Category Archives: Economic Development

Follow Up on Living Wage and Inequality – Neal Peirce in @citiwire

Neal Peirce discusses the challenges of poverty wage jobs at major chains – linking severe inequality with these jobs.  Given the recent debate in DC over its living wage job and recent reporting on inequality, the article is apropos.

Peirce notes that Los Angeles hotel workers near Los Angeles International Airport (with support from service unions) got a living wage law passed and are now paid $12 an hour.  Further efforts in LA are underway to expand the law.

Peirce also highlights the negative social and psychological effect on children of low wage workers who feel helpless, which may be one of the most lasting and damaging side effects of inequality.

There is hope – Bill de Blasio, now the frontrunner in the NYC Mayoral race, has taken low wage work up as a campaign platform.  Peirce quotes de Blasio’s exasperation over a minimum wage of $7.25 an hour.  He has been surging in the polls – maybe the economic populism has something to do with it.

Is Harvard Business School a Microcosm of American Inequality?

Jodi Kantor, writer for the New York Times, chronicles class division and inequality at Harvard Business School.  In addition to $50,000 plus a year tuition, students are expected to spend significant amounts of money for extracurricular events and activities.  Some students interviewed in the story estimated that the costs of social events were upwards of $20,000 over the program.  Kantor also noted increasing division between students of middle and lower socioeconomic status and students (both domestic and international) who come from incredibly wealthy backgrounds.

Paul Krugman commented on the article today in the New York Times.  He suggests that wealth inequality is moderating the benefits of education, making upward mobility more difficult.

DC’s Mayor Gray Vetos Living-Wage Law — Setting up City Council Vote to Override

Vincent Gray has vetoed a living wage bill in Washington DC that would require stores with corporate sales over $1 billion dollars that operated large footprint stores (75,000 square feet or more) to pay a super-minimum wage of $12.50.

The bill was targeted largely at a set of new Wal-Marts that were planned to be built in the city. Proponents wanted to ensure that workers were paid a fair wage.  Opponents worried that the law would limit grocery store access and jobs (even low wage jobs) for people who need them.  Wal-Mart has threatened to cancel the locations if the bill passes.  Some feel that the threat is hollow because the store wants to access the dense population in the city.  The City Council can override Gray’s veto with a two-thirds majority vote in favor of the bill.

As former Secretary of Labor Robert Reich once questioned, are we limited to a future of high wages and high unemployment (as in Europe) or low wages and low unemployment?  Hopefully we can create and plan a future with high wages and low unemployment.

Adding One To Ezra Klein’s 5 Worst Things About The Jobs Market

Ezra Klein from the Washington Post has a great analysis of today’s somewhat disappointing jobs report.

I’d like to add one point.  We need to create even more jobs to keep up with population growth.  Klein gets at this in his third point about weak job creation, but we need to remember that we aren’t just aiming at getting back to pre-recession job levels.  America is a growing country and getting back to pre-recession jobs levels in 2023 will mean that the country will still have high unemployment and numerous people out of the job market – we have to do better and create jobs faster.

The Downside of Incentivizing College Loan Debt or Home Debt For Educated Workers

Garance Franke-Ruta recently wrote a piece for the Atlantic suggesting that using debt reduction to incentivize young, debt-strapped professionals could be a good way to increase urban populations, especially in distressed cities.  Given that the country has a serious student loan debt problem AND a number of distressed cities, it seems like the suggestion could be a way to “kill two birds with one stone.”  A policy like that could help reduce student loan burdens as well as bring people to a city that would not have otherwise lived there.

In fact, policies like this have been close to passing.  Recently the New Jersey Legislature considered providing refundable tax credits (that would turn into student loan payments) to college educated residents that moved to either Jersey City, Camden, or Trenton.  New Jersey proposed giving new college educated residents $7,000 for two years of residence in one of the three cities.  (The program did not pass).

On first brush a policy like this – paid for either by federal, state, or local government – seems to make a lot of sense – it could reduce student loan debt and get people to move into a city.  But from both the national, state, or local government perspective, there are serious flaws in the implementation.  I’ll outline a few of them for each level:

National

Regressivity – The main critique I have at the national level is that a program like this is regressive.  It gives money to college graduates who are likely to make more money than their non-degree holding counterparts.  National policy – with respects to higher education – are about making it more affordable, therefore more equitable and accessible to more people.  The country does have a student loan debt problem, but there is a good chance that providing money to solve the debt problem without addressing the cost of education would not do this.  As incentives were more available, college costs will simply “price in” the incentive and  outpace any tax credit or debt reduction programs.  Student debt is a symptom of flawed student finance.

A progressive program would increase access to college for people who could not afford it, thereby increasing access.  The proposed program in the Atlantic rewards people who were able to finance and finish college – a group that least needs incentives.  This is a similar critique to those who would like to see the mortgage interest deduction eliminated or phased out at higher incomes.

Congressional District Politics – urban policy has been limited because of Congressional District politics.  How would a program like this pick the “winning” cities where incentives would be provided and “losing” cities where they weren’t.  Hopefully Congress would use some type of objective criteria to identify the cities most in need of highly educated new workers and residents or that would benefit most from their presence.  (Most in need and most likely to benefit are not synonymous either).  But given the history of other urban related policies like Clinton’s Empowerment Zone programs, we should suspect that twice as many cities will be designated with half as much funding.  Alice O’Connor gives a good review of this in her 1999 essay, “Swimming Against the Tide.”

State and Local

State and local policies are similar so I will discuss them at once:

The Enduring “But-For” Problem – young adults want to live in built up, walkable urban areas.  Urbanist and urban planning media presents some evidence of this phenomenon constantly.  Economic developers are criticized for giving unnecessary incentives to businesses that would have come to an area with or without any government intervention.  This is called the “but-for” problem.  Tim Bartik, an economist at the Upjohn Institute for Employment Research, suggests that incentives can be beneficial if a company would not have located in the area otherwise.

If states or cities pay young college educated workers to live within their boundaries they should be sure that the new residents they attract would not have moved to the area “but-for” the student loan forgiveness.  The proposed programs seem to suggest that incentives between $7,000 and $20,000, will be paid one time, in the future after a certain length of residency.  Young college educated adults are smart and intuitively discount future payments, further reducing the value to individuals.  The young bright people might not be swayed to move to an area just by the sum, but would take advantage if they moved to the area for other reasons.

Buffalo Hunting – this is similar to a main criticism of economic development.  Another important assumption of these programs is that a small amount of money will induce the new residents to stay for a long time.  If people stay for a long time, they will ultimately pay their incentive back through taxes and other economic and social benefits.

Economic development sees a small set of “footloose” businesses that move from one locality to another, constantly taking advantage of different tax incentive programs.  Individuals could do this even more easily.  College educated workers are the most mobile people in the workforce and can move more easily than any other workers.  Theoretically, someone could bounce from one residential student debt incentive to the next and pay off all of their loans.  This would be great for that individual, but every municipality or state that gave them money under the hope that they would pay their money back would be left without much return on that hope.  “Clawbacks” or provisions that protect the locality would need to be stronger, but they would reduce the efficacy of the incentives.

Conclusion

Helping distressed cities and making college more affordable and accessible are very important, but I am not sure that incentivizing completion and residential location in this way works to solve the issue.

 

#aesopacsp13 Recapping the AESOP-ACSP Joint International Congress in Dublin Ireland

I attended the Association of European Schools of Planning (AESOP) and the Association of Collegiate Schools of Planning (ACSP, it is the North American association of planning academics) Joint International Congress in Dublin Ireland from July 15-19.  What a great conference!

Dublin is a nice European city to spend a few days in, especially with the “European” style of academic conference where proceedings are held at the host university’s campus instead of in a conference hotel.  Despite the logistical considerations of getting to and from the university, it was a great way to meet other academics and to get the see the city with them.

I also got to go on a mobile tour of Tallaght, a new town development in the Dublin suburbs.  While the town dates back centuries, it was interesting to see the greenbelt style development from the 1960s as well as the more recent new urbanist commercial and mixed use development.  The recent development is struggling because of the global recession, which Ireland felt especially acutely, but in the future the area should be a nice mixed-use community. The town is about a 20 minute drive from the Dublin historic core and is connected by light rail that takes between 45 minutes and an hour.  As the region grows, Tallaght should become an alternative place to live for people working in the city.

2013-07-17 15.54.24(Tallaght commercial plaza — with both vacant and occupied retail spaces)

I learned quite a bit from the papers that I heard at the conference too.  From strategies for shrinking cities to the downfalls of cycle theory to evidence on neighborhood change and gentrification to new methods of assessing divergence from the median, I am always impressed with the quality and depth of research on urban planning and urban issues.  I also got very helpful comments on my dissertation research and suggestions for follow up studies.  I am excited to continue my research and to hear more in Philadelphia at the ACSP 2014 Conference.  (I am going to follow up with a number of posts on specific papers and presentations that caught my attention.)

And a final note – conferences are also a great way to meet new like minded people.  I met so many people, both in person and through the high quality tweeting on #aesopacsp13, that I look forward to continuing to communicate with and to be a part of my academic and professional community.

 

Recapping Lincoln Education and Land Policy @LandPolicy Conference

This post is somewhat belated.  The 8th Annual Land Policy Conference was held by the Lincoln Institute of Land Policy in Cambridge, MA in early June, and this year’s topic was Education, Land, and Location.

Eric Hanushek, an educational and urban economist from Stanford, was the keynote speaker where he gave an overview of research that he had conducted for the OECD that identified a economic benefit to the United States of somewhere in the range of $40-50 trillion dollars (in present terms) associated with closing the achievement gap between minority and white students in America.

The rest of the conference was made up of thorough discussions of national and international research on how land policy and education are inter-related.  Presenters (and chapters in the upcoming volume) will provide a vast overview on some relatively traditional research topics – including how school quality is capitalized in home values and why people without children in schools still support taxes for education (the answer is that it supports home value and community quality according to William Fischel’s “Home-Voter Hypothesis).  The conference papers also covered how newer policies like school choice and residential mobility programs affect individual outcomes in education and the labor market.  While there was some disagreement on the topic, choice and mobility might contribute to further inequality – but this could be just a short term effect.  There were also great papers on homeschooling, the role of segregation in educational outcomes, and how school choice affects municipal transportation costs.

I was encouraged to see urban economics, urban planning, education policy, and land policy being discussed in nuanced and innovative ways! I learned a lot at the conference and the work of the scholars at the Lincoln Conference has influenced by dissertation.