“Lucky Lindy” vs. Jeff Bezos: Who Is the Better Bet for Missouri?

Posted on by Andrew B. Wilson

It may be the biggest and most closely watched competition since Charles Lindbergh – backed by a group of Saint Louis businessmen – won the $25,000 Orteig Prize as the first pilot to cross the Atlantic Ocean. That was 90 years ago, in 1927.

Will Saint Louis (or Kansas City) surprise the business world in winning the Amazon Prize? I speak, of course, of the bidding war to decide what city, suburb, or close-in town – out of 238 contestants – will be selected as the site of Amazon’s second headquarters. In every important way, “HQ2” is supposed to equal its existing headquarters in Seattle. Amazon will announce its choice in the spring of next year. Both of our two biggest metro areas are in the bidding – with enthusiastic support from Gov. Eric Greitens and his team.

The potential payout dwarfs the Orteig prize, but so too do the costs to the cities and states doing the bidding. Amazon says it is prepared to invest about $5 billion of its own money at its new site and create up 50,000 jobs with an average annual compensation of more than $100,000 per job.

In Lindbergh’s case, Saint Louis businessmen put up $15,000 (to his $2,000) to underwrite the cost of building his airplane. As for HQ2, it seems clear that the costs to local and state taxpayers over a period of 15 to 20 years will run into the billions of dollars.

It’s a big and potentially wildly uneven trade-off, beginning with the fact that Amazon cannot guarantee 50,000 sustainable jobs – or even 5,000 jobs or 1,000 jobs. Who is to say Amazon will continue to grow at the same phenomenal pace that it has maintained over the past two decades? In the tech world, many once-hot companies have either fallen into bankruptcy (think Wang Laboratories and Digital Equipment Corporation) or stopped growing and faded into insignificance (think AOL and Yahoo).

Remember that the initial build-out of HQ2 is supposed to take 15 years. That is a long time, and it makes this competition a very different proposition than the Lindbergh flight. Less than three months after getting his final go-ahead from Major Albert B. Lambert (after whom Saint Louis’s airport is named) and other backers, Lindbergh had designed and built his Spirit of St. Louis monoplane and completed his historic flight from New York to Paris.

It is disturbing that city and state officials in Missouri have responded with such rapturous glee to the Amazon bidding – while maintaining that they must, in deference to Amazon’s wishes, remain mum about what they have offered in the way of tax breaks and other subsidies.

Nobody knows what Amazon will look like in 15 or 20 years. In that sense, HQ2 is a multi-billion-dollar pig in a poke. Whatever city wins the Amazon Prize, you may be sure that local and state taxpayers will, for a long time, be deeply in hock to trying to make a go of it.

On Raising the Minimum Wage in Missouri

Posted on by James V. Shuls

On December 1, members of the Missouri General Assembly may begin prefiling legislation for consideration in the upcoming legislative session, which begins January 3, 2018. Not surprisingly, it looks like a bill will be put forward to increase the state’s minimum wage. As Missourinet reports, State Rep. Brandon Ellington (D) plans to offer such a bill. When Rep. Ellington was asked how he’d respond to critics of the bill, he responds, “I would tell them to look at states like Washington D.C., where the minimum wage is $12 an hour or Seattle, where the minimum is to be up to $12 an hour…Or any of the other states that have increased their minimum wage that has not seen an exodus of corporations and companies.”

 Let’s do just what Rep. Ellington has suggested. Let’s look at the evidence from these places. Ellington is correct in saying there hasn’t been an exodus of “corporations or companies,” but there have been some negative outcomes.

 Washington D.C.

 D.C. passed the “Fair Shot Minimum Wage Amendment Act of 2016.” The amendment increases the district’s minimum wage to $15 by 2020 and then sets annual increases that are pegged to changes in the Consumer Price Index. Earlier this year, the Office of the Chief Financial Officer for the D.C. mayor’s office released a study that estimated the impact this will have on the city, and the findings aren’t anything to be bullish about.

 As one would expect, wages will increase. By 2021, the study’s authors estimate that “the average resident will gain roughly $5,100 more (20 percent higher) in wages as of 2021, but approximately 2 percent of impacted residents will experience job loss; this job loss estimate increases to about 3.4 percent by 2026.” Additionally, the study found that “average citywide prices will increase by roughly 0.2 percent and businesses will experience a 2.3 percent average reduction in profits as a result of this policy.”

 Seattle

The Seattle Minimum Wage Ordinance went into effect in 2015. From 2015 to 2016, the minimum wage increased from $9.47 to $13. This is roughly a 37 percent increase in a short amount of time. The ordinance has different provisions for different types of employers, but will gradually increase the minimum wage to $15. Earlier this year, a team of researchers from the University of Washington released a paper on the impact thus far. When the minimum wage went up, employers did what we would expect them to do; they reduced the hours of employees. The researchers suggest the increased minimum wage resulted in a reduction of 3.5 million working hours per calendar quarter. Low-wage jobs (jobs paying under $19 per hour) went down 6.8 percent.

 As economist David Neumark noted in his 2012 policy study for the Show-Me Institute, “Should Missouri Raise its Minimum Wage?,” there are clear tradeoffs with this policy proposal. Raising the minimum wage increases the wages for a select portion of the population: those earning roughly minimum wage who manage to not have their hours cut (or their jobs eliminated altogether). This increase comes at the expense of the low-skilled workers who are not able to enter the labor market or lose their jobs. This issue is particularly concerning in our border cities, where higher pay may attract people from neighboring suburbs in other states. As these individuals enter the job market, they may take jobs away from low-skill Missourians living in Saint Louis and Kansas City.

 The real question for Missouri lawmakers is: Do you want to increase unemployment for some Missourians to provide others with higher wages? 

 

School Choice for Me, but Not for Thee: Part 6

Posted on by James V. Shuls

Over the past few weeks, I have discussed four reservations some parents have about private school choice programs.

Reservation number 1: School choice may hurt traditional public schools.

Reservation Number 2: School choice gives the public less control of the school system.

Reservation Number 3: School choice may lower the quality of private schools.

Reservation Number 4: School choice does not solve the larger problem of concentrated poverty.

For each of these concerns, I noted there was some inconsistency in the thinking behind them. Often, critics of school choice set up straw-men arguments or hold school choice programs to an impossible standard.

During my study, I didn’t push parents on these issues. My goal was to hear their concerns. But a funny thing happened as parents took turns speaking; several parents recognized their own apparent hypocrisy. They sent their children to private schools, but wouldn’t support a program that would enable families with less means to do the same.

The truth is, these parents are not alone. We regularly see people opposing school choice while sending their kids to private schools. Politicians, even those who oppose school choice, often send their children to private schools. Recently, actor Matt Damon was taken to task for the same thing.

While there may be a place and time to call these “hypocrites” out, I worry that name-calling and hand-wringing will do little to bridge the divide and win people over. It is not hypocritical to want the best for your child and to want a robust public education system that effectively serves all children. All of us want this.

That’s why it is so important for school choice supporters to effectively make their case. We need to show how school choice can provide a quality education system for all kids while also providing opportunities we want for our own children. This blog series was written for this purpose, and I hope it has provided useful responses to some of the important reservations held by parents who oppose school choice. 

Ignore the Gimmicks. Here Are the Reasons Amazon Should Come to Missouri.

Posted on by Patrick Ishmael

My colleague Patrick Tuohey has talked at length about the stunts some have pulled to try and get Amazon to bring its second headquarters, or “HQ2,” to Missouri. That silliness, paired with the tax incentives that almost certainly accompany both Kansas City’s and Saint Louis’s Amazon proposals, give off a whiff of desperation—desperation that, frankly, is warranted for some politicians, but unwarranted with regard to the fundamentals of the regions themselves.

I also take exception to the Coastal notion that our cities are flatly uncompetitive, and the specific suggestion that Saint Louis is some charity case. In fact, there are very strong business cases for Amazon to consider both Kansas City and Saint Louis that have nothing to do with charity. And with respect, if Amazon doesn’t recognize and exploit those advantages, other companies will.

Make no mistake: I would love to see Amazon come to Kansas City and/or Saint Louis, and Show-Me Institute analysts have written about the advantages that Missouri’s biggest cities bring to the table for literally years now.

This isn’t to gloss over the cities’ problems, either, whether it be crime, governmental mismanagement, regressive taxation, or a whole host of other issues discussed on this site in the past. Too often city and state leaders try to hit home runs with tax incentives and paper-thin kabuki PR campaigns to compensate for the fact that they don’t consistently hit the singles and doubles that actually lead to economic wins—keeping residents safe, maintaining infrastructure, treating businesses fairly, and the like.

But no city, anywhere, is perfect; all cities fall short at times, and the process of local government reform and improvement is a continual effort.

What Kansas City and Saint Louis are world-class at—intermodality, centrality, cost, and livability—accentuate the fact that both cities, jointly and separately, should be in Amazon’s final conversations about advantageous sites. Two terrific papers written for SMI by Wendell Cox (the most recent being Kansas City’s, published last year) reiterate this truth and are available via the links below.

Whether Amazon comes to Missouri certainly remains to be seen, and the odds are against it. But win or lose, Kansas City, Saint Louis, and Missouri have a lot to offer to Amazon and companies like it, now and in the future. It’s those advantages that will direct these cities’ success going forward—not Amazon, not tax incentives, and certainly not political gimmicks.

KANSAS CITY–Genuinely World Class: A Competitive Analysis by showmesunshine on Scribd

HOUSING AFFORDABILITY: The Saint Louis Competitive Advantage by showmesunshine on Scribd

School Choice for Me, but Not for Thee: Part 5

Posted on by James V. Shuls

Americans are well aware of problems in urban public schools. We see news stories about violence in the hallways and regular reports about abysmally low test scores. Could private school choice help address these issues or offer a way out for some students?  When I asked 35 parents in focus groups a version of this question, many had reservations. In posts two, three, and four of this series, I address the first three major reservations. Here I address the final one.  

Reservation Number 4: School choice does not solve the larger problem of concentrated poverty.

The parents in my focus groups recognized that some schools are not doing well. That’s why many of them refused to enroll their children in their local public schools. Yet many wouldn’t support a state-supported private school choice program. To them, that was just a Band-Aid to cover over a problem rather than actually solving it. Instead, the concerned parents thought more needed to be done to address the root cause that led to the poor educational opportunities: poverty.

This line of argument suffers from two shortcomings. First, it sets an almost impossible expectation of school choice programs—that they solve a problem that traditional public schools have failed to solve for centuries. Rarely do we expect public policies to solve this kind of massive societal problem. Even when considering issues related to poverty, we often hope an intervention will move the needle in the right direction by a matter of degrees. When it does, we consider it a success.

Second, this argument absolves public schools of blame for the role that they have played in exacerbating the problems of poverty. Not only have traditional public schools failed to solve the problems of poverty, in some places, they have actually made it worse. Look at the patchwork of school districts in the areas surrounding Kansas City and Saint Louis. Homes in the higher-performing districts cost more because the schools are better; wealthier families segregate themselves from lower-income families by moving to these better districts. This creates virtuous cycles within these districts, where wealthier students attend better schools, get better jobs, move to places with even better schools, and then send their children to them. But it also creates a vicious cycle in poorer-performing districts, where families that are not able to break into the housing market of better districts are shut out of higher-performing schools, are prevented from accessing better opportunities, and stay trapped in poverty.

There is nothing nefarious about a family wanting to be in a good neighborhood with great schools. There is, however, something wrong with a school system that only allows families with financial means to access great educational options.   

Vouchers and charter schools have done nothing to create this situation. But they can help stop it by breaking the connection between where children live to where they go to school.

It is true that school choice does not solve issues of poverty. School choice programs also do not cure cancer, reduce tensions in North Korea, or solve male pattern baldness. In other words, school choice does not solve complicated, thorny issues that are incredibly complex. It does, however, reduce the barriers that stand between low-income families and educational opportunities for their children.    

What Is Direct Primary Care? This Fun Video Explains It

Posted on by Patrick Ishmael

A quick post and a short video about a topic we’ve talked a lot about. Direct primary care is one of the most exciting health care innovations of the last few years, and for those unfamiliar with what it is and why it matters, the video below does a great job of laying out its benefits. If you’re looking for a DPC physician, try this Mapper tool.

Direct Primary Care (DPC): A Health Care Revolution from Day’s Edge Productions on Vimeo.

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