Archive for the ‘Demographics’ category

NH’s Most Valuable Import?

December 11, 2012

I write a lot about the importance of skilled individuals with higher levels of educational attainment to the prospects for our nation’s and NH’s economic growth and prosperity.  I’ve also written about how important the in-migration of skilled individuals with higher levels of educational attainment from other states to NH has been to NH’s economic success.

I know  foreign immigration to the U.S. is a hot-button issue in this country and an increasingly high-profile one in cities like Manchester in NH.  Whether because of economics, legitimate  fiscal concerns, or simple xenophobia,  for many, foreign immigration is viewed with concern, skepticism, and sometimes hostility.  While some cities and school districts are more challenged by differing characteristics of immigrant populations in NH, on balance, foreign born individuals add significantly to the overall level of skill and educational attainment of the workforce in NH.  The chart below shows how much higher is the educational attainment of the foreign-born workforce in NH than it is in the U.S. as whole.

Ed Attainment by Place of Birth US and NH

Comparing foreign born workers in NH to U.S. born workers in NH shows that foreign born workers are much more likely to have a graduate or professional degree than are U.S. born workers age 25-34.  Foreign born workers comprise a disproportionately large percentage of NH residents with graduate and professional degrees and that is reflected in many of the highest skill occupations in the state.  Which, of course, will be the subject of a future post.

Ed attainment by birth ages 25 to 34

Who are the 47% and Who Did they Really Vote For?

December 6, 2012

I know a lot of people who voted for President Obama (and about as many and maybe more who voted for Mitt Romney).  None of the people who voted for the President fit the famous “47%” profile of individuals dependent on government for support.  In fact, very much the opposite was the case.  Nevertheless, the notion that a dependent population was largely responsible for the President’s re-election seems popular in some circles.  My small circle of acquaintances is not a  valid sample from which to accept or reject the dependency theory of  the election so here is one small step toward empirical verification or rejection.

I chose ten states from various regions of the country (NH,MA,NY,IN,KS,GA,FL,TX,AZ,OR), half of whom were won by President Obama and half by Mitt Romney.   I compiled a county-level dataset that includes the percentage of votes won by each candidate, the percentage of the population age 25 and older in the county that has a bachelor’s degree or higher, and the percentage of the population in the county that is white and non-Hispanic.   For my dependency measure I used the percentage of total personal income in the county that comes from government transfer payments.  The largest government transfer payments are for Social Security, Medicare and Medicaid (see chart below).  Of those, only Medicaid is for low-income individuals (and thus more closely fitting the profile of dependency) and income support payments like disability, supplemental income, food stamps and other (see chart below).

transfer payments

The ten states are not random and perhaps not a valid sample and there are many more demographic variables I could have included but this is all I could accommodate in the span of a Boston Celtics game and a couple of glasses of wine.  The ten states represent 814 counties, or about 26% of all counties in the U.S.  Using a simple regression model that analyzes the impact of the educational, race, and dependency variables on the percentage of the vote in each county received by the President, results were significant but still only explain about 25% of the variation in the percentage of the vote received by the President.  A larger percentage of income in a county  from government transfer payments is, in fact,  positively related to higher percentage of the vote for the President (although the simple correlation is small), and a higher percentage of the population that is white is negatively related to the vote received by the President (no surprise that we are a long ways from being color blind).  Its no great epiphany that users and supporters of government assistance  would be more likely to vote for a Democrat or that white voters might be less likely to vote for the President.  What is most interesting, however, is that the strongest relationship is a positive one between the percentage of persons age 25 and above in a county who have at least a bachelor’s degree, and the percentage of the vote received by the President.  Republicans may be right about not being able to win as many individuals who rely on government assistance as will Democrats but over the next few decades the percentage of the population that will be receiving the largest share of government benefits (Social Security and Medicare) is going to skyrocket and the percentage of the population that has a bachelor’s degree or higher is likely to increase as well.

I guess you can dismiss election results when they appear to be an aberration driven by the “great unwashed” who depend on government benefits, but what do you say if  the results were more influenced by the voting behavior of the most educated?

Anyone interested in the limited dataset I have, feel free to contact me.  I’d love to include all 50 states and many more demographic and economic variable but I doubt I will ever get to that.  For the truly nerdy who might want the stats from the regression models, you are welcome to those as well.

Will NH’s Fiscal System Get Better Looking Each Year?

November 9, 2012

Up close everyone sees the wrinkles, greys and infirmities that come with age,  but some things do, in fact,  get better looking with age.  Surprisingly,  NH’s revenue structure  may be one of them.  For a lot of people New Hampshire’s fiscal system has been out of balance for a long time.  I see it somewhat differently.  The state was able to maintain a fiscal structure that was unlike any other in the country.  Some hate it, some like, but one thing it absolutely most depends on is balance.  Specifically, those identifying with the left of the political spectrum had to be satisfied with doing the things that state government has to do and only a limited amount of what it may want to do.  While those on  the right of the political spectrum had to be willing to occasionally adjust the tax price of services (adjust rates and fees etc. temporarily or in some cases permanently).  Without a recognition of the need for balance from either side, the pressures from one side that were met with complete inelasticity from the other could cause the system to burst.   If NH has lost some of that balance I hope it regains it quickly because while some may see our system as flawed, it has also been a big part of our successes.

Looking toward the future, our current system is likely to suffer less from some of the demographically and economically induced changes in the growth in state-level revenues.  I don’t know if we will be the envy of other states but we should consider the impacts of the changes before walking too far down the path of big changes.  The biggest change is the fact that growth in the working age population is slowing and may continue to do so for decades (see below for NH).

That, of course, implies slower growth in wage and salary income and states most reliant on income taxes will feel that pinch the most.  On the flip side, with more older citizens, likely more income will be in the form of interest and dividends, a benefit for NH’s current system if interest and dividends tax revenue grows proportionately .  NH’s business enterprise tax (BET) depends on wage and salary payments so that revenue source would be negatively affected but because of the way the BET interacts with the business profits tax(BPT), a decline in either source is cushioned by impacts to the other source.  Moreover, as labor becomes more scare, the capital intensity of businesses should increase as businesses look to produce more with fewer people.  While the BPT impacts will be mostly neutral, it is possible that a deepening of capital in the economy could  increase in the relative profitability of businesses which would provide more lift to the BPT.

As the age structure of the population changes to include more older residents, in the aggregate, less money will be spent on the types of things subject to general sales taxes and more on goods and services that are not taxed (health care being the most notable), thus sales tax revenue growth rates could slow.  Combined with more sales occurring digitally via the internet and the generally increasing geographical separation of  buyers from the location of sellers, this does not bode well for long-term growth in sales taxes.  NH’s hybrid mix of taxes and fees collectively are likely to suffer less as a result of demographically induced changes in revenue .  As the risk of impacts is spread over a greater number of sources, any negative impacts on one source will have less of an effect than if the state relied on either of the two major sources of most other state’s revenue, the income and general sales tax.  For the most part, property taxes will also be relatively less affected by demographically induced changes.

It may not look like it now, but with the kind of balance that characterized fiscal policy making in NH for decades, and with coming shifts in revenue growth resulting from demographic and economic changes, NH’s fiscal structure  may well be better positioned to avoid the next (and inevitable)  fiscal calamity to hit states.

Its the Dependency Ratio That Matters Most

November 8, 2012

There is a good deal of fretting (warranted) about the impact on national and state-level government spending of a population that is growing older.  It is relatively easy to project a path for age-affected expenditures both nationally and in NH and to model how changes in spending programs and policies could alter the projected path of those expenditures.   Getting agreement on which policies to alter to influence the spending path is a much more difficult task.  What is missing from most discussions is an understanding that aging isn’t the only important demographic trend.  The dynamics of an increasing number of older individuals and median age of the population are largely misunderstood, but that is a subject for another post.  From a fiscal perspective, the most important indicator of spending pressures resulting  from the age structure  of the population is the “dependency ratio.”   The dependency ratio measures the ratio of working-age individuals in a population to those who are generally more ‘dependent” in a population (that is are likely to draw greater resources from governments then they give to governments).  Generally dependency is defined as age groups least likely to be in the labor force (children and those age 65+ – which may be unrealistic as individuals are healthier and for a variety of reasons stay longer in the labor force).  The dependency ratio affects both spending and revenues (revenue impacts are mostly missing from the demographic discussion and are the subject of tomorrow’s post).  A lot of government spending is directed at these groups – young people via schools and older citizens via things like Medicare, Medicaid, Social Security etc.  The chart below shows the rise in the projected dependent population in NH.  The chart shows that the past decade has been a “sweet spot” for the dependency ratio in NH, with an overall decline in the percentage of the population in “dependent” years (albeit with an increase in older dependency).  I produced a similar chart in the early 2000’s and suggested state government make good use of the state’s time in the “sweet spot” by adopting policies to minimize the impacts of future increase in the dependency ratio in the state (it wasn’t the first nor will it be the last time my thoughts were ignored by lawmakers – in fairness, it’s not always unreasonable for them to do so).  Certainly some policies have looked to reduce the impacts of an increasing older population.  But with limited, and in some years declines in the youth dependency, less attention has been given to innovative ways to slow the growth in spending (largely education expenditures) in a way that is proportional to growth in the youth population.   Effectively managing changes in spending pressures without producing unacceptably large overall increases in spending or unacceptable reductions in services requires that resources not be locked in specific spending categories or programs, but rather be allowed to rise and fall and flow to and from programs programs and services most influenced by demographic and economic pressures.  Tomorrow: The other side of the ledger – demographic influences on revenues.

What’s Behind NH’s Recent Net Out-Migration?

November 1, 2012

I’ve written often about how important the ability to attract skilled, well-educated individuals is to NH’s past and future economic success.  Appropriately, there is much concern over NH’s recent population losses resulting  from movements of residents into and out-of the state and what it says about NH’s relative attractiveness.  Not surprisingly, that concern  results in many simplistic, inaccurate, and analytical flawed explanations for the patterns of migration to and from NH.  I don’t have a book, video, seminar, or anything else to sell that depends of any particular explanation for NH’s migration patterns so I will let the data , as it becomes clearer, shape and evolve my theories on the phenomenon.

Here is the basic scenario:  NH has traditionally been a magnet for residents moving from another state (most prominently from  another Northeastern state – especially MA). During the past decade NH has attracted less net in-migration from other states, especially during the second half of the decade, culminating in net out-migration at the end of the decade.  The resulting concern by many (including me) is that NH may be losing its fundamental attractiveness relative to other states.  Because NH has relied on in-migration to fuel growth in “human capital” and the economy, this would imply very bad things about the future of our state.  I worry a lot about NH’s attractiveness  but my answer to the question of whether the state has lost its attractiveness is: “no…….not yet“.   Lets look at migration to and from the state during the recession (chart below). During the recession the patterns of the past several decades were largely the same – albeit with different magnitudes.  NH gained and lost a  lot of residents from other Northeastern states, and smaller numbers from other states in the South and West.

The difference in recent years has been that the positive net flows to  NH have been smaller for states that traditionally send NH a lot of residents (the Northeast), while the states with whom NH traditionally has net negative outflows have been larger (largely states in the south and west).   But is this a sign that NH is now less attractive?  I don’t think so (yet) and here is why. Since the housing and financial crisis and subsequent recession, the U.S. Census Bureau reports that state-to-state movement in the U.S. (on a % basis) has been about as low as it ever has been.  One reason for that,  many economists believe, is the fact that there were fewer places to move to that had stronger economic growth that often drives migration.  But another important factor has been the phenomenon of “housing lock.”

Because of the housing market bust and subsequent housing equity, credit and financial issues, both the selling and buying of homes were disrupted or impossible for large numbers of homeowners in NH and across the country.  That has especially profound impacts on net migration to NH.  I can’t explain in detail here, but migration patterns in NH indicate that the state has been especially attractive to and a magnate  for  30-44 yr. old, two wage-earner married couple families with children.  To move to NH they typically have to sell a house in their  native state and buy one in NH.  Each of those was a lot more difficult at the end of the last decade.  I believe this  reduced our core demographic of  potential  in-migrants.  At the same time, the housing market crash had less of an effect on the ability of the young, and non-homeowners to move from state-to-state.  This is the demographic group that traditionally has shown net out-migration from NH.  So the groups most likely to choose NH were most constrained from doing so during the last half of the 2000s, while the groups most likely to leave NH were not constrained from doing so by “housing lock” or other housing market issues.  The result – much lower rates of net in-migration to the state.  This explanation doesn’t account for all of the recent decline in net migration to NH, but it surely has played a significant role in the trend.

Keeping an Eye On Which Prize?

October 26, 2012

Every state is obsessed with maintaining or creating a “good business climate.”  I think NH has traditionally had a good business climate, with both the public and policymakers demonstrating a high regard for businesses,  and with a climate of mutual respect between the business community  and state policymakers.  At times they have differed in their views, and the balance of interests could change marginally from time to time, but over the years there was a nice balance where each was able to ultimately rely on one another to increase opportunities and prosperity in the state.  There is a lot of fretting over the business climate in the state and what it means for our ability to “attract” businesses. That is always a good thing to monitor, but I am concerned that we (business people, policy makers, citizens) may be spending too little time concerned with creating a climate that is attractive to individuals.  More specifically, skilled individuals with higher levels of educational attainment that increasingly are the source of competitive economic advantage in states and regions.  The in-migration of individuals with higher levels of educational attainment fueled NH’s economy and increased the concentration of technology and higher-skill industries and occupations during much of the past few decades, just as it has in other states that have been able to successfully attract skilled, well-educated individuals.   The chart below shows how the educational attainment of NH residents differs between  those who were born and continue to live in NH, and those who live in NH but where born in another state (in a future post I will discuss international migrants).

The chart shows that residents who have moved to NH from another state are much more likely to have a bachelor’s or higher educational degree.  NH regularly loses its natives with higher-levels of educational attainment to others states, just as other states lose those individuals.  Individuals with higher-levels of educational attainment are the most mobile in society.  They have the most opportunities and generally resources that afford them more choices on where to locate.  That means that the native population will often show overall levels of educational attainment lower than in-migrants from other states.  In-migrants to MA also have much higher overall levels of educational attainment than natives who live in the state,  but the native population that was born and lives in MA has higher levels of educational attainment than the native population in NH.  In fact, educational attainment among those who where born and live in MA looks a lot like the in-migrant population of NH, not surprising since about 300,000 individuals born in MA now reside in NH.

In-migration to NH has been slowing and recently stopped, with tremendous implications for our economy’s ability to grow, innovate, and remain dynamic.  Lets keep our eye on maintaining a good business climate (we can start by reinforcing our tradition of mutual respect between business and government), but I think we need to quickly  begin asking ourselves if a singular concern about business climate is sufficient to assure growth in our economy  if NH is losing its attractiveness to the individuals who are increasingly the source of its economic strength.

Spotting Bubbles After They Burst

October 25, 2012

I’ve lived through two housing bubbles since I was old enough to know and care about them.  During the first one I was writing quite unpopular reports for developers and lenders (I’m still not very popular with realtors) that  indicated, to me at least, that the “effective demand” for housing in many areas just would not support a viable project (based on the fundamental underlying determinants of the demand for housing – population, employment, and income growth as well as new household formations).  I did not understand then nor do I do now, how an industry (home building) can survive when so many decisions it makes are made with a view toward the immediate past (what sold last week or month and at what price).  Of course everybody, including me, recognizes a bubble after it has burst.  But there really is no substitute for understanding the fundamental underlying demand for housing in a region or community when making a decision about building or buying housing.  Few have the patience or knowledge to assess the “effective demand” (the willingness AND ability to purchase) for housing versus the desire to purchase based on the current sentiment about the housing market.  Potential home buyers are not likely to get that understanding from a real estate industry that can make money from a purchase regardless of whether the purchase increases in value or not.   It is easy to see the “effective demand” for housing and the real conditions of the market after the fact, as with the many charts I see that show how  the relationship between home prices and household incomes in a region was widening prior to the last housing market crash.  Its a great way to make a call after the game is over.  Household income data is reported with a lag of more than a year for smaller areas, is subject to a significant margin of error, and may likely be revised sometime  down the road.

There really is no substitute for understanding the fundamentals but a quick and easy way to get a sense of where the home buying market is, is to look at the ratio of the monthly cost of purchasing a home (at the average selling price) versus the monthly cost of an average rental.  Both selling and rental price data is readily available in NH from, among other sources, the NH Housing Finance Authority which regularly does rental price surveys.  The chart below shows the ratio for NH going back to 1990.  The ratios can be calculated for sub-areas of the state and for communities as well.  The ratio is not a substitute for a thorough analysis of “effective” or fundamental underlying demand that all home builders should undertake, but for home buyers, it clearly shows that when the ratio gets above 130% or 140% (which can be determined with a data lag of only a few months at most) a bubble is likely forming.

The Feminization of NH’s Workforce

October 22, 2012

Nothing gets you thinking about gender equity issues more than being the father of three daughters, except maybe being the father of four or more daughters.  In my upcoming October edition of  “Trends Lines” I am looking at trends in NH’s labor force.  One of the more significant trends is the increasing percentage of women employed at businesses in NH.  Despite the fact that men participate in NH’s (and the nation’s) labor force at higher rates (about 9% higher in NH) than do women, women now are a slight majority of employees at businesses in NH.  Women comprised 51% of employees covered by unemployment insurance during the third quarter of 2011 – the most recent data available.   Only in Hillsborough and Sullivan Counties are men a majority (and by less than 1%) of employees at NH businesses.

Among workers with the highest level of educational attainment, those with a bachelor’s degree or higher, women comprise 52% of those employed by NH businesses.   Moreover, the percentage of NH workers with the highest levels of educational attainment who are women is likely to increase because the percentage of new hires (not including recalls of  layoffs), with at least a bachelors degree, who are women, is now even higher (53% – see chart below).  These differences don’t seem large, but over time  they have tremendous implications for the economy and for society.

I don’t know if this data says more about the changing nature of the workplace or the changing nature of the male workforce, but as the father of three daughters, my anecdotal experience leads me to believe it is more about the latter.

Manufacturing’s Toughest Sell

October 12, 2012

The percentage of younger workers in the workforce is declining in NH, as it is across the country, but the trends are different for specific industries and occupations (more about that in a later post).  Simply put, some industries are capturing a larger share of a smaller cohort of younger workers and the key for any industry or occupation is to have appeal for younger workers and students.  How does an industry capture more younger workers?   Is it because the industry is perceived as being desirable or “cool,” or do younger workers respond to signals about the opportunities in an industry or an occupation?

Manufacturing is one industry that has been capturing a smaller share of younger workers (government and utilities are others).   The chart below shows that over the past 15 years the share of younger workers (age 25-34) declined in NH’s workforce (age 25-64).  But the chart also shows that the drop was more pronounced in manufacturing than in the workforce overall.

Government employment hasn’t been perceived as cool for some time but job opportunities have grown or remained steady (except in very recent years) over the years suggesting that “coolness” is a factor in the career choices of younger workers.  For manufacturing it is likely to be a combination o cool and opportunities.  While manufacturers now have good opportunities for young workers, that perception must overcome  decade s of    labor market signals showing large declines in manufacturing employment.  The decline in younger workers in manufacturing roughly corresponds to the change in manufacturing employment in the state (chart below).

Manufacturing employers are in a difficult position.  Fewer households have workers with a history of manufacturing employment, limiting the legacy effects that can contribute to career choices.  A “twist”  (changing occupational makeup) in the manufacturing labor market mean that much of the public and almost no  high school guidance personnel have an understanding of the types of jobs in manufacturing. A general lack of “coolness,” perceived lack of opportunities, and  limited understanding of the opportunities that exist in the industry all mean that manufacturing will have a tough time capturing a larger share of the younger workforce, but it is important to do so for a number of reasons. I just don’t know if manufacturers can do it alone.


%d bloggers like this: