Category Archives: Labor & workforce

How Not to Shift From Coal

coal-plantBy Peter Galuszka

Coal is rightly the scourge of environmentalists. Economic pressure is on to shift to cleaner natural gas made plentiful by controversial hydraulic fracking. Political pressure is on to replace fossil fuels with renewables such as wind, solar and other methods.

In Virginia, Dominion, the state’s largest utility, relies for 46 percent of its generating capacity on coal and is moving in fits and starts to natural gas. It doesn’t get much from renewables. How much and how fast should it shift?

Yet out of Colorado comes a cautionary tale. According to The Washington Post, a family in the impoverished city of Pueblo is at odds running power. They only use a window air conditioner part of the time. They avoid using their oven in the summer. It uses electricity they not longer can afford because it overheats the house in summer.

For the family of Sharon Garcia, the problem is Black Hills Energy, which recently bought the local power company – Aquila, which got some of its power from a coal plant that was first built in 1897 with peaking extra power from Xcel, another utility.

Then, in 2008, Black Hills bought out Aquila and everything changed. Xcel decided it could make more money selling power at retail rates in Denver and not at wholesale rates to the utility serving Pueblo. In the midst of these events, a state law prompted Black Hills to shut down older coal plants for cleaner natural gas.

The state approved rate increases so Black Hills could build new infrastructure to handle natural gas and and rates when up significantly.

The problem is likely to be further complicated if the utilities move on the renewables, which, in the short term, are more expensive than either coal or gas.

This is not to say that companies should stick with coal forever, or natural gas. Renewables should still be the goal. But during the transition, green activists, many of them affluent, need to realize who pays the price. What’s a few dozen extra dollars for some is a tragedy for others.

Chart of the Day: Virginia’s Aging Population

aging

This graph comparing Virginia’s age between 1980 and 2013 comes from Luke Juday’s latest post over on the Stat Chat blog, published by the demographics shop the Weldon Cooper Center for Public Service. I urge you to check out the opening chart in his post to see an animation of the changes year by year. It’s fascinating to watch the bulging Baby Boomer generation crawling up the age ladder.

I would love to see a projection of Virginia’s demographic profile over the next 20 years. We would see the big Boomer blob move up, out of the workforce and into retirement age. The implications of that massive shift cannot be over-estimated. Virginia’s working-age population won’t be increasing in size — indeed, it probably will begin shrinking within a decade. Extrapolate that trend nationally, and you’ll understand why the Congressional Budget Office (CBO) maintains that the structural U.S. budget deficit — “only” $583 billion this year, according to the Obama administration’s updated forecast, will march relentlessly higher within a few years as the growing ranks of seniors put increasing stress on the Medicare, Medicaid and Social Security programs.

America still faces a Boomergeddon scenario, although we may have bought ourselves a few years’ grace. The CBO thinks that the slowdown in the growth rate of medical spending experienced since the 2007-2008 recession is a lasting phenomenon and will slightly bend the spending curve downward — enough to keep the Medicare Part A trust fund solvent through 2030. In February, the non-partisan budget shop had projected that the trust fund would run out of money in 2025, reports the Wall Street Journal.

The good news is that Congress has five more years to dither and procrastinate about reforming Medicare. The bad news is that Congress probably will take full advantage of that five years before making hard choices.

– JAB

RAM, Coal and Massive Hypocrisy

The Pikesville RAM clinic in 2011. Photo by Scott Elmquist

The Pikesville RAM clinic in 2011. Photo by Scott Elmquist

By Peter Galuszka

Sure it’s a photo op but more power to him.

Gov. Terry McAuliffe is freshly arrived from the cocktail and canape circuit in Europe on a trade mission and is quickly heading out to the rugged and impoverished coal country of Wise County.

There, he, Attorney General Mark Herring and Health and Human Resources Secretary William A. Hazel will participate in a free clinic to help the mountain poor get free health care. The political opportunity is simple: Many of the 1,000 or more who will be attending the Remote Area Medical clinic are exactly the kind of people getting screwed over by the General Assembly’s failure to expand Medicaid to 400,000 low income Virginians.

RAM makes its Wise run every summer and people line up often in the wee morning hours to get a free medical and dental checkup. For many, it’s the only health care they get all year unless it’s an emergency. Another problem: Distances are great in the remote mountains and hospitals can be an hour away.

Mind you, this is Coal Country, the supposedly rich area upon which Barack Obama is waging war and harming local people by not going along with coal executives’ demands on environmental disasters such as mountaintop removal, keeping deep mine safety standards light and avoiding carbon dioxide rules.

The big question, of course,  is why if the land is so rich in fossil fuel, are the people so poor and in need of free medical care? It’s been this way for 150 years. And now, coal’s demise got underway in Southwest Virginia in 1991 when employment peaked at about 11,000. It is now at 4,000 or less. It’s getting worse, not better.

In June 2011, by coincidence, I happened along a RAM free clinic in Pikesville, Ky., not that far from Wise when I was researching my book, “Thunder on the Mountain: Death at Massey and the Dirty Secrets Behind Big Coal.” My photographer Scott Elmquist and I spotted the clinic at a high school. There must have been hundreds of people there –  some of whom told me they had been waiting since 1:30 a.m. It was about 8:30 a.m.

Attending them were 120 medical and dental personnel from the U.S. Public Health Service. They were dressed in U.S. Navy black, grey and blue colored fatigues. The University of Louisville had sent in about 80 dental chairs.

Poverty in Pike County had been running about 27 percent, despite the much-touted riches of coal. Pike is Kentucky’s biggest coal producer.

One man I spoke with said he had a job as a security guard, but he doesn’t qualify for regular Medicaid and can’t afford a commercial plan. In other words, had I interviewed him more recently and had he been a Virginian, he would have been lost through the cracks of Medicaid expansion. Alas, he’s in luck. In 2013, Kentucky opted for a “marketplace” expansion system where federal funds would be used to help lower income buy health plans through private carriers.

Lucky the man isn’t from here. The marketplace plan is exactly the kind that McAuliffe has proposed and exactly the one that stubborn Republicans such as Bill Howell in the General Assembly are throttling. The feds would pick up the bill for expanding Medicaid to 400,000 needy Virginians, at least initially.

Yet another irony. Expanded medical benefits are available just across an invisible border in two states whose coalfield residents somehow never got the great benefits of King Coal.

More Defense Cuts Plague Virginia

Special deliveryBy Peter Galuszka

Virginia continues to see painful military spending cuts in the aftermath of the years’- long U.S. intervention in Iraq and Afghanistan.

Among the latest news is that the Army may cut 3,600 jobs at Ft. Lee, ironically the site of a recent and large expansion, by 2020. That could result in a decline of 9,000 residents near Petersburg which is close to  the base.

Plus, the Air Force plans on cutting 742 positions at its Air Combat Command headquarters at Langley Air Force Base in Hampton although some of the positions are already vacant and won’t be filled.

These are just some of the changes that are affecting Virginia, which is the No. 2 defense industry state after California. Many of the cuts involve active duty personnel whose vacancies are not being filled or are being asked to take early retirement.

Defense industry jobs are likewise taking cuts. A report by the National Association of Manufacturers states that in 2014, California will lose the most military-related jobs (148,400) followed by Virginia (114,900) and then Texas (109,000). Maryland will lose 40,200 jobs, the report says.

Many of the jobs are in heavy manufacturing, such as aerospace and ship building, and search and navigational services, but general business and other services will also be affected.

The news is especially hard on Petersburg and nearby Ft. Lee which just a few years ago enjoyed a major boost after a Base and Realignment and Closure round consolidated many multi-service logistics and supply functions. The influx of thousands of soldiers, contractors and their families boosted the city and surrounding areas.

Hampton, the location of Langley Air Force Base, doesn’t seem to be in store for such heavy impacts since the cuts involve some jobs already being lost to attrition. Other bases and areas hurt by the Air Force cuts include Washington, D.C.; San Antonio; Texas; Dayton, Ohio; and Belleville, Illinois.

Newport News Shipbuilding, now owned by Huntington Ingalls Industries, could lose a deal to build one submarine and might delay another to build as Ford class nuclear attack carrier, if automatic defense budget cuts return in 2016. Another potential hit: refueling the nuclear-powered carrier George Washington but may mothball the ship if the budget cuts kick in. About 24,000 people work at Newport News Shipbuilding, making it the largest private employer in the state.

Besides the Washington area, Hampton Roads is greatly dependent upon defense spending. Some 47 percent of the regional economy depends on it. Anticipating more defense cuts, former Gov. Robert F. McDonnell formed a commission to come up with ideas before he left office this year. One of them is to be pro-active and recommend cuts of its liking before the federal government acts.

One of its recommendations cuts both ways on environmental issues. It recommends against offshore oil and gas drilling in watery areas where the military trains, thus making them available over the long term. It likewise recommends against wind turbines in the same areas.

These are interesting, but very difficult choices.

Expect No Help from the Ivory Tower

ivory_towerby James A. Bacon

In yesterday’s post, I expressed skepticism that Virginia’s system of education and job training (like that of the nation as a whole) is equipped to provide Virginia’s workforce with the skills required for employment today. Skills, I conjectured, are obsolescing faster than educators and job trainers can keep up. One reason for that, I suggested, is that funding streams are dominated either by fractured and overlapping government-funded job training programs, which by their nature are unresponsive to the marketplace, or by colleges and universities with their own institutional imperatives.

What did I mean by “institutional imperatives”? An article in Charlottesville’s Daily Progress yesterday sheds some light in a discussion of two of Virginia’s elite educational institutions, the University of Virginia and the College of William & Mary.

As described by reporter Derek Quizon, the great challenge of UVa and W&M is balancing increasing costs, decreased state funding and a push to retain top faculty. Those are essentially the same priorities, I might add, of every university, public or private, although less renowned institutions may lack the resources to recruit star faculty.

Judging from the reporting in Quizon’s article, cutting costs does not appear to be a major preoccupation of either UVa or W&M. The focus is how to increase tuition revenue while meeting the goal of making college affordable to everyone, including lower-income students. The solution: Jack up tuition, siphon a fraction of the revenue into student aid, and squeeze harder those students whose families can afford to pay.

In institutions whose bottom line is prestige, not profits, no one is talking about dialing back the recruitment of star faculty. No one is talking about rolling back administrative overhead. No one is talking about disrupting the educational marketplace through online learning. Strategic plans are forged in response to the demands of internal constituencies, not to the demands of the labor market.

What’s true of major universities is not necessarily true of all colleges within those universities — engineering and business schools, I suspect, stay in close touch with businesses that hire their grads — and probably not true at all of community colleges, which remain focused on equipping their students with specific skills needed in the workplace.

But for the most part colleges and universities seem to be floating in a bubble high above the grubby concerns of the business world that that pays the taxes and creates the wealth in our society. If we’re looking for structural change in how citizens acquire the skills that make them employable, don’t look for that change to be led by our elite educational institutions. The change we need will have to come from somewhere else.

– JAB

Virginia’s Jobs-Skills Mismatch

skills_mismatchEvidence is mounting that a reason for slow economic growth and high unemployment — not the main reason but a significant one — is the mismatch between the skills required for the jobs that American companies have to fill and the skills that American workers actually possess.

A recent survey of 87 small and midsize business CEOs conducted by the Robins School of Business at the University of Richmond and the Richmond Council of CEOs found the following: 70% staffing was a significant issue, particularly the finding, recruiting and training of operational and sales talent.

When asked how much their annual revenues might increase if their talent concerns were resolved, more than half of all CEOs (51.7%) indicated they would experience growth of 11% or more, with 17.2% of firms indicating potential revenue growth of more than 20% if they could solve their staffing issues.

The problem is concentrated in two main areas: sales and IT. “The CEOs I work with are very concerned with attracting talent in two areas,” says Scot McRoberts, executive director of the Virginia Council of CEOs. “Many small business CEOs are raising the bar for their sales teams. … In our local IT community, programmers and coders are just not there in sufficient skill and quantity.”

Let’s see…. Businesses want employees with different skill sets. Employees want skills that will get them hired. Virginia has a massive educational/job training establishment — colleges, universities, community colleges, job training programs — that spends billions of dollars a year. Yet, somehow, the system is not functioning properly. Old skills are obsolescing faster than ever as businesses strive to incorporate new technologies, and the education/training system can’t keep up.

Bacon’s bottom line: If those 87 CEOs are representative, thousands of jobs in Central Virginia alone are going begging. Instead of trying to create jobs by building baseball stadiums and sports arenas, perhaps our political and civic leaders should focus on the jobs-skills mismatch. On the other hand, maybe they shouldn’t. Given their track record, maybe they should just stay out of the way.

Regardless, we need a new system to equip Virginians with the skills they need to be employable and that businesses need to be competitive — a system that can keep up with fast-evolving technology. Will we get that system? Don’t count on it. The existing system is ossified in place by funding streams determined more by politics and institutional privilege than by market demand.

– JAB

Why High Schools Should Prioritize Proficiency in Writing and Algebra II

enrollment_persistence

Image credit: VLDS

Virginia high school students who earned the more academically demanding Advanced Studies diploma were six times more likely to have earned an Associate’s or Bachelor’s Degree within four years of graduating. That’s one of the most recent findings to emerge from the Virginia Longitudinal Data System (VLDS), a system that matches de-identified data from multiple state data sources, allowing researchers to track the progression of Virginians from school to college and into the workforce.

A study of “postsecondary persistence,” the likelihood of a student persisting through college long enough to earn a degree, also found that students who scored “advanced proficient” on their Algebra II Standards of Learning and end-of-course writing SOLs were far more likely than their peers to enroll and graduate from college within four years.

Why does this matter? Because experts estimate that by 2018 65% of all jobs will require some level of post-secondary education or training. “It is critical that Virginia’s high schools ensure that students graduate with the knowledge and skills needed for success in post secondary programs,” write the authors Deborah L. Jonas and Marshall W. Garland in “Virginia’s 2008 On-Time Graduation Rate Cohort Four year college enrollment, persistence and completion.

“This research provides important insights into the value of the Advanced Studies diploma — and the courses within the diploma – in preparing students for success in life.” In particular, it documents the importance of ensuring students reach high achievement in mathematics and English courses.

That may not sound like the most dramatic finding in the world, but it does lead to important public policy conclusions. (The authors did not draw these conclusions — I am drawing them.). Not only should high schools encourage students to strive for Advanced Studies diplomas, they should focus resources (e.g. the best teachers) on English and algebra courses. Students need writing and math skills to make it through college. All other courses — history, foreign languages, physical education, various elective studies — are worthwhile but less essential.

In the future, we should be seeing more research like this based upon VLDS data. Hopefully, Virginia’s government and political leaders will use the research to guide public policy. I don’t under-estimate the power of ideology and bureaucratic inertia to trump research when it comes to reforming the system, but hope springs eternal.

– JAB

McAuliffe Hits Private IT Outsourcing

mcauliffeBy Peter Galuszka

Just a decade ago, privatizing and out-sourcing traditionally government work was all the rage.

Virginia’s Democrats and Republicans alike saw a philosophical advantage in fending off Information Technology, road maintenance and other work to for-profit, private companies who supposedly – if you believed the hype then  –could always do things better, faster and more efficiently than state workers.

The concept of “government” workers always seemed to be negative. Not only would taxpayers have to pay their health and retirement benefits, they might try to join unions and make labor negotiations even more difficult. It didn’t wash with Virginia’s conceit of being an anti-labor, “right-to-work” state that promised to keep workers docile as the state tried to recruit outside firms.

Now, Gov. Terry McAuliffe is turning this concept on its head. He is ordering a review of state contracts, especially on out-sourced IT service work that he says may be inefficient and expensive. “I am concerned that state government is inappropriately dependent on expensive contract labor when traditionally appointed state employees can perform at a higher level at a lower cost.”

Now that’s a major turn-around, even for a Democrat. After all, it was fellow Democrat and former Gov. and now U.S. Senator Mark Warner, currently running for re-election, that worked the get the state to accept a $2.3 billion contract for defense contractor Northrop Grumman to take over and upgrade the state’s antiquated IT system in 2005.

That deal proved disastrous as the contractor’s performance issues brought on bouts of oversight and renegotiation. The state ended up extending its contract with Northrop Grumman by three years.

An underlying problem is that while the contract lasts until 2019, the state must make some decisions if it wants to continue with the outsourcing route or start relying on its own state workers.

Another problem is whether the state identifies independent contractors as such or employees of state organizations. About 1 percent of the state’s workers were misidentified as independents. Apparently, state workers have their Social Security and taxes withheld from paychecks. But are they really independents? Or is it just window dressing to play homage to some fad thought up by fiscal conservatives?

McAuliffe is right to start thinking in these terms. What he’s going to have to face, however, is the conventional wisdom in Virginia that “public” is always bad and “private, for-profit” is always good. For evidence of this hidebound view, just read this blog regularly.

In Praise of an Unsung Hero

John D. Bassett III

John D. Bassett III

by James A. Bacon

Nearly 40 years ago I moved from the big city to a place had I barely heard of, Martinsville, Va., to embark upon my journalism career as a cub reporter for the Martinsville Bulletin. Compared to Washington, D.C., where I had spent most of my time growing up, it seemed a hard-scrabble place. Little did I know, those were the glory days.

Martinsville was reputed to have more millionaires per capita than anywhere else in Virginia. (Those were the days before the rise of Northern Virginia’s high-tech industry sector.) There was poverty, to be sure, but the region had pride. As the headquarters town for three major textile and apparel companies, Martinsville claimed to be the Sweatshirt Capital of the World. In the days before off-shoring, the town dominated the global knitted fabrics sector. Martinsville and nearby communities of Bassett and Stanleytown also comprised one of the largest concentrations of furniture manufacturing in the country. There was a large DuPont plant there as well, and even a high-tech company started by immigrant Julius Hermes, Martin Processing, that manufactured advanced film coatings.

Other than DuPont, all the businesses were locally owned and operated. Martinsville was no branch-plant economy. The town had a strong middle class of middle managers and professionals. And even the poor weren’t destitute. Many workers lived on plots of land in the country, supplementing their factory wages with garden crops and, often, small plots of tobacco. To my recollection, the population was affluent enough to support four country clubs. The local delegate to the General Assembly, A.L. Philpott, was speaker of the House. Martinsville was small but it punched above its weight.

In just a few short decades, however, it all came tumbling down. America embraced globalization and open trade. It was something the nation had to do, and there has been a huge payoff to companies and their employees who could provide the higher value-added services where American was globally competitive. But free trade came at a cost — and the people of Martinsville were among those who paid it. First the DuPont nylon plant closed, for reasons that may or may not have been connected to free trade (I can’t remember). The textile-apparel sector was the next to go. Within a couple of decades after I had left, the entire sector had shut down, shuttering the huge knitting mills, as production moved to Asia. Then the furniture industry met its demise. That process was more protracted, and some of the companies survived. Although most production moved overseas, local companies like Bassett, Stanleytown and Hooker survived as furniture designers, marketers and distributors of Chinese-manufactured goods.

That’s all prelude to the purpose of this post, which is to highlight a new book, “Factory Man,” by Roanoke Times reporter Beth Macy, which received a rave book review in the New York Times. Macy tells the story of John Bassett III, president of Vaughn-Bassett Furniture, who fought the fight to preserve furniture manufacturing in Virginia and North Carolina longer and harder than anyone. As the NY Times recapitulates the story:

[Macy] went looking for mountain families who had spent generations working for the region’s furniture giants, until the whole industry was walloped by cheaper furniture imported from China. She found all that and more in the battling Bassetts, a feudal family of factory owners who controlled a string of these companies and the bank, hospital, school, clinic and housing their workers used.

Questions of how the business can survive weigh heavily on manufacturers’ minds.

The ’80s answer brings JBIII’s attitude into stark contrast with those of his fellow owners. Companies merge; Wall Street takes over; laying off workers and closing plants is seen as smart rather than damaging. And nobody much cares what happens to those workers except for JBIII, who can’t bear thinking of them “in unemployment lines instead of assembly lines.”

After leaving the Martinsville Bulletin, I worked for the Roanoke Times from 1979 to 1984. That was before Macy joined the newspaper. I did not know her, but my hat’s off to her for finding the color and the drama in Bassett’s largely Quixotic quest and for telling a story that truly deserves to be told. John Bassett will never be remembered as one of America’s great innovators, like Steve Jobs, or one of its captains of industry, like Jack Welch. Unlike them, he failed. He could not revitalize American furniture manufacturing; China’s economic advantage of cheap labor was overwhelmingly decisive. But he deserves America’s admiration as a businessman who cared about the people who depended upon him, who chose to follow the hard path rather than the easy one, and who gave it his all.

(Hat tip: Patrick Zilliacus)

Sure Looks Like a Brain Drain

Exerpt from map published in CityLab. Purple = net in-migration. Gray = net out-migration.

Exerpt from map published in CityLab. Purple = net in-migration. Gray = net out-migration.

by James A. Bacon

Richard Florida’s latest demographic research project presents an interesting twist on the old “domestic migration” data we’ve all seen (well, we’ve all seen it if we’re regular readers of Bacon’s Rebellion!) The U.S. Census tracks “domestic migration” — the movement of American citizens from one locale to another — and commentators have made much of the fact that some metros are consistent population losers while others are consistent gainers.

While the migration data is useful, there is much it doesn’t tell you. It’s one thing if your region is seeing an influx of college grads and Ph.Ds and quite another if you’re getting flooded with high school drop-outs. Florida broke down the migration data by education level to determine which metros were enriching their human capital, which metros were diluting their human capital and which were simply exporting their human capital. You can see his presentation at CityLab.

In some ways, the data presents the same picture. Big Northeastern and Midwestern cities like New York, Chicago, Philadelphia and Detroit lost population across all education categories between 2011 and 2012. But other cities showed more complex patterns. The Washington and San Francisco metros saw a net in-migration of people with college degrees and advanced degrees and a net out-migration of the less-than-college educated. Not a bad trade — you gain the people who contribute the most to the economy and tax base and you shed people the most likely to wind up on food stamps and unemployment insurance!

Here are the details for Virginia MSAs. Take the numbers for Charlottesville, Blacksburg and Harrisonburg with a grain of salt. Their massive outflow of college grads and Ph.D.s undoubtedly reflects the outsize demographic impact of local universities — hundreds of students come in with high school degrees and leave with sheepskins.

domestic_migration2
Richmond saw the greatest net in-migration of any Virginia metro during this period, although the newcomers were a mixed bag educationally. The region saw a bigger influx of people with less-than-high-school education levels than college and post-graduate combined. Roanoke experienced what can only be called a brain drain — no, make that a brain hemorrhage — losing large numbers of educated residents while receiving equally large numbers of ill-educated citizens.

This data is fundamental to economic development. Political and civic leaders need to know not only how many people are coming and leaving but what their net education level is — whether the region is building human capital or seeing it shrink. Each region needs to track this data over time. And, if it wants to have any kind of future in the entrepreneurial knowledge economy, it needs to attract citizens with the highest level of education who are likely to contribute the most to the economy.

The prognosis from this one year’s worth of data is not good for downstate Virginia. Throwing out the figures for Bristol-Kingsport (which is mostly Tennessee) and the three college towns, I conflated results for Hampton Road, Richmond, Roanoke, Lynchburg, Danville and Winchester. Here is the composite tally:

composite

That’s just one year but it looks like a major brain drain to me. We should be terrified. But we’re not. We should feel a sense of urgency. But we don’t.