About Daraius Irani

Dr. Daraius Irani serves as the Executive Director of the Regional Economic Studies Institute (RESI) within the Division of Innovation and Applied Research as well as the Division’s Associate Vice President. Daraius and his team are often called by state agencies, private companies and local government to provide insight into proposed policies, development or forecasting the economy. Numerous reporters in print, radio and television rely on Dr. Irani’s insight into the local and state economy and other issues. With a deep passion for all things economic, his blog posts focus on a wide range of topics from immigration to the super bowl.
Daraius

Daraius

Later this month, a fifth casino will open its doors in Maryland, and in about two years, a sixth casino will open its doors. My question is this: Is there a sufficient consumer base to support this growth, or are the new casinos cannibalizing revenues in Maryland and the surrounding states in the region (New York, New Jersey, Pennsylvania, Delaware, West Virginia, District of Columbia, and Virginia)?

 

About thirty years ago, two states—New Jersey and Nevada—had casinos. For New Jersey, Atlantic City was the gambling destination for the East Coast; Las Vegas was the gambling destination for everywhere else. Additionally, Indian casinos came into prominence in the 1980s due to a Supreme Court ruling. However, in the last decade, the nation and the Maryland region have experienced an explosion of casinos and other gambling venues. The adult population or, more specifically, those who identify as wanting to gamble is not keeping up with the growth in the number of casinos opening in the region. Between 2000 and 2012, the adult population in the region (New York, New Jersey, Pennsylvania, Delaware, West Virginia, District of Columbia, Virginia, and Maryland) grew by 9 percent. However, the number of casinos grew by 183 percent during that same period.

 

Declining Gambling Revenues
As a result of this explosive growth, the media are full of reports on the share of gambling revenues declining across the region. This decline has resulted in several casino closures in Atlantic City. The gambling revenue is down in Delaware as well. In fact, there is a proposal to provide a subsidy to the casinos there. Gambling revenue is also down in West Virginia and Pennsylvania. Hollywood Casino Perryville saw a drop in its revenues once Maryland Live! Casino opened in Arundel Mills. I suspect that, when the Horseshoe Baltimore casino opens at the end of this month, Maryland Live! Casino will see a similar drop in revenue. Furthermore, when the MGM National Harbor casino opens in two years, another drop in Maryland Live! Casino’s revenue is likely to occur.

 

Image credit: South Bmore

Image credit: South Bmore

What is the underlying trend fueling this growth in casinos?
First, many states introduced lotteries as a means to raise additional revenues earmarked for specific programs such as education. Many states saw the success of other state’s gambling ventures and began to introduce gambling in their own jurisdictions, partly to keep their residents’ gambling spending in the state and partly to attract out-of-state gambling expenditures. The tax rate on gambling revenues is usually very high, but casinos are willing to pay due to the profitability of gambling ventures. For Maryland, it is a means for generating additional revenue as well as an economic development opportunity.

 

The economic development aspect of introducing casinos is somewhat tricky, and timing is everything. Being the first state outside New Jersey to allow gambling allows that state to generate enormous tax revenues and economic opportunity, as many out-of-state visitors are attracted to the new casinos. However, being the last state to allow gambling means that the number of new gamblers visiting from out of state is very limited.

 

Furthermore, the shifting in-state spending from local restaurants to local casinos does little in the way of increasing local economic activity. However, if local casinos can capture out-of state spending, then there will be an increase in local economic activity. In the Mid-Atlantic region—New York, New Jersey, Pennsylvania, Delaware, West Virginia, District of Columbia, Virginia, and Maryland—all but two, Virginia and District of Columbia, have legalized gambling. For Maryland and West Virginia, this disparity has proven to be a great geographic advantage, as Virginians and Washingtonians who wish to gamble can go to either West Virginia or Maryland to spend their money. However, within Maryland, the share of clients to each casino will likely drop as the number of casinos increases.


Daraius

Daraius

A long time ago, in a business cycle far, far away there was a great recession. Before this recession, jobs were plentiful, high-paying, and secure. The recession officially ended in June 2009, and, according to economists, I included, the economy has been in recovery for the last 60 months – one of the longest periods of recovery in the post-war period.  The stock market has soared to new heights and while energy prices still remain high, they haven’t spiked too much in recent years. In fact, the US is now a leading producer of hydrocarbons. The US has also enjoyed one of the lowest interest rate environments in its history. As a result, the housing market has picked up and consumers are spending again. In spite of all of the signs of an economic recovery, it still does not feel like an economic recovery. There is a disturbance in the force.

 

The Number of Jobs Created & the Challenge of the Long-Term Unemployed
A couple of factors are driving that disturbance. While nationally, the number of jobs being created every month has been impressive, they have fallen short of the need to fill those jobs that were lost as well as those jobs that should have been created. The difference is noticeable, and I had to ask, “aren’t you a little short for a recovery?” Moreover, the challenge of the long-term unemployed continues to cast a shadow over the recovery and we often mutter a prayer that we are not one of them. While these two factors contribute to the feeling of recovery malaise, there are two other often over looked factors that also contribute to that disturbance—part time jobs and the wages of the post recessionary jobs.

 

Part Time Jobs
The percentage of jobs classified as part-time has risen quite dramatically as the economic recovery has evolved. Nationally, the part-time job percentage has gone from less than 16% to over 19%. This could be a result of the types of new jobs being created. In fact, nearly 40% of the new jobs created in the post-recession period were in retail, food service, and temp jobs, which tends to have more part-time jobs than say the manufacturing sector. It seems the recovery is trying to pull a Jedi mind trick on us, but these are, in fact, not the jobs we’re looking for.

 RESIemploystatusgraphic (2)_small

Wages of Post-Recessionary Jobs
The second factor is the quality of jobs being created and by quality I am implying wages. The National Employment Law Project recently published findings supporting our analysis. While the economy has created jobs, the median wages of the jobs created fall dramatically short of the median wages of the jobs lost. In the US, fewer mid and high wage jobs were created than were lost, but more low wage jobs were created during the recovery. Sadly, this same phenomenon is repeated here in Maryland as illustrated by the infographic below.

RESIjobsinfographic_small

The challenge before us is to ensure that we as a nation or as a state do not end up with a labor force comprised of part-time workers earning low wages. Are you worried? We find your lack of faith disturbing.

 


Daraius

Daraius

This past week, I attended my ninth Maryland Economic Development Association (MEDA) annual conference. Each time I attend, I come away feeling smarter and better networked into the community of economic development. This year’s conference theme, “Research to Revenue: Harnessing Maryland’s Intellectual Capital for Economic Growth,” was very timely and interesting. The panels and speakers ranged from venture capitalists to entrepreneurs to practitioners.

 

Conference Overview
One of the key takeaways from the conference speakers and panels was that conventional thinking and practices will get the same outcomes. If everyone is doing the same thing, nothing will change. The opening keynote speaker challenged the way economic development practitioners view technology transfer projects. The closing keynote, a venture capitalist, suggested that economic development may have added success if states or localities invest in start-up companies outside the region and, if successful, then bring them to the state or locality to permanently set up shop.

 

My Presentation
I had the opportunity to present our work on the National Establishment Time Series (NETS) data. These data have 45 unique attributes for each company such as number of employees and sales from 1990 through 2012. Moreover, all the data are geocoded, a feature that enables us to analyze business trends at the sub-county level. We hoped that this availability of data and our analytical and mapping expertise would enable local economic development organizations to have better information about their counties and the business districts within their counties.

 

Entrepreneurs at MEDA
There were several panels of entrepreneurs who spoke of their challenges with funding, hiring, and the culture within their organizations. While the cultures in each varied dramatically—from a very cerebral quiet office to a rather loud and rambunctious shop floor—all were in agreement that the state and local resources used to assist entrepreneurs were instrumental in their collective success.

 

Finally, the closing speaker offered a great story of combining a family business with technology. Hooper’s Island Oyster Company was started by a waterman using technology, university scientists, and passion to create a sustainably farmed oyster sold locally as well as in the mid-Atlantic region. Moreover, I can attest that the oysters were absolutely delicious. So, all in all, this past MEDA conference was a great success both for the mind and taste buds.


Daraius

Daraius

Every February, restaurant reservations at romantic spots become very scarce, heart-shaped gift boxes of chocolates sell like hotcakes, and the price of a dozen roses seemingly rises along with the stress level of any one who is in a relationship and is looking for that perfect Valentine’s Day gift.  According to the National Federation of Retailers, an American will spend $133.91 on average on Valentine’s Day gifts, compared to $130.97 in 2013. However, only 54% of those surveyed will celebrate the holiday—down from 60% in 2013.

 

With the advent of the internet and smart phones, Valentine’s Day gift giving patterns may be changing. More than 40% of consumers will shop online or use their smart phones to purchase a Valentine’s Day gift. So, gone are the days of men (I say men as a majority of the Valentine’s Day spending, by over half, is done by men) dashing into a florist or jewelry shop to buy whatever is available on the way home from work. This is important, as over half of the women would dump their boyfriends if they did not get something for Valentine’s Day. Even a card would suffice, and Valentine’s Day is the next most popular holiday after Christmas for cards.

 

However, while the means to purchase Valentine’s Day gifts has changed, the mix of gifts have not changed; it is still cards, candy, flowers, dining, jewelry, or some combination of the above. Gifts of gym memberships or fitness equipment are usually not well received.

 

Women prefer to receive their gifts in the evening after nice dinners, while men prefer to get their gifts in the morning. With the exception of friends, most people will spend more on their pet for Valentine’s Day than on their coworkers, classmates, and teachers. Condom sales spike by nearly 30% on Valentine’s Day, and the month of March is usually the biggest month in sales of pregnancy tests. This figure is not surprising as 85% of men and women consider sex an important part of Valentine’s Day. Moreover, over 10% of couples get engaged on Valentine’s Day.

 

While Valentine’s Day retail sales are nearly $20 billion, Christmas retail sales are nearly $270 billion. However, forgetting a gift on Christmas may not have as significant an impact on your romantic relationship as forgetting a gift or getting the wrong type of gift on Valentine’s Day.

Image credit: Tada - click the image to view full Valentine's Day infographic

Image credit: Tada – click the image to view full Valentine’s Day infographic


Daraius

Daraius

As we are carving into our turkey (or tofurkey if you don’t eat meat) and enjoying the company of our families and loved ones (dysfunctional as they all may be), many retail employees will have already have worked a full day. Many stores will have been open since 6:00 a.m. to offer great, budget-pleasing deals to hardy shoppers.  This raises the question: why?

 

There are two challenges that face retailers. First, how do you squeeze out more shopping time between the Friday after thanksgiving and Christmas morning? Second, how do you top last year’s deals?  According to many sources, about 20 percent of the retail industry’s sales occur between Black Friday and Christmas.  Retail sales are expected to rise by about 4 percent. The holiday season can make or break a retailer, so this is a very important period.

 

Image credit: Joe Heller

Image credit: Joe Heller – Click the image to view more cartoons

A little history: the Friday after thanksgiving was named “Black Friday” by Philadelphia merchants in the early ‘60s.  It was considered a negative as it was named to describe the downtown crowds and traffic on both Friday and Saturday.  Now, it’s considered to be the official start of the holiday shopping season.  As internet shopping became more commonplace, and online retailers inevitably participated in this bacchanalia of shopping, a new term was coined in 2005: “Cyber Monday.” The term refers to the Monday following Thanksgiving. Cyber retail sales have more than doubled from $600 million to just over$ 1.4 billion between 2005 and 2012.

 

Retailers have addressed the first challenge, in effect, by creating one more shopping day—Thanksgiving Day.  The logical question, then, is whether this current event is a one-off or whether it will become the norm.  Will we soon have “Purple Wednesday,” the day before Thanksgiving Day, as a shopping day?

 

Retailers try to address the second challenge by offering goods that have very high perceived value: flat screen TVs, laptops, computers, etc., at a very low price.  Although this is becoming harder and harder with each passing year, I suspect that retailers will figure it out.  I am hoping that one day soon I can buy a new car as a gift on “Green Tuesday” at 1:00 a.m. for very little money, assuming I am one of the first five people in the door.


Daraius

Daraius

As August winds down, a mounting gloom begins to infect many school-age children as they realize that the lazy days of summer are coming to an end, and soon they will be back in school. For parents, there is both joy and sadness with this change of season. The joy is that the kids will be out of the house and in school. However, that joy is tempered with the fact that they will have to shell out anywhere from $285 to $635 to properly attire and equip their children for school, according to two surveys conducted by the National Retail Federation and International Council of Shopping Centers. For retailers, this is a little taste of Christmas in August. To lessen the financial impact on many families, seventeen states offer some sort of holiday from sales tax during August on clothing and school supplies.

 

These numbers are slightly down from last year, but still represent s a substantial amount of spending by consumers in a short period. For Maryland retailers, this translates into an additional $600 million to $1.3 billion in spending in August over what households would normally spend. To ensure that households spend all their back-to-school funds in one place, many retailers are advertising that they are a one-stop shop for everything related to going back to school and that they have the lowest prices.

 

So what does this “dog days of summer” spending translate into for Maryland’s economy? For every one million dollars spent on retail goods, nearly 22 jobs are supported, from direct jobs at the retail establishments to indirect and induced jobs at logistic firms, supermarkets, and other businesses. So, while many school-age children are bemoaning that the last weeks of summer vacation are whipping by like the Grand Prix racers in Baltimore, retailers are relishing the back-to-school season.


Daraius

Daraius

One of my favorite TV characters is Tim “the tool man” Taylor, and one of his great loves was new power tools. We can all remember the grunts of joy when a new tool passed through his hands. Invariably, he would use the tool incorrectly or overbuild something with the new tool—a lawnmower with 500 HP, for instance. For the last 20 years, RESI has undertaken numerous economic and fiscal impact models for federal, state, and local government as well as the private sector—by my last count, well over 100 studies. In each study, we used IMPLAN, a wonderful static input-output modeling tool. This past year, RESI has begun to use REMI PI+, a dynamic input-output modeling tool, for our economic and fiscal impact projects. REMI allows us to conduct dynamic economic and fiscal policy analysis. Cue manly grunt of joy.

 

What are the benefits of dynamic analysis?
Dynamic economic and fiscal policy analysis has been around since the early 90s and is currently used by state and federal governments to determine future policy impacts. The benefit to the dynamic aspect of analysis is the ability to estimate the compounding effect of a one-time shock over years. Traditional static analysis models are good for single-time projects, but to determine the impact of an Earned Income Tax Credit, the better method would be to create a dynamic forecast with a tool such as REMI.

 

For example, suppose a state government is considering a tax credit for renewable energy generation. The transactions of private firms taking advantage of this credit are ultimately weaved throughout the economy in the traditional “business cycle.” Think of a static model as providing an HD photograph of this tax change, a snapshot of the tax policy. The jobs, wages, and output derived from that shock are applicable to that specific period in a static model. The model can be used in a “create and support” situation, but to see the impacts of this tax policy over multiple periods, a dynamic model is more suitable.

 

REMI

Click the graphic above to read more about REMI

How can a dynamic model show the impacts of tax policy?
Think of a dynamic model like REMI as providing policymakers with an SD video of the tax change, as compared to the HD photograph that IMPLAN will provide. Economists can review the change from the baseline caused by the shock and see how the economy shifts through consumption pattern and price changes. Therefore, if the policy created 400 direct jobs and 20 indirect jobs, the impact of those jobs and wages throughout time may add up to more than 420 jobs. States such as Minnesota have used REMI in the past to forecast the potential impacts from their Green Solutions Act on their economy.

 

RESI looks forward to the new detailed and dynamic forecasting we can now offer our clients with REMI. It’s a shiny, new tool, and our team is ready to put it to work!


This blog series “Partnerships Across Campus” gives you — our partners, collaborators, and clients — an inside perspective on how the professional outreach staff within TU’s applied research and outreach centers work and collaborate with Towson University faculty.

 

Daraius

Daraius

I have been working for the Regional Economic Studies Institute (RESI) at Towson University in various capacities for the last fifteen years, and I have worked on a host of projects. For a few of these projects, we were able to include a faculty member on the team, but this was more the exception than the rule. The challenge we faced at RESI was matching our client’s needs with faculty research agendas and schedules, as many of these projects did not coincide with semester or summer breaks. So, it seemed that RESI was forever consigned to work with faculty only on the off chance that a client’s project and timing coincided with that of a faculty member. This did not seem to be a good way to become more integrated with the university.

 

In early 2011, while we at RESI were bemoaning the lack of faculty participation, Dr. Ray Lorion was wondering how he was going to fulfill the terms and conditions of a $4.7 million four-year grant awarded to the university as a result of the Maryland State Department of Education’s (MSDE) Race to the Top grant award. Moreover, immediately upon award, MSDE was demanding project schedules and budgets for evaluation plans of proposed programs that had yet to be implemented by MSDE. In addition to being a Dean of one of the larger colleges at Towson University, Dr. Lorion was tasked with writing project plans, preparing budgets, and meeting with various stakeholders for projects that had yet to start.

 

Through a series of conversations, both Dr. Lorion and I realized that this grant was a perfect opportunity for RESI and the College of Education to collaborate. RESI could devote its project management, technical, and analytical skills to develop the project plans, budgets evaluation processes, and analyses to address the needs of the project. The College of Education would bring in its subject matter experts in education as well as a leadership team to the project. From this, the Center for Application and Innovation Research in Education (CAIRE) at Towson University was firmly established.

 

Dr. Ray Lorion

Dr. Ray Lorion

RESI’s contribution to CAIRE is now deep and broad. Their expertise in the management of large projects has been an essential component of CAIRE’s becoming organized and able to recruit, train, and monitor what are now nearly 40 individual applied scientists. Our work involves qualitative, quantitative, and mixed methods evaluation designs. In each of these investigatory modalities, RESI adds expertise and coordination. Through experience with RESI, I have come to appreciate its capabilities in the design, administration, and analysis of large-scale surveys and its capacity to mine large data sets to answer highly focused questions. Its experts can “mine” as well as drill into the data to answer very specific questions from a retrospective as well as prospective perspective.


Daraius

Ah, the New Year is upon us and spring is nearly here. While Baltimore is still basking in the afterglow of its Cinderella Football season and Super Bowl XLVII win, gas prices have been steadily rising to the point where they now account for nearly 4% of the average household income, or nearly $3,000. However, many households have not fully realized how much they are spending on gasoline. This is the highest amount since 2008 that households have spent on gasoline. I recently spoke to Fox about this very issue. The current percentage of expenditures on gasoline is still lower than the 1980s, where it surpassed 5% of household income, but this was the decade of the Yugo, K-cars, big hair, and mullets. So, maybe it was better that we spent more on gasoline as our taste in fashion and cars left a lot to be desired.

 

In 2008, the freeways and gas stations were choked by behemoth SUVs that had single-digit or low-teen MPG, while today the freeways run amok with hybrid and other high-mileage cars. In spite of this sea change in cars, we are still paying nearly 4% of our household income on gasoline purchases. What is even more vexing is that we are now a net exporter of energy, and some have indicated that we could be energy independent by 2020. So, how is it that gas prices seem to rise with no end in sight?

 

Image credit: Digital Art

There are several national and international forces that are driving up the price of gasoline here in Baltimore (and the rest of the nation).

  1. The refining capacity in the U.S. is near its maximum. As a result, shutdown of a refinery due to maintenance or an industrial incident will have an impact on gas prices. As it is, a fire in a refinery in the Midwest has pushed up prices. In the northeast, the refinery capacity is more acute. Unfortunately, like wind power, refinery infrastructure is never where it is needed most.
  2. Both the U.S. economy and the world economy are recovering, which means there is an increase in demand for energy not only here but in China and India, further pushing up the price of gasoline.
  3.  Many refineries are switching over to the summer blend of gasoline, which also constricts the supply of gasoline currently and pushes up gas prices.

Looking ahead, the prospect for significantly lower gas prices does not look good. However, my prognosis for the Orioles winning the World Series is much better.


Daraius

For the second time in team franchise history, the Baltimore Ravens are going to the Super Bowl.  That sentence has such a wonderful ring to it that it’s worth repeating.  For the second time in team franchise history, the Baltimore Ravens are going to the Super Bowl.  Moreover, the Raven’s path to Super Bowl involved three “win or go home” playoff games against formidable opponents. So, aside from civic pride and serious bragging rights—that’s right Patriots, Broncos, and Colts—are there any economic impacts associated with playoff appearances and Super Bowl appearances?  Fortunately, these questions have been answered by other economists.  And the answer is yes, there are.

Baltimore, MD — 1/23/12 — The Ravens logo is seen on Federal Hill a week before they head for New Orleans to play in Super Bowl XLVII. Photo by Jerry Jackson/Baltimore Sun

In the past, many economic impact analyses focused on the economic benefits accruing to the host city, be it a playoff game or the Super Bowl.  While there is some contention that the economic impacts may not be as great as civic boosters would suggest, there are some.  However, an area that has only been recently examined is whether or not there any economic benefits for cities with teams in postseason play that are not hosting any postseason games.

 

For teams in the postseason play, there are some economic benefits.  Not so obvious is that these benefits may be driven by psychological factors.  Some studies have indicated that postseason appearances actually increase productivity.  An early study in this field determined that victories by the home team actually resulted in increased production, while losses resulted in increased workplace accidents.  Because of the timing of postseason play, a winning season may result in increased holiday spending by the fans.  Finally, there is some evidence that charitable giving is higher in cities as a result of postseason appearances.

 

Ravens Super Bowl Jerseys | Image credit: BaltimoreRavens.com

While it is great that a city’s team is in postseason play, are there any additional economic impacts associated with winning the Super Bowl?  Arguably, the spending by fans on home team sports paraphernalia related to postseason play would have been money spent in the region anyway.  And the increase in income by those vendors is probably matched by decreases in other vendors.   However, according to a study by Dr. Coates and Dr. Humphreys at UMBC, there is a one-time gain in per capita personal income of about $140.

 

While the economic benefits are not driven by increased hotel activity, restaurants, and paraphernalia as Baltimore is not hosting the Super Bowl, Baltimoreans will be more productive, less prone to workplace accidents, give more to charities and have spent more money over the holidays as a result of the Ravens postseason play.  When the Ravens win the Super Bowl, Baltimoreans may even see an increase in personal income.  Regardless of these economic benefits, it still will be great to see a sign on I-95 reading,  “Welcome to Baltimore, home of the two-time Super Bowl Champions, the Baltimore Ravens!”