Economics in the News – Sept. 18-24, 2023
Economics impacts our lives every day. Below are some of the top storylines from this past week related to economics.
o How knowledgeable are the board of directors at S&P 500 companies on cybersecurity? A research study completed by WSJ Pro Research found that professionals with experience in cybersecurity account for 2.3 percent of board seats, or 107 directors at 113 companies. The study showed an increase in cybersecurity experience from 2022, as 86 directors represented by 91 companies held board seats. The Securities and Exchange Commission passed a rule in July aimed at improving board oversight of cybersecurity risk.
Cybercrime is a massive and growing risk for businesses, and the increase from 2022 to 2023 is likely driven by growing awareness among companies of the importance of cybersecurity to their long-term performance. Cybercrime threatens to disrupt company operations, tarnish their reputation, and expose them to legal action and regulatory penalties. The industries with the highest number of board members with cybersecurity experience are in financials and information technology, with the lowest number coming from the communication services and materials industries. [The Wall Street Journal]
o Greece is one of Europe’s fastest-growing economies. Its economy has grown twice as fast as the eurozone average. An estimated 10 million tourists who vacationed in Greece this summer spent more than €21 billion. The droves of tourists have fueled a construction boom, with demand for new hotels on the mainland and popular islands. Companies are also investing in Greece. Microsoft is building a €1 billion data center in Athens, while Pfizer is building a €650 million research center.
It is a stark contrast to 2008, when the Greek economy imploded. Greece’s economy required three rescue packages from 2010 to 2015, totaling $343 billion. Household incomes shrank and the economy contracted by a quarter. By 2013, nearly one-third of Greeks were unemployed. The Greek economy still faces risks, with a debt load that is 166 percent of its gross domestic product, which is among the world’s highest. Banks are also holding more nonperforming loans higher than most European countries. However, the government has raised the minimum wage for workers and is ahead of schedule in paying back its international bailout money. Moody’s, one of the world’s largest credit ratings agencies, raised Greece’s debt rating on Sept. 15 by two notches, bringing it just shy of investment grade. [The New York Times]
o A government shutdown is looming if a divided House of Representatives does not pass 12 appropriation bills before the end of September. The United States has experienced 21 government shutdowns since 1976, with the most extreme sidelining roughly 800,000 government workers for 34 days between Dec. 2018 and Jan. 2019. A government shutdown would suspend nonessential government operations until Congress acts to restore funding. Workers are either furloughed or critical workers will continue to work without pay. For the public, a shutdown will cause interruptions to various services, causing inconveniences in daily life.
Federal workers who would continue working include federal prosecutors and investigators, postal workers, and Transportation Security Authority (TSA) workers. Benefits such as Medicare and Social Security would also continue uninterrupted because they are authorized by Congress in separate laws that do not need to be renewed yearly. Medical care for veterans would also be uninterrupted. [The New York Times]
o In the early 1990s, rank-and-file employees in motor vehicle manufacturing averaged $43 per hour in earnings in today’s dollars. That was more than any of their private sector, non-managerial peers across 165 other industries. But in the past year, those same motor vehicle manufacturing workers earned an average of $32.70 per hour, 30 percent less than their 2003 peak. That places them in the middle of the pack among their peers.
Motor vehicle workers plunged in compensation to 40th, behind industries such as commercial and road construction work, mining, and office administration. What caused the drop? For one, technology replaced manufacturing as the nation’s profit center. A shift to non-unionized factories in the South and significant compensation concessions made by the United Auto Workers (UAW) amid the 2008 financial crisis when automakers General Motors, Ford, and then-Chrysler were fighting for survival. [The Washington Post]
o US Retailers pay an estimated $160 billion yearly in credit card swipe fees. Swipe fees are typically 2.225 percent of a transaction, and credit card companies charge vendors every time a customer uses a credit card for a purchase. The swipe fees are split among the issuing bank, the processing company – such as Visa or MasterCard – and the rewards earned by customers. Businesses’ total fees have increased by more than 50 percent since 2020.
Some lawmakers hope to reduce the swipe fees by promoting increased competition in processing credit card transactions. The proposed bill would require big banks issuing credit cards to allow a rival network, other than MasterCard or Visa, to process transactions. However, banks and credit card networks argue that increased competition would jeopardize security and credit card rewards. [NPR]