Best College Majors for Fewer College Loan Defaults

Posted on May 2, 2018 by matt ohern
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Colleges and universities offering programs that lead to careers in occupations that are relatively high-paying and have low unemployment tend to have lower student loan default rates.
Some of the top “low-default occupations” for jobs that typically require an associate’s degree theoretically would be dental hygienists and respiratory therapists.
For jobs needing a bachelor’s degree, some careers with the best combination of high wages and low unemployment rates are aerospace engineers and software developers.
For master’s degrees, nurse practitioners and physician assistants are career choices where there are low default rates.
The professional and technical services industry, for example, provides higher-than-average wages with lower-than-average unemployment as does the healthcare industry.
Finding the right occupation with higher-than average wages and lower-than-average jobless rates is important because those jobs tend to have lower student loan default rates.
Student loan default rates have been generally rising in the past decade, according to the U.S. Department of Education.
Default rates reached a historical low of 4.5 percent in 2003 — prior to the Great Recession. But by 2014, the latest data available, the average student loan default rate in the nation had risen to 11.5 percent.
Finding what programs offered by a college or university is important in determining whether its students are likely to default.
In addition to occupational characteristics of graduates, Chmura Economics & Analytics created a student loan default model that includes institutional characteristics directly related to the school and its student body, as well as the economic climate of the state in which the school is located. Those factors were important predictors as well.
For example, institutions with a higher percentage of students who did not graduate with a degree had higher default rates. This finding is expected, since a student who takes on debt for a four-year degree and drops out after two years is unlikely to obtain a job that will pay a salary sufficient to repay the loan.
It is not easy to answer the question whether students who graduate with a degree in an occupation that is not in demand are more likely to default on their loans than students with degrees that are needed by employers.
Student loan default is affected by many factors other than occupation, including overall economic conditions and students’ family finances.
Another challenge in determining what occupations will have the smallest default rate is the availability of data availability. Although higher education institutions know the degree choice of the students who default on their loans, the Department of Education only releases the overall loan default rate of institutions.
We do know the number of students who graduate from each institution and the degree they were awarded, such as engineering, economics or registered nurse. Some degrees, such as registered nurse, sync up easily to a specific occupation. Others, such as economics, could end up in a variety of occupations from financial adviser to risk assessment.
(This column first ran in the Richmond Times Dispatch on April 8, 2018)
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Richmond’s Proposed Cigarette Tax Increase Will Hurt Business

Posted on April 18, 2018 by matt ohern
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On April 23, the Richmond City Council is scheduled to decide whether to approve a massive new cigarette tax. Throughout the debate, tax supporters have undersold both the extreme price jump the proposal represents and the likely and profound harm to local businesses if Richmond’s experience is similar to other jurisdictions that have significantly raised cigarette taxes.
Far from being “business as usual” the $8.00 per carton tax would equal the largest one time increase in the history in the Commonwealth of Virginia. The new tax rate would put Richmond in the top 4% of all local cigarette taxing jurisdictions in the entire country.
The tax being proposed represents an overnight price increase on each pack of cigarettes of 15% – 20%. The likely overwhelming consumer response will be to take their business to Henrico and Chesterfield County retailers. The cigarettes in those counties are exactly the same as the ones in Richmond, only at $8.00 per carton less if this tax is approved.
Following the recent tax increase in Petersburg, cigarette sales in the city plummeted while Prince George County sales increased by nearly 20%. Similarly, after a recent increase in Philadelphia, sales in that city fell by more than 50% while three surrounding Counties saw their volume increase by more than 24% – and this during a time of nationwide decline in cigarette purchases.
Proponents have regularly cited “success stories” such as Virginia Beach and Norfolk. These Cities are simply not situated similarly to Richmond as they border other high tax jurisdictions, providing a buffer from purchasers fleeing those cities.
Perhaps more importantly, cities such as Virginia Beach are engaged in an endless cycle of increasing cigarette taxes, which leads to more consumers taking their business out of that city, which leads to still more taxes just to maintain flat revenue. It is currently considering its 5th cigarette tax increase just in the last 10 years. Since 2006, Virginia Beach has increased its tax rate by 50% to gain less than 1% in revenue. This water-from-a-stone approach treats local businesses and adult smokers like bank teller machines. Richmond should run from this model, not seek to emulate it.
Moreover, even without these policies, cigarette taxes are a declining and fleeting revenue source. As the City of Norfolk put it in a recent budget document, “revenue generated from these rate increases tends to be short-lived.” Clearly, the important needs facing Richmond, including school maintenance, deserve better answers.
Richmond’s small business owners also deserve better answers. In recent City Council hearings local retailers shared concerns about how this tax would harm their businesses. These concerns have, at times, been dismissed as either not credible or too similar to objections raised during the meals tax debate as if all business is identical. If anything, these testimonies understate the potential business harm.
Indeed, City Council’s staff certainly views the business harm from the meals and cigarette taxes differently. Based on the City’s own revenue estimates, policy makers expect continued growth in prepared food sales in the City, even following the recent meals tax increase, compared with a massive collapse in cigarette sales in the City if the cigarette tax is implemented.
The City has built this outcome into its financial assumptions.
Without saying it explicitly, the City is projecting millions of transactions leaving Richmond stores. The business harm adds up quickly. When your neighbors buy cigarettes at the local convenience store, they frequently purchase many other items, including gas and snacks. Many adult smokers will likely take all of these purchases outside of the City, compounding the negative impact on local businesses.
Has Richmond contemplated the potential decline of business and sales tax collections from this massive purchasing shift?
When considering any tax, Richmond’s voters expect the Council to consider if “the juice is worth the squeeze.” The cigarette tax offers a potential short term bump of a declining revenue source that does little to solve the long-term funding needs of the City. This dramatic tax increase could cost local small businesses tens of millions of dollars in lost revenue and it would be an unfair burden on those in the lowest income brackets who buy the largest share of cigarettes. This is one tax Richmond should avoid.
(This column first ran in the Richmond Times Dispatch on April 12, 2018)
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Leveraging Offshore Gas Drilling to Build Offshore Wind

Posted on April 18, 2018 by matt ohern
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The Trump administration is opening up the East Coast of the United States to oil and gas drilling, but it’s not clear how much enthusiasm there is. A recent sale of drilling rights in the Gulf of Mexico has attracted only “moderate” interest, reports the Financial Times, an indication that the oil & gas industry is more focused on expanding production in the country’s vast shale basins.
Last year the Department of the Interior cut the royalty rate it had been charged on production from leases in shallow water (less than 200 meters deep) from 18.75% to 12.5% in the hope of stimulating greater interest. But drillers submitted bids for only 148 of 14,000 tracts offered.
If the Trump administration can’t gin up much excitement in the Gulf of Mexico, where a mature oil & gas exploration and drilling infrastructure exists, it’s unlikely to do any better in the southern Atlantic states where no such infrastructure is to be found. Also discouraging interest is the reality than any effort to start drilling would ignite a firestorm of opposition. Why bother when shale can be fracked elsewhere with minimal fuss and muss?
But that’s today. Who can say what economic conditions and public opinion will look like in three or four years? What if public opinion could be swayed to look upon offshore drilling as a pathway to developing a viable offshore wind industry?
Environmental groups and Virginia Beach civic interests oppose offshore drilling, raising the specter of another Deepwater Horizon disaster — even though (a) any drilling off the Virginia coast would be in shallow water, while Deepwater Horizon occurred in… you guessed it… deep water, and (b) most, if not all, of the drilling would be for natural gas. I’ve never heard of a natural gas spill, and neither have you.
Indeed, the Commonwealth’s official energy policy supports offshore oil and gas drilling, with the caveat that no drilling occur within 50 miles of the shore. A 2005 study by the Virginia Secretary of Commerce and Trade found that natural gas exploration was safe, although if oil is discovered that the Commonwealth must “carefully consider the risk of spills.”
Is it not possible to work out a compromise that could allow drilling to move forward when market conditions permit while providing tough environmental safeguards? Here’s how we can do it.
First, let’s just take oil drilling off the table. Let’s make it official Virginia policy to permit no oil drilling because we want zero risk of oil spills. Drilling and production should be limited to natural gas only. (Do some wells produce both oil and gas? Can the gas in such wells be extracted while the oil is kept in the ground? I concede that some technical questions may need to be answered.) The vast majority of the energy wealth off the Atlantic coast is natural gas, so imposing an anti-oil restriction should not cripple the economics of offshore energy production.
Second, Virginia should get the first-mover advantage of establishing an East Coast offshore drilling industry. As the largest metropolitan area on the Atlantic coast between Miami/Fort Lauderdale and New York — and one with a large ship repair industry, at that — Hampton Roads would be the logical location for offshore companies to set up and do business. Thus, Virginia could get a significant economic-development bonus from the opening up of offshore drilling.
Third, an offshore drilling industry was the precursor in Europe to developing an offshore wind industry, and it could be the precursor in Virginia, too. The two sectors share many skills, competencies, services and specialized equipment. If Hampton Roads can develop an offshore drilling industry, it can lower the costs and risks of getting offshore wind companies to locate here. The lack of an existing industry is perhaps the biggest barrier to developing Virginia’s offshore wind resources — a desiderata of environmentalists and economic developers alike.
The immediate hold-up to large-scale development of wind resources is the need to test the performance of wind turbines in the Atlantic Ocean, which has different seabed conditions and is subject to hurricanes. That won’t happen until the State Corporation Commission approves Dominion Energy’s proposed VOWTAP project, two costly test turbines that could never be justified on the basis of their electricity production alone.
But if the SCC approved VOWTAP, and if the turbines proved their efficacy in Virginia offshore conditions, and if a gas drilling business ecosystem had a toehold in Virginia, then the chances would improve immeasurably to persuade European wind companies to invest in Virginia for the purposes of building and maintaining a fleet of offshore wind turbines at an economical price. Virginia then could become the hub of offshore wind production for much of the entire Atlantic coast.
If we play our cards right, it should be possible to fulfill former Governor Bob McDonnell’s dream of making Hampton Roads the energy capital of the East Coast while not only protecting the environment but improving it.
(This article first ran in Bacons Rebellion on April 13, 2018)
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The “Gig Economy” or “Sharing Economy” is Growing Rapidly

Posted on April 18, 2018 by matt ohern
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The proliferation of smartphones and online platforms have lowered the barrier for suppliers to provide on demand services, making it easier for more individuals to complete some small jobs and participate in the new gig economy.
It is also called the sharing economy because it has its origin as individuals giving or sharing goods and services. Uber, Airbnb and Task Rabbit are examples where peer-to-peer internet platforms connect passengers with drivers, travelers with places to stay, and home owners with local handymen.
Individuals enjoy the flexibility of choosing their hours or supplementing full-time employment with additional income.
Users of the gig economy generally enjoy lower prices than the traditional alternatives. As a result, the gig economy is growing rapidly and is reported to threaten well-established industries such as taxi services or hotels.
But understanding the size of the gig economy is more challenging.
Neither the Census Bureau nor the Bureau of Labor Statistics publish estimates of gig employment.
In a recent report, the Virginia Employment Commission used nonemployer statistics from the Internal Revenue Service that track businesses with no employees as a proxy for the gig economy.
Nonemployer growth in Virginia from 2010 through 2015 was faster than overall employment growth and the gains were largest in gig-inclined industries such as ground transportation.
The census also used the nonemployer statistics to measure passenger transportation establishments without employees in all states.
California topped the list of states with 111,486 passenger transportation establishments in 2015, up 92 percent from 57,990 in 2014. New York was second with 95,201 establishments but it only grew 16 percent over the prior year.
Virginia ranked eighth with 20,931 passenger transportation establishments, up 46 percent from the prior year.
While the data indicates the reach of ride sharing, it remains to be seen how the gig economy has penetrated other industries.
Academic studies show that the gig economy is impacting traditional sectors.
A 2017 study by Georgios Vervas, Davide Proserpio and John W. Byers in the Journal of Marketing Research found that hotel revenue from January 2003 through August 2014 was down 8 percent to 10 percent in Austin, Texas, where Airbnb supply was the highest. Lower-end hotels and those not catering to business travelers were most vulnerable.
Jonathan Hall and Alan Krueger used data from Uber to study the characteristics of their drivers in a 2016 study released by the National Bureau of Economic Research.
They found that the number of active Uber drivers about doubled every six months from the middle of 2012 to the end of 2015. That rate, they admitted, would undoubtedly slow down, or every American would be an Uber driver by 2020.
Measuring the gig economy is important because without that information, the growth rate of employment in the nation is understated and productivity is overstated.
In light of this need, the Bureau of Labor Statistics added four questions to its May 2017 Contingent Worker survey that measures employees that are hired on-demand by organizations.
Once the results to these four questions about the gig economy are published we’ll have a better sense about its size in the nation.
(This article first ran in the Richmond Times Dispatch.)
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Missouri A.G. defends Virginia’s sovereign, economic interests

Posted on April 18, 2018 by matt ohern
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In requesting the U.S. Supreme Court to accept its complaint in the California cage size case, Missouri’s Attorney General states, “Unless this Court acts, California will continue to impose new agricultural regulations on other states in violation of federal law and those States’ sovereign, quasi-sovereign, and economic interests…”
The Reply Brief filed on March 20, 2018, to the Supreme Court states, “California persistently ignores federal law in its regulation of extraterritorial agricultural production.” The brief also declares California’s effort to regulate the size of a cage for laying hens “…reflects one of several attempts by California to dictate the manner of agricultural production in other States…”
California passed a Proposition, then legislation and regulations, which mandate that California egg producers and egg products in other states spend large amounts of capital to put in new cage systems for laying hens. We reported on this last December. California’s creative standards are required on other states if those states’ producers wish to sell eggs in California.
In a move which has infuriated the complaining states, California has the audacity of sending its enforcement officials into neighboring states to enforce its cage size statute and regulations.
The Attorneys General from Missouri, Alabama, Arkansas, Indiana, Iowa, Louisiana, Nebraska, Nevada, North Dakota, Oklahoma, Texas, Utah, and Wisconsin state they have “…a claim of seriousness and dignity between Sovereign States over which this Court [U.S. Supreme Court] has exclusive jurisdiction.” The complaining states are requesting the Court to hear this case between them and the state of California. The complaining States make it clear California has a history of ignoring federal statutes. (Violation of immigration laws comes to mind.)
The complaining states believe California is violating the Constitution’s Commerce Clause and the federal Egg Products Inspection Act (EPIA). The claim is California is imposing new standards of quality and conditions on how eggs are produced which are in addition to or different from Federal standards. California, of course, disputes that its law is preempted by the EPIA.
The complaining states declare “[T]he Commerce Clause forbids any law that discriminates against out-of-state producers and imposes burdens that outweigh putative local benefits.” California claims it has every right to require larger cages for hens because California has studies showing hens laying eggs in small cages produce more eggs with salmonella in them. Missouri’s Attorney General and his colleagues eviscerate that argument: “Studies also show that no causal link exists between salmonella contamination and conventional cage sizes.”
In fact, the evidence suggests exactly the opposite. The studies show that free range and cage free produced eggs “…have worse salmonella incidence.” Studies also show that diseases also increase in hens roaming cage free.
Consequently, the basis California used for its legislation and regulation is bogus.
California is offending other states’ sovereignty by sending California inspectors into sovereign states to enforce its statute and regulation. California admits it is conducting cage size inspections in other states. On top of this, California “…collects labeling fees in all states that supply eggs to California.”
The complaining Attorneys General appear to be livid about California sending its officials into their states to inspect their egg producers. The Attorneys General brief requests the Supreme Court to act favorably on their Bill of Complaint. They believe because this case involves a dispute between states the U.S. Constitution provides only the Supreme Court with original jurisdiction over lawsuits arising between two or more states. California officials, again not following the law, believe the Attorneys General should file their case in a federal district court. A U.S. Court of Appeals case declares “States cannot sue other states in federal district court.”
This case is not only important for production agriculture; it is critical. If California can dictate to other states’ egg producers how they house their chickens, the next steps are fairly clear: Hogs, cattle, and dairy cattle housing will be next. After that, the people who govern California will likely decide that they do not like GMO corn, soybeans, and I think you can imagine the rest of the story.
The Missouri Attorney General and his colleagues are standing up for production agriculture at a critical time. These Attorneys General need your support.
(This article first ran in Farm Futures on April 3, 2018.)
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