Archive for April 2013

There’s No Place Like Home (Your Home State)

April 29, 2013

I was surprised by data on the enrollment migration of high school graduates who enter  four-year colleges immediately or shortly after graduation from high school.   As the chart below shows, in most states, a very high percentage of students enrolling in four-year colleges enroll in a school in their home state.

Student Migration

This would not be  unexpected if it were data from 1920 but a lot has changed in the world that should exert a fairly strong influence on the enrollment decisions of high school graduates.  First, anything that reduces the time, cost, or difficulty in travel should contribute to an increase in the willingness of students to travel further to attend college.  The real cost of travel (measured as dollar per airline mile) has fallen dramatically over the past several decades.  In addition, the increased ability to communicate over longer distances and at ever lower prices should also reduce disincentives to enrollment over distances.  Perhaps even more importantly, the information available to students and their parents about schools (including video tours, rankings, and all types of detailed data), should also reduce the barrier of distance from home  to enrollment in a college.   In addition, colleges have more information about students and an increasing ability to target potential students irrespective of their distance from campus.  States with a low percentage of students enrolling in a college in their homes state (NH, VT, CT, MD, DE) all have many college choices in nearby states so many of the barriers that might influence enrollment distance don’t really apply.

We in NH fret a lot about the percentage of students who choose to enroll in an out-of-state college, but almost 90 percent of NH grads enrolling in a four-year institution enroll in a college in New England and on balance we are a slight “net-importer” of college enrollees.   There are tremendous economic and public policy implications related to the supply of young college graduates but we need to be careful that in analyzing the issues we use appropriate metrics.  I am not convinced that in NH’s case, the percentage of students enrolling in-state is a good one.

I need to look at a time series of this data to get a better handle on some of the contributing factors to these data.  For now the only conclusion I can draw is that college-age children simply care too much about their families to want to venture far from home – at least that is want I have wanted to believe for the past several years.

Give Me Your Huddled, Talented Masses

April 19, 2013

This is a week that reminds us of how many people from around the world  want to harm the U.S.  and just how easy it can be.  This is a day when a daughter who was supposed to be coming home for the weekend  is unable to leave her apartment, catch the “T”  or even get a cab to North or South Station where no trains or buses are leaving the city of Boston anyway.  For me at least, its not an easy time to be rationale and analytical.  That is precisely why this is an especially good afternoon to highlight, in one small way, how much the presence in the U.S. of individuals from the rest of the world contributes to our economy, communities, and society.

A lot of attention is focused on the relative inability of the U.S. to produce enough individuals with the education and training needed to fill critical  openings in scientific, technology engineering and mathematics (STEM) fields.  Why that is is the subject for another (or many other) posts.  There aren’t enough individuals in this country with STEM degrees to meet existing demand according to businesses that employ them.  Looking at unemployment rates for individuals with science, tech, engineering and math degrees seems to validate that belief.   But the U.S. would be even further from meeting the demand if it were not able to tap a global labor market.

I’ve been looking at trends that affect recent college graduates so I will focus on the importance of foreign-born individuals to the supply of skilled workers among recent college graduates and younger workers in the U.S..  I sorted data on individuals in the U.S. workforce,  age 24-29, with a Bachelor’s degree or higher, according to the college major of their first college degree, and then by the percentage of individuals in each major that were foreign-born.  The results are striking.  Overall, about 13.6 percent of all workers age 24-29, with at least a Bachelor’s, are foreign-born.  However, the percentage in STEM majors is dramatically higher, comprising  30, 40, to as much as 50 percent of young people and recent graduates in some major fields of study.  By far, the majors with the highest percentage of individuals that are foreign-born are STEM majors.

Foreign Born STEM Grads

The data make clear how important the rest of the world is, and will continue to be, in meeting our economy’s demand for skilled workers.  On an afternoon, in a day, during a week, like this one, data doesn’t have much influence on our thoughts or maybe just not on mine, and that is all the more reason to look closely at it.

What Do Help Wanted Ads Say About the “Skills Gap”?

April 18, 2013

It has been quite a while since I wrote about some of my favorite topics, the “skills gap” and occupational supply and demand.  But since there are recent media reports about the issue and more and new or renewed groups in NH looking to influence the debates and discussions on the issue, let me once again add my $.02.

I’ve made the plea for empirical rather than anecdotal or ideological evidence on the issue and produced a little evidence myself that both points to a skills gap as a contributor to slower than desired employment growth as well as evidence that suggests the issue may not be as prominent an explanation for slower job growth as some believe.  I’ve also noted the larger economic policy debate that engulfs the skills gap issue.  The data I’ve presented in this blog only hints at  answers to the fundamental question of whether slower job growth is more of a problem of labor supply (the number and/or quality available workers with the education, skills and training desitred by employers), or one more of labor demand (not enough employers looking to hire qualified, educated and skilled workers in NH).  I think the charts below  again provide some clues to labor supply and demand trends in NH and also illustrate some bigger trends in the NH economy.

The first chart most directly addresses the skills gap issue.  It shows that in terms of broad occupational groupings, professional and technical job openings are the largest component of on-line help wanted advertisements in NH.  Because these tend to be among the most-skilled and highest-paying jobs we assume that if there were a sufficient supply of labor then job growth in the industries that most employee these occupations would be relatively strong.  In fact, one  industry grouping – business and professional services  – employs a lot of professional and technical occupations and it is growing almost twice as fast as is overall private sector employment in NH.

The crux of the skills gap issue is this: “would a larger or better qualified supply of individuals in these occupations result in faster job growth in NH, or are there other or complimentary factors that also need to contribute to faster growth?”   How you define the problem of slower job growth also largely defines the range of your solutions. Increasingly, and I think somewhat disappointingly,  it also seems to define your ideology (if you have one).

March 2013 HW

The chart  below is less sanguine.  It shows that compared to the same month in 2012, March 2013 help wanted ads in NH for professional and technical ads declined by more than 10 percent.  One month isn’t a trend but recent months have shown more weakness than strength in this indicator.  The chart also shows that the largest improvements in labor demand are not among the most skilled occupations, although changes in the occupational make-up of manufacturing industries makes it increasingly likely that production workers will  have higher levels of education, training and skills.

Pct Change in HW in March


Productivity and Student Debt in NH

April 15, 2013

Student debt is in the news again today (as it is pretty much everyday) and because I am doing some work on higher education costs and debt, today I will highlight what some students (and others) at UNH were drawing attention to with their pencil sculpture using more than 30,000 pencils to highlight the average debt of students graduating from NH colleges and universities.

I’ve written before about how the cost of a higher education is affected by many things.  The level of tuition and fees, the volume and type of student financial aid, the demographics and characteristics of students at each institution as well as the interactions among all these factors affect student costs and debt.     It’s a complicated issue that seems to generate a wealth of simple and intuitive explanations.   NH policymakers debating the appropriate level of support for higher eduction are concerned with tuition prices, the efficiency of  higher education institutions, the impact of college costs on access to college, graduate’s debt, and the larger impacts of all of these on the economy.

The chart below highlights what NH students (and students everywhere) are concerned about.  The chart shows the average debt of graduates with debt (not all graduate s do so with debt) from UNH along with the average debt of students  from “flagship” public universities across the country.  Each state has one flagship university and I chose to use them here to control for the fact different types of institutions will have different characteristics that can affect average debt levels.  Just as importantly, state lawmakers in NH and elsewhere decide funding levels for public colleges and are often most interested in how public  higher education is affected by important issues.

UNH grad debt

The chart shows that the average debt of  UNH graduates (who graduate with debt) is higher and has risen faster than the national average for flagship universities.  The chart also shows that the per capita debt of graduates has been rising faster than the average debt of graduates with debt, both at UNH and nationally.    The more than 70 percent rise in per capita debt of graduates is especially troubling because it is a sign that more is being borrowed by each graduate but also that more students are graduating with debt.  Debt at UNH is higher but the problem is occurring everywhere.  The economic and social implications of the larger amounts of aggregated student debt on each successive cohort of young people are significant.

UNH’s high relative tuition among public, flagship universities across the country is not completely responsible for the debt levels among its graduates (although it is clearly a driving factor).  Demographic characteristics of student, financial aid policies, as well many other factors also play key roles.  UNH takes a lot of heat for its high tuition price and some see the high tuition as a sign of UNH’s inefficiency.  There are a lot of factors that help explain the rise in college costs but UNH’s high tuition isn’t readily explained by inefficiencies or “waste” compared to other public institutions.  Below is one  measure of efficiency I developed to compare colleges and their costs.  The chart below shows the direct educational and general expenditures per degree awarded at “flagship” public  institutions.  It is not a measure of quality.  A university could reduce its costs per degree awarded by teaching every class with 150 students or if it offered no student support services.  It will also reduce its costs per degree if it offered less grant and scholarship money.  The chart shows that UNH has the lowest cost per degree of any flagship institution in the country on this metric. In part it is a measure of efficiency as well as the characteristics of students because  a greater number and percentage of students who graduate will also lower expenditures per degree awarded.

exp per degree awarded

A couple of words about this metric.  First, I use a weighted degree measure that uses a bachelor’s degree as the baseline and assigns higher values to PhD and professional degrees and lower values to masters degrees to reflect the differing time (and thus costs)  related to obtaining each degree and to account for difference between institutions  on the mix of degrees awarded.  A university that awards medical degrees, for example, can be expected to have higher costs to educate each degree recipient (I need to examine how strongly the results are influenced by the weighting scheme).   I also adjusted the dollar figures to reflect differences in the cost of living in each state.  Wages, salaries and labor costs differ greatly across the country to compensate for differences in the cost of living and that should be reflected in the expenditures of public universities across the country.  It isn’t done often but when comparing expenditures of similar types of college I think it is a good idea.

Getting What You Want But Not What You Need

April 10, 2013

Business taxes are about one-quarter of NH state government revenues and an even higher percentage when you take out sources such as the statewide property tax which is largely an accounting fiction that really does nothing to support state services.  That is a higher percentage than any state with the exception of some states that get oil, gas and mineral extraction revenues.

When business taxes are that important to a state’s fiscal health it better make sure that it takes care of its businesses and its business climate because if and when they go south (or south and west just as more people have) it becomes very difficult for the state to produce a budget.   The chart below shows how NH’s “own source” general and education fund revenue from the nine largest sources of revenue (exclusive of the statewide property tax) have grown comparatively since 2003.  I think the chart shows how important trends in business tax revenues are to overall revenue trends in the state.  The bad news is that revenues from the business profits and business enterprise tax are still more than 20 percent below peak.  The good news is that they are growing.

Growth in Own Source Revenue

The chart also says a few other things to me.  First, a strong and dynamic business climate is the best fiscal policy for the state.  Second, if you are going to cut business taxes you had better be certain that it is a good way produce a strong and dynamic economy because if not, the fiscal health of the state will suffer.  Third (and related), if revenues rise in response to cuts in business taxes great, it will be evidence of a stronger economy and healthier state finances, but if revenues  fall you better be sure that the service and spending reductions that result don’t affect those things that most contribute to a strong and dynamic economy because economic growth (and thus revenues) will be at risk for falling further.   All businesses want lower taxes and it that is the quickest and easiest way for policymakers to demonstrate how much they love  businesses.  But businesses also need and want a lot of other things to prosper and, like lowering taxes, they aren’t shy about asking for them.  Unfortunately, in a state so dependent on business tax revenues businesses getting what they want can sometimes make it more difficult to get what they need.

NH lawmakers, like lawmakers in most other states, want prosperity and opportunity for residents .  Most  also recognize that a strong and dynamic economy is the way to assure that.   So unless you are big financial institution, a big oil company, or just about any business or industry that is prefaced by “big,”  it’s a pretty good time to be in business because almost everyone wants to show you some love, they just can’t agree on how to demonstrate it.  Right now a lot of ideology and little evidence is being brought to bear on the question of “what policies are most helpful in producing a strong and dynamic NH economy.”   That makes it a lot harder to see that we all have a common interest in a strong economy and even more difficult to agree on what to do about it.

Controlling College Costs One Student at a Time

April 8, 2013

Higher education costs, productivity, and student debt are issues in the cross hairs of policymakers and the public. Public colleges blame government support for trends in college costs, lawmakers blame colleges for poor productivity, parents blame both colleges and government, and the academy blames almost everyone for misunderstanding the issues or not being given the unconditional love that they believe they deserve.   Aside from my professional interest I have a strong personal interest in the issue as the father of college students.  One thing that I have learned from the blurred lines between my professional and personal interests in higher education is that both colleges and students (and their parents), have far more control over the costs of higher education than either seems to want to acknowledge and until each more fully exercises that control, some disturbing trends aren’t going to change much.

Trends in higher education costs and productivity are more complex than their popular treatment suggests but as I noted in a February post, the surest way to limit the cost of higher education is for students to graduate on time.  I’ve been looking at college completion and grad rate data and since it is impossible to highlight the rates of thousands of colleges I have chosen to highlight the rate at which students at  the “flagship” public university in each state graduate “on-time” (within 4 years for a Bachelor’s degree).  A quick look at the chart below shows what tremendous variation there is in “on-time” grad rates at public universities.  It is nice to see the University of New Hampshire with a relatively high “on-time” graduation rate.  I am sure there are other factors as well but “eyeballing” the chart also suggests how important student qualities and characteristics are to these data, as the “top” public universities in the nation that are more selective (UVA, UNC, UMICH, U Cal Berkely etc.) also have very high on-time grad rates.

On time grad rates at public universities

Speaking of the University of Virginia, here is a picture of one of the authors of this blog at the foot of greatness (a free, lifetime subscription to this blog for anyone who suggests that, in fact, that is where he is spends every day).

Gully and Jefferson

Yes it costs a lot to send a kid to college and I wish it were cheaper but the chances of that happening during the matriculation of my (or any) individual’s child are slim.  But we can price shop and perhaps more importantly make sure we have to pay for as few years of college as possible by graduating early or on-time and by choosing a college where we have the best prospects for that to happen.   I’ve been looking at college cost, finance, and completion and graduation data a lot lately, along with demographic, student ability, and other data on the characteristics of college students and their families.  I think it would be pretty easy to develop a discriminant function that would fairly accurately predict whether a student of differing characteristics and abilities would graduate and graduate on time from a particular institution and that might give parents a better metric of potential costs than does ‘sticker price” or “net price”. Choosing a college where can you pursue your calling is most important but price shopping and choosing to graduate on time are keys to minimizing college costs and they are both factors that are largely within the control of students and their parents.

What’s Behind the Weak Jobs Report?

April 5, 2013

Bad news arrived today with the release of the monthly employment report by the U.S. Bureau of Labor Statistics.  Only 88,000 non-farm jobs were added across the country in March. Following  two months which saw the U.S. add 148,000 and 268,000 jobs respectively in January and February, the low number raises concerns that the U.S. may again be heading for a “Summer slump” after showing signs of stronger job growth early in the year.

I share that concern but I am most interested in what the job growth numbers may or may not imply about recent U.S. economic and domestic policies.  I know sequestration is the hot policy topic and may be blamed or credited for all evil or good that occurs in the U.S, economy this year, but it is really too early for it to register much  impact on March’s job growth.  Two other policies have the potential to more significantly impact job growth in the near term.  The details of the March employment report provide some clues about if and how these policies may affect job growth in the future. The elimination of the temporary reduction in the payroll tax and health care coverage mandates in the Affordable Care Act are policy impacts that we worried about before we started worrying more about the potential impacts of sequestration.

I last posted that gains in home values, stocks and, retirement accounts along with increases in wages and salaries would help the economy overcome the large potential impact on consumer spending from the rise in the payroll tax (elimination of the temporary rate reduction) that took effect in January.  I may have been a little too optimistic about those factors ability to help the U.S. economy overcome more than $100 billion in lost consumer spending power (over $600 million in New Hampshire).   For me, the most troubling piece of data from the March job growth report was the seasonally adjusted decline of 24 thousand retail trade workers and generally downward trend since January, that has followed several months of solid gains in late 2012 (chart below).

U.S. Retail emplyoyment

When housing values are recovering, homeowner’s equity is rising, and employment and wages are growing, retail employment should not decline.  The elimination of the payroll tax cut (along with higher gasoline prices early in the year) likely provided a greater shock to consumers than anticipated.  But another explanation is that implementation of the health care mandates of the ACA could be affecting employment more in some industries.  If so, it would likely impact industries that typically are less likely to offer their employees health care coverage and industries that employ more part-time workers.  Retail and leisure and hospitality industries  meet those criteria but only retail trade lost employment in March.  Because the ACA mandates coverage for full-time employees, one way to avoid the mandate would be to increase part-time employment.  In that case I would expect the average weekly hours of workers in retail or other industries that may be more  affected by the mandate to decline, as more workers were shifted to part-time status but average hours have increased slightly in retail over the past three months.  Looking more closely at the data on part-time employment is needed to get a handle on any ACA impacts.  Over the next few months I will be looking for evidence of  increases in the number of workers working “part-time for economic reasons” – meaning they are working part-time when they want to be working full-time, as well as employment trends in businesses employing between 50 and 499 workers (those most affected by ACA).  Trends in these employment data would provide stronger evidence of any ACA effects but for now, it looks like the payroll tax is the culprit in the retail employment data.

Improving Household Net Worth and Cash Flow Bode Well for Spending

April 1, 2013

Improvements in the balance sheets and cash flow of households along with continued if not robust improvement in the labor market bode well for consumer spending  as the year progresses, helping the economy overcome the negative impacts of  payroll and other tax increases.

Home equity is a strong driver of the buying power and spending decisions of households.  Home prices are rebounding across the country and even New Hampshire is beginning to show some strengthening according to Core Logic’s Home Price Appreciation Index.  Appreciation in NH remains below a majority of states and well below the 15% suggested by the industry in the state.

January HPI

While home prices are still off from their 2006 peak, the rise in home prices has raised homeowners’ equity $1.6 trillion over the past year. This is the second largest nominal gain on record since 2005 when homeowners’ equity was up $2.0 trillion. In percentage terms, owners’ equity as a share of household real estate rose to 46.6% last year compared to 40.5% in 2011—the previous cyclical peak was 59.6% in 2005—and an all-time record low of 37.3% in 2009.

Private retirement and pension accounts represent a much smaller component of the net worth of households but they are key contributor to households’ sense of  financial “well-being” and a contributor to the “wealth effect” that impacts household confidence and their willingness to spend.

Private Pensions

The equity of homeowners is the largest contributor to the improvement in household net worth but the value of  the private pension accounts of households along with the rise in the value of the stock market are adding to consumer’s willingness to spend.  Lower interest rates, lower levels of debt, and improvements in wage and salary income are also improving the cash flow of households.  In combination, the outlook for consumer buying power and spending in 2013 looks like it could be stronger than the growth in the underlying economy would suggest.

Household Net Worth

%d bloggers like this: