Category Archives: Labor & workforce

The New Idle Class: Men

fat_guyby James A. Bacon

Earlier this week, I noted that employers in Martinsville, a city with one of the highest unemployment rates in Virginia, have 1,400 unfilled jobs. Many jobs require skills that locals do not possess. But few aspiring workers are enrolling in courses at the region’s New College Institute that would equip them with those skills. Local officials bemoaned the lack of motivation of those out of work.  “We don’t have an employment problem,” said City Manager Leon Towarnicki. “We have a participation problem.”

It turns out that the phenomenon of unfilled manufacturing jobs is hardly unique to Martinsville. Openings for manufacturing jobs this year have averaged 353,000 a month nationally, but manufacturers struggle to find workers to fill them, reports the Wall Street Journal today. The Journal article emphasizes the mismatch between job requirements and worker skills.

In 2000, 53% of manufacturing workers had no education past high school. By 2015, that share had fallen 9 percentage points, while the share with college or graduate degrees increased 8 points. … The “upskilling” in manufacturing mirrors a broader bias in the economy toward more educated workers. …

Companies say education and training systems haven’t evolved with industry needs.

Perhaps there is something grievously wrong with the U.S. system for educating and training workers. That’s not hard to believe: The federal and state governments fund more than a dozen job training programs, which are notorious for their overlap, administrative inefficiency and lack of effectiveness. But, then, the nation does have a strong system of community colleges. And as the Martinsville case shows, many people out of work are unwilling to avail themselves of the opportunities to re-tool themselves.

In a separate WSJ piece, “The Idle Army: America’s Unworking Men,” Nicholas Eberstadt with the American Enterprise Institute focuses on the decline in workforce participation among American men. The fraction of American men age 20 and older without paid work rose from 19% to 32% over the past 50 years. “For prime working-age men,” Eberstadt wrote, “the jobless rate jumped to 15% from 6%. Most of the postwar surge involved voluntary departure from the labor force.”

Who are America’s new cadre of prime-age male unworkers? They tend to be: (1) less educated; (2) never married; (3) native born; and (4) African-American. But those categories intersect in interesting ways. Black married men are more likely to be in the workforce than unmarried whites. Immigrants are more likely to be working or job-hunting than native-born Americans, regardless of ethnicity. …

What do unworking men do with their free time? Sadly, not much that’s constructive. About a tenth are students trying to improve their circumstances. But the overwhelming majority are what the British call NEET: “neither employed nor in education or training.” Time-use surveys suggest that they are almost entirely idle. .. For the NEETs, “socializing, relaxing and leisure” is a full-time occupation, accounting for 3,000 hours  a year, much of this time in front of television or computer screens.

Part of the problem can be attributed to the workforce barriers encountered by America’s huge pool of ex-prisoners and felons, who account for one adult male in eight in the civilian non-jail population. Another is the increase in nonworking men who draw from disability and other means-tested benefit programs.

Meanwhile, writes Eberstadt, “the male retreat from the labor force has exacerbated family breakdown, promoted welfare dependence, and recast ‘disability’ into a viable and alternative lifestyle. Among these men the death of work seems to mean also the death of civic engagement, community participation and voluntary association.”

The assumption that “everybody wants to work” is no longer founded. That is an ethnocentric notion of U.S. elites, projecting their own values through an ideological filter upon an expanding underclass of all races. Economic policies that fail to recognize the new workforce reality, no matter how well intentioned, are a waste of time. Indeed, insofar as such policies distract us from the real issues and squander precious resources that our decreasingly affluent society can no longer afford, they do an actual harm.

Is It Time to Blame the Victim?

New College Institute, Martinsville, Va.

New College Institute, Martinsville, Va.

by James A. Bacon

Martinsville is one of Virginia’s hard luck cases. Once a thriving center of home-grown furniture and apparel enterprises, its economy has been hollowed out by international trade, and its unemployment rate chronically runs around twice the state average. Earlier this year, when the statewide unemployment rate was hovering around 4.0%, joblessness in Martinsville had barely dipped below 8.0%.

Given the persistent slack in the labor force, one would think that workers would go to great lengths to get a job. Remarkably, many are not. At a recent Martinsville City Council meeting, city officials and economic developers estimated that about 1,400 jobs were unfilled in the area.

“We don’t have an employment problem. We have a participation problem” — people don’t want to be part of the workforce anymore, City Manager Leon Towarnicki told the council, reports the Martinsville Bulletin.

Said Mark Heath, CEO of the Martinsville-Henry County Economic Development Corp: the key to filling available jobs is “to motivate people that it’s better to have a job and go to work” than rely upon government aid to sustain themselves.

As an example, Heath cited the experience of the local New College Institute, which launched  the Center for Advanced Film Manufacturing in 2014 to train employees for jobs at Eastman Chemical Co. and other local high-tech manufacturers. Students take 28 credit hours of work over two semesters. Financial aid is available; no one is turned away due to an inability to pay. Moreover, graduates are virtually guaranteed a job. Heath had hoped that 40 to 45 people would enroll this semester. The actual number: 15.

Bacon’s bottom line:  The conventional wisdom in Virginia is that unemployment is high because there aren’t enough jobs and that, therefore, government needs to do something to stimulate job creation. A more sophisticated version of the CW is that there is a mismatch between job requirements and the skills of the workforce — Governor Terry McAuliffe has famously said that there are nearly 30,000 tech vacancies in Northern Virginia alone — implying that we could lick the problem if only the educational/training system did a better job of equipping workers with the skills that employers need.

Without question, solving the jobs-training mismatch is part of the solution. But how we explain the situation in Martinsville, where a mechanism exists to train workers and provide them jobs, and there disappointingly few takers?

Dare we “blame the victim” and suggest that not all Virginians are equally motivated to find work… that some are content to live on government support, as meager and inadequate as that may be?

Read the comment thread on the Martinsville Bulletin article. It’s fascinating. Some readers point out that it’s hard to go to school if you can’t afford to pay for rent, gas and day care. Others, many of whom put themselves through school to earn a credential needed for a job, have no sympathy whatsoever. As one man a said, “I just spent over two years going to school at night while working 45 hours a week. Where there is a will to succeed, a way is made. Work ethic is dying in this country, and it is starting to show.”

Virginia Retirement System — Trouble Ahead

Last week as I was watching the business channel, I was very interested in the comments of AIG’s head of investments about the effects of low interest rates on his firm. For those involved in life insurance and other long-term products, today’s historically low interest rates pose a significant problem. With negative rates on investment-grade bonds, insurers have no choice but to raise prices to the consumer or leave markets where bond yields are not high enough to support interest-sensitive products.

This morning’s Richmond Times Dispatch brought the issue a little closer to home. House Speaker William J. Howell wants to shift from the current structure to a self-managed system. In other words, employees would manage their own retirements and, as is the case with 403b plans or IRAs, would take their accounts with them when they shift jobs. (As a retired teacher, I receive a small pension from the Virginia Retirement System.)

It is unclear from the article how, under Howell’s proposal, the employee would fund this. Would employees receive a stipend equal to the amount that school districts currently contribute on their behalf to VRS? Or would they be totally on their own? If the latter, the state would be shifting not only market risk but the actual cost to teachers and its other employees.

Teaching has always been a relatively low wage profession. One of the unspoken deals always was, “You work for a low wage now and we will help you out in your later years.” The article leads me to conclude that Howell wants to destroy that bargain. Sure, we all want to be on our own, but attracting skilled folks to the teaching profession, which has seen a decline in real wages since the Great Recession, will be even more difficult. Funding their own retirement is a risk that few will be able to afford.

— Les Schreiber

Another Example of Good Intentions Gone Wrong

Jennifer Doleac

Jennifer Doleac

by James A. Bacon

Last year Governor Terry McAuliffe signed an executive order to “ban the box” prohibiting employers from asking job seekers about their criminal history at the initial job stage. The goal was to “remove unnecessary obstacles” to felons seeking employment after incarceration. How could one object? Once felons have paid their debt to society, we should ease their transition back into the workforce, right?

It turns out that things don’t always work the way we expect them to. From the Daily Progress:

Research published recently by Jennifer Doleac, an assistant professor of public policy and economics at the University of Virginia, found that ban the box policies actually lowered the probability of employment by 5.1 percent for young, low-skilled black men and 2.9 percent for young, low-skilled Hispanic men.

According to Doleac, who conducted the study with the University of Oregon’s Benjamin Hansen, the lowered chance for employment comes from the unwillingness by employers to take chances on hiring someone without knowledge of their potential criminal history.

“Simply taking away information about whether someone has a record doesn’t stop employers from caring about someone’s criminal background,” Doleac said. “It just leaves them to guess based on the remaining information they do have.”

All too often, that “remaining information” is age, race, ethnicity and socioeconomic background. (Hat tip: John Butcher)

Bacon’s bottom line: Society is extraordinarily complex. Political ideologies (both on the left and the right) provide simplified models for how society works. Often those simplified models overlook important linkages and feedback loops that lead to very different results than anticipated. Individuals and private entities can quickly alter their behavior to adjust to reality; government adjusts much more slowly, if at all.

Will McAuliffe rescind his “ban the box” order? I’m not betting on it. The social engineer’s response to problems created by a law or regulation is to “fix” the emergent problem by enacting more laws and regulations… thus creating new problems. 

It’s fine to try new ideas, but we have to pay attention to whether they work or not. If they don’t, we need to reconsider them. Good intentions are not enough.

Move to the City, Young Man, Move to the City

Image credit: StatChat

Image credit: StatChat

Virginians are most likely to move to another jurisdiction when they reach age 18 and head to college and again as they establish themselves in the job market. As they grow older and sink personal and professional roots in a community, their proclivity for moving steadily declines. Only when Virginians hit retirement age does the trend line level off. The pattern is shown clearly in the chart above, taken from Hamilton Lombard’s latest blog post on the StatChat blog.

Equally interesting is Lombard’s map showing where young people (15 to 24 years old) are moving from, and where they’re moving to. No surprise here: They’re moving from rural and suburban counties to college towns and urban-core jurisdictions.

migration_map

Image credit: StatChat. Click for larger image.

What does that mean for public policy in Virginia? Writes Lombard:

The rise in college attendance rates and the common need to move to large urban centers for graduates to find jobs are both likely helping drive the increasing flow of young adults into Virginia’s urban areas and communities with universities. The inflow of young adults into Virginia’s cities has boosted their workforce noticeably and helped support the revival in growth that many cities in Virginia are experiencing. But as an increasing share of young adults have remained in cities after starting families, it has also forced many urban localities, such as Arlington and Falls Church, to reevaluate their long-term planning as demand for housing and school spaces have surged.

Conversely, he writes, “A smaller working age population has typically also meant fewer families with children in rural counties, often slowing population growth and in many cases causing population decline.”

If there is a consolation for rural counties, the outflow of young people is offset to some degree by an influx of retirement-age Virginians. As Lombard speculates: “Many the older people that rural counties are attracting are likely the same ones that moved away for college or work decades ago.”

— JAB

DEQ Approves Utility-Scale Solar Permit in Buckingham

solar_panelsby James A. Bacon

The Department of Environmental Quality (DEQ) has issued a permit for construction of a 19.8-megawatt, utility-scale solar project in Buckingham County, Governor Terry McAuliffe announced yesterday. Construction of the 200-acre facility is expected to begin early in 2017 and be finished by the end of the year. The cost is estimated to run between $30 million and $35 million.

DEQ Director David Paylor hinted that more solar projects are in the pipeline. “DEQ is looking forward to issuing more of these renewable energy permits in the future,” he said. “Our priority will be to take the steps necessary to protect Virginia’s environment while helping the Commonwealth become a leader in renewable energy production.”

The project is being developed by Firestone Solar LLC, a subsidiary of Virginia Solar, headed by Richmonder Matthew Meares.

“We are very pleased and thankful to Buckingham County and the Commonwealth of Virginia for supporting a 100 percent Virginia-owned and operated utility scale solar developer by approving our Firestone solar project’s state permit,” Meares said in the press release. “We hope this is the first of many such projects by Virginia Solar in the Commonwealth promoting Governor McAuliffe’s goals of helping the environment creating new economic drivers, utilizing Virginia products and services, and attracting business to the Commonwealth.”

Few other details were available about the project from the press release. However, the project has been in the works since at least August 2015. An article in the Farmville Herald indicated that the facility would include “ancillary support facilities and electrical interconnections … to be transmitted on a Dominion distribution line.”

The project could employ 150 workers during the construction phase, but full-time employment after construction would be minimal. Stated the Farmville Herald:

The project would have up to three employees every two months on-site for system inspections, vegetation management and preventative maintenance. … In addition, one employee may be on-site for security at any time, according to the application. There are not expected to be any permanent employees stationed at the site.

Bacon’s bottom line: So much for the miraculous green-energy job creation machine: a couple of low-skilled, part-time jobs. Solar may (or may not) be good energy policy, but promises that it will spur job creation are a cruel delusion. (Not that the alternative, gas-fired power plants, are a big job creator either on a jobs-per-kilowatt basis. But power plant jobs do require a high level of training and education, and they pay well.)

As always seems to be the case with solar projects, the economics of the Firestone deal remain a mystery. It’s not clear who will buy the solar power — whether Firestone will sell into the PJM Interconnection wholesale market or whether it has lined up a specific customer take the electricity, as in Amazon Web Services. Another possibility is that the developer will just flip the project to Dominion Virginia Power, as has happened with other projects in Virginia.

The up-front cost of about $1,625 per kilowatt is more than twice the cost of a state-of-the-art gas-fired plant, but it is considerably cheaper than the $2,250 per kilowatt for the recently announced Oceana Naval Air Station. (That may not be an apples-to-apples comparison, however, because the Ocean deal may have included infrastructure improvements not included in the Buckingham project.) If Virginia Solar is selling its power to a private customer, the cost is immaterial to the general public. But if the power will be passed on to Virginia rate payers, cost is very germane.

There is little information about the developer. Virginia Solar doesn’t even have a website. (The domain name www.virginiasolar.com is available for purchase.) Matthew Meares, the principal behind Virginia Solar, describes his specialty as “solar and wind financial structuring” on his LinkedIn page. That page also describes him as managing director of Richmond-based Sunworks NC, which has a one-page website. The company’s core competencies include financial modeling of various “tax equity and debt structures,” capital structuring, development assistance, technical due diligence, and energy production analysis.

There is a cottage industry of entrepreneurs who do the leg work of identifying prime solar sites, consolidating the land parcels, lining up the regulatory permits and then flipping the project to a player with deeper pockets. The ideal solar site is located near an existing electric transmission line that requires minimal investment to connect to the grid. It is in a rural area where NIMBYs won’t object to its presence and local governments will welcome the boost to the tax base. It also helps when negotiating the acquisition of land parcels to be a no-name firm rather than Dominion Virginia Power, Appalachian Power or any other company that cries out, “Deep pockets!”

Update: Reader Erik Curren pointed me to the www.vasolarllc.com website, which provides a bit more detail. Virginia Solar LLC was behind a 17-megawatt project in Powhatan County, projected to be installed in 2016. “Dominion Virginia Power intends to purchase this project and has submitted it to the Virginia State Corporation Commission for approval,” states the home page.

How to Stop Worrying and Learning to Love the Nuke

Keel-laying ceremony for nuclear attack sub U.S.S. Delaware in April. Huntington Ingalls, owner of the old Newport News Shipbuilding shipyard, is one of the world's leading experts in small nuclear power plants. The ship's crew began extensive training in operating the nuclear reactor long before construction of the ship was complete.

Keel-laying ceremony for nuclear attack sub U.S.S. Delaware in April. Huntington Ingalls, owner of the old Newport News Shipbuilding shipyard, is one of the world’s leading experts in small nuclear power plants. The ship’s crew began extensive training in operating the nuclear reactor long before construction of the ship was complete.

by James A. Bacon

I don’t know what kind of future the nuclear power industry has in the United States, but whatever it is, Virginia wants to grab a piece of it.

The Virginia Nuclear Energy Consortium (VNEC) and the Center for Advanced Engineering and Research (CAER) have announced a plan to join forces to bring more nuclear research dollars into Virginia and create more nuclear workforce opportunities, reports Virginia Business magazine.

VNEC was created in 2013 by the Virginia General Assembly as an independent authority with the goal of making the Commonwealth a global leader in nuclear energy. CAER’s mission is to increase competitiveness for  core, high-wage industries in the Lynchburg area around a knowledge-based research hub.

The two organizations agreed to pursue initiatives related to researching new nuclear technologies, education and training programs, and bringing nuclear-related businesses into Virginia,

“This agreement will help us ensure government, academic institutions, and private commercial entities make the most of Virginia’s capabilities for contributing to the next generation of nuclear technology and education, opening doors for additional research funding, creating opportunities for new jobs, and launching new businesses in the commonwealth,” Sama Bilbao y León, director of nuclear engineering programs at VCU and chairman of VNEC, said in a statement.

It wasn’t clear what resources will be applied to the initiative, although the article did allude to “the historical support” of the General Assembly and the Virginia Tobacco Regional Revitalization Commission as possible sources of financial backing.

VNEC has endorsed the use of nuclear power in Virginia’s electricity generation mix, stressing the need for zero CO2-emissions baseload capacity to offset the intermittent generation of solar and wind. But VNEC’s main thrust is to bolster the economic prospects of key players in the nuclear power industry including AREVA Inc. North America, a Lynchburg-based subsidiary of the French nuclear construction and services company; Babcock & Wilcox, a Lynchburg-based nuclear service firm; and Huntington Ingalls Industries, the Newport News-based builder of nuclear-powered submarines and aircraft carriers.

Bacon’s bottom line: Nuclear power has had a bad image in the United States ever since the Three Mile Island episode, not to mention the Chernobyl and Fukushima disasters. Moreover, the massive safety redundancies built into nuclear power plants make them incredibly expensive. But the industry is working on new technologies that might bring down costs and alleviate safety concerns, the most promising of which is a new generation of smaller reactor.

Virginia has had a good experience with nuclear. Dominion Virginia Power’s nuclear facilities in North Anna and Surry have among the best tracks records in the country. The U.S. Navy in Norfolk has operated nuclear-powered warships without incident for decades. Why not embrace the industry? Why not benefit from other peoples’ unfounded fears?