Traffic Trouble List topping is often a very good thing, but here’s one list we don’t want any part of. It’s the recently released rankings of the nation’s worst traffic trouble spots compiled by the American Highway Users Alliance. Essentially, this group looks at congested areas, tallies the vehicle count, and totals the hours of delays. Unfortunately, Texas has 22 traffic bottlenecks which made the cut—meaning they’re responsible for at least 700,000 hours of delays per year.
Not surprisingly, the worst delays are concentrated in the largest metro areas. Of Texas’ 22 problem areas, nine are in the Metroplex, seven are in Houston, three are in San Antonio, two are in Austin, and one is in El Paso. The worst in Texas is the I-610 at I-10 interchange in Houston, which ranks as second in terms of hours of delays of all bottlenecks across the country. About 295,000 vehicles pass through this area every day, and it causes over 25.2 million hours of delays each year.
Traffic is more than an inconvenience. Millions of hours are lost every year sitting at intersections and creeping along interstates. This time could be better used, whether for work or play. Imagine the productivity increases we would see if traffic jams were a thing of the past. And there’s no doubt that we’d all like to reclaim time to spend as we wish, rather than being held captive in our cars.
Those sitting in traffic also include vehicles delivering supplies to all types of companies. The resulting time delays and cost increases that ripple throughout the economy are quite significant. In some of my prior work, I have found that the annual rate of return to highway investments averages more than 30%. At super-crowded nodes, it is much higher.
There are other benefits of reducing delays. In the first place, it would improve safety. Unexpected slowdowns and difficulties entering and exiting roadways lead to a substantial number of accidents. The environment also benefits with improvements in traffic flow. Vehicles that are moving slowly or idling continue to emit pollutants, and the millions of hours of additional time slowdowns cost lead to greater pollution levels. Given that Texas has several cities struggling to meet Clean Air Act standards and otherwise enhance environmental quality, this is an important issue.
Totally alleviating traffic is both impractical and impossible. In fact, it doesn’t even make sense to do so because the excess capacity during non-peak hours would be enormous. The costs would be so extreme that they would far outweigh the benefits. Even so, it’s clear that the current congestion is costing us a fortune in wasted time and wasted fuel.
The impact of construction projects (once they’re completed) can be substantial. One interchange in Houston serves as an example. In 1999, the US-59 (Southwest Freeway) and I-610 Loop interchange was one of the worst in the country. Thanks to subsequent construction, delays in the area have dropped from 22.1 million hours to 2.9 million hours despite significant growth in the number of vehicles through the interchange.
I have long argued that infrastructure investments can be crucial to the economic vitality of an area. Any intersection or stretch of roadway that causes millions of hours in delays is hampering growth in and around the area. If we can’t move people and cargo where we need to when we need to, we’re harming economic efficiency. Well-conceived plans to alleviate these conditions are certainly worth our support and our tax dollars.
posted @ 01:08 PM CST [link]
Friday, February 20, 2004
Degrees and Dollars The basic theme is hardly a surprise: there is a strong correlation between education and income. What may be a shock to some is just how wide the variation is. It is (or should be) enough to renew the commitment of students to staying in school and parents to saving to pay for it.
Let me start with a few dollar figures. Data for 2001 (the latest available) compiled by the Census Bureau indicates the median income level for all people age 18 and older is $35,805 per year. A median is the point at which half of the observations in the designated group fall below, while half fall above; in this case, it indicates half of all adults in the US make less than $35,805 per year and half have incomes exceeding that amount. Unlike an average, it is not skewed by extremes at either end of the spectrum.
The median income level for those who do not complete high school, however, is only $18,793 per year—barely more than half the overall figure. Simply adding a high school diploma pulls the income to $26,795 per annum, a greater than 40% jump just for finishing. Add some college courses or an associate’s degree and median income jumps to $30,782 per year.
The big gains come with a bachelor’s degree, with a median income of $50,623 per annum. For those with advanced degrees, the total rises more than 40% again to $72,869. And remember, this is a median, so it’s not a case of a few people at the tip top skewing an average. Bill Gates is counted exactly like the rest of us.
There are certainly exceptions to this pattern—high school dropout who are millionaires, for example—but those are the exceptions. The fact that the median yearly income for someone with an advanced degree is four times that of persons who don’t finish high school is difficult to ignore.
I’ve written at length about the importance of education and training programs. Improvement in these areas, both in terms of quality and accessibility, is one of the most important goals we can aspire to as a state. (My lovely bride spends countless hours working toward these ends as a member of the Texas Higher Education Coordinating Board, a group whose mission is to work with the Legislature, Governor, higher education institutions, and others toward these ends.)
As an economist, I feel such strides are crucial to growing the economy and increasing the standard of living for all Texans. As the world of business becomes more global, complex, and mobile, employees will need to hone their skills through education and training. This will be necessary not only to job performance, but also to adaptability to a changing environment. Education is also a major factor in the domestic productivity growth which is essential to sustainable prosperity. On a personal level, I have five children at, near, or just beyond college age. I know how hard it is at times for them to understand the lifelong consequences of their educational choices. I also know how expensive it is to foot the bill for college. The crisis in higher education affordability is one of the biggest challenges to our long-term economic performance as a state.
A great resource is www.CollegeforTexans.com. A project of the Higher Education Coordinating Board, this website is loaded with information about financial aid, the application process, and other important topics. Did you know, for example, that $2 billion is available every year to help Texans attend college?
Finding ways to keep more kids in high school and encourage them to go on to college is integral to the future vitality of the Texas economy. It’s also crucial to the quality of life of Texans. These are Herculean tasks, but as the numbers demonstrate, it’s well worth the effort.
posted @ 01:06 PM CST [link]
Friday, February 13, 2004
Fields to Neighborhoods As I travel across the state, I am often struck by the sheer volume of homebuilding going on in cities large and small. Former pastures have grown into neighborhoods at amazing rates. While the population of Texas is rising (both due to natural growth and through in-migration), that is only one trend among several driving the expansion in our demand for (and supply of) housing.
Demand for housing boils down to affordability. Texas’ affordability (a measure of the ratio of an area’s median household income to the median price of a home) varies across the state; however, in most areas, households with average incomes can afford average-priced homes. Other states face far less favorable ratios, with land constraints, regulatory patterns, and other issues contributing to pricey housing.
There are two essential factors that determine whether a household can afford a house: income and cost. For a home (a first home, a newer home, a larger home, or a more expensive home) to become a reality, available income must exceed the cost. Let’s first look at incomes.
The lion’s share of most households’ incomes arrives in the form of payments from an employer (or draws if self employed). The ongoing recovery has encouraged stability in wages and has helped alleviate fears of further job cuts. In fact, many companies are beginning to add positions and pay out better bonuses and wages than in the recent past. Given these factors, many families are more willing to start the home-buying process.
As part of the purchase process, families must typically locate mortgage financing. In this regard, there are provisions of the Fair Credit Reporting Act and other trends in the sharing of consumer information that are beneficial. Essentially, the availability of more and better credit-related information enhances the probability that a loan officer will approve a mortgage loan application.
On the other side—the cost side—the price of the house is, of course, the primary determinant of the total mortgage payment. However, the historic lows we’re seeing in interest rates reduce the monthly outlay; they also encourage some people to move ahead with a purchase in order to take advantage of these savings. In addition, we’re working through insurance-related issues (such as problems dealing with black mold claims) and rates are stabilizing as insurers re-enter the market.
Another trend helping homebuyers is the advent of creative financing methods. These have been around for some time, but are now more favorable and available than ever. You can find mortgages where all you pay is interest for some period of time, for example. There are also ways to avoid double closings when you build a new home. Interest-only mortgages greatly reduce monthly payments, and can work very well for homebuyers with the discipline to put away money for future principle reductions.
I was a rather young economist during the real estate boom and bust of the 1970s and 1980s. (Certainly, I had more hair.) I saw first hand the excessive overbuilding and the later debacle in the housing market. This time, there’s no resemblance. The other was a tax-policy, oil-boom driven anomaly. By contrast, the current situation is characterized by sustainable growth, favorable financing, natural population expansion, and an economic recovery. There will, of course, be real estate cycles, but there is no reason to expect a crash.
While there is still a need for improvement in the area of ensuring that all families desirous of a house can afford one, things are going in the right direction. In Texas, the combination of good things on both the income and cost sides will keep the conversion of fields to neighborhoods going for years to come.
posted @ 08:16 AM CST [link]
Friday, February 6, 2004
Job Search It is hard to imagine that economic statistics could ever be anything but boring (unless you happen to be a nerd geek like me), and I frequently recommend them to friends as a guaranteed cure for insomnia (my resume also works well). Once in a great while, however, one comes along that is worthy of mention outside the arcane world of the obsessed. At present, there is a modestly fascinating phenomenon occurring in—of all things—employment.
Much has been written (by me and others) over the past couple of years about our “jobless” recovery. Indeed, it is only in recent months that the labor market has shown signs of life. By one measure, however, the world looks very different.
When we measure employment each month in the US, we actually do it twice. In one survey, the Bureau of Labor Statistics (BLS) asks businesses “How many folks are working for you?” This one is called the “Establishment Survey.” When we talk about job growth (or lack thereof), those are the numbers we use. From the beginning of the current expansion in late 2001 through the end of last year, this measure shows a net loss of about 70,000 jobs (hence, the name “jobless recovery”).
In the other survey, the BLS asks people at home “How many people that live here are working?” That one is known as the “Household Survey,” and, since it can also tell us how many are not working, it is the basis for the widely watched unemployment rate. By this measure, there has actually been a gain of some two million jobs over the past couple of years.
It is not uncommon for these two measures to differ over time for understandable reasons. For example, moonlighters can be counted twice in the Establishment Survey. Farmers don’t get picked up at all. The Household Survey, however, always shows more people working and is generally regarded as the quirkier of the two. Some people don’t want to admit they are out of work; some are tinkering with something that really has no prospect of bringing in any income; and some domestic goddesses feel (quite justifiably, I might add) that they work full-time and then some even though they are technically not part of the workforce (you can tell that guys made up the system and did so in much different times than today).
In any case, they all generally move in the same basic direction over time despite some minor monthly gyrations. It is quite strange for one to show a healthy gain in jobs while the other shows a loss over an extended period of time. This phenomenon suggests to me that we may not be picking up some employment trends in the proper way. For example, the Internet and other gains in infrastructure and communications technology has made it much more practical for both self-employed persons and others to work at home. Thus, the Establishment Survey may be measuring some very legitimate concerns. Similarly, with the increasing trends toward employee leasing, outsourcing, use of temporary workers, and contract labor, the existing measurement instruments may be missing a lot of gainfully employed people. I could go on and on, but you get the picture.
Economists and others have historically used the Establishment Survey to measure “job growth.” At the moment, however, it may be missing more folks than usual and, in our dynamic and ever-changing world, it may be time to revamp the way we go about calculating employment. I am not suggesting that the jobless recovery was a myth; there was well-known and widely-chronicled sluggishness in the labor market while gross domestic product percolated along at a reasonable and at times frenetic pace. I am saying, however, that it may not have been as bad as it seemed. In any case, while I think that both surveys will be pointing upward in the future, we still need to figure out a way to get it right (or, at least, “righter”).
posted @ 07:59 AM CST [link]