Tag Archives: economics

Winston-Salem as a Case Study

Since moving here in 2004 I’ve found Winston-Salem to be a fascinating study in how to revive a city that had been hit by multiple economic tsunamis in recent decades. It seems that others have taken notice, including a writer who penned a piece for the Christian Science Monitor about how a few US cities can teach the country a little something about democracy (h/t to my Mom for sending me the article). You can find the full article here (second story down), but here’s the segment focused on Camel City:

Winston-Salem, N.C., lost 10,000 jobs in 18 months after R.J. Reynolds moved its headquarters to Atlanta and several other homegrown companies failed in the late 1980s. It was the first of several waves of job losses as the city’s manufacturing base collapsed. Civic leaders chipped in to create a $40 million fund to loan start-up capital to entrepreneurs, hire staff for a local development corporation, and fund signature projects. One of them was the renovation of a 1920s Art Deco office tower into downtown apartments.

This activity helped spur Wake Forest University’s medical school to undertake an ambitious project to create a research park in former R.J. Reynolds manufacturing buildings next to downtown. The school has filled 2 million square feet of empty factories with high-tech companies and world-class biomedical researchers. An adjacent African-American church has turned 15 acres in the area into lofts, senior housing, and businesses. Downtown has attracted $1.6 billion in investment since 2002.

Now people gather to sip coffee, attend concerts, or take yoga classes in a new park in the shadow of the looming chimneys of a former Reynolds power plant. The plant itself is being repurposed into a $40 million hub of restaurants, stores, laboratories, and office space. Students, researchers, and entrepreneurs mingle in the halls and atria of all the former factory buildings, creating the kind of synergetic environment the innovation industry now craves.

Our very own Jeff Smith, of Smitty’s Notes, provides the money quote:

“It wasn’t one person or thing that made it all happen; it was everyone from the grass roots to the corporate leaders coming together,” says Jeffrey Smith, who runs Smitty’s Notes, an influential community news site. “We realized it would take all of us to get this hog out of the ditch.”

Much of the foundation for this renewal had been laid by the time I moved here with my family in 2004, but community leaders have continued to do what’s necessary to keep building upon it. For my job I get to spend a significant amount of time in neighboring Greensboro, a city that is slightly larger but quite comparable to Winston-Salem, and it’s been interesting to see how the two cities have proceeded from their respective economic crises. Winston-Salem has a lot of momentum, and it’s redevelopment seems to be benefiting from consistent collaboration among its community leaders, including elected officials as well as corporate and civic leaders. Greensboro, on the other hand, is making progress but it seems to be in more fits and starts; its progress seems to occur in spite of local leaders’ lack of cooperation and collaboration.

Sure, Winston-Salem has its problems and leaders sometimes disagree on how to proceed, but for the most part its leaders have shown how to lead a community out of the ditch and back on the road. Hopefully we keep it going for decades to come.

The Impact of Malgovernance

*Disclaimer – this piece is my opinion alone and does not reflect the beliefs of any other person or organization with which I’m affiliated.*

Last week I wrote about the way in which the North Carolina legislature enacted the controversial HB2. Since then the controversy and noise swirling around the new law has escalated greatly, with the supporters of the law squatting behind a defensive shield that focuses on the “shiny object” portion of the law; the part that focuses on the rollback of Charlotte’s ordinance regarding transgender bathroom usage. And if you ever doubted it was about politics, in the process of defending law they also attack attorney general Roy Cooper, who is running against incumbent Republican governor Pat McCrory. From Sen. Phil Berger’s Facebook page:

CLICK THE LINK AND SIGN YOUR NAME: I have never seen a campaign as vicious and dishonest as the radical left’s assault on Pat McCrory over the bathroom safety bill. Unlike Roy Cooper, Gov. McCrory courageously did his job and protected the people of North Carolina by signing this common sense law that keeps grown men out of the same bathroom and locker room as little girls. Will you please share StandwithMcCrory.com with your friends and ask them to sign their names in support of Governor McCrory to fight back against the left’s shameful smear campaign?

Now, this stuff is pretty predictable. Of course the backers of the new law are going to run a PR campaign that focuses on the titillating aspects of the bill, simplifies and sensationalizes it with the zero reality-based evidence that it will help protect anyone from anything except their own boogeyman fears, and gets their political base all hot and bothered. Fine, we knew that would happen, but we also knew that there would be an uproar from the rest of the “liberal” world and it was quick in coming, in ways large and small. Here’s just a sampling:

So how are the law’s backers reacting? One editorial in the Charlotte paper captured it perfectly: Republicans’ Schoolyard Reaction to PayPal. This kind of stuff works beautifully with the hard-right’s true believers, and it is definitely part of their strategy – as misguided as some of us might think it is – to give McCrory an issue to go after Cooper with and to distract from the other parts of the law that actually impact far more North Carolinians.

What, you ask, could impact us more than who gets to use the restroom? Well, the one part of the law that has gotten the least attention and yet could directly impact far more of us than anything, is the elimination of a person to sue for wrongful termination in state court if they are fired. That’s a big deal, as explained in this article:

By prohibiting the state Equal Employment Practices Act as the basis for civil action, Noble said, “this law has essentially eliminated state law sanctions for employers, who can now fire its employees … with no state law consequences.”

N.C. House and Senate Republican legislative leaders emphasized during debate over the bill that North Carolinians have a “far more robust” federal court option for filing discrimination lawsuits.

Noble disagrees with the “robust” suggestion, saying that filing a complaint in federal court is twice as costly as state court, more time-consuming in terms of logistical requirements, and likely to have a longer period before a decision…

Legislators say there is a state remedy in that complaints could be investigated and mediated by the N.C. Human Relations Commission.

However, Noble said that commission has focused “on resolving housing discrimination complaints for private persons and improving community relations.”

“The commission simply does not address employment discrimination complaints against private employers … because its authority is expressly limited to receiving, investigating and trying to mutually resolve such complaints,” she said.

The commission also does not receive reoccurring financing from the legislature.

Federal remedies for compensatory and punitive damages are capped according to employer size, ranging from a combined $50,000 to $200,000. In state court, Noble said, there is no cap on compensatory damages, and punitive damages can be worth up to three times the compensatory damage award.

Federal claims must be filed first with the EEOC, whose due diligence obligations often serve to weed out the majority of lawsuits before they reach federal court.

Noble and Rainey said the EEOC tends to take more than six months to recommend whether to pursue a federal court filing, in part because its three North Carolina offices typically are understaffed. By comparison, Kennedy said it is not uncommon for a discrimination case filed in state court to be completed within eight to 12 months.

Seriously, you have to admire the effectiveness of their campaign to this point because no one is talking about it and it directly affects every working person in the state. But, by all means, you go right ahead and focus on who’s using that bathroom and argue about whether or not the new law does any good in protecting someone while they’re taking a squat, while those in the economic development trenches try to figure out how break through all this noise when recruiting businesses and while our various convention and visitor bureaus try to figure out how to keep event organizers from running to more welcoming venues. Think that’s not an issue? Well, here’s a little tidbit I came across on an online network for association professionals:

Topic: Addressing concerns about having our meeting in North Carolina this year

Dear All:

We are having our annual meeting in 6 months in a state that recently passed a law that revokes certain local anti-discrimination ordinances. ($*&*#%!!!!) When we were contacted by the media, we re-iterated our stance on equality (see below). Today we received an inquiry from someone for whom we have no record in our any of our systems asking how we will protect the civil rights of attendees. We have no idea if they are truly a new potential attendee or exhibitor, from the media (though they should identify themselves as media), or from an advocacy group. This got me thinking that we could face protesters or other issues if the courts don’t resolve the situation before this fall.

Has anyone else faced a similar situation?  What should we do and what should we ask the CVB to do, proactively, to reassure our organization, our attendees and exhibitors, etc? 

Believe me when I tell you that there are so many places someone can take a conference or show that there’s no reason they even consider opening themselves up to this kind of hassle, no matter who is behind it. If you’re a supporter of the law, at least the part that’s getting all the noise, and are beating the drum for state leadership to stand strong in the face of “liberal media/activists” then please understand that while you’re more than welcome to your opinion you are also obligated to accept the consequences of that support. You can try to say that it’s the “liberals'” fault for losing that business, that they’re creating a false perception, but here’s the deal: peoples’ perception IS their reality and the perception that you have created is one of being unwelcoming, bigoted and small minded. In today’s business environment that’s a death notice.

If You’re a Poor Kid in Forsyth County Then You’re Screwed

According to a recently released report Forsyth County, NC is the second worst county in the United States when it comes to income mobility for poor children. From the report in the New York Times:

Forsyth County is extremely bad for income mobility for children in poor families. It is among the worst counties in the U.S.

Location matters – enormously. If you’re poor and live in the Winston-Salem area, it’s better to be in Davie County than in Yadkin County or Forsyth County. Not only that, the younger you are when you move to Davie, the better you will do on average.

Every year a poor child spends in Davie County adds about $40 to his or her annual household income at age 26, compared with a childhood spent in the average American county. Over the course of a full childhood, which is up to age 20 for the purposes of this analysis, the difference adds up to about $800, or 3 percent, more in average income as a young adult…

It’s  among the worst counties in the U.S. in helping poor children up the income ladder. It ranks 2nd out of 2,478 counties, better than almost no county in the nation.

Take a look at this graphic and you can see that there’s a huge disparity between the prospects for poor kids and rich kids in the county:

Source NYtimes.com

Source NYtimes.com

Forsyth’s neighbor to the east, Guilford County, isn’t much better off:

It’s among the worst counties in the U.S. in helping poor children up the income ladder. It ranks 37th out of 2,478 counties, better than only about 1 percent of counties.

While it would be easy to say, “This should be a wake up call to the leaders of our community” I think that would be a cop out. This is the kind of thing that should concern us all because what do we think will eventually happen if we continue to allow a huge segment of our community to live in circumstances in which they perceive little chance of improving their lot in life? What do we think these young people will do when they lose hope?

So yeah, our elected leaders should view this as an early warning that they need to address these underlying causes of this disparity in opportunity, but this is bigger than them. All of us need to get engaged, through our schools, churches, civic groups, businesses and neighborhoods, in order to begin to make any progress in improving the prospects for our kids’ futures. The underlying issues are systemic – broken family structures, poor educational attainment, too many low wage jobs, etc. – and only a concerted effort by the entire community will be able to address them. If we don’t we will have much larger problems on our hands in years to come.

Winston-Salem and Forsyth County have made a great deal of progress in addressing the major economic challenges that were wrought by the declines of the local manufacturing industries, highlighted by the resurgence of downtown Winston-Salem, but now we need to make sure that the tide rises for everyone, not just those lucky enough to be born into well off families.

A Tale of Two States

The weekend edition of The Wall Street Journal had an article about the burgeoning film industry in Georgia that is likely to make the folks in the film industry here in North Carolina cringe:

ATLANTA—The film industry here has hit the big time, thanks to generous tax credits that have made Georgia one of the top states for movie and television production behind California and New York.

But the growth of what many call “Y’allywood” is being threatened by a shortage of makeup artists and costume and set designers—the rank and file of film and television crews…

In fiscal year 2013, film and television production budgets in Georgia totaled $933.9 million, according to the Georgia Department of Economic Development.

While some states have turned away from incentives, arguing that they hurt budgets, Georgia’s Republican-dominated legislature strongly supports them. Georgia offers film and TV projects transferable tax credits for 20% of production costs, plus an additional 10% if the project agrees to display the state’s promotional logo in its credits. The incentives apply for all workers on a set, whether they are Georgia residents or not.

North Carolina is one of the states that has turned away from incentives, with the state legislature failing to pass the legislation that would have renewed them in 2014. The Hollywood Reporter has a detailed story describing the issue and the probable effect:

One big reason the North Carolina incentive legislation failed is because the Koch Brothers-backed nonprofit Americans for Prosperity bought radio commercials as the debate that slammed film incentives was going on. The ads were part of a larger campaign to eliminate a range of state-funded development programs.

“The money coming in from the outside has hurt the North Carolina programs for business development,” said Rep. Susi Hamilton, a Democrat who fought to retain incentives. “The Americans for Prosperity spent a lot of money to try and end the program and unfortunately they have the ear or our leadership and appear to be successful.”

Hamilton, however, doesn’t believe this means other Southern states will follow suit. In fact, she sees the opposite happening as North Carolina stands to lose more than 4,000 good jobs.

“The implications for other states,” says Hamilton, “particularly in the Southeast, are that they are going to pick up the work that otherwise would have come to North Carolina. That’s good news for the other states.”

Griffin says the irony is that there has been an influx of work into North Carolina in the past three or four years, and 2014 could be a record year.

Hamilton estimates that, in 2013, $360 million was directly spent by productions, while the state paid out $62 million in incentives. And that doesn’t count millions more spent on services and by workers who have moved to the state for jobs that pay an average of more than $65,000 per year.

The article also points out that the legislature did pass a grant program for the film industry, but because of the way it was structured it is “nearly useless.”

As tempting as it is to see everything as black and white, to assume that all Republicans or all Democrats see things the same way, it’s situations like this that reveal how varied the views within a political party can be. Republicans are in charge in both Georgia and North Carolina, but they obviously take very different stances on economic incentives. The folks in the North Carolina film industry are likely to lose out because of it.

Where Efficiency Goes to Die

"Baumol's disease" provides an interesting explanation for why service businesses like health care can only be so efficient. Can they be more efficient than they currently are? Absolutely, but any improvements made will not bring delivery costs down to the levels found on the product side of our economy. From Steven Pearlstein's column in the Washington Post:

No matter how innovative people were in coming up with new technology and new ways of organizing their work, Baumol and Bowen reasoned, it would still take a pianist the same 23 minutes to play a Mozart sonata, a barber 20 minutes to cut the hair of the average customer and a first-grade teacher 12 minutes to read her class “Green Eggs and Ham.” Based on this observation, the duo predicted that the cost of education and health care would inevitably outstrip the price of almost everything else.

Now, 50 years later, Baumol has updated and expanded his observation with a new book,“The Cost Disease,” which sheds some useful light on our current economic debate.

The basic facts are well-known to most Americans: Over the past 30 years, overall prices have risen 110 percent, median income has risen 150 percent, medical costs have risen 250 percent and college tuitions have risen 440 percent.

To hear the politicians talk, you’d think the rise in tuitions and medical costs was an American phenomenon. But as Baumol points out, the growth rates are pretty consistent across all developed countries.

The whole column is an interesting read, and I would be remiss if I didn't point out that Pearlstein's the Robinson Professor of Political and International affairs at my alma mater, George Mason University

The Incredible Shrinking Middle

One of the underexplored aspects of the current unemployment situation in North Carolina is the movement of people from adequate paying jobs to under paying jobs. A study by the NC Justice Center makes it vividly clear:

The nonprofit group determined there were 356,000 more working-age adults employed in the state in 2001 than in 2010, with manufacturing taking the brunt of the job decline.

The state lost 380,000 jobs in that period, with about 75 percent concentrated in industries with average hourly wages that enabled individuals and families to stay above the living income standard. A family of four needed to earn at least $23.47 an hour in 2010 to have enough money to meet basic expenses, according to N.C. state government standards.

The state's manufacturing workforce, which paid an average of $25.30 an hour, fell by 38 percent during the 10-year period. Manufacturing accounted for 72 percent of the state's job losses…

Where North Carolina did have job growth, it mostly came in low-wage industry sectors, the group said. About 83 percent of the job growth came with average wages of less than the $23.47-an-hour living income standard for a family of four.

For example, 15 percent of the state's job growth from 2001 to 2010 came in the food-services and accommodation sectors, which paid $7.15 an hour.

The state's median household income dropped 9.4 percent during the decade, or from $47,823 in 2001 to $43,326 in 2010.

The center found the number of North Carolinians living in poverty – $22,314 annual income for a family of four – rose by 24.1 percent during the decade.

In a nutshell the middle class is shrinking, and not from upward mobility. You would think that would lead to an outcry against the "corporate class," but outside of a little wrist-slapping at the height of the economic meltdown it just hasn't happened. That's what makes this interview of Mike Lofgren by Bill Moyers so easy to believe (h/t Fec for the link). For those of you expecting an anti-Republican screed you'll be disappointed – he basically argues that both parties have been captured by the corporate class. Enjoy: