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April 30, 2010

Who creates jobs?

There is an often-repeated statement that jobs are created primarily by small businesses. What do the numbers say about employees in different-sized firms?

Dr. Mike Walden, North Carolina Cooperative Extension economist in the College of Agriculture and Life Sciences at N.C. State University, responds:

"It is actually a very interesting pattern. Let's look at firms who have less than 100 workers -- that's really considered to be the standard for small business. If you look nationally, those firms with less than 100 workers employ 37 percent of all workers.

"But at the other end of the spectrum, this is where it is interesting: At the other end of the spectrum, firms with more than 2,500 workers -- those would be considered big firms -- they also employ 37 percent of the workers.

"So ... very small firms and very big firms are really the dominant employers. And then of course firms in the middle -- those would be firms that have between 100 and 2,500 employees -- they employ the rest, which comes out to be about 26 percent.

"Now actually another way of looking at it is if you take 500 workers as the dividing line -- firms with less than 500 workers, firms with more than 500 workers -- you exactly split the work force in half. Firms with less than 500 workers employ 50 percent of the workers. Firms with more than 500 workers also employ 50 percent of the workers."

Posted by deeshore at 09:42 AM | Comments (0)

April 29, 2010

Will North Carolina's population grow?

One of the major factors driving growth in an economy is population. When demographers and others look out over the next several decades do they see a growing population in the U.S. and, even more important to us, in North Carolina?

Dr. Mike Walden, North Carolina Cooperative Extension economist in the College of Agriculture and Life Sciences at N.C. State University, responds:

"Let me put this in perspective. ... One of the big problems in some countries of the world is not just slow population growth but population decline. [For] countries like Japan, Russia and some key Western European countries, demographers predict -- and it is not a very hard prediction, because you look at birth rates and death rates -- ... that these countries will actually get smaller: fewer numbers of people in them, and this has all kinds of implications for your economy, for social programs, for taxes, et cetera.

"Not so though here in the U.S. Among developed countries, we are actually a leader in terms of population growth. In fact, demographers estimate that by 2050 we will have added another third to our population -- that is a 100 million people.

"In North Carolina, if you would just take that same proportion, that means we would add another 3 million, putting our state population at 12 million by that period of time. And actually it will probably occur faster because we are actually growing faster.

"Now this means a lot of business opportunities -- means a lot of new job opportunities -- but it also means challenges for things like our infrastructure and our natural resources."

Posted by deeshore at 07:48 AM | Comments (0)

April 28, 2010

They're still coming

As the recession has slowed economic activity, it has also slowed the movement of households within the country. Has North Carolina seen a big change?

Dr. Mike Walden, North Carolina Cooperative Extension economist in the College of Agriculture and Life Sciences at N.C. State University, responds:

"Many of the regions, many regions of the country that were attracting a lot of folks -- so called in-migrants, folks that moved from one state to another -- they have really cooled off during the last couple of years. Parts of California, Florida, DC, Tennessee are examples; they are actually attracting many fewer people, or actually losing people compared to what they were doing prior to the recession.

"Not so, though, with North Carolina. If you look at a map of the U.S. and you look at regions of the country that are still attracting high levels of in-migrants, again people moving from one state to the other, you see two big areas of North Carolina that are continued strong and attracting folks: the Triangle and the Charlotte region.

"Now, the rate of growth from in-migration has definitely slowed down, but the Triangle and Charlotte are still at the top of the list -- top of the national list -- in terms of attracting folks from other states.

"And I think what this shows is that, despite the recession, economic fundamentals are viewed very strong here for the long run, so people want to come here to get jobs and pursue their future lives."

Posted by deeshore at 09:31 AM | Comments (0)

April 27, 2010

How will they respond?

The new health care law includes several new taxes, particularly on folks in the upper income ranges. It's estimated these new taxes will be more than enough to cover the additional expenses mandated by the health care changes. Is there anything that could prevent this from happening? Listen

Dr. Mike Walden, North Carolina Cooperative Extension economist in the College of Agriculture and Life Sciences at N.C. State University, responds:

"Well certainly. ... These are estimates -- these are done by the Congressional Budget Office, a nonpartisan group. Any time you are dealing with, first of all, something as big as the health care bill, and then going out a number of years, you are going to have questions and you are going to have issues.

"In terms of highlighting some of the things that could go wrong, that is where the health care bill actually ends up costing more than the new revenues. One has to do with the cost side. Particularly, the health care bill is going to say that insurance companies have to cover people -- all people with pre-existing conditions, also no caps on insurance payouts. Well that's going to be a big expense increase in expense for insurance companies. We don't really have a good fix on how much that means their cost will go up.

"Then on the revenue side, one of the things the health care bill does of course is mandate that everyone buy insurance. If you don't, you pay a fine. Well the fine is not very big, and so there is some concern that young people in particular may feel like, well, they are just going to go without health insurance -- pay the modest fine (and) they will actually come out ahead there. Then when they do need health care, that is when they will sign up. Obviously you will take a loss on those folks.

"And then finally there are a lot of taxes that increase what high income people pay into the government. Concern there is, Will high income people change their behavior to avoid paying some of these taxes thereby causing the revenues coming in lower than expected?

"So there are plenty of variables here. We'll have to wait and see how this program unfolds over the next decade."

Posted by deeshore at 11:25 AM | Comments (0)

April 26, 2010

Public costs of recession

The personal and business losses associated with this recession have been very high, but perhaps not as well appreciated is that government, particularly state and local governments, have also suffered losses.

Dr. Mike Walden, North Carolina Cooperative Extension economist in the College of Agriculture and Life Sciences at N.C. State University, responds:

"In terms of tax revenues, if we look at our state of North Carolina between 2008 and 2009 revenues from the individual income tax -- this is for the state collected in North Carolina -- decreased, decreased by $2 billion.

"Revenues from the sales tax: They had sales tax down $250 million, and revenues from the corporate income tax down $300 million.

"Now again this should all make sense if unemployment is high, or even people who have jobs are not spending as much or their incomes are down, that is all going to affect public revenue.

"Now at the same time state spending for some key programs go up during a recession. For example state spending for unemployment compensation has virtually doubled over the last year, and state spending on Medicaid goes up about $1,000 for each unemployed worker.

"So this is the big reason why our state is probably going to continue to be challenged fiscally in the next fiscal year."

Posted by deeshore at 10:11 AM | Comments (0)

April 23, 2010

Are jobs finally coming back?

There is modest optimism about the nation's job market. Does this good feeling apply to North Carolina?

Dr. Mike Walden, North Carolina Cooperative Extension economist in the College of Agriculture and Life Sciences at N.C. State University, responds:

"It actually does. ... We have two job surveys that come out every month. The household survey, where surveyors go to peoples homes and ask them if they are working, etc., has actually shown jobs up for three straight months after falling for 22 consecutive months.

"The payroll survey, which goes to businesses, has found that jobs have gone up for three of the last five months after going down for 19 straight months.

"Now, yes, the unemployment rate is up, but that is due to workers who have dropped out of the labor force now coming back looking for work. They are counted as unemployed until they get a job.

"Since last fall the sectors with the largest job gains have been government, professional and business services, and education and health."

Posted by deeshore at 07:39 AM | Comments (0)

April 22, 2010

Balancing act

The new national debt commission will deliver by the end of the year a report on reducing the budget deficit and slowing the growth of the national debt. Are there any ideas the commission can start with?

Dr. Mike Walden, North Carolina Cooperative Extension economist in the College of Agriculture and Life Sciences at N.C. State University, responds:

"There are many, many ideas. In fact, annually the congressional budget office puts out a couple of volumes ... of ideas on reducing the deficit and reducing the rate of growth of the national debt. Let me just hit some of the highlights here. These are not necessarily my recommendations, these are just ideas:

"On Social Security, for example, we could substantially raise the retirement age. We could also change the way in which Social Security payments are adjusted to inflation. That would save billions over future years.

"On Medicare and Medicaid, one idea is to convert those to vouchers so that people then could go out and buy their own insurance rather than as the system works now -- the government, in essence, pays for whatever expenses comes in.

"On various kinds of deductions like the home mortgage interest deduction, one idea is to cap that by income level. The higher your income, the less of a deduction you are able to take.

"The same way with health insurance, which businesses can now provide to their employers and employees -- perhaps put limits on that and the tax deductibility of that.

"The question I think is not are there ideas out there. The question really is which ideas have traction? Which ideas can attract agreement among a diverse group of politicians and really among our diverse population to get adopted and move on these two very important items?"

Posted by deeshore at 09:02 AM | Comments (0)

April 21, 2010

The new normal vs the new mix

There's a new term being used to describe the kind of economy we are likely to have in coming years: the new normal. It refers to an economy not in recession but one in which growing very slowly and uncomfortably high unemployment is the name of the game. Is this the accepted view among economists?

Dr. Mike Walden, North Carolina Cooperative Extension economist in the College of Agriculture and Life Sciences at N.C. State University, responds:

"It is not among economists. ... In fact, some economists argue that a better description of our future economy -- rather than the new normal -- is the new mix.

"They argue that the major driver of our economic engine is going to change. Gone will be the dominance of consumers and consumer spending. And indeed that is what many economists worry about with consumers not spending as much. That's why they are looking for uncomfortably high unemployment.

"Well, these new thinkers say, 'Yes, consumers are not going to be spending as much as they had in the past, but this is going to be replaced by new drivers.'

"The new drivers will be exports and business spending on investments -- for example, business spending to become more energy efficient and simply more productive.

"And so we are going to still have a consumer-oriented sector, but it is going to be a slow-growing sector. The big pushers in the economy will be business spending and exports, and so jobs will cluster around those latter two -- therefore, the new mix."

Posted by deeshore at 08:53 AM | Comments (0)

April 20, 2010

College costs

A college education is perhaps more important today than ever before. But college costs continue to escalate. Is college still a good financial deal?

Dr. Mike Walden, North Carolina Cooperative Extension economist in the College of Agriculture and Life Sciences at N.C. State University, responds:

"College costs have been rising very fast -- in fact, faster even than medical care. Yet you have to account for several elements here:

"One is the increase in college costs (doesn't) account for financial aid. Most students get some form of financial aid, which is going to cushion that rise in college costs.

"And, for example, here in North Carolina we get a great deal of support from our General Assembly. Tuition and fees for college students at public universities in North Carolina among the lowest in the nation.

"And then lastly of course a student always has to ask, 'Well, O.K., yes, I'm going to shell out some money for getting a college degree; is it worth it?'

"And I think the overwhelming answer is still yes. You are going to see your salary be much, much higher if you have a college degree than if you don't.

"And then look at today's employment market. Unemployment rates, for example, ... for those with a college degree are half -- half -- what those rates are for someone with only a high school degree. So in a recession you are much more protected if you have a college education.

"Bottom line: College is still worth it."

Posted by deeshore at 03:26 PM | Comments (0)

April 19, 2010

Will mortgage rates rise?

The Federal Reserve has supported the housing market by buying almost all the mortgages taken by home buyers in the last year. This means the Federal Reserve owns the mortgages and takes the risks, rather than the banks. But this buying by the Fed will soon come to an end. Will this hurt the housing market? In particular, will it cause mortgage interest rates to rise?

Dr. Mike Walden, North Carolina Cooperative Extension economist in N.C. State University's College of Agriculture and Life Sciences, responds:

"This is a big concern that you hear registered. And experts think not. We don;t think that mortgage interest rates are going to rise as the Federal Reserve withdraws from buying up these mortgages. And the reason is that the Federal Reserve has long telegraphed -- they have told us -- they were going to do this months ago.

"And so the effects of the Federal Reserve's change will, in effect, have been priced in, if you will, already to mortgage rates. Markets always look ahead.

"I think the bigger issue right now that many economist worry about regarding the housing market is what happens when the latest tax credit for new buyers expires -- that $8,000 tax credit (and I think it is somewhat less for existing buyers) expires.

"Some economists worry that sales, which have actually been not too bad over the last few months, those sales have actually been borrowed against the future sales. And so that when that tax credit expires, people that would have bought homes without the tax credit months ahead have already done so, and we will see a big dip -- sort of a double dip, if you will -- in home sales.

"That, I think, is something more important to watch and economists will be keeping a key eye on trends in home sales."

Posted by deeshore at 08:44 AM | Comments (0)

April 16, 2010

The stimulus debate

Debate over the economic stimulus plan's impact continues. It was passed over a year ago, and rather than increasing, jobs have continued to be lost. Does this mean the stimulus plan was a failure?

Dr. Mike Walden, North Carolina Cooperative Extension economist in the College of Agriculture and Life Sciences at N.C. State University, responds:

"This was a source of intense debate not only in the public, but among economists, so let me lay out some of the points here of contention.

"Supporters of the stimulus plan recognize, yes, jobs have continued to go down, but they argue that, hey, they would have gone down even more without that plan. So that's one point of disagreement.

"Another source of disagreement is whether government spending at all can create jobs. Detractors say, no, that when the government has a stimulus plan like we've had they are simply borrowing money, so they are shifting money from private hands to public hands and there is no net job impact.

"Supporters of the stimulus plan say, no, no, no, that money that was borrowed would have been idle. That happens during recessions -- that people have money, (and) they don't spend it because they are fearful, and so it makes sense for the government to borrow that money and then spend it.

"And then, finally, another point of contention is that we have to recognize that, yes, you have the federal government with its stimulus plan and its spending. You also have state and local governments, and what they were doing in the last couple of years actually spending less?

"So in terms of the public sector, you have to really look at the combined effect of the federal government and state and local governments, and when you do that the impact of the stimulus is going to be somewhat muted because of the downsizing of state and local governments."

Posted by deeshore at 08:19 AM | Comments (0)

April 15, 2010

Household wealth

The wealth owned by households took a big hit during the recession. The Federal Reserve recently released an update on our wealth. Has it made a comeback?

Dr. Mike Walden, North Carolina Cooperative Extension economist in the College of Agriculture and Life Sciences at N.C. State University, responds:

"We now have statistics that go through the end of 2009. The good news is that we saw our wealth continue to rebound. It took a big hit during the recession. We saw wealth continue to rebound, but it is still off. It is off 16 percent from pre-recessionary levels.

"Some other items that came out of that recent survey: Households continue to pay down on their debt. In fact, household debt is now down 5 percent from its peak -- first time in history we have ever reduced debt that much.

"And we have also seen modest improvements in our wealth that is embodied in our home. In fact, owner equity as a percent of the homes value rose to 38 percent; it was in the low 30s, it is now 38 percent, but that is still well below the 60 percent level that we had before the recession.

"So we are making improvements, and we are seeing a rebound in household wealth. But we are certainly not back to where we were."

Posted by deeshore at 08:28 AM | Comments (0)

April 14, 2010

Energy efficiency

As there was 40 years ago, there is a big move in the country now to become more energy efficient -- to get more energy output per barrel of oil or gallon of gas. Are we accomplishing this?

Dr. Mike Walden, North Carolina Cooperative Extension economist in the College of Agriculture and Life Sciences at N.C. State University, responds:

"Well, yes and no. ... If you look at what I'll call standard household items -- heating and cooling, refrigeration, cooking, and lighting -- energy efficiency there has improved dramatically over the last 30 years.

"However energy usage in each household has gone up, because we keep adding new products -- products that weren't around 30 years ago; products like the microwave, the computer, TVs (and indeed flat screen TVs), and cell phones.

"So if you look at the average household today, they are actually using more electricity than they were 30 years ago even though they are using less for those sort of standard household items.

"The challenge is as we get new electronic gadgets and we want to use them, that is going to take more energy.

"My thought is that probably the next move toward energy efficiency will be for these new household items like flat screen TVs and cell phones. When we get those under control, then I think we'll really hit a good run in terms of reducing our energy in the household."

Posted by deeshore at 08:31 AM | Comments (0)

April 13, 2010

Oil use

Although there is a big push for energy alternatives, oil is likely to remain a major fuel for a long time. What factors will drive oil usage in the near future?

Dr. Mike Walden, North Carolina Cooperative Extension economist in the College of Agriculture and Life Sciences at N.C. State University, responds:

"Well ... in answering this question it is useful to divide the world into what we call developed countries -- these are countries that have higher standards of living like the U.S., North America, Western Europe -- and developing countries. Those are countries who are involved in improving their standard of living: China, India, Eastern Europe would be examples of that.

"And what we have seen over the last 30 years is a real dichotomy here. Developed countries have actually improved their energy efficiency; they are actually using less oil per person than they were 30 years ago.

"On the other hand, developing countries, because they are developing so rapidly they are actually using more oil per person.
Now right now the developed world, countries like the U.S., Western Europe, still collectively use more oil.

"But the point here is that oil usage is shifting away from those developed countries to countries like India and China.

"The bottom line here is although the developed world, to continue to improve in terms of energy efficiency, may move away from oil to alternatives, oil usage is likely to continue to go up because of the growth of these developing countries and the fact that as they grow they are using a lot more oil."

Posted by deeshore at 08:43 AM | Comments (0)

April 12, 2010

Was it a good jobs report?

North Carolina's unemployment rate hit a modern-record high of 11.1 percent in January. Does this mean the state's job situation continues to deteriorate?

Dr. Mike Walden, North Carolina Cooperative Extension economist in the College of Agriculture and Life Sciences at N.C. State University, responds:

"Actually not. ... This can get confusing so let me see if I can clear it up. We actually saw in January we saw more jobs created in North Carolina than compared to December, and I should say that this is after doing your seasonal adjustments, which are very important in January.

"One job report showed jobs in the state went up by 7,000; the other job report showed jobs in the state went up by 8,000. So that's good.

"Now how can it be, therefore, that we had an increase in the unemployment rate? Well, this is due to a shifting of a group of workers that are unemployed: we call them discouraged workers. These folks are only going to be counted as unemployed if they are actively looking for work. And what happened in December, those folks weren't actively looking for work. They were unemployed, but they weren't going on interviews, so they weren't counted as unemployed. However in January they did start looking for work.

"Why? Well because the job market improved. And actually we see this at the end of recessions. We typically see jobs go up at the same time as unemployment rates go up because of the movement of these so-called discouraged workers.

"So I would recommend to folks in terms of getting a fix on what is happening in the job market, keep your eye on the number of people employed. If that number goes up, that shows that North Carolina's job market is improving."

Posted by deeshore at 09:00 AM | Comments (0)

April 09, 2010

North Carolina budget outlook

The General Assembly will soon be returning to Raleigh to deal with the state budget for the next fiscal year. What's the latest reading on the budget? Will decisions be easier or harder?

Dr. Mike Walden, North Carolina Cooperative Extension economist in the College of Agriculture and Life Sciences at N.C. State University, responds:

"Well, they will still be challenging. ... Unfortunately revenue to the state government is running still below expectations. This is primarily due to soft sales tax revenues and soft individual income tax revenues that are coming in low.

"This, of course, is a result of the unemployment situation in this state. The situation actually ... would be a lot worse if not for a special collection that the revenue people were able to do of unpaid taxes of over $200 million.

"However, there is still hope: The most important month in terms of revenue for the state is April, obviously because of income tax filings. And what's important about that is because it's very hard to estimate, for example, income from investments and capital gains which result when people sell stock.

"So that will become much clearer after we get the income tax filings in April. That wild-card, of course, is going to be investment income. So right now it's going to be a challenging situation -- how challenging will depend on what April's numbers look like."

Posted by deeshore at 09:17 AM | Comments (0)

April 08, 2010

TARP payback

When the $700 billion Troubled Asset Recovery Program started in the fall of 2008, it was widely thought that taxpayers would never see this money repaid. Where do we stand almost 18 months later? Is the government seeing some of this money returned?

Dr. Mike Walden, North Carolina Cooperative Extension economist in the College of Agriculture and Life Sciences at N.C. State University, responds:

"Happily the answer is yes. ... Big banks who received the lion’s share of these funds have actually largely repaid those loans, and I should say they have repaid them with interest.

"Many other recipients are beginning to do the same. The estimate now ... is that of that $700 billion, only -- and of course only in quote -- $150 billion will not be prepaid. And I think that is a major achievement because when TARP was passed -- of course we don't have a perfect crystal ball -- many people were very, very concerned that that was the last we would see of that money. The taxpayers, that is.

"So it looks like things have turned out much, much better. And so really you have to ask yourself the question, If indeed we do lose -- we taxpayers lose $150 billion -- is that an adequate price to pay for preventing the total collapse of the financial system at the end of 2008.

"We will never know for sure, but certainly the outlook right now is much brighter."

Posted by deeshore at 06:45 AM | Comments (0)

April 07, 2010

The new U.S. auto industry

The industry that makes vehicles in our country has gone through an amazing transformation that culminated in bankruptcy of GM and Chrysler, two of the big three. What brought this about?

Dr. Mike Walden, North Carolina Cooperative Extension economist in the College of Agriculture and Life Sciences at N.C. State University, responds:

"I think it is a combination of being unlucky and uncompetitive. The first hit really occurred in the 1970s, when we had the big jump in gas prices, the result of distortions and embargos in the oil market.

"And we already had foreign auto producers here. They were primarily selling small cars; they were a very small part of the market. Our producers really didn't -- had not gotten into the small car market.

"Well when gas prices went up in the '70s everyone wanted a small car. So that was really the start of the movement away from the big three to the foreign producers.

"Then in the 1990s our domestic producers got a reprieve because gas prices went down so they focused on big trucks, SUVs. And so again they sort of ignored the small car market.

"Then we got the big jump in gas prices in the 2000s, and I think this really solidified the position of the foreign producers who then had made inroads not only into the small car market but particularly in the quality.

"So really what we have now is really not the big three. We have what many call the medium three. And then of course we have many, many foreign producers also competing."

Posted by deeshore at 08:30 AM | Comments (0)

April 06, 2010

Wider impact of schools

Parents closely watch the quality of schools their children attend. This is understandable, because obtaining a good education is a key to ultimately doing well in our economy. But are there other groups that might be interested in a school's performance?

Dr. Mike Walden, North Carolina Cooperative Extension economist in the College of Agriculture and Life Sciences at N.C. State University, responds:

"Absolutely ... . And ... one of the primary groups is property owners. The point here is that if you own property -- let's say -- in a county, and the county -- you have a countywide school system, so that if someone lives in that county in most cases the children are going to go to the county school system. Then as a property owner, the value of your property will be in part affected by how good the schools are perceived to be. That is to say, if schools are perceived to be better, that actually is going to have a positive affect on property values in the county, because more people want to live in that county and send their kids to the good schools.

"And the opposite, if the schools are perceived to be not as good. That will have an adverse affect on property values because not as many people want to live there.

"This tie-in, if you will, between property values and the impact of schools -- the value of schools -- has been demonstrated time and time again in economic studies. And it is one reason why you often see property owners being very concerned about the local quality of schools."

Posted by deeshore at 08:14 AM | Comments (0)

April 05, 2010

Strong or weak?

We hear about the dollar strengthening or weakening against foreign currencies. Is it better if the dollar strengthens?

Dr. Mike Walden, North Carolina Cooperative Extension economist in the College of Agriculture and Life Sciences at N.C. State University, responds:

"Well maybe. It depends on what side of the fence you are on ... . And this is one of those things where ... people automatically think, 'Well, strong is good; weak is bad; must be that a strong dollar is good.'

"Well, actually, if you are an exporter, let's say, if you are a company like many in our state and in our nation who make products and sell them in foreign countries, you actually want a weak dollar. Because a weak dollar actually makes our exports in those foreign countries cheaper, and our exporters therefore can sell more things.

"On the other hand, if you are an importer you want the opposite. You want a strong dollar because that makes obviously imported products cheaper, and with a strong dollar you can buy more of those. So it really depends on which side of the import export fence that you face.

"Ultimately though the dollar's movement is related to trade balances. If we do develop a big trade imbalance ... importing a lot more than we are exporting, that is actually going to put downward pressure on the dollar. Which will make our exports stronger, make our imports more expensive and that tends to at least reduce that trade balance.

"So think of a teeter-totter here. The value of the dollar is something that in the long run tries to work to balancing imports and exports."

Posted by deeshore at 08:51 AM | Comments (0)

April 02, 2010

When will we know?

When will we know it is time to convert from conventional energy sources to alternatives? Do we have to rely on the government to tell us?

Dr. Mike Walden, North Carolina Cooperative Extension economist in the College of Agriculture and Life Sciences at N.C. State University, responds:

"No, we don't. ... And this is kind of one of the big selling points to economists, or economic system. All we have to do is look at one thing: prices. Prices will tell us when we want to convert.

"When the price of conventional sources of energy go up and they get higher than the prices of alternatives, then people know it is time to transform our energy sector. And we have seen this many, many times.

"For example, when we were using whale oil, whales became scarce. Whale oil prices went up and people found other sources. In fact, they found crude oil.

"Now, what is the role for government here? Well government can do a couple of things: One, government can try to help develop alternatives, and we have research money from government that goes into that.

"But also government can play a role perhaps in adjusting these prices. If, for example, we think that there are some negatives to using conventional sources of energy -- environmental negatives, national security negatives -- then what the government can do is say, 'Well, those negatives aren't reflected in the price, and so we are going to up that price. We are going to put an extra tax on the price of conventional sources.'

"Likewise, if the government feels as if the value of alternatives is not adequately reflected in price, you can say the government will subsidize those prices.

"But ultimately what we look at is the price. And you and I make a decision when to switch when those prices ... tell us to do that."

Posted by deeshore at 07:46 AM | Comments (0)

April 01, 2010

CEO pay

One of today's hottest economic topics is CEO pay. Even in bad economic times, many CEOs make millions of dollars and continue to earn big raises. How can this be justified?

Dr. Mike Walden, North Carolina Cooperative Extension economist in the College of Agriculture and Life Sciences at N.C. State University, responds:

"First of all ... you have to recognize what a CEO does. The CEO is responsible ultimately to the shareholders of the corporation. And it is the CEO's job to not only keep the company afloat but maximize its value for the shareholders.

"This is a tremendously difficult, stressful and time-consuming job. And it has really gotten more so in recent decades. I mean, if you read about the average day of a CEO ... they are on call all of the time. Every decision that they make can not only affect millions of dollars but thousands of jobs.

"So it really takes a special kind of person, not only with a special personality but a special skill set to do this kind of job.

"And the point is there just aren't many people that have that skill set and that personality to do that. It is kind of like in professional sports. You have to have special skills to play professional, sports and one of the reasons why those folks get high pay is because there are not that many people that have those skills.

"It is the same sort of situation with CEOs. Demand for CEOs is high, supply is very low, hence you get large salaries."

Posted by deeshore at 07:50 AM | Comments (0)