Tuesday, October 21, 2014

A first sign of wage growth

Numbers about the labor market continue to send mixed messages.  The unemployment rate is down to 5.9 percent, a level last seen in summer 2008.  In contrast the employment-population ratio dropped from 63 per cent in early 2008 to 58.5 percent by fall 2009 and has not recovered since (still at 59.0 percent).  So is the labor market back to full employment, as the unemployment data indicate, or is there still a significant excess supply of potential workers?

A key signal, many observers feel, is what will happen to wages as output expands.  If those out of the labor force are really just like the unemployed, employers will be able to fill new positions without having to raise salaries.  On the other hand, if those who have left are out for good and we really are near full employment, then salaries will need to increase.

It is too early to know which interpretation will turn out to be correct.  Last week WSJ reported rising "manufacturing wages ... in some major industrial states as shortages of certain skills ... force more companies to pay up to attract and retain workers."

However, most jobs are in the service sector.  When we hear about Walmart having trouble getting greeters and cashiers, we will know for sure that the labor market is getting near capacity.

Sunday, October 19, 2014

N&O features NC State MBA career coach John Hutchings

Today's Raleigh N&O has a long story providing advice about how to work a job fair.  The first person quoted and the person who appeared to be quoted the most (because he is THE expert) is our own John Hutchings, associate director of career development in the NC State Jenkins MBA.

Career development support is a key difference between a good MBA program and a great one.  Most MBA programs for part-time students provide little, if any, of this support.  John has been with NC State's MBA program for six years and he has become the go-to guy for career advice for working professional MBAs.

Going to a career fair soon?  John has the following pointers:

  • Research carefully the companies you are interested in.  Don't just look at the web page; use Linked In to network with employees.
  • Dress professionally, even if the interviewers are wearing polo shirts.  
  • Tailor your resume for each company that you are excited about contacting.  

Friday, October 17, 2014

How soon before we choose our own cable bundle?

The recent announcements by CBS and HBO to start selling content directly to consumers mark the beginning of the end for the bundling of cable TV stations.  Now consumers can choose between different tiers of programming but are locked into all channels within a tier.  Time Warner Cable in Cary NC has starter TV with 20+ channels (mostly local channels and CSPAN), standard TV with 70+ channels and preferred TV with 200+ channels.

The average person ends up paying for lots of channels that are never watched.  Cable cutters have moved to Hulu, Netflix and Amazon Prime.  These outlets provide plenty of content but they do not include (1) live sports and (2) the latest shows on premium channels.  This is now changing; it will not be long before the other major networks and premium channels match CBS and HBO.

The tough question: will buying the stations you want a la carte save you money?  This WSJ piece argues that the answer will be yes in a single person household where only a few channels get watched.  But in a multi-generational household with varying tastes, the old cable bundle may start to look pretty good.

Another key issue: households still need an internet connection to watch online content, even if they drop cable.  Is there enough competition between cable, DSL and satellite broadband services to keep internet subscription costs down?  If not, cable companies will raise their fees for internet service to make up for lost revenue from cable channels.

Finally, if cable cutting becomes widespread then expect many channels to vanish (will we be able to survive without VH1 Classic?) and others have to raise prices significantly to cover costs. ESPN collects about $5.50 from every cable customer, regardless of whether they ever watch it.  The unbundled version will create pain: either it will end up costing a lot more or college and professional sports may have to learn to get by on less revenue.

Friday, October 10, 2014

Amazon security vs. worker rights -- which will give?

The Supreme Court heard arguments Wednesday on whether Amazon should be required to pay workers for time they spend in line going through security clearances as they leave work (BBW account here).  Right now this time is unpaid and workers complain of wait times of up to 30 minutes.  Since Amazon does not have to compensate its workers for this time, it has no incentive to invest in quicker, more expensive inspection techniques.  Interestingly, the Obama administration is supporting Amazon!

There is no legal precedent that readily applies.  Workers cannot be paid for commuting time, which makes sense because workers make choices about how close they live to their job.  Workers have no choice about the inspections, a factor that may weigh in their favor.  But of course airport passengers have no choice about the TSA!

A key issue, BBW argues, is whether the time in line is "integral and indispensable" to essential work activities.  Butchers have to be paid for time spent sharpening knives; in some occupations where workers are exposed to hazardous materials, workers get paid for time spent cleaning up.

Apparently Amazon has other unique workplace policies, such as no lipstick and no watches, because of their concern about employee theft.  

Thursday, October 9, 2014

What does the future hold for full-time MBAs outside the top 20?

In an interview with P&Q, outgoing Pitt dean John Delaney thinks the future will not be pretty.   He sees a lot of programs with 60 or fewer students total and questions their ability to survive.  The applicant pool keeps getting smaller and younger.  Many of these schools are offering financial aid to most (and in a few cases, ALL) of their full-timers.   Those that do not have a generous alumni base or a successful exec ed revenue stream will have trouble maintaining this level of aid support.

Tough question: what will determine which programs fold and which prosper?  I see three factors:
#1) Location: Some very good universities are located in very remote areas.  This is a hindrance for an MBA program where networking with the business community is a key element of the degree's ROI.
#2) Differentiation: All too many MBA programs are clones of each other.  Could you tell the difference between the Georgetown and Georgia MBA programs if you just looked at the list of courses and requirements?
#3) Experiential learning: Programs that focus on textbooks and historical cases will lose market share to those where students work in teams that consult with real companies on live cases.  The students with hands-on experience will be better trained and will have better networking opportunities.

NC State's Jenkins MBA is well-positioned on all three fronts.  We are located in one of the best places to live and work in the country.  We have followed a differentiation strategy focusing on innovation.  And the program is extremely experiential, perhaps more so than any other program in the country.  Maybe that is why we are rising in the rankings and enrollment numbers for 2015 are looking very, very good?

Friday, September 26, 2014

Hiring and promotion at Chipotle

Great LinkedIn post by Paul Patrone about incentives for employees and managers at Chipotle Grill.   Chipotle restricts its hiring to entry level positions and develops employees for managerial roles.  New hires are exposed to all aspects of the operation -- cash, cleaning, and cooking.  The one policy I really liked is that supervisors can be promoted only when they have developed an internal replacement for themselves.  Also, employees reporting to the supervisor are consulted as part of the promotion decision.

Even though the starting wage is just $9 per hour, the hiring process is very selective.  Before an interview, an applicant is directed to study the Chipotle careers website carefully.  Chipotle wants employees who are ambitious, happy, smart, polite, respectful, honest, conscientious, presentable, curious, motivated, hospitable, high energy and infectiously enthusiastic.  Part of the interview is designed to see if the applicant actually read the material they were assigned.  Employees are involved in the hiring decision.

Most employees working at Chipotle probably have no more than a six month time horizon, but the company seems sincerely committed to providing career opportunities.  Looks like a place where a high school graduate could get ahead and our economy needs more of those.

Wednesday, September 24, 2014

On climate science

Climate change is in the news again as over 100 countries convene at the United Nations.  (Let's not even think about the carbon footprint of that event; where is Telepresence when you really need it!)  I have no claims of scientific expertise here, but I strongly encourage everyone to read this WSJ piece by Dr. Steven Koonin, former undersecretary for science in the Department of Energy under President Obama.

Koonin has impeccable scientific chops as a physics professor and provost at Caltech and a stint at BP as chief scientist.  His article is titled "Climate Science is Not Settled" and here are a few key quotes:

  • The climate has always changed and always will.
  • Even though human influences could have serious consequences for the climate, they are physically small in relation to the climate system as a whole. 
  • Precise, comprehensive observations of the oceans are available only for the past few decades; the reliable record is still far too short to adequately understand how the oceans will change and how that will affect climate.
  • While the past two decades have seen progress in climate science, the field is not yet mature enough to usefully answer the difficult and important questions being asked of it. This decidedly unsettled state highlights what should be obvious: Understanding climate, at the level of detail relevant to human influences, is a very, very difficult problem.
One thing I learned as a math major a long time ago is that if you have a given number of data points, there is some function out there that will perfectly fit those data points.  Whether that function makes any sense or not in terms of explaining the data pattern, well that's another matter entirely.  Climate science is a relatively new field, not unlike macroeconomics.  Important issues, lots of emotion, and big gaps in knowledge.  

Monday, September 22, 2014

Enrollment and tuition concerns

Ran across two items over the weekend about the market for higher education.  Chronicle of Higher Education reports the results of a survey of senior executives.  The survey found that 85% are very or somewhat worried about enrollment.  The enrollment worries are driven by higher tuition and competition from other schools.  Yet almost half plan on raising tuition another notch!  Relatively few were looking for ways to cut costs or generate more revenue.

Why has tuition been rising so much?  Michigan economist Susan Dynarski shows that the main culprit for public universities has been declining state support (NYT Upshot).  She shows that public colleges collected $11300 in state funding and tuition per student in 1988; this amount rose to $11500 in 2013.  Over this period state funds dropped from $8600 to $6100, whereas tuition rose from $2700 to $5400.  One need not look any further for an explanation of why public schools have increased tuition.

But what about private schools?  Since public universities have become more expensive, this has led to increased interest in private schools and allowed them to raise their tuition as well.  

Longer term the prognosis for public schools is not great.  State governments are faced with rising expenses for Medicaid and employee retirement and health care.  I am not aware of any governor or legislator running on a platform of raising taxes to preserve funding for higher education.  It will be up to the public universities to either get a handle on costs or find their own sources of funds.  


Friday, September 19, 2014

Why is cash so popular in for transactions in Germany?

In a world where more and more transactions are handled by credit or debit cards, why do people hold cash?  Cash is needed in some establishments that do not accept cards.  It also is difficult to trace, making it the payment mechanism of preference for those who wish to leave no record of their purchases.  However, cash carries significant downsides.  You can lose it or have it stolen.  It pays no interest.  Governments can debase its value by printing too much of it.  

It came as no surprise to me that half of Americans carry $20 or less in cash.  I expected this would be the case in most other high income countries.  I was wrong.  

It turns out that Germans still rely heavily on cash and this has been the case for some time.  They carry around an average of $123 in their wallets and conduct 80% of their transactions in cash.  This cannot be explained in terms of simple economic factors.  For instance lower interest rates would lead to increased cash holding, but interest rates in Germany and the US are pretty close to each other.   

Some sources argue that the German preference for cash reflects the hyperinflation of the 1920s.  But most of the people who lived through that event are no longer around.  (Also, if there was ever a time to minimize cash holdings, that was it.)  Another possibility is that debt avoidance is integrated into German culture; always paying in cash is a good way to avoid ballooning credit card bills.  

We may see a clash of culture with technology soon, as mobile payment systems become more widely available.  Will paying by phone be viewed as equivalent to paying in cash?

Thursday, September 18, 2014

NC State Jenkins ranked #15 Supply Chain MBA

The annual Gartner survey is the gold standard for ranking supply chain programs.  This year's ranking just came out and NC State's Jenkins MBA placed #15 in the US.  Penn State was #1, followed by Michigan State and Tennessee.  NC State was the only program in North Carolina in the top 25.  

Gartner's rankings are based mainly on two factors: Gartner's own evaluation of the curriculum and the success of graduates in the job market (measured by employer surveys and salaries).  This is great recognition for our supply chain program.