The $15/hour Minimum Wage - A Parable

Unintended consequences of public policy are often glossed over by the public and politicians alike. I can understand the sympathy for a minimum wage. Its proponents simply want all workers to enjoy a comfortable life. However, they rarely acknowledge the downsides of arbitrarily dictating the value of certain work in society. I thought I would attempt to show how raising the minimum wage can result in unemployment or foregone employment with a simple story. This example is not meant to argue that the unemployment rate in a country or state will necessarily go up when the minimum wage is increased. The economy is too complex and there are too many interacting forces working simultaneously to make such a bold claim. However, it should make the ardent supporters of a large increase in the minimum wage understand more fully its impacts on workers, businesses, and customers (i.e. society).

Eddy & Anne's Bake Shop

Eddy and Anne are bakers who met in school and co-own a small baked goods shop. They pride themselves on quality ingredients, hand-mixed batters, and friendly customer service. The shop is open Monday to Saturday from 8:00 am to 6:00 pm. Their staff consists of four bakers and one cashier. The bakers are knowledgeable and hard-working and earn $10 per hour for their efforts. Each baker is allotted one day off per week. The cashier is a young woman, Sally, who takes college classes at night while working 5 days a week at the bakery. Sally earns $8 per hour as the cashier. Eddy and Anne value her interaction with their customers and her positive attitude.

The owners have put up their own money and taken out loans to start the shop. They have chosen a modest annual salary of $50,000 per owner to support their respective families. The total labor costs, including the owners who work in the shop filling in for bakers and the cashier on their off days, amount to about $220,500 annually. The shop makes $364,000 in revenue in an average year and incurs expenses (rent, cost of ingredients, equipment) of $122,000 each year. This leaves a net profit of $21,500 at the end of most years. Eddy and Anne typically pay their staff a holiday bonus of $1,000 per employee. The other $16,500 of profit is stored away in the company bank account to insure against a down year in sales, increases in costs, and/or to invest in new equipment or ingredients.

The state where Eddy and Anne live and work has recently passed a minimum wage law requiring employers to pay $15 per hour to all full-time employees. Every worker at their shop must now be paid at least that amount, given their full-time status. This law alone will increase their labor costs by $67,770 and turn their net profit of $21,500 into a net loss of $46,650.

Eddy and Anne consider many options. They think about reducing their own salaries, but they are already taking modest salaries for entrepreneurs who have risked their own savings. Besides, even lowering their salaries to the new minimum wage would only cut the net loss to $24,700. They reconsider a crucial element of their business: hand-mixing. Customers seem to like the idea of hand-mixing and Eddy and Anne figure they may pay a premium price partly because of this practice. However, to keep their business afloat they reason they can invest in 4 stand mixers and layoff their least experienced baker. The don’t want to sacrifice any of their beloved staff, but the mixers will save time and increase the amount of work each baker can perform. The mixers cost $700 a piece for a total of $2,800, but that will be far offset by the salary of $37,650 that they save by laying-off one baker.

That one change would save the bakery about $35,000 but would still leave it with a net loss. Eddy and Anne think about raising prices, but their customers already pay a premium compared to grocery store baked goods. They worry that increasing prices by the amount they would need to break-even would drive away too much business. And they still would not be operating at their previous profit level.

Eddy and Anne decide that as much as they hate it, they should lay-off Sally as well. She makes the shop a better place, but the owners can’t reason paying nearly twice what they normally would for a cashier. Instead, they decide to split days working at the register and with the bakers. One week Eddy will work 2 days at the register and 3 days in the back with the bakers, then flip with Anne the next week and work 3 days at the register and 2 days in the back of the shop. This last change would reduce their labor costs to $212,950. That would be below the original, pre-minimum wage salaries of $220,480 by about $7,500.

The owners of the bake shop have had to sacrifice one element of operations they considered a competitive advantage over grocery stores. They also had to fire two beloved employees whom they also consider friends. Yet, with the layoffs and use of new equipment they anticipate being able to keep the shop open and operating at the same profit level as usual. The remaining bakers on staff will be $12,550 richer each year, but at the cost of two of their fellow employees’ old salaries. It will be a bittersweet reward for them. The shop will survive and the community will continue to enjoy its treats, but they may not know or understand the costs of the new minimum wage. 

WV Employment By Trade

West Virginia is not a state full of coal miners. Until policy leaders and legislators understand this fact, it is worth emphasizing. This is a fact; it is not open for interpretation. The Bureau of Labor Statistics can help quantify the state's workers by sector. At the end of the first quarter of 2016, there were 13,225 workers in WV employed in "Mining." Another 4,770 people were performing "support activities for mining." Combining the two sectors yields 17,995 workers employed directly by mining. That is 3.3% of the private workforce. That is less than 4%. Should the other 523,526 private sector workers in the state be beholden to policies set specifically for this small minority? That is a rhetorical question. The answer is "No."
Not only is coal mining not employing a large share of the private workforce, employment in the sector has been declining for years. You could blame federal policy and the Environmental Protection Agency (EPA) for that, or you could realize the impact of mechanized labor and competition in power generation by natural gas and renewable sources is making coal mining less labor intensive and less important, respectively.

I understand the deep nostalgia of the coal miner and its use as a symbol. But it is a tired and dated symbol in desperate need of retirement. We can do better than exalting minimum wage work with a direct risk of lung cancer.

Taxpayer Return for 2016

This is my late recap of Wallethub's 2016 taxpayer return on investment by state.

Source: WalletHub

There are some very interesting points that can be inferred by looking at this graph. It is striking how clear the political divide on taxes shows up when comparing states. Most states that have relatively low tax rates and worse government services are Republican. Directly opposite that, almost every state that has relatively high tax rates and better government services identifies as Democrat. The exceptions to this rule are: Florida (which is pretty evenly split politically speaking), and Wyoming and North Dakota which both have significant energy revenue to spend on services while being Republican dominated states. These combinations make sense and are understandable to the layman: higher taxes reduce incomes but result in better government services and the preference for higher income or good public services divides along well known political lines. However, West Virginia is one of six states in this graph that suggest its citizens are being taxed at relatively high rates AND receiving poorer public services. Its brothers in ignominy include: California, New Mexico, Arkansas, Delaware, and Alaska. Those are three blue states and three red states, so this is not a political divide - it is simply poor governance. On the opposite end of the spectrum, some citizens enjoy good government services and lower tax rates. Those states are also a mix of predominantly Republican and Democratic citizenry. New Hampshire ranks as the best mix of lower taxes and better services with South Dakota close behind them. Colorado and Virginia seem to do a good job of balancing tax rates and services as well.
Tax rates are easy to measure and rank. Public services are inherently more difficult to quantify and rank and Wallethub's methodology can surely be questioned. (Funnily, WV was ranked #1 in water quality in 2015 yet this year it was not in the top five best. I wonder if that had anything to do with the Freedom Industries spill a couple years ago.) But they do attempt to provide people with a broad indication of what their tax dollars do for their community. For example, Wallethub uses educational rankings as 20% of the total composition of this score. WV has the 16th highest spending rate on education but only the 45th best outcome on a broad measure of education indicators (dropout rates; reading & math scores; SAT & ACT scores; pupil-teacher ratio; school safety). So higher spending on education is not resulting in better educated kids. Hence, either spending does not result in better education outcomes or WV is spending money on things in the education budget that do not aid outcomes. To provide another contrast, Indiana has the fourth lowest spending rate on education and the 12th best ranking.

Source: WalletHub

It is also difficult to determine how much public spending can help economic outcomes. The economic data used for this ranking includes: the unemployment rate; median household income; the annual rate of job growth; the percentage of residents below the poverty line; and economic mobility. Most of these indicators can be good or bad based on preexisting conditions that cannot be altered by state government spending. State funds can create a lot of government jobs, but it cannot exactly spur private business development as politicians like to claim it can. Thus, a state with declining industries will dampen economic outcomes and leave the state with less tax revenue for reasons outside of the government's control.
Infrastructure, which accounts for 20% of the services rank, is the area where spending should most closely result in a better ranking. If you build a new bridge, presumably, you have a nice new and safe bridge. Hence, there is some connection between state spending and the quality of life in a given state. It is more difficult than assuming a one-to-one trade-off though. Higher spending at the state level is no guarantee of better life outcomes for its people.
If you are in one of the states that gets a low return for every tax dollar, and you live in a high tax rate state, there are a few things you can do. One obvious solution would be to move. This is not always possible for a long list of reasons, but given the opportunity it should be considered by more people. Another proactive step would be to vote down propositions to spend more money on education or infrastructure. Politicians may claim that they can spend their way into better outcomes, but if history shows this to be unsuccessful, the electorate should not be swayed by that argument. You could write to your state representatives to protest tax hikes as well. It is a taxpayer responsibility to not allow spending to grow unchecked. Citizens of WV (and Alaska, New Mexico, Arkansas, California and Delaware) should take some, or all, of the steps mentioned here.

Gross Domestic Product - 2016 First Quarter

The Bureau of Economic Analysis (BEA) releases an estimate of gross domestic product (the output of all goods and services) by individual states. For the first quarter (Q1) of 2016, the figures signaled bad news for WV - the annualized (scaled to one year) rate of growth was -2.5%. The economic output contracted from the final quarter of 2015. WV was the only state in Appalachia to suffer negative growth over the first three months of the year, although Kentucky featured a very low 0.4% growth rate that is basically stagnate. Other Midwest states featured negative GDP growth over the same period with Wyoming (-4.9%) and North Dakota (-11.4%) being the hardest hit. The dependence on mining natural resources is the common denominator in states with negative growth. As the BEA notes, "Mining declined 11.1 percent for the nation in the first quarter. The industry subtracted 1.82 percentage points from real GDP growth in Wyoming...and more than 2.0 percentage points from Alaska, North Dakota, and West Virginia, which declined 1.0 percent, 11.4 percent, and 2.8 percent, respectively."

A decline in the mining industry shrunk GDP in WV by more than 2.0% and the total decline for Q1 was 2.5%. Basically, the state's output shrank by the same amount that mining output declined. As bad as that sounds, North Dakota shows a bleaker boom-bust picture. The low price of oil over the last 18 months (at or below $60/barrel) has decreased the revenue from the Bakken Shale. Production in North Dakota has slowed slightly in response, dropping from an average of 34.23 million barrels per month in 2015 to 32.247 million barrels per month for Q1 2016. But mainly it was a drop in the price of oil at the start of 2016 that drove down oil revenue for North Dakota. The decline over in GDP over what mining directly contributed to North Dakota shows how much services are directed at supporting mining in that state.
Meanwhile, WV declined in line with the amount its mining sector declined. There was no "multiplier effect" that subtracted more economic activity due to decreased mining production and revenue. It was a 1-to-1 relationship. Wyoming also fared worse in terms of total economic activity. It is more closely related to WV in that both states are large coal producers. Both states had a decrease in coal production from 2014 to 2015, the decline in WV -14.7%. The production for WV for Q1 2016 was 19,260 short tons down from 27,239 short tons in Q1 2015. Consider that while coal production has been declining, the price of coal exports has remained flat or decreased since 2012. Lower production and less revenue for each unit of coal produced results in less tax revenue and fewer service industries in the state. The natural gas industry has undergone similar duress in WV due to over expansion in the Marcellus Shale, resulting in sustained low gas prices and less production.
With the Northeast, South, West Coast, and a few Midwest states featuring moderate to strong output growth, it is depressing to see negative growth in WV. It is true that output as measured by GDP is not the most important indicator for a healthy society. However, health and welfare are often tied to economic output (be that causation or simply correlation). For a state with a drug abuse problem and unemployment rate in the bottom 25% of the country, contracting economic output is a bad sign (duh, I know). Pundits can decry political opposition to natural resource extraction and blame policies for the decline of the mining sector. But to respond proactively and diversify industries will do more to boost economic output than arguing along boring, banal, stagnant political lines. "Diversifying" is easier said than done. And the mining industry has a large footprint that will not easily be filled by even a few industries. The service sector will always need industry to support it. Barbers, retailers, restaurants, doctors, and more, their work exists to serve the surrounding populace. Finding the next generation of "makers" is a problem for society to solve together. I know I don't have the answer, but drilling holes in the ground is increasingly not what will support the well-being of WV and Appalachia at large.

Economics of Discrimination

The late Gary Becker was one of the first economists to examine the economic motivations and consequences of discrimination. He published a book on the topic in 1957. Since then, many students and colleagues of Becker at the University of Chicago and elsewhere have continued to study the topic. There are many pieces to the discrimination puzzle to unpack, but given its current media focus, I thought it was worthwhile to archive some thoughts.
An important distinction in economics is that price discrimination is not always the same as outright bigot behavior. As John List and Uri Gneezy recognize in their 2013 book "The Why Axis," men pay about 20% more for identical car insurance than women. This is based on statistical data that women have fewer driving accidents. You can always call your insurance company and negotiate lower premium payments based on your safe driving history, but otherwise, the insurer will trust the data that says a client is more or less risky and charge him/her accordingly. Another instance of price discrimination is that senior citizens often enjoy lower priced tickets at the movie theater. This may be because they are underrepresented among moviegoers, so the theater does not lose much money, or because the theater makes most of its profits off of concession sales, or because it provides good public relations value to the theater. In both of these instances, people either would not complain about the price discrimination or they would not be successful in changing company practices.
The more opportunistic form of discrimination is harder to spot in markets. One example that List and Gneezy found in their research is quite ugly. They observed disabled men getting estimates for car repair work and compared their price quotes to those of able-bodied men getting the same work done on their cars. The study found, "On average, the disabled men received price quotes that were 30 percent higher than the able-bodied men." The authors go on to note that car mechanics likely tried to get more money out of the disabled because they realized how difficult it is for the handicapped to transport themselves. If vendors feel they have a "captive customer," (like a patron at a amusement park that wants a bottle of water) they will probably charge a higher than average price for goods and services.
But even opportunistic discrimination differs form outright bigotry. Its effects are no less important in market economies. Despite the intention of markets to be free and open to everyone regardless of age, race, gender, nationality, etc. vendors can consciously and unconsciously bias their habits along these dimensions. It can come in the form of poorer service to individuals outside of a merchant's approved social groups or lower job acceptance rates for people outside a hiring company's desired groups. The costs due to bigotry are hard to measure, but the benefits of diversity are documented in various studies. Ottaviano and Peri found that U.S. born citizens benefited economically by living in a city where the share of foreign born citizens was increasing. And Scott Page, a professor of complex systems, has found that bringing together people of diverse backgrounds in an organization increases the rate of problem solving due to the new perspectives it lends. This applies as much to merging workers of different races as it does to merging those who practice different areas of study. Often scientific discoveries occur when scientists from different fields cross into new areas and open up new perspectives on unsolved problems. Hence, the costs of discriminating in the workplace and marketplace can be large.
These findings do not include the possibility that local governments could legalize merchant discrimination against customers and potential employees. But given the research findings noted above, such developments would prove doubly harmful. Humans already have a natural predilection to identify and favor other similar humans. Making economic discrimination legal in the marketplace would only amplify its harmful effects. Much like the public denouncing trade with Mexico, where does discrimination end? Should West Virginians refuse to trade with Kentuckians? Should Kanawha County residents refuse to trade with Cabell County residents? Or should everyone refuse to trade with a person outside his/her household? Obviously by reducing the argument for trade discrimination to an absurd level the flawed logic becomes more obvious. The same type of illogical arguments populate bigotry discrimination in the broader economy. Ultimately, the current research shows that a more diverse society is a more prosperous society.

Effect of State Lotteries on Education

states w/ education lotteries spent less on education than they would have if they had not adopted the edu. lottery https://t.co/Hb2ogbQ795

— Matt Harmon (@GTmatt08) January 12, 2016

An Employment Snapshot - 2015

A quick look at some numbers from the Bureau of Labor Statistics can shed light on how the WV job market has been faring since the 2008 financial crisis. Since the first quarter of 2009 the labor force has been shrinking. It fell from nearly 820,000 to about 775,000 participants between 2009 and the start of 2015. That is a decline of approximately 5.5% (about 0.9% per year). However, that trend reversed course drastically in 2015, and there are close to 790,000 people working or looking for work. The bad news of that small uptrend is that there are many more people looking for work than those who have actually found jobs. Gross employment is still down since 2005. There are over 100,000 fewer workers in 2015 than there were in 2005.
In summary, there are more citizens looking for jobs in 2015 and fewer total jobs than in 2005. This can only mean one thing for the unemployment rate. It has risen. The unemployment rate had been on a steady decline since 2011 when the recovery seemed to begin reaching WV's job market. It steadily declined from 8.5% to 6% at the start of 2015. But with the recovery more job seekers are now entering the labor market. Unfortunately, the recovery has been slow and long. Thus, the unemployment rate is back around 7.5% in 2015.
The government, large national chains, health care organizations and natural resources are the main sources of state-wide employment. So the national economy can serve as a fairly good predictor of WV's employment fortunes. Higher environmental standards and lower commodity prices have spelled bad news for the coal and gas industries, so that source of employment will be less promising in the coming years. Government budgets have taken a hit since the financial crisis as lower tax revenues struggled to keep pace with expenditures. Some cuts have been made to state employee insurance policies; I imagine this is one way to protect against layoffs, which are rarely done in government. Stagnant pay and benefits in government and natural resources will hurt the service industry. But since most of the service industry consists of national brands, it will be somewhat immune to lower regional sales in WV. The health services industry will remain a steady source of employment, but for some unsettling reasons - mainly, an ageing and ailing populace.
Employment prospects are always dependent on the individual and his/her level of qualification as well as the demand for workers in a specific industry. But the overall picture for 2015 is this: slightly higher employment, much higher demand for work.

Fiscal Condition Ranking

The Mercatus Center, a market-oriented think tank, has released a report ranking the fiscal condition of the 50 U.S. states. This is especially pertinent given the global state of public finances and the long-run viability of funding pensions and health care. Greece is dealing with the fallout of an overextended public sector and has been for the last five years. Meanwhile, the debt-to-GDP ratio of the U.S. has risen above 100% as of 2013. The solvency of the U.S. is not particularly worrisome given the low levels of interest at which the national government can borrow. However, individual states and municipalities have been running massive deficits within the U.S. This has led to some unprecedented bankruptcies and defaults. Although there have been numerous bankruptcy filings by counties, municipalities, and towns during U.S. history this collapse highlighted the magnitude of the problem in post-Great Recession America. The reasons many local governments are running deficits are very predictable: huge pension obligations; huge Medicaid costs; an assumed growth rate of state investments at unattainable levels (usually 8% or higher); high levels of state employment relative to private employment (less tax revenue to collect); an aging population that contributes less tax revenue. Many of these problems were caused and/or exacerbated by the 2008 financial crisis, but they all date back to governments over-promising benefits that they could not reasonably pay in the future based on current and future tax revenues.
West Virginia ranks in the bottom ten of the Mercatus ranking, 43rd to be exact. The state's "fiscal condition index," an aggregate of different statistics on solvency, is -1.2. For comparison Alaska, the best ranked state, has a rating of +8.26. Illinois is the worst ranked state at -1.86. Part of what is unsettling about West Virginia's public finance ranking is that many of the best ranked states have high amounts of natural resources. North Dakota, South Dakota, Alaska, Nebraska, and Florida all have either large amounts of energy resources (oil & gas), agricultural productivity, and/or natural beauty that attracts tourism. West Virginia has both high amounts of coal and natural gas activity and attractive tourism locales but still manages to be one the ten least solvent governments.

What details make the public finances of WV look bleak? The state actually did not run a deficit in the year this report was released, 2013. It had a per capita surplus of $116.65. The short term budget seems to be handled quite well. However, the state has about $6.1 billion in unfunded liabilities. WV has a ratio of Unfunded Liabilities per Personal Income of 9%. There are at least 17 states that have a liabilities per income ratio of 5% or less. Kentucky is in a much worse situation with 18% unfunded liabilities of their state's personal income, so WV is outperforming its neighbor there. WV's Current Account Ratio (Assets / Liabilities) is 2.05 whereas the national average is 3.37; the state is not too far behind average in that category. The total amount of WV pensions per state income is right on the national average at 0.29. Tax revenue taken in roughly matches the amount of state spending at a ratio of 0.18 of state income. Since WV is not a "bad" outlier in any one category it can safely be assumed that the state ranks in the bottom ten states in terms of solvency because it is consistently at or below average on the Mercatus statistics.
The relative position of WV in this list is more disheartening than the overall performance. South Dakota and Florida manage to have strong cash positions and high tax revenue despite having NO income taxes. They make up the revenue primarily through sales taxes. Similarly, North Dakota used its oil tax revenues to decrease its total debt position; West Virginia does not seem to have utilized its energy assets as well as North Dakota. West Virginia also has a high number of separate pension systems with eight. South Dakota has one - the South Dakota Retirement System. New York, one of the most populous states with a bad fiscal position, only has three separate pension obligations. If WV wants to manage its budget better it could start by consolidating the pension system and closing the unfunded liability gap. No immediate disaster appears in store for the state, but if public spending has to rise to meet the needs of the citizenry WV does not have a lot of cash to make that happen.

 Illinois we are not. But there is significant room for improvement.

Taxpayer Return for 2015

Tax Day 2015 has come and gone. Last year I wrote a post about taxpayer return on investment by state. Wallethub has produced a 2015 return analysis, so a year-to-year comparison can be made for West Virginia. The (moderately) good news is that WV climbed one spot up the rankings, from 46th to 45th best return on investment for taxpayers. The still bad (overall) news is that WV has one of the ten worst returns in government services per amount of taxes paid.
The state's "tax rate rank" fell from 18th to 22nd best. Wallethub ranks states by looking at the average state and local taxes and comparing them to the national average. For WV, the average figure was $5,457.  That is lower than last year, but enough states cut their tax rates so that WV dropped four spots in relative terms. To provide context, Alaska had the lowest rate at $2,993/person and Illinois had the highest at $7,719/person. Despite having a perception as a state with high tax rates, WV is at least in the top half of states with the lowest tax burden. When a lower cost of living than the national average is taken into account, this tax burden is even lower. But taxes did get marginally higher from 2014 to 2015.
The overall government services rank improved from 47th to 46th best. Surprisingly, Wallethub ranks our water quality number one in the U.S.

It is hard to tell where their data is coming from for this ranking. They note The Environmental Working Group (EWG) as a source, but I could not find a recent report from that organization. Thus, last year's chemical spill in Charleston was probably not factored into their analysis. On the other end of the spectrum, WV ranked near the bottom in hospital systems. 

This is an improvement from worst (51st) last year, but is still not good. Wallethub based this rank on a number of factors. One of them was the concentration of hospitals per population, which makes WV look bad. The average life expectancy and infant mortality rates are two other "outcome" based factors that went into their calculation. Out-of-pocket medical expenses and the average health premium payment were the other factors, along with a generic "public hospital system rank". Ultimately, there is only so much hospitals can do to improve the general health of the population, so life expectancy is a bit of a poor measure of the state's health care. The amount paid out-of-pocket also does not seem very causally linked to the system's quality. Regardless, the perception is still that WV citizens are getting a low return on taxes paid when it comes to health care.

The big picture has changed very slightly from last year. We are in the top half of states for least oppressive tax rates, but we are near the bottom in terms of government services quality. Reason would dictate that either the state's services improve dramatically, or taxes decrease a little bit (marginally). For example, a state with the worst government services should have a very low (maybe the lowest) tax rate. Whereas a state that is getting very high quality services can expect a high (maybe the highest) tax rate. With the 46th best services, WV citizens could argue that they should pay the 5th lowest tax rates (51 - 46 = 5). That would mean the average West Virginian pays about $4,000 in state and local taxes instead of $5,457. That is a reduction of around 25%. 

Unfortunately, taxes appear to be moving a little higher instead of a little lower. Unless that state has solid plans on how those extra dollars in tax revenue will improve services and outcomes for citizens, it should consider reducing the average tax rate. This is easier said than done. Politics will ultimately rule the day and stamp out any well-formed public policy analysis. But at least there are organizations like Wallethub providing a clearer picture to taxpayers. 

And it could always be worse. West Virginians could move to Michigan which combines one of the highest tax rates with the 45th best government services. High taxes and poor government services, that is a recipe for disaster. 

Employment & Wages Update

This is an update concerning the WV wages and employment with the most recent data from the Bureau of Labor Statistics (BLS). Historical data is only available up to the second quarter of 2014, which ended in June 2014. While the average U.S. state posted a gain of 1.56% in employment from June 2013 to June 2014, WV had negative employment growth of -0.3%. It was one of three states/territories to lose jobs over that period. The other two areas to have negative job growth were the Virgin Islands and Puerto Rico. This is a continuation of the weak employment recovery from the financial crisis of 2008. But it is disappointing that WV could not post even moderate positive employment growth over that 12-month time span, especially given the ability of every contiguous state to do just that.
Looking at the breakdown of employment growth and decline among WV counties shows great inequality. Doddridge County had job growth of +19% from June 2013 to 2014 to lead the state, while Mingo County had negative employment growth of -14.9% at the bottom of the list. Thirty-six of the fifty-five counties had flat or negative employment growth for this period. Counties with stagnant or negative employment included some of the counties with relatively high average weekly wages. Mingo County had the 3rd highest average weekly wage at $936, but had the worst job losses; Putnam County had the 5th highest weekly wage ($907), however it gained 0% employment. Kanawha County had -0.1% job growth with the 12th highest weekly wages of $830.
Unsurprisingly, most of the employment decline and growth is tied to natural resources. Coal mine closures in Mingo County are probably responsible for the majority of job losses. Legislation proposed to give tax credits to employers who locate on reclaimed mine properties is unlikely to have much of an effect. Tax credits may sound appealing, but if employers have no other reason to locate in a particular area (access to markets, natural resources, skilled workforce) they will not obey some politician's whim. On the other side of the spectrum, natural gas projects in the northern counties are adding to employment growth. This is powered by Marcellus Shale drilling and its support services, pipeline transmission, and electricity generators that are flooding those counties. That growth is not without negative side-effects, as some residents cope with increased truck traffic on local roads, consumption of large volumes of water from local sources, and load noises from drilling activity. The potential for explosions from highly pressurized gas, due to inattentive operators, and the constant worry of water contamination from the public will also continue to hamper the natural gas industry.
The search for new industries and employment diversification continues in WV. Natural resource exploitation, education, health care, and government work have offered the extent of employment opportunities in recent state history. That has landed WV with the 41st highest average weekly wage ($792) of 50 states. And it failed to contribute net job growth in the most recent period. More than tax breaks will be required to alter the state's employment picture. It will take a wide-scale change in workforce skills that attract existing companies and a thriving small business sector. That may not be possible to achieve with any set of policy tools.

Addendum: To be fair, employment has mostly recovered in WV since the 2008 recession. Seasonally controlled net employment is down from a 10-year peak of 715,677 in 2008 to 711,266 in June of 2014. The recovery of jobs seems to have leveled off since 2012 with declining employment over the last few quarters. The picture is not too bleak if we consider that from 2004 to 2014 employment in WV has increased from 694,322 workers to 711,266 workers - a gain of 16,944 net jobs.

Employment in WV

Many high school and college students struggle to understand the needs of the labor market as they are finishing their school years. This leads to a disconnect between employers and the work force that can result in reduced business activity and higher unemployment. Most readers will recall the lack of vision they had as high school students trying to pick a career path (the author certainly struggled). This problem needs to be tackled jointly by parents, schools, and businesses. Schools can go a long way to communicating what jobs will be available when students graduate. Education for its own sake is admirable, but preparing students for a work life is equally important. Businesses can reach out to schools and tell them what skills and workers are currently needed. They can communicate this with data and stories.

Having identified the problem, let us see what the current facts and figures say about employment opportunities in West Virginia. Presented below is a snapshot in time of the March 2014 employment picture in the state (BLS.gov data). For all private sector employment categories, Trade, Transportation, and Utilities leads the way by employing 23% of the WV workforce. 

Regardless of what you may have heard during election season, Natural Resources, and Mining is not a huge share of the state's employment at 5.7% of total private employment. Similarly, the Construction category accounts for only 5.5% of private state jobs. Manufacturing is a low source of employment at 8.6% although it is slightly higher than the previous two categories. Those three categories account for the almost 20% of employment that is associated with Goods Producing. The rest of private state employment, 80%, is attributed to Service Providing jobs. Education & Health Services are close behind Trade, Transportation, and Utilities with nearly 22% of employment. Together those two categories account for about 45% of the state's jobs. If you add Professional & Business Services (11.7%) and Leisure & Hospitality (13.1%), that group of four service providing categories accounts for 70% of all private work in WV.

That is the broad picture. If you are a student or unemployed West Virginian, you should probably look for work in one of those four categories. Education & Health Services probably consists of: nurses, doctors, health care administrators, private teachers. But the BLS data can be very specific within these categories. For instance, it might be beneficial to know that there were 7,534 jobs in home health care services for March 2014. Getting more detailed with the job numbers enables job seekers to get a feel for specific opportunities. The higher the employment, the more likely someone would be to find work in that category. Once a category of work is defined, a job search engine is a good place to start for finding specific job openings. Even more effective than internet searching is networking among friends and family. A large portion of workers learn of opportunities through social networks instead of official job listings. For students, this simple exercise can guide them in choosing courses and learning about industries while they are still in school.

The graph above looks at private employment only. Between federal, state, and local governemnt employment there are another 47,935 workers. These workers are considered separately because their wages come from tax revenue on private businesses. However, it may be beneficial for job seekers to know that nearly 48,000 government jobs currently exist and that the average annual wage for a government employee is above that of a service provider (broadly speaking). As you can see below, federal government positions pay considerably more than state and local jobs.

One thing that is not being considered with this "snapshot" is the trend of employment among categories. Looking at whether employment has moved up or down in each category over the past 5-10 years would allow us to make more definitive statements about where work is likely to be found. 

Taxpayer Return on Investment

My attention was turned onto a report that ranks states according to the returns they provide to taxpayers. Economist Scott Sumner at The Money Illusion makes the observation that states with no, or low, income tax rates tend to rank better with regard to their public services. He checked for a political bias in the ranking organization, but found that Republican and Democrat leaning states were evenly mixed throughout the rankings. The organization providing the rankings is called Wallethub. Their mission statement says they provide financial information for consumers and small businesses. The report was produced by professors of political science, economics, and public policy at various universities across the country.
So what does the report say about West Virginia? The state ranked 46th of 51 (D.C. was included) in return on taxpayer money. The good news is that the tax rate rank is not oppressive. West Virginia was ranked 18th, top 35%, in terms of how much taxes its citizens pay annually. Wallethub estimated that the average West Virginian pays $6,598 annually in taxes, which is 5% below the national average. The bad news is that our overall government services rank 47th, according to this organization.
There are a few graphics that break down the metrics by government service. West Virginia is featured in two of them.

That is interesting given the chemical spill that tainted Charleston's water supply in January 2014, but before that West Virginia had been nationally ranked with the best water quality. It is assumed they ignored the recent spill and looked at the larger picture of the state's past and future water quality when conducting the report. More troubling is that WV was ranked last in terms of quality hospital systems. The explanation for this is not readily available. One could reason that the lack of health care options in rural areas across the state lead researchers to rank the state last. Their sub-metrics in determining health care provision were: the number of state and local hospitals per 100,000 residents; a public hospital system rank; the average life expectancy; the infant mortality rate; out-of-pocket medical costs; and the average health insurance premium. The average life expectancy could be more due to lifestyle choices, but the other areas are somewhat within the state's purview. And it can be noted that the quantity of hospitals does not always mark their quality. Still, a low health rating certainly made WV look like a bad return on taxes invested.
However, there is a bigger point to be drawn from this report. Could West Virginia improve its quality of public services by increasing or reducing the tax rate? Given that the state already collects below the national average in taxes, one might say that raising the tax rate to the national average or beyond could give the government more resources with which to improve health services, reduce crime, or build infrastructure. This makes good sense, but the state by state picture muddies this clear reasoning a bit.

Look at how convoluted this graph appears. Putting the same data into Microsoft Excel shows that there is a small negative correlation (-0.22) between lower tax rates and higher government services. But it is far from clear that higher taxes necessarily provide a state with better government services.

West Virginia would hope to move downward on the above graph. That would indicate better public services. The trend line would indicate that increasing taxes marginally would help that. However, the chart shows plenty of states with low taxes and high government service rates. Look at the cluster of five states in the lower left hand corner that rank in the top ten in low tax rates and in the top twenty in government services. Those states are: Wyoming, South Dakota, North Dakota, Washington, and Colorado. Of those states, South Dakota, Washington, and Wyoming have no income taxes. On the other end of the spectrum, the state with the highest tax rate rank, New York, has the 25th best public services. So New York has high tax rates and is in the middle in terms of services. California has the second highest tax rate rank and is 38th in public provisions.
Complicating the relationship further are states with high tax rates and highly rated government services. Iowa, Nebraska, and Vermont all rank in the top ten highest tax rates and provide top ten quality public services. All three states have a progressive income tax that is steeper than West Virginia's.
So what is the lesson from all this data? Should West Virginia lower or increase tax rates? And if so, which ones should it lower or raise? The main moral seems to be that rates are not as important as quality decision making. The efficiency with which a state government spends money is more important than the amount collected. Finding cost effective ways to improve infrastructure, schools, air and water quality, and health services is the best route. That is easier said than done though. Building bridges or hospitals takes money. Increasing safety requires better training or more officers or both. And improving education starts with better teachers and teacher training. It requires as much dedication from the populace to provide these services as it does the state to facilitate them. Teachers and police officers taking pride in their work and looking for innovative ways to improve their community are just as important as the politicians hoping to effectively parse through the tax code.

More on Minimum Wage

Many states have taken time during their recent legislative sessions to pass higher minimum wage laws. Whether this is an attempt to keep pace with inflation (which is at historic lows), or battle income inequality is up for debate. I wrote two months ago about the state of inequality. Here are two graphs depicting: 1) the upward shift of the population among income brackets (less people in the lowest income bracket, more people in $50k-$200k range) and, 2) the higher concentration of wealth among higher income brackets (less wealth among lowest income bracket; $100k-$200k range grows; $1 million+ bracket grows).

As I mentioned at the time, these trends show a positive movement of the population up the income ladder with the consequence that more of the total state income is held by people making $75,000 or more. But are those making much less, like the minimum wage, cut out of this growth in prosperity?
The unemployment rate has dropped almost linearly from a peak of 17.4% in 1983, with reversals of trend coming after each recession. Widely held economic theory says that raising the minimum wage results in higher unemployment. But that can be difficult/impossible to tell when unemployment rates are much more heavily influenced by macroeconomic conditions (changes in preferences, globalization, technological innovation, etc.). Shifts in the nature of the labor force away from mining and manufacturing toward health care, retail, law, finance, and other technical jobs requiring computer skills ultimately produced new, different jobs that displaced some workers from the labor force while providing new sectors for other workers. Upticks in the unemployment rate seem to follow the path of recessions (crash of 1987, tech bubble, Great Recession of 2008).

By adjusting the state minimum wage by the inflation rate (taken from the Bureau of Labor Statistics CPI rate - table 24), we can see a fairly flat rate.

The current minimum wage of $7.25 is keeping pace with inflation though it is down slightly from a record peak of almost $8.00. Thus, increases to the nominal minimum wage have kept the real minimum wage steady, and increased it somewhat, since 1980. During this time, the unemployment rate of WV has dropped, subject to macroeconomic conditions in the broader U.S. economy. At the same time, the share of taxable income in WV has experienced a shift from earners making less than $50,000 to workers making $75,000 or more. The lowest taxable income bracket of below $30,000 in 1997 and below $25,000 in 2011 (the IRS changed the brackets for some reason) shows a movement of workers out of that bracket. A total of 46% of returns were filed for those making under $30,000 in 1997, while 25% of returns were filed for those making under $25,000 in 2011.
From this information it can be reasoned that workers making under $25,000, around the minimum wage, are not making less in inflation adjusted terms. Not only that, but more and more workers are not in this category. And lastly, that is why the share of total income of the bottom income brackets has dropped; not because they are earning less, but because of the upward mobility of higher earners.
In conclusion, there is an indeterminable relationship between unemployment and minimum wage. It may increase unemployment at the bottom of the income spectrum, but there is not clear data showing this and no way of inferring causality. The minimum wage has stayed constant, in real terms, as unemployment has dropped in WV over the years. It is currently above the 1980-2013 average of $6.55 in 2013 dollars. Increasing it now may slightly increase the share of income going to the bottom tax bracket, but it won't be considerable due to the broader shift of workers up the income brackets and their increasing wages.
This is an issue of importance being hotly debated at the global level. The release of Thomas Piketty's book: Capital in the Twenty-First Century has created a flurry of discussion over inequality and whether it is due to grow indefinitely in the future. Piketty's main thesis is that the growth rate on capital has been higher than the growth rate of labor over the broad course of human history. This makes the people owning capital assets (stocks, buildings, land, machines) wealthier than the people providing goods and services. He uses this point to advocate for a global redistribution of income. While the jury is out on his claim about growth rates, the story for a large amount of people over their lifetimes has been a rising standard of living as they jump up the income scale. The Great Recession may have called this mobility into question, but the numbers have yet to show that it has stopped. There is still wealth to be made for those that can and will work for it.

Race Track Subsidies

The WV House recently passed a bill to reduce subsidies to thoroughbred and dog race tracks. It estimates this would save the state $35 million and help reduce a budget deficit. Some delegates objected because they represent districts with dog breeders or race tracks. Do they have a point, or are subsidies to private enterprises like these an unnecessary expense to the state?

Tyler Cowen of George Mason University calls state "racino" legislation that allocates a percentage of gaming revenue to racing and breeding businesses a "triply stupid policy". Why such a harsh endorsement? The first trip up, in his opinion, is that there should not be a separate legal entity for a casino with racetracks, such as Mardi Gras Resort and Casino in Cross Lanes, WV. Secondly, he objects to the nature of such legislation as a response to competition between state lotteries and racinos. State lotteries like to bill themselves as great benefactors to local education. But the effects of all their spending on education is ambiguous while the revenue they generate is often extracted from the lower income residents of a state. And lastly, Cowen finds it bizarre that a private, for-profit enterprise should need state funding to survive. In his words, "how about spending the money on poor people, rather than on sectors which extract money from a disproportionately lower income clientele?"

Delegates arguing against this legislation are doing so to represent their breeders and race track workers. That is all well and good. But what is the cost-benefit of defending these subsidies? It seems fairly intuitive that if a company cannot operate without government subsidies perhaps it should not be in business. And if race tracks are losing out to competition from state lotteries, why not abolish the state lottery? Again, state lotteries extract revenue from lower income residents, on average, and frame their operations as benevolent by funding things like education. These lotteries could be replaced by so called "no-lose" lotteries run by local credit unions. Some states, like Michigan, already allow these "no-lose" lotteries where savings accounts are opened by players and the winners receive extra cash in lieu of each depositor gaining interest in their account. Britain already runs a form of this that they call "premium bonds". That program has been around since 1956.

So while we are reviewing race track subsidies, maybe it's time to throw in some lottery reform as well. It's food for thought. 

Income Inequality in WV

A recent news blip on WV Public Broadcasting relays a report that income inequality in West Virginia has grown over the last three decades. Specifically, it focuses on the difference between the top 1% of earners in the state and the rest of the state's earners. It has become popular since the Occupy Wall Street movement to discuss the 1% of top earners and the rest of the public. But what does the broader breakdown of different income brackets look like? How has it changed over time? And what does this mean from a public policy outlook?

The article sights a research paper released from the Economic Policy Institute (EPI). That is a rather bland name that most people will gloss over. The EPI states on its website that it "conducts original research according to rigorous standards of objectivity and, as a result, is a reliable source of information and analysis." But on the same page it mentions this: "EPI proposes policies that protect and improve the economic conditions of low-and middle-income workers and assesses policies with respect to how they affect those workers." The organization states it is releasing objective economic analysis, but then states it has a mission of promoting certain public policies. Having a policy agenda implies having a bias; this makes an organization less than completely objective. Also, note this from their website, "In 2010 through 2012, a majority of our funding (about 60%) was in the form of foundation grants, while another 26% came from labor unions." So this organization will be inherently biased towards policies advocated by the foundations funding it as well as labor unions.

Still, its claim that income inequality is growing in West Virginia deserves to be inspected. The statistic stated in the article is that the top 1% of incomes in West Virginia are, on average, 20 times greater than the average income of everyone else. This alone is not shocking. The smaller the percentile of highest earners, the bigger the multiple. So average incomes from the wealthiest 1% will always be higher than average incomes from the wealthiest 2%. For example, in 2011 the top 0.1% of earners in WV had an average income 67 times that of the average income of all other WV earners. That's basic mathematics.

Another statistic in the article says that WV is one of the states where the top 1% of earners took between 50% and 84% of the income growth from 1979 to 2007. This statistic does seem to imply that the top 1% of earners are capturing all the economic growth in the state. But there are problems with making this basic interpretation. One is that the people who were in lower income brackets in 1979 were not the same people in those same income brackets in 2007. Someone earning $30,000 in 1979 could reasonably be earning $70,000 in 2007. Another person earning $250,000 in 1979 might be earning over $1 million by 2007. Other people may have moved out of the state or passed away since 1979. This is an important distinction. People outside the 1% can move into or out of that bracket over time. An income bracket is not the same people gaining and losing a share of economic growth over time.

Reviewing real data from the IRS is helpful to make these points more salient. Consider the period 1997 to 2011. There were about 61,000 fewer taxable income forms reported in 2011 than in 1997; this signifies outward migration from WV. But more important for discussions of income inequality are the movements between income brackets. In 1997 80% of the tax forms were for individuals earning $50,000 or less, but by 2011 that number dropped to 56%. Meanwhile, the share of individuals in each income bracket above $50,000 increased from 1997 to 2011. For example, in 2011 41% of earners took home between $50,000 and $200,000. Back in 1997 only 19% of workers were in that income bracket. Therefore, the recent evidence suggests that there is income mobility by WV income earners over time. If this is not the case, then lower income workers left the WV labor force and higher income workers entered it.

Having discovered that people are not stationary in income groups over time, one can move on to seeing how income has changed within the groups. Those West Virginians earning above $1 million in 1997 had an average taxable income of $1.93 million. Individuals in that bracket in 2011 earned $2.64 million on average. That is an increase of about 37%. Meanwhile, individuals earning below $50,000 moved from having an average taxable income of $18,000 in 1997 to $13,500 in 2011. This is a decrease of around 25%. And indeed there is a decrease of average incomes in each bracket except for those over $1 million. Other than the under $50,000 income bracket, those decreases were at or below 8%. That still seems like a bad thing.

Does it mean that income inequality is a rampant problem in the state? Recall that the people earning less than $50,000 in 2011 were not the same people earning less than $50,000 in 1997. Therefore, there are a host of reasons why the average income in this bracket might be lower. We know there are fewer people in this bracket over time. Maybe the type of workers in this bracket changed. The type of worker may have changed from employees working at a plant earning $45,000 a year to service workers earning closer to $25,000 per year. A shift in the nature of the workforce could produce such a change. Maybe there were younger workers in the 2011 $50k group who could not demand wages close to $50,000 whereas those in the 1997 group may have been tenured employees. These are two examples of why averages within income groups change over time. And at least the share of income in groups from $75,000 to $1 million increased over that period.

Hence, while we do see higher income among the highest earners in the state, this does not necessarily mean workers in the lower income brackets are worse off than they were two to three decades ago. For one thing, they are not the same people. A Carbide employee from 1980 is not the same person as a recent high school graduate working retail at the Town Center Mall. The high school graduate may not have a family and wouldn't mind earning $10,000 less if it meant having a smart phone, internet access, and a television.

The public broadcasting article goes on to state that this report was released while the WV senate is considering a minimum wage bill. In doing so it implies that the minimum wage has a direct connection to income inequality. But this is far from straightforward. The academic and public policy community is deeply divided over whether minimum wage reduces income inequality or not. It may seem intuitive that if you make a company pay its lowest income workers more, people in the bottom income bracket will earn more. However, employers can simply choose to not hire as many minimum wage workers, or they can fire those they currently employ. Changing what you require a company to pay a worker does not change the productive capacity of that person. In this way economists often predict that increases in the minimum wage will increase unemployment. A minimum wage law may raise the average income in the under $50k bracket, but that would be accomplished by pricing the lowest earners out of the labor market. An employer will simply avoid hiring a worker who does not produce above the level of income required by the government.

Income inequality in a society can be problematic. It can cause social strife and depressed workers and it implies stagnation in living standards. Those are serious problems. That makes understanding the statistics behind inequality very important. Fortunately for West Virginia, the picture is not as bleak as the study released from the EPI would lead you to believe. Unfortunately, the causal link between minimum wage policies and inequality is hazy at best. There is no simple fix to making relatively lower income earners in a society more productive and more valuable to employers. 

Oil and Gas Reserve Fund

*Disclosure: I work for a natural gas company.*

The Senate recently passed a bill for what it calls a Future Fund to set aside tax revenue from oil and gas companies. Here are the particulars: the state will maintain $175 million in oil and gas taxes that it can spend. Twenty-five percent of all the oil and gas revenue after that will be placed in a reserve fund. This fund will earn interest for six years before it can be spent by the government. The main issue is whether this is a prudent, fiscally responsible policy to ensure future financial health, or if using the tax revenue immediately would produce more value during tough economic times.

There is a strong case for the implementation of the Future Fund. It rests on an idea known as the resource curse that has plagued West Virginia in the past, but has had economic impacts worldwide. The basic idea is that countries (and states) with large stores of natural resources often end up with lower incomes, employment, and standards of living than surrounding countries. One glaring example is Venezuela, where $100 billion per year in oil revenue has yet to provide a better life for most of its citizens. Likewise, the phenomenon is present in Africa and the Middle East where autocratic governments hoard the wealth from oil revenue for themselves and at the expense of their populace. West Virginia experienced a form of this with the coal boom in the mid-20th century. This rush temporarily produced employment and tax revenue, but after the easily removed coal had been extracted and technology reduced the need for human labor, many coal towns were deserted. To be fair, the coal industry has continued to provide tax revenues to the state to this day. However, had the funds from this resource extraction been saved and invested in a reserve fund, a smoother transition to jobs in different industries may have been available to past generations.

Norway provides a good example of effectively using a resource reserve fund. That country found large oil reserves off its coast in the 1970s. Instead of allowing companies to extract the oil as quickly as possible, the government handed out a few licenses every year. Then, Norway decided to not spend the new oil revenue immediately on social programs and infrastructure. Instead their government put the money into a pension fund. The Norwegians restricted their government from spending anything other than the interest earned on that pension fund. Today the fund contains about $550 billion. Norway's social programs are envied by countries across the globe due, at least in part, to its oil revenues.

The argument against saving funds from oil and gas revenue rests mainly on urgency. Citizens concerned about high unemployment, high Medicaid costs, and failing infrastructure would rather see new tax revenue spent immediately. While this argument carries some weight, the historical evidence from state and national governments does not support it. There are few examples of governments rapidly exploiting resources then benefiting from years of economic growth due to tax revenues. Instead, future generations could benefit from annual state budgets backed up by a reserve fund. The level and timing of what should be saved or spent can be debated, but the existence of the reserve fund itself has solid economic evidence in its favor. 

Launch Pad Legislation

The recent House Bill 4343 introduced in West Virginia's legislature seeks to entice companies with "state-of-the-art" technologies to setup their businesses in the state. Whenever you hear governments talk about encouraging economic activity you have to wonder how they plan to go about accomplishing those ends. Politicians have a finite amount of tools they can use for encouraging business activity. This bill mainly looks to institute tax breaks for manufacturers of certain technologies*. 

So how effective at attracting business activity is the method of offering tax breaks and other subsidies? The effect of this political action can be examined with some basic economic thinking. If a government offers privileges to certain businesses, it stands to reason that those businesses will notice and be more likely to locate within the area of that government. But there are multiple surrounding governments, in this case different states, where a manufacturer can choose to locate a company. If those other states offer the same or similar privileges, the company and its directors have no incentive to choose one state above the other. Therefore, if West Virginia offers a tax break to companies that is similar to a tax break in Virginia, Ohio, and Kentucky a company choosing between the four still has no particular reason to choose West Virginia. Under such a scenario, the best that can be said for the tax break is that it "stays competitive" with the enticements of other governments.

The bill states in its introduction, "West Virginia has not done a good job to position itself for economic development in the new economy, which largely can be located anywhere in the United States or for that matter, the world." If the businesses this bill is trying to attract can be located anywhere in the U.S., then using policies that can be enacted anywhere in the U.S. is not a selling point. It is not a comparative advantage to any particular state. That is, it does not use the existing skill sets and infrastructure particular to a certain people to attract business. For example, if a nanotechnology company is trying to decide where to locate its operations, it will look at a variety of factors. Two of the main factors will be the existing infrastructure and skilled workforce of an area. A nanotechnology company looking at Indiana would see that Purdue University has the Birck Nanotechnology Center that produces the research and educates the students needed for its business. If it then looks at West Virginia and sees no existing research facilities or workers skilled with nanotechnology, it will not be swayed to locate in West Virginia solely by tax breaks.

This is not to say that a state lacking high technology will never host companies producing it. Those states with high-tech companies had to start somewhere. But the path to being the home of specialized industries is more difficult than offering financial incentives. It starts with existing resources. Then, governments or individuals with the necessary funds can concentrate their resources into a very particular sector. That attracts knowledge workers with complimentary skill sets. Out of this base of workers some will create new companies that go on to benefit the rest of the state. This is one logical way to develop new economic activity, but there is no formula or easy fix. If there were an easy policy solution, every politician would use it and garner the praise and respect for instituting it. 

*Among those listed in the bill are: aeronautics, biotechnology, materials science, nanotechnology, homeland security, photonics, and alternative fuel vehicles.