Category Archives: Economy

Report: One-Third Of Businesses Affected By Storm Sandy Were Uninsured

by Categorized: Economy Date:

Among small businesses affected by storm Sandy in 2012 and polled by the Federal Reserve Bank of New York, one-third had no insurance and half paid for damages out of personal funds.

The New York Fed polled the businesses in New Jersey, New York city, the Hudson Valley and coastal Connecticut late last year between Oct. 10 and Dec. 3, roughly a year after the storm.

Forty percent of firms reported being affected by the storm, mostly negatively, although 8 percent said they had net financial gains — including some in construction.  Among the one-third of respondents hurt by the storm, “22 percent had losses greater than $100,000,” the New York Fed said in a release Monday.

“The top sources of losses for firms included decreased customer demand (59 percent), utility or service disruption (43 percent), and damage to or loss of assets (29 percent),” the report said.

A breakdown of responses by state or county was not available Monday. New Jersey and New York city were hit much harder than Connecticut and the Hudson Valley.

Among the firms hurt by the storm, 43 percent cited a continued financing need of $25,000 to $100,000. a similar percentage of those helped by the storm cited the same financing need.


UConn Parade Raises, Spends $90K; How Much Economic Benefit?

by Categorized: Economic Development, Economy, Entertainment/Tourism Date:

The final tally is in for Sunday’s UConn victory parade in downtown Hartford: Exactly $90,000 raised from 23 corporate sponsors.

And that’s exactly how much the Hartford Downtown Improvement District, the organizing group, will spend, said Mike Zaleski, executive director. As of midday Monday the bills totaled $86,500.

The most important economic effect of the UConn celebration: Cheerleading for Hartford. Dan Haar/The Hartford Courant

The most important economic effect of the UConn celebration: Cheerleading for Hartford.
Dan Haar/The Hartford Courant

The figure is up from $50,000 that Zaleski has set last Wednesday as a minimum needed to mount the celebration, and it’s up from the $70,000 that Gov. Dannel P. Malloy announced as the total early Friday morning.

The added dough enabled the organizers to rent a 20-foot video screen for the rally at the north steps of the state Capitol — for $13,475, delivered from a firm in Philadelphia.

Seems like a lot in an age when large-screen TV’s are dropping in price.  But I was at the event with friends, and one said, “This has a big-time feel.”

And that’s the economic point. Forget the money the 200,000 visitors to the Capital City did or did not spend. That’s small stuff. What makes an economy move is an improvement in how people feel about a region.

This event, one of the few mass-happenings that was truly racially integrated, accomplished that, though it can’t be measured. And it was problem-free except for one guy who fell out of a tree in front of the Hartford Public Library.

Aside from the obvious double championship, part of what made up the “feel” of the parade was a larger event, with 51 marching and rolling units, up from 33 last year, and a shorter route than in the past.

Metro Hartford is an $80 billion-a-year ecosystem of commerce. We don’t have a lot of growth but we do have a lot of wealth.  As we’ve learned, it’s not easy to convert that wealth into energy and positive feelings by the wide population.

In other words: Just as money doesn’t buy happiness, it doesn’t buy the sorts of good feelings that can lead to decisions by people and companies to spend in a region. That takes things like quickly organized parades that have a “big-time feel.”

Here’s the list of corporate sponsors who donated cash. It doesn’t include “in-kind” sponsors such as the Peter Pan bus company.

  • Webster Bank
  • Mohegan Sun
  • Cigna
  • The Travelers Companies, Inc.
  • The Hartford Steam Boiler Inspection and Insurance Company
  • Northeast Utilities
  • United Technologies Corporation
  • AT&T
  • Virtus Investment Partners
  • The Connecticut Buick and GMC Dealers
  • Harvard Pilgrim Health Care
  • Coca-Cola
  • Bank of America
  • The Hartford Financial Services Group
  • Aetna
  • SNY
  • Capital Region Development Authority
  • XL Center
  • CBS Radio
  • Rogo Distributors
  • Peel Liqueur
  • Robinson & Cole
  • Foxwoods Resort Casino

February Report: Slow Progress For Metro Hartford House Sales

by Categorized: Economy, Housing Date:

The frozen month of February brought more slow improvement to the housing market in central Connecticut, not a realization of the high hopes from a strong January report, but progress nonetheless.

The median price was up by 2.7 percent for single-family houses that sold in the 57-town area of the Greater Hartford Association of Realtors, the group said Monday. The number of closed sales 478, was up by nearly 5 percent from the same month in 2013.

The number of new listings rose by 5 percent to 1,055, but the number of days on the market also increased by more than 6 percent, to 82 days.

“It’s encouraging that even with this harsh winter, closed sales continue to rise in our housing market,” said Jeff Arakelian, the association’s president and CEO.

The modest year-over-year price increase, to $194,000, followed a 10 percent jump in January, to $220,000.

All in all, the market heads into the spring season as it has in recent years: with some momentum but no clear sign of a breakout year — other than a prediction by CoreLogic, a California-based firm, that Metro Hartford will be one of the nation’s hot housing markets in 2014.

Plan To Charge Stores For Paying Low Wages: Flawed But Has Merit

by Categorized: Economy, Jobs, Labor, Politics, Poverty, Retail Date:

Connecticut is already one of the three states with the highest minimum wages and it’s the only one with mandatory paid sick days. Now advocates for the working poor are pushing for a novel plan to address the crisis of below-poverty wages: Penalize employers that pay too little.

The controversial plan isn’t in effect in any state and was narrowly defeated in Washington D.C., where Wal-Mart threatened to pull out. The idea is to extract money from low-paying retailers and fast-food companies to help the state compensate for the income supports that low-wage workers receive.

Fair is fair, the logic goes. Why should taxpayers subsidize Wal-Mart, McDonald’s and Dunkin’ Donuts?

Tina Conners, a McDonald's employee in Manchester who lives in her car. Dan Haar/The Hartford Courant

Tina Conners, a McDonald’s employee in Manchester who lives in her car.
Dan Haar/The Hartford Courant

Care to get upset? A recent report by the Connecticut Association for Human Services showed that a family of four with two adults working a total of 60 hours a week at $10 an hour would be eligible for $29,147 a year in public assistance — much of it Medicaid. And that wouldn’t even include the earned income tax credit, which would push the total higher.

That means you the taxpayer are subsidizing you the shopper to the tune of thousands of dollars for every low-wage sales employee. Still feel good about those 12-packs of socks for $6?

Under the Connecticut version of the wage penalty bill, which had a hearing Tuesday before the legislature’s labor committee, any company with at least 500 employees in the state would have to pay $1 per hour per affected worker into state coffers if it paid less than the “standard wage” for its lowest job classification. For a minimum wage worker in fast food, for example, the standard wage is $11.31 an hour — 130 percent of the $8.70 minimum.

The idea has big problems, illustrated in the story of Tina Conners, who’s from Manchester and told lawmakers and Gov. Dannel P. Malloy Tuesday, in a meeting in his office, that she lives in her car.  Conners, 21, works between 10 hours and 20 hours a week  at a local McDonald’s. She’d like to have more hours but can’t get them.

Conners was at the Capitol to push for the low-wage penalty and a higher minimum wage, which Malloy wants. But what she needs more than a slightly higher wage is many more hours. She told me she’d prefer to log 20 to 30 hours a week, leaving her time and money to go to college and eventually, a career as a dentist.

The $1 an hour penalty wouldn’t come close to paying for the public subsidies that we the taxpayers have to shell out for low-wage workers, but it would be a start. And it wouldn’t help Tina Conners add hours to her workweek; if anything, it could lead to fewer hours.

Another problem: Franchisers such as McD’s and Subway are not the employers. No worry, advocates say. Franchisers would be liable even if they didn’t own the stores in question.

Bills like this come up precisely because low-wage employers are abusing the public trust. We as greedy, shortsighted consumers are the ones letting them do it — all the worse in the case of the poison we’re buying and ingesting from the fast food industry.

And so the bill is politically brilliant if only for the point it makes: The fines would not go to the workers, in effect an enforced wage; rather, the money would go back to the taxpayers.  “Politically, it’s a no-brainer. It’s a home run,” said Tom Swan, executive director of the Connecticut Citizen Action Group and a leader of the effort. “Morally, it’s the right thing to do.”

It’s not a home run for the Connecticut Retail Merchants Association and the Connecticut Business and Industry Association, who argue that the bill would raise costs in the state and drive out retailers that pay property taxes and offer opportunity to workers. “Our employers do the best job they can,” said Tim Phelan, president of the retail merchants group.

Well, no, they don’t. He can say that about his small retail members that are just getting by, but not about the big national chains and franchises that are transferring billions of dollars from taxpayers to shareholders by shortchanging workers. McDonald’s employees alone receive $1.2 billion a year in public assistance, an October, 2013 report by the National Employment Law Project showed.

Phelan and CBIA advance the idea that low-wage jobs are entry level. “They provide the learning experience,” said Eric Gjede, assistant counsel at CBIA, the state’s largest business group.

Certainly any specific worker can get ahead, but by definition the system will screw most people, simply because the wage structure at many big retailers is so bottom-heavy.

Both sides flash numbers showing why states should, or should not, force employers to pay higher wages or penalize those that don’t.  But ultimately, the states are just bystanders in a private-sector pay system that creates opportunity for a few and poverty for the many, to the benefit of us the consumers.

Maybe we should try the penalty. Flawed as it is, nothing else is working.

Hospitals Fire Back At Malloy: We Are 9 Percent Of CT Economy

by Categorized: Economy, Health Care, Jobs, Public finance Date:

Fresh from another snub by Gov. Dannel P. Malloy, the Connecticut Hospital Association is waving around a new report that claims its member hospitals account for nearly 9 percent of all economic activity in the state, and that every dollar the state gives them brings $2.33 from the federal government.

The first statement seems hard to believe, though without question hospitals are a huge part any region’s economy, especially the hard-hit cities.  The second statement about federal reimbursement is not exactly true but isn’t always wrong.

The hospital association’s report says the hospitals employ 55,000 people directly, with a direct payroll of $5.3 billion, or $96,000 per job. By spending money in the community, those employees indirectly create another 56,000 jobs for a total of 111,000 jobs, and $11 billion in payroll.

Separately, the hospitals themselves buy goods and services that directly or indirectly create another $8.1 billion in activity, and they spend another $530 million on buildings and other capital projects which multiplies to $1.1 billion in the economy, the report said.

Grand total: $20.2 billion in a state economy that’s $235 billion a year.

That’s a rebuke to Malloy, who, the hospital association says, shorted the hospitals by just over $500 million in Medicaid reimbursements and other costs last spring that they said they would need to keep providing the same level of services.

Then, when Malloy’s budget chief, Ben Barnes, was asked by reporters on opening day at the Capitol last week whether there was anything for hospitals in this year’s proposal, he said simply, “No.”  When pressed, he said he had looked at the state filings and thought the hospitals were doing fine.

They of course disagree.

As for the $20.2 billion, we see a handful of these economic output reports from industries, and this one seems to push toward the high side. For example, I know there are formulas to get there but it’s still not clear to me how a group of employees with $5.3 billion in their pockets can give rise to another group of people who earn $5.7 billion.

Yes, we are all connected in the economy.

And as for the federal reimbursement, the hospital association appears to be referring to the Medicaid formula when it says the federal “match rate” is 70/30. That means for every additional dollar we spend on Medicaid, we get $2.33 back.

But Malloy and Barnes say their plan did not cut back on Medicaid spending, only on the amount the hospitals wanted to receive from the state. They say the $1.7 billion for hospitals is actually up slightly, but of course the hospitals argue that Medicaid spending is up more than slightly.

To be continued this spring at a state Capitol near you.

Auto Dealers Upbeat But Face Pressure As President’s Day Nears

by Categorized: Economy, Retail Date:

The region’s auto sales industry heads into the crucial President’s Day push with hopes of approaching an all-time sales record in 2014, but with pressures that are squeezing profits.

That was the assessment Monday by three industry executives in Connecticut and Massachusetts, who spoke with media outlets about the recession that wracked the auto industry and the recovery since.

Connecticut lost 17 percent of its dealerships, 16 percent of dealership employees and 34 percent of sales in just two years from 2007 to 2009, according to BlumShapiro, the West Hartford-based professional services firm that released a report Monday. That sales plummet was about the same as the nation’s 35 percent drop.

Courtesy of BlumShapiro

Courtesy of BlumShapiro

Nationwide new car and light truck sales reached a peak of 16.9 million in 2005 and fell to 16.1 million in 2007 before collapsing to 10.4 million in 2009, the report said. This year, sales are expected to top 16 million again for the first time in seven years.

Connecticut is also nearly fully recovered in sales, but hiring is not all the way back, said Chip Gengras of East Hartford-based Gengras Motor Cars, a multi-brand seller. “I’m excited about 2014, there are certainly a lot of challenges,” he said. “The low interest rate has been very helpful to us.”

Gengras has about $35 million in inventory at any given time and must pay interest charges on that, he said — so the rate not only affects sales, but costs as well.

And as for employees, each person in sales must move 15 percent to 20 percent more cars now than before the recession, to make the same money. That’s because profits on each car are tighter as a result of Internet databases, but online information also means buyers come in closer to a decision.

The comments echoed those made in November at the Connecticut International Auto Show by executives in the Connecticut Automotive Retailers Association.

Gengras and Warren Waugh, head of a family dealership group in Massachusetts, bemoaned automakers requiring them to upgrade showrooms at huge cost, sometimes even after recent renovations. A BMW showroom rebuilt in 2010 must now be done over again, Waugh said, “and it breaks my heart … it’s just never-ending.”

Also never-ending is the search for service technicians, who can make $45,000 to start and up to $60,000 after just three years. Right now, Gengras said, “We could use a half-dozen to 10 technicians.”

With the slump in new car sales a few years ago, used cars are harder to find, making them more expensive — a good trend for new car sales, said Rick Parmelee, a BlumShapiro partner who works with auto dealers. “The new car is incrementally not that much more expensive,” he said.

  2009  10.4 million
2010  11.6 million (11.1% increase)

  2011  12.7 million (10.2% increase)

  2012  14.4 million (13.4% increase)

  2013  15.3 million (7.6% increase)

  2014  16.5 million (projected)

  2015  17 million+ (projected)

Tracking The Postage Stamp And The Minimum Wage

by Categorized: Economy, Labor Date:


 source: Bureau of Labor Statistics, U.S. Postal Service

Look at the price of postage stamps compared with the federal minimum wage since 1950.  An all-too-familiar pattern emerges.

For more than 20 years, until 1971, the two measures rose in near-lock-step. The minimum wage was 25 cents an hour for every penny the U.S. Postal Service charged to mail a letter.

Then rates started to pull apart — in that fateful time of inflation, the Arab oil embargo, Nixon’s wage and price controls, women entering the workforce in great numbers, the birth of the computer age and the Japanese threat to U.S. manufacturing.

By 1974, a stamp cost a dime and the minimum wage had fallen behind. Instead of $2.50, it was $2. And we’ve never looked back.

Stamps rose mostly in step with the Consumer Price Index until last month, when the 3-cent increase exceeded the inflation curve. And remember, postage prices are controlled by a (quasi) public agency.  As for the minimum wage, we all know it has lagged since the early ’70s.

That latest stamp hike is supposedly for just two years but of course it will never go back. If the minimum wage had kept up with postage prices, it would now be $12.25.

By no coincidence, the early ’70s was precisely when American workers stopped sharing in all they produced. Put another way, the income and total output are in place but workers aren’t seeing it.

Sure, some states, like Connecticut and Oregon, have pushed ahead of Congress by setting a minimum wage in the $9 range. Connecticut started to pull ahead of the nation for good in 1999. But no state has come close to keeping up.

Now President Obama wants to push the federal minimum to $10.10 an hour, and Connecticut Gov. Dannel P. Malloy wants the state to match that amount even if Congress doesn’t act — which would help many workers and hurt others.

Connecticut would be a lot better off if Congress raised the national wage. What should Congress do?  Even a wage of $12.25 an hour is barely enough to get by, and while it’s politically impossible to adopt, we’re basically paying it anyway with food stamps, rent subsidies and the earned income tax credit.

But it seems clear that Congress needs to give a raise at least for workers in a job for, say, 500 hours, and perhaps for everyone. Pass it and put a stamp on it.

Shiller On Live Yale YouTube Feed: Bubbles Could Get Worse

by Categorized: Economy, Housing Date:
Robert Shiller, left, and Eric Gershon at the Yale TV studio Thursday.

Robert Shiller, left, and Eric Gershon at the Yale TV studio Thursday.

Robert Shiller, who just won the Nobel prize in economics and is best known for describing speculative bubbles, doesn’t think we’re any better able to control those dangerous, irrational price run-ups these days despite all we’ve lived through.

“I don’t think that we have learned, and we are probably more vulnerable to bubbles in the information age,” Shiller said Thursday in a live YouTube broadcast at Yale.

The reason: Twitter and other instant sources of news could tend to heat up irrational behavior.

“There isn’t a science to controlling bubbles,” the Yale economist told interviewer Eric Gershon, our former colleague at The Courant.

Sure, there are measures such as limits on bank loans and rising interest rates that could flatten price curves, but Shiller said, “It’s like trying to control a crowd. If you have an angry mob outside your door what scientific method  can you use to control it?”

On the other hand, Shiller, whose 2013 Nobel prize was awarded for his work in describing how human behavior affects markets, does believe we’re getting better at that end of economics. “We’re understanding behavior better so we can make better policy.”

But what policies? Shiller is concerned about income and wealth inequality but he also sees the downside of a sharp rise in the minimum wage. And he’s very skeptical of measures to redistribute current wealth — favoring instead ways to change the rules going forward.

“I’m not saying that we shouldn’t have substantial inequality,” he said, because it provides strong incentives for people to produce and earn. “But I’m worried that inequality is going to get much worse in the future.”

And the housing market? Last year saw a price runup of 13.7 percent in the 20 largest metro areas according to the Case-Shiller index, which he helped develop. It’s not sustainable, he told Gershon, but it’s not a bubble that’s about to burst, either.

His prediction for this year: 5 percent, playing it safe like most economists do. The folks who run the Case-Shiller index predicted that Metro Hartford would rise by 8.3 percent, 5th highest in the nation, from a paltry 2.9 percent in 2013.

Shiller is about to teach a course online on Coursera called “Financial Markets,” which he thinks is a more important topic than ever, considering the rise of financial markets in the developing world.

“For anyone who wants to make a mark on our society…you have to appreciate finance because it is how we get big things done.”


A College Athletes Players Union? Like The Min-Wage Fight, It’s The Result Of Abuse

by Categorized: Economy, Education, Labor, Politics Date:

As it happened on Tuesday, the same day that President Obama proposed the largest minimum wage increase in history, football players at Northwestern University petitioned federal labor officials for the right to form a union.

The College Athletes Players Association, with Northwestern’s co-captain and standout quarterback Kain Colter as its face, submitted registration cards to the Chicago office of the National Labor Relations Board.

It’s a bad idea but it’s about time this happened.

There will be many steps and many battles before the players gain collective bargaining rights. The NCAA is saying they’re not employees so they have no right to organize.

The would-be union, headed by a former UCLA player and represented by the United Steelworkers, says it’s not looking for big money, or any money at all, other than the basic, low pay that most people agree players should receive.

Rather, the union’s demands include “financial coverage for sports-related medical expenses, placing independent concussion experts on the sidelines during games, establishing an educational trusts fund to help former players graduate and ‘due process’ before a coach could strip a player of his scholarship for a rules violation,” according to the Chicago Tribune.

This has been brewing for decades, as big-time college football and basketball programs reap billions, larding up coaches’ salaries and university coffers. Players do get an education and a 4-year tryout for the NFL or NBA but that still leaves plenty of room for abuse, especially for the non-stars.

This will be a great fight, just as the national battle unfolds over Obama’s push for a $10.10 an hour minimum wage, up from $7.25 an hour.  And they are linked, in that both are developments that would not happen in an ideal world, but have merit simply because the abuse has gone too far.

The whole point of a minimum wage is to set a floor that gradually rises, below which workers can’t get by without some form of outside help. Raising it radically might be jarring to the economy, but it hasn’t changed in five years and it was historically low even in 2009.

Likewise, NCAA athletes in big-time programs such as the Big 10 have seen everyone else get rich while they sacrifice not only every hour of free time, but their health.

Colter, a great natural leader, was among the players who wore the letters APU on their wristbands — for All Players United — in a Sept. 21 home game.  That week, he told reporters the movement was not players vs. Northwestern, but teammates exerting their rights. “It’s players coming together for a better cause,” he said in a video posted by the Northwester News Network, run by students.

In a written statement, the NCAA said “This union-backed attempt to turn student-athletes into employees undermines the purpose of college: an education….We are confident the National Labor Relations Board will find in our favor, as there is no right to organize student-athletes.”

In the old system, boosters illegally snuck envelopes of cash into athletes’ hands and while that was corrupt and insidious, it took care of a few problems. Now we need a modern system to take care of players, just as the minimum wage needs to be indexed to inflation once and for all, so we don’t have to go through this charade of a debate every three years.

Instead of modernizing, Congress and the NCAA screw around doing nothing, so we get a president fighting for a 40 percent hike in the minimum wage and a college players union petition.

Flawed ideas whose time has come. Enough is enough.


Five Things You Need To Know About Income Inequality

by Categorized: Economy, Poverty, Wealth Date:

President Obama’s Dec. 4 speech on income inequality laid out his thoughts on an issue that’s been brewing since 1973. His State of the Union speech added some specifics, notably an executive order for a $10p.10 minimum wage for federal contractors. But there’s plenty he’s not saying, or barely touching.

1.  Rising income inequality is not mainly a result of public policies. What’s happening is that the value of work is declining in relation to the value of ideas and investment capital. Workers are paid less for their work. That’s not caused by something the government did or didn’t do. “The decisions we make on these issues over the next few years will determine whether or not our children will grow up in an America where opportunity is real,” Obama said in the December speech. Not entirely true.  It’s possible that Obama could affect the pay gap as much through the bully pulpit as through the minimum wage, collective bargaining rules and taxes.

2. The poor do better when the rich do fabulously better.  The old saw about the rich getting richer and the poor getting poorer is true much of the time, but often it’s only true for the very, very rich.  When the top 10 percent stay flat or barely move ahead, the working poor lose ground. But when the rich take a hugely bigger share of the pie, that’s when the working poor make headway, chiefly in the late ’90s (see chart). This is because the pie is growing at those times.

Change In Real Annual Household Income, By Income Group, 1979–2007:

Graphic by Economic Policy Institute

3. The real issue is living standards — income adjusted for inflation — and the real problem is that they’re falling for most families.  How much does the income gap matter if you’re seeing gains?  Yes, the way other people are doing matters to you, but consider this: When billionaire Edward Lampert moved out of Connecticut in 2012 in a huff over taxes, income inequality instantly improved in the state. Did the average Connecticut resident feel better?

4. Global competition and technology are not the main causes of the rising pay gap. Those are the old excuses, but research, including a lengthy report by the Economic Policy Institute in November, show that there’s something deeper going on that’s not explained by automation lowering demand for labor.  Certainly they are factors, said co-author and EPI president Lawrence Mishel.  But each gap — between the rich and the middle class, the middle and the poor, the ultra-rich and everyone else — has its own causes. For example, the 1 percent zoomed ahead because of CEO pay and the rise of Wall Street finance, and the middle fell behind the 90 percent because of globalization, deregulation, unemployment and privatization. More and better training is not necessarily the answer because someone has to do the dirty work.

5. Raising the minimum wage helps even the playing field but it doesn’t address underlying issue and it could hurt some people. The debate over whether a higher min-wage hurts the economy is endless. Clearly, raising the wage from its current. depressed federal level of $7.25 an hour would help matters because it would take full-time workers out of poverty.  Still, as Eric Rosengren, president of the Federal Reserve Bank of Boston, said this month in a Courant interview, the best way to raise workers’ bargaining power is by addressing unemployment. Even the liberal Rosengren said a sharply higher minimum could cause retailers, for example, to use more technology and fewer employees.