Building Idaho’s Human Capital

(H/T to Tim Merrick for sending me the data that I used in this post. You can read the whole publication of the Science and Engineering Indicators, published by the National Science Board, at the National Science Foundation’s website: http://www.nsf.gov/statistics/seind10/start.htm The data in this post comes from Chapter 8, the state indicators.)

This is a follow on to the previous post where I tried to illustrate the financial strength of Idaho’s universities relative to regional and national competitors. This was in direct response to the formation of the new lobbying group, the Idaho Technology Council. The Council and its supporters, as you recall, are huge proponents of increasing Idaho’s human capital, especially in relation to the development of Idaho’s technology-based economy. My next post will deal with the technology side of this discussion, today we’ll start with the higher ed component.

I hate always seeming like the bad guy here. I am not. I sincerely hope that the Technology Council is a success, and I would love to live to see the day that Boise State University, my alma mater, actually morphed into a “metropolitan research university of distinction.” However, I have consistently maintained that almost every premise from which we operate in this state, is false. We have lots of grand plans for spinning off university technology, and growing this booming tech sector, but folks, that just isn’t to be Idaho’s lot in life. This state simply cannot be competitive in those areas. It is time to rip out our pre-conceived notions by the roots, and get a new plan. Every economic development plan in this state needs to be scrapped and thought anew.

Mark Rivers has some good insights, here. SPORTS. We can do that. Recreational technology businesses and tourism. We can do that. We’re not doing them very well, but we could. But we cannot and should not expect our universities and state to do is become a sophisticated research hub that will one day cure cancer or even launch an important disruptive technology. Won’t happen. Here’s the evidence:

Academic R&D Output, United States, 2006

Academic Article Output in Science and Engineering, U.S., 2006

The research and development spending at Idaho’s universities is woefully inadequate - that is what the top graph shows. Idaho is at the bottom of the heap when it comes to basic R & D spending at the university level. The bottom graph shows the research output of science and engineering articles among the scientific community. Again, same story. There just isn’t any output here, folks, and there isn’t going to be, because Idaho and Idahoans are not going to make, in fact do not have the capacity to make, the necessary investment of billions of dollars into the state’s universities. Development of widely dispersed and marketable technologies will probably never happen here. Having a more educated local workforce can happen here; we can certainly graduate more bachelor’s degree holders that we currently do.

I would argue that Idaho’s economic development has become “path dependent.” The social and historic conventions established long ago, and chronic underinvestment in education and infrastructure (to name just a couple things) has placed us upon a path from which we cannot escape.

That isn’t to say that there aren’t pockets of hope, areas for growth and opportunity. As noted I think sports, sports marketing, professional services related to sports, etc., is a great place to start and to FOCUS. What will not work is a blanket strategy of “increasing human capital” and targeting the “information technology” sector. That is destined to fail. If the universities in this state are to be called upon to be a part of the economic engine here, they are going to need small, clearly defined, narrow targets that are directly applicable to very specific capacities in the private sector. “Nanotechnology” is not specific. “Green energy” is not specific. Those are HUGE fields dominated by the biggest players.

The longer we maintain the facade that we have at our fingertips all the tools we need to be the next SLC or the next Denver, the more economically and psychologically painful reality becomes. The sooner we replace grand visions, i.e., fantasies, with small victories, the better.

2,100 Idaho Jobs Created or Saved from Stimulus? Impossible.

The following is an e-mail I sent to Idaho Statesman reporter Bill Roberts regarding his article in the Sunday paper on page A1. The article states that the $246 million that Idaho has received in federal stimulus money has created or saved 2,100 jobs. Here’s my retort, after doing the math:

Bill:

Interesting article you have on A1 of the Sunday paper. Something isn’t adding up, however. In September I sent the attached file over to Kevin Richert to review. In it, it shows that according to the records of the federal government, as of July 2009, Idaho had received $235 million in stimulus money for transportation projects. If you scroll to the last column of the file, you’ll see that only $671,000 has made it to payroll. That’s not a lot of money.

The figure you show in the paper says Idaho has received $246 million, and that economists estimate 2,100 jobs were created or saved by that infusion. That can’t be possible. Again, in the attached file, the feds are claiming that only 136 jobs have been created by the $235 million. There is just simply no possible way the $11 million dollars difference between our figures created 2,000 jobs. And I think the feds are over estimating that 136 unless they are annualizing those, which they must be.

If only $671,000 has made it to payroll so far, that doesn’t support that many jobs. The ARRA was passed in February 2009. Let’s assume then that at most this file shows the payroll generated by a full quarter - that is probably grossly overstating reality. But rolling with that assumption the findings are not so good.

Payroll of $671,000 per quarter for one year would support these various scenarios:

178 minimum wage ($7.25) jobs.
or
150 “living wage” ($8.63) jobs
or
130 jobs that could support a family of four at poverty level
or
45 jobs that could support a family of four at the “living wage” level

Thus it seems that the case you outline in the paper is probably grossly overstated. For certain there is no theoretical way (i.e., no mathematical way possible) that the money has created/saved 2,100 jobs.

The report I used was from data reported through July. The latest figures reported by the feds run through October 31, 2009. More money is finally hitting payroll - a total of $4.5 million has now made it to people’s pockets (remember though we got over $230 million). Assuming that $4.5 million is about 6 months of wages and the total wages paid out over the course of a year will be twice that - $9 million - here’s what we’re looking at for job creation/saving:

597 jobs at minimum wage
501 jobs at living wage
440 jobs supporting a family of four at poverty level
149 jobs supporting a family of four at living wage level

So we are still nowhere near the 2,100 jobs claimed. You can do the math yourself with the living wage calculator and the feds’ stimulus accountability reports. As poor a job as Idaho is doing spending the stimulus money, at least we didn’t get a nasty letter from the feds like Utah did. Finally, something we’re doing better than Utah.

Moody’s: Idaho one of first five states to emerge from recession

Moody’ s Economy.com and MSNBC today released a very sophisticated report prophesying that Idaho will be among the first five states in the nation to recover from the economic downturn. I certainly hope this is the truth, but like other national surveys released, this one too rests on largely faulty assumptions.

Here is how Moody’s explains how it came to these conclusions:

“States that have a high concentration in tech-related industries are well positioned to take advantage of this trend, which is particularly true of Colorado, Idaho, Oregon and Washington and to a lesser extent Texas,” said economist Andrew Gledhill of Moody’s Economy.com.

As we all know, however, Idaho’s tech economy is largely based upon two firms Micron, which still has more layoffs coming, and HP, which has been shrinking its workforce here for a number of years. And as I noted in my Ignite presentation, government employment is twice what the high tech economy is in the state. The moral of the story is - throw out the outliers in the statistical analysis, and this report looks A LOT different.

The second point that Moody’s makes that needs clarification is this:

“One factor that the five early job recovery states all have in common is less erosion in household credit conditions, with the worst of the group being Idaho,” Gledhill said. “As a result, once it seems apparent that recovery is setting in, households in these states will be more able to turn and inject money back into their local economies. There is less de-leveraging of household balance sheets in these states. This will in turn prompt a more favorable trend in certain types of service industries.”

To translate, even though Idaho has the second highest non-mortgage related household debt in the United States, Moody’s still gave the state a favorable outlook based on the strength of the high technology sector. But because Idahoans currently pay 40.6% of their household income to non-mortgage debt, they won’t have the cash to spend on services as Moody’s predicts.

To sum it up - It would be fantastic if Idaho is one of the first states to recover. But if Idaho does recover first, it won’t have anything to do with the high-tech employment levels which are still dropping. Combine that with massive amounts of household debt, and I think Moody’s just got this plain wrong.

(Hat tip to Andy Petersen for sending me the article!)