Archives: Reg Murphy Pubs

Should we raise the minimum wage?

Written by Don Mathews on . Posted in Don Mathews, Reg Murphy.

Economists once considered the minimum wage a simple and classic case of bad economic policy.

The minimum wage is a price floor, and price floors lead to surpluses and waste without fail. A surplus in the market for low-skilled labor is an especially serious problem. It means reduced hours or unemployment for workers who can least afford it.

But careful observation over the past generation has made clear that the economics of the minimum wage is not so simple.

The new economics of the minimum wage shows that businesses don’t always adjust to the minimum wage by cutting the hours or employment of low-skilled workers. Reducing other forms of compensation to low-skilled workers, upgrading jobs and demanding greater productivity, raising prices, or simply accepting lower profits are other ways businesses adjust. 

The minimum wage might even provide the wage increase that low-skilled workers with few options and weak bargaining power are unable to negotiate on their own.

The new economics of the minimum wage also shows that the effects of the minimum wage are likely to vary considerably across businesses, industries, towns, cities, states and low-skilled workers.         

Consequently, economists are now more divided on the minimum wage. A majority still opposes the law, but it’s a much smaller majority.  Some, once opposed to the law, are now unsure. Plenty have changed their minds and now support raising the minimum wage to $15 per hour.

To my mind, rather than muddying the waters, the new economics of the minimum wage has made the case against the minimum wage even stronger.

The new economics of the minimum wage makes it clear that a federal minimum wage is a one-size-fits-all policy for an anything but one-size-fits-all economy.

A $15 minimum wage would certainly benefit some low-skilled workers. Low-skilled workers employed by large corporations or other firms for which low-skilled labor is a small fraction of costs would probably see at most minor decreases in hours or other forms of compensation, leaving them better off on net. The same would be true for many low-skilled workers in cities, where workers have more options and wages are higher already.

But a $15 minimum wage would just as certainly harm some low-skilled workers. Low-skilled workers employed by low-skilled labor-intensive businesses, especially those located in towns or rural areas where wages and small business profits tend to be lower would be particularly vulnerable to cuts in work hours, cuts in other forms of compensation or job loss.

Evidence suggests that, in aggregate, a $15 minimum wage would benefit low-skilled workers more than it costs them. And the low-skilled worked workers made better off by a $15 minimum wage would probably outnumber those made worse off.

But does that justify the policy?

Good economic policy requires more than good economics. It requires ethical judgment. Economists are keen on identifying flaws in markets. We ought to be no less keen on identifying flaws in ourselves. A flaw to be especially vigilant for is hubris.

I would gently suggest that on matters of public policy, we economists ought to be extremely careful.

To advocate a $15 minimum wage is to advocate a policy that restricts freedom, reduces opportunities and is certain to harm some highly vulnerable workers and small business owners in highly vulnerable communities.

Those who would benefit from a $15 minimum wage might well outnumber those harmed, but the harm would be concentrated and very real, and none of it would be borne by the economists advocating the law.                 

The minimum wage is still bad economic policy.

  • Don Mathews
  • Reg Murphy Center

Perspective on Local Labor Shortages

Written by Melissa Trussell on . Posted in Melissa Trussell, Reg Murphy.

If you regularly read this paper, spend much time downtown, or stay engaged in local gossip rings, you no doubt have read or heard the newest complaint from local business owners: We are struggling to hire enough workers because of the federal government’s stimulus payments to individuals.

Let’s take a quick look at what economic theory has to say about this complaint.

First, theory does predict that non-labor earnings—government transfers, interest or dividend payments, or even just a birthday check from Grandma—will encourage someone in the labor force to work fewer hours and will make it less likely that someone not in the labor force will choose to enter it.

In other words, we should expect that when the government sends a check to every household, labor supply would decrease, and employers would find it difficult to hire.

But, here’s why this economist is not buying the stimulus as an explanation for local hiring woes.

Data actually show that in February 2021, labor force participation in the Brunswick area was less than half of one percent below its pre-pandemic level from February 2020, and employment is down only one percent over the same time period.

People are working. Available data from 2020 show that the pandemic has caused a shift in the industries in which those people are working. From the beginning of 2020 to the end of the third quarter, Brunswick-area employment in leisure and hospitality dropped ten percent while employment in construction increased three percent. This is just one example of the sort of shift our labor market has seen that could be contributing to the difficulty of hiring in some sectors of our economy.

Moreover, on the supply side, there are much bigger issues keeping some folks out of the labor force right now than a couple of checks from the government.

As the parent of a 3-year-old, my ear is always close to the ground in our community’s childcare market. Due to the expenses involved in meeting pandemic safety requirements, we have lost several childcare facilities in the last year. This has huge implications for the labor market. Childcare is a parent’s prerequisite to participation in the labor market.

Then, there is the whole viral pandemic thing. Vaccines are out and not hard to come by in our neck of the woods, but this pandemic is not over. Many folks are choosing not to be vaccinated, and those who have not yet been approved for vaccination (our kids) are still at risk. Asking someone to tend a bar or run a register is still a dangerous ask. If an employer is hiring for the same job in a now-risky environment as they were hiring pre-pandemic, that employer should expect to pay higher wages than before to compensate the workers for the new risk. (Google compensating wage differentials for more on this.)

Now, we segue to the Demand side of the labor market, where the bottom line is that wage offerings just aren’t cutting it.

From the day I closed on my house in Brunswick and started talking with local employers, a common thread in every conversation with a business owner or hiring manager has been that it is hard to find reliable workers in our area. That was five years ago, long before COVID-19 existed. And my response always has been the same—you get what you pay for. It’s an adage that is true in markets for goods or services and also in markets for labor. If you are an employer who is struggling to hire and/or to keep good employees, economic theory is clear. The wage you are offering is below the market equilibrium.

If that was before families lost childcare, and job risk increased, then that same wage that was below the old market equilibrium is way below the new one. This is especially true in sectors experiencing soaring competition for labor from other sectors.

One could argue that the recent stimulus checks to households have unfairly pushed up the market equilibrium. But, according to the U.S. Chamber of Commerce, each stimulus package that has been passed during the pandemic has included multiple forms of aid to small businesses, including both loans and tax credits for businesses that chose not to lay off employees during the pandemic. The latest package even includes grants specifically for restaurants.

If stimulus aid to families has increased the wage workers are requiring, then stimulus aid has increased the wage employers are able to offer.

You get what you pay for.

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Dr. Melissa Trussell is a professor in the School of Business and Public Management at College of Coastal Georgia who works with the college’s Reg Murphy Center for Economic and Policy Studies. Contact her at mtrussell@ccga.edu.

Community Attitudes Toward Section 8 Housing

Written by Heather Farley on . Posted in Heather Farley, Reg Murphy.

I live in a comfortable suburban Brunswick neighborhood. Our neighbors are nice, and we enjoy the area. When we moved into this house a few years ago, I joined to area Facebook page and Nextdoor page to keep up with lost dog posts, HOA announcements, and the like.

Recently, there was a post on our Facebook page that announced that some rezoning signs had been spotted near our community grocery store. The rezoning signs indicated that a new 72-unit apartment or duplex complex may be coming to the area. This was followed by many comments and assumptions about what this would mean for our community.

Some of the assumptions included concerns that this rezoning almost certainly meant we would be getting “yet another section 8 housing complex.” This was followed by many opinions about such housing: it will lead to increased crime, the people living in this housing are (mostly, but not always, noted the commenter) looking for handouts and don’t want to work, and that this kind of housing will lead to overcrowding in our area. The final comments encouraged residents to come to the public meeting to voice these concerns.

I am, unequivocally, in favor of the last call to action. Yes, every citizen has a right to participate in their democratic process and be heard by their elected officials. But, what struck me was the assumptions that were being made about people who live in section 8 housing specifically. Having only a general notion about exactly what section 8 is, I thought I would do a little research to see if their policy concerns held any weight. Was there data to support their notions?

I started by simply looking into what section 8 housing is. In short, The Brunswick Housing Authority administers this federally-funded rental assistance program to help low income families secure affordable housing through the use of vouchers paid directly to landlords. These vouchers typically do not cover all of the tenant’s rent and do not include utilities. Here are some statistics on the average occupant in Glynn County that I obtained:

·      Turnover rate: 20% annually

·      Average time voucher holder has received these benefits: 6 years, 11 months

·      Average household: 2.8 persons

·      Average household income: $13,113/year

·      Percent using welfare benefits as primary income source: 1%

·      Percent with other income source (disability, Social Security, or Pension): 44%

·      Head of Household: 25-49 (67%), 51 or older (27%)

·      70% of households have children – 68% headed by a woman only, 2% headed by two adults

This indicates to me, that these vouchers are used to support the working poor, those with disabilities, in some cases the elderly, and in many cases women supporting their children. The Brunswick Housing Authority also noted that applicants must be in good standing in terms of criminal history and financial obligations to the Housing Authority.

I then tried to look into this fear of increased crime as a result of such housing. I attempted to use the county GIS maps to help me answer this question, but quite simply did not have a strong enough command of the technology. Instead I had to look to more general data – scholarly articles. In particular, economist Dr. Paul Emrath synthesized data from 16 studies published after 2000 for the National Association of Home Builders. He found the following:

In distressed neighborhoods, the basic findings were that building LIHTC housing increases surrounding property values and reduces crime rates.  In high-opportunity neighborhoods, LIHTC housing has no effect on crime rates, either positive or negative, but a small negative impact on property values—although only within one-tenth of a mile and if the high-opportunity neighborhood also lacks racial diversity. 

Another 2019 study by Elena Derby found that each additional year a child spent in a Housing Credit home “is associated with a 3.5 percent increase in the likelihood of attending a higher education program for four years or more, and a 3.2 percent increase in future earnings.” As someone working in Higher Education, this statistic excited me.

In short, what my cursory research indicated was that, 1) this kind of housing can have a big impact on women and children in particular, 2) it is not likely to negatively affect my property value in a meaningful way, 3) it might just improve diversity in my area, 4) it is not likely to increase crime in my neighborhood, and finally 5) it could, in some small way, improve higher education attainment for Glynn County children. Unfortunately, I think the fears surrounding this rezoning are a typical case of NIMBYism (not in my backyard) rather than an indication of real threats.

Dr. Heather Farley is Chair of the Department of Criminal Justice, Public Policy & Management and a professor of Public Management in the School of Business and Public Management at College of Coastal Georgia. She is an associate of the College’s Reg Murphy Center for Economic and Policy Studies.

What might happen if we raise the minimum wage?

Written by Don Mathews on . Posted in Don Mathews, Reg Murphy.

Supply and demand sounds simple. It rarely is, however, and some cases are quite complex. Consider the minimum wage.

Raising the minimum wage makes low-skilled labor more expensive. Basic supply and demand suggests that businesses are likely to adjust by employing fewer low-skilled workers or reducing their hours.

Economists call that straightforward adjustment the “employment effect” of the minimum wage. Estimates of the actual employment effect – and there are file drawers full of them – are not so straightforward, however. Most are indeed negative, meaning that an increase in the minimum wage reduces the employment of low-skilled workers.

But many of the negative estimates are small, some estimates are close to zero and some are even positive, suggesting that raising the minimum wage might actually increase the employment of low-skilled workers.

The conflicting estimates have economists themselves conflicted. To many, the large percentage of negative estimates supports the traditional view that the minimum wage costs many low-skilled workers either their jobs or work hours. To other economists, the variability in the estimates means we still can’t say with confidence what the actual employment effect is. 

To still others, the preponderance of small negatives, close to zeroes, and positives among the estimates indicates that raising the minimum wage has little if any harmful effect on the employment of low-skilled workers. These economists tend to favor raising the minimum wage.

There’s another interpretation.

Professional grade supply and demand is ever mindful that people can be quite creative in adjusting to change. For instance, businesses can adjust to an increase in the minimum wage in all sorts of ways.

One is to raise prices. Economists have investigated this option closely and have found that businesses largely reject it. For most businesses, wages paid to low-skilled workers is a small fraction of their costs. A higher minimum wage thus increases costs only marginally. Raising prices to cover the costs of a higher minimum wage risks alienating customers.

Plus, there are easier options. Cut health benefits to low-skilled workers. Cut their breaks. Cut their food or merchandise discounts. Cut their training or work amenities. In short, offset the higher wage by cutting other forms of compensation.

It’s thus possible for a minimum wage increase to have no effect on the total compensation or employment of low-skilled workers. What workers gain in a higher wage they lose in other compensation, which enables businesses to avoid cutting hours or jobs.

Another option: raise performance standards and be quick to dismiss workers who fail to meet the higher standards.

Workers adjust in creative ways, too.               

Pay workers more and they are less likely to quit. They are also less likely to behave in ways that might get them fired. Happier workers are also more productive.

That’s not “feel good” fluff. Ample evidence supports the claims. Treating people with common decency is good business.

Which means raising the minimum wage might pay for itself, or better. If the lower turnover and greater productivity reduce costs by more than the higher minimum wage raises costs, the happy possibility becomes reality.

Skeptical? I am. Most business owners and managers already understand all that about turnover, productivity and treating workers decently, don’t they?

At any rate, the upshot is that the employment effect of the minimum wage is likely to vary considerably across businesses, industries, towns, cities and workers. That’s why the estimates of the employment effect vary so much. There is no single employment effect; there are many of them.

So, should we raise the minimum wage or not? We’ll take that up in my next column.

  • Don Mathews
  • Reg Murphy Center

Why do some economists support the minimum wage?

Written by Don Mathews on . Posted in Don Mathews, Reg Murphy.

Economists have traditionally considered the minimum wage a bad idea. But in recent years, including this one, a number of economists have come out in favor of the minimum wage. Why? What happened that caused some economists to change their minds?

If you’re into cerebral drama, it’s not a bad story.

The key to understanding the economics of the minimum wage is careful thinking about the buyers’ side of the labor market, the employers.

Businesses compete with each other for the labor that workers supply. But a business will not pay a worker more than the productivity the worker contributes. And businesses are creative. Businesses are literally in business because they’re good at figuring out how to produce things people want and how to produce them in the most economical way. Their survival depends on it.

If a type of labor or any other input to production becomes more expensive, businesses aren’t “stuck.” They figure out ways to economize. One way is to use less of the now more expensive input.  

That’s the predicament of the minimum wage. Raise the minimum wage and businesses will figure out ways to cut back on low-skilled labor. For some low-skilled workers, that means reduced hours. For others, it means unemployment.

A policy that hurts many of the people it’s supposed to help is not a good policy, which is why economists have traditionally opposed the minimum wage. It was a settled issue.

Or so it seemed.

The reasoning above says that raising the minimum wage will reduce the employment of low-skilled workers. But it doesn’t say by how much. That “how much” has become very important. For many economists, it’s the crux of the minimum wage issue. 

Economists call the “how much” the employment effect of the minimum wage. Determining the actual employment effect is an empirical matter. It requires statistical analysis of actual experience.

Economists have been estimating the employment effect now for 50 years and counting. The results? Of 121 estimates in studies published since 1992, 80 percent find a negative employment effect: increasing the minimum wage reduces the employment of low-skilled workers. No surprise.

But many of the negative estimates are small. For example, estimates that a 10 percent increase in the minimum wage reduces the employment of low-skilled workers by between 1.5 and 3.5 percent are common.

Some of the 121 estimates are close to zero. And some are even positive, suggesting that increasing the minimum wage actually increases the employment of low-skilled workers.

It’s those estimates of the employment effect – the small negatives, the close to zeroes, and especially the positives – that have caused some economists to change their minds about the minimum wage.

See why? A negative but small employment effect suggests that raising the minimum wage may substantially benefit low-skilled workers.  They receive a higher wage at only a small cost in reduced hours or a slightly longer job search.

 An employment effect of zero is even better: a higher wage with no cost in reduced hours or time unemployed. A positive effect is better still: a higher wage and businesses want their services even more. A positive effect may sound like water running uphill, but that’s what some studies have found.

And that’s the point. Some economists have changed their minds and now support the minimum wage because the evidence, as they interpret it, says they should.

That said, there are problems with the evidence and, in my view, a larger problem that goes beyond the evidence. We’ll look at that in my next column.

  • Don Mathews
  • Reg Murphy Center

Analyzing voting rights legislation in Georgia

Written by Heather Farley on . Posted in Heather Farley, Reg Murphy.

Each semester in my Public Policy classes, we begin the term by laying out the basics – how policy is developed and the fundamental phases of the policy cycle. Then, we spend much of the semester analyzing and evaluating policy. Through these exercises in analysis, we discuss the drivers and influences on policy. Some of the typical drivers of policy include:
 

·      disequilibrium within a group – some population is unhappy with some issue that the government can address

·      political leadership – a politician has made a promise and they are attempting to “make good” on that promise

·      protests – the population or a specific part of the population are publicly protesting an issue

·      a critical mass of attention – something big happens and it focuses attention toward the issue

Then, when one or more of these drivers have functioned to get an issue on the legislative agenda, there are several typical influences that determine the success of that agenda. These might include media attention, public opinion, major expert reports, interest groups, and good timing.

Interestingly, the same drivers and influences that help get an issue on the agenda also can operate to determine whether a policy is adopted.

This week in the Georgia legislature, the Senate voted (29-20) on the issue of voting rights in our state during crossover day. Crossover day is the deadline that bills must pass out of one chamber to remain alive for the remainder of the legislative session.

The voting rights bill is a clear result of the 2020 elections. The election, which resulted in several key Democratic wins at the national level, prompted controversy over whether our state conducted a secure election. This controversy was spurred on by unfounded claims by the President. These claims were followed by support from various leaders in the GOP, protests that culminated in a riot at the Capitol, and a great deal of media attention. The result is that there are now a slew of political leaders who must react to the critical mass of attention surrounding this issue.

All of the typical drivers and influences are present in this case: disequilibrium, political leadership, protests, and a critical mass of attention accompanied by media attention, strong public opinion, and appropriate timing. So, the agenda has been set by the Republican-led legislature and it seems to have a good chance of success. Therefore, the analysis of the Bill’s merits will ultimately be left to the Governor.

When I ask students to analyze policy, the big question they must ask is “who gets what and what are the alternatives?” In the case of SB 241, the question really needs to be reframed as “who doesn’t get what?” because it is a restriction of current laws. The bill ends no-excuse absentee voting and limits it to only people 65 years of age and older, those with a physical disability, and those who will be out of town during the voting period. The House voted in favor last week on a similarly restrictive bill (HB 531) that would limit Sunday voting, restrict the use of ballot boxes, and require an ID for absentee voting among other provisions.

At first blush, this may sound like it will increase the security of our elections. Georgia’s Republican Governor, however, along with the Republican Secretary of State, both repeatedly affirmed that there was no widespread voter fraud in 2020. Therein lies the first problem – if these bills are meant to address an issue, where is the issue? It seems that there is a perception of an issue within parts of the population, but it is not clear that an issue actually exists in the first place. Even within the committee meetings for these bills, GOP law makers have made statements indicating that while there is no evidence of fraud, they must address the perception of fraud.

Next, by keeping people 65 and older in the mix of eligible absentee voters but excluding all others, limiting Sunday voting, and requiring ID for absentee voting, a clear message is being sent that the GOP hopes to keep this kind of voting flexibility for their older majority exclusively. In fact, a March 6th report from the Brennan Center for Justice indicated that it is clear that the provisions in these bills will directly impact Black voters in the state disproportionately. Simply put, younger Black voters increased their use of mail-in voting in 2020, utilized Sunday voting to a greater degree, and are less likely to have ID compared to white voters.

The final concern the Governor will need to consider is the fact that in 2020, 5 million Georgians voted and 1.3 million of them voted absentee. This was record-breaking turnout. And while it resulted in some national gains for Democrats, it also resulted in a Republican-led Assembly. While it is clear Georgia is now purple, it is not clear that we are a blue state. Given that the Governor will be running for his seat next year, he will need to carefully consider if signing these restrictive bills will have the political effect of alienating more moderate voters in this state-wide seat.

There are certainly voting security alternatives that can be considered, and at the College we will continue to ponder these alternatives in our classrooms. But, as these bills make their way through the legislative process, it seems clear that the onus of such analysis will be left to our Governor in short order.

Dr. Heather Farley is Chair of the Department of Criminal Justice, Public Policy & Management and a professor of Public Management in the School of Business and Public Management at College of Coastal Georgia. She is an associate of the College’s Reg Murphy Center for Economic and Policy Studies.

When economics goes wrong

Written by Don Mathews on . Posted in Don Mathews, Reg Murphy.

Here’s a question. Which embodies a greater amount of knowledge — cellphone technology or the price of a gallon of ice cream?

A cellphone is a marvel indeed. It took the human race a long time to figure out how to make a cellphone.

But, in an important way, the knowledge embodied in the price of a gallon of ice cream far exceeds cellphone technology.

The price of a gallon of ice cream is the result of countless choices by many millions of individual people in unique, local circumstances. Every gallon brought to the market embodies the knowledge behind the decisions made by thousands and thousands of entrepreneurs, workers and resource owners in figuring out the best and most efficient ways to produce, transport and market ice cream, and every gallon purchased expresses an individual buyer’s unique preferences and circumstances.

Each retail seller of ice cream wants to sell what they bring to the market at a price that yields profit. But buyers are finicky, and competition is fierce. Choosing the price is no small matter.

In other words, a market price is not arbitrary or coincidental. Behind the price of a gallon of ice cream is the knowledge behind the countless decisions of the buyers, entrepreneurs, workers and resources owners that are in any way associated with producing and consuming ice cream. It’s a mind-blowing amount of particular and highly dispersed knowledge.

And it’s all processed in the vast and complex network we call the ice cream market.

The market for a resource — a piece of land, a piece of equipment, the skills of a worker — is also a network. The market for a resource transmits knowledge about the value of the resource in competing uses. But it does more than that. The market produces that knowledge. And the knowledge is conveyed by the price of the resource.

Without markets for resources — without entrepreneurs competing to employ resources in their particular lines of production — knowledge about the value of resources in competing uses would not exist. And without that knowledge, there is no way to determine the best and most efficient way to produce a good or service.

Those insights — that a market price embodies an enormous amount of knowledge and that markets produce knowledge that otherwise would not exist — are the most important insights in economics.

When those insights are disregarded, economics goes wrong. Examples abound. The most important is socialism.

Socialism is a system in which the government owns the vast bulk of land, natural resources and capital in an economy. Almost all production is undertaken by the government, and almost every worker is a government employee. The only private businesses a socialist government allows, if it allows any at all, are very small scale.

Socialism has serious flaws. One that is often overlooked is socialism’s built-in inability to produce anything efficiently. Even if all socialist leaders, bureaucrats and workers were supremely dedicated to the socialist good, they would have no way to figure out how to produce goods efficiently.

That’s because, under socialism, there are no markets for resources. No markets for resources means no resource prices and no way to know the value of resources in competing uses. That knowledge goes unproduced.

It’s not just socialists who fail to appreciate that prices embody knowledge that only markets can produce. Advocates of economic nationalism, minimum wage laws and antitrust suits against big tech, as well as those who think imports are bad for an economy, make a version of the same error.

I’ll address each of these and more in future columns.

  • Don Mathews
  • Reg Murphy Center

The Need for Increasing Diversity in Economics

Written by Melissa Trussell on . Posted in Melissa Trussell, Reg Murphy.

This paper has a large readership with diverse educational backgrounds. The subset of those readers who also will read this column is smaller, but you likely still possess a range of levels of educational attainment in a range of fields and from a range of institutions.

Many of you, though, will have taken at least one course in economics, either at the high school level or above. And if you think back on those courses, chances are almost all of your economics professors had something in common—they weren’t black.

According to the most recent data published by the American Economics Association’s (AEA) Committee on the Status of Minority Groups in the Economics Profession (CSMGEP), only 5.16% of Bachelors Degrees in Economics, 7.43% of Economics Masters Degrees, and 2.8% of PhDs in Economics were awarded to Black or African American scholars. In fact, African Americans and other minority groups have lower representation in Economics than in STEM subjects at all degree levels.

The New York Times reported this month that across all of its branches and the board of governors, the Federal Reserve employs 870 Ph.D. economists, only 11 (1.3%) of whom are Black, single-race. Six (0.7%) are two or more races, races not specified.

The Times article also rightly points out that is a pretty big problem in a field responsible for advising policymakers on how best to allocate resources.

It is tempting, as an economist, to think that since what we do is focused on data-driven fact-finding, it does not matter who the economist is, what they look like, or what their background is. We all should arrive at the same advice for policymakers if what we are doing is simply describing what is and not what should be.

But, anyone who has worked much with data or even has watched news reports of data knows this is not true. Two economists, equally skilled and equally committed to fact-finding, can analyze the exact same data and come to different conclusions.

Every model and every study begins with a set of underlying assumptions. Those assumptions can differ depending on the researcher’s knowledge, experience, and training. Often, a researcher considers many possible starting assumptions before deciding on the most appropriate assumptions on which to found their model. Increasing diversity among researchers increases the pool of assumptions considered and increases the likelihood of producing the most accurate analysis and interpretation of data.

Perhaps an even greater reason to work toward increased diversity among economists is a need for greater interest in and ability to study issues of concern to minority populations. According to Newsweek, less than half of one percent of all articles published in the top five economics journals between 1990 and 2018 addressed issues of race or ethnicity.

This blows my mind! We know there is a strong correlation between race/ethnicity and economic outcomes. And we know, theoretically, that markets do not discriminate on race/ethnicity. The economics profession must commit ourselves to studying the historical interaction between race and market outcomes and understanding where reality deviates from theory. Only then can we rightly advise policymakers on how to improve outcomes for minority individuals and families.

Recruiting diversity into the profession is the best way to begin to see this change.

So, what are we doing about it? The AEA has stated its intention to focus on diversity initiatives and has begun to do so.

But, for us, the effort begins at home. Students in the School of Business and Public Management at College of Coastal Georgia are diverse in race and ethnicity, and most of them are required to take at least one, usually three, economics classes before graduation. We are intentional to include in these courses a diversity of perspectives as well as topics of special interest to minority students. And when we notice that student of any race or ethnicity has a knack for the subject, we encourage that student to consider an economics concentration and possibly graduate school in economics.

We are committed to joining with the AEA in increasing diversity in economics. The future of the field depends on it.

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Dr. Melissa Trussell is a professor in the School of Business and Public Management at College of Coastal Georgia who works with the college’s Reg Murphy Center for Economic and Policy Studies. Contact her at mtrussell@ccga.edu.

Senate Filibuster: A check on power or a tool for gridlock?

Written by Heather Farley on . Posted in Heather Farley, Reg Murphy.

Hidden beneath a second Presidential impeachment, calls for the censure of a GA Congresswoman, and ongoing Capitol riot aftermath, lies a simmering debate waiting to happen: the removal of the Senate filibuster.

The U.S. Senate filibuster is an institutional rule that has been around long enough that it effectively feels like part of our Nation’s founding. It is not in fact; the filibuster emerged in 1806 and has no Constitutional origins.  Some scholars argue that the U.S. Constitution lays out an “implicit premise of majoritarianism” (Chafetz 2011) and, therefore, the filibuster with its ability to increase minority power, is unconstitutional.

The filibuster is the ability to block legislative action through lengthy debate. Until 1806, debate in the Senate could be ended with a simple majority vote. Once the filibuster was in place, a 2/3 majority (later changed in 1975 to 3/5 or 60 votes) was required to end debate on legislation and nominations (this is called cloture) thereby creating a larger role for the minority party in blocking or assisting in decision-making.

By and large, the filibuster has historically been used sparingly. The notable instances of its use have included large displays of long, or even silly, speeches to draw out and ultimately block a vote. Notably, it is the filibuster that was a favorite tool of southern Senators from the 1920s to 1960s as they aimed to block legislation to protect civil rights. This included anti-lynching bills, bills prohibiting poll taxes, and anti-discrimination bills. As such, the filibuster holds a certain historical reputation. Former President Obama has referred to it as a “Jim Crow relic.”

For much of this rule’s history, it has either been used sparingly or, the mere mention of filibuster was enough to block a debate. During the Obama administration, however, it became a heavily relied-upon tool by the Republicans in the Senate to obstruct everything from court nominations to legislative proposals. At the time, Democrats had 55 votes in Senate – just short of the 60 needed to invoke cloture. In 2013, Democratic Senators changed the filibuster rule to allow a simple majority vote (51) on nominees to courts and other federal offices. The rule was not changed for Supreme Court nominations nor for legislation.

Today, there are calls to eliminate the filibuster rule entirely while others warn that the filibuster serves to balance majoritarian power. For instance, former Senator and Vice-Presidential candidate Joe Liberman cautions that the 60-vote filibuster serves as an incentive for both parties to work in a bipartisan fashion toward common goals. Several Democratic Senators meanwhile, criticize the rule as a mechanism for gridlock that prevents the work of the people from getting done.

Not surprisingly, one’s view of the filibuster seems to change depending on their party affiliation and the party that holds a Senate majority at any given time. Those in the minority consistently support the filibuster while those in the majority (particularly when it’s a very slim majority) decry it as obstructionist.

This politically-motivated position may lead to short-sighted thinking. While eliminating the filibuster now would allow Democrats to pass a wide range of progressive bills, they won’t hold the majority forever. In fact, in just two years Senator Warnock (D-GA) will be up for re-election along with 13 other Democratic senators and 20 Republican senators. The balance of power can shift very quickly. The result of course is that we could experience a dramatic pendulum swing when it comes to legislative direction in the country. Much like President Biden essentially reversed all of Donald Trump’s Executive orders in his first weeks, thereby swinging those policies to the other end of the pendulum, without the filibuster Senate Republicans will undoubtedly push through extremely conservative legislation once they regain Senate control in 2, 4, 6…years. The result would be policy fluctuation but not any meaningful progress. Democrats, therefore, should think very carefully before making such a bold procedural move and perhaps consider if rules such as the special Reconciliation rule that was just used for the COVID relief package might be a viable alternative for getting things done. Or, perhaps more radically, Senators from across the aisle might just have to figure out how to work together again.

Dr. Heather Farley is Chair of the Department of Criminal Justice, Public Policy & Management and a professor of Public Management in the School of Business and Public Management at College of Coastal Georgia. She is an associate of the College’s Reg Murphy Center for Economic and Policy Studies.

Economics at its best

Written by Don Mathews on . Posted in Don Mathews, Reg Murphy.

Last week, Dr. Skip Mounts began his From the Murphy Center column with an ironic quip. He wrote that while he believes “there is no such thing as macroeconomics,” he wanted to talk about it anyway. So he did. The entire column after that introduction was about macroeconomics.

My colleague’s quip might have appeared to be a playful inside joke among economists, but behind his quip is the most important insight that economics offers.

Economics is fundamentally a way of thinking about the choices individual people make. People choose among alternatives. Economics pays careful attention to alternatives. Good economics thinks about every choice in terms of alternatives.

Of course, people make the bulk of their choices in relations with each other. Economics thinks long and hard about choices of that sort.

For example, consider the market for ice cream in the U.S.

In 2019, people in the U.S. consumed 4 billion pounds of ice cream. In addition to the millions of buyers, the U.S. ice cream market consists of many thousands of retail sellers, wholesalers, producers and their workers. Thousands of other firms are associated with the market: dairy farmers, transport firms, producers of freezers, cartons, ice cream scoops, dispensers, conveyor belts, sugar, flavorings, and on and on and on. The amount of resources that are in some way engaged in the ice cream market is staggering.

Ever go to an ice cream shop that was out of ice cream? A grocery store that was out of ice cream?

Every once in a while an ice cream shop might run out of a flavor, and occasionally some ice cream goes to waste. But those glitches are short-lived and utterly puny compared to the amount that is produced and consumed.

And consider this. No one designed the ice cream market. There is no plan for the market. Nor is there a goal. No one oversees or manages the market to make sure that the quality, flavors and amounts of ice cream that buyers want are produced, and produced economically.

The ice cream market is millions of individual people – buyers, entrepreneurs, workers and resource owners – each of whom makes their own choices subject to their own unique circumstances.

Millions of people and vast resources engaged in an activity for which there is no design, plan, goal or oversight. Yet the result is not chaos but order: enormous amounts of a product whose quality, variety and economy in production improve year after year.

Now, take the intricacy, complexity and magnitude of the network of localized decision-making in the ice cream market and multiply it by, oh, somewhere around a gazillion, and you have the economy as a whole.

And what is true of the ice cream market is true of the U.S. economy. No one designed the U.S. economy. It has no plan or goal. And no one – not the president, not Congress, not the bureaucracy, not the Fed, not “elites” or big corporations – oversees or manages the U.S. economy. 

The most important insight that economics offers, the insight behind Dr. Mounts’ quip about macroeconomics, has two parts. The first part is understanding that a market or market economy is an enormous and enormously complex network of individual people making countless decisions in their own local circumstances. The second part is understanding why such arrangements, with no design, plan, goal or management, produce order and enrichment rather than chaos and stagnation.

When that insight is disregarded, economics goes wrong.  We’ll discuss that in my next column.

  • Don Mathews
  • Reg Murphy Center