Finally, Clear Performance Data for Comparing the World’s Cities

June 24, 2014

By: Neal Pierce
Via: Citiscope

A new international standard known as “ISO 37120” lays out 46 measures that cities on any continent can measure their performance by. (Dabarti CGI/ Shutterstock)

The phrase “ISO standard” is something you might find on the base of a light bulb, under your computer keyboard or in the owner’s manual for your refrigerator. It means that these products are made in a way that complies with international standards of quality and compatibility. There are ISOs for financial management, electrical engineering, chemical technology—you name it.

But now, the first-ever set of ISO standards for world cities has been created. And the implications are dramatic. City policymakers will have objective standards to compare their services and performance with other cities around the world. And just as significant, the people of cities—civic, business organizations, ordinary citizens—will be able to access the same new global standards. This means they can ask city leaders tough questions, stoking debate about their own city’s performance on the basis of verified measures ranging from education to public safety to water and sanitation.

The late May start-up list of city indicators by the Geneva-based International Organization for Standardization seems, at a glance, straightforward enough. What’s the particulate matter in a city’s air? Debt service as a percentage of the city’s own revenue? Average life expectancy? Green area per 100,000 residents? The percentage of the city population with regular solid waste collection? The share of the city population that lives in slums?

But many cities, up to now, haven’t recorded data on all those indicators. Or if they did, they were inconsistent in their precise definitions, making it difficult to make apples-to-apples comparisons of cities across continents and diverse societies. Many organizations, in independent media and special interest groups, issue rankings of cities. But in 2008, when the Global Cities Indicators Facility at the University of Toronto compared rankings that had been applied to seven prominent world cities, it turned out that only six of the 1,200 indicators being applied were exactly the same.

Now, cities everywhere will have an internationally agreed upon set of standards indicating data that should be collected, and the definitions and criteria to use in collecting it. They won’t be legally required to do so, but they’re likely to be under pressure from citizen, business, academic and other groups insisting they use the ISO standards so that their performance can be benchmarked clearly against peer cities, both in-country and—in today’s increasingly globalized economy—across the globe.

“It’s a potential game changer for world cities and everyone who works for cities, for journalists evaluating city performance, for the World Bank in determining grants and more,” notes Dan Hoornweg, a former World Bank official, professor at the University of Toronto and an early proponent of world city standard setting.

Global game changer

The goal, say Hoornweg and other supporters, is to encourage higher levels of city service delivery by making the data open and transparent. The need to collect and verify data could improve cities’ credit and bond ratings, appealing to investment decision-makers. Cities that show high performance will be able to argue more forcefully for higher national government assistance and tax sharing.

Conversely, the system could make politically motivated manipulation of data tougher and inefficiencies in city policies and administration more difficult to hide.

The ISO organization is hailing the new standards as a significant breakthrough. Cities, notes ISO Deputy Secretary General Kevin McKinley, share many patterns of behavior “regardless of geography, politics or economic model.” He contends that the new standard, officially known as ISO 37120, establishes a uniform approach to what’s measured and how— “a cornerstone of needed consistency and confidence to improve our cities.” But, he adds, “the standard doesn’t spit out a value judgment on what a particular city should choose as targets. Instead the standard helps provide more consistent expressions of city performance and quality of life.”

Initial city response to the new standards for cities seems positive. “There’s never been a time where it’s been more important to understand how we as a global city compare with other cities,” says Andrew Collinge, assistant director for intelligence and analysis at the Greater London Authority. “We can learn from them and actually use data so we can address challenges facing all of our cities.”

Another city that is excited about the news of the ISO standard is Minna, Nigeria. “To us in Minna, this is an important milestone in city management,” says Abdul Husaini, a town planner and geospatial analyst in Minna. “The presence or absence of information on an indicator is in itself an indication of the adequacy of basic services in a city.”

Rotterdam, notes Nico Tillie, an indicators expert there, strives to be an attractive, resilient, economically successful city. But, he adds, “How do we perform? If we want to improve, we need to know why we rank 3 or 50. If you can’t measure it, you can’t manage it.” But in a study Tillie worked on with the Delft University of Technology, the researchers found that verified and standardized third-party data not only was missing from the rankings but in many cases the entire ranking process was performed in “a black box” without clear definitions. This made it totally impossible to analyze the data outcomes.

New World Council on City Data

London, Minna and Rotterdam, plus a dozen other cities including Shanghai, Dubai, Chicago, Johannesburg and Buenos Aires, are inaugural members of a body called the World Council on City Data. Launched at a Global Cities Summit in Toronto in late May, the council will play the important role of verifying that cities are collecting the right data the right way. The council intends to be “a global hub for cities, international organizations, corporations and academia,” sharing ideas for city performance improvement broadly.

The path to an ISO standard aimed at broad global city buy-in was not an easy one. Supporters acknowledge a heroine behind the story—Patricia McCarney, director of the University of Toronto’s Global Cities Indicators Facility, who has made creation of good global data on cities an all-consuming goal for close to a decade.

Patricia McCarney, director of the University of Toronto’s Global Cities Indicators Facility, who has made creation of good global data on cities an all-consuming goal for close to a decade.

The project began in 2008, McCarney relates, when Hoornweg and his World Bank colleagues approached her to start working on a uniform set of indicators for cities. Nine pilot cities, including Bogotá, Toronto, São Paulo and Belo Horizonte helped to devise a list of some 115 initial indicators. Over time the number of participating cities would rise to 258 across 82 countries.

But as McCarney and her allies pushed forward on the project, it became clear that independent audits including ISO-like third-party verification of the data would be critical to its acceptance. ISO central in Geneva was approached in 2011 and initially seemed lukewarm to the idea. But as French, Japanese and Canadian bodies showed interest in some form of city standards management, that changed.

A technical committee was formed. With McCarney’s institute acting as a de facto secretariat, meetings were held in urban centers from Japan to France and Britain to Canada. Comments were received from cities worldwide— “fantastic for us, really strengthening the set of indicators we started with back in 2008,” notes McCarney. The analysis winnowed down and rejuggled the list to 100 candidate indicators. Finally, 46 (see them all here) were selected as well-tested core measures that cities must report to prove they’re in conformance with the new ISO 37210 standard.

“Now Geneva is fully behind us,” says McCarney. “Usually an ISO process takes six years. We did it in two. They took a big leap of faith with us.”

And, she notes, there’s been a big change in cities’ attitudes about releasing data on their performance indicators. “In the early days when we were testing and fine-tuning,” she notes, “cities were willing to give us data confidentially and share it with other cities. But they were very uncomfortable releasing it to the public.” But, she notes, cities seem more comfortable opening up this sort of data now and making it public, as it will be under the ISO standard.

Plus, McCarney observes, “researchers in universities and international agencies can now access the data—for analytics, for visualization, for performance analysis,” in a way never before possible.

Looking forward, the ISO city crafters are considering new measures focused on risk and resilience for cities. Indicators might include such things as the presence of early warning systems focused on such threats as stormwater surges and tornados, or seismic preparedness in cities prone to earthquakes. Both for the initial and added measures, auditors in each case will check the data to ensure that the definitions and methodologies in the formal ISO 37210 standard are being followed.

Special cases

Most of the new city ISO standards apply all across the globe—for example the number of police officers or firefighters per 100,000 population are equally applicable in a Toronto or a Bogotá. But developed-world city standards, for such services as fresh water supply and sanitation services, are tough for developing-world cities of Asia, Africa and Latin America that have fast-filling slums triggered by cascading levels of immigration from poor rural migrants.

European and North American cities did, McCarney notes, “have a strong voice” in planning sessions for the new standards. But “we were very careful,” she asserts, to include special recognition of the conditions developing-world cities face in many of their poorest neighborhoods— “what’s possible for them, what they can report on.”

Another concept the process is encouraging is a focus on “peer” cities. London, New York and Tokyo, for example, may be in a class to themselves, notwithstanding their geographic separation. Toronto’s best global match may be halfway across the globe in Melbourne.

And the expanding data collection possibilities may, over time, identify more global peers—and exchanges—between cities. Potential advocates range from business and citizen groups within individual cities to globally active consulting groups and NGOs, all debating and pushing for expanded standards that correspond to their missions.

“With the initial ISOs, the city-standards issue has made a big leap forward,” says Hoornweg. “But now that the process is launched, it’s sure to spread widely.”

MORE: Here are the 46 performance measures the world’s cities will be judged by.

Small Business Owners Grade Their States for Business Friendliness: Utah and Idaho Rate the Highest; California and Illinois Among Least Friendly to Small Businesses

June 12, 2014

By: Dane Stangler
Via: Kauffman Foundation

Click for interactive version.

SAN FRANCISCO, Calif. — June 10, 2014 –, in partnership with the Ewing Marion Kauffman Foundation, today released the third annual Small Business Friendliness Survey showing that small business owners in Utah, Idaho, Texas, Virginia and Louisiana gave their states the highest rating for friendliness to small business.

Small businesses in Colorado Springs, Boise and Houston gave their cities the highest ratings.

In contrast, small business owners gave California, Rhode Island and Illinois an “F,” while Connecticut and New Jersey both earned a “D” grade.

Sacramento, Providence and Buffalo were the survey’s worst-performing cities as rated by their small business owners.

More than 12,000 entrepreneurs nationwide participated in this year’s survey. The Small Business Friendliness Survey is the largest survey of its kind and is the only survey to obtain data from an extensive, nationwide sample of small business owners to determine the most business-friendly locations. The survey ranked 82 cities and most states on what makes a positive environment for small businesses.

“Creating a business climate that is welcoming to small, dynamic businesses is more important than ever, but rarely does anyone ask small business owners themselves about what makes for a pro-entrepreneur environment,” says Jon Lieber, chief economist of “Thousands of small business owners across the country told us that the keys to a pro-growth environment are ease of compliance with tax and regulatory systems and helpful training programs.”

Some of the survey’s key findings include:

  1. Small businesses in Texas, Utah and Idaho have rated their states in the top five every year this survey has run, while California and Rhode Island have been rated in the bottom five every year.

  2. The friendliness of professional licensing requirements was the most important regulatory issue in determining a state’s overall friendliness to small businesses. Closely following licensing requirements was the ease of filing taxes.

  3. Once again, tax rates were a less important factor than the ease of regulatory compliance in determining the overall friendliness score of a jurisdiction. Two-thirds of respondents said they paid their “fair share” of taxes – that is, they felt like they were neither under-paying nor over-paying.

  4. Small business owners who were aware of training programs offered by their government were significantly more likely to say their government was friendly to small business than those who weren’t. Awareness of training programs raised overall scores by 10 percent, while 76 percent of those who said they were aware of government-sponsored training programs for business owners ranked their local government as “somewhat” or “very supportive,” and only 8 percent of these said local government was unsupportive.

  5. Only 19 percent of respondents said they were prepared for implementation of the Affordable Care Act.

  6. Female entrepreneurs were more likely than male entrepreneurs to say that their state government was friendly to small business, while male entrepreneurs were more likely than female entrepreneurs to have a positive view on the outlook of their state economy.

  7. Kentucky’s grade was this year’s most improved, jumping from a B- to an A.

“It is critical to the economic health of every city and state to create an entrepreneur-friendly environment,” said Dane Stangler, vice president of Research and Policy at the Kauffman Foundation. “Policymakers put themselves in the best position to encourage sustainable growth and long-term prosperity by listening to the voices of small business owners themselves.”

Complete results can be seen here and include full sets of rankings and dozens of easily searchable quotes from small businesses nationwide. Each state and city also has its own data visualization showing its detailed survey results.

Survey methodology surveyed 12,632 small businesses across the United States. The survey asked questions about the friendliness of states and cities toward small business, such as:

  1. “In general, how would you rate your state’s support of small business owners?”
  2. “Would you discourage or encourage someone from starting a new business where you live?” and
  3. “Do you think you pay your fair share of taxes?” and the Kauffman Foundation evaluated states and cities against one another along more than a dozen metrics. The full methodology paper can be found here.

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Economics Of The 2014 World Cup

June 9, 2014

By: Jon Roberts, Principal & Managing Director, TIP Strategies

"Outubro, 2012" by copagov via Flickr (Arena Amazonia, Manaus)

There will be those who say the only thing more boring than soccer is the economics of soccer. I am not one of them. I do, however, have friends and acquaintances who are very much of that opinion. To disabuse them of their benighted view, I’d like to tie Brazil’s current political crisis to more general questions of economic development. What does it mean to spend many billions (yes, billions) of dollars supporting the construction of stadiums? What does it mean to provide subsidies to private corporations or to international governing bodies to host large sporting events? These questions are also ours here in the US. We publicly subsidize everything from the Super Bowl to minor league ball parks to NASCAR tracks. We do this in the belief that there will be a return on investment. Are we justified in this view?

If economic development issues are not complicated enough, I have also indulged my desire to weigh in on the World Cup itself, who will win, and why. Fans of the game can add one more voice to the countless prognosticators and pundits who think they know who will win the World Cup by reading my post on the matter here.

Beyond the spotlight a single World Cup provides lies the larger public policy question of whether massive subsidies for sports are necessary—or even desirable. This post uses the World Cup stage as an opportunity to talk about the economics of sports and the peculiarities of soccer generally.

Brazilians ask: Why did we decide to host this event?

The World Cup begins this week. Thirty-two nations are participating, and a total of sixty-four games will be played in 12 stadiums. Some of these facilities are brand new and purpose-built. All have been constructed or improved through public financing of the Brazilian government. The most remarkable of these is in Manaus, a city at the edge of the Amazon rain forest. There are no viable roads in. Construction materials were sent by barge. Visitors to the four matches will fly in, though there is a river boat option as well. Yes, four matches at a stadium designed for 42,000 fans. And after the matches are played? No one knows. There is no local team that can justify a stadium of this scale. More broadly, the cost is well over $3 billion for all of the stadiums.The entire budget deficit of the country could have been offset by that spending. And there is no discernible ROI for the stadium development. What’s more, soccer’s international governing body (FIFA) will take all of the gate receipts and broadcast rights—one hundred percent.

So with no direct ROI, what justifies that spending? The most common answer, one familiar to cities who have vied for the Olympics (or sports venues or events generally), is that they generate welcome publicity for the host community. Never mind that no credible study supports the perceived benefits. Wh, then, you may ask, do communities continue down that path? There are two answers to that question, neither of which is very encouraging. The first is that officials are corrupt. We have ample evidence of that. FIFA itself is rife with kick-backs and bribery. Sepp Blatter, the head of FIFA, is deeply complicit in “selling” the Cup to the highest bidder. The 2022 Cup is scheduled to be held in Qatar, which would force players into matches where the temperature can reach 140 degrees. Moving the Cup from the summer to the winter would disrupt the professional league matches, so that’s not a good idea. And did I mention that the next World Cup will be held in Russia?

There’s corruption, and then there’s a simple case of being misguided. In 2007, the former Minister of Sport, Orlando Silva, said that no public money would be required for the construction (and improvement) of stadiums for the 2014 World Cup. More recently, Silva’s replacement, Aldo Rebelo, dismissed the notion that the new stadiums would become white elephants. In fact, there is every reason to think that neither the new construction nor the improvements to existing stadiums will ever justify the expenditures. The experience after the World Cup in South Africa strongly suggests that not only is there no ROI, but that the host nation is saddled with additional debt. This was Greece’s experience after the Olympics, and almost certainly played a part in that nation’s debt crisis.

Brazil was the only nation to bid on the 2014 World Cup. Since then, support for the Cup among Brazilians has steadily declined—from over 70% to under 30%. It may sink even further. Brazil’s president, Dilma Rousseff, is a vocal defender of the Cup, but she is struggling with the strikes and protests that have engulfed the nation. Even high profile former soccer stars are questioning the expense. Street protests made the news early this year and can be expected to play to the international news media for the next several weeks. The complaint is that money spent on stadiums should have gone to the country’s “Third World” infrastructure. It’s an argument that deserves more than passing consideration.

It is entirely possible the relationship between major governing bodies (FIFA, the IOC, and even the NFL, with its non-profit status) and host cities and nations will have to change. If countries and cities quit bidding on events, or subsidizing stadiums, sports won’t go away. TV coverage won’t stop, and there will still be breath-taking moments for fans across the country and around the world.

Why the US should care about the Cup

Around the globe, nations are waiting for the first game between Brazil and Croatia with bated breath. But Americans will, as they always do, wonder what all the fuss is about. There are obvious reasons for this: we already have a game called football and it’s, well…different. Beyond that, we have a national team that rarely wins and pretty much struggles against all opponents.

Soccer is a game we don’t understand and we play poorly, but there are other reasons to be skeptical of the hoopla. In addition to the massive capital outlay to host the event, this World Cup carries a load of scandals that rival the Lance Armstrong era in cycling. Are the stadiums actually prepared for the tens of thousands of fans who will occupy them? Are the police ready for the tens of thousands of citizens who will occupy the streets? And that’s not all. Accusations of match-fixing associated with illegal international betting are hitting the presses, just as teams are leaving for Brazil. Then there is the systemic corruption of the sport’s governing body, FIFA.

How, you may wonder, can we be enthusiastic about a quadrennial event the host nation no longer cares to have, is tainted by match fixing, and is overseen by an organization that no fan of the game will defend? And oh yes, an underperforming national team, sub-par officiating, and players that may fall over and writhe in agony when an opponent so much as breathes on them?

Despite all this, soccer’s influence in the US continues to grow. Close to a million Americans may now watch a high-profile English Premiership match. Hundreds of thousands more carefully track the fortune of national teams from Germany, Italy, Nigeria, and, of course, Mexico. Soccer is rapidly becoming our “fourth” sport, ahead of hockey, and it is beginning to rival baseball in popularity. It’s no great stretch to imagine soccer joining basketball and football as one of the big three by the time of the 2022 World Cup in Qatar (or the US, if the scandal that accompanied the selection of Qatar results in a change of venue). In short, soccer is big in this country, and the World Cup will command attention for three glorious weeks. Despite the riots in the streets of Rio and Sao Paulo, despite the bad officiating and the prima donna antics of some players, despite all this, the tournament will captivate a global audience of which the US, for better and worse, will be a part.

What soccer has, and what constitutes a huge part of its appeal, is the flow of the game. In the US, one could argue that sports have lost that beauty. Our major sports are so over-managed that actual playing time is an absurdly small percentage of the coverage. I timed the fourth quarter of the recent Super Bowl from when the ball was snapped to when the play was blown dead. There were less than eight minutes of action in a quarter of play that seemed to go for an eternity. Basketball has begun to follow a similar pattern, with an increasing number of mind-numbing time outs. And baseball, well let’s not even go there. In American sports, players don’t so much play the game as follow the instructions of the coaches. In soccer, there are no time outs. You play for 45 minutes, then you take a break, then you play for another 45 minutes. There are only a total of three substitutions allowed. If you required more than that, due to injury, you would have to play a man down. All this and the players run an average of six miles during the match, often at sprint speeds. Flow is everything—or the ability to disrupt the flow. (Watch Italy.) But in any case, decisions are made and executed by the players rather than managed by the front office’s or television’s demands.

The US can learn to love soccer because it is a beautiful game. People can love it even if their interest in sports isn’t all that great in the first place. Why? Because the passion that drives the 32 nations who participate is unlike that of any other sport, or any other event. While we do watch the Olympics, the intensity has never equaled that of soccer. US sports certainly generate enthusiasm, but soccer more closely resembles collegiate athletics than it does our professional sports. There is also the separate question of how insular our big sports are. Yes, baseball is international, but we continue to host the “World” series even though we won’t allow other countries to participate (excepting Canada). American football is little more than a curiosity outside of North America. Basketball is the notable exception, but it pales in comparison with soccer.

Soccer is wonderful for the non-sports enthusiast, if for no other reason than it provides an alternative to Ambrose Bierce’s chillingly funny adage: “War is God’s way of teaching Americans geography.” Soccer, it turns out, can also teach Americans about geography. We can learn to appreciate that Bosnia and Herzegovina is a single small country in what was the former Yugoslavia (and the former Austro-Hungarian Empire), that many great Belgian players have more than a passing affinity for the Congo, and that England is, well, just England and that Scotland and Wales and Northern Ireland all have their own soccer teams (none of which qualified for this Cup).

What does this all mean for economic development?

There are lessons to be learned from Brazil’s misadventures with the World Cup. Yes, we want the Cup to be a success, but if we fail to understand the consequences of bad decisions, we will certainly repeat them ourselves:

  • Do not assume that public subsidies for facilities will yield measurable benefits.
  • Question assumptions about the promotional value of sports generally.
  • Acknowledge that governing organizations (such as FIFA and the NFL) are profit driven even if they are “non-profit.” Their profits are simply allocated differently
  • When working with private developers, ensure that the stadiums are integrated into the fabric of the community (Portland’s Providence Park soccer stadium).
  • Promote and support sports that the community can participate in, not just as spectators but as participants and investors (youth organizations, for example).
  • Stand firm in the face of pressure from professional teams who will claim to “put you on the map.” You are already on the map. Your economic development success will not be the result of sports franchises. Here in Austin we have no professional sports teams (and did I mention that we lead the nation in job growth)?

The World Cup is a unique event. Its viewership (and the passion it generates) is second to none. Being the host nation, however, is not a reason to cave to the demands of an overreaching governing body, and to ignore the greater needs of the country. If we think our sport is so great, we’ll find a way to support it without bankrupting a country.

How The Recession Reshaped The Economy, In 255 Charts

June 7, 2014

By: Jeremy Ashkenas and Alicia Parlapiano
Via: The New York Times

Five years since the end of the Great Recession, the economy has finally regained the nine million jobs it lost. But not all industries recovered equally. Each line below shows how the number of jobs has changed for a particular industry over the past 10 years. Scroll down to see how the recession reshaped the nation’s job market, industry by industry.

A Mixed Recovery

Industries in the health care and energy sectors grew substantially over the last five years, while jobs in real estate and construction continued to shrink. Industries that paid in the middle of the wage spectrum generally lost jobs. And while the economy overall is back to its pre-recession level, it hasn’t added the roughly 10 million jobs needed to keep up with growth in the working-age population.

More Bad — and Good — Jobs

Americans often lament the quality of jobs today, and some low-paying industries — like fast food, where annual average pay is less than $22,000 — are growing. But so are some high-paying sectors, such as consulting, computing and biotech.

The Medical Economy

The middle-wage industries that have added jobs are overwhelmingly in health care. Labs, home-care providers and dentist offices all pay between $18 and $29 an hour on average — and all have grown. But these gains have not offset losses in other middle-wage industries, such as airlines and construction.

A Long Housing Bust

Home prices have rebounded from their crisis lows, but home building remains at historically low levels. Overall, industries connected with construction and real estate have lost 19 percent of their jobs since the recession began — hundreds of thousands more than health care has added.

Made in America

Manufacturing has bounced back somewhat, adding 363,000 jobs since the recession ended. Labor-intensive industries that face global competition, like clothing production, fared worst, while higher-paying jobs in export-heavy industries, such as aerospace and medical equipment, have done better.

Black Gold Rush

While it took a hit from the recession, oil and gas extraction — and its associated jobs — have been booming, transforming economies in resource-rich places like West Texas and North Dakota. Many of these industries have average salaries above $70,000.

Digital Revolution

Bookstores, printers and publishers of newspapers and magazines have lost a combined 400,000 jobs since the recession began. Internet publishers — including web-search firms — offset only a fraction of the losses, adding 76,000 jobs. Electronic shopping and auctions made up the fastest-growing industry, tripling in employment in 10 years.

Grooming Boom

In the midst of recession, Americans held on to simple luxuries — for themselves and their pets. Nail salons, which made up one of the most resilient industries, were closely rivaled by pet boarding, grooming and training.

For interactive versions of the above and additional charts, view the full story here.

How Student Debt May Be Stunting The Economy

May 23, 2014

By: Neil Irwin
Via: The Upshot

Is student loan debt holding back the economy? There’s some new evidence that the answer may indeed be a big “yes.”

In the past, it was easy to ignore the role that student borrowing might play in the overall economy. A decade ago, there was only about $300 billion in such loans outstanding, and even now the $1.1 trillion in student loan debt is dwarfed by mortgage debt. But people who borrow money to pay for their education can’t simply walk away without paying, unlike with mortgages, car loans or credit cards; there is no equivalent of foreclosure, and student loan debts aren’t cleared by bankruptcy.

That may all be great from a lender’s point of view. But there’s a growing body of evidence that rising levels of student loan debt are restraining the ability of young adults to enter the “grown-up” economy — to buy a car and to buy a home and start filling it with big stuff.

While the overall level of student debt may not measure up to that of mortgages — $8.2 trillion — it is highly concentrated among a small slice of people — those in their 20s and 30s — who are the engines of a great deal of economic activity. One of the crucial reasons the housing market has not expanded enough to support robust economic growth is that young adults are not setting up their own households at anywhere near the historical norm.

Might higher student loan debt burdens be an important reason? After all, a person with monthly student loan payments of $300 — about what you would expect for the average new loan balance of $29,400 at government-subsidized interest rates — is going to be more inclined to bunk with roommates or Mom and Dad.

One more solid piece of evidence for this theory is contained in the latest report on household debt issued by the New York Fed, and an accompanying post on its Liberty Street Economics blog.

In the not-too-distant past — until just before the 2008 financial crisis, to be precise — around 30 percent of 27- to 30-year-olds had debt issued backed by a home. Even more interesting, 33 percent of the people in that age bracket also had student loan debt.

But since then, the proportion of 27- to 30-year-olds with mortgages has plummeted to around 22 percent, according to the New York Fed data, which is also consistent with the trends in homeownership identified by the Census Bureau and other data sources.

Here’s what’s most interesting, though. The proportion of adults in that age bracket who have a mortgage has fallen most sharply among those who have student loans as well. Unlike in the past, when they tended to be more likely to have mortgages (perhaps because of better credit, or more inclination to take out loans), they now have mortgages at a lower rate than those with no student debt.

A similar story holds with auto loans. In 2008, 37.6 percent of 25-year-olds with student loan also had an auto loan, but by last year that had fallen to 31.4 percent.

There is some good news in the New York Fed report; young adults had somewhat better credit risk scores in 2013 than in 2012.

And there could be more to the weak housing market than just student debt overhang. The researchers, Meta Brown, Sydnee Caldwell and Sarah Sutherland, also mention the possibilities of limited access to credit and a possible shift in young adults’ preferences away from home buying.

But the evidence certainly fits an explanation of higher student debt levels as a significant factor standing in the way of a stronger recovery.

SXSW Interactive: Through the Economic Development Looking Glass

April 11, 2014

By: Jon Roberts, Principal & Managing Director, TIP Strategies

Photo Credit: "SXSW Day 5" by Flickr user Tony Carr

March 11, 2014, marked the last day of this year’s SXSW Interactive. Austin’s premier tech event has grown steadily since its inception in 1994. One notable mark of its reach, that may be overlooked by the standard measure of badges sold and tourism dollars generated, is the heightened presence of economic development organizations at the festival.

The industry’s interest in SXSW was apparent from the number of US states and cities, as well as foreign cities, regions, and countries, that set up shop at SXSW, all vying for one of the most desired of economic development targets: tech start-ups and young entrepreneurs. No doubt about it, this tactic represents a sea change in what counts as credible economic development. Where in the past the profession’s holy grail was the relocation of a major manufacturing company, we now see a shift to technology and high growth start-ups (though manufacturing is still seen as the primary objective in many parts of the US). We’ll leave for another time a more thorough discussion of how successful these efforts are. (The short answer: it varies widely.) At one end of the scale is the possibility that bringing companies to SXSW will only speed their exodus from less tech-savvy regions to (you guessed it) Austin. At the other end is the ability to connect with and recruit entrepreneurs to new markets. My panel, “Start-up Grind: What Makes Austin a Startup Hub,” touched on these issues, as well as the question of what made Austin successful in the tech space.

Clearly, industry recruitment and expansion is not the stated objective of SXSW Interactive, nor is it likely to be the primary draw for most participants. As suggested by their mission statement—encapsulated in three values: creativity, innovation and inspiration—SXSW Interactive is about stepping outside your intellectual comfort zone. At a minimum, spending time in the presence of so many creative companies and individuals gives you an opportunity to rethink assumptions behind your business—even, and especially, at a fundamental level. From an economic development perspective, for example, this rethinking of assumptions raises the question of whether measuring success by jobs created is the best way to grow our economy. Abandoning this gold standard is, in some ways, analogous to growing a business without worrying about profitability. It’s a radical notion, and one that, on the face of it, makes no sense. Just don’t tell that to Amazon or to Facebook.

But testing one’s assumptions is not the whole of the SXSW experience. The real power of SXSW lies in what Tony Hsieh, of Zappos fame, calls collisions—connections that occur spontaneously and bring together individuals and companies that might never have connected before. The sheer number and variety of panels, speakers, and registrants makes this goal relatively easy to accomplish. It can be as simple as colliding with the AT&T team during the Ping-Pong tournament (and, in my case, losing to them) then learning what AT&T is doing, what their talent strategy is, and what their new product line will look like. If I’m busy “recruiting companies,” I miss out on these chance encounters; my agenda gets in the way of making real connections. Sometimes an indirect approach is the surer path towards one’s goal.

And even if you weren’t able to experience the randomness of SXSW, you couldn’t fail to miss this year’s driving theme. It was already apparent on the first day and gathered steam throughout the event: Internet privacy. First Julian Assange, via Skype from the Ecuadorian embassy in London, then Edward Snowden from an undisclosed location in Russia (routed through multiple ISPs). Whatever one’s political attitude towards Assange and Snowden, their message is coming through loud and clear and is being fully embraced by the tech crowd: privacy matters.

The question of Internet privacy has numerous dimensions. It is not exclusively governmental. It extends to transactional privacy with corporations and to the question of who owns our personal data (our Internet identity). The default answer should not be that this information is “owned” by corporations or the government (or health care providers). We—it is being argued—have an absolute right to our personal data and we ought not to be giving it up (or having it taken from us) without our informed consent. This, of course, is a discussion that requires a much larger platform. At a minimum, however, SXSW is signaling a shift in how we think about our use of the Internet. I’ll venture to say it signals a sea change, one whose implications may be profound.

Among the immediate insights that arise from taking a privacy perspective on data are the following:

  1. Bitcoin is interesting far beyond its effects on financial institutions. The way to think about Bitcoin is as a means of ensuring transactional privacy. What could only be done with cash, can now be done electronically with the same advantages – and, as we have discovered, some of the same risks.

  2. Our health records are ours, and do not belong to a health care system or the government. The realization that our health records tell our personal story and that their ultimate value belongs to us and needs to be managed by us is still a startling fact.

  3. Every online transaction, from simple browsing to Internet (and credit card) purchases, reveals information about us that we have the right to control. Commercial transactions, by definition, are between at least two parties. E-commerce exponentially increases the parties involved in each transaction. Data collected during the initial transaction becomes a commodity in itself, which can be shared and sold many times over. Whether we explicitly agree to this extension of our transactions or not, we are entitled to know which of our data is kept and how it is being used.

These points—and many more like them—could have enormous business and social implications. It is immediately apparent that they relate to one another and foreshadow a changing relationship to the data and metadata that increasingly define who we are. In fact, we can expect to see a new wave of disruptive technologies related to managing our on-line activity. We are already beginning to note distinctions where before there were none: distinctions, for example, between privacy and security, and what it means to own our digital identity. Add in social media (in its multiplicity of forms), and every on-line activity is subject to a major re-thinking.

SXSW has a way of making small ideas very big. This was true of Twitter, and it may be true of a new wave of privacy-related companies. Stay tuned.