Changing Virginian Demographics

UVA’s demographers have posted a great summary of the changing Virginian demographics.  While still growing, growth has slowed because many Virginians are leaving for other states.  Further, most of the growth continues to be in metropolitan Virginia (Northern Virginia, Richmond and Hampton Roads) which now make up 93% of Virginia’s entire population.

Read the entire summary at http://statchatva.org/2017/01/30/virginias-population-is-growing-at-its-slowest-pace-since-the-1920s/

Number of Illegal Immigrants Continues to Decline

Bob Davis of the Wall Street Journal wrote an excellent article (this link doesn’t require a subscription) on the declining numbers of illegal immigrants.  From 2007-2012, Pew Research estimated that the number of illegal immigrants in the US declined 8.2%.  In Arizona, the number dropped by an astounding 40%; clearly showing that illegal immigration can be addressed when desired.

Measuring the overall economic impact of this change on Arizona is difficult because it occurred during the latest economic recession and because the undocumented workers greatly affect the economy for better and for worse.  It is now much more difficult to obtain unskilled workers for farm work and construction, causing these markets to shrink – at least temporarily.  However, American unskilled workers who can find work are seeing raises now that they are not competing with illegal immigrants.  In addition, government spending on health care services and education has also dropped with the outflow of the undocumented workers.  Finally, while farmers have planted smaller crops because of the reduced availability of pickers, the article quotes several farmers who are investing in specialized mechanical harvesters to gather crops.  Once these are working, Arizona’s agricultural economy should equal or exceed its previous level.

This story is important for several reasons.  First, it provides data on what happens when people start enforcing immigration laws.  Keep in mind that this 40% drop took place despite a federal government that largely refused to execute federal immigration laws in Arizona during this period.  If the US government had partnered with Arizona instead of fighting it, the drop would have been much more drastic.  Second, it provides pointers for what to expect for the USA as a whole in the years to come.  In 1970 the fertility rate in the United States was 2.5 kids per woman compared to 6.8 kids per woman in Mexico.  In 2012, it was 1.9 kids per woman in the US compared to 2.3 kids per woman in Mexico.  If trends continue, in another generation Mexico will be trying to convince people to immigrate to Mexico instead of flooding the US with illegal aliens.  Thus, Arizona’s experience may be similar to what the rest of the country will experience in the years to come.

Generational Differences in Retirement Savings

In my Consumer Behavior class, we evaluate differences between how various groups behave, including differences between generations.  One of the findings about baby boomers is that, for all their good traits, as a group they are not very effective at handling their money.  I noticed a story this week that showed that, on average, older boomers had saved less for retirement than members of Generation X.

Of course, there is an alternative reason to this finding besides weaker money management skills.  Older boomers may simply be more confident that the government will pay for their retirement while younger generations have less faith that social security will be around when they need it.

Gender Demographic Trends and Thoughts

I found an interesting article written by David Bauer with a very detailed discussion of gender demographics.  I highly recommend it.  For a free article, it is quite informative.  Bauer shows that there are more men than women on the earth mostly due to the practices of China and India – where a preference for sons has resulted in many female abortions (and female infanticide).  This practice was exacerbated by China’s one child policy because many Chinese would kill their child if the child was a girl so they could then be allowed to try for a boy. Bauer’s collection of statistics also shows that most developed countries have slightly more women than men because women tend to live longer.

Bauer gave some reasons why women live longer than men, but another reason is simply because men engage in more risky behavior than women.  This is not just human behavior, it is true in the animal kingdom as well.  For example, male monkeys in Japan will play a game where they try to cross a busy highway despite (or because of) the risk of death.  Female monkeys do not play such games…

Bauer points out gender differences in migration, especially illegal migration.  I had not considered this before, but it makes sense and has implications for entire nations.  For example, Bauer showed that Mexico now has a larger percentage of females because so many of their males are illegally in the United States.  It makes one wonder how much of the crime in Mexico is due to the fact that so many men – who traditionally serve as defenders of the home – are away.

While it was a bit outside his topic, I would add the role of social norms to his discussion.  Social norms influence population growth by putting an effective cap on family size in cultures where reliable birth control is available.  For example, a few generations ago most Americans thought four kids was the ideal family size.  Once reliable birth control was commonplace, four became the cap for most families – people who reached their ideal family size stopped at that point.  Since all families did not reach that point, many people saw families with less children and that became the norm for the next generation.  China is experiencing the power of social norms right now – the Chinese government has seen the error of their ways concerning the one child policy and this policy is no longer rigidly enforced and may be going away.  However, since a generation of Chinese has grown up seeing families with only one child, this is now the social norm.  Even if the Chinese government paid parents to have more kids, they will find most families will only want one child.

I Knew This Day Would Come

Robert Morris University created sixty (yes, 60) scholarships for a team video game, League of Legends.  This was brilliant and I am certain RMU will not be the last university to create scholarships for video games.  Within 48 hours of the news getting out, RMU had over 2,000 inquiries, including one from Gambia, West Africa.

Generations Y and Z care more about video games than many traditional collegiate varsity sports and this is a natural response to changing consumer behavior.  I expect I will see video game contests reach an audience larger than the Super Bowl in my lifetime.

My favorite quote from the story was from one player.

So it’s official, playing videogames can benefit my education now…HAHA MOM.

For more details, see the entire story at the Wall Street Journal.

Startup May Disrupt Makeup Industry

Most brilliant ideas look obvious in hindsight. Grace Choi had such an idea when she realized 3D printing technology could be applied to makeup. She is working on Mink, a product that may greatly disrupt the makeup industry if it can deliver quality makeup. There is no theoretical reason why this will not work, 3D printers can use the same materials used in makeup provided by established companies – both at the high end of the market and ingredients for the cost conscious consumers. So let’s assume Grace releases Mink as a quality product that works as described.

I expect this will do very well with not only the target group (girls 13 to 21 years of age), but many women may also adopt. So long as Mink can provide quality equivalent to that of the established market, I believe Mink’s print-your-own makeup concept will succeed and dramatically disrupt the current makeup market. I expect Grace has already considered these options, but here are several ideas that would help Mink succeed. Product-wise, I’d recommend a software feature that allows Mink’s customers to scan colors (ideally with a smart phone) and then print that color of makeup without the need for a fancy art or photography program.

Market-wise, while some people will love the ability to print their own makeup, others will not want to buy and master yet another device. For these customers, there are two other business models Mink should consider. First, they could market a version of their makeup printer to department stores themselves. These stores could then print custom makeup for their regular customers, delivering better customization while reducing inventory. Second, Mink could also pursue an affiliate model where Mink certified specialists could resell makeup to their friends and acquaintances.

Female Demographics in the News

The Wall Street Journal has recently published two interesting articles regarding female demographics.  One had to do with women who decide to be full-time homemakers.  29% of all mothers with children under 18 stayed at home, the highest number recorded since the late 1980s.  85% of married stay-at-home mothers are doing so by choice, not necessity, much higher than other demographic segments.

The other article discussed the findings about income difference between genders.  It took them a bit to get to the meat of the findings, but they did a good job summarizing it.  Men and women in the same fields with the same experience tend to make the same amount.  However, genders tend to make different decisions during their career (e.g., men are more likely to pursue life-threatening occupations that pay more and women are more likely to work part-time or stay home for several years when a child is born).

Taken together, these articles and other findings indicate that at as long as my daughters are well educated, they will have ample opportunities to either work at a career, work at building a family, or a combination of both.  Obviously there is still room for improvement, but the data provides ample room for optimism.

Thoughts and Findings on Minimum Wage

I was asked to write a column about the minimum wage for The Free Lance-Star.  It appeared in yesterday’s paper, and I thought I’d post it here as well.  The column is virtually identical, but I took advantage of the medium to include hyperlinks.

Should we raise the minimum wage?

That depends upon what we are trying to accomplish.

If the goal is to ensure that each person who has a job earns enough to support himself—and possibly a family—on it, then yes we need to raise it. However, we need to realize that any decision to raise the minimum wage will also reduce the number of people employed and adversely impact firms.

Businesses will either have to pass along the increased costs by raising prices or make other adjustments (include closing for firms that are currently operating on the margin). With today’s minimum wage, larger stores still find it more economical to buy self-service check-out scanners than pay a person. If you increase the cost of hiring people with low skills, you increase the incentive to automate these jobs.

If you doubt organizations react to changes in the law, consider one obvious response to the Affordable Care Act, commonly referred to as Obamacare. The law mandates health care coverage for everyone who works at least 30 hours a week at organizations with more than 50 full-time people.

So how did many large organizations—including the State of Virginia–react to this law? They no longer allow their part-time workers to work 30 hours a week (Click here for a list). So these folks still don’t have coverage but now either earn less or have to juggle multiple part-time jobs to make ends meet.

The other factor to consider is that minimum wage is mostly paid for jobs requiring little skill. However, the experience gained by working these jobs is crucial toward preparing people for future jobs that require more skills and education. For example, when I was 12, my first job paid below minimum wage—I had a bicycle paper route for an afternoon paper and was paid for each paper I delivered. Newspaper delivery people are among the many exceptions to the federal minimum wage law.

While I didn’t realize it at the time, being a paperboy taught me several key lessons. I learned to be responsible and to manage my time. It didn’t matter if I wanted to play when came home from school, I had to deliver the papers on time or people would complain and I’d be fired.

In addition to the job requirements (mostly fold the papers and deliver to each subscriber’s house by 5 p.m.), spending time working also forced me to be more efficient with my other time. By the time I finished my route, cleaned up, and had supper with my family it was about 6:30 p.m. before I could start on my homework. My parents were supportive of my having a paper route, but they made it clear if my grades suffered, I would have to quit.

I also learned firsthand about taxes—my reaction was similar to that of Rachel from the TV show Friends when she got her first job, “Who is this FICA guy and why is he getting all my money?” Despite Uncle Sam taking his share, I learned the relationship between working hard and having money to spend.

Shortly after I turned 14—the minimum age to work for most jobs outside of school hours—I found a job at a local bookstore and quit my paper route. I could work full-time in the summers and part-time during the school year. I made the minimum wage of $3.35 per hour. Considering inflation, it was similar to today’s minimum wage of $7.25 per hour.

Minimum wage jobs are more than sufficient for entry-level jobs, if the person being trained has someone else paying their living expenses. Since my parents paid for my necessities, $3.35 per hour—even after taxes—was more than sufficient for me to pay my own personal expenses and save money for college. The skills I learned from these low-skill entry-level jobs helped me progress to better paying jobs that required more skill, experience, and education.

The current minimum wage is not sufficient as a living wage, but is more than sufficient as a training wage. I agree with the goal of ensuring all families have the necessities to thrive, not just survive, but this may be better handled by reforming our social safety nets which drastically penalize people if they work. Raising the minimum wage will make it even more difficult for people to find their first job where they can learn key skills that will help prepare them for more challenging and better paying future jobs.

This is not just my opinion. In one of the most comprehensive reviews—if not the comprehensive review—of minimum wage studies, David Neumark and William Wascher (Minimum Wages, 2008) found three key findings.

First, increases in the minimum wage decreased the number of jobs for those currently earning minimum wage and for those trying to enter the job market. Second, increases in the minimum wage do not reduce the percentages of families near or below the poverty line (although several studies have found that it increases these percentages given the loss of low-skill jobs). Third, researchers found that when the minimum wage was increased, the motivation for those with low-paying jobs to continue with their education decreased, thus reducing their long-term opportunities for obtaining better jobs.

These clear consistent findings—replicated at different times by different researchers—make a strong argument for eliminating the minimum wage entirely. Raising the minimum wage will decrease the number of entry-level jobs available for those wanting to enter the workforce, will not help (and may harm) poor families as a group, and will reduce the likelihood of those with low-skill jobs going back to school.

A Mother’s Perspective on Marketing Innovation

Good marketers come up with products that meet consumer needs they don’t even realize they have.  Tide Pods are a great example of how innovation can revolutionize and disrupt a mature industry with a simple, but innovative change that adds value to the consumer.  After discussing this in class, one of my students (Thanks Simone!) sent me a great article showing a mother’s perspective on marketing innovation.