Economics in the News – April 22-28, 2024
Economics impacts our lives every day. Below are some of the top storylines from this past week related to economics.
o Michelin announced an initiative to overhaul its pay structure, guaranteeing all employees a “decent wage.” The company, which has 132,000 workers at 131 factories in 26 countries announced a broad social plan in which it intends to ensure that none of its workers would have to struggle to make ends meet. Unions have warned that the Michelin pledge would still have some workers struggling and that it did not guarantee against future layoffs or site closures.
The French company ignited debate among the French over what constitutes a decent wage and whether more companies should follow suit. A Michelin study, conducted by a Swiss organization Fair Wage Network, found that five percent or 7,000 Michelin employees worldwide were earning less than a livable wage. In response, Michelin adapted its salaries to the cost of living, corresponding with the costs of rent, food, transportation, and childcare in the regions in which the factories are located. [The New York Times]
o In a cost-cutting move, Southwest Airlines announced plans to cease operations at four airports and reduce flights from others. The move comes as its growth plan was stalled due to fewer-than-expected plane deliveries from Boeing. The airports in which it plans to cease operations include: Bellingham International Airport in Washington State, Cozumel International Airport, George Bush Intercontinental Airport in Houston, and Hancock International Airport in Syracuse, NY. Several of the airports it plans to reduce the number of flights include Atlanta’s Hartsfield-Jackson and Chicago’s O’Hare International Airport.
Southwest also expects to limit hiring, ending the year with 2,000 fewer employees after the airline reported a loss of $231 million for the first quarter. The issues at Southwest stem from only flying Boeing 737 jets, and the ripple effect from the Jan. 5, 2024 incident in which a panel of a Boeing 737 Max 9 jet blew out during an Alaska Airlines flight. [The New York Times]
o Politicians and corporate leaders commonly praise rising home prices and rallying stock prices as signs of economic well-being. However, for younger Americans, the rising asset prices are building a larger wealth gap between generations. Many of the gains are concentrated to older Americans without mortgages and investments made at much lower costs.
Home-buying affordability fell in 2023 to its lowest level since 1985, according to the National Association of Realtors index. The median household now requires more than 40 percent of its income to cover payments on a median-priced home, according to the Federal Reserve Bank in Atlanta. Roughly 61 percent of millennials who were around 40 years old in 2022 owned a home, compared to 66 percent in the baby boomer generation in 1989. Until demand slows or supply increases, home prices will continue to climb, but mortgage rates are expected to remain expensive for the foreseeable future. [The Wall Street Journal]
o Baltimore officials revitalized the city’s port in the early 2000s, providing one of the last blue-collar jobs in the city amid a shutdown of manufacturing and steel production facilities. The transformation allowed the Port of Baltimore to process a record amount of cargo last year, but experts warned that tight quarters for the enormous cargo ships could lead to trouble.
While the Dali – the ship that collided into the Francis Scott Key Bridge on March 26 – was not the largest ship to dock in the Port of Baltimore, it was 1,000 feet long, 160 feet wide with a weight of more than 116,000 tons. It has led to more transparency of the heightened risks of similar accidents with large cargo ships. [The Washington Post]
o The US Department of Transportation is attempting to crack down on steep passenger fees to check bags and change flights. Under the new regulations, airlines will be required to show the full price of travel before passengers pay for their tickets. Airlines will also be required to provide prompt refunds when flights are canceled or significantly changed.
The airline industry has previously rejected the idea of a more transparent fee, arguing that it would be difficult for airlines to accomplish. The new requirement necessitates that airlines disclose all baggage, change, and cancellation fees, sharing the information with third-party booking sites and travel agents. [NPR]
