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BBA Economic Digest: The Good and the Bad

The Good and Bad

It may be the norm for some time to come -- office workers logging in from their living rooms. And while it may be good for some, it's not for all.

The changes that have remote work accelerating “are a disaster for low-skilled labor and could be a good thing for high-skilled labor,” Gerald F. Davis, a professor of management and sociology at the University of Michigan’s Ross School of Business told the New York Times.

A more remote, transactional relationship with employers may promote companies’ use of contractors — which can be more lucrative but less stable for the people accepting such work. When workers are spread out, they may have a harder time sharing information, and a collaborative culture is at risk. Small talk at the office can have a huge effect on morale, but many companies are also learning that informal, person-to-person interactions are also crucial to the flow of mission-critical information. Businesses that successfully ran largely remote work forces before the pandemic tend to document their processes and knowledge. That enables employees to join projects and get up to speed on their own time, without having to consult colleagues first. This reflects “sound management that companies with physical offices didn’t adopt simply because they could afford to be sloppy,” writes Noam Scheiber with the New York Times.

Zero Effect

Some idled workers had been receiving more in unemployment benefits than they did in their pre-pandemic paychecks. That is no more. Job vacancy postings are still down about a quarter from precrisis levels. And while it seems possible that, on the margin, some workers might turn down work because they want to keep getting that government cheese, the generosity of benefits do not, on net, appear to be holding back employment growth. “So far, there is no evidence that the [federal $600 payments] had either job finding or job leaving effects in the May and June data,” according to a detailed analysis of Labor Department data from Ernie Tedeschi, Evercore ISI’s head of fiscal analysis. A new study by Yale economists also found that the benefit had no effect on the labor market.

"Our findings don't imply that nobody is making this particular tradeoff, but what we do find is that [the extra benefit's] aggregate effect on employment is zero," Dana Scott, one of the study's authors, told Axios. In fact, there are around 14 million more unemployed people than there are jobs, per the Economic Policy Institute. "If we’re in a scenario where the jobs aren’t there, searching isn’t going to help," Scott said.

Get the Word Out

Brian Hanson, an economic developer who I know and trust, recently sent me an email that I think his cohorts in the profession can learn from. "The COVID-19 pandemic has caused both a health and economic crisis worldwide. Any disaster or economic downturn, natural, or man-made, is like a coin - it has two sides. There are both challenges to overcome and opportunities to take advantage of. Today, we are reaching out to inform you of an upcoming opportunity that may be of interest to you in these difficult economic times." Hanson, the president of the Duluth, Minn.-based President & CEO Area Partnership for Economic Expansion, then provided a brief description of the soon-to-be available 30,000 square-foot manufacturing facility. His email included two pdfs -- one on the county, highlighting transportation infrastructure and workforce, and the other on the building itself.

"The Bigfork Manufacturing Building is a very important asset in a rural town in northern Minnesota. APEX is working with a local and state team to find a new use for this electronics manufacturing facility. Interested parties can reach out to me direct for more information," Hanson said. Nobody likes a plant shutdown, but sometimes a resulting new owner/tenant can provide more and better job opportunites than the prior one. Bottom line: When a good building comes open, get the word out.

The Cost of Water

Bank on it: The availability of water will become more important to the site selection process for industrial projects in the future. Roughly 60 percent of real estate investment trust properties are projected to experience high water-stress by 2030 — more than double the number today, according to a report from BlackRock. Roughly two-thirds of U.S. REIT properties are projected to be in high-risk water zones, double the proportion today. This includes most of the country west of the Mississippi. Water stress occurs when the need for water exceeds supply due to a combination of population growth and urbanization — which increases demand — and the effects of climate change, which can alter supply distribution. According to World Bank estimates, global water infrastructure costs are expected to rise fourfold by 2030, to $150 billion a year. But managing scarce water supplies in the future will both good governance and forward-thinking investment to get the most out of what's left. Water use is also a good proxy for stewardship at both the national and corporate level, Brian Deese, BlackRock's global head of sustainable investing, told Axios. "If you're using water well, you're usually doing other things efficiently, too."

The Tip of the Spear

A nascent industry that one state and one community is jumping on. It is always best to get ahead of the curve (and the competition) if you can. Two wind turbines owned by Dominion Energy, Virginia’s biggest utility, are now positioned off the coast of Virginia Beach, representing a $300 million down payments on what state officials believe will be a new industry and a source of clean energy for the future. Gov. Ralph Northam (D) signed laws creating a state Office of Offshore Wind and setting a mandate for 5,200 megawatts of offshore wind energy by 2034. “Virginia has a chance to be one of the leaders . . . in renewable energy,” Northam told the Washington Post. When the turbines start spinning later this summer, they’ll be the first of what is expected to be the biggest wind farm in federal waters in the U.S. More than 180 turbines are expectd to be built by 2026 on a 112,800-acre site leased by Dominion that sits 27 miles offshore. The project is expected to cost about $8 billion.

Northam has backed a $350 million effort to make the Port of Virginia the deepest on the East Coast, partly to enable it to become a staging area for assembling the gigantic wind turbines. That could lure manufacturers to locate there, he said.

Doug Smith, president and CEO of the Hampton Roads Alliance, says the area encompassing the Virginia Beach-Norfolk-Newport News metro area can be the "tip of the spear" when it comes to developing an offshore wind supply chain.

“We are uniquely positioned to capitalize on this opportunity. Between our strategic mid-Atlantic location, second-to-none port infrastructure, and premier maritime workforce, Hampton Roads Virginia is the ideal landing place for any company within the offshore wind supply chain,” Smith said.

Rapidly falling offshore wind power prices in key European markets could also bode well for the emerging U.S. sector, according to findings from a peer-reviewed study in Nature Energy. Researchers analyzed years of developers' winning bids in offshore wind power auctions in five countries that represent three-fourths of global capacity. They found that the bid price for power from proposed wind farms in northern Europe fell by roughly 12 percent annually from 2015 to 2019.

BloombergNEF projects that the U.S. will have 20 gigawatts of installed capacity by 2030, and the Nature Energy paper underscores how Europe's experience is aiding the sector here.

The Skills Required

I think it is safe to say that most innovation for the foreseeable future will be based on digital technologies. Any initiative on entrepreneurship and innovation should be predicated on giving people digital skills and training starting at the elementary school level. Anything short of this will not produce transformative results. Bottom line: There has to be a real commitment and action from both the public and private sectors working together to make this happen. Without that, vast segments of the population and entire communities will be left behind and it's just more talk.

There’s this feeling that entrepreneurs are born and not made. Not true says Ethan Mollick, a Wharton Management professor. And if an entrepreneur can be made, that means an entrepreneur can be taught. Studies show that when people's skills increase and they learn to be better entrepreneurs, their companies do better and are more likely to survive. Here's where economic development organizations can really make a difference. They can not only inform budding business owners about available resources, but they can establish online classes that go into the nuts and bolts of creating and running a business.

What We're Reading and Watching

Whiskey Bent Valley Boys Drink Up That Whiskey (Above)

Everyone tested positive': Covid devastates agriculture workers in California's heartland The Guardian

New Study Shows What Happens To Your Brain When You’re Anxious And Depressed Forbes

The Workforce Is About to Change Dramatically The Atlantic

Water, Sand and Plenty of Elbow Room on 8 Wild, Protected Coastlines NYT

This is the donut capital of the United States National Geographic

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