Thursday, January 29, 2015

What we do not know about the minimum wage

We were discussing the minimum wage last week in my MBA 505 Global Economics for Managers class.  Bloomberg columnist Megan McArdle did a nice job in a recent column summarizing the economics research literature.  Did she read literally 100s of papers?  I kind of doubt it, but she reaches three main conclusions:
1) Most people have their own opinions about whether the minimum wage is a good or not so good idea and they naturally seek out and site research that supports their own opinions.  Psychologists call this confirmation bias.  As is always the case in economics, you do not have to search very hard to find a study that matches your views.  Some find big job losses, others find small job losses and one very famous study found no job losses.  Out of these 100s of papers, guess which study gets cited as hard evidence by minimum wage proponents!  (Overall, the literature seems to indicate small job losses, by the way.)
2) Historically most changes in the US minimum wage have been modest, e.g. an increase from $2.65 in 1978 to $3.35 in 1981.  Some states and cities are now contemplating much larger changes, from the current $7.25 to $15.  It is quite possible that research done on small hikes does not translate into larger ones.  For instance, automation opportunities that McDonalds would ignore at a $1 increase may be too tempting to pass up at the President's proposed $3 increase. 
3) None of the minimum wage studies have been able to deal with long term consequences, such as how many McDonalds might end up closing or and how many never open because of higher labor costs. 

Sunday, January 25, 2015

Understanding the drop in the labor force

Just ran across two items from Marginal Revolution dealing with the drop in the labor force participation rate.  Stanford econ prof Robert Hall has taken a careful look at personal and household factors and has found that most of the drop has taken place among teens and young adults.  More intriguing is the finding that the drop is greater among households in the upper half of the income distribution than the lower half, casting doubt on the theory that more generous income maintenance programs (food stamps and unemployment insurance would be the most likely culprits) are driving the shrinkage of the labor force.

A recent article in BloombergBusinessweek reaches a simular conclusion.  Young people in high income households are staying in school longer and more of them are not working.  The article also notes the growing share of the labor force claiming disability benefits; these individuals are unlikely to return to work even if the unemployment rate dips below 5 percent.

Thursday, January 8, 2015

NC State Online MBA ranked #9 by US News

What a way to start the year -- US News announced yesterday that NC State's online Jenkins MBA program ranked #9 in the US.  This is the first top ten ranking for any platform of our MBA program. A year ago the online MBA program was ranked #36.

NC State's overall score was based on four components: student services and technology (#13), student engagement (#13), admissions selectivity (#16), faculty credentials and training (#69) and peer reputation (no rank reported).

What were some of the secrets to our success?  Our student retention and graduation rates have been near 100%, so that definitely gave us a leg up on the student engagement score.  As is the case with our full-time and Professional Evening platforms, our online student credentials are quite high, especially in terms of work experience.  The faculty score is a bit of a head-scratcher -- I have a hard time believing NC State and UNC-Chapel Hill (#120 on faculty credentials) are really behind Gardner-Webb and the University of the Cumberlands on this dimension.

Kudos as well to UNC-Chapel Hill for being tied with Indiana and Temple for #1.  Both of our programs have come a long way in just three years (we both started in 2012).  North Carolina residents have two outstanding choices.  Compare the programs, compare the costs, and decide which best fits your needs!

Thursday, December 11, 2014

November job numbers: Let's party like its 1999!

I have always been cautious about making too much out of one jobs report, but the numbers reported last Friday merit serious attention.  We now have a string of consecutive months with strong increases in employment.  Unless the last 20 days of December turn out to be an unforeseen disaster, 2014 will be the best year for job growth since 1999.  

Two more reasons for optimism:
1) Wage growth is becoming more widespread.  More jobs is nice; more people making more money is even nicer.
2) The unemployment rate did not go down.  This is good news because it means that more people have entered the labor force looking for jobs.

Friday, December 5, 2014

Supply and demand for truckers

Spending the morning at the NC State Poole College of Management's semi-annual Supply Chain Resource Cooperative meeting.  Lots of great student projects for companies like CAT, Duke Energy, GSK, MetLife and others.

One topic that has come up repeatedly is the shortage of truckers and the increasing difficulty firms are having with this critical transportation mode.  At the same time, the percentage of young people who are participating in the labor force is at a 30 year low.

So what is stopping young people (or even not so young) from entering the profession?  (I have posted on this topic before.) Lots of theories were offered.  Part of the story is that training is expensive to obtain (but there are student loans); another part is that many potential job candidates cannot pass background checks and drug tests (maybe, but I would like to see some numbers).  One new theory offered by Jason Schenker (economist and regular SCRC speaker) -- Xbox addiction.

Friday, November 28, 2014

Labor market impact of immigration exec order

Legal analyses of the President's executive order on immigration are a dime a dozen; economic analyses  are much rarer (this WSJ piece is the only one I have seen).  The courts and voters will ultimately work out the legal end, so what are the economic takeaways?
1) Most illegal immigrants face skill and language barriers in the labor market and end up taking relatively unskilled jobs.  The increased supply of such labor leads to lower wages for natives who compete in the same markets.  Most economic estimates find the wage impact is modest (a 10% increase supply leads to a 2-4% cut in wages for natives), but tell that to someone who is having trouble making ends meet.  
2) Do not be surprised to see the rate of illegal immigration accelerate since the order could be reversed on Inauguration Day 2017.  But wait, those who cross borders after the order aren't covered, right?  True, but perception is everything.  Do you seriously believe that someone in a dirt poor village in Guatemala thinks the odds of being deported have gone up?  What matters is what potential immigrants believe, not what the order actually says.  
3) To the extent that employers have used fear of deportation to keep illegals from quitting to find a better job, the order should open up some mobility options.  Illegals who have learned valuable skills and who speak/write decent English will now start competing with more skilled natives.  
4) The most critical immigration issue is making it easier for highly educated STEM students to stay in the US.  The President punted on this one.  

Wednesday, November 12, 2014

Obama pushes for net neutrality

The FCC has been deliberating for some time about whether and how the internet should be regulated by the federal government.  President Obama made a pitch on Monday for heightened regulation, asking the FCC to regulate the internet as if it were an electrical utility or a phone company.

NYT blogger Eduardo Porter gives a somewhat balanced view of the pros and cons of net neutrality.  Net neut advocates worry that monopolistic ISPs will control through pricing what content becomes available.  Net neut opponents point out that one needs some mechanism to ration scarce capacity.  Since Netflix alone accounts for 30% or more of internet traffic at peak periods, they argue that Netflix directly (and its customers indirectly) should pay for the fast access needed to stream movies.
An even bigger concern is what a regulated internet do to incentives for investing in further capacity.

My take: this argument is another classic case of who do you trust more to act in customers interest -- a federal regulatory agency or a less than perfectly competitive market?  Today in Raleigh, Time Warner and AT&T only have to compete with each other for USP business.  But over time there will be more competition, especially if Google Fiber decides to play.  I think I will take my chances with the market!

Tuesday, November 11, 2014

NC State full-time MBA climbs to #54 in Businessweek rankings

More great news on the rankings front for NC State's Jenkins MBA program!  Bloomberg Businessweek's ranking of full-time programs just came out and we placed #54 in the US.  There were 85 schools ranked.  NC State was just behind Georgia, UC San Diego, Boston College, and George Washington and just ahead of Tennessee, Florida International, Boston University, and Babson.

This year's ranking represents a dramatic turnaround from two years ago.  Bloomberg Businessweek is very selective about which schools are deemed eligible to be ranked.  In 2012 we were pleased to be on the list for the first time (at #63); that was an important milestone for the program.  We were not as pleased with our position on the list (63 of the 80 invited schools had high enough response rates from student and employer surveys to be listed).

The 2014 ranking is based on a weighted average of three components: (1) student satisfaction with the program, (2) employer satisfaction with the graduates and (3) faculty research.  NC State's MBA placed #45 in student satisfaction, #60 in employer satisfaction, and #71 in research.

As an MBA program that only has been in existence for 12 years, we have come a very long way.  We have been on quite the rankings roll over the last year:

  • #15 supply chain MBA, Gartner
  • #17 online MBA, Poets and Quants
  • #20 part-time MBA, Bloomberg Businessweek
  • #36 online MBA, US News
  • #61 part-time MBA, US News
  • #65 full-time MBA, US News

Kudos to the alums, faculty, staff and students in the NC State Jenkins MBA community for making this happen!  Our focus on innovation, experiential learning, and value is getting the recognition it has long deserved.

Thursday, October 30, 2014

Even health economists have trouble choosing the right plan

Austin Frakt has a PhD in statistical and applied mathematics from MIT and has published in the New England Journal of Medicine and the Journal of the American Medical Association.  In other words, a real intellectual heavyweight.  Yet he confesses in an NYT blog post: "I am a health economist, and I cannot rationally select a health plan."

The reasons are pretty simple.  First, the plans are maddeningly complex.  It is relatively easy to see the rates, deductibles and copays (I am not saying easy, just easy compared to what comes next) but very tough to figure out what you are actually buying.  Which medical conditions are covered and which are not?  If you need medical services, which providers are included in the network covered by the plan?

Second, you must buy the plan based on a forecast of what health services you think you will need in the coming year.  Some are predictable (e.g., annual checkups) but many (perhaps most) are not.

Expect this issue to receive more attention in the future as more and more companies get out of the business of providing employee health insurance.  Today's WSJ has a piece on how more and more small companies are doing this.

Wednesday, October 29, 2014

#WhyMBA competition @ BusinessWeek

As a lead-in to its full-time MBA rankings announcement Nov. 11, Bloomberg Businessweek has launched a #WhyMBA competition on Twitter.  Students and alums at all MBA programs have been encouraged to post tweets explaining what makes their school special.  Schools are ranked on tweet volume; right now NC State's Jenkins MBA is #57.  UNC-CH is #60.

What makes NC State so special?  Great value. ROI.  Real world experience.  Community service. Click here to see all the tweets.

I encourage all members of the NC State Jenkins MBA community to join the #WhyMBA discussion.  Let's aim for top 50 for both the tweet count and the actual program ranking!