are beatng them into politically correct obeisance.

    We would do well to close down and privatize the entire system.

    We have massive overconsumption on one hand, and no way for ordinary pwople to live decently on the other. How do you make sure everyone “gets by”?

  12. Larry Gross Avatar
    Larry Gross

    The ying and yang seems to be that in emphasizing SOLs and NCLB that we are not supporting those who can excel.

    Until the advent of the SOLs and NCLB, our schools were, in fact, babysitting for those demographically disadvantaged and pretty much tuned to provide amenities for those who were/are demographically advantaged.

    The idea being that.. we need to superbly equip those who are capable right out of the box – and forget those who are not.

    that’s the kids – we choose to leave behind.

    I’m not talking about kids with very serious problems. I’m talking about the 25% who do not graduate but another 25% who are mostly functionally illiterate.

    I’m talking about kids who have normal and above normal IQs.

    And the problem is that for every kid who does not get a decent education, he/she does ends up needing assistance later on with health care, retirement, AND their kids needs (like SCHIPS).

    Who pays for this?

    Well.. it’s the kids that get the good educations.

    It’s odious from a morality point of view – but its downright dumb from an economic point of view.

    Every kid that gets enough education to grow up and take care of themselves – is one less person getting public assistance.

    The Europeans and Japanese know this.

    Bill Gates and Newt Gingrich know this.

    folks who are opposed to NCLB and SOLS for the most part, whether they’ll admit it or not – are in favor of the rich getting richer and the poor getting poorer.

    My view is that NCLB and the SOLS are all about maintaining a middle class.

    That, in fact, was the fundamental purpose of public schools in the first place because those of means always had (and still do) ways to obtain superior educations.

  13. Anonymous Avatar
    Anonymous

    In england the “public schools” are what we call private. They consider them “public” because anyone can go, who has the money.

    But in England and Japan, if you want to go to what we call public schools, you will have to pass the tests. The grueling pressure of those tests leads to all kinds of bad consequences, and their importance is way overblown.

    Their are plenty of people who the schools failed to capture or nurture who went on to become productive and even famous.

    The public school system cannot do the job that needs to be done. They can’t even do the job as they have so narrowly defined it. Close the damn things down, make a voucher system, and let “public schools” of all kinds and descriptions compete for the money.

    Some of them will be “special interest” schools, and then the “special interests” will have to split their funds between the educational process and the political process. The “special interests” will then be stuck in the position of showing how their view of things translates to a personal ROI from the effort involved in their brand of education.

    By itself, that could save a few billion which we could spend on better things, maybe. Or maybe on personalized license plates of the thousands of new alma mater types.

    RH

    RH

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