Economics an Imagined Natural Disaster for St.

Economics

An imagined natural disaster for St. Louis would be a flood of either the Missouri or Mississippi. The mechanics of such a flood are unimportant, but the economic consequences could be dire. A flood would wipe out entire sections of the city, which would need to be abandoned and subsequently rebuilt. All port activities would cease during the duration of the flood and the rebuilding of any port areas that suffered damage. This would disrupt the city's rail activities as well. Many other of the city's major industries would likely recover quickly from a flood scenario, unless specific plants were damaged.

Such a natural disaster would have an impact on both the demand for labor and the supply of labor. On the demand side, there would be an initial reduction in demand. The flood would create a significant disruption to economic activity in the area, in particular if the ports were disabled for a long period of time. This reduction in demand for labor would be partially offset by an increase in demand for labor during the reconstruction phase. It is unlikely that an increase in construction labor demand would entirely offset the decline in labor demand attributed to a reduction in economic activity, however.

The supply of labor would initially be reduced. If residential areas were inundated, many residents would be forced to leave the city. Those without jobs to return to may leave the city permanently, causing a permanent reduction in the supply of labor. There may also be a constraint to new workers entering the city to take the newly-created reconstruction jobs in that there may not be housing for those workers, or jobs for their spouses. There is a high level of vacant housing in St. Louis and some of its suburbs, so this may help alleviate some of that problem. However, jobs for spouses would be scarce because non-construction economic activity would be expected to decline in the aftermath of a flood.

These shifts in demand and supply would also impact on the price of labor in the St. Louis market. For most labor types, the demand would decrease significantly, as would the supply. In some sectors, such as transportation, the fall in demand could be substantial. As a result, wages would be expected to decline in most sectors. In construction, however, wages would increase. This increase would reflect the number of reconstruction jobs available relative to the supply in construction workers in the region. In addition, higher wages would be needed to entice construction workers into the city, especially if the level of devastation was high and there are no spousal jobs available.

The new equilibrium point for labor in St. Louis would be one with a much lower demand for non-construction labor and a substantially lower price. The supply would likely fall rapidly as well, but may not fall to the equilibrium point as quickly. This is because workers would be constrained by their ability to sell their homes -- which would be difficult in a devastated city with a moribund economy.