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The top chart above shows the annual brewery count in the US from 1874 to 2014, based on data from the Brewer’s Association here, and the bottom chart shows the annual change in the number of US breweries. The growth in America’s breweries over the last decade, especially the exponential growth in craft breweries, microbreweries, and brew pubs, has to be one of the most remarkable small business success stories in recent years, maybe in a generation or more. Except maybe for the recent exponential growth in shale oil production in Texas and North Dakota and the growth in natural gas production in the Marcellus region, I don’t think there are very many other examples of a rise in output or number of producers than can compare to the surge in American beer makers over the last decade. Here are some beer facts to consider:
1. The number of US breweries last year reached a 140-year high of 3,464, the greatest number of American beer makers since 1874, when there were 3,631 domestic breweries (see top chart above).
2. Except during the “War on Beer” period from 1920-1932 (aka Prohibition), the number of US breweries reached an historic low of only 89 mostly “macrobreweries” in 1978, before rebounding to more than 3,400 mostly craft beer makers last year.
3. The net increase in the number of new US breweries last year – at 547 (more than one per day) – was the largest annual brewery increase in US history (see bottom chart).
4. In just the last seven years, the number of US breweries more than doubled from 1,511 in 2007 to more than 3,400 last year, which is an average annual increase of 279 breweries, or more than one new US brewery every business day of the year for the last seven years.
5. By category, the biggest growth sector last year was by far the microbreweries, which increased in number by 27.8% from 1,464 in 2013 to 1,871 in 2014 and represented more than half of the total US brewery count last year for the first time ever. More than 400 new microbreweries opened for business last year, at an amazing rate of more than one new US microbrewery opening every day of the year on average. Sixteen new regional craft breweries opened last year, bringing the total number from 119 in 2013 to 135 in 2014. More than 2.5 new brewpubs opened every day last year, bringing the total at year-end to 1,412, an increase of 10.3% and 132 new establishments in 2014.
MP: Thanks to the thousands of American “fermentrapreneurs” who have revitalized America’s now-booming craft beer industry, we have gone from a long period of limited choice among extremely low-quality, domestic macro-beer “swill” options to unlimited choices today for extremely high-quality domestic craft beer, which is the envy of the world. Especially for those who love IPA-style beers, I don’t think you’ll find better beer of that variety anywhere in the world, compared to what you can get today in America at almost any liquor store. To paraphrase Gregory Zuckerman’s description of the US shale revolution: For all of the criticism the US has fielded for losing its edge in innovation, surging American craft beer production is a reminder of the deep pools of ingenuity, risk taking, Yankee ingenuity, and “fermentrapreneurship” that remain in this country – the new United States of Beer.
There’s never been a better time to be a beer drinker in America than today, given the awesome selection of craft beers from more than 3,400 domestic breweries in every part of the country. Welcome to the Golden Age of Beer - there’s certainly no “great stagnation” for this part of the US economy!
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Last month the American Association of University Women (AAUW), the nation’s leading voice promoting equity and education for women and girls, released its annual report on the gender pay gap — “The Simple Truth about the Gender Pay Gap.” I take the liberty below of editing some of that report to focus on the persistent gender pay gap at the White House, and I call upon the AAUW to join me in asking President Obama (the “Discriminator-in-Chief”) to address the significant glass ceiling and gender pay gap for his White House staff.
Did you know that in 2013 2014, women working full time at the White House in the United States typically were paid just 78 82 percent of what men were paid, a gap of 22 18 percent (see chart above)?
If you take one simple truth from this guide, I hope it’s this: The $14,300 gender pay gap at the White House is real. This guide backs up this assertion with the latest evidence and present ideas for what we can do about it.
The pay gap at the White House is the difference in men’s and women’s median earnings, usually reported as either the earnings ratio between men and women or as an actual pay gap, as defined below. The median value is the middle value, with equal numbers of full-time workers earning more and earning less. The American Association of University Women (AAUW) has been on the front lines of the fight for pay equity since 1913. AAUW members were in the Oval Office when President John F. Kennedy signed the Equal Pay Act of 1963 into law, and more than 50 years later, we continue to lead the push for policies and legislation to encourage and enforce fair pay in the workplace. That is why we want to bring attention to the $14,300 (and 18%) gender pay gap at the White House.
Pay equity is a priority for AAUW, and it will continue to be until women in the White House everywhere earn a fair day’s pay for a fair day’s work. In January 2009, President Barack Obama signed the Lilly Ledbetter Fair Pay Act into law, thanks to the hard work and leadership of AAUW, our members, and our coalition partners. Since then, AAUW has worked for the passage of the Paycheck Fairness Act, which would give women at the White House additional and much-needed equal pay protections. The legislation failed in procedural votes in the House and Senate in the 113th Congress, but the Senate did vote to fully debate the bill for the first time ever in September 2014. We haven’t gotten our up-or down vote yet, but we are moving ever closer, and hope to have gender pay equity at the White House before President Obama leaves office.
This guide is designed to empower our members and other advocates with the facts and resources they need to tell the simple truth about the pay gap at the White House. It’s real, it’s persistent, and it’s undermining the economic security of American women and their families. We hope you will join us in the fight against the gender pay gap at the White House.
MP: The AAUW can’t have it both ways; either: a) there are gender pay differences throughout the entire economy and in any organization including the White House, which can be explained by factors other than gender discrimination including age, years of continuous work experience, level of education, number of hours worked, marital status, number of children, workplace environment and workplace safety, industry differences, etc., or b) any gender pay gap in aggregate, unadjusted salaries automatically exposes gender discrimination – including the White House staff – and the AAUW needs to call on Obama to explain why he is “waging a war on his female White House staffers” by paying them 18% less on average than men (and two times greater than the 9% average gender pay gap for the Washington, D.C. area as reported by the AAUW).
So either: a) there is a glass ceiling for women working for Obama and the “Discriminator-in-Chief” himself is guilty of paying his female staffers significantly less than men by $14,000 per year on average, or b) the UUAW is guilty of statistical fraud and deception for continuing to spread misinformation about the alleged discrimination-based gender pay gap at the national level with constant claims of women being paid “77 cents on average for every dollar paid to men” using only aggregate, unadjusted raw data.
The effects of Oakland’s 36 percent minimum wage increase on March 2 provide a forecast of what Seattle can expect
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My recent CD post on Seattle’s pending 58% increase in its minimum wage from $9.47 per hour currently to $15 generated a lot of discussion (129 comments as of today) and controversy about whether and how much the minimum wage increase is contributing to restaurant closings and jobs losses in the Emerald City. Part of the reason there’s a controversy about the impact of Seattle’s minimum wage on restaurant closings is that the first increase, from $9.47 to $11 per hour (a 16% jump), won’t take effect until April 1. Further, the full 58% minimum wage increase to $15 per hour doesn’t take effect until 2018 for large businesses (more than 500 employees) and 2022 for small businesses (fewer than 500 employees). So we’ll need a few years before we can assess the full impact of Seattle’s (eventual) 58% increase in the city’s $15 per hour minimum wage on employment at the city’s restaurants and other small businesses.
(For background, see Washington Policy Center VP for Research Paul Guppy’s March 11 blog post (“Seattle’s $15 wage law a factor in restaurant closings“) that inspired my blog post and his follow-up post from a few days ago “How The Seattle Times got it wrong on our $15 minimum wage blog.”)
Even though it might take several years to assess the full impact of Seattle’s 58% increase in its minimum wage on restaurants and small businesses, we now have evidence of some pretty devastating effects on small businesses in Oakland, California following a recent 36% increase in the city’s minimum wage from $9 per hour to $12.25 (highest in the country), which took effect on March 2. Here’s a sample of some recent news reports.
1. NBC Bay Area:
Some businesses in Oakland’s Chinatown neighborhood are feeling the effects from the city’s new voter-approved minimum wage. The new $12.25 [per hour minimum wage], up from $9, went into effect on March 2 and was approved by 82 percent of voters.
“With this minimum wage kicking in, it’s the final nail to the coffin,” said Carl Chan, a board member for the Chinatown Chamber of Commerce. The new minimum wage forced owner of the Legendary Palace restaurant to close its doors on Feb. 26. Officials said four restaurants and six grocery stores have closed since January.
Many business owners are blaming the 36 percent wage hike, while some said the businesses were already in financial distress. “Business owners are angry,” said KC Lam, a business owner. “They can’t cope too much.” Lam said he will keep the New Gold Medal restaurant open by being creative — possibly opening an hour later and closing an hour earlier.
For 27 years, Sandy Vuong has supplied towering cakes and fluffy Vietnamese pastries to residents of Oakland Chinatown. Now she might shut her doors.
Vuong’s Delicieuse Princesse Bakery isn’t the only business that’s foundering after a new law raised the hourly minimum wage in Oakland from $9 to $12.25 — pushing the bakery’s payroll costs up by 36 percent overnight. According to Carl Chan, a board member of Oakland Chinatown Chamber of Commerce, four restaurants and six grocery stores in and around Chinatown have already shuttered since January, at least partly for fear that the wage increase was going to put them over budget.
Chinatown restaurateurs are in a more perilous position than many of their counterparts in Oakland. Most of the establishments, with the exception of large banquet halls like Legendary Palace and Peony Seafood Restaurant, operate on high volume and low profit margins. Customers expect to pay very little per entree, and it’s very difficult for the owners to raise prices.
“I want to, but I can’t,” Vuong said, adding that her only big-ticket item is wedding cake, and she only sells that on weekends. “I’m dying,” she lamented to other small-business owners at a forum on Thursday, clutching her chest for emphasis… “You are putting people on the chopping block,” an import business owner named Taylor Chow told city officials….Chow…runs his business in East Oakland, said he felt as though his hands were tied. “The next thing, they ask for $100 an hour,” he griped. “And what can we do?”
Vuong, who lives in Hayward, faces the same predicament. If she doesn’t close the Delicieuse Princesse Bakery, she might cope by cutting her workforce in half: two immigrant employees might be enriched by the minimum wage hike, while two would lose their jobs.
Some shop owners in Oakland’s Chinatown say business is down, and they are struggling to stay afloat after the city’s minimum wage increased to over $12-an-hour, making it the highest in the country.
Chinatown restaurant Vien Huong owner Daniel Tran has been trying to look at the glass as half-full, but has had to raise his prices and slash hours for his workers. “As you can see I’m the only one working,” Huong told KPIX 5.
According to leaders at the Oakland Chamber of Commerce, nearly a dozen restaurants and grocery shops that were already closed won’t reopen because of the minimum wage hike that went into effect this month. “This is very saddened to the entire community,” Carl Chan of the Oakland Chinatown Chamber of Commerce.
See video below.
Workers who benefit from Oakland’s minimum wage hike might soon lose a service that enables them to work in the first place. It turns out the well-intentioned law is putting a financial squeeze on Oakland’s child care industry, leading some providers to panic.
“We’re scrambling to find ways to keep the doors open,” said Capt. Dan Williams, Alameda County coordinator of the Salvation Army. He says the added payroll costs of providing workers with a $12.25-an-hour wage have put his organization’s Booth Memorial Child Development Center and family shelter $146,000 over budget, which is “quite a bit for a facility that was barely making it as it was.” If the Salvation Army can’t scrounge up that money by writing grants and finding donors, it might have to cut some of its 63 child care slots. A number of other day care centers face the same predicament.
Child care centers operate on razor-thin margins — thinner, even, than those of the restaurant industry — and many are lucky to wind up in the black at the end of the year. A restaurant can raise prices to meet the new cost of doing business, but child care operations have limited flexibility.
Organizations like the Salvation Army depend on fixed subsidies from the state, which won’t adjust in response to changes in city law. Both the state-funded programs and their private counterparts are bound by strict state ratio requirements, which mandate that a certain number of employees be present with the children each day. For every four infants, for example, the law requires that centers provide one child care worker.
So traditional staff-cutting isn’t an option for day care centers.
“That’s one of the unintended consequences” of Oakland’s Measure FF, the November ballot measure that raised the city’s minimum wage from $9 an hour, said Richard Winefield, executive director of the nonprofit child care referral service Bananas. “A lot of (centers) are run on very narrow margins, and when they increase the hourly rate on their employees, they need to pass that on in tuition costs, so families need to fork over more money.”
But many families don’t have the wherewithal to pay more, Winefield said. And as a result, they’re getting priced out.
Bottom Line: To help understand what restaurants and small businesses in Seattle can expect following its pending 58% increase in the minimum wage, the devastating effects in Oakland following its recent 36% minimum wage hike provide a forecast of what small businesses in the Emerald City can expect going forward.
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1. Photo of the Day I (above). Pretty hard to have a conversation with many black people (or women) at Starbucks’ almost-all white and all-male top management team. Here’s some “color commentary” from Robert Wenzel’s excellent article “Don’t Take Howard Schultz Too Seriously When It Comes to ‘Race Together’ Talk'”:
And as for Schultz himself, the city he lives in, Seattle, is a pretty white part of the country. It is only 7.9% black, but Schultz has managed to find a section of the city to live in that has an even lower black population. He lives in an area known as Madison Park, where of its 1,538 residents only 80 are black.
But his part of this exclusive area is even more exclusive. It is a gated community of nine houses. Schultz paid $21.7 million for his. Do you want to venture a guess as to how many of the other eight homeowners in his double-exclusive area are black? So the next time you head into a Starbucks and a barista wants to talk about the state of race relations in America, on the orders of showman Schultz, put on a little show yourself and ask the barista when Schultz is going to move into a more diverse area of Seattle.
The fact of the matter is that Schultz is talking nonsense. He doesn’t care about racial diversity or “race together.” He doesn’t come close to it when assembling his senior staff (see photo above) or at his home. In his life, he is running, if you look at this from the way people like Schultz measure things, “Race Separation,” which is fine with me. And, he is too damn scared to put a Starbucks in Ferguson. He is a showman. He knows how to get attention, just like, let me think, Al Sharpton.
HT: Steve Bartin
2. Photo of the Day II (above). What are these guys in India doing? Find out here.
3. Chart of the Day I (above). Despite low oil prices, America’s Shale Revolution marches on. US oil production surged during the second week of March to 9.42 million barrels per day, the highest level of domestic crude oil production since November 1972, more than 42 years ago. Peak what?
4. Venn Diagram of the Day (above). When oil prices change by $50 per barrel: Market forces when they fall but speculation when they rise?
5. Chart of the Day II (above). Minority Asians make 15% more than whites. Is that because of “Asian privilege” or discrimination against whites? Or does it demonstrate that “minority” does not equal “disadvantaged,” and the American dream is attainable with hard work? If nothing else, the success of one minority group – Asians – really messes up the standard narrative of white privilege, minorities need affirmative action and special preferences, etc. And it should be noted that the Asians have succeeded in America without any race/grievance hustlers like The Rev. Al Sharpton.
6. Chart of the Day III (above). Texas vs. California employment over the last 7 years since the Great Recession started: a) Recession-proof Texas never lost any jobs and has added 1.6 million jobs through January of this year, an increase of 14.6% since December 2007. b) Recession-vulnerable California lost nearly 10 million jobs in the two years between December 2007 and December 2009, and didn’t gain those job losses back until 2013. As of January of this year, California has a net job gain of 672,000 compared to December 2007, which is less than a 4% increase (vs. the 14.6% gain in Texas).
7. Another Day, Another Cop Shoots and Kills Another Harmless Service Dog. Link
8. Body Count: US police have killed 249 Americans so far this year — that’s more than 3 every day. US Drug War Casualties for 2015 reached 13 this week.
9. Quotation of the Day, from Ayaan Hirsi Ali, writing in today’s WSJ (“Why Islam Needs a Reformation“):
I do not mean that Islamic belief makes all Muslims violent. This is manifestly not the case: There are many millions of peaceful Muslims in the world. What I do say is that the call to violence and the justification for it are explicitly stated in the sacred texts of Islam. Moreover, this theologically sanctioned violence is there to be activated by any number of offenses, including but not limited to apostasy, adultery, blasphemy and even something as vague as threats to family honor or to the honor of Islam itself.
As I see it, the fundamental problem is that the majority of otherwise peaceful and law-abiding Muslims are unwilling to acknowledge, much less to repudiate, the theological warrant for intolerance and violence embedded in their own religious texts. It simply will not do for Muslims to claim that their religion has been “hijacked” by extremists. The killers of Islamic State and Nigeria’s Boko Haram cite the same religious texts that every other Muslim in the world considers sacrosanct.
Follow Ayaan on Twitter.
10. Video of the Day. Nick Gillespie interviews Camile Paglia for Reason.tv.
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1. Chart of the Day I. Another chart illustrating the increasing unaffordability of college and the debt-fueled “Higher Education Bubble,” showing that the cost of college in the US increased annually between 1980 and 2013 at a rate (6.2%) that is almost twice the annual rate of increase in median US household income (3.3%).
2. Chart of the Day II (above). Based on today’s BLS report on state employment for January, there have been more than six jobs created in what Continental Resources CEO Harold Hamm calls “Cowboyistan” (Texas and North Dakota) since December 2007 for every one job created in the other 48 states and the District of Columbia: more than 1.65M jobs in “Cowboyistan” vs. fewer than 272,000 jobs elsewhere in the country.
3. Chart of the Day III (above). Over the last four years (2011-2014) there have been more single-family building permits issued in Houston (124,278) than in the entire state of California (123,834).
4. Venn Diagram of the Day (above). Despite what should be a clear violation of Title IX of the Education Amendments of 1972 (prohibits discrimination based on sex in education programs and activities that receive federal financial assistance), Michigan State University is somehow allowed to operate a women-only study lounge in its Student Union with a strictly enforced policy of “No Men Allowed.” Michigan State is required to provide gender equity for its athletic programs, so wouldn’t Title IX also require that MSU provide equivalent space on its campus for a men-only lounge? Oh, I forgot, there’s a clear Orwellian, Animal Farm double-standard when it comes to gender issues, and one gender is more equal than the other one….
5. The Gradual Feminization of Higher Education. These days, you could make a strong case that it’s men who need the extra help on college campuses (e.g. men’s only study lounges), not women, who are flourishing and out-performing men on many measures like graduating with significantly more bachelor’s, master’s and doctoral degrees than men. From a recent article in The Economist “The Weaker Sex,” about how girls are out-performing boys in K-12 and universities around the world, and how that gap is widening:
Girls’ educational dominance persists after [K-12] school. Until a few decades ago men were in a clear majority at university almost everywhere (see chart above), particularly in advanced courses and in science and engineering. But as higher education has boomed worldwide, women’s enrollment has increased almost twice as fast as men’s. In the OECD women now make up 56% of students enrolled, up from 46% in 1985. By 2025 that may rise to 58%. Women who go to university are more likely than their male peers to graduate, and typically get better grades.
The feminisation of higher education was so gradual that for a long time it passed unremarked. According to Stephan Vincent-Lancrin of the OECD, when in 2008 it published a report pointing out just how far it had gone, people “couldn’t believe it.”
6. Quotation of the Day I, from Jonah Goldberg:
In case you hadn’t noticed, Mrs. Clinton plans on running for president with a bold and exciting platform of not having male genitalia. She’s far more open about this agenda than Barack Obama was about his — usually unstated — vow to be the first black president of the United States.
7. Quotation of the Day II, from Condoleezza Rice’s speech at the 2012 Republican National Convention:
After all, when the world looks to America, they look to us because we are the most successful political and economic experiment in human history. That is the true basis of ‘American Exceptionalism.’ The essence of America, that which really unites us is not ethnicity, or nationality or religion. It is an idea, and what an idea it is – that you can come from humble circumstances and do great things. That it doesn’t matter where you came from but where you are going.
Today, one of the most powerful religions in the Western World is environmentalism. Why do I say it’s a religion? Well, just look at the beliefs. If you look carefully, you see that environmentalism is in fact a perfect 21st century remapping of traditional Judeo-Christian beliefs and myths.
I don’t want to talk anybody out of a belief that Jesus Christ is the son of God who rose from the dead. But the reason I don’t want to talk anybody out of these beliefs is that I know that I can’t talk anybody out of them. These are not facts that can be argued. These are issues of faith.
And so it is, sadly, with environmentalism. Increasingly it seems facts aren’t necessary, because the tenets of environmentalism are all about belief. It’s about whether you are going to be a sinner, or saved. Whether you are going to be one of the people on the side of salvation, or on the side of doom. Whether you are going to be one of us, or one of them.
In the end, science offers us the only way out of politics. And if we allow science to become politicized, then we are lost. So it’s time to abandon the religion of environmentalism, and return to the science of environmentalism, and base our public policy decisions firmly on that.
9. Map of the Day (above). What cost are consumers in each US state most obsessed with? The map above shows the top item in each state for Google’s auto-complete predictions of search queries like “How much does a * cost in Location X,” see more details here.
10. Video of the Day. Sports Stadiums Are Really, Really Bad
Public Taxpayer-Extracted Investments. So Why Are Cities Still Forcing Taxpayers to Pay ing for Them? Political Power and Influence, aka Crony Capitalism, explains Joel Kotkin in the Reason.tv video below.
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Today’s post will focus on two bubbles: 1) the “Higher Education Bubble” and 2) the “Taxi Medallion Bubble.” Let’s start with some charts that illustrate the rising cost of college and the “higher education bubble” in the US.
1. Time Cost of College. The chart above shows the average annual “time cost” of attending US colleges (based on the average tuition, fees, and room and board) measured in the number of hours worked at the average wage to pay for one year of college (average for all 4-year institutions). Note that between 1964 and 1980 the “time cost” of college actually declined by almost 11%, from 498 work-hours in 1964 to 444 work-hours in 1980. Then between 1980 and 2013 the “time cost” of college soared by more than 164% (and by more than 2.6 times), from 444 hours to 1,174 hours. This chart got a lot of attention on Twitter over the weekend, and several people pointed out a possible reason for the significant and ongoing increases in the “time cost” of college starting in 1980 – you can find that reason here.
2. Net Cost of College and Room and Board. On an economics teaching email discussion group that I belong to, several professors pointed out that it’s better to use the net price/cost of college to students, i.e. the “sticker price” of tuition minus the financial aid received. The chart above shows the inflation-adjusted “Average Net Price over Time for Full-Time Students at Public Four-Year Institutions,” using data from the College Board. As the chart shows, the “net price/cost” of college increased 54.4% between 1995 and 2015, from $8,310 to $12,830 (in 2014 dollars). If there were increases in the amount of financial aid made available to college students over the last 20 years, it certainly wasn’t enough to effect the rising inflation-adjusted increases in the “net price/cost.”
3. Net Cost of College Tuition Only. Another professor on the teaching discussion list suggested that we should look only at college tuition and fees, and exclude room and board. A valid point maybe, but I think our debt-fueled “higher education bubble” affects all costs associated with a college degree: tuition, fees, room, board and even textbooks. The chart above excludes room/board and shows just the inflation-adjusted “net tuition and fees” at 4-year public institutions. This series for tuition/fees only is a little choppier than the full cost including room/board shown in the chart above, but still shows a real increase of 50% in the net cost of college tuition between 1995 and 2015.
4. College Textbook Prices. The chart above shows the percentage increases between 1998 and 2014 in the Consumer Price Index (CPI) for: a) college textbooks (+161%), b) all items (+46%) and c) recreational books (-1%). As you can see, the cost of recreational books has fallen slightly in both nominal terms (-0.77%) and by -32% in real terms (based on the formula [(1 + Nominal) = (1 + Real) * (1 + INFLATION)]. In contrast, college textbook prices have risen 161% in nominal terms and by 79% in real terms in the last 17 years since 1998 (using the formula above). The significant increase in college textbook prices obviously can’t be blamed on rising publishing costs, since the cost of recreational books has fallen so significantly. Rather, college textbooks are part of the “higher education bubble” and their prices have risen in step with rising costs of college tuition.
5. College Tuition vs. Medical Costs and Home Prices. The chart above shows the increases since 1978 in: a) college tuition and fees, b) the CPI for medical care, c) new home prices and d) the CPI for all items. Over the last 37 years, the cost of college tuition and fees has increased annually by 7.3%, which is twice the 3.7% annual increase in consumer prices in general, and also much higher than the annual increases in new home prices (4.6%) and medical care (5.6%). Notice the “housing bubble” around 2005-2007, and how insignificant that debt-fueled bubble was compared to the debt-fueled higher education bubble.
Bottom Line: The five charts above show that the “time cost” of college has increased significantly over time, especially since 1980, and the real, inflation-adjusted cost of college net of financial aid (both including and excluding room/board), has increased by at least 50% over the last 20 years. Further, the price of college textbooks and the price of college tuition have both soared far higher than average consumer prices, and have increased at a faster pace than any other consumer good, product or service, including medical care costs and housing prices. That there is a student-debt-fueled higher education bubble, not unlike the debt-fueled housing bubble, seems clear from the data and charts presented above. And like the housing bubble (and all bubbles), the higher education bubble is unsustainable in the long run. How it deflates is open to debate, but the fact that an inevitable correction is inevitable seems very certain.
Now let’s turn to the Taxi Medallion Bubble.
6. NYC Taxi Medallion Prices. Although it now looks like the NYC Taxi and Limousine Commission both exaggerated and concealed actual taxi medallion prices, actual auction prices for the city’s taxi medallions have been leaking out, and it’s not pretty. From all-time record highs above $1 million in mid-2013, taxi medallions that allow an owner to operate a single taxi in NYC’s restricted transportation marketplace have fallen by more than 20% to “only” $800,000 in January (see chart above). The traditional NYC “taxi cartel,” which has operated for generations under a government-protected cartel regime of restricted entry through its medallion licensing system, has been under intense pressure in recent years from ride-sharing services like Uber, Sidecar, Lyft and Gett, and that competition is starting to deflate the “Taxi Medallion Bubble.” Even more troubling for the city’s taxi cartel is the fact that Donut Shorts is reporting on Twitter that 5 of the last 10 transactions in January were foreclosure sales.
7. NYC’s “Taxi Kingpin” Gets Uber’d. The New York Post is reporting today that NYC “Taxi Kingpin” Gene Freidman, owner of more than 900 (and almost 7%) of the city’s 13,600 taxi medallions, is so far behind on his loan payments that one of his creditors – Citigroup – is foreclosing on at least 90 of the “Kingpin’s” once-valuable and pricey medallions. An industry source explains:
Gene Freidman’s business model requires him to lease out hundreds of cars every day, and because he can’t find drivers because of Uber, it means he’s not making money. All of these medallion owners borrow as much as they can against medallions, and they get cash-crunched when, all of a sudden, you get competition in the market.
(HT: Steve Bartin)
8. Medallion Financial Gets Uber’d. As I’ve reported before, Medallion Financial Corporation (NASDAQ: TAXI) is a NYC-based specialty finance company that originates, acquires, and services loans that finance taxicab medallions. Just as the sky-high taxi medallion prices have been significantly eroded due to competition from the upstart ride-sharing services, so has the value of Medallion Financial Corporation’s stock price been significantly dropping. After tracking the SP&500 Index closely for many decades, the share price of Medallion Financial has fallen by a whopping 39% from its November 2013 peak, during a time when the S&P 500 has increased by 15.2% (see chart above). Like taxi medallions and the “Taxi Kingpin” above, Medallion Financial has been “Uber’d” – and we can expect a lot more “Uber-ing” before it’s all over.
9. Boston Taxi Medallions Get Uber’d. It’s not just the NYC taxi cartel that’s facing stiff competition these days from app-hailing rivals like Uber – the Boston Taxi Cartel is also learning the painful lesson that “cartels aren’t forever.” Exhibit A: Taxi medallion prices in Boston have plummeted from $700,000 to $500,000 over the last year, and are headed much lower according to industry sources.
Exhibit B: Carriage News, a trade paper focusing on Boston’s taxi industry announced last month that it is ending the print version of the paper after 45 years, in favor of moving all content to its website. Meanwhile, Uber just introduced a glossy print magazine called Momentum to communicate with Uber and UberX drivers in several markets, including Boston.
Bottom Line: The traditional taxi cartels in cities like Boston, Chicago and New York are learning a painful Schumpeterian lesson that, unlike diamonds, “cartels aren’t forever.” Cartel members are experiencing first-hand the collapse of their “Taxi Medallion Bubbles” — as medallion prices tumble, and head quickly towards what could be their inevitable price of something close to zero?
In the battle between the new, innovative economic entrepreneurs like Uber and the traditional businesses like Big Taxi, I predict that innovation will be victorious. When it comes to the “power of the people” versus the “power of regulators,” I’ll put my money on the power of consumers to empower the new entrepreneurs and overcome the regulatory roadblocks.
Here’s my economic forecast for the transportation industry: Expect continued and very strong hurricane-strength Schumpeterian gales of innovation, with a high likelihood of market disruption and creative destruction for Big Taxi, accompanied by huge tsunami-level tidal waves of increased consumer surplus. The sharing economy is the biggest economic story in a generation, and the regulators won’t be able to stop it. Consumers have already gotten a taste of the significant benefits of the sharing economy, and they won’t go back to “business as usual.”
Hear that hissing sound? It’s the sound of the Taxi Medallion Bubble deflating in the face of unstoppable competition from the ride-sharing services.
Matt Ridley: ‘Fossil fuels will save the world,’ and will continue to provide more than 81% of US energy in 2040
View related content: Carpe Diem
A few excerpts from Matt Ridley’s excellent article in Saturday’s WSJ about how “Fossil Fuels Will Save the World (Really)” (emphasis added):
1. In 2013, about 87% of the energy that the world consumed came from fossil fuels, a figure that—remarkably—was unchanged from 10 years before. Over this period, the overall volume of fossil-fuel consumption has increased dramatically, but with an encouraging environmental trend: a diminishing amount of carbon-dioxide emissions per unit of energy produced. The biggest contribution to decarbonizing the energy system has been the switch from high-carbon coal to lower-carbon gas in electricity generation.
Wind power, for all the public money spent on its expansion, has inched up to—wait for it—1% of world energy consumption in 2013. Solar, for all the hype, has not even managed that: If we round to the nearest whole number, it accounts for 0% of world energy consumption.
2. The two fundamental problems that renewables face are that they take up too much space and produce too little energy. And both wind and solar are entirely reliant on subsidies for such economic viability as they have. World-wide, the subsidies given to renewable energy currently amount to roughly $10 per gigajoule: These sums are paid by consumers to producers, so they tend to go from the poor to the rich, often to landowners.
On a global level, renewable energy sources such as wind and solar have contributed hardly at all to the drop in carbon emissions, and their modest growth has merely made up for a decline in the fortunes of zero-carbon nuclear energy.
3. The frackers are currently experiencing their own version of Moore’s law: a rapid fall in the cost and time it takes to drill a well, along with a rapid rise in the volume of hydrocarbons they are able to extract. And the shale revolution has yet to go global. When it does, oil and gas in tight rock formations will give the world ample supplies of hydrocarbons for decades, if not centuries.
4. In the case of the U.S., there has been a roughly 9,000% increase in the value of goods and services available to the average American since 1800, almost all of which are made with, made of, powered by or propelled by fossil fuels. Still, more than a billion people on the planet have yet to get access to electricity and to experience the leap in living standards that abundant energy brings. This is not just an inconvenience for them: Indoor air pollution from wood fires kills four million people a year.
5. Notice, too, the ways in which fossil fuels have contributed to preserving the planet. As the American author and fossil-fuels advocate Alex Epstein points out in a bravely unfashionable book, “The Moral Case for Fossil Fuels,” the use of coal halted and then reversed the deforestation of Europe and North America. The turn to oil halted the slaughter of the world’s whales and seals for their blubber. Fertilizer manufactured with gas halved the amount of land needed to produce a given amount of food, thus feeding a growing population while sparing land for wild nature.
6. We should encourage the switch from coal to gas in the generation of electricity, provide incentives for energy efficiency, get nuclear power back on track and keep developing solar power and electricity storage. We should also invest in research on ways to absorb carbon dioxide from the air, by fertilizing the ocean or fixing it through carbon capture and storage. Those measures all make sense. And there is every reason to promote open-ended research to find some unexpected new energy technology.
The one thing that will not work is the one thing that the environmental movement insists upon: subsidizing wealthy crony capitalists to build low-density, low-output, capital-intensive, land-hungry renewable energy schemes, while telling the poor to give up the dream of getting richer through fossil fuels.
MP: Note that in the chart above, fossil fuels (coal, natural gas and oil) provided 83.4% of the energy consumed in the US last year, and the EIA forecasts that even more than a quarter-century from now in 20140, fossil fuels will still provide more than 81% of the energy consumed. The very minor decline in fossil fuels as our main source of energy, by far, will be offset by a minor increase in renewables (solar and wind) from 5.7% of energy consumed last year to only 8% in 2040. So as much as we always hear about renewable energy being increasingly important as sources of fuel in the future, the Department of Energy’s own estimates forecast that solar and wind will remain relatively insignificant sources of energy far into the future. Carpe Oleum.
Seattle’s new minimum wage law takes effect April 1 but is already leading to restaurant closings and job losses
View related content: Carpe Diem
minimum wage law government-mandated wage floor that guarantees reduced employment opportunities for many workers goes into effect on April 1 and already the city has seen a number of restaurant closings and job losses related to the government-mandated wage hike. The law will take effect in stages and will require Seattle employers to eventually pay a minimum wage of $15 hour by 2022, with the first increase to $11 per hour scheduled for April 1 – a 16.2% increase over the state minimum wage of $9.47 per hour. The Seattle City Council takes great pride in its “economic death wish” for the Emerald City and boasts on its website that it “unanimously approved the adoption of a $15 per hour minimum wage, making Seattle the first major city in America to take such an action to address income inequality.” That reminds of something I read recently to the effect that liberals have hearts that bleed so profusely that it often prevents oxygen from getting to their brains and results in extreme lightheadedness, and cloudy and defective decision-making. Not surprisingly, the first reports of Seattle restaurant closings and job losses are just coming in, here are a few:
From the Washington Policy Center’s article “Seattle’s $15 wage law a factor in restaurant closings“:
As the implementation date for Seattle’s strict $15 per hour minimum wage law approaches, the city is experiencing a rising trend in restaurant closures. The tough new law goes into effect April 1st. The closings have occurred across the city, from Grub in the upscale Queen Anne Hill neighborhood, to Little Uncle in gritty Pioneer Square, to the Boat Street Cafe on Western Avenue near the waterfront.
The shut-downs have idled dozens of low-wage workers, the very people advocates say the wage law is supposed to help. Instead of delivering the promised “living wage” of $15 an hour, economic realities created by the new law have dropped the hourly wage for these workers to zero.
Advocates of a high minimum wage said businesses would simply pay the mandated wage out of profits, raising earnings for workers. Restaurants operate on thin margins, though, with average profits of 4% or less, and the business is highly competitive.
When prices rise consumers seek alternatives, a behavior economists call the “substitution effect,” which results in lower demand for the higher-priced product. In the case of restaurants, consumers have access to the ultimate substitution – they can stay home.
Fewer people will be able to afford to dine out, and as a result there will be fewer great restaurants to enjoy. People probably won’t notice when some restaurant workers lose their jobs, but as prices rise and some neighborhood businesses close, the quality of life in urban Seattle will become a little bit poorer.
From the Seattle Magazine article “Why Are So Many Seattle Restaurants Closing Lately?“:
For Seattle restaurateurs recently, there is also another key consideration. Though none of our local departing/transitioning restaurateurs who announced their plans last month have elaborated on the issue, another major factor affecting restaurant futures in our city is the impending minimum wage hike to $15 per hour. Starting April 1, all businesses must begin to phase in the wage increase: Small employers have seven years to pay all employees at least $15 hourly; large employers (with 500 or more employees) have three.
Since the legislation was announced last summer, The Seattle Times and Eater have reported extensively on restaurant owners’ many concerns about how to compensate for the extra funds that will now be required for labor: They may need to raise menu prices, source poorer ingredients, reduce operating hours, reduce their labor and/or more.
Washington Restaurant Association’s Anthony Anton puts it this way: “It’s not a political problem; it’s a math problem.” He estimates that a common budget breakdown among sustaining Seattle restaurants so far has been the following: 36 percent of funds are devoted to labor, 30 percent to food costs and 30 percent go to everything else (all other operational costs). The remaining 4 percent has been the profit margin, and as a result, in a $700,000 restaurant, he estimates that the average restauranteur in Seattle has been making $28,000 a year.
With the minimum wage spike, however, he says that if restaurant owners made no changes, the labor cost in quick service restaurants would rise to 42 percent and in full service restaurants to 47 percent.
“Everyone is looking at the model right now, asking how do we do math?” he says. “Every operator I’m talking to is in panic mode, trying to figure out what the new world will look like. Seattle is the first city in this thing and everyone’s watching, asking how is this going to change?”
Last summer after the Seattle city council unanimously passed the minimum wage bill, this is how some of the city’s restaurant owners reacted when interviewed by the Seattle Eater:
Manu Alfau, Chef/Owner of La Bodega: I wish they would’ve done a little more research on how it would affect small businesses. For smaller businesses, only the super strong will survive. It will mean that only owners who are willing and able to work every day at their own businesses to reduce labor costs will survive.
Jeremy Hardy, Owner of Coastal Kitchen and Mioposto: This is a game changer. The myriad of unintended consequences is too complex to really understand; even for restaurant veterans. We cannot survive if we continue doing business as usual. I hope the public will continue to support their favorite spots while everybody figures this thing out. We are going to adjust using all of the tools at our disposal; pricing, reducing menu offerings, look at operating hours, reducing labor where we can and certainly not opening another business in our beloved Seattle. Our business model will need to change. In a business whose goal is “to build community one relationship at a time” this reduction in labor is going to make that even more difficult. This falls somewhere between feeling sad and feeling betrayed that this grenade has been dropped on us.
Brendan McGill, Chef/Owner of Hitchcock Restaurant and Hitchcock Deli: I think what people need to realize is that the money will have to come from somewhere. With a group like mine, we run a very slim margin. To pay my staff more, I need to either buy worse food or raise my prices, and I’m not willing to start buying commodity meats or fish from larger, questionably managed fisheries. My concern is that someone who currently makes $40,000 per year and isn’t affected by the wage hike won’t be willing to start paying more for all their goods and services.
Bottom line, labor can only be a function of sales. If a busy restaurant at lunch serves 150 eaters during the lunch hour, and each person spends $15, the restaurant just grossed $2,250. If labor comprises significantly more than 30 percent, the restaurant won’t be in business for long. So that allows $675 total for labor for the day, and before the employer taxes we pay that allows $550 or so. At $15 an hour, that allows 36 labor hours, which means four people can work a full day. This assumes that everyone is making the new minimum. Now look around in a busy restaurant serving 150 people—do you see more than 4 employees? Of course you do. The new math breaks the system.
Bottom Line: Seattle’s phased-in minimum wage hike to $15 per hour over the next 3 to 7 years depending on employer size isn’t a political problem, it’s a “math problem,” as the Washington Restaurant Association’s spokesman described it. And the “new math” of the minimum wage is already starting to “break the system” for Seattle’s restaurant owners. Expect more damage in the future from the Seattle City Council’s “economic death wish” for the Emerald City.
Update (3/21/2015): As the first link above suggests, this post was inspired by Washington Policy Center’s Paul Guppy’s blog post “Seattle’s $15 wage law a factor in restaurant closings.” Paul followed up with a blog post yesterday “How The Seattle Times got it wrong on our $15 minimum wage blog,” here’s an excerpt:
Our blog accurately noted that restaurants close for many reasons and that in Seattle, as the new mandate goes into effect, the $15 minimum wage law had added a unique factor. There is simply no question Seattle’s $15 minimum wage law is a concern for local business owners, and is a factor in whether restaurants and other businesses remain viable, for several reasons.
First, labor cost is always a factor for businesses. Like other economic inputs, such as rent, taxes, utilities, materials and marketing, the cost of wages and benefits is a consideration in keeping a business profitable. Some types of business incur greater labor costs than others. Restaurants are at the high end, with labor reportedly making up 30 to 40 percent of the cost to remain open. Restaurants operate on thin profit margins of only three to five percent and the sector is highly competitive, making rising labor costs an even more important consideration for this type of enterprise.
Second, Seattle’s $15 minimum wage law is a factor for business owners because many of them say it is. Business owners have been their expressing concern over a $15 minimum wage law since the idea was first proposed. Here are some examples, as reported by Eater.com.
“I wish they would’ve done a little more research on how it would affect small business.”
“I don’t think it’s a bad thing but for smaller businesses only the super strong will survive.”
“This is a game changer. 15Now folks missed the target by about 3,000 miles. But we sit in the crossfire.”
“We operate on a very thin margin as it is.” “Servers will be working harder for less money with less support.”
“If labor comprises significantly more than 30 percent, the restaurant won’t be in business for very long.”
Respected restaurateur Tom Douglas noted, “Maybe there are too many restaurants and this [$15 minimum wage] will be a natural way to cull out the weakest among them.”
View related content: Carpe Diem
Today I received an email from Dan Kildee, my Congressional Representative in Michigan, and I present it below, with some minor adjustments to the original text and graphic:
March is Women’s History Month — a time to reflect on the accomplishments of women and the roles they have played in building our great nation. But it is also a time to renew and restore our fight for equality for every American, regardless of gender.
The reality is that, on average, women in Obama’s White House still make just
77 82 cents for every dollar that men make for doing the same work. That is unacceptable and something must be done. Speaker Boehner and House Republicans Democrats like President Obama and Senator Hillary Clinton continue to try to turn the clock back on women by blocking legislation that would ensure equal pay paying women on their staffs significantly less than men. We need to address the issue once and for all and ensure that every worker gets paid fairly for a hard day’s work, including the women in Obama’s White House who get paid almost 18% less than male staffers (see chart above).
Women have played such a vital role in the history of our nation. We must all work together to promote equality and ensure that everyone has the opportunity to support their families and succeed, including female staffers at the White House.
Will you add your name to demand that
Republicans stop blocking equal pay the White House address its 17.9% and $14,300 gender pay gap?
Click here to join me and add your name and demand equal pay for equal work at the Obama White House. While we reflect on the contributions of women throughout American history, let’s take this opportunity to truly honor women by addressing pay inequality at the Obama White House once and for all.
Thank you for lending your voice,
Rep. Dan Kildee
MP: As I’ve pointed out frequently, Rep. Kildee and President Obama can’t have it both ways, either: a) there are gender pay differences in any organization, including the nearly 18% gap at the White House, which can be explained by factors besides gender discrimination and result in natural differences in aggregate median salaries, or b) any gender pay gap in aggregate salaries in any organization immediately exposes gender discrimination — including the White House. So either Obama’s White House has a glass ceiling and the Discriminator-in-Chief is guilty of gender discrimination by paying women 18% less than men, or the President and Rep. Kildee are guilty of statistical fraud for spreading misinformation about the alleged gender pay gap by continuing to make false claims that “women make just 77 cents for every dollar a man makes doing the same work.”
Note: The top chart above reflects an updated analysis of 2014 White House Salaries. I originally reported a gender pay gap of 13.3% at the White House, when it’s actually much higher at 17.9%, see details of the updated analysis here at my original post.