Archives: Reg Murphy Pubs

Why local workers are harder to find

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

Plenty of local businesses have raised their wages but are still having difficulty attracting workers. Which means, of course, they haven’t raised their wages enough.

I’m sure the “raise your wages even more” assessment exasperates business owners into a froth, especially when offered unsolicited by a pointy-headed academic who has never had to worry about covering labor and a zillion other costs to make a living.    

I get that. The labor situation for employers in Glynn is indeed difficult, and the difficulty runs much deeper than supplemental unemployment compensation, shuttered day care facilities and other consequences of the pandemic.

We have some major league long-run economics going on here. Consider: 

Since 2005, Glynn’s population has increased by 19 percent, from 72,589 to 86,002. Total personal income in Glynn, adjusted for inflation, has increased by 28 percent, from $2.926 billion to $3.74 billion.   

In a word, Glynn’s population and economy have grown significantly since 2005. Our labor force, however, hasn’t grown at all.

Here are the numbers. Glynn’s labor force is currently 39,617. In 2005, it was 39,156. Allow for standard estimation error and there’s no difference.

Shifting business conditions and a variety of other factors cause a labor force to fluctuate in size from year to year. Since 2005, our local labor force has ranged between its all-time high of 41,141 in 2008 and 37,028 in 2014.

Year-to-year labor force fluctuations of the magnitude we’ve seen in Glynn since 2005 would be ho-hum if our population had held steady around its 2005 count of 72,589. Our issue is not the year-to-year fluctuations.

Our issue is 16 years in the making: 19 percent population growth, 28 percent real personal income growth and no change in the size of the labor force.

Glynn does draw workers from other counties, especially Brantley and McIntosh. (Which is why, in case you’ve wondered, the U.S. Census Bureau has Brantley, Glynn and McIntosh designated as the Brunswick Metropolitan Statistical Area or MSA, for short.)

Glynn employers certainly appreciate the help, but our MSA shows a very similar labor force pattern.

In 2005, the labor force of the Brunswick MSA was 51,817. Since 2005, it has fluctuated between 54,417 in 2008 and 49,766 in 2014. It currently stands at 53,135 – a puny change considering the 22 percent jump in the MSA’s population since 2005.

Strong long-run population growth, solid long-run economic growth, zero long-run labor force growth. That’s our local labor situation. Throw the long-run ever-rising numbers of tourists into the mix and it’s no wonder local businesses are scrambling for workers.

What’s behind this odd long-run labor force pattern? 

Have a look at the change in Glynn’s working age population by age group from 2010 to 2019, the most recent year for which county age group estimates are available. (Age grouping inconsistencies in Census county population estimates require starting with 2010 rather than 2005.)

Between 2010 and 2019, Glynn’s working age population – that is, everyone 16 years old or older – increased by 7,034. The population of 16 to 19 year olds increased by 399. The population of 20 to 54 year olds increased by 70. The population of 55 to 64 year olds increased by 1,055. The population of 65 year olds and older increased by 5,510.     

The labor force participation rate for 20 to 54 year olds is 80 percent. The labor force participation rate for 65 year olds and older is 20 percent.

Glynn is attracting retirees. Younger workers, not so much.

  • Don Mathews
  • Reg Murphy Center

New, Small, and Creative Entrepreneurs

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

Readers of ‘From the Murphy Center’ know that new firms – those under 6 years of age – are the source of all net job growth in the United States economy. These firms are also the source of new entrepreneurial creativity. New and small firms also know that they cannot compete head on with older, more established businesses. To survive, the new, the small, the creative, must compete around the edges of the market with niche/unique goods and services.

I would like to think that the same could be said about academic enterprises. Are we creative entrepreneurs? While I let you be the judge of what follows, I do think some adjectives that could be used to describe the School of Business and Public Management (SBPM) at the College of Coastal Georgia might include new, small, and entrepreneurial.

SBPM was created in fall 2009. So, we are sort of new, yet a bit older than 6. Let’s just say that we are new relative to all the other units in the University System of Georgia (USG). We are also small. Programs in SBPM enroll only about 900 students. Also, from business administration to culinary arts, we are probably one of the more program-diverse schools of business in the State system. So my colleagues don’t think bad of me, we have degree programs in business administration, criminal justice, public management, workforce management and leadership, health informatics, hospitality and tourism management, and culinary arts. We are like Nick’s – a buffet of high-quality products, friendly service and simply unique. (Some will also say that with me as Dean we also have some bull.)

But are we entrepreneurial? Do we try to solve the problems of others?

Everyone enrolled in the BBA receives a general business major. However, as part of their program of study, each student chooses an area of concentration like accounting, finance, marketing, etc. for extended, in depth study.

A new BBA concentration this fall is Cyber Defense. Several years ago we added cyber courses to our criminal justice program. This was based on the idea that cyber security issues tend to end up as criminal justice issues. The recent cyber attacks on various companies and looking at Colonial Pipeline specifically, questions if business leaders fully understand cyber security and the management of cyber assets within a business context. This is a real problem. One part of a solution is to start hiring new, knowledgeable employees. So, to help we added the cyber defense concentration to the BBA program. It is essentially the same as the one we created for the criminal justice program. This offering is rather extensive, 8 courses in all, across all four years of study.  In addition, students can earn valued certificates found in the cyber security area that are expected of well-trained and qualified individuals. This is much more than a minor which is found in other business programs.

Another new concentration offered this fall is Small Business Creation. Students pursuing our BBA degree have several concentrations from which to choose. To a large degree, our students will be seeking entry level positions at existing firms. Again, a concentration adds to a student’s knowledge base that is being offered to potential employers. I suspect that this is true of almost all graduates of undergraduate business programs.

However, there are students who simply want preparation to start their own businesses after graduation. Traditional concentrations do not really prepare a student to do this. A traditional concentration is just adding specific knowledge about one area of business. However, students selecting the small business creation concentration see themselves as entrepreneurs ready to take on the marketplace. The goal of this concentration is to assist a student developed a business plan that can be executed after graduation, if not before. This program covers 18 months. A very special feature of it is that a student works, not only with faculty, but with a mentor who may come from our wonderful coastal retirement community. This is truly a unique BBA concentration.

So, are we creative entrepreneurs that just happen to be academics? You be the judge. Join us in our entrepreneurial endeavors by spreading the word of these new programs. Better yet, for real fun, give back by giving it forward, become a mentor. Drop by to learn more. I’m in 211 Academic Commons North at the College.

Skip Mounts is the Dean of the School of Business and Public Management at the College of Coastal Georgia, a Professor of Economics, and an associate of the Reg Murphy Center of Economic and Policy Studies.

  • Reg Murphy Center
  • Skip Mounts

The Conflict Between Market Freedom and Human Freedom

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

Last weekend, we celebrated our country’s birthday. We celebrated our independence from the British Empire, and we celebrated our nation’s foundation on the principle of freedom. Freedom. Freedom of “all men” to enjoy the “unalienable Rights” of “Life, Liberty, and the pursuit of Happiness.”

In the same year that Thomas Jefferson so eloquently described the American ideal of human freedom, Adam Smith published his book The Wealth of Nations, describing what would become another pillar of this new country—market freedom and its close relative, capitalism.

And, so, in 1776 were born a new nation and a new theory of economics. Both were founded on principles tested through history, but each included novel and genius concepts that have forever changed how we think about the world.

What I find interesting is how these two American ideals—freedom of men and freedom of markets— have interacted over the years. While many Americans would die defending both concepts, I would argue that, in fact, the two cannot coexist without compromise.

The American experiment has made this clear. All men cannot be free unless markets are regulated.

Let’s look at some examples, using Jefferson’s three unalienable rights of freedom as our guide.

First, the right of life. When I think about what it means to have life, I think of health and the conditions necessary for sustaining or extending life. Free markets often deny those conditions. For example, unregulated manufacturing produces polluted air and water, which can cause significant health effects for the people who ingest the toxins. Additionally, a highly capitalistic healthcare market leaves many families without access to quality healthcare and, consequently, without the unalienable right of life. This became especially apparent during the Covid-19 pandemic, as the virus disproportionately killed poor and minority individuals with limited access to healthcare.

Second, the right of liberty. Our newest federal holiday, Juneteenth, is a reminder that even as Jefferson wrote about freedom for “all men,” the early American economy was dependent on denying liberty to those who were enslaved. Until June 19, 1865, when government regulation finally ended the most egregious economic practice of American history, market freedom meant denial of human freedom.

Last, Jefferson included in his description of freedom the right to pursue happiness. This evokes the ideal of the American dream, the promise that in America, one can be and do whatever they want if they are willing to work for it. This is an inherently capitalistic dream and is the reason, despite what I have written here, I still like (regulated) capitalism. Unfortunately, though, due to discriminatory practices, this dream is not available to all in an unregulated market. I have written pretty extensively about labor market discrimination here before, and I will not rehash it all. But, data as well as anecdotal evidence show unequivocally that racial and gender discrimination still exist in American labor markets, and as I stated in an article published here a year ago, It does not matter how hard you try to climb a ladder if those who built the ladder did not install rungs all the way up for people like you. Without anti-discrimination regulation, markets do not provide for everyone the freedom to pursue happiness.

Before you freak out about all this, remember that market regulation, too, is a part of the fabric of America. It is what government exists to do—address shortcomings of markets. If we truly value human freedom and if we truly believe that life, liberty, and the pursuit of happiness are unalienable human rights, we should always possess a healthy commitment to examining and re-examining our economic systems to be sure they are promoting, and not hindering those rights.

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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.

Inflexible remote-work policies could hurt businesses

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

My economics colleagues at the Murphy Center have been exploring some of the timely labor market trends we have been seeing in the post-vaccine economy. They have adeptly explained the economic shifts we are experiencing and explained why these shifts might have occurred. I would like to extend this line of thinking from a policy perspective — not public policy, but business policy.

A March 2021 survey (Pulse of the American Worker Survey: Is This Working? A Year In, Workers Adapting to Tomorrow’s Workplace) looked at the new remote workforce to understand where businesses need to focus their policies moving forward. While businesses may be keen to resume fulltime, in-person operations, the workforce seems to have other ideas that will undoubtedly have to be considered if companies wish to retain talent.

The American Worker Survey found that 73% of all workers say employers should continue to offer and expand remote-work options even after the pandemic is over. This number was even higher among those who have been working remotely throughout the pandemic (83%). Forty-two percent of those same workers who have been working remotely during the pandemic also indicated that if their employer does not continue to offer an option to work from home, they will quit and look for a more flexible company.

These staggering numbers are likely related to the age demographics of American workers today. According to the Pew Research Center, millennials (ages 25-40) are currently the largest generation in the workforce. Among millennials in the American Worker Survey, 1 in 3 reported that they plan to look for a new job with a different employer once the pandemic is no longer an issue. Only a quarter of Gen-Xers and 10% of baby boomers reported the same.

These numbers align with a recent New York Times article on the new YOLO (you only live once) economy. In the article, technology columnist Kevin Roose explains that millennials have enjoyed rising asset prices and stabilizing savings that have emboldened them to re-evaluate their careers and view job flexibility as another kind of benefit. Just as they would consider health care benefits as an important factor in job choice, flexibility is increasingly becoming less negotiable for them. In fact, in Care.com’s recent report The Future of Benefits, 500 human resource leaders and decision-makers across the U.S. were asked about the kinds of benefits they plan to increase, decrease, or change. Nearly all (98%) of the respondents indicated that they planned to newly offer or expand the benefits workers deem most essential: child and senior care or flexibility in work arrangements.

Even in our own field of higher education, where a sense of place has typically been seen as essential, faculty and staff job candidates are already identifying flexible work as a key job issue according to leaders within the College and University Professional Association for Human Resources (CUPA-HR). These leaders further warn that failing to offer flexibility could lead to a “turnover tsunami” on college campuses. Higher Ed has lost at least 570,000 workers since the start of the pandemic through both layoffs and voluntary departure. Colleges and Universities will have to compete not just within the field now, but with other industries who are willing to offer flexibility as a benefit.

As businesses start returning to more normal operations in the coming months, it seems clear that talent recruitment and retention is going to be more important than ever. And if that recruitment/retention strategy includes millennial workers, forward-thinking businesses need to start having serious conversations about the role of remote work in their culture and operations.

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