Employment (Economic theory) ; Wages ; Hospitals - Economic aspects ; Federal Reserve District, 5th

Andrew Foerster

English

Research Papers in Economics

6 Region Focus • Fall 2003
A NEW FOUNDATION
Manufactured
Housing Flourishes
in South Carolina
S
outh Carolina often con-
jures up images of tree-
lined streets dotted with Greek
Revival homes with porticos.
But more than 355,000 South
Carolina families live in
manufactured homes. That
means one fifth of all homes in
the Palmetto State are
manufactured, the highest
percentage in the country.
The Manufactured Hous-
ing Institute (MHI) esti-
mates that this year, in the
South Atlantic region (from
Delaware to Florida) nearly
one-fourth of all single
family housing starts will be
a manufactured home ship-
ment. This percentage has
been steadily increasing
since 2000.
South Carolina has been
experiencing the same
trend, but on a much larger
scale. Over one-half of
South Carolina single-family
housing starts this year will
be manufactured homes.
(Manufactured homes that
are placed on a foundation
and purchased with land
may qualify for mortgage
financing. Otherwise, they
are considered personal
property and are financed as
such, usually at a higher
interest rate.)
The manufactured hous-
ing industry took off at the
end of World War II when
veterans returned to find a
lack of affordable housing.
Many consumers remained
cautious about purchasing
manufactured homes, though,
and by the 1970s Congress
passed legislation that estab-
lished safety standards for
the industry.
Today manufactured home
builders boast that their prod-
ucts are on par with the
quality and attractiveness of
their site-built counterparts.
According to the MHI,
“Today’s manufactured homes
are built with the same build-
ing materials as site-built
homes, but in a controlled
factory environment where
quality of construction is
invariably superior to what
can be done outdoors.” Last
year, 250,500 manufactured
homes were shipped in the
United States with an average
retail price of $46,000.
Also, the growing trend
in the industry is to develop
communities of manufac-
tured homes. The new sub-
divisions offer pools and
landscaping options. Oakley
Pointe and Strawberry
Station are two develop-
ments near Charleston, S.C.
In these communities, resi-
dents usually pay a monthly
fee to developers for the lot
and purchase their home
from a manufactured dealer.
As in any subdivision, there
are guidelines governing the
size, age, and appearance of
manufactured units.
Many believe manufac-
tured homes drive down the
property values of neigh-
boring site-built homes. But
a 1997 study of residential
properties by Richard
Stephenson and Guoqiang
Shen of East Carolina Uni-
versity found no such cor-
relation. In fact, those
homes built on a fixed foun-
dation appreciated in value.
Although two-story
verandas with white
columns are not offered as
amenities, manufactured
houses are becoming an
attractive alternative to a
large percentage of South
Carolinians who want
affordable, quality homes.
—AMANDA WHITE GIBSON
NEW REACTORS
Energy Firms 
File Permits
T
hree nuclear energy com-
panies, including one in
the Fifth District, have said
they will file for early permits
to build new reactors. Rick
Zuercher, a spokesman for
Dominion Resources, based in
Richmond, Va., says his
company plans to file for a
permit to build on its North
Anna site, in Louisa County, Va.
Applying for the permit
doesn’t mean Dominion will
actually build a plant,
though. “It allows us to keep
the nuclear option open,”
Zuercher says.
The Nuclear Regulatory
Commission, under 1992
legislation, allows firms to
obtain early permits valid
for 20 years. New nuclear
plants may loom on the
horizon should energy bills
under consideration in the
SHORTT AKES
According to estimates,
manufactured homes
will account for more
than one half of single-
family housing starts
this year in South
Carolina.
C
O
U
R
T
E
S
Y
 
O
F
 
M
H
IFall 2003 • Region Focus 7 Fall 2003 • Region Focus 7
U.S. Congress include loan
guarantees for new con-
struction. Also under con-
sideration is permanent
reauthorization of the Price-
Anderson Act. This insur-
ance program subsidizes the
industry, by placing a $9.5
billion cap on liability for
owners in the case of
nuclear accidents.
Nuclear power accounts
for about one-fifth of the
nation’s electricity genera-
tion, but no new plants have
been ordered since 1978
because of high plant con-
struction costs, worries
about safety, and waste dis-
posal issues. Costs have
been estimated to average
about $3,000 per kilowatt
of capacity in 1997 dollars,
according to the Congres-
sional Research Service.
However, Steve Kerekes of
the Nuclear Energy Insti-
tute says costs have been
trending downward. “Our
goal is to get our costs down
on a kilowatt basis installed,
to about $1,000 to $1,100
per kilowatt, which is what
we need to be competitive,”
he says.
The Fifth District has 18
nuclear power plants oper-
ating in Maryland, North
Carolina, South Carolina,
and Virginia. In South 
Carolina, nuclear power
accounts for about 55
percent of the state’s total
power generation. Tom Shiel
of Duke Energy, based in
North Carolina, says Duke
is not planning to build any
new nuclear plants but con-
tinues to apply to extend
the life of its existing
nuclear plants.
—BETTY JOYCE NASH
FIELD GOAL OR FUMBLE?
The Economic
Score on the
Atlantic Coast
Conference’s
Expansion
L
ast spring, the Atlantic
Coast Conference (ACC)
took center stage in college
athletics. Its controversial
recruitment of two Big East
teams — Virginia Tech and
the University of Miami —
had economic ramifications
as well. Both schools could
benefit financially from ACC
membership, while current
members hope the expansion
will improve their bottom
lines and the conference’s
future stability. 
Seven universities in the
Fifth District founded the
ACC in 1953. The conference
currently has nine member
schools, four of which are in
the Tar Heel State: Duke
University, the University of
North Carolina, North Car-
olina State University, and
Wake Forest University. The
other members are the Uni-
versity of Maryland, the Uni-
versity of Virginia, Clemson
University in South Carolina,
Georgia Institute of Tech-
nology, and Florida State
University. 
Being part of the ACC
offers several advantages.
Robert McCormick, an eco-
nomics professor at Clemson
University who has studied
sports, says that the confer-
ence’s intense rivalries energize
the ACC’s die-hard fan base in
the Southeast, which drives
ticket sales and alumni dona-
tions for member schools. 
Also, ACC members
divvy up net earnings from
the sale of broadcast rights
to conference games and
branded merchandise. This
additional money helps fund
less visible college teams,
from men’s soccer to
women’s lacrosse.
By expanding to 11
members, the ACC hopes to
boost its revenue. For one
thing, bringing Miami’s pow-
erhouse football team into
the conference could trans-
late into more money from
broadcasters. Second, the
conference would need only
one more team to obtain
permission from the NCAA
to hold a year-end football
championship game, which
can be enormously profitable
according to McCormick. 
ACC newcomers Miami
and Virginia Tech may also
benefit. Their travel expenses
could be reduced since their
teams won’t have to travel up
north to play Big East schools
like Boston College or Syra-
cuse University. Switching
from the Big East could also
increase their revenue, since
the ACC divides its proceeds
evenly versus providing a base
amount plus bonuses for
being in national champi-
onships. ACC members will
have to split revenue 11 ways
instead of nine, but they hope
that increased earnings will
offset this dilution. 
There also is a concern
that the quality of confer-
ence play could be diluted
since Miami and Virginia
Tech’s basketball teams
aren’t as strong as their
football teams. Further-
more, a bigger conference
means that some teams like
Wake Forest will lose home
games with in-state rivals.
Both factors could dampen
ticket sales.
Such short-term sacri-
fices may be necessary to
ensure the ACC’s long-term
survival. Sports commenta-
tors say that athletic con-
ferences will only get bigger
in the future, pressuring
smaller ones to either
enlarge or be engulfed. 
—CHARLES GERENA
WINE DISTRIBUTION
Virginia Uncorks
Out-of-State
Shipments
I
n July, Virginia became the
23rd state to allow direct-to-
consumer wine shipments
from out-of-state sources.
Previously, Virginians could
have their favorite vintage
delivered to their doorsteps
from in-state wineries, but it
was illegal to receive wine from
beyond the state’s borders. 
Virginia consumers and
out-of-state wineries filed a
grievance in November 1999
asserting that the Old
Dominion’s restrictions on
wine shipments were uncon-
stitutional, because they vio-
lated the Commerce Clause
of the U.S. Constitution.
The courts agreed in8 Region Focus • Fall 2003
March 2002. Federal Judge
Richard Williams ruled that
allowing only in-state pro-
ducers to deliver wine
directly to Virginia residents
discriminated against out-of-
state wineries. The ruling was
immediately appealed by the
Commonwealth’s Attorney
General and the Virginia
Wine Wholesalers Associa-
tion, and Judge Williams
issued a stay of execution.
But on April 9th, the
pending legal battle was ren-
dered moot when Gov.
Mark Warner signed Senate
Bill 1117. Under the new law,
an out-of-state winery can
ship up to two cases a
month to Virginia con-
sumers after purchasing a
$50 license. 
Opponents of the law
point to an increase in the
risk of underage drinking and
loss of state revenue as a result
of direct shipments to cus-
tomers. The Wine & Spirits
Wholesalers of America, Inc.
asserts that the existing
“system of distribution has
served consumers and states
well for 70 years.” Direct ship-
ping “could severely damage
the ability of a state to regu-
late the distribution of alcohol
as it deems appropriate for
the protection of its citizenry
— especially minors — and to
efficiently collect excise and
sales tax revenue.”
Supporters of the looser
regulation argue that con-
sumers will benefit from
greater choice and lower
prices. The new law also may
benefit Virginia’s winemak-
ers. Around 60 percent of the
500,000 visitors to Virginia
wineries each year aren’t state
residents. In the past, winer-
ies couldn’t export directly to
many of these out-of-state
customers because it violated
the receiving state’s beverage
control laws.  
Stemming from the new
law, Virginia has embarked
on the process of gaining
status as a “reciprocity state.”
This means that Virginia will
allow direct shipments from
other states with similar wine
distribution regulations, such
as neighboring West Virginia.
In return, reciprocity states
like California will welcome
wine imported from Virginia.
“Vintners are now one
step closer to gaining access
to a number of new
markets,” says Chad Zakaib,
director of sales and mar-
keting for Jefferson Vine-
yards in Charlottesville.
Pending the finalization of
reciprocity agreements, Vir-
ginia wineries will be able to
ship to 22 states, more than
doubling the size of their
export market.
—ANDREA HOLLAND
SHORE BREEZES
Wind Farms May
Harvest Energy
From Coastal
Communities
A
long the Eastern Shores
of Maryland and Virginia,
residents have been struggling
to find new industry beyond
fishing and farming. Wind
power may offer a way to both
spur economic growth and
safeguard the region’s natural
resources. 
The Eastern Shore gets
plenty of ocean breezes.
Most of its Atlantic coastline
gets air currents measuring
16-17 miles per hour at an
altitude of 164 feet, accord-
ing to the U.S. Department
of Energy. This level of wind
power is considered useful
for generating energy.
In addition, the region’s
relative isolation is finally an
asset. “You try to be in an
area where there isn’t a lot
going on,” says Dennis Quar-
anta, president of Winergy
LLC. Quaranta’s company
has proposed a “wind farm”
of 150 giant, propeller-driven
turbines off the coast of
Fisherman Island, Va., and
350 turbines a few miles west
of Ocean City, Md. Although
the Fisherman Island tur-
bines may interfere with the
routes of migratory birds,
company literature notes
that both offshore locations
aren’t near shipping lanes
and don’t have a lot of
marine mammal activity. 
When air currents are at
their peak, Winergy expects
to generate 540 megawatts
(MW) of electricity at its
Virginia wind farm and 1,200
MW in Maryland. Another
company, Provento America
Inc., estimates that its six
land-based turbines pro-
posed for Cape Charles will
generate almost 8 MW of
power at peak capacity. (One
MWof electricity can power
approximately 1,000 homes.)
These companies see a
nascent demand for wind-
generated power. Quaranta
believes that residential cus-
tomers will appreciate the
health benefits of buying
electricity from non-pollut-
ing wind turbines instead of
from coal-fired plants. They
may also want to help reduce
America’s dependence on
imported fuel. As for busi-
nesses, he thinks that using
wind power will improve
their environmental image. 
Marketers have success-
fully sold electricity gener-
ated by the Mountaineer
Wind Energy Center in
northern West Virginia. The
center’s 44 turbines help
power about 10,000 small
businesses and residences in
the Washington, D.C., area,
according to a report pub-
lished in the Charleston
Gazette in July 2003. 
However, Provento hasn’t
been successful in Cape
Charles. Greg Manter, direc-
tor of the Eastern Shore of
Virginia Economic Devel-
opment Commission, says
that the German firm hasn’t
secured contracts for the
power that its turbines will
generate. In his view, the
problem is that wind power
is priced higher than the
market rate for electricity.
“You need to find a buyer
who is willing to do it for
environmental reasons.”
Entrepreneurs have proposed
building "wind farms" on the
Eastern Shores of Maryland
and Virginia.Fall 2003 • Region Focus 9
And, according to a Cato
Institute report published in
January 2002, that buyer isn’t
prevalent yet. “Because of
higher costs, no more than 1.5
percent of the retail cus-
tomers in any state have
signed up for [special pack-
ages of renewable energy],
and participation in utility-
sponsored programs is gener-
ally around 1 percent or less.”
Over the years, wind-
powered turbines have
been improved to lower
production costs — a single
turbine can produce several
megawatts of power today
versus only a few hundred
kilowatts 20 years ago. As
a result, the cost for wind
power has fallen from as
much as 50 cents per kilo-
watt-hour (kWh) to less
than 5 cents per kWh. This
makes wind power close to
being competitive with
electricity generated from
coal-fired plants.  
Still, the start-up costs of
a wind-powered plant are
quite high. For example,
building transmission lines
to carry wind-generated
electricity to a regional
power grid can be prohibi-
tively expensive. 
Given these challenges,
it may take a while longer
for wind-based power gen-
eration to become econom-
ically viable. That won’t stop
people like Dennis Quar-
anta from trying to harvest
energy from windy spots
like the Eastern Shore. “It’s
not that [wind power] is an
unknown technology —
there are 13 wind farms in
Europe. It [just] hasn’t been
done in the United States.”
—CHARLES GERENA
UNHEALTHY SITUATION
Nursing Shortage
Threatens 
Health Care
M
any states in the Fifth
District and the nation
face a shortage of nurses, a
problem that experts project
to increase as the baby-
boomer generation ages.
Insufficient staffing can
sometimes cause critical
problems. Astudy published
by the Journal of the Ameri-
can Medical Association sug-
gests that patients in
hospitals with severe short-
ages have up to a 31 percent
higher chance of death than
they otherwise would.
Economic theory suggests
that a shortage of specialized
employees should lead to
higher wages, but nurses’ real
wages have remained rela-
tively unchanged in recent
years. The Bureau of Health
Professions reports that for
the past decade, nurses’
wages have risen at the level
of inflation, while alternative
occupations for potential
nurses, such as elementary
school teachers, have risen
faster than the inflation rate.
Barbara Brown, vice
president of the Virginia
Hospital and Healthcare
Association, points to the
fact that many hospitals
negotiate long-term con-
tracts with insurance com-
panies, so they cannot react
easily to fluctuations in the
market. “The insurance
company barters with the
health-care facilities and
physicians as to what they
will pay for certain condi-
tions,” she says. “So the
ability of any facility to
respond to a tightened work
force by increasing wages is
really limited.”
To deal with the problem
in the short-term, healthcare
facilities, including hospitals,
are trying to delegate some
nursing responsibilities to
lesser-skilled workers. “[The
goal is] to find an individual
who could assist the nurse in
caring for the patient, and
could free the nurse up to do
the planning and to do the
administrative tasks, and the
care on more difficult
patients,” Brown says.
The U.S. General Account-
ing Office reports that facili-
ties have attempted to
improve the situation in the
long run by looking to state
governments for wage sup-
plements. They also are
changing the structure of
nurse training and specializa-
tion to create a career path,
thus rewarding the more
experienced nurses with
greater responsibility and pay. 
Also, according to Cheryl
Peterson, senior policy fellow
at the American Nurses
Association, collaborative
efforts have led to media
campaigns to cast a positive
image on the nursing profes-
sion. She notes that general
media attention will proba-
bly attract potential nurses
“because people see that jobs
are available [and] they’ll look
at nursing because they see
that there’s a shortage.”
While these changes may
have some immediate bene-
fits, the health-care industry
may need to make some
structural changes to remove
the constraints on wages to
solve the long-term problem.
—ANDREW FOERSTER
Fall 2003 • Region Focus 9
Projected Shortages in Registered Nurses: 2000-2020
State 2000 2005 2010  2015  2020
D.C. -219  -1,305  -2,085  -2,904  -3,851
Maryland -545 -3,299 -7,772 -13,044 -18,954
N. Carolina  629  931 -2,046 -8,868 -17,924
S. Carolina  -104  -649  -1,555 -3,571 -6,741
Virginia -4,736 -7,698  -11,927  -18,446  -25,111
W. Virginia  1,296  738  183 -725  -1,876
Fifth District  -3,679  -11,282  -25,202  -47,558  -74,557
Total U.S.  -110,707  -149,387  -275,215 -507,063  -808,416
NOTE: Negative numbers indicate shortages SOURCE: U.S. Department of Health and Human Services

Unhealthy situation : nursing shortage threatens health care

http://www.richmondfed.org/publications/research/region_focus/2003/fall/pdf/short_takes.pdf

Unhealthy situation : nursing shortage threatens health care

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