Has Ohio Lost its Labor Force Edge?

On Friday August 1, the Bureau of Labor Statistics (BLS) released its national jobs numbers for July. The report contained a familiar narrative: a modest increase in total employment and a slowly declining unemployment rate. However, because the unemployment rate is calculated as a fraction of the labor force (those who are employed or actively seeking employment), it does not accurately reflect the percentage of the total population that remained unemployed. That number remains stubbornly stagnate. The BLS estimates that only 59% of the U.S. civilian (16 yrs & older) population was employed in July, only one percentage point higher than in June 2011, the low point of the last 30 years. The employed to population ratio remaining steady as the unemployment rate drops can be explained by the declining labor force participation rate, a problem Ohio shares.

In July 2014 less than 63% of Ohioans aged 16 and over declared themselves to be part of the labor force. This is lower than in any month since October 1978, before women had fully entered the workplace. Traditionally, Ohio has exceeded the national average, but the gap has disappointingly closed over the last few years. In particular, 2014 has seen a steep drop, with more people dropping out of Ohio’s labor force during the months of March, April, and May than in any other three month span since the height of the recession in October 2009. Similar to the United States as a whole, here are three major reasons for the declining labor force in Ohio:

Demographic changes:  An aging population results in a natural decline in available workers. The graphic below is based on a combination of U.S. Census and American Community Survey data and illustrates the changing age demographics of Ohio between 2006-2013.

According to the BLS, in June 2014 about 54.7% of people in the U.S. aged 16-24 participated in the labor force, compared to 80.9% of people aged 25-54 and 40.0% of people 55 and over. Ohio has seen over 4% of its 15 and over population shift from 25-54 into the 55 and older segment over the past 7 years. Similar demographic changes are happening all around the country. According to some estimates, the changes account for about 25% of the nationwide labor force decline.

School Enrollment:  When the economy dips and the job market suffers, the opportunity costs associated with school enrollment decline and the perceived necessity of greater education rises. More potential workers return to school to complete a degree (or add one), and a higher percentage of teenagers complete high school. This effect is illustrated below by the percentage of Ohioans aged 18-24 who were enrolled in college between 2006 and 2012. Data is from the American Community Survey with the Ohio labor force participation rate overlaid.

Higher school enrollment causes a temporary decline in the labor force. However, in the long run it creates a better educated and more productive and efficient labor force. The bad news for Ohio is college enrollment rates did not rise as dramatically as the rate of the nation, likely meaning much of Ohio’s labor force reduction has come from a third major factor.

Increased Disabled Beneficiaries:  Since the Great Recession, disability claims have skyrocketed, and unfortunately Ohio has outpaced the national average in this category. The worst news is that unlike school enrollees, people claiming disability insurance rarely return to the labor force.

Between 2006 and 2012, Ohio’s population aged 18-64 saw almost no change, but in 2012 there were over 93 thousand more disabled beneficiaries within that age range. With disability claims rising to all-time highs, policymakers will need to confront reform. The Social Security Disability Insurance trust fund is projected to be empty by the end of 2016.

Ohio may have lost its historical edge on the nation in labor force participation rate among its population. In order to counteract that Ohio will need to attract a younger generation into the state, or face the challenge of increasing production among a permanently smaller and continually aging labor force.

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Celebrate National Employee Freedom Week!

Should a person be forced, against their will, to reach into their own pocket and give money to a cause with which they disagree?  This is the question that thousands of union members in Ohio are confronted with every year.  Unfortunately, their freedom to make this decision is severely restricted since Ohio is a Forced Union state.

This is why The Buckeye Institute has once again partnered with the Nevada Policy Research Institute (NPRI) and more than 80 other groups in 45 states to raise awareness for National Employee Freedom Week that runs August 10 through August 16.  National Employee Freedom Week is a national effort designed to educate union members about their legal rights concerning membership as well as the use of member funds for purposes other than collective bargaining.

According to a national poll commissioned by NPRI, nearly 30 percent of union households nationally would opt out of union membership if given the chance.  In Ohio, the number of people that believe employees should have the right to decide, without the use of force or penalty, whether or not to join a union is a staggering 80.5 percent.

While many union members are pleased with their representation, there are also many who feel compelled to pay dues to an organization that spends their hard-earned dollars on issues with no connection to their union’s stated purpose of collectively bargaining on behalf of its members.

And many of the issues that are supported by unions that have nothing to do with collective bargaining are controversial among union members.  For example, the National Education Association (NEA), the national affiliate for the Ohio Education Association, has approved a laundry list of controversial resolutions, including:

  • Urging participation by the United States in deliberations before the [International Court of Justice];
  • Supporting the nuclear freeze;
  • Promoting DC statehood;
  • Opposing efforts to legislate English as the official language; and
  • Supporting efforts to abate climate change.

And the NEA puts its money where its mouth is, donating through its PAC, to give but one example, $200,000 to the Sierra Club in 2010 as it promotes its green agenda, including “Retiring one-third of the nation’s more than 500 coal plants by 2020.”

The NEA is not alone.  Unions frequently take positions and use PACs to promote causes and candidates that may be contrary to the views of members.

People can have reasonable disagreements about the controversial issues listed above, but should union members be compelled to support their organization’s stance on these issues, even if they have a deeply felt objection?

Fortunately, union members who do not want their money going to support these types of causes without their consent do have options-and National Employee Freedom Week seeks to assure that union members are aware of these options.  In Ohio, union members can block their money from being used for political activities by becoming what is referred to as an “agency fee payer.” This will mean that they are paying only for the direct representation offered by the union in collective bargaining.  To learn more about this option, click here. One can also become a “religious or conscientious objector” where the dues are deducted but made payable to a charity.  Click here to learn about this option.

Despite these options, there is only one way that current and prospective union members can assure themselves of complete employee freedom, and this is for Ohio to become a Right to Work state.

The Buckeye Institute has published numerous reports showcasing the economic benefits Ohio can reap from becoming a Right to Work state, including our 2012 report,

Ohio Right-to-Work: How the Economic Freedom of Workers Enhances Prosperityand our monthly Ohio by the Numbers reports.  However, this issue is about more than economics; it’s about right and wrong.  No one should be forced to pay to join an association against their free will, much less so if that association uses their money to promote causes that are against their personal beliefs.  This is the message of National Employee Freedom Week, and it is a message the Buckeye Institute hopes you will spread around the state, especially to those who may be unaware that there is a path to freedom.

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Number of New School Operating Levies Lower than Past Highs

Some big government advocates claim that reductions in state education funds have caused an increase in the number of local levies for new school operational funds over the past four years. Janetta King, president of left-leaning Innovation Ohio, has argued that such reductions have “pushed the need for tax increases down to the local level where middle and low income Ohioans are being asked to hike their own property taxes in order to make up the shortfall.” But a broader view of Ohio’s recent history with school levies suggests that taxpayers should look for a different culprit.

Innovation Ohio recently reported a 14 percent increase in the number of new school operating levies between May 2007-May 2010 and May 2011-May 2014, leading to a 34% increase in approved school operating revenue. Unfortunately, these numbers don’t tell us much without further context.

First, the Innovation Ohio report neglects to note that approximately half of the increase in approved school operating revenue flows from a massive levy passed in 2012 as part of the Cleveland schools reform plan.  Second, Innovation Ohio fails to account for Ohio’s Great Recession, which dominated the first period of study. To be sure, the understandable (and wise) reluctance to enact new tax increases during a prolonged recession predictably led to fewer proposed levies in the first period.  The latter period of the study, however, from 2011 to 2014, shows a slow, but steady recovery.  Third, the study’s limited time period does not tell us if a 14 percent increase is shocking or expected.  Indeed, the Buckeye Institute’s own analysis demonstrates, for example, that a 14 percent increase in school operating levies pales in comparison to the 140 percent increase seen between 1999-2002 and 2003-2006.

A more complete pictureon the number of levies was provided by the Education Tax Policy Institute (ETPI) in 2007, and offers a fuller context for understanding Ohio’s current levies.  The ETPI report compiled and analyzed every school operating levy in Ohio from 1994-2006, and found that the number of levies decreased each year from 1994 to 1998, but then increased each year from 2001 to 2004. The chart below, showing only new operating levies, illustrates the trend.

Source: Education Tax Policy Institute

As shown here, considered in the context of the past twenty years, the reduction in new operating levies from 2007-2010 identified by Innovation Ohio merely continues the trend that began in 2004 and should not be particularly surprising.  Furthermore, if we include data from the August and November 2010 elections, the 4 year period from 2007-2010 saw an average of 135.25 new school operating levies per year, far below the 230.25 average found from 2003-2006 in the ETPI report.

Finally, according to the Innovation Ohio report, there have been 498 new school operating levies from May 2011 through the most recent election, and Governor Kasich’s term is likely to see more new operating levies than Governor Strickland’s.  But even these numbers can be deceiving when taken out of the broader historical context.  For example, there would have to be over 200 new levies in the upcoming August and November elections for the average number of new levies during the first Kasich term to hit the average seen during the second term of Governor Voinovich, and nearly double the previous three years for the Kasich average to hit the high seen during the second term of Governor Bob Taft. Thus, barring a catastrophic event, the 14 percent increase in levies seen between the Strickland years and the Kasich years, won’t come close to the 140 percent increase seen between the two Taft terms.

The available data does not allow for grand conclusions, but it is safe to say that the 14 percent increase in new operating levies over the past four years is not particularly surprising when taken in context. And although new tax burdens are never to be ignored or taken lightly, this recent rise is still well within the scope of Ohio’s new-levy average over the past 15 to 20 years.

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California Case Sheds Light on Why Teacher Tenure is Bad for Students

“Evidence has been elicited in this trial of the specific effect of grossly ineffective teachers on students. The evidence is compelling. Indeed, it shocks the conscience.” 

So said California state judge Rolf Treu in deciding Vergara v. California. The decision, issued in June, held that California’s teacher tenure, dismissal, and lay-off procedure laws were unconstitutional under the state’s constitution.  Although California boasts some of the worst tenure laws in the nation, the fundamental issues of teacher tenure, dismissals, and “last in first out” lay-off policies transcend state lines.

Like California, Ohio has laws that establish tenure for public school teachers and provide procedures for dismissing teachers and reducing staff.  Unfortunately, these procedures often mean that teacher quality takes a back seat to teacher seniority under Ohio law.

In Ohio, a teacher may qualify for tenure, known as a “continuing contract,” seven years after obtaining a teaching license. Once an Ohio teacher holds a continuing contract he may not be permanently removed from the classroom unless he voluntarily resigns or is “terminated.”  Termination, however, may only occur for “good and just cause,” or for extreme behavior as specified by statute (e.g., “willfully retain[ing] membership in an organization that advocates the overthrow of the government . . . by force, violence or other unlawful means.”).  In either case, the school board trying to remove a tenured teacher must follow procedures set out in state law, which include a formal hearing in front of a referee and a potential appeal to a court of common pleas.  Not surprisingly, cases involving termination for “just cause” typically trigger a string of legal challenges, arbitration hearings, and court battles—making termination a costly and onerous step for school boards to take.

Furthermore, Ohio’s tenured public school teachers also receive preferential treatment during staff layoffs.  Although not a strict requirement for a “last in, first out” system, Ohio law effectively ensures that the youngest and newest teachers will be furloughed first, and any tenured teachers will be reinstated before any non-tenured teachers return if the layoffs are rescinded.

Only Cleveland enjoys reprieve and exemption from some of these failed tenure policies.  Under H.B. 525, known more commonly as the “Cleveland Plan,” the Cleveland Municipal School District may legally “terminate” or remove tenured teachers for “poor performance.”  Fortunately for parents and children in Cleveland, the law considers “poor performance,” defined as two consecutive ratings of “ineffective,” to be “good and just cause” for removal. Imagine that—a school board able to fire a teacher for being ineffective.

Similarly, under the Cleveland Plan, the Cleveland school district may layoff ineffective tenured teachers before laying-off effective, high-performing non-tenured teachers.  Regrettably, students in the rest of the state are not as lucky and must continue to languish under sub-par tutelage because of the state’s backward tenure and dismissal provisions.

But the Cleveland Plan and the decision in Vergara offer hope.  Teacher tenure laws too often protect “grossly ineffective teachers.” The time has come to acknowledge that students and teachers would be better served by public school systems that elevate teacher quality over teacher seniority.

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The Buckeye Institute Announces Rea S. Hederman, Jr. as New EVP/COO

The Buckeye Institute for Public Policy Solutions announced on Tuesday its hiring of Rea S. Hederman, Jr., as Executive Vice President and Chief Operating Officer.

Rea (pronounced “Ray”) Hederman brings more than 20 years of experience to his new position, having most recently served as the Director of The Heritage Foundation’s Center for Data Analysis in Washington, D.C.  In his capacity at Heritage, Hederman oversaw one of the premier econometric modeling shops in the think-tank world, and managed a seven-figure budget as well as a significant staff of economists, mathematicians, and public policy experts.

Robert Alt–President and CEO of The Buckeye Institute–says, “Having worked directly with Rea at Heritage, I could not be happier to have him join Buckeye.  He has that rare combination of deep knowledge of public policy along with well-honed skill as a manager and leader that will serve Buckeye well in the years to come.  The Buckeye Institute has embarked on a phenomenal upward trajectory unseen in its 25 year history, and Rea’s addition to our team will compound our success, growth, and capacity.”

Hederman remarked that “Washington is, of course, a great place to work on economic policy firsthand, as I’ve been fortunate to do over the past two decades, but the real opportunity to make an impact is found in the states–and nowhere more so than the ultimate swing state of Ohio.  I am excited to get to work formulating and promoting sound economic policies to help Buckeye achieve its goal of a freer and more prosperous Ohio.”

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An Idea Whose Time Has Come: ShareOhio

Ohioans owe Auditor of State Dave Yost and his staff a round of applause for a new online innovation.  The Auditor of State (AOS) staff is going to implement an innovative web-based system to facilitate the sharing of equipment, personnel and facilities among local governments.  Using “ShareOhio” to facilitate the sharing of assets could start saving private citizens on their tax bills.  In 2012, the auditor’s Ohio Performance Team studied the utilization rates for capital equipment (think air compressors and backhoes) in Lake County.  They found that while some equipment was utilized heavily in each taxing jurisdiction within the county, other items were only used as little as once per month.  Local governments could save big money by sharing under-used equipment rather than each owning and maintaining an expensive machine themselves.  Other states such as Oregon and Rhode Island have successfully used these techniques.

However, problems existed:  some usage records were poorly maintained, and actually implementing a fluid sharing system could be tricky.  To that end, AOS drafted sample shared services contracts along with their study and built many useful capabilities into the website, www.shareohio.gov.  Now equipment can be tracked and inventoried and usage reports calculated online with a few clicks.

We encourage taxpayers to get onboard and make sure their local governments use this resource to the fullest extent.  As we have shown in our Joining Forces report, shared services have the potential for massive savings across the state and should be the first place local officials look instead of tax increases.

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First School Consolidation in Quarter of a Century Moves Forward

After flirting with the idea for decades and having recently arranged to share services, two Ohio school districts—Bettsville and Old Fort—have finally decided to tie the knot and consolidate.

Both districts are located in rural Seneca County and educate far fewer students than the state average of 2,640.  While Old Fort enrolled only 483 students in fiscal year 2014, Bettsville is the smallest district in Ohio, serving 156 students in grades K-12.  Further, while for Old Fort this represents a 14 percent decline over the past decade—not much worse than the state average of 8 percent—Bettsville has lost a crippling 34 percent of its student enrollment over the same period.  Such large declines obviously make running an entire school district for so few students an inefficient practice.

Along with major enrollment declines, Bettsville was struggling with severe budgetary problems.  In fiscal year 2013, their $600,000 deficit equaled approximately one third of their total revenues.  The district was placed under fiscal emergency on February 6, 2014, and a state audit estimated a $775,000 deficit for fiscal year 2014.  This forced Bettsville to take out a large loan from the state to remain solvent.

At this point talks of a merger with neighboring district Old Fort intensified, and the recently enacted section 3311.241 of the education MBR (House Bill 487) provided a saving grace.  Under the newly signed law, their debt to the School Solvency Assistance Fund would be forgiven if they were to voluntarily consolidate.  After talks with the community, the Bettsville Board of Education made the decision to do so for the coming 2014-2015 school year.

Although community members may be sad to see Bettsville Local Schools go, the consolidation is projected to save close to $400,000 per year and free up money for better course offerings and extracurricular activities.  Old Fort benefits because they will no longer have to renovate their old elementary school, as the old Bettsville elementary will now house grades K-6.

According to the Ohio School Boards Association, this is the first voluntary school consolidation Ohio has seen since 1989.  With several other districts facing enrollment decline and budget squeezes, expect HB 487 to spur more districts to follow suit in the near future.  In this instance, it seems they really are doing it for the children.

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