Archives: Reg Murphy Pubs

Why hospitality workers are harder to find

Written by Don Mathews on . Posted in Don Mathews, Reg Murphy.

We have been overlooking a major reason why many businesses in the hospitality industry are having difficulty attracting workers at pre-Covid wages.

To be sure, supplemental unemployment compensation from Covid relief legislation, the closing of many day care facilities and continued fear of contracting Covid are contributing to the difficulty.

But there is a larger and, indeed, ironic reason why hospitality workers have become harder to find. There simply aren’t as many of them. Here’s why.   

For more than a generation now, states and communities, including our own, have been steadfastly promoting education to enhance personal well-being and the skills of workers. Efforts to get more kids to finish high school and more kids to go to college have been paramount.

The efforts have been fruitful.

Between 2000 and today, the number of people in the labor force age 25 and older who had completed no more than high school has decreased from 50.2 million to 43.7 million, while the number with a bachelor’s degree or more has increased from 36.6 million to 60.5 million.

That’s a 13 percent decrease in the number of workers 25 and older with at most a high school diploma and a 65 percent increase in the number with at least a bachelor’s degree in just 20 years. It’s a remarkable achievement.

More kids finishing high school and more going to college has had another effect. Between 2000 and today, while the U.S. the labor force as a whole has increased from 142.5 million to 160.9 million, the number of 16 to 24 years olds in the labor force has shrunk from 22.5 million to 20.2 million, a 10 percent drop.

Why the drop? 16 to 24 year olds are much less likely to be in the labor force if they are enrolled in school. More 16-24 year olds in school means fewer in the labor force. (Recall: you’re classified as in the labor force if you’re working or looking for work. If you’re neither working nor looking, you’re classified as out of the labor force.)       

What does all that have to do with the hospitality industry?

The hospitality industry relies disproportionately on young workers. In the U.S., 12 percent of all employed workers are age 16 to 24, while the median age worker is 43. In the hospitality industry, 38 percent of employed workers are age 16 to 24, and the median age worker is 30.

The industry relies even more heavily on low-skilled workers regardless of age.  According to the U.S. Bureau of Labor Statistics, the leading occupations in the hospitality industry are: counter workers, waiters and waitresses, cooks, first-line supervisors, food prep workers, bartenders, maids and housekeepers, dishwashers, and hosts and hostesses.

Those occupations alone accounted for 10.8 million of the 14.2 million workers employed in the hospitality industry in 2019, and, by the industry’s own standards, not one of those occupations requires more than a high school diploma.

You see the situation. Before Covid, the flourishing hospitality industry had been soaking up workers, adding 4.1 million to its payroll since 2000. The industry is now growing again and needs workers, but the two pools from which it draws more than 75 percent of its workers – young workers and low-skilled workers – have shrunk considerably because the country has been so successful at raising the educational level of its workers.

Long-term labor market shifts are gradual, but their effects are inescapable. 20 years of hospitality industry growth combined with 20 years of a shrinking labor pool will have its effect. We’re feeling it now.

  • Don Mathews
  • Reg Murphy Center

Read More about Market Value of a Liberal Arts Degree

Written by Skip Mounts on . Posted in Reg Murphy, Skip Mounts.

There’s a hard question I find myself pondering and discussing over and over these days—why do some important jobs pay so much less than other important jobs?

Of course, I know the standard economist’s answer: supply and demand. Wages are determined by the intersection of what employers are willing to pay and what employees are willing to accept. But, my questions lie deeper. What makes this intersection lower for some than for others? What factors are contributing to differences in willingness to pay or willingness to accept, especially when job qualifications and duties are similar?

My most recent conversation about this was with a friend during Memorial Day weekend. She is an English professor and lives in another state. When an English professor and an Economics professor compare notes, questions about their salary gap almost always arise.

And the questions and points made are legitimate. In the classroom, the two professors do basically the same job, and outside class, an average English professor almost certainly spends more time grading long papers and projects than an average Economics professor. Yet, in the U.S., the median English professor makes almost $27,000 less per year than the median Economics professor.

The simple answer here is that professors’ salaries reflect salaries in the broader market. Outside academia, the average economist makes about double what the average English major makes. In order to entice someone to teach, a college or university must offer competitive compensation.

The median salary for Liberal Arts BA’s is $5,000 lower than the median for all BA’s. And with little job experience, those with a BS earn substantially more on average than those with a BA.

But why?

As my friend puts it, the skills taught in liberal arts majors—the ability to problem-solve, to ask good questions and to think critically about their answers— are the skills that will change the world. So, why does it seem the market so under-values these majors?

My first thought is that this is likely a supply issue. The market must be flooded with liberal arts majors, driving down their wages. But, that’s not really true. In 2016, only about 23% of all college graduates were in liberal arts majors, and that number is falling pretty rapidly.

If we align this with data from the demand side, it seems even less likely that an over-supply issue is at play. According to a 2014 report by the Association of American Colleges and Universities, 93% of employers rank a candidate’s ability to think critically and communicate and solve problems as more important than that candidate’s college major. These qualities are most focused on in the liberal arts, and I might argue that possession of these qualities makes one well suited, regardless of their college major, to learn the specifics of almost any career.

So, there’s not an “issue” on either side of the market for liberal arts majors; demand is high, and supply is moderate. The best explanation for why other markets have higher equilibrium wages is just super soaring demand in those markets. The Bureau of Labor Statistics projects demand for economists to grow 14% over the next decade, while demand for the most popular professions of liberal arts majors will grow by at most 4%.

This is the hardest part of labor economics to me. Market value does not equate to intrinsic or moral value. The liberal arts will change the world. Employers know that. But, and I hate this, world changing isn’t a growth area in our economy right now.

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Dr. Melissa Trussell is a professor in the School of Business and Public Management at College of Coastal Georgia who works with the college’s Reg Murphy Center for Economic and Policy Studies. Contact her at mtrussell@ccga.edu.

Our local economy has changed

Written by Don Mathews on . Posted in Don Mathews, Reg Murphy.

In 21st Century America, we would expect 20 years to bring significant economic change, even to a small local economy such as Glynn. And it did.

Glynn is larger today. In 2000, the county’s population was 67,568. It’s now 86,002, an increase of 27 percent. We’re still small, but 27 percent is no small increase. Over the same 20 years, the U.S. population increased by 16.6 percent.

We are also more prosperous. Total personal income in Glynn, in 2012 dollars, increased from $2.58 billion in 2000 to $3.74 billion in 2019. That’s a 45 percent jump in inflation-adjusted personal income.

Some changes we literally see. For instance, the majestic Sidney Lanier Bridge, a revamped Jekyll Island, an increasingly entrepreneurial downtown Brunswick, a newer and much expanded Brunswick campus of the Southeast Georgia Health System and, my personal favorite, the transformation of a timid little community college into the warm, fearless, full throttle, four-year College of Coastal Georgia.

The industrial structure of our local economy has also changed over the past 20 years.

Hospitality continues to be Glynn’s leading industry and largest employer. That’s not surprising. Glynn is a prime tourist destination, so naturally hospitality is our leading industry, and it’s hard to imagine that changing.

What might be surprising is that our hospitality industry is an even bigger and more important part of our local economy today than it was 20 years ago.

It might seem reasonable to think that our population growth would lead to a more diverse industrial structure in which hospitality remains our leading industry while constituting a smaller fraction of a larger local economy.

Except it hasn’t. 

In 2000, our hospitality industry consisted of 257 business establishments with 6,464 employees. That amounted to 11 percent of all Glynn businesses and 17.5 percent of the county’s employed workers.

In 2019, our hospitality industry consisted of 345 business establishments with 8,551 employees, amounting to 13 percent of the county’s businesses and 22 percent of its employed workers.

In short, while our local economy has grown much since 2000, our hospitality industry has grown even more.

Other significant changes in Glynn’s industrial structure have come in health care, construction and manufacturing.

In 2000, our health care industry accounted for 6.5 percent of Glynn’s employed workers. That put it behind hospitality (again, 17.5 percent), retail (14 percent), local government (11.8 percent), manufacturing (10 percent), professional and administrative services (9.8 percent) and the catch-all “other services” (8.8 percent) on the list of the county’s leading employers.

In 2019, health care eclipsed retail as Glynn’s second largest employer. Employment in our health care sector increased from 2,390 in 2000 to 5,274 in 2019, a jump of 121 percent. Those 5,274 workers made up 13.6 percent of the county’s employed workers. Retail remains a large employer, accounting for 12.9 percent of Glynn’s employed workers in 2019.

Construction and manufacturing have become smaller components of the Glynn economy. In 2000, construction employed 2,023 Glynn workers, accounting for 5.5 percent of total Glynn employment, while manufacturing employed 3,678 workers, 10 percent of the total. In 2019, construction employed 1,433 workers, 3.7 percent of total Glynn employment, while manufacturing employed 1,876 workers, 4.8 percent of the total.

A troubling note on the last 20 years: the size of our local labor force, currently about 39,000, has barely changed since 2005. Our population has increased, our economy has grown, but the size of our labor force hasn’t changed in 15 years.

We’ll take a closer look at our labor force situation in my next column.

  • Don Mathews
  • Reg Murphy Center

How guidance can become policy…when it’s done wrong

Written by Heather Farley on . Posted in Heather Farley, Reg Murphy.

Last Thursday the CDC released guidelines, rather abruptly, that suggested that vaccinated individuals no longer needed to wear masks or socially distance in most cases. While it can be assumed that the purpose of releasing this information was to encourage more widespread vaccination, the method of information dissemination was confusing in that it came out in a blanket statement as opposed to as a well-defined information campaign. Knowing your audience, conveying nuance, and clearly explaining data are all important elements in public communication that the CDC missed here. The effect of this release was that it seemed to give everyone pause, no matter their personal opinions about masks and distancing, and think, “so what do we do now?”

It’s a fair question and one that can come up when the government and its agencies are attempting to convey new policies, laws, guidance, or regulations. The trouble with guidance is that it does not hold the same force of law or the administrative authority of regulation. Guidance is not binding, it is not subject to rule-making procedures (meaning there is no proposal or comment period for the public or experts), and institutions aren’t subject to enforcement action if guidance is not followed. The main purpose of guidance is to simply highlight expectations and priorities.

Let me take a few sentences to highlight why the nature of agency guidance is important and why it has caused some initial confusion. Laws derive from the legislature and are implemented through executive agencies – like the CDC – who interpret the law and develop regulations to implement its dictates. Laws and regulations have teeth and are binding. Guidance, on the other hand, is voluntary.

In the case of CDC guidance for the public, they are attempting to convey the best practices, standards, or expectations according to the scientific information they possess. How that guidance is interpreted in practice, however, remains a function of individuals, businesses, and government entities. That’s where the “deer in headlights” reaction is stemming from on this new guidance. There are no teeth in the guidance and a lot of room for interpretation. Businesses can continue to enforce mask and social distancing requirements or do away with them entirely. Individuals can choose to go to large gatherings unmasked and unvaccinated and we really aren’t at a point in this country that we are asking people to identify their vaccination status.

I am not suggesting that our pandemic response be codified into law or regulation, but if the CDC is going to share such sweeping guidance with the public, I am suggesting that our government understand the function of guidance and handle the public communication of that guidance accordingly.

For starters, crystal clear communication of what is safe and for whom would be a good start. Next, involve your stakeholders, namely state and local governments, before this kind of information is released so they can react appropriately and in an orderly fashion. Finally, rethink whether this kind of public policy communication is where the strength of the CDC lies. I would argue that while the CDC is excellent at interpreting scientific data and developing guidance based on that data, communicating it to the public can have major policy implications (such as effectively ending mask mandates for everyone) that should have been considered before potentially shifting the entire trajectory of the pandemic response.

Dr. Heather Farley is Chair of the Department of Criminal Justice, Public Policy & Management and a professor of Public Management in the School of Business and Public Management at College of Coastal Georgia. She is an associate of the College’s Reg Murphy Center for Economic and Policy Studies.

A Rebuttal to Dr. Mathews’ Arguments Against Minimum Wage

Written by Melissa Trussell on . Posted in Melissa Trussell, Reg Murphy.

My undergraduate degree is a Bachelor of Science in Discrete Mathematics. I have always been drawn to math because of its precision and predictability. We live in a complicated world, and there is something really appealing about working in a field in which there is a set of agreed-upon rules that work every time to arrive at the one, agreed-upon right answer.

This is also part of the appeal of economics. Markets are magical. My colleagues and I write about this magic a lot. Subject to just a few rules and without need for outside intervention, markets find prices that equate quantity supplied with quantity demanded and maximize efficiency. They are almost mathematical in their predictability.

Almost.

The primary difference between mathematics and economics is the reliability of the rules underlying the predictability of outcomes. The rules in math are typically definitions and axioms establishing how numbers or symbols behave or relate to each other. The rules in economics are typically assumptions about how humans behave. Numbers can be counted on (pun intended) to follow rules. Humans cannot. Therefore, assumptions in economics are much more likely to fail than axioms in mathematics.

When assumptions fail, outcomes are not as easy to predict. Though I loved math, this twist is what ultimately drew me to apply my knack for mathematics to economics. The predictability of math is comforting, but the challenge of understanding that which is less predictable is exciting.

My colleague Dr. Don Mathews has written here a series of columns lately on the minimum wage. This provides an excellent example of when reality may diverge from theory due to market participants’ inability to play by economists’ rules.

Dr. Mathews’ columns have provided a brilliant overview of economic theory and the history of economic thought on minimum wage. And, like many economists before him, Dr. Mathews concludes that “the minimum wage is still bad economic policy.”

If all of the traditional assumptions of labor market theory hold, I agree completely with Dr. Mathews. But, what if they don’t? What if participants in a labor market do not follow the rules assumed by the theory?

Theory assumes employees have many options of places to work and can move freely among those options, giving them some bargaining power in the negotiation of wages— the ability to say, “If you won’t pay me enough, I will go somewhere that will.”

In reality, for many individuals, life is not that flexible and options are not that abundant. This is especially true for the poorest among us—those without stable housing, transportation, or childcare. And we know from the literature on differences between male and female workers that even when workers may have some power to negotiate, many do not for a variety of reasons including lack of knowledge about the process, lack of confidence, or fear of repercussions.

Whatever its reason, this inability for employees to negotiate their wages creates an imbalance of power in the labor market and gives employers the ability to hold wages below the efficient market equilibrium.

There is evidence that this does happen. Employees with similar skills are not paid a uniform, market wage, neither within a firm nor across firms. People who ask for raises are more likely to get them. And unionized workers earn an average of 11.2% more than nonunion workers in the same industries and job types.

The success of unions especially showcases what markets might look like if power were not so heavily concentrated in the hands of employers.

This is why I believe we cannot always dismiss the minimum wage as bad economic policy. If an imbalance of power is holding wages below the efficient market wage, then a well-set minimum wage would lead to an increase in market efficiency and NOT an increase in unemployment. And as they place more money in the hands of the least-paid workers, increasing their ability to purchase goods and services for their households, firms may even experience increases in profit!

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Dr. Melissa Trussell is a professor in the School of Business and Public Management at College of Coastal Georgia who works with the college’s Reg Murphy Center for Economic and Policy Studies. Contact her at mtrussell@ccga.edu.

Policy, Business, and the New Climate Normals

Written by Heather Farley on . Posted in Heather Farley, Reg Murphy.

When you are watching the weather channel and the forecast calls for temperatures above normal, what does “normal” mean? On Tuesday, May 4th the National Oceanic and Atmospheric Association (NOAA) and the National Center for Environmental Information (NCEI) will update the 30-year U.S. Climate Normals. Climate normals are released every ten years and began in 1901. This year’s release includes climate averages from 1991-2020 whereas we have been using the 1981-2010 data set for the last 10 years. With the new data set comes some potentially significant shifts that will change the way we interpret rainfall averages, monthly temperature averages, and other climate conditions.

The climate normals are weather observations that are used in a variety of functions such as seasonal forecasts (will it be a warmer than average summer?) and weather reports (how much wetter was it this month compared to the average?). But meteorologists on your favorite weather station are not the only ones who are impacted by these new normals.

A variety of industries – travel, utilities, farmers, and constructions companies to name a few – use these averages to make informed decisions. For instance, drought assessment and freeze risk are important indices to farmers; energy companies monitor Heating and Cooling Degree-days and compare them to the normal averages to assess energy use; governments might use snow averages in budgeting and operations planning; or, these averages may be used by the travel industry in developing cancellation policies or in their planning.

So, what do the new normals mean for these industries, our government, and you and me? If we look at the maps from the early 1900s (our baseline), there are splotches of red (warmer than the average), white (about average), and blue (cooler than average).[i] It makes for a very patriotic-looking map. Now, the maps are only varying shades of red. In short, observations of the ten, 30-year normal data sets indicate that dry areas and dry seasons are getting drier, wet areas and wet seasons are getting wetter. This means more extremes that make being outdoors dangerous (due to heat) and increases in extreme weather events (droughts, fires, hurricanes, floods, etc.).

As far as policy and budgeting, the Federal government must consider these trends as they set aside allocations for disaster relief, extreme weather events, and agriculture. If they do not understand the way these climate normals are set, they may not appropriately intervene with policy or appropriations. Meanwhile, industry may be inclined to pass the increased costs of adaptation on to customers. It is possible that the new normal will impact pricing structures or the ability of industries like construction to operate at different times of year.

And you and I? We will likely adapt too. Much like frogs in an ever-warming pot of water, we will come to mentally accept that our average temperatures and humidity are just hotter in the Southeast now. We will come to accept the new normal. But, many who are not in the financial position to adapt will feel the costly and often life-changing effects of these new normals. Disasters are expensive.

The new normals, however, need not remain on the same course. We can support the reduction of greenhouse gas production through our voting habits and consumer choices. Such choices can lead, slowly and over time, to reversals in the hotter places getting hotter and wetter places getting wetter trends. Slowly, and over time, we can see less red on those maps and a little more red, white, and blue.

Dr. Heather Farley is Chair of the Department of Criminal Justice, Public Policy & Management and a professor of Public Management in the School of Business and Public Management at College of Coastal Georgia. She is an associate of the College’s Reg Murphy Center for Economic and Policy Studies.

[i] Climate Normal Maps – https://www.climate.gov/news-features/understanding-climate/climate-change-and-1991-2020-us-climate-normals

Should we raise the minimum wage?

Written by Don Mathews on . Posted in Don Mathews, Reg Murphy.

Economists once considered the minimum wage a simple and classic case of bad economic policy.

The minimum wage is a price floor, and price floors lead to surpluses and waste without fail. A surplus in the market for low-skilled labor is an especially serious problem. It means reduced hours or unemployment for workers who can least afford it.

But careful observation over the past generation has made clear that the economics of the minimum wage is not so simple.

The new economics of the minimum wage shows that businesses don’t always adjust to the minimum wage by cutting the hours or employment of low-skilled workers. Reducing other forms of compensation to low-skilled workers, upgrading jobs and demanding greater productivity, raising prices, or simply accepting lower profits are other ways businesses adjust. 

The minimum wage might even provide the wage increase that low-skilled workers with few options and weak bargaining power are unable to negotiate on their own.

The new economics of the minimum wage also shows that the effects of the minimum wage are likely to vary considerably across businesses, industries, towns, cities, states and low-skilled workers.         

Consequently, economists are now more divided on the minimum wage. A majority still opposes the law, but it’s a much smaller majority.  Some, once opposed to the law, are now unsure. Plenty have changed their minds and now support raising the minimum wage to $15 per hour.

To my mind, rather than muddying the waters, the new economics of the minimum wage has made the case against the minimum wage even stronger.

The new economics of the minimum wage makes it clear that a federal minimum wage is a one-size-fits-all policy for an anything but one-size-fits-all economy.

A $15 minimum wage would certainly benefit some low-skilled workers. Low-skilled workers employed by large corporations or other firms for which low-skilled labor is a small fraction of costs would probably see at most minor decreases in hours or other forms of compensation, leaving them better off on net. The same would be true for many low-skilled workers in cities, where workers have more options and wages are higher already.

But a $15 minimum wage would just as certainly harm some low-skilled workers. Low-skilled workers employed by low-skilled labor-intensive businesses, especially those located in towns or rural areas where wages and small business profits tend to be lower would be particularly vulnerable to cuts in work hours, cuts in other forms of compensation or job loss.

Evidence suggests that, in aggregate, a $15 minimum wage would benefit low-skilled workers more than it costs them. And the low-skilled worked workers made better off by a $15 minimum wage would probably outnumber those made worse off.

But does that justify the policy?

Good economic policy requires more than good economics. It requires ethical judgment. Economists are keen on identifying flaws in markets. We ought to be no less keen on identifying flaws in ourselves. A flaw to be especially vigilant for is hubris.

I would gently suggest that on matters of public policy, we economists ought to be extremely careful.

To advocate a $15 minimum wage is to advocate a policy that restricts freedom, reduces opportunities and is certain to harm some highly vulnerable workers and small business owners in highly vulnerable communities.

Those who would benefit from a $15 minimum wage might well outnumber those harmed, but the harm would be concentrated and very real, and none of it would be borne by the economists advocating the law.                 

The minimum wage is still bad economic policy.

  • Don Mathews
  • Reg Murphy Center

Perspective on Local Labor Shortages

Written by Melissa Trussell on . Posted in Melissa Trussell, Reg Murphy.

If you regularly read this paper, spend much time downtown, or stay engaged in local gossip rings, you no doubt have read or heard the newest complaint from local business owners: We are struggling to hire enough workers because of the federal government’s stimulus payments to individuals.

Let’s take a quick look at what economic theory has to say about this complaint.

First, theory does predict that non-labor earnings—government transfers, interest or dividend payments, or even just a birthday check from Grandma—will encourage someone in the labor force to work fewer hours and will make it less likely that someone not in the labor force will choose to enter it.

In other words, we should expect that when the government sends a check to every household, labor supply would decrease, and employers would find it difficult to hire.

But, here’s why this economist is not buying the stimulus as an explanation for local hiring woes.

Data actually show that in February 2021, labor force participation in the Brunswick area was less than half of one percent below its pre-pandemic level from February 2020, and employment is down only one percent over the same time period.

People are working. Available data from 2020 show that the pandemic has caused a shift in the industries in which those people are working. From the beginning of 2020 to the end of the third quarter, Brunswick-area employment in leisure and hospitality dropped ten percent while employment in construction increased three percent. This is just one example of the sort of shift our labor market has seen that could be contributing to the difficulty of hiring in some sectors of our economy.

Moreover, on the supply side, there are much bigger issues keeping some folks out of the labor force right now than a couple of checks from the government.

As the parent of a 3-year-old, my ear is always close to the ground in our community’s childcare market. Due to the expenses involved in meeting pandemic safety requirements, we have lost several childcare facilities in the last year. This has huge implications for the labor market. Childcare is a parent’s prerequisite to participation in the labor market.

Then, there is the whole viral pandemic thing. Vaccines are out and not hard to come by in our neck of the woods, but this pandemic is not over. Many folks are choosing not to be vaccinated, and those who have not yet been approved for vaccination (our kids) are still at risk. Asking someone to tend a bar or run a register is still a dangerous ask. If an employer is hiring for the same job in a now-risky environment as they were hiring pre-pandemic, that employer should expect to pay higher wages than before to compensate the workers for the new risk. (Google compensating wage differentials for more on this.)

Now, we segue to the Demand side of the labor market, where the bottom line is that wage offerings just aren’t cutting it.

From the day I closed on my house in Brunswick and started talking with local employers, a common thread in every conversation with a business owner or hiring manager has been that it is hard to find reliable workers in our area. That was five years ago, long before COVID-19 existed. And my response always has been the same—you get what you pay for. It’s an adage that is true in markets for goods or services and also in markets for labor. If you are an employer who is struggling to hire and/or to keep good employees, economic theory is clear. The wage you are offering is below the market equilibrium.

If that was before families lost childcare, and job risk increased, then that same wage that was below the old market equilibrium is way below the new one. This is especially true in sectors experiencing soaring competition for labor from other sectors.

One could argue that the recent stimulus checks to households have unfairly pushed up the market equilibrium. But, according to the U.S. Chamber of Commerce, each stimulus package that has been passed during the pandemic has included multiple forms of aid to small businesses, including both loans and tax credits for businesses that chose not to lay off employees during the pandemic. The latest package even includes grants specifically for restaurants.

If stimulus aid to families has increased the wage workers are requiring, then stimulus aid has increased the wage employers are able to offer.

You get what you pay for.

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Dr. Melissa Trussell is a professor in the School of Business and Public Management at College of Coastal Georgia who works with the college’s Reg Murphy Center for Economic and Policy Studies. Contact her at mtrussell@ccga.edu.

Community Attitudes Toward Section 8 Housing

Written by Heather Farley on . Posted in Heather Farley, Reg Murphy.

I live in a comfortable suburban Brunswick neighborhood. Our neighbors are nice, and we enjoy the area. When we moved into this house a few years ago, I joined to area Facebook page and Nextdoor page to keep up with lost dog posts, HOA announcements, and the like.

Recently, there was a post on our Facebook page that announced that some rezoning signs had been spotted near our community grocery store. The rezoning signs indicated that a new 72-unit apartment or duplex complex may be coming to the area. This was followed by many comments and assumptions about what this would mean for our community.

Some of the assumptions included concerns that this rezoning almost certainly meant we would be getting “yet another section 8 housing complex.” This was followed by many opinions about such housing: it will lead to increased crime, the people living in this housing are (mostly, but not always, noted the commenter) looking for handouts and don’t want to work, and that this kind of housing will lead to overcrowding in our area. The final comments encouraged residents to come to the public meeting to voice these concerns.

I am, unequivocally, in favor of the last call to action. Yes, every citizen has a right to participate in their democratic process and be heard by their elected officials. But, what struck me was the assumptions that were being made about people who live in section 8 housing specifically. Having only a general notion about exactly what section 8 is, I thought I would do a little research to see if their policy concerns held any weight. Was there data to support their notions?

I started by simply looking into what section 8 housing is. In short, The Brunswick Housing Authority administers this federally-funded rental assistance program to help low income families secure affordable housing through the use of vouchers paid directly to landlords. These vouchers typically do not cover all of the tenant’s rent and do not include utilities. Here are some statistics on the average occupant in Glynn County that I obtained:

·      Turnover rate: 20% annually

·      Average time voucher holder has received these benefits: 6 years, 11 months

·      Average household: 2.8 persons

·      Average household income: $13,113/year

·      Percent using welfare benefits as primary income source: 1%

·      Percent with other income source (disability, Social Security, or Pension): 44%

·      Head of Household: 25-49 (67%), 51 or older (27%)

·      70% of households have children – 68% headed by a woman only, 2% headed by two adults

This indicates to me, that these vouchers are used to support the working poor, those with disabilities, in some cases the elderly, and in many cases women supporting their children. The Brunswick Housing Authority also noted that applicants must be in good standing in terms of criminal history and financial obligations to the Housing Authority.

I then tried to look into this fear of increased crime as a result of such housing. I attempted to use the county GIS maps to help me answer this question, but quite simply did not have a strong enough command of the technology. Instead I had to look to more general data – scholarly articles. In particular, economist Dr. Paul Emrath synthesized data from 16 studies published after 2000 for the National Association of Home Builders. He found the following:

In distressed neighborhoods, the basic findings were that building LIHTC housing increases surrounding property values and reduces crime rates.  In high-opportunity neighborhoods, LIHTC housing has no effect on crime rates, either positive or negative, but a small negative impact on property values—although only within one-tenth of a mile and if the high-opportunity neighborhood also lacks racial diversity. 

Another 2019 study by Elena Derby found that each additional year a child spent in a Housing Credit home “is associated with a 3.5 percent increase in the likelihood of attending a higher education program for four years or more, and a 3.2 percent increase in future earnings.” As someone working in Higher Education, this statistic excited me.

In short, what my cursory research indicated was that, 1) this kind of housing can have a big impact on women and children in particular, 2) it is not likely to negatively affect my property value in a meaningful way, 3) it might just improve diversity in my area, 4) it is not likely to increase crime in my neighborhood, and finally 5) it could, in some small way, improve higher education attainment for Glynn County children. Unfortunately, I think the fears surrounding this rezoning are a typical case of NIMBYism (not in my backyard) rather than an indication of real threats.

Dr. Heather Farley is Chair of the Department of Criminal Justice, Public Policy & Management and a professor of Public Management in the School of Business and Public Management at College of Coastal Georgia. She is an associate of the College’s Reg Murphy Center for Economic and Policy Studies.

What might happen if we raise the minimum wage?

Written by Don Mathews on . Posted in Don Mathews, Reg Murphy.

Supply and demand sounds simple. It rarely is, however, and some cases are quite complex. Consider the minimum wage.

Raising the minimum wage makes low-skilled labor more expensive. Basic supply and demand suggests that businesses are likely to adjust by employing fewer low-skilled workers or reducing their hours.

Economists call that straightforward adjustment the “employment effect” of the minimum wage. Estimates of the actual employment effect – and there are file drawers full of them – are not so straightforward, however. Most are indeed negative, meaning that an increase in the minimum wage reduces the employment of low-skilled workers.

But many of the negative estimates are small, some estimates are close to zero and some are even positive, suggesting that raising the minimum wage might actually increase the employment of low-skilled workers.

The conflicting estimates have economists themselves conflicted. To many, the large percentage of negative estimates supports the traditional view that the minimum wage costs many low-skilled workers either their jobs or work hours. To other economists, the variability in the estimates means we still can’t say with confidence what the actual employment effect is. 

To still others, the preponderance of small negatives, close to zeroes, and positives among the estimates indicates that raising the minimum wage has little if any harmful effect on the employment of low-skilled workers. These economists tend to favor raising the minimum wage.

There’s another interpretation.

Professional grade supply and demand is ever mindful that people can be quite creative in adjusting to change. For instance, businesses can adjust to an increase in the minimum wage in all sorts of ways.

One is to raise prices. Economists have investigated this option closely and have found that businesses largely reject it. For most businesses, wages paid to low-skilled workers is a small fraction of their costs. A higher minimum wage thus increases costs only marginally. Raising prices to cover the costs of a higher minimum wage risks alienating customers.

Plus, there are easier options. Cut health benefits to low-skilled workers. Cut their breaks. Cut their food or merchandise discounts. Cut their training or work amenities. In short, offset the higher wage by cutting other forms of compensation.

It’s thus possible for a minimum wage increase to have no effect on the total compensation or employment of low-skilled workers. What workers gain in a higher wage they lose in other compensation, which enables businesses to avoid cutting hours or jobs.

Another option: raise performance standards and be quick to dismiss workers who fail to meet the higher standards.

Workers adjust in creative ways, too.               

Pay workers more and they are less likely to quit. They are also less likely to behave in ways that might get them fired. Happier workers are also more productive.

That’s not “feel good” fluff. Ample evidence supports the claims. Treating people with common decency is good business.

Which means raising the minimum wage might pay for itself, or better. If the lower turnover and greater productivity reduce costs by more than the higher minimum wage raises costs, the happy possibility becomes reality.

Skeptical? I am. Most business owners and managers already understand all that about turnover, productivity and treating workers decently, don’t they?

At any rate, the upshot is that the employment effect of the minimum wage is likely to vary considerably across businesses, industries, towns, cities and workers. That’s why the estimates of the employment effect vary so much. There is no single employment effect; there are many of them.

So, should we raise the minimum wage or not? We’ll take that up in my next column.

  • Don Mathews
  • Reg Murphy Center