January 2011 Archives

A house is a house...

So, 50 homes are on the market each month on average in Crookston (pop. 9000) I have been told by a local real estate professional who has been in the business here for quite a long time. That is about 1.5% of the homes, and though there are 'gentle rolls" I'm told, the fluxuations are not extreme. It was noted that folks grow up and move, older folks also move out of their homes. UMC provides somewhat "transient" home owners, and there has been buy outs from the city toward relocating people (so as to build levies). Most people taking the buy outs had already paid off mortgates and thus bought 'straight accross' for homes of similar value. In any account, even with intra-city movement the home surplus has been kept at the same level, which is good news for a hub that brings folks 'into town'.

Laboring over labor markets ...

The Crookston School Superintendent just received the annual administrator's award for this region of school districts. It was announced on the local radio site (in written form- a great use of the internet by this community) along with a summation of this past weeks' orientation of new board members and superintendents in the Twin Cities. One of the quotes from the supt. mentioned efforts to get non-teachers who are laborers participating in other fields into the classrooms, especially for rural areas. I have no idea how that will be handled by the Fed's financial funding due to their 'best qualified' requirement for teacher by certification placement under No Child Left Behind. But I am fairly certain that this will not be favorable to the teachers' union(s) in this region. I don't know from a strictly financial point of view whether this would pull people out of other professions in the area. No doubt it would require an additional year of teacher's training beyond the person's professional bachelors if modeled after current 'after college' cert programs.

The hiring and wage markets up here in the northwest are certainly influenced heavily by local manufacturing. In fact, a person out of high school (with a good quality skill set) can start close to here at $12/hr, which translates into $24K right off with full health benefits at very, very little cost share by the employee. This is a base, and does not count additional income for all the overtime that is available; it also accounts for about eleven months of work once vacation is accounted for. Teachers generally receive just a couple vacation days per year, and though they roughly work nine months a years, there is LOT of behind the scenes 'overtime' type of hours involved. A new certified teacher right out of school with a certificate and bachelors may start at ~$30K around here, yet in this district employees are paying well over $5K as their cost share for a fairly advantageously subsidized health insurance program.

A few years ago while I slept overnight at the only available accommodations -on the floor of a remote village(pop. 90) school- I talked quite a while with a fellow social studies teacher who had just arrived that September out of a bachelors teaching program in Wyoming. When I asked him about teaching job availability back home, he mentioned there was a large shortage. He indicated it was due to market competition for labor, as out of his ENTIRE (teaching) graduating class only he and one other went into teaching if I remember right. The rest got their degrees/certifications and went right into the local oil fields to make much, much more money.... I expect with current Minnesota trained student teachers looking at a stymied job market within the state, many may be looking to start- and finish- teaching careers in North Dakota which would certainly be a switch from decades past. (Or similar to Wyoming a few years back, many teachers may join the several people from this area who have given up local careers for oil patch jobs in the western part of the state)

Schools are vitally important to economic development in rural, small towns as often they are the lion's share of industry/payroll. And so, to bring it home, our local school board is going into contract negotiations with teachers (and several bargaining units this year). I have a feeling from indicators that locally these will be hard line negotiations. With economic tough times staving off many of the enmass Baby Boomer teachers from retiring ....it may just be the school board's thought are along the lines of 'keeping your job is the new raise!' But in this region, with labor shortages in manufacturing it may be that younger teachers take cues as mobile labor agents to 'go back to school', retrain and enter a labor market. Unfortunately, this may decimate the effectiveness of smaller schools considering the type of historical and institutional knowledge needed when working with human capital (kiddos).

Incentives for Housing

Have you seen the newly released remake of True Grit yet? The main character (Mattie Ross) opens the movie with "You must pay for everything in this world one way and another. There is nothing free except the Grace of God". Economists are by training mindful that on this earth nothing is "free". There is the constant thought of opportunity costs (the utility, or benefit, of one option forgone with the choosing of some other option). Calculating and allocating the limited resources there's a recognition that every transaction has winners, loosers and often free riders. Yet with common goods, there is a delination as to whether costs or benefits from transactions or a policy are to increase the welfare of the individual or the community as a whole. And every now and then there arises a deal or policy where in the context of the whole, everyone comes out a winner to some degree.

After speaking at length with Crookston's Housing and Economic Development Authority, I think that Crookston's local tax abatement (two year) for those building on discounted, plumbed lots fits this category. It is a type of grace, given to attract building on the NE edge of town. New home builders-whether new to Crookston or longstanding residents-choose a candidate lot and are basically get refunded taxes up front two years of taxes (which will be paid back as regular tax payments out of a mortgage escrow for those two years and then beyond). This gives the builder more immediate monies to finance their buildling efforts with. As I understand it, while the city and school district (joint venture) 'forego' tax revenues for a couple years due to the immediate rebate, it is income they would not have had without the building activity as empty city owned lots generate very little- if any- revenue. It is true that the city and district could use the initial two year's of tax revenues for investments or their own operating costs for those couple of initial years if they didn't offer an abatement, as revenues (not profits) are generally comprised of quantity multiplied by price. Yet here, the quantity of new buildiers willing to move forward and the height of value/price to be taxed for years to come may be compromised by not offering abated money immediately (not withstanding the logistics of availability of money/loans and cost/interest). By the design of our state taxation system, the city gets the same overall pool of taxes regardless of how many residents it recruits. Thus the burden decreases for individuals as it gets spread out amongst more payers. There are positive externalities to the albiet small sustained amount of growth that Crookston's abatement lends to. This year three lots qualify.

The school district doesn't incur any direct fiscal costs by being a part of this incentive. And while this incentive drops the price/tax for individual residents in Crookston, those living outside of the city yet inside the district stand to gain from this in that any additional students enrolled (up to certain operational break points) will reduce the cost of education per pupil by the adding many thousands of dollars to the district's coffers through state funding). NOT being a public finance guy, nor fully understanding the housing market, it seems that on the surface this is one of those infrequent situations where though certain individuals of the community (school district) may recieve a larger benefit than others, the societal benefit is greater than the social costs incurred by this municipal policy. We tolerate similar (though not exactly the same) leveraging of individual gain versus the gain of the whole when we participate in insurance pools. There's been the idea voiced that this incentive denies full benefits by some who live in the school district, yet outside the city limits where the incentive is offered. Yet by default, attraction policies are created to redistribute residents/goods/services with the understanding that people are free agents to be competed for in the free market of 'residency'. In a general sense, businesses and communities sense that. And while there may be negative externalities that were unexpected, they know that at certain levels growth often brings benefits due to larger economies of scale. Since enacting this incentive, the city has marketabley grown with new homes, and there are plenty of older used homes on the market as well (which still have taxes paid on them). In some policy cases the whole community can be a winner- though some individuals winning more than others.

Making the case for Mobile Websites

A transformation has taken place; people are aborting their desktop computers in favor of mobile hand held computers such as the iPhone, Android, and Blackberry. Various reports find rising levels of Americans using the internet on a mobile handset. One-third of Americans (32%) have used a cell phone or Smartphone to access the internet for emailing, instant-messaging, or information-seeking. This level of mobile internet is up by one-third since December 2007, when 24% of Americans had ever used the internet on a mobile device. On the typical day, nearly one-fifth (19%) of Americans use the internet on a mobile device, up substantially from the 11% level recorded in December 2007. That's a growth of 73% in the 16 month interval between surveys.

More than half of mobile web users go online from their phones on a daily basis
In addition to being a growing proportion of the overall cell phone population, users of the mobile web now go online more frequently using their handheld devices than they did as recently as last year. More than half of all mobile internet users go online from their handheld devices on a daily basis--43% do so several times a day, and 12% do so about once a day. At a similar point in 2009, just 24% of mobile internet users went online several times a day.

Hopefully this data from Pew and Nielsen make the case that it is important for businesses and organizations to connect with people on the go on through their handheld device or smartphone. At minimum this means that if you have a regular website then you should also start thinking about having a mobile version of you website developed. And while you are at it make sure people using a variety of location based services on their iphones or android phones can find your businesses. Examples include: Yelp, Google Maps, Urbanspoon, and many more.

For a very visual presentation on all of this click here

And for the best help contact one of you local Extension community economic educators

NAICS gazing....

In preparing for a foreign trade zone meeting with various EDA's in the region, I pulled down all the known businesses and highlighted manufacturers. (The 31's to 33's series of NAICS are designated for these types of firms). When looking at the top 5 earning of all firms (by sales), it was not surprising that Polaris headed up the list, with New Flyer (bus manufacturing) and the two American Crystal factories in Polk County took up the third and then the fourth, fifth top earners respectively. Ag manufacturing/processing is certainly known in this area- as is transportation manufacturing- as top in sales.

Now, the second ranked firm in terms of sales volume was in itself not surprising-Marvin Windows; yet Marvin's was not classified by Infogroup as manufacturing, but rather as a building material dealer. Under 444 series NAICS. Incidentally, this firm was the only one in the top five ranked for the most employees which was not coded as a manufacturer. While the company has a home center for local customers at their main factory, there is no doubt to anyone up here that the bulk of the firm's activity at that location is the manufacturing doors and windows from raw materials to finished product. Concerning the number of employees, the next several ranking firms were made up of a Wal-Mart, a single school district, several health care facilities, and several Native owned casinos.

The lesson confirmed is familiar- assigned NAICs from Infogroup may describe a secondary activity, and while being close it may miss designating the main function of a firm. This is not to knock the company compiling the data, but just a reminder that local knowledge of a firm is yet helpful in accurately organizing output information.

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This page is an archive of entries from January 2011 listed from newest to oldest.

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