Archive for the ‘Demographics’ category

Demographic Demise – The Sequel

June 17, 2013

Those well known demographers at Governing Magazine are likely to ignite another round of hysteria about NH’s aging population with their recent article highlighting increases in the median age of state populations.  I do not plan to go “gently into that good night” and for the past decade, as I hurtle toward my dotage,  I have “raged against the dying of the light” by highlighting why, at least in NH’s case, demographic trends are far less apocalyptic than popularly portrayed.

I can’t say it enough, I  believe that demographics explain two-thirds of everything.  Current trends will present the U.S. and NH with many challenges but we will be infinitely better able to confront these challenges with an accurate understanding of the forces that are creating them.  Too often demographic data is tortured to yield conclusions in support of some issue or cause rather than analyzed to reveal the real underlying  forces affecting the economy and society.  If we think the state’s population is aging because of zoning restrictions or because contraceptives are too widely available,  or because there aren’t enough skateboard parks or coffee shops then policies designed to manage the changes resulting from demographic forces are going to be profoundly ineffective.

I first made the arguments below  about a decade ago and despite the protestations of those who have horror stories to tell and books and documentaries to sell, nobody has shown why they are inaccurate.

Aging is a permanent, irreversible consequence of low average family size and longer life expectancies in developed societies.  Because NH has both wealthier and healthier older citizens (on average) than does the US, we expect greater longevity.  NH also has among the lowest fertility rates of any state in the nation and this, more than anything, accounts for our increasing median age relative to the US.  The chart below shows how much lower and how much faster the fertility rate among women of child bearing years has been declining in NH compared to the U.S. average, along with how much lower NH’s mortality rate is than is the U.S. rate.

Fertility and mortality trendsUnlike the brother and son of former U.S. presidents I don’t know anything about how fertile women of different races or ethnic origins are but I am probably just as prone to putting my foot in my mouth, so here goes:  “Fertility rates,”  or the number of births per 1,000 women in child bearing years does vary  by the educational attainment, labor force status, and as is evident in the state of Utah, even the religious beliefs of women and their partners.  Fertility rates largely account for NH’s rising median age, just as they do for Vermont and Maine.  Fertility almost always has a more powerful effect on the age structure of a state’s population than does either migration or mortality because all of the population changes that it generates arise at age zero and work their way through the age structure for 70+ years.  The chart below shows how much lower is NH’s fertility rate among women age 15-44 than is the rate in most other states in the nation.  The chart also largely explains why Utah has the youngest median age of any state and why NH, VT, ME and other New England states have older median age populations.

State Fertility RatesWomen in NH (as well as in most New England states) have higher educational attainment (on average) and are more likely to be in the labor force than are women overall in the U.S..  Both of these factors are associated with lower birth rates. Much of NH’s increase in college educated workers is the result increases among women and this has produced substantial economic benefits for the state and its residents.

For two decades NH has added large numbers of families with children and lost younger people who attend college or otherwise leave the state in young adulthood.   In recent years a weak economy and a housing market that made it difficult to both sell and buy a house has greatly curtailed migration into NH.  Mover’s to NH over the past several decades are more likely to be a married couple family age 30-44 with children and  likely to both be college educated and working.  That demographic doesn’t do a lot to lower the median age of a population but it can help keep the median age stationary in the middle of the age range.  However, economic conditions not only have curtailed state-to-state migration, they have also lowered fertility rates, as income and employment trends appear to have given  pause to more families considering expansion.   Across the nation state-to-state migration has been lower than at any time in a half century and fertility rates started to decline in the U.S. (after rising in a few consecutive years) as the last recession took hold. 

The long-term trend in NH is for a gradually increasing median age that should be rising at about the same rate as the much of the U.S..  The state is not even close to the top among state on the percentage of its population age 65 or older and that fact alone should eliminate some of the more simplistic explanations for why NH’s median age has been rising faster than the U.S..  Because of our low fertility and mortality rates, NH is more dependent upon in-migration to offset trends that would produce more rapid increases in median age than seen in much of the country.  Over the past several years those migration trends haven’t been favorable.  If the economy and housing markets recovery continue and NH focuses on the right policies (hint – zoning regulations aren’t it) this should be a temporary  phenomenon, but that doesn’t mean we aren’t going to get any older, it just means that we can keep the median age at a more stationary point in the middle of the age distribution.  The middle has gotten a pretty bad name in recent years, but demographically at least, its not at all a bad place to be.

Educational Attainment, Economic Prosperity and Fiscal Reality

March 4, 2013

I write and speak a lot about the importance of demographics to community and regional prosperity.  Over the past several years I have written and spoken about my belief that communities wanting to increase the number and quality of employment opportunities available in their town increasingly need to recognize the importance of being an attractive place for skilled individuals with higher levels of educational attainment.  Employers in emerging and growing industries  locate in areas where the pool of talent (skilled, well-educated individuals) is “deep” or growing.   A community can still see employment growth even if it doesn’t have a lot of skilled, well-educated individuals if it is located in a region that does have enough of them but the impact on and benefits to the community will be very different.

It is hard to empirically test the importance of skill levels and educational attainment to job growth in individual communities but anyone involved with the location and expansion decisions of employers knows how important the availability of a skilled and educated labor force is.  Because the occupational needs of employers in different industries varies greatly, I, and others, often use the percentage of the population age 25+ with at least a bachelor’s degree as a surrogate for trends in the education and skill-level of the workforce in a community or region. It’s a good way to labelled an elitist, at least by those who don’t know anything about you.  I don’t think only college graduates can get good jobs but it is clear to me that trends in the educational attainment of the population of cities and towns is a pretty good indicator of how the economic fortunes of a community are changing. I’ve tested the relationship statistically and found that there is a  relationship between the change in the percentage of individuals age 25+ with at least a BA degree in a community and employment growth over the past decade.  There are a lot of factors that influence employment growth but over past decade communities that have had larger increases in the percentage of individuals with high levels of educational attainment generally have had better job growth (or at least less negative growth).  The relationship narrowly missed statistical significance when tested on NH’s 40 most populated communities.  Since the recession in the early 2000’s, there has been virtually no private sector job growth in NH (primarily because the last “‘great recession” wiped-out gains from the middle of the decade).  The chart below crudely divides NH’s larger communities into quartiles according to the change between 2000 and 2010 in the percentage of their population age 25+ that has at least a BA degree and the mean change in private sector employment between 2003 and 2011.  One caveat, the figures for 2010 used to calculate this is based on the three-year average of American Community Survey values and smaller communities have larger margins of error in the survey results.  It is just one of the challenges in documenting the relationship between demographics and economic performance at the community level.  Nevertheless, I think  the data point to a relationship were towns that are seeing increasing levels of educational attainment among their population are performing better economically than than those that are seeing less of an increase.

job growth and ed attainment change

It also says a lot about how the character of a community might be changing.  I live in city that has seen a significant increase in the percentage of its population with a BA degree or higher over the past two decades.  That change has contributed to changing expectations of the community (the type of services and amenities it offers).  That type of change creates a clash between the old and new that has and continues to characterize many communities.  In many ways I believe local tax cap debates are more about demographic and socioeconomic changes than they are about economics and fiscal policies.  But I digress.

Skilled individuals with higher levels of educational attainment have the most economic opportunities and they are the most mobile.  I think keeping and attracting skilled individuals with higher levels of educational attainment is an increasingly important economic development strategy for communities.  Looking at changes in educational attainment between 2000 and 2010 among NH’s largest communities shows some interesting patterns.  Not surprisingly, some of the communities that have done the most to restrain expenditures have seen the smallest increases in educational attainment levels (some towns like Durham had such high levels – 77%  – they have no way to increase much).

ed attainment change by town

Spending liberally is never a good thing but providing the services and amenities desired by skilled and educated individuals and families at a price (in terms of local taxes) lower than other communities is a good way to accumulate the talented workforce that can increase real prosperity in a community.  Just adding skilled and educated individuals isn’t enough for employment growth, particularly if a community doesn’t want to be a center of employment or is otherwise inhospitable to employment growth.   I don’t think a low tax price alone is enough to attract talent and I don’t think providing amenities and services without regard to price is enough either, but too often never the twain shall meet in striking a balance between prices and  services and amenities and longer-term community development objectives.  I don’t know many local budgets that can’t be cut but unfortunately the cuts usually come at the expense of those services and amenities most likely to help a community attract or retain individuals with the most economic opportunities and choices of where to locate.  When I say or write these things I risk being labeled a big spender or liberal.  In reality I am just documenting trends that seem pretty clear to me.  Nevertheless, my advice to others is never bring data to an ideological fight if you want to escape unscathed.  In an age of austerity, spending decisions need to consider both the current  fiscal reality as well as the longer-term implications for the economic prospects  of  a community.

The Coming Matriarchy in the U.S.

February 12, 2013

I received a great comment/question  about my post “Why Can’t a Man Graduate More Like a Women” asking about the potential impact of Title IX on the rise in the percentage of female college graduates relative to male college graduates.  I didn’t have a good answer or much empirical evidence then but as is my custom I responded as if I did.

Title IX is most often identified with efforts to equalize opportunities to participate in intercollegiate sports for women but its real purpose was to prevent discrimination in education based on sex.  Title IX is a portion of the Education Amendments of 1972 and is also known as the Equal Opportunity in Education Act, it said:

No person in the United States shall, on the basis of sex, be excluded from participation in, be denied the benefits of, or be subjected to discrimination under any education program or activity receiving federal financial assistance…

Rules for its implementation were finalized in 1975 and since it was implemented the number of young women attending college on a full or part-time basis has increased by 138% compared to 47% for young men.

Male Female Enrollment Growth

Since the percentage of young women and young men hasn’t changed much since 1975, the differential growth rate is attributable to increasing enrollment rates for women.   I can’t say  how much of this is attributable to Title IX, a lot of things began to change for young women in the 1970s and female enrollments jumped between 1970 and 1975 as well (see chart below).

Male_Female Pct of Enrollment

Women now comprise about 57 percent of all undergraduate students in this country.  The growth trend seems to have stabilized somewhat in recent years – recessions tend to limit employment opportunities for young men more than for young women and this can prompt greater college enrollment among young men.

Male_female Unemployment Rates

A lot of progress has been made by women in this country since 1975 but it is hard not to see the association between the growth in female college enrollment and implementation of Title IX.  I am sure some readers will note Title IX’s shortcomings and more may object on principle to anything that seeks to equalize opportunities among our citizens.  But ideology often causes temporary or permanent blindness.  I’ve noted my interest in gender issues as the father of daughters and I blog frequently about gender and economics (select  the “gender” category to see some) but the issue has profound implications for the future of this country;  economic, political, as well as social.  Women are increasingly contributing to the quality of  “human capital” in this country.  There are now more women working in New Hampshire than men.  It is a great development that would be even greater absent the disturbing trends among young men.

From a political perspective (isn’t everything political these days?) the feminization of the workforce as I have called it (not pejoratively) along with the relationship between educational attainment (college graduates) and voting for Democratic candidates should prompt leaders of the Republican Party in this country to consider their relatively lack of appeal to women, especially younger women because as I see it, and as my daughters no doubt hope, it won’t be long before women will rule this country.

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.


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