NewGeography.com blogs

A report by University of Washington economists has concluded that the most recent minimum wage increase in the city of Seattle is costing jobs. The Seattle Times reported:

“The team concluded that the second jump had a far greater impact, boosting pay in low-wage jobs by about 3 percent since 2014 but also resulting in a 9 percent reduction in hours worked in such jobs. That resulted in a 6 percent drop in what employers collectively pay — and what workers earn — for those low-wage jobs.”

According to the Times, this translates into a pay reduction of $125 per month for a low wage earner. This can be a lot of money, according to a study author, Mark Long, who noted that “It can be the difference between being able to pay your rent and not being able to pay your rent.”

The study also indicated that there were 5,000 fewer low-wage jobs in the city as a result of the minimum wage increase. This is more than one percent of the approximately 440,000 private sector jobs in the city of Seattle in 2015, according to the American Community Survey. It is likely that most of the job losses occurred in the private sector, as opposed to government.

The study was partially funded by the City of Seattle, which enacted the minimum wage increase.

In 2012, the state of Kansas under Gov. Sam Brownback passed a large tax cut. Despite this massive fiscal stimulus, the state’s economy actually underperformed the nation during much of the subsequent period and the cuts blew a gigantic $900 million hole in the state’s budget.

Finally the legislature cried uncle. It passed a $1.2 billion tax hike. Brownback vetoed it but the Republican dominated legislature overrode the veto.

Not only did the tax cuts fail to grow the economy, one of the state’s major metro regions, Kansas City, received a gigantic free broadband investment in the form of Google Fiber. Spanning Kansas and Missouri, this investment also failed to produce significant tech growth.

Meanwhile in Connecticut, the state twice raised taxes to address a budget deficit. Unfortunately, these tax hikes did not create long term revenue growth. What’s more, after the most recent rounds of tax hikes, the state experienced a corporate exodus highlighted by GE and Aetna. The state capital of Hartford is also flirting with bankruptcy. Gov. Dannel Malley now admits the state is tapped out on tax increases.

There are a lot of claims one can make out of these situations. I’m only going to point out that both Kansas and Connecticut are out of favor in the marketplace right now. For example, while the suburban office park may not be extinct, it’s certainly facing challenges in high tax settings like New Jersey and Connecticut. Companies like GE are in fact increasingly looking to global city centers for their highest level executives. Connecticut doesn’t have that product on offer and can’t create it. Regarding Kansas, it was likely a low tax state even before the cuts, which did not materially improve its competitive position or instrinsic attractiveness.

It’s simply very difficult to counter these macro forces. When cities were out of favor, even NYC was en route to oblivion. Trying to push on a string often only creates as many problems as solutions.

The Daily Telegraph reported (June 20) that:

"Crews believed they had put out the fire at the London high-rise and were astonished to see flames rising up the side of the building, new reports have claimed."

"But, soon after, the 24-storey building was consumed by flames in one of Britain's biggest ever tower block fires that left at least 79 people dead."

The paper continued that: " Those reports will add weight to claims that it was the cladding on the exterior of Grenfell Tower that caused the fire to spread so rapidly."

The entire Telegraph article can be read at: http://www.telegraph.co.uk/news/2017/06/20/grenfell-tower-firefighters-put-fridge-blaze-just-leaving-flats/

The fire's death toll is now at 79. Newgeography.com covered the fire ("The Grenfell Fire: A Litany of Failures?").

How can Middle America tap into its potential to drive the nation’s economy?

At "The New American Heartland" forum, hosted by the City Club of Cleveland, J.D. Vance, author of Hillbilly Elegy: A Memoir of a Family and Culture in Crisis, discussed the economic and cultural challenges facing Middle America. Decline in civic institution participation, drug addiction, and childhood trauma hit lower-income communities higher than anyone else. The key to lifting these communities up is to create economic opportunity because, as Vance explained, “…a good job isn’t just a paycheck, a good job is about having a community, a good job is about going to work and doing something that’s meaningful and dignified…” The source of that opportunity in our country comes from small, but high-growth start-ups, which are largely based on the coasts. However, industries based in the Heartland, such as transportation and energy, are prime for similar innovation which in turn would spur job growth.

Joel Kotkin and Michael Lind, authors of The New American Heartland: Renewing the Middle Class by Revitalizing Middle America report, define the “New American Heartland” as the region between the Appalachians and the Rockies, and from the Gulf of Mexico to the Canadian border. This region holds about half of the country’s population with the power to propel the whole nation’s economy forward. The Heartland’s lower cost of living, high-paying manufacturing employment, and productive power has the potential to foster the middle class and fuel economic growth across the United States.

It is time to change the narrative about Middle America.

Watch the City Club of Cleveland's video of the event here and read a recap, from Peter Krouse of cleveland.com, here.