Category Archives: Business and Economy

Which comes first, the jobs or the people?

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New research from an urban sociologist suggests that the conventional wisdom that jobs bring new residents doesn’t match reality:

But according to a study in the Journal of Urban Affairs, MSU’s Zachary Neal found the opposite to be true. Bringing the people in first – specifically, airline passengers traveling on business – leads to a fairly significant increase in jobs, he said.

“The findings indicate that people come first, then the jobs,” said Neal, assistant professor of sociology. “It’s just the opposite of an ‘If you build it, they will come’ sort of an approach.”

For the study, Neal examined the number of business air-travel passengers in major U.S. cities during a 15-year period (1993-2008). Business passengers destined for a city and not just passing through are a key to job growth, he said.

Attracting business travelers to the host city for meetings and other business activities by offering an easily accessible airport and other amenities such as hotels and conference centers is one of the best ways to create new jobs, Neal said. These business travelers bring with them new ideas and potential investment, which creates a positive climate for innovation and job growth. In the study, Neal analyzed all permanent nonfarm jobs…

Neal added that business airline traffic is far more important for a city’s economic vitality than population size – a finding he established in an earlier study and reaffirmed with the current research.

So will cities alter their strategies for creating jobs to match this research?

This could be taken as a call for improved infrastructure, specifically airports and convention centers. Such projects can be expensive and difficult to get off the ground. (As a good example, see the case of the proposed expansion of O’Hare Airport.) But if Neal is right, then having more capacity to bring in business travelers would lead to more jobs. The upfront cost to expand the airport or convention center or attract hotels for business travelers would pay off down the road.

Can the NFL over-hype itself?

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As the NFC and AFC title games slowly approach, I wonder: can the NFL over-hype its product?

On one hand, it appears not. NFL television ratings have been excellent this year (regular season stats here). The league has a number of stars that draw a wide range of attention, from the good (Tom Brady, Peyton Manning) to the bad (Brett Favre, Michael Vick’s sage in recent years). Particularly at this time of year, talk about the NFL dominates the airwaves – a number of other sports are mid-season. The final four teams remaining in the playoffs are historic franchises that have passionate fan bases. Even with Bill Simmon’s recent claim that there is “there’s at least one great [NBA] game” each night, other sports can’t match the popularity of the NFL. The NFL even thinks it can sell $200 tickets for a “party plaza” outside of the Super Bowl.

On the other hand, it is A LOT of talk. In the weeks between playoff games, it seems that ESPN can’t stop talking about the next match-ups. In Chicago, everyone has been talking Bears-Packers. The teams already have played twice so how much more is there to discuss? Could it get to the point where fans tune out the week before and are just happy to get the game over with? And interestingly, it only gets worse for the Super Bowl: then we get the infamous “Media Day.” Though the Super Bowl gets tremendous ratings, how often does the game match the hype? In my lifetime of watching Super Bowls, I distinctly remember being disappointed by most of them. (A couple stand out in memory: the Giants-Bills match-up in 1991, Rams and Titans in 2000, the Bears-Colts in 2007, Patriots-Giants in 2008, Steelers-Cardinals in 2009.)

From a broader perspective, there is no guarantee that the popularity of the NFL will be maintained over the years, let alone continue to increase. (Gregg Easterbrook, ESPN’s Tuesday Morning Quarterback, points this out.) The first non-sports comparison that comes to mind are presidential elections. Yesterday, the New York Times reported how President Obama is getting his next campaign in order and plans to formally declare his candidacy in two months. From now until November 2012, this is what we will hear about in the news: who will challenge Obama, how much money will be raised, what are the issues, who has the best image, what do the latest polls say, etc. Don’t voters, at least some of them, get burned out by all of this by the time the actual election takes place? The idea that some countries have of holding more defined election seasons, typically announced by the current leader and lasting for a few months, seems preferable to this endless, over-hyped presidential election season.

I am sure someone has done research on over-hyping. For the NFL, the question is when will it saturate its market. Of course, one way around this is to expand your market and head overseas. (They are trying to do this with games in Toronto, London, and Mexico City in recent years. But the NBA is way ahead of them.) In the meantime, the sporting public will get heavy doses of talk, analysis, and replays. I, for one, will be very happy when it finally gets to 2 PM Sunday afternoon and we can actually see whether the Bears and Packers will win.

A sociologist offers a short history of dieting

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If you partake of any advertisements in any media form, you will inevitably hear pitches for different kinds of diets. Eat less carbs! Count your points! Take this pill! Get this exercise machine! These sorts of diet pitches are not just a recent phenomenon; a sociologist suggests our ideas about dieting stretch back several hundred years.

Thin has been in much longer than most of us realize, says Ellen Granberg, an assistant professor of sociology at Clemson who studies the history of weight loss…

Moderating the experts will be David Kirchhoff, president and CEO of Weight Watchers International. His organization is just about 50 years old, but Granberg says the very first documented “weight watcher” was an Italian guy in the early 17th century who took notes about his caloric intake and weighed himself daily on a crude scale.

Diet and exercise really took off in the mid-19th century in Europe and migrated over to the U.S. by the 1890s. Why then? Granberg suspects it has to do with the introduction of commercially developed food. And early health gurus, including Sylvester Graham (of eponymous cracker fame), were worried from the get-go about adulterated products.

What Granberg finds most surprising is that modern diets look a lot like the first ones. People were eating low-carb in the 19th century, way before Atkins came along. Sweets were shunned. Just about the only slimming method you won’t hear about today is the suggestion that you smoke cigarettes.

To Granberg, this history proves weight loss has never been easy — and it may never be. “The idea that there is a single, perfect plan is a very old idea. People were thinking about this in the 1600s,” she says. “But it’s always difficult and frustrating. It’s not the fault of the individuals struggling.”

It is interesting to note that the rise of diets in the 1800s seems linked to particular products, such as Graham crackers or corn flakes, that their makers deemed healthy. I wonder if this sociologist could comment on  how much ideas about dieting are tied to capitalism and making money.

And for those who dieted in past histories, which segments of the population were interested in this? Was it a widespread movement or did this come later with the rise of mass media?

How other states see Illinois’ income tax hike

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The news this week that Illinois will have higher personal income and business taxes has spread to nearby states. According to this AP report, “neighboring states” are “gleeful” over this news:

Neighboring states gleefully plotted Wednesday to take advantage of what they consider a major economic blunder and lure business away from Illinois.

“It’s like living next door to `The Simpsons’ — you know, the dysfunctional family down the block,” Indiana Gov. Mitch Daniels said in an interview on Chicago’s WLS-AM.

But economic experts scoffed at images of highways packed with moving vans as businesses leave Illinois. Income taxes are just one piece of the puzzle when businesses decide where to locate or expand, they said, and states should be cooperating instead trying to poach jobs from one another.

“The idea of competing on state tax rates is . . . hopelessly out of date,” said Ed Morrison, economic policy advisor at the Purdue Center for Regional Development. “It demonstrates that political leadership is really out of step with what the global competitive realities are.”

A few thoughts:

1. Mitch Daniels watches The Simpsons? Might this admission hurt his possible presidential run or would it help him sell a hipper image? In the minds of some, perhaps where the analogy breaks down is that the Simpson family always seems to turn out all right in the end.

2. Income taxes are just one factor that businesses consider. I would like to read more about this at some point. For example, the conventional literature on suburban development suggests that low taxes is one of the reasons that residents and businesses decided to move out of the city in the first place. It would be helpful to know what are the “most important” factors that businesses consider – is income tax a lesser factor or a greater factor?

3. How many businesses will actually move to Wisconsin or Indiana or elsewhere and is there a way to predict this? It is true that Americans can vote for certain policies or actions by moving. Taxes may even be part of the reason the Sunbelt has grown in population in recent decades. At the same time, there are other factors beyond taxes that anchor people or businesses to certain places. I was intrigued with this question when living in South Bend, Indiana. Some people said they couldn’t wait to leave. Others wanted to stay. What pushes people (or businesses) to the point where they actually will move? Moving is not an easy process – it requires quite a bit of change and money (though money might be saved in the long run).

3a. The opinion of Wisconsin or Indiana held by Chicago area residents is often not the highest. Are these tax increases enough to push people toward places that they chose not to move to before?

3b. Is this “gleefulness” from other states tied to larger issues other states with the state of Illinois?

A sociologist discusses giving money and gift certificates as gifts

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The history and social significance of money is more complicated than one might think. One sociologist, Viviana Zelizer, has written a lot about money including pieces about how life insurance came to be seen as “moral” in the 19th century and how women’s earnings were seen as extra money rather than part of a household’s finances. In a recent New York Times op-ed, Zelizer tackled a subject that often comes up at the holidays: is giving money or a gift certificate an acceptable gift?

It turns out that both the economic realists who give money as presents and the traditionalists have history on their side, because this is a debate that began back in the early 20th century. As the consumer society expanded and Americans began giving more Christmas presents to more people, money emerged as an acceptable gift. Christmas money, according to a 1912 issue of Ladies’ Home Journal, “supplies dearly cherished wishes, adds small luxuries, prevents worriment and gives opportunities for helpfulness as no other gift does.”…

We can’t all be as clever as Lou Eleanor Colby, but buying a gift card that restricts what the money can be used for is just another way of distinguishing gift money from regular money, and a way for givers to demonstrate their intimate knowledge of what the recipient likes and cares about.

The key here seems to be the significance behind the money or gift certificate: is it simply a cash payout (and writing a check or withdrawing money from an ATM can be a fairly normal and heartless event) or does it have thought behind it (meaning it is a gift certificate that matches one’s tastes)? I know we have had these discussions in my family with people coming down on various sides.

But as Zelizer points out in this op-ed, this was a particular historical process that had to occur. Businesses, particularly those catering to women, had to create a safe space for a gift of money or a gift certificate. Gift certificates do not have inherent significance – it must be endowed with such by the society, the giver, and the recipient.

Personally, I would accept both cash or gift certificates. But they do have separate meanings: cash tends to go into a larger pot of money and gets lost while a gift certificate, say to a bookstore, helps keep that money destined for books or music or DVDs. I would also expect that the younger generations have less difficulty giving and receiving money or gift certificates.

How to respond to the demise of Borders

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With negative business news about the bookstore Borders, a number of commentators have weighed in with opinions about how to respond. On one hand, Borders is a big box bookstore that helped push independent and smaller bookstores out of business. On the other hand, the demise of Borders suggests that bookstores in general are on the way out in favor of online retailers.

Chicago Tribune columnist Mary Schmich writes about how the closing of the Borders store on Michigan Avenue in Chicago affects the shopping district:

By Saturday, Borders’ marquee Chicago store, at 830 N. Michigan Ave., will be closed for good. And — here’s what I think is the real news — the city’s premier shopping street will be without any bookstore for the first time in decades…

Borders was hardly a landmark on par with the old limestone Water Tower that stands just outside the store’s windowed walls. It had occupied its prime corner for only 16 years, barely a blip in Chicago history.

But 16 years is half an eternity in retail time, and Borders had come to seem as basic to the street as traffic.

Back in 1995, when it opened, spinning through its revolving doors was like stepping into a literary Oz, a unique place that, even though part of a chain, pulsed with ideas, people, cappuccino.

Even people who sniffled that it was killing smaller bookstores — most memorably the cozy shop just up the street run by the legendary Stuart Brent — came for the books and the buzz.

I myself have spent a good amount of time in this store, browsing books and music. This location was a nice change of pace from the typical retail store (clothing, in particular), a place to get out of the heat or the cold, watch people go by on Michigan Avenue, and enjoy browsing.

Instapundit provides a different perspective. After some comments about how Borders leftist leanings might have driven some customers away, Instapundit quotes an email from a reader who cites the irony of people lamenting the end of Borders:

Is this — like much of the newspaper industry — a case of the leftist 20% of the populace chasing a way a lot of potential customers over politics? Or is it mostly just technology and convenience?

STILL MORE: Reader Gary Rice has thoughts on the sudden onslaught of Borders-nostalgia:

Re; Borders…. Wasn’t it just a few years ago that Borders and Barnes & Noble were the bad guys? Corporate behemoths destroying the local independent bookstore with their Wal Mart like pricing models ? Wasn’t there even a Tom Hanks romance movie about this exact subject?

So Amazon comes along with a better pricing model and now we are all supposed to mourn liberal Borders’ demise? It is a wonder these people remember how to read, because they sure can’t remember anything else….

Heh.

A good point: can we lament the end of Borders today after criticizing it for over a decade? Perhaps we can: bookstores could be considered “third places,” a middle location between home and work where citizens could gather to read the news, talk to each other, and shop. I suspect there will always be people who like going to bookstores (I will still enjoy it though I’m not sure I would go out of my way to go there) but perhaps they simply can’t survive on the scale and size of a Borders or Barnes & Noble.

These sorts of strange juxtapositions may one major marker of our globalized and fast-paced economy. Do we want any bookstore or a big box bookstore or an online bookstore or an independent bookstore? People vote with their dollars and visits and within twenty years, the entire landscape can change.

But I doubt we would see the same kind of mourning if Walmart suddenly went out of business in favor of online retailers. There is something unique here about bookstores.

Generation R(ecession)

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This isn’t the first article or commentator to suggest that the current generation of roughly 20-somethings will be profoundly affected by the current economic malaise. But sociologist Maria Kafelas provides some insights into what she terms Generation R:

[Generation R] were born between 1980 and 1990. They’re the children of the baby boomers…

Working class kids said to us, “Listen, we’re going to be the first generation of Americans to do worse than our parents.” One young woman said, “I just feel burned. My friends who didn’t go to college, they don’t have debt and they’re making more an hour than I am.”…

[A working class girl who went to college] actually said, “I don’t even know why I spent the money.” The middle class kids were saying, “It’s very tough, I am filled with anxiety. I can’t sleep at night, but I still believe in a college degree. I’m just going to have to work harder and it’s going to take longer.” And those elite kids said, “Is there really a recession? It’s more like — it’s just harder for me to get a job.” And they’re sitting out this recession in a lot of ways…

They now talk a great deal about not wasting money; conspicuous consumption they say has gone out of fashion. And they don’t want to be seen as throwing money around when their families are eating into their resources to keep them afloat, etc.

If these characteristics do mark this current generation, their beliefs and practices would affect a number of institutions: higher education (and the education system in general), the economy (with more measured consumption practices), the relationship between generations (perhaps being the first generation in a while whose life is not markedly better), and perhaps more (government – for letting this all happen, financial institutions – for helping to make this happen, etc.).

But these comments from Kefalas also highlight the class differences that are exacerbated in these difficult economic times. For the elite, not a whole lot has changed. The middle class may still believe in college and the value of hard work. But it is the working and lower classes that might really have a lack of hope as the ways to move up, such as a college education, seem to be further out of reach.

Another possible consequence of the foreclosure crises: a lack of trust of financial institutions

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In recent decades, a number of sociologists have written about a necessary feature of human interaction: trust between the individuals or groups involved. Two sociologists discuss this in the Huffington Post:

While also feeling shame and embarrassment, even personal failure, for having allowed themselves to be taken in, these families are also aware of the exploitation they have experienced at the hands of their “trusted” financial advisors. That mistrust threatens the recovery some believe has begun in recent months.

As the British sociologist Anthony Giddens has noted, in complex societies where each individual cannot become expert in all the institutional contexts in which they must operate, trust is essential for people to negotiate the various realms, including financial institutions, in which they operate. People must feel secure in the trust networks they establish in order to survive and prosper, and for society itself to advance.

In a series of in-depth interviews nationwide with 22 adults who are at risk of foreclosure (they were either behind in their mortgage payments at some point in the past two years or, in two instances, had already lost their homes due to foreclosure) all respondents expressed both anger and personal responsibility. The interviews lasted between 30 and 90 minutes. In no question with any respondent was the word “trust” used. But in every case but one, the respondents explicitly referred to the mistrust they now have for anyone associated with the mortgage lending industry in particular or financial services generally.

From this short excerpt, it is hard to get an idea of how representative these 22 respondents are and how we can know whether their opinions reflect those of Americans at large. But if this is generalizable information, it suggests it could take a long for customers to approach the mortgage industry in the same way. At the same time, many Americans don’t really have many other options when shopping for a home: a mortgage is a necessity. So how could the mortgage industry once again gain the trust of consumers – special programs, special efforts, more government regulation?

According to the postscript at the end of the article, a longer argument from these two sociologists will be published soon in Social Science Quarterly.

The American Bar Association issues a financial warning for prospective law students

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The American Bar Association has issued a warning for perspective law students about the cost of obtaining a law degree:

According to the association, over the past 25 years law school tuition has consistently risen two times faster than inflation.

The average private law student borrows about $92,500 for law school, while law students who attend public schools take out loans for $71,400. These numbers do not include any debt law students may still have from their time as undergraduates.

Before the recession, the ABA cites statistics that show an average starting salary for an associate of a large law firm of about $160,000 a year. But by 2009, about 42 percent of graduates began with an annual salary of less than $65,000.

And those are just the newbies.

This is an interesting statement: a national organization warning students about the large amount of debt they will incur (and hinting at the lack of jobs to pay off this debt) for their own profession. What do law schools think about this? What sort of discussions took place before issuing this warning? How many complaints have come from people who did not know about the full cost of getting a law degree?

It would help to have some context regarding this statement. Is this the first time the ABA has issued something like this? How unusual is this across a variety of disciplines that require a professional or advanced degree? Are other organizations interested in issuing similar statements?

(Read the full statement here.)

h/t Instapundit

Deciding whether to buy or rent

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One of the New York Times blogs discusses whether residents should buy or own. The decision could be based on a ratio for metropolitan areas that gives some indication of whether owning or renting is a better choice:

A good rule of thumb is that you should often buy when the ratio is below 15 and rent when the ratio is above 20. If it’s between 15 and 20, lean toward renting — unless you find a home you really like and expect to stay there for many years.

While the metropolitan average is 15.1, 17 metro areas have ratings over 20 (led by East Bay, CA, Honolulu, HI, San Jose, CA, San Francisco, CA, and Seattle) and 14 metro areas have ratings below 15 (with the five lowest being Pittsburgh, PA, Cleveland, OH, Detroit, MI, Phoenix, AZ, and Dallas – Fort Worth, TX).

The blog writer come to this conclusion about the data: “It’s pretty amazing when you think about it. The country has suffered through a terrible crash in home prices, yet buying a house remains an iffy proposition in many markets.”

While this may be true, what is even more remarkable is that homeownership is still such a widespread goal. If this measure is reliable and valid (meaning that it is consistent and it really tells us something about buying vs. owning), then homeownership might never really be about an economic improvement over renting. Rather, Americans have made owning a home an important cultural value and then use economic rationales to justify their decisions.

What exactly is it that appeals to people about owning their home? They get to make their own decisions, they don’t have to pay a landlord or wait for them to take care of repairs, they get some separation from their neighbors, and overall, they feel like they have made it on their own. If renting was a cheaper option but people could still afford to buy a home, how many Americans would decide to rent?