Hurricane Matthew’s impact on workers in Georgia? Low-wage service workers will be hit worse than others

Conventional wisdom would say that the hurricane will show few long-term effects on overall earnings but that certain groups of workers will be affected more severely than others.

Low-wage workers in service industry jobs in the affected areas, such as Savannah, will see a decline in their income for the year.

Hurricane Matthew was felt severely in the coastal counties of Georgia. Required evacuations in Chatham County (Savannah) and other counties disrupted some of the fastest growing parts of the state.

In some respects, the disruptions were minimized by the storm coming at the end of the week. Nevertheless, Chatham County schools, which can be seen as a proxy for area’s return to “normal,” were not to reopen until Wednesday, October 12.

Looking at impact, it is tempting to see the disruption as causing a major economic blow to coastal Georgia, and to a less extent, the entire state, but this overstates the true impact.

Looking at impact, it is tempting to see the disruption as causing a major economic blow to coastal Georgia, and to a less extent, the entire state, but this overstates the true impact.

But it is important to note that while overall impact may be minimal in most areas, the effect on earnings will vary for different groups of employees. Low wage employees who do not hold occupations needed for cleanup and recovery will not be able to make up wages lost during the natural disaster, while those employees who do have skills needed for repair and restoration activities should see a net increase in their earnings as the increased recovery work more than offsets the loss of wages caused by the temporary shutdown of businesses during the event.

What conventional wisdom tells us

Here is the conventional wisdom when it comes to dealing with the effects of a natural disaster such as Hurricane Matthew:

Prior to the event, business picks up as consumers and businesses purchase additional supplies in anticipation of shortages. These include food and fuel.

When the event causes evacuations, people leave the affected areas. Within the affected areas, business slows, while there is an increase in economic activity in the areas receiving the evacuees.

After the event, people return to the areas previously evacuated, and economic activity increases above the normal level as people spend money and effort to restore the areas to their pre-event levels.

Over the medium term, the dip in economic activity is cancelled out by the higher-than-usual rise in economic activity post-event.

Depending on the amount of post-event activity, the natural disaster can result in an overall boost to the local economies as they receive an influx of assistance from outside sources such as state governments and the federal government.

By all appearances, Hurricane Matthew should fit this model: Short-term disruption but no longer-term impact.

Effects on workers’ income in affected areas

For workers, the effect of a natural disaster depends, somewhat, on their type of employment. Hourly workers lose income because businesses close during the natural disaster. The cleanup period benefits hourly workers who work in industries that assist in repairing and restoring areas to their pre-event level. This includes construction workers and those in the utility industry who find increased demand and benefit from working more hours and receiving overtime pay.

Low-wage workers in other industries, such as hospitality workers or hourly school employees, suffer longer dips in their pay. They lose income during the time of the natural disaster as businesses slow or shut down temporarily. After the event, businesses in industries such as tourism and hotels, and even higher-end restaurants, find reduced economic activity and so workers in those industries continue to feel the effects.

In most all industries, salaried workers continue to be paid during this time, so their income loss is less. Their income levels feel neither the effect during the event nor see a particular boost after the event.

Workers paid on commission, such as sales workers, lose that business during the natural disaster and even, to some extent afterwards, as cleanup takes precedence over new purchases. Some purchases are postponed, so they are pushed to a future date, while other purchases are cancelled and are never regained.

Effects on workers’ income outside affected areas

For areas taking in evacuees, it means an unexpected but welcome increase in economic activity. These unexpected “guests” purchase goods and services, including hotel rooms, food, and gasoline causing extra work in these areas and creating demand that translates into additional wages for hourly workers in meeting their needs.

Workers in the areas taking in evacuees see a wage “bonus” from the extra demands resulting in a temporary boost to their earnings. When evacuees return to their home areas, this demand slows and earnings return to more normal levels.

Summary

Hardest hit will be low-wage workers who lost wages during the natural disaster and who do not have jobs related to the subsequent cleanup. Those workers suffer a decline in earnings that will not be recovered.

Workers who have skills related to repair and restoration of areas affected by the natural disaster will see a net gain in earnings as work lost due to the natural disaster is more than offset by additional work caused by recovery operations.

While the actual economic impact will not be known for months, maybe for a year, it will be interesting to economists to see how the real impact measures against “conventional economic wisdom”.

It is important that policymakers understand that while the overall impact may not be significant, you cannot overlook how individuals’ earnings are affected by such events.

Georgia Labor Commissioner Mark Butler responds to labor force problems by threatening unemployed workers

Yesterday, I posted a blog on this site detailing a number of news reports about Georgia’s labor force, most of them negative.

Georgia Labor Commissioner Mark Butler chose to respond by posting a YouTube video threatening workers over the smaller issue of unemployment insurance fraud in a response that could be considered both tone-deaf and irresponsible.

From the University of California Berkeley Center for Labor Research and Education’s report on “Producing Poverty: The Public Cost of Low-Wage Production Jobs in Manufacturing”, to the New York Times’s story on “Hiring Hurdle: Finding Workers Who Can Pass a Drug Test,” the message is that Georgia’s labor force needs the same positive approach that the state puts towards economic development.

The AAUW’s finding on the large pay inequality between men and women in Georgia, or the U.S. Department’s view that tightening the rules on overtime will affect more than 158,000 low wage workers in Georgia, are additional measures that the state’s workforce needs positive reinforcement.

That should not be a hard message for state officials to understand, as they should know that attracting employers to Georgia depends on supplying companies with good quality workers.

Yes, unemployment insurance fraud is a problem in Georgia, as it is elsewhere, and Georgia has done a reasonable job of enforcing the rules, but focusing on this story to the exclusion of the more critical challenges facing Georgia workers is a misplaced priority.

He could just as easily made a video addressing worker misclassification that costs Georgia workers millions of dollars each year in lost wages, but I don’t think we will see that video anytime soon.

There are simply bigger issues facing Georgia’s workers, and it makes Mr. Butler’s choice of topics look like an attempt to distract the citizens of Georgia from the more important issues facing the state’s workers.

Time for Georgia to take a positive approach to labor development

Low wages, pay equity, public assistance, and drug use are related issues for Georgia.

This month, a series of reports have been published concerning Georgia’s labor force, most of them negative. The UC Berkeley Center for Labor Research and Education published a study titled “Producing Poverty: The Public Cost of Low-Wage Production Jobs in Manufacturing”. 

In it they found that 47 percent of production workers in manufacturing and temporary services relied on some form of public assistance:

	Earned Income Tax Credit	Medicaid/CHIP	Food Stamps	TANF	Total Participation
Georgia	39%	15%	22%	1%	47%

(Some workers participate in more than one public assistance program.)

The study also provides an explanation for these high rates of public assistance. “Historically, blue collar jobs in manufacturing provided opportunities for workers without a college education to earn a decent living. For many manufacturing jobs, this is no longer true. While employment in manufacturing has started to grow again following the great recession, the new production jobs created are less likely to be union and more likely to pay low wages. When jobs do not pay enough for workers to meet their basic needs, they rely on public assistance programs to fill the gaps,” according to the report.

This past Tuesday, the U.S. Department of Labor issued its new rules for overtime. In a map accompanying the announcement, USDOL indicated that the updated protections would extend protections for an additional 158,000 workers in Georgia. This in a state where 4.4 percent of workers were already at or below the minimum wage, a figure much higher than the national average.

The American Association of University Women published a study showing the median earnings for men and women across the nation. In Georgia, the gap was widest in Congressional Districts 6 (Price, R-GA) and 11 (Loudermilk, R-GA). In the 6th Congressional District, women earned on average 27.4 percent less than men. In the 11th Congressional District, the difference was 25.8 percent. This compares to a 21 percent gap nationally.

Georgia Congressional Districts with widest earnings gaps between men and women (2014)

Member of Congress	District	Earnings Ratio
Price (Republican)	GA-6	72.6%
Loudermilk (Republican)	GA-11	74.2%
Scott, A. (Republican)	GA-8	75.6%
Westmorland (Republican)	GA-3	76.3%
Hice (Republican)	GA-10	77.0%

As it happens, the two Congressional districts are side-by-side, with the 6^th District including much of the northern suburbs of Atlanta including portions of Cobb, Fulton, and Dekalb counties. The 11^th District is located in the northwestern part of the Atlanta metro area and includes Cartersville, Marietta, and Woodstock proving that the worse problems were not just in the traditionally rural parts of South Georgia.

Finally, The New York Times published a story this week on “Hiring Hurdle: Finding Workers Who Can Pass a Drug Test.” In the story, Georgia officials and company managers were dismayed to find that companies in Georgia are having trouble finding workers due to the number who fail company drug tests.

Taken individually, the stories can be read as a series of “what’s wrong with Georgia”, but they should not be read as unrelated issues.

Low wages, low rates of unionization (only 4 percent of workers in Georgia are members of unions), and significant problems in pay equity between men and women feed on each other. The results show up as social problems including greater need for public assistance and greater drug use.

Georgia has done an excellent job of luring companies, and most recently the film industry, to the state. Now they need to commit to raising their labor force, not by creating more rules and barriers but by taking a positive approach to developing its workforce by supporting efforts at great pay equity and higher wages for both men and women even if that means taking a less confrontational approach towards unions. 

The same positive approach Georgia officials take to economic development should be applied to labor development.