Workforce Development Must Encompass the Spectrum of Professions

Posted on by Patrick Ishmael

The state cuts to higher education proposed by the governor this month have generated a lot of discussion about how they might affect four-year degree programs in the state and, eventually, the state’s future prosperity. As I’ve written before, a good education can often lead to personal financial security, and certainly funding reductions to four-year programs may affect whether some students enroll in those programs. 

But if the conversation about workforce development ends there, then it will have covered only the “seen” impact of public policy. Instead, policymakers should also consider the unseen consequences of oversubsidizing fields offered through our higher education system and neglecting other possible workforce investments. As the cargo-cultification of STEM (science, technology, engineering, and math) jobs has escalated in public policy circles in recent years, workforce development policy has increasingly emphasized professions requiring at least a bachelor’s degree, while other quality jobs that don’t require that version of education have been neglected—or even denigrated. 

Mike Rowe of Dirty Jobs fame, who’s become a fierce public proponent of jobs of all stripes, may have put it best in this response to a detractor last year:

To be clear—I strongly support education in all its forms. I have a college degree, and as I’ve said many times, it’s served me well. But I believe society is making a terrible mistake by promoting college at the expense of all other forms of education. For instance, the surgeon you reference (who I would indeed prefer to have graduated from an accredited university) will never make it to the hospital to successfully remove my appendix without a functional infrastructure, which depends almost entirely upon an army of skilled tradespeople. And yet, our society clearly values the surgeon far more than mechanic who keeps her car running, or the contractor who put in the roads that allows her to drive to the emergency room.

We need people with formal higher educations. We also need people in professions that don’t require such degrees. The perception—often promoted by four-year institutions seeking tax dollars—that high paying jobs require degrees is plainly wrong.

It certainly remains true that four-year degree holders tend to make more than those who don’t hold such a degree, but while the average salary might be higher, there is a lot of variance in those numbers when you get down to the individual level. I have countless friends in their early 30s with undergraduate and graduate degrees who are scraping by under the twin pressures of loan payments and compressed salaries in both STEM and non-STEM professions. At the same time, I also know countless blue-collar professionals in their early 20s who have been catapulted into life’s comforts with a rising middle class salary thanks to professions like construction that, especially now, have tons of jobs but hardly enough trained professionals to fill them. (We’ve talked about this issue before.) 

Policymakers who believe in limited government need to reassess what the state spends its money on—what the state subsidizes directly and indirectly—and this is as true in the realm of workforce development as it is in other parts of the budget. Surely, STEM industries and other higher education programs deserve attention, but policymakers should exercise considerable caution in treating those jobs as talismanic rather than as components in a much larger, and much more diverse, state jobs portfolio.

Yes, the Cost of Medicaid Has Exploded

Posted on by Patrick Ishmael

This week the St. Louis Post-Dispatch penned an article about whether the cost of Missouri’s Medicaid program has “exploded.” The paper dismissed the idea, quoting a constellation of liberal organizations to explain away a pretty staid assertion made by Governor Eric Greitens.

“Despite the fact that Missouri’s economy is growing and we’re in a stronger position than we were last year, what continues to be the greatest challenge in the budget is the explosion in federally mandated and other health care spending,” Greitens said Monday at a news conference in Jefferson City to outline his budget plan.

From there, the paper embarks on a roughly 1500-word odyssey to impress on readers that four- or six-percent rates of growth in the Medicaid program do not a cost “explosion” make. This pronouncement, delivered without providing any context, fails on several fronts, including the fact that both figures are double and triple the rate of inflation, respectively.

But I wouldn’t constrain the question of whether Medicaid costs have exploded to a single year, anyway. Consider the program’s growing impact on Missouri’s budget. According to the National Association of State Budget Officers (NASBO,) Missouri spent 18.4 percent of its FY2000 budget on the Medicaid program. By FY2016, that figure had more than doubled to over 37 percent of the state’s budget. As we’ve argued for years, Medicaid’s cost problems aren’t some artifact of Obamacare alone. The program has long been broken and, like the rest of the health care system, outpaced inflation—eating into public spending priorities just as private health care has grown in our own budgets. Over the last 17 years, Missouri even lowered eligibility thresholds for certain populations, and yet overall costs have continued to rise.

Years of cost increases—even if only of the four- or six-percent variety—add up to an ongoing cost explosion. That is precisely why former President Barack Obama said this back when he was selling Obamacare. (Emphasis mine)

And, finally, the explosion in health care costs has put our federal budget on a disastrous path. This is largely due to what we’re spending on Medicare and Medicaid—entitlement programs whose costs are expected to continue climbing in the years ahead as baby boomers grow older and come to rely more and more on our health care system. That’s why I’ve said repeatedly that getting health care costs under control is essential to reducing budget deficits, restoring fiscal discipline, and putting our economy on a path towards sustainable growth and shared prosperity.

So yes, Medicaid’s costs are exploding. And the sooner we can get to reforming the program, the better.

The Financial State of Missouri Cities

Posted on by Patrick Tuohey

It won’t be a surprise to readers of this blog that Kansas City and St. Louis are in bad financial shape. Taxes and debt are both high. But a recent study of American cities finds that things may be even worse than we thought.

The reason for the discrepancy is that according to the report, “cities balance budgets using accounting tricks” such as moving payments to a different year or failing to make sufficient payments to public pension funds. None of these solve the problems, of course; they just shift the burden to future taxpayers.

The organization Truth in Accounting, a nonprofit dedicated to honest accounting in municipal finances, “developed a sophisticated model to analyze all the assets and liabilities of the nation’s 75 most populous cities, including unreported liabilities.” Kansas City and St. Louis are ranked 55th and 66th (lower on the list means higher unreported liabilities), respectively. How did this happen?

While both Kansas City and St. Louis have balanced budget requirements, both have accumulated a great deal of debt. The report points out that cities can do this by inflating revenue assumptions, understating the true cost of government, and delaying the payment of bills.

The report also states that most of the top U.S. cities do not have enough money to pay their bills. In the aggregate, these cities have $335 billion in unfunded debt. That includes $211 billion in pension debt, largely the result of cities papering over their cash problems by shortchanging their public pension obligations:

Although these retirement benefits will not be paid until the employees retire, they still represent current compensation costs because they were earned and incurred throughout the employees’ tenure. Furthermore, that money needs to be put into the pension fund in order to accumulate investment earnings. If cities didn’t offer pensions and other benefits, they would have to compensate their employees with higher salaries from which they would fund their own retirement.

Missouri is no stranger to these problems. The problems at the state level are well publicized, but there are also serious issues at the municipal level.

These are just some of the highlights; the entire list of factors contributing to the financial woes of St. Louis and Kansas City is too long to cover in a blog post. As we enter the new year with a list of new projects and priorities, perhaps policymakers should spend less time fixating on pie-in-the-sky solutions, like luring Amazon to the state. Instead, they should  focus on the less glamorous but more important task of regaining sound fiscal footing. 

Governor Releases Tax Plan, Rightly Aiming For Revenue Neutrality

Posted on by Patrick Ishmael

 After releasing his proposed budget last week, today Governor Eric Greitens followed it up in with his long-awaited tax cut plan. Readers will find details at the link, but I wanted to highlight one noteworthy paragraph from the release:

In order to responsibly achieve these results, Missouri should eliminate or alter some tax breaks that are outdated, unfair, or unnecessary, and close loopholes in the tax code. This tax plan boldly cuts taxes for nearly every Missouri taxpayer and dramatically improves Missouri’s tax environment for businesses. It is also revenue-neutral according to an analysis from the Department of Revenue. By eliminating these breaks and closing these loopholes, Missouri families and businesses will see a tax cut and Missouri’s budget will not be unduly burdened. The alterations to tax breaks and loopholes are laid out in detail in this document.

Translation? Rather than continuing a raft of carve-outs for special interests and activities—carve-outs whose burdens, of course, fall on the shoulders of other taxpayers—this plan appears to be a reorientation of tax policy away from income taxes and toward a broad sales tax base. The immediate beneficiaries should be individuals (especially the poor, whose income taxes would effectively be zeroed out under the plan) and corporations, whose income tax rate would be cut by about a third. 

I could write at length comparing this  plan to the two tax cut plans already afoot in the state Senate. Perhaps the biggest difference is that this plan appears to omit an increase in the gas tax for infrastructure improvements. But it seems in all three cases, the policy principle sitting in the sidecar of each tax cut plan is that of revenue neutrality. As I discussed with Marc Cox earlier this month, while the details of the Governor’s plan were unknown at that time, it was reasonably easy to speculate about its principal parts, given the explicit neutrality targets and what had already been filed in the Legislature.

That isn’t to say that tax cuts must always be revenue-neutral, since reorganizing tax revenues for a government that has grown too large obviously doesn’t address its largeness. Yet, one can divide the questions of pro-growth tax policy and government size into different legislative pieces rather than addressing both issues all at one time and, potentially, confusing the issues in the process. These proposals address the pro-growth policy questions first and leave the question of government size for a later date, and in my opinion, that’s a responsible approach that adheres to both good and limited government principles. 

Does Banning the Box Work?

Posted on by Patrick Tuohey

WDAF TV in Kansas City recently reported that City Councilmember Jermaine Reed is seeking to expand the city’s ban-the-box initiative that currently prevents the city from including a box on job applications asking if the applicant has had a felony conviction. Approval of Reed’s proposal would mean that private companies and landlords would be subject to the same restriction in their applications. However, despite good intentions, research tells us that ban-the-box policies hurt minorities.

The WDAF story goes on to point out:

The city has “banned the box” since 2013 and said it’s been a big success. Employers can still do background checks, which could prevent someone from getting hired. But getting rid of the check box can help eliminate the stigma [that would] prevent qualified candidates from getting hired just because of their criminal history.

That is certainly a noble goal. But research from respected universities and public policy organizations casts doubt on the effort’s effectiveness. According to The Atlantic magazine,

. . . banning the box may actually be hurting some of the exact groups of people it was designed to help, according to a few new studies. In a recent paper from the National Bureau of Economic Research, Jennifer L. Doleac of the University of Virginia’s Frank Batten School of Leadership and Public Policy and Benjamin Hansen of the University of Oregon looked at how the implementation of ban-the-box policies affected the probability of employment for young, low-skilled, black and Hispanic men. They found that ban-the-box policies decreased the probability of being employed by 5.1 percent for young, low-skilled black men, and 2.9 percent for young, low-skilled Hispanic men.

The left-leaning Brookings Institution found the same, detailing what happens when the felony conviction disclosure is removed:

Employers are forced to use other information that is even less perfect to guess who has a criminal record. The likelihood of having a criminal record varies substantially with demographic characteristics like race and gender. Specifically, black and Hispanic men are more likely than others to have been convicted of a crime: the most recent data suggest that a black man born in 2001 has a 32% chance of serving time in prison at some point during his lifetime, compared with 17% for Hispanic men and just 6% for white men. Employers will guess that black and Hispanic men are more likely to have been in prison, and therefore less likely to be job-ready.

In short, ban-the-box policies are likely hurting minorities.  Hiring discrimination is a thorny problem, but not all such problems have easy or obvious solutions. If your proposed solution is hurting the people it is intended to help, it’s probably time to think about a new approach.

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