How can we improve housing affordability in Ohio?

Last week, the National Low Income Housing Coalition and the Coalition on Homelessness and Housing in Ohio reported that a full-time worker needs to make nearly $21 an hour in Ohio to afford a two-bedroom apartment.

Housing affordability is a growing concern in Ohio. According to Apartment List, the average apartment price has grown from under $800 in 2017 to over $1,100 in 2024. While wages have also risen over this time period, this is still increasing costs for households across the state.

So what can we do about rising rents? Policymakers have options to address housing prices for residents.

Zoning Reform

The number one strategy for keeping the cost of housing under control is reforming zoning. Many communities across Ohio still zone specifically for single-family homes, even when people would be happy to move to a neighborhood where duplexes or small apartment buildings are available. This creates a serious barrier to entry for people entering a given neighborhood and can create economic gates for entry.

Reducing barriers to constructing the range of housing residents desire can ease the pressure on the market for housing and reduce the rapid rise in cost of housing throughout the state.

Housing Subsidies

A direct way to help people afford housing is to provide payment assistance to people for rent. This can even be deployed with programs like the Families Flourish (previously “Move to Prosper”) program that provide assistance for people to move to new neighborhoods with more assets. This demand-side intervention will help close the gap between the cost of housing and the ability to pay of renters by providing extra resources to families to pay rent.

Affordable Housing Development

Another approach is for state and local governments to put the thumb on the scale of the market to spur more development of affordable housing, either through tax incentives, subsidies, or some other intervention. This can increase the supply of affordable housing by reducing the cost of constructing it. Developers under this model could be traditional, non-profit, or even public sector. 

While this approach does not provide the family and development flexibility of zoning reforms or housing subsidies, it can be a third-best policy intervention that can sometimes be more feasible than these more straightforward approaches due to governments’ comfort with providing subsidies through tax incentives

Cash Assistance

The easiest way to fight poverty is to give people money. Cash assistance works the same way a housing subsidy does, but without the strings attached. Maybe rent is paid for the month but a family is running out of baby formula. Maybe a family needs to buy a car to get to work to be able to pay rent. Maybe a family needs to pay down a credit card to improve their credit to qualify for a mortgage. Cash assistance acknowledges the lack of knowledge we have at the top and trusts families to make choices in their own best interest. This may be what the housing crisis needs most.

While there’s a trope in public policy that there is no silver bullet for a given problem, we have a cylinder full of bullets that can improve housing affordability in Ohio. Now it’s up to policymakers to pull that trigger.

This commentary first appeared in the Ohio Capital Journal.

Ohio economists agree algal blooms hurt the economy

In a survey released this morning by Scioto Analysis, 9 of 13 economists surveyed agreed that harmful algal blooms lead to significant economic loss for Ohio. The other four economists were uncertain, and none of the respondents disagreed. 

A study from 2018 of every state’s Genuine Progress Indicator found that Ohio had the fourth highest cost of water pollution per capita, trailing only New Hampshire, Hawaii, and Delaware. Harmful algal blooms are a significant contributor to Ohio’s poor water quality, especially on the Western shores of Lake Erie near Toledo. 

Will Georgic from Ohio Wesleyan wrote “There is an abundance of peer reviewed evidence indicating that Ohio suffers significant economic losses each year attributable to harmful algal blooms. Harmful algal blooms cause a decrease in property values (Wolf, Gopalakrishnan, and Klaiber 2022), a fall in fishing license sales and associated economic activity (Wolf, Georgic, and Klaiber 2017), and changes in recreational behavior such as swimming at the lake (Wolf et al. 2019; Zhang and Sohngen 2018).”

In recent years, the state has created the H2Ohio program to help address this issue. Scioto Analysis’ evaluation of the voluntary nutrient management plan initiative funded by H2Ohio found that it has so far been very successful in improving Ohio’s water. 

One option the state has yet to implement is a tax on fertilizer use, which 11 of the 13 respondents agreed would be an efficient way to address this issue. As Kevin Egan from the University of Toledo wrote “No industry wants regulations. But efficient regulations are there to limit pollution and fertilizer runoff is polluting our water.” 

The Ohio Economic Experts Panel is a panel of over 40 Ohio Economists from over 30 Ohio higher educational institutions conducted by Scioto Analysis. The goal of the Ohio Economic Experts Panel is to promote better policy outcomes by providing policymakers, policy influencers, and the public with the informed opinions of Ohio’s leading economists. Individual responses to all surveys can be found here. 

How much do you save by pumping your own gas?

I have a lot of family that lives in New Jersey, and every time I go out to visit them I am always surprised to remember that I am not able to use a gas pump by myself. For those of you who have not had the pleasure of driving a car through New Jersey (or until quite recently Oregon), it is against the law to pump your own gas at any station within the state. Each gas station is staffed by attendants whose job is to do this for you. 

The stated reason that New Jersey has a self-service ban is because of fire hazards, an idea that was lobbied by full-service gas station owners in the late 40’s. Today, the majority of New Jersey residents still oppose fully self-service gas stations. A Monmouth University poll found that 55% of residents say that New Jersey being the only state that does not allow self-service is a good thing for the state.

Another question asked by Monmouth University was whether or not New Jerseyans would prefer full self-service if it meant that gas was 15 cents less per gallon compared to full-service. To this, 70% of people said they’d prefer to pump their own gas at lower prices. 

This is interesting because we might expect that full-service gas stations would charge slightly more for their gas than self-service. They have an extra employee to pay, after all. 

According to AAA, New Jersey has the 29th cheapest gasoline prices in the country. How much more would drivers be saving if New Jersey did switch to self-service gas?

According to a new study by Vitor Melo from Clemson University, the answer is about 4.4 cents per gallon. This study used the 2018 partial repeal of Oregon’s self-service ban in order to better understand what the impact on prices was. 

In 2018, Oregon passed a law that lifted the self-service ban in certain counties (with populations below approximately 40,000). This exogenous policy change within the state was perfect for a difference-in-differences analysis.

Gas prices can be a challenging thing to study because they are so unstable, so it is difficult to understand whether they are changing because of a policy or just because they are gas prices. After the partial repeal went into effect however, the change in prices for the affected counties was consistently less than the change in prices for the control counties. 

The total savings over a year for a family with three licensed drivers would likely be about $90. In his conclusion, Melo speculates that this effect might be larger in urban areas where gas stations may have to pay attendants higher wages. 

For policymakers, this is new evidence that helps them better understand the impacts of a self-service ban. While it does support the jobs of gas station attendants, those costs are passed on to all other drivers through the form of higher gas prices. 

Is allowing self-service gas stations worth it for New Jersey? That’s for them to decide. What we do know is that if one day New Jersey lifts its ban, we should expect lower gas prices to follow.

How can we do capital budgeting better in Ohio?

Late last month, the Ohio Senate sent a $4.2 billion capital expenditures budget to the Governor’s office.

Ohio’s capital budget is a budget of long-term investments in projects and infrastructure across the state mostly financed by debt. This year’s version of the capital budget includes $3 billion in new debt taken on by the state to finance these projects.

The capital budget is usually a fairly noncontroversial bill passed every two years. This might be strange for a bill that allocates billions of dollars. But this is because every legislator that votes for this bill can build projects across the state without having to allocate dollars today.

Nonetheless, the capital expenditures budget is not costless. Over time, taxpayers will pay for the capital expenditures budget. Even in the short-term, the state has a constitutionally-mandated cap on debt it can take on. So projects we fund crowd out funding for other projects. There is an opportunity cost to the projects funded by the capital expenditures budget.

So how can we choose the best projects to fund with the capital expenditures budget? Surely there is someone in charge of assessing these projects and seeing which ones will have the largest returns to the residents of the state.

Unfortunately, that is not the case. Capital expenditures are largely a function of the judgements of legislators, uninformed by objective analysis of the economic, equity, or other impacts of these projects.

What would a better system look like?

Ideally, projects selected for a large spending bill like this would have some sort of analysis conducted so policymakers would be informed about the impact of the projects on the public. Having Office of Budget and Management or Legislative Service Commission staff in charge of scoring proposals for fiscal, economic, and equity impact would bring valuable information to the table for policymakers making decisions on these projects.

This would mean a policymaker would be able to assess the economic impact, fiscal impact, equity impact, and other impacts of a potential project and the tradeoffs of one against one another when making a funding decision.

These sorts of decisions could have substantial impacts on the state economy. $4.2 billion is a lot of money. Just a 1% increase in efficiency of these allocations could mean an additional $42 million in state GDP. If this created jobs at the value of the median household income in the state, that would mean an additional 640 jobs created statewide by more efficient allocation of these resources.

More equitable allocation of these dollars could have an even larger impact as dollars could be targeted toward projects that would help people in poverty or who live in struggling parts of the state.

The state government is a powerful economic force. Whenever decisions are made blind, we lose the opportunity to grow our state economy, reduce poverty and inequality, and improve lives for residents of Ohio. More intentional allocation of state resources could have a substantial impact on Ohio’s economy, people in poverty, and the well-being of residents across the state. Understanding what these impacts could be is the first step.

This commentary first appeared in the Ohio Capital Journal.

What does "right-to-work" really do?

In January of last year, we asked our Ohio Economic Experts Panel about what the impacts of a “right-to-work” law might be in Ohio. Right-to-work laws prevent unions or employers from mandating union membership. The tradeoff here is that union bargaining power is reduced in order to lower barriers to entry for new employees. The economists we surveyed thought at the time that right-to-work would likely increase inequality, and they were split on whether or not it would increase overall employment.  

Much of the conversation around right-to-work laws focuses on the employment impact. It’s why advocates use the name right-to-work. However, unions are responsible for negotiating all aspects of a work environment.

That is why a recent paper published in the Journal of Policy Analysis and Management, authors Rania Gihleb, Osea Giuntella, and Jian Qi Tan from the University of Pittsburgh explored the impact that right-to-work laws have on other aspects of employment. 

In particular, this paper focuses on the impact that right-to-work laws have on long working hours. Long working hours have been shown to have negative effects for employees, including increased risk of injury in the workplace. 

By using a stacked difference-in-differences approach, these researchers determined that right-to-work laws led to a 6% increase in the proportion of workers who worked long hours. This effect was concentrated in industries that are characterized by higher unionization rates, such as construction and manufacturing. 

Other industries with lower unionization rates such as education and public administration showed less of an effect on the proportion of workers working long hours, and instead exhibited an increased likelihood of non-standard working hours. 

I found this paper interesting because it is an important reminder of the fact that policy changes can have extremely far reaching impacts. Even though much of the debate on right-to-work is focused on employment and wages, we need to be aware of what the whole range of impacts might be. 

At its core, right-to-work laws are about how much power unions have, and unions are involved in a lot more than just wages and employment. 

I’ve written in the past about the unintended consequences that some policies can have, but I would argue that these types of unintended consequences are not the same. In that previous blog post, I talked about college admissions and employment for people with criminal records. In both cases, there was an unexpected change in behavior that reduced the effectiveness of those policies. 

In the case of right-to-work and its impact on long hours, it is an issue of not looking closely enough at the expected outcomes. A thorough policy analysis will miss an unexpected outcome (this is why program evaluation is important), but it should always let us know about the expected outcomes. If someone took the time to perform a full cost-benefit analysis of right-to-work, we might find lots of impacts on all of the aspects of work that unions are able to negotiate. Policymakers who care about creating the best outcomes for their constituents should care about policy analysis. 

Income inequality in the United States

One thing I find interesting about income inequality is how, unlike other parts of our society that are widely believed to be a flaw, there is a strong economic case to be made that at least some inequality might be healthy. Severe income inequality is unacceptable, but it seems to be alright to allow people to earn different incomes based on different levels of contribution to society. 

Compare this to something like pollution. We still tolerate some amounts of pollution as a byproduct of economic activity, but unlike income inequality, it would still be better if we could eliminate pollution entirely. 

Income inequality is the byproduct of a wage economy where people earn more largely based on how difficult their skills are to replace. There isn’t a technological fix for this like there hopefully is for pollution. 

To quantify income inequality, we most commonly look at an area’s Gini Coefficient, a single number that quantifies how far a community is from perfect income equality. A number close to zero means that a community has very low levels of inequality, and a number close to 100 means that a place has extreme disparities. 

The World Bank calculates that the United States has a Gini Coefficient of 39.8, which is solidly in the top half of countries in terms of inequality. The highest national Gini Coefficient is South Africa’s 63, calculated in 2015. Of the more recently calculated numbers, Brazil has the highest at 52.9.

However, if we want to get a much more detailed picture of what income inequality looks like in this country, we can look at the Gini Index for each state. Below is the data as calculated and published by the Census Bureau.

A few things jump out to me about these results. First, all of these coefficients are higher than those calculated by the World Bank. An important thing to recognize about the Gini Coefficient is that it is sensitive to how it is calculated. In particular, the number of income bins used for each region. 

Another finding is that it appears that a state’s Gini Coefficient is somewhat correlated with their total GDP. It makes some intuitive sense that states with larger nominal economies would have more inequality since we often assume that inequality is a tradeoff that comes with growth. 

The states with low Gini Coefficients are relatively smaller, and have fairly low poverty rates. Alaska is a unique case because despite the fact that a large part of its economy is the result of its oil industry, it repurposes some of that profit to fund a basic income program as a state. 

While the overall gap between states is fairly small (it is roughly equivalent to the gap between the United States and France on the World Bank’s list), it does highlight some important facts about state economies. 

Right now, it appears that in the United States, strong economic growth results in high inequality, but that doesn’t have to be the case. Alaska is a great example of this, where by repurposing the benefits that arise as a result of their economic growth, they can prevent rampant inequality. Inequality is, at least partially, a policy choice.

How did Ohio’s workforce change in 2022?

Last year, I wrote a blog post looking at the most common jobs in each income decile in Ohio, which was inspired by an NPR blog post looking at the most common jobs nationally. I’ve recently been working on another project that had me looking at the most common jobs for low income people in Ohio, so I thought it would be interesting to see how the most common jobs have changed if at all. 

Incomes went up

The first thing I noticed when redoing this analysis was that the incomes were higher in 2022 than they were in 2021 across the board. This is a good sign for workers who were faced with rising prices during 2022. 

Although there is no one definition of the middle class, if we look at the middle deciles we see that the income boundaries moved up by about $3,000 - $4,000. The increase in incomes seems to be larger for people who previously earned more, suggesting that the economic gains were more strongly concentrated at the top. Low-income workers still saw a wage increase, but theirs was much smaller. 

Moderate income mobility within professions remains the norm

In both the 2021 and 2022 data, many of the most common professions appear across multiple income brackets. This is largely because these are the most common occupations, and there are bound to be people earning lots of different salaries within each field, but it tells us that there is room for upward mobility in lots of these occupations as well. 

The most relevant example of this is the laborers / freight, stock, and material movers. Many people working in that profession can have incomes ranging from deep poverty all the way up to the upper middle class.

There are some examples of industries that appear to only employ people at extremely low wages. Many consumer-facing service industry workers appear as common employees only in the lowest income brackets. It seems as though people working in these professions would need to change careers in order to achieve upward economic mobility.

The top-earning professions never earn less

One thing that strikes me about the most common jobs in the highest income brackets is that we don’t see them lower down on this list. In other words, there aren’t really many lawyers and doctors who fail to earn in the highest categories. 

On the other hand, this means that if you don’t already work in one of these professions it is very unlikely that you will find your way into the highest income brackets. There appears to be a cap on upward mobility right near the high end of what most people would consider upper middle class. To break into the upper class, people need to be working in certain fields. 

What occurs to you looking at these data?

Ohio economists tepid on economic impact of income tax repeal

In a survey released this morning by Scioto Analysis, 11 of 19 economists disagreed that Ohio will experience significant economic growth if lawmakers eliminate its state income tax, while four agreed and four were uncertain. There is currently legislation under consideration that would eliminate the state income tax in Ohio, and supporters claim that eliminating the tax will strengthen Ohio’s economy and encourage businesses and workers to move to the state. 

Will Georgic from Ohio Wesleyan wrote “I think that Ohio is more like Kansas than its lawmakers want to admit (and certainly more like Kansas than we are like Florida, Washington, Nevada, or Texas). This experiment did not go well for Kansas.” In contrast, Jonathan Andreas from Bluffton University wrote “Although the Federal income tax is a pretty efficient and very progressive way to generate revenues, state income taxes like Ohio's are relatively regressive and Ohio's is particularly burdensome relative to the smaller amount of revenue given that Ohio has three income tax authorities: state, school district, and local! That is an absurd amount of bureaucracy for a much smaller amount of tax revenues than the Feds get. I'd prefer that we just pay one income tax to the Feds and have states generate revenues primarily through higher land taxes which are more efficient and about as progressive.”

Whether or not removing Ohio’s income tax leads to economic growth, it will present a challenge to lawmakers who have a mandate to keep the state’s budget balanced. 18 of 19 economists surveyed agreed that it will be difficult for lawmakers to keep a balanced budget if they eliminate the income tax. 

As Paul Holmes from Ashland University wrote “Raise taxes elsewhere or reduce spending. Both are difficult.”  Similarly, Bob GItter from Ohio Wesleyan wrote “We cannot eliminate more than 1/3 of our State's General Revenue Fund without dire consequences.”

The Ohio Economic Experts Panel is a panel of over 40 Ohio Economists from over 30 Ohio higher educational institutions conducted by Scioto Analysis. The goal of the Ohio Economic Experts Panel is to promote better policy outcomes by providing policymakers, policy influencers, and the public with the informed opinions of Ohio’s leading economists. Individual responses to all surveys can be found here.

What if Ohio had cleaner rivers, lakes, and streams?

In 2022, a childhood friend of mine was married in Denmark.

I flew out to Copenhagen with a few of my friends and we spent the week seeing a very different life than we were used to living in Ohio.

As someone whose primary mode of transportation is my bicycle, I was of course impressed by the bike infrastructure in the city. It was hard to not appreciate a place where biking is the norm rather than something you get yelled at by motorists for doing.

But what I keep going back to when I think about Copenhagen is the quality of their public waterways. Every day after work there were hundreds of young people hanging out next to the canal, taking dips in the water. We ended up taking a boat around and jumping into the water along the way.

This is a canal that goes right through the city center of Copenhagen. Could you imagine that being the norm in the Cuyahoga, Ohio, or Scioto rivers?

When I asked people about this phenomenon, they told me that the canal did not used to be swimmable. They talked about how a large ballot initiative was passed a decade ago and it was cleaned up so now it is safe enough to swim in. This was a decision made by residents of the city.

Ohio’s waterways are one of its most valuable assets. Before the railways came through, Ohio had one of the most extensive canal systems in the world. Even today, University of Toledo Economist Kevin Egan says that the counties along Lake Erie account for a majority of the state’s tourism industry.

And the state is making strides to improve its water quality. The H2Ohio program is helping curb fertilizer runoff. Ohio State University recently was awarded $4.9 million for water quality initiatives.

It is needed. According to objective measures, Ohio has exceptionally poor water quality. I was in a meeting earlier this year where a data analyst with the Ohio EPA disputed this claim, saying that Ohio looks bad because we do more testing than other states. I asked him for the data to support this claim but he failed to get back to me about it.

So as it stands today, objective measures say Ohio’s water quality is poor and evidence we have about how people use our public waterways suggests people who engage in public recreation think so, too.

But what if that changed? What if our rivers in our cities and in the country were safer places to use for swimming, boating, and fishing? Recent trends in migration within the United States suggest that rural areas that are growing are those with a capacity for recreation. Improving the water quality of Ohio’s streams, rivers, and lakes could be a boon for rural counties looking to figure out what their future economy looks like.

On top of that, there are benefits to clean surface water. Ecological diversity will make our ecosystems more resilient. In an era of changing climate, resiliency matters. And it won’t just be good for plants, animals, and ecosystems: it will be good for people, too.

This commentary first appeared in the Ohio Capital Journal.

How do state taxes relate to state GDP?

One topic I have been interested in for a long time is how different states collect taxes.

We have some great resources in the United States to understand how taxes are collected by state government. With the rich data available to us, someone could build a career studying how taxes are collected by the states.

One important statistic we can use to understand how taxes are collected by U.S. states is the percentage of GDP collected in state taxes.

We can easily calculate this statistic by using data from the U.S. Census of State and Local Finance and the Bureau of Economic Analysis. Below are the 50 states, their 2021 state taxes collected according to the Census of State and Local Fiance, their 2021 GDP according to the Bureau of Economic Analysis, and the ratio of their taxes to state GDP.

A few things stand out to me here. First, the states at the top are not necessarily all Democratically-controlled high-tax states. Arkansas, Mississippi, and West Virginia are also in the top 10 for highest percentage of GDP collected by the state government in the form of taxes. These three states, along with fellow top-10 state New Mexico, are four of the poorest states in the country. This means that the top 10 states are a mixture of blue states with high taxes and high-poverty states.

Looking at the bottom of the list, the trend that stands out to me is the prevalence of states without income taxes. Six of the nine states without income taxes are also in the ten states with the lowest percentage of GDP collected in state taxes. Alaska, which only collected 1.8% of GDP in taxes, the lowest in the United States, has neither state income nor state sales taxes, depending mostly on oil revenues to raise state taxes.

Living in Ohio, I am of course always looking to Ohio to see how it stacks up regionally. Interestingly enough, Ohio ranks lower than all of its neighboring states, only collecting 4.6% of state GDP in taxes. The next closest is Pennsylvania, which collects 5.9% of GDP in taxes. Indiana (6.3%), Kentucky (6.1%), Michigan (6.0%), and West Virginia (7.0%) each collect more. This is especially notable because members of the Ohio General Assembly are working right now to eliminate the state income tax.

What I take away from this quick analysis is that the percentage of taxes collected compared to GDP is a function of both policy and economic landscape. Some states, like Hawaii, Minnesota, and Vermont, have high state taxes that lead to higher collection of taxes compared to state GDP. Others, like Arkansas, Mississippi, and West Virginia, have fewer resources to collect in the first place. There are states like New Mexico that have relatively high taxes and low resources. Then there are states like Alaska, New Hampshire, and Texas, that decline to raise revenue at all.
What this analysis does not tell us, however, is what good policy looks like. Do these taxes drag the economy? Do they reduce poverty and inequality? Do they fund effective and efficient programs? More detailed analysis is necessary to answer all or even any of these questions. But it is valuable to get this sort of big-picture idea to help us understand how states are utilizing their economic resources.