Labor Demand Will Drive New Orleans Economic Recovery

BUFFALO, N.Y. -- Demand for unskilled labor to clean up after Hurricane Katrina will help drive economic recovery in New Orleans, according to an economist at the University at Buffalo School of Management.

"If there is a positive aspect of this terrible catastrophe, it's that it creates a huge demand for local unskilled labor, and there are very few unskilled jobs in America," says Lewis Mandell, a professor of finance and managerial economics.

"The huge clean-up effort alone is going to create a lot of jobs -- much of them paid for by private insurance, some of them paid for by government -- and with the jobs will come income for people who want to rebuild their lives."

Mandell compares the potential for job creation in New Orleans to job programs created during the Great Depression by the federal government.

"For many of the citizens of New Orleans who are ready and willing to work, there are going to be lots and lots of jobs for them. It could be almost like another WPA (Works Progress Administration) program," he says.

According to Mandell, the major drivers of the New Orleans economy -- tourism, education, shipping and energy -- could rebound relatively soon in parts of New Orleans that weren't hit as hard by Katrina.

"You get the universities dried out and open, you get tourism back up and you get the shipping lanes open and now you're beginning to drive a large part of the economy," he says. "An awful lot of the New Orleans economy is going to come right back to it."

The larger economic question will be deciding how much of the city and surrounding area should be rebuilt, given its vulnerability to hurricanes and flooding, Mandell points out.

"There will be political pressure for the government to rush in and begin rebuilding without considering whether some areas should be rebuilt," he says.

"In a capitalistic economy, people are free to live where they want to, but they have to assume some of the risk; or is this a case where people can live in a dangerous area and the government assumes all the risk?

"That needs to be answered soon before we pour $200 billion into New Orleans at a time when we're running a huge federal deficit," Mandell says.

The University at Buffalo is a premier research-intensive public university, the largest and most comprehensive campus in the State University of New York.

Lewis Mandell
Professor of Finance and Managerial Economics
716-645-3274
lewm@buffalo.edu