What will happen with a $15 minimum wage?

Seattle's SeaTac Airport is located in the town of SeaTac, a small blue collar suburb.  SeaTac voters appear to have approved a referendum that will set the minimum wage for hospitality and transportation workers at SeaTac Airport at $15.  Apparently other airports on the West coast also have such provisions; at LAX, the minimum wage is $15.67.  The SeaTac minimum wage is well above Washington state's minimum of $9.69, which in turn is the highest state minimum wage in the country.

Supporters of the higher minimum wage for airport workers point to full-time employees living below the poverty line.  Opponents argue that there will be fewer jobs and that airport customers will have to pay higher prices and receive degraded service.  The actual impact will depend on how price sensitive airport customers are to more expensive hot dogs and rental cars.  It also will hinge on how companies can substitute capital for labor; for a $5.31 increase in the minimum wage, we might soon see McDonalds customers inputting their orders and paying on iPads.  

A dirty secret about Black Friday

Some stores will open on Thanksgiving evening this year to get a jump on the traditional Black Friday sales.  (Maybe it's because the number of days between Christmas and Thanksgiving is at a minimum this year?)  Ads lead shoppers to believe that this is the best day of the year to make gift purchases.

The truth?  If you want the real bargains, stay home and rake leaves or watch football on Friday and do your shopping online closer to Christmas.  Yesterday's WSJ reveals the pricing strategy firms use year around to convince shoppers that they are getting a bargain.  It is a simple twist on versioning, a topic we cover each year in my MBA economics class.  Retailers start with an unrealistically high list price, one at which they know only the most dedicated followers of fashion will accept.  The price then comes down as time passes, either through direct markdowns or through sales and coupons.

Most consumers are not well informed about how much prices of close substitutes, so they use the sale or coupon as a signal that they are getting a good deal.  Money quote:

The red cardigan sweater with the ruffled neck on sale for more than 40% off at $39.99 was never meant to sell at its $68 starting price. It was designed with the discount built in.

To be fair, there will be a few items on sale Friday that are priced below cost, but these items serve as bait to get customers in the store.  Customers will make better informed decisions if they comparison shop online.  

Gaming your way into a job

Knack.it is a Palo Alto startup that endeavors to use gaming and big data and to lead to improved decisions on employee selection.  Knack has developed games such as Wasabi Walter and Balloon Brigade that test for personality traits.  Companies can then use the games to decide which traits are associated with good job performance and hire based on those measures.

MIT Sloan's Erik Brynjolfsson notes in a recent Business Week article, "People are our biggest resource, and right now a lot of them are mismatched."  Firms make screening decisions on such factors as interviews and number of short-term jobs held that in many cases are not reliable predictors of job performance.  Now they can have star employees play Knack and develop a profile of a successful hire that can be then matched against the Knack performance of job applicants.  The Economist reports that Shell and Bain are starting to use Knack; will this be the beginning of a trend?

MBA job market quite strong

The Graduate Management Admissions Council just issued a report on placement for spring 2013 MBA graduates, and the news is very good.  Among US citizens 95% of the spring grads had jobs by September.  This is up from 91% last year and is the highest since the Great Recession.  The overall placement rate (which includes international students) is somewhat lower at 92%, reflecting a tough job market in Europe and difficulties in obtaining green cards in the US.

These stats are consistent with the experience NC State MBAs have had this year.  Hopefully the 2014 market will be even stronger.

Student loans - time for change in repayment options?

Jenkins MBA students at NC State will soon be getting their tuition bills for spring.  Many will be borrowing money to cover the bills.  How should repayment terms be established?  Today students are asked to pay off the entire borrowed amount over a 10 year time period, similar to a car loan or a mortgage.

For most students, investing in college and graduate school has an ROI of 10% or more.  But there is risk involved especially because the earnings streams of gradates vary tremendously both within the same field of study (some engineering grads earn more than other engineering grads) as well as across all fields of study (engineering grads earn more than liberal arts grads).

In a recent WSJ column David Wessel considers whether the repayment schedule should be set in terms of percentage of income.  Currently this is an option for borrowers, but very few select it.  Two Michigan economists propose that all borrowers be put into a system where repayment is based on income, with those having higher incomes having higher payments than those with lower incomes.  This has desirable risk sharing aspects as it automatically reduces debt repayment obligations if one's income falls.

However, it effectively acts like a tax that reduces the incentive to move into a higher bracket.  By itself the effect may be modest, but when combined with eligibility for other government benefits, the disincentives could be sizable.

MBAs seeking out tech jobs, finance not so much

Earlier this week WSJ reported that nationwide we are seeing a shift in the types of jobs MBAs are seeking.  At schools like Cornell, Harvard, MIT, and Yale, the percentage of MBAs getting jobs in finance is dropping and the share of those seeking tech positions is rising.  At Stanford, more MBAs now go into tech than finance; two years ago finance grads outnumbered tech grads 3 to 1.

If you look at the academic offerings at most of these schools, you are not going to see the same shift. Finance and general management continue to dominate.  It will be interesting to see if students start showing more interest in schools with strong tech offerings.  I know one top 20 program that has tracks in supply chain, consumer innovation, high tech entrepreneurship and biosciences management.

NC State Professional MBA ranked #20 by Bloomberg Businessweek

Great news to share with the NC State Jenkins MBA community: Today Bloomberg Businessweek released its 2013 Part-Time MBA rankings and we came in at #20, up 10 spots from two years ago.  NC State's MBA placed #10 in the country in academic quality; we earned an A in teaching quality and curriculum.  I am very pleased to see the program get the recognition that its students, alumni, faculty and staff have worked so hard to achieve.

Stacy Wood's research featured in WSJ

NC State marketing professor Stacy Wood is featured in today's WSJ article "The Biology of the Sports Fan."  Wood found in a 2011 article in the Journal of Consumer Research that traffic fatalities increased significantly after close football and basketball games, with the increase in fatalities directly related to the closeness of the contest.  For more information about the research, click here for an NC State news release and here for the entire article.  Professor Wood holds the Langdon Distinguished Professorship of Marketing and directs the Consumer Innovation Consortium in the Poole College of Management.