BBA Economic Digest

December 1, 2019

 

The Low Wage Workers 

 

On the face of it, the economy seems to be doing pretty well, with unemployment rates near or at record lows.

 

But that's far from the full story. The truth is there exists a huge segment of workers today who are earning low wages that leaves them and their families at risk.

 

When I speak with economic developers, which I do almost daily, we seldom talk about the working poor. But a new report from Brookings shows that 53 million Americans -- 44 percent of all workers aged 18-64 -- have low-wage jobs.

 

This significant portion of the nation’s labor force is earning median hourly wages of $10.22 and median annual earnings of $17,950. Brookings found that they are not only students, people at the beginning of their careers, or people needing extra spending money.

 

Nearly two-thirds of low-wage workers are in their prime working years of ages 25-54, and much of this group (40 percent) is raising children.

 

For most, their low-wage work is the primary way they support themselves and their families. The authors of the report found that low-wage workers are a racially diverse group, and disproportionately female. 52 percent are white, 25 percent are Hispanic, 15 percent are black, and 5 percent are Asian American.

 

Sixty-three percent of Hispanic workers and 54 percent of black workers earn low wages, compared to 37 percent of white workers and 40 percent of Asian American workers. Black and Hispanic workers earn less than white workers with equivalent educational levels and experience.

 

Additionally, the report finds that 30 percent of low-wage workers live in families earning below 150 percent of the poverty line. These 16 million low-wage workers get by on very low incomes—about $30,000 for a family of three and $36,000 for a family of four.

 

The authors of the report note that education is a primary sorter of labor market opportunities and is a perennial recommendation to help low-wage workers get better-paying jobs.

 

Nearly 40 percent of low-wage workers (20 million) are adults ages 25-64 with a high school diploma or less, and another 13 percent (7 million) are young adults who appear to be off track: They are not in school and do not have a college degree.

 

While low-wage workers account for 44 percent of all workers nationally, that figure varies substantially by place. Across more than 350 metropolitan areas, the share of workers earning low wages ranges from 30 percent to 62 percent.

 

Metro areas with high concentrations of sectors such as finance, health care, and professional services -- industries with high average wages -- have below-average shares of low-wage workers.

 

Areas that concentrate in sectors with low median wages such as agriculture and hospitality have higher shares of low-wage workers. 

 

Really?

 

There are certain business clichés that just need to die. When used, they lessen value and almost assure that people will ignore everything else that follows. (Note: Not a good marketing strategy.)

 

Have I used clichés in my writing? Probably, but I try to avoid them precisely because they are tired, overused expressions that have come to mean nothing.

 

Barry Albrecht, a corporate site selector for the defense industry and a member of our BBA team, recently did a Google search for "open for business economic development."

 

The results -- page after page of economic development organizations using a phrase that may have been new in the 1960s, but incredibly is still being used today.

 

I actually cringe when I read that a community is "open for business" or that it is ideal for "live, work, and play." Really?

 

If you paid a marketing group and they came up with something so lame, you need a refund and a different marketing group.

 

Wordsmithing for marketing purposes is an art, which should evoke appeal and not turn people off with mindless, more-of-the-same drivel.

 

Put that in your pipe and smoke it. (Note: A cliche to be avoided.)

 

One Leg at a Time

 

Economic development is such a broad field that nobody but nobody knows it all, although there are some who would suggest otherwise.

 

I recently received a LinkedIn message from a person who wanted to know how growth could be made to happen in the small, rural town where she grew up. I found it interesting that the question came from a consultant whose principle job is to  negotiate financial incentives for companies pertaining to economic development investment projects.

 

Many economic developers would naturally assume that this person, by the very nature of her job, would be an authority on economic development. But the truth is that many economic developers have a far better understanding of economic development than do many of the site consultants and those who would negotiate on the behalf of companies.

 

And yet, and you see this frequently, the economic development community tends to genuflect to the consultants, many of whom have never been economic developers, holding them up as all-knowing.

 

Was I surprised by the consultant's question to me? Not really, but it was revealing.

 

Do some consultant's possess certain specialized knowledge that would be useful for economic developers to know? Sure, but by the same token many of those consultants could learn more than a thing or two from the economic developers. 

 

Look, we all put our pants on one leg at a time, and we all need each other for things to happen.

 

 

Bright, Shiny and New

 

It's quite understandable that an economic development organization would want to show off its brand new website. Chances are that it is an improvement over the previous one.

 

But that doesn't mean that this new shiny version can't be improved. I see new ED websites all the time that are missing important elements. In short, new doesn't mean fixed.

 

Case in point, I looked at a new website this morning. I generally liked it, as it was fairly easy to navigate and was chock full of good information. But it missed something that is commonly not on most ED websites.

 

On vocational education/training, the new website, probably like the old one, just provided links. Somebody thought, "Well, that should cover it."

 

Well, it doesn't. What I want to see, and what is not hard to do, is to provide specific information on what vocational classes are being offered by local institutions with a brief description and then, and only then, provide me the links.

 

In other words, show me the dang curriculum, rather than having me dig for it.

 

 

OK, Boomer, Whose Going to Buy Your House?

 

Baby boomers are expected to vacate roughly 21 million homes over the next 20 years — more than the amount of new properties sold during the past 20-year period, new Zillow data reveals.

 

Currently, 33.9 percent of owner-occupied U.S. homes are owned by residents aged 60 or older, and 55.2 percent by residents aged 50 or older. The problem is many of these properties are in places where younger people no longer want to live.

 

Younger buyers may lack the "financial strength to absorb all of this new supply," according to the Wall Street Journal. 

 

Places likely to be most impacted by this upcoming Silver Tsunami include retirement hubs (Miami, Orlando, Tampa and Tucson) and regions where young residents have left (Cleveland, Dayton, Knoxville and Pittsburgh).

 

The impact of the Silver Tsunami is also likely to vary greatly across different areas within metros. The places likely to be least impacted include those with vibrant economies featuring fast growth and affordable housing that act as magnets for younger residents (Atlanta, Austin, Dallas and Houston).

 

Coal's Downward Spiral

 

America is using less coal than it has in decades, so I was a bit surprised when an utility representative recently told me that 80 percent of the electricity that his company generates comes from coal.

 

He did say the company was taking steps to change that and planned to have 100 percent of its power generated by renewable sources by 2030.

 

Since 2017, 15 percent of coal power plants in the U.S. have been retired. Since 2016, coal consumption for power generation has fallen 27 percent. U.S. power plants are expected to burn less coal in 2020 than they have in 42 years, according to new government projections.

 

The amount of coal used to generate electricity next year is predicted to decrease by 14 percent to 545.8 million metric tons, according to the U.S. Energy Information Administration.

 

Renewable energy sources could overtake coal’s remaining market share in coming years, as states like Texas and California are pushing hard to reduce their reliance on fossil fuels for power generation.

 

Coal’s steep decline has continued despite President Donald Trump’s attempts to revive the industry by relaxing or eliminating environmental regulations.

 

But, but, but: Coal remains king in much of the world. The amount of electricity generated from coal jumped 7% in the developing world last year, according to BloombergNEF's annual Climatescope report that evaluated more than 100 nations.

 

Real Estate for Economic Developers

 

There is and always will be a real estate aspect to economic development. Wherever people are engaged in commerce, real estate almost always comes into play.

 

For that very reason, I believe economic developers should have a basic understanding of principles of real estate because it is so central to much of the work that they do.

 

I got a real estate license for the sole purpose of being able to better advise economic development organizations and companies with site selection. In keeping with that idea, I thought that it might prove useful that I touch upon real estate principles every Friday.

 

Space is limited so I'll keep it brief. Let's start with land, a tangible thing that can be touched. Economic developers often think of land in terms of utility and suitability for a specific use. Three general principles:

 

1. Indestructibility. Land remains no matter what. It may be flooded, become a quarry or a landfill, but it is still there.

 

2. Immobility. You cannot move it. When land or land rights are purchased, the owner, in effect, goes to the land.

 

3. Uniqueness. No two parcels of land are the same. Like a snowflake, each parcel is different and unique in its own right. The truth is that unimproved, raw law presents certain challenges.

 

We'll talk about that in an upcoming segment.

 

 

What We're Reading

 

‘Queen & Slim’ Could Be One of the Great Love Stories of All Time — if You Let It  The New York Times

 

Inequality could be lower than you think   The Economist 

 

Does Who You Are at 7 Determine Who You Are at 63?  NYT Mag

 

The most remote emergency room: Life and death in rural America

The Washington Post

 

We Are Running Out of Air  The Atlantic

 

Why Did America Give Up on Mass Transit? (Don't Blame Cars.)  CityLab

 

Parting Thoughts: Personalities of America

 

Do people in San Francisco think and act differently than people living in say, Frisco, Texas?

 

It is dangerous to generalize and stereotype people, but I cannot help but believe that history, geography, topography, weather, culture all have a way of shaping people's beliefs and the way they interact with others. Likewise their beliefs tend to influence the way a community looks and operates.

 

As an economic development consultant to communities, I have come to truly appreciate the different personalities and nature of American towns, cities and regions. I never met a community that I didn't like.

 

Aside from travel, I have lived my life in the country's interior -- in the Midwest, the Southeast and now the Southwest (I'm based in Dallas.) When I first visited Boston many years ago, I was living in Birmingham, Alabama.

 

I joked with a friend on that trip, who was a native of Boston, that I had more in more common with Cubans than with Bostonians. Mind you, I liked Boston a lot and have never been to Havana.

 

Jason Rentfrow, a psychologist at the University of Cambridge, analyzed a set of surveys that had been conducted between 2003 and 2015 in 2,082 U.S. counties—about two-thirds of all the counties in the country. The surveys asked three million people 44 questions about their habits and dispositions.

 

“Psychology is about trying to understand the inner workings of people’s minds,” he told CityLab. “Here I was trying to make these broad generalizations, not just about individuals, but about people based on where they lived.”

 

His work is a followup to 2013 study that suggests the U.S. has three “psychological regions.”

 

The first, in the Midwest and parts of the Southeast, is “friendly and conventional.” It has high levels of extroversion, agreeableness, and conscientiousness.

 

“The characteristics of this psychological region suggest a place where traditional values, family, and the status quo are important,” the authors wrote. 

 

Americans tend to be “relaxed and creative” in the second region that consists of the West Coast, the Rocky Mountains, and the Southwest.

 

“In general, the qualities of this region depict a place where open-mindedness, tolerance, individualism, and happiness are valued,” the authors note.

 

Then there’s the “temperamental and uninhibited” region, consisting of the Northeast and, to some extent (which I found particularly interesting) Texas. These states are moderately high on openness, but "depicts the type of person who is reserved, aloof, impulsive, irritable, and inquisitive,” he writes.

 

In an extreme case, think of the character Travis Bickle in the movie Taxi Driver -- "You talkin’ to me?"

 

I have to believe that anyone who has to ride packed subway car to work, as millions of New Yorkers do on a daily basis, are going develop a somewhat different attitude in dealing with others. (By the way, I like "the City" a whole lot.)

 

Rentfrow argues that people living in places once dominated and since abandoned by large employers, such as coal and heavy industry, can be scarred and display neurosis.  The higher frequency of deaths caused by opioids in Appalachia would seem to confirm as much.

 

All this suggests that environment shapes people and people shape environments.  

 

Three Chords and the Truth (Click and Ye Shall Find.)

 

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