Economics in the News – Aug. 19-25, 2024
Economics impacts our lives every day. Below are some of the top storylines from this past week related to economics.
o A work stoppage by Canadian rail workers threatened to disrupt supply chains across North America ended by the Canadian government ordering the two largest rail companies into binding arbitration. The Canadian Pacific Kansas City railroad and the Canadian National Railway locked out workers as the clock struck midnight Thursday, following days of heated negotiations failed to result in a new contract. While the work stoppage was short, it threatened to disrupt shipments of cars, timber, petroleum products, and grain across Canada and the United States. Each day of a work stoppage would have required three to five days for the railroads to recover, according to experts.
The lockout marked the first time that Canada’s two largest rail companies faced simultaneous work stoppages. Crew members are pushing for sacrifices regarding crew scheduling, rail safety, and fatigue management, while the railroads have argued that they have offered sufficient pay increases and adequately addressed scheduling concerns. [The Washington Post]
o Democratic Presidential nominee Kamala Harris has pledged to ban price gouging on food and groceries. Part of the plan has come about due to many Americans believing that corporate greed is to blame for high inflation. The food industry argues that the rise of prices has to do with an economic reordering caused by the pandemic. What do economists think about price gouging and whether it should be banned?
Laws against price gouging in effect become price controls, and rent controls are an example of a price ceiling. Most economists believe that rent controls are a bad idea. However, many economists have positive views on rules against price gouging during extreme events, such as a law in the state of Florida during state of emergencies which prevent the raising of prices to unbearable levels. The Harris plan also calls for increasing competition to help lower prices, which would agree with the general sentiment of economists. [The Wall Street Journal]
o Fall has arrived earlier than ever for retailers. Promotions for Halloween-related goods and Starbucks’ favorite pumpkin spiced lattes have arrived, while the summer season remains in full swing. While Home Depot launched its Halloween merchandise in an online campaign back in April, stores such Lowe’s, Party City, and Michaels started to sell some of their merchandise in June. Meanwhile, Starbucks began serving its iconic pumpkin spice latte and apple spiced seasonal drinks this past Thursday, marking the earliest that customers could order their favorite fall drinks.
Experts suggest that retailers rollout holiday promotions to prevent unsold inventory and to get a leg up on their competition. Lowe’s, Party City and Michaels attributed growing consumer demand. Halloween, in particular, has grown increasingly popular among adults, where shoppers spent $12.2 billion on Halloween goods in 2023, according to the National Retail Federation. While retailers have more consumer data and the ability to sell online, there still can be a risk of selling an item too early, diminishing a sense of urgency for consumers. [NPR]
o Could higher property insurance premiums end subsidized housing for developers and landlords? The costs of property insurance, mostly in coastal states, has dramatically increased with the insurance industry arguing that those increases are justified due to more frequent storms, along with increased home prices, including increased material and labor costs. For the developers and landlords that are selling or renting to buyers with constrained budgets, the soaring costs of insurance pose a significant threat.
The collapse of affordable housing could increase homelessness, but, in addition, it could hurt banks that have collectively invested billions in housing projects through a federal tax credit program. Insurers are quick to point out that their property insurance business has lost money in recent years. Developers are asking for construction codes to force builders to use stronger materials, reducing to the risk insurers would have to take on. [The New York Times]
o Losing a job, used to be something that was frowned upon. However, that is changing, as more people open up about their experience of being let go. In the 1970s and 1980s, layoffs were considered a private matter. But that slowly started to shift in the 1990s, where it became a more or less standard business practice. The tech sector alone has accounted for more than half-million workers since 2022.
During the pandemic, the millions who were laid off turned to social media platforms, such as LinkedIn and Tik Tok to create awareness of their situation. New job seekers are looking to connect with others. While job loss has become easier to deal with, it can still be incredibly disruptive for those in financial stress, as well as the psychological damage it can cause. [Bloomberg]
