While we wait for news on a financial assistance deal for the airlines I decided to model what the latest estimate from IATA Economics and others–a roughly 20% revenue decline for the year–would look like for states and metros with significant concentrations of jobs and economic activity in the airline industry. As you might guess, it’s not pretty.
The Scheduled Passenger Air Transportation industry (just passengers, no freight, for this exercise) contributes $124 billion to U.S. GDP and employs nearly 450,000 workers, according to Emsi, a labor market analytics firm. Average earnings per worker ($113,000) are very high, which means these jobs are critical drivers of other jobs in the labor market (i.e. a large multiplier effect). That’s great for the purpose of economic development in good times but can be catastrophic when that industry hits a down cycle. Current times certainly qualify.
Using Emsi’s model of the national economy, an estimated 20% decline in sales would result in losses of about 96,000 jobs and $10.7 billion in earnings in the Scheduled Passenger Air Transportation industry. Total losses to the U.S. economy would be nearly 928,000 jobs, $58 billion in earnings, and $12 billion in federal, state, and local tax revenue.
Here’s how the estimated 20% sales decrease could impact states with significantly larger concentrations of jobs in the industry compared to the U.S. economy as a whole:
Approximately two-thirds of job losses in the industry would happen in those fourteen states.
Metropolitan areas with major hubs, such as Atlanta or Chicago, would absorb most of those employment and earnings losses, of course, and the impacts would be dramatic. Projected employment declines in the New York, Chicago, Dallas, and Atlanta metropolitan areas would top 30,000, each. State and local tax revenue decreases would range from about $257 million in the Atlanta metro area to $479 million in New York. Places like Miami, Denver, Seattle, Minneapolis, and Charlotte would also be hit hard.
There are apparently several scenarios being discussed right now in terms of a rescue strategy for the airlines, and I’m sure the industry experts will continue to adjust their forecasts as new information is available. I’ll update this post as I see new estimates released. Also, please get in touch if you would like results (or other scenarios) for states or metropolitan areas I did not mention here.
This is going to be a moving target, but we are starting to get an idea of how to quantify some of the impacts of the coronavirus on Nashville’s restaurant industry. Preliminary estimates show that Davidson County’s restaurant industry could lose more than 9,000 jobs and $245 million in earnings resulting from the coronavirus shutdown. The total economic impact could reach 12,000 jobs and $420 million in earnings across the Nashville economy, if a recent industry forecast proves accurate.
The National Restaurant Association sent a letter to President Trump and members of Congress on March 18 estimating that a three-month closure of restaurants due to the coronavirus could result in a twenty-five percent decrease in industry sales and a total economic impact of $675 billion, including up to seven million jobs lost.
Restaurants contribute about $1.5 billion and nearly 36,000 jobs to the Nashville economy, according to Emsi, a labor market analytics firm. Let’s assume the economists at the National Restaurant Association are on target and we can apply their national forecast to the local industry in Nashville with a reasonable degree of accuracy. Based on my analysis using Emsi’s data, here’s what a 25% decrease in sales at restaurants in Davidson County would look like:
$732 million decrease in sales
$245 million decrease in earnings
9,100 jobs lost
Total impacts on the local economy:
$420 million decrease in earnings
$62 million decrease in state and local taxes
12,000 jobs lost
I don’t think the National Restaurant Association’s analysis includes bars. A similar decrease of 25% would result in losses at local bars of about $40 million in sales, 700 jobs, and $22 million in earnings. The total impact of restaurant and bar closures on the Davidson County economy would be about 12,900 jobs, $451 million in earnings, and more than $64 million in state and local taxes.
The latest economic development news out of Michigan is a pledge to do something about lagging real wages, or, rather, ask state officials if they will do something about it.
Many of the state’s leading economic development organizations and private foundations have banded together under Rising Income For All to request that state policy makers adopt United Way’s ALICE (Asset Limited, Income Constrained, Employed) statistic for estimating cost-burdened households as the “universal measure of success in meeting the goal of an economy that as it grows, benefits all.”
ALICE, like predecessors such as MIT’s Living Wage Calculator, EPI’s Family Budget Estimator, and the Family Budgets tool by Texas-based Center for Public Policy Priorities, shows quantitatively why traditional metrics–unemployment rate, poverty rate, even per capita income–can provide only incomplete pictures of what economic distress looks like today to the growing ranks of cost-burdened households, especially if regional cost of living differences and inflation are ignored. According to the latest available ALICE data from United Way, 43% of Michigan households are unable to cover basic household necessities.
First, let’s give credit where credit is due. It’s been about ten years since “traditional” economic development advocacy groups started saying, at least publicly, that “not all jobs are good jobs.” Now some economic development leaders in Michigan appear ready to take another step in that direction, which, to my knowledge, is the first coordinated statewide effort among local economic developers to do so, publicly. I can’t recall anything similar in other states, but please let me know via email if you are aware of something that should be mentioned.
What gets measured gets done, as I’m sure some of the people on the Rising Income For All roster might say, so I’d call this a good sign for the future of economic development in Michigan. As an instructor, I would also give them high marks for compelling calls to action:
“For the first time ever Michigan is a low-prosperity state with a strong domestic auto industry.”
“In every county in Michigan, 30% or more of families can’t afford basic necessities.”
https://risingincomeforall.org/
There will undoubtedly be detractors. It’s not too difficult to be cynical about economic development. As the media coverage points out, as of yet the Rising Income For All supporters have not offered any specific proposals to achieve their stated objective, beyond state recognition of ALICE. They should probably be ready to explain why their advocacy for better math doesn’t appear to extend to the minimum wage.
Further, according to data from Good Jobs First, companies investing in Michigan have received state and local subsidies totaling nearly $16 billion, ranking third among states. How would Rising Income For All supporters characterize the return on investment for those projects in the interest of fighting wage stagnation?
How far are economic developers on board with the initiative prepared to go? Will they advocate for changes to the state’s tax credit programs to ensure that only companies committed to real wage increases receive subsidies? Will local economic developers encourage their boards and elected officials to make changes to tax abatement policies? Are they willing to sign an economic development non-compete agreement to improve their collective negotiating position with companies in the pursuit of Rising Income For All’s vision for inclusive prosperity?
I get it, Memphis has its challenges. I don’t want to diminish them or in any way discourage data mining in service of better understanding your city or local economy. I can even forgive burying the lede in that story on the margin of error. It’s frustrating when new data is available on a topic of general interest but you can’t say anything for sure about year-to-year changes because of the margin of error.
But there’s no reason to stretch that far for talking points that can tell a more complete story about the local economy. Here are a few:
Nearly one out of five dollars in state gross domestic product (GDP) is generated in Shelby County.
Real (inflation-adjusted) GDP growth in Shelby County is averaging about 1% per year–nothing to crow about but certainly not declining.
Nearly 40% of the state’s transportation and warehousing industry is found in Shelby County.
Real value of durable goods manufacturing in Shelby County is up by more than 40% since 2010.
Total employment in Shelby County is growing by an average of more than 7,000 jobs per year.
Population growth is a challenge, as mentioned in the story, but Memphis isn’t exactly hemorrhaging residents. According to the Census Bureau’s annual population estimates, Memphis was one of 165 cities or towns in Tennessee with fewer residents in 2018 compared to 2010. But Memphis is only losing one resident per day, on average–not exactly an exodus. By contrast, the county is gaining about three per day.
From an economic development standpoint, the local economy is also very competitive in several industry clusters. According to the Institute for Strategy and Competitiveness at Harvard Business School, Shelby County ranks in the top twenty counties for medical devices (#6) and transportation and logistics (#19):
There is no question Memphis faces challenges and the city has work to do to achieve inclusive economic development for its residents. But so does Nashville, and every other fast-growing community across this country. Indeed, growth can often make that challenge more daunting. We see this in places like San Antonio, too, where community leaders are quick to compare the city to Austin. But why? The two places are very different–demographically, economically, and culturally. Perhaps they also have different goals for the future of their communities and what they can offer to residents of today, and tomorrow.
So, Memphis, by all means continue to track your performance on the metrics that speak to you. And make sure the people telling that story reflect the diversity of your wonderful city. Nashville has very little to offer to that story.
“The prosperity of recent years has disproportionately benefited people with higher incomes, who own property, and who have technical or higher-level skills.”
“Meanwhile, wages have stagnated or fallen for long-term lower-skilled workers who have struggled to keep up, especially people of color.”
I’ve heard different versions of those points made many times since I arrived in Nashville two years ago. Anecdotal evidence abounds about where the benefits of “New Nashville” are accruing, and how growth is exacerbating the gaps between newcomers and existing residents, the “haves” and the “have nots.” But what does the data say? Are those claims accurate? And do they tell the entire story?
To be clear, I hope that Plazas and advocates continue to push our elected leaders to keep equity front and center of debate about economic development in Nashville. When Metro and its various stakeholder groups decide they are ready to have a serious policy, and not just tinker around the edges, I hope that equity will be its cornerstone. There are many good examples from other cities to draw from, including what we adopted in Austin.
But if and when that day comes we’ll need more than testimonials and anecdotal evidence. Clearly articulating goals, developing strategies, and evaluating progress will require data and a serious commitment to open dialogue, transparency, and accountability. As with any public endeavor, everybody gets a say; all experiences are valid. But Very Serious People should not go unchallenged publicly because of what I’ve heard described as “Nashville Nice” or some distorted view of defining “politics” as one’s inalienable right to dissemble when facts are readily accessible. This was part of our motivation behind launching the resident survey and publishing the data on Metro’s open data portal. I hope the Cooper administration and new Metro Council continue down that path.
So, in that spirit, let’s take a look at Plazas’s points. We’ll combine them here since they are somewhat related and restate the issue as follows: Are the benefits of Nashville’s economic growth disproportionately accruing to people equipped with the tools (i.e. education, skills, etc.) to take advantage of it? And, if so, is that exacerbating inequality? I can’t say for sure how Plazas would define or measure “benefit[ed],” but since he used terms such as income and skills it’s probably safe to assume that he was thinking, at least in part, about workers. Which means the question becomes: Have wages “stagnated or fallen” for workers with lower levels of educational attainment compared to those with higher levels?
Here’s a table showing growth in inflation-adjusted (real) average earnings for workers age 25+ in Davidson County by educational attainment and race/ethnicity for 2011-18. The data is from the Census Bureau’s Longitudinal Employer-Household Dynamics program.
Average earnings for workers in Davidson County with no postsecondary education grew faster than any other cohort during that time period. In fact, average earnings for workers with no high school diploma or GED grew about three times faster than average earnings for workers with a bachelor’s or advanced degree, according to Census estimates. Clearly, Nashville’s recent period of economic growth has produced gains for workers across the spectrum of education and skills, not just at the top of it.
But I don’t think that’s what Plazas was really trying to say. I think his point was directed more toward issues of equity and affordability–and, in that context, he’s absolutely right. Housing experts tell us that we should spend no more than 30% of earnings on housing costs to be considered affordable. Do that calculation using the 2018 figures in the table above and Plazas’s argument comes into focus. For example, average earnings for Black workers in Davidson County are equivalent to about $1,000 in total monthly affordable housing costs. The average rent in Nashville now exceeds $1,400 per month.
It’s the same story for Hispanic workers in Davidson County, as well as workers with no completed postsecondary education, on average. And the gaps are growing. Inflation-adjusted average rent in Nashville increased by 40% in 2011-18, compared to average earnings growth of only 5% for Black workers in Davidson County.
This is where the debate about inclusive economic development in Nashville, or any fast-growing city for that matter, should start. What combination of policies and strategies are going to effectively address these challenges resulting from economic success? In fact, we had a similar conversation in Austin this week with a group from Grand Rapids.
As any of my former students can attest, I feel very strongly–and very likely annoyingly so–about the importance of a call to action when developing a strategy. It’s an often overlooked feature in practice. But if you don’t have a compelling call to action it can be really difficult to get people engaged and participating in a serious way.
I’ll offer this for Plazas’s next one:
In 1998, when Nashville was a much different place, Black workers in Davidson County earned, on average, about 66% that of White workers. Today, despite twenty years of economic growth and opportunity, it’s 59%.
