Archives: Reg Murphy Pubs

One of the expectations of economists working in academia is publication. My career is full of written work that, in all truth, no one has ever read except for my mother. She kept all my research in the holiest of places — the top shelf of her closet.

In doing research, one always hopes to find an original question — one touched by no one else. Here we can clearly search for an original answer. Yet, in many cases, we simply end up repeating the work of other academics, except we use a different methodology. Different methods often produce different conclusions, making our work relevant. Yet, you can avoid accountability in this way by saying that two pieces of research cannot really be compared, and therefore judged, because they are not really the same due to differences in methods.

It is a wonderful thing when comparisons can be made and the issue of different methods is not at play. Such is the case of two economic impact studies done by the Selig Center for Economic Growth of the University of Georgia of Jekyll Island and Sea Island. Both are based on 2016 data and the underlying methodology is identical. So while Jekyll Island and Sea Island appear very different, the analysis performed by the Selig Center treats them as if they are identical, thereby, allowing for comparison.

What are some things that should be considered in doing an economic analysis? First, they are members of the same industry — hospitality and tourism.

Second, they may be classified in the same industry but they are very different. Sea Island is the best private resort — in every facet — in the world. Given my unbiased assessment, its operations are private, profit-seeking. It is even family owned. From golf tournaments, to gatherings of world leaders, it is exclusive, expensive and simply wonderful.

Jekyll Island is on the other end of the ownership spectrum. Jekyll Island is a self-governing state park largely occupied by outside vendors (the Westin, for example). Just pay $6 and you enter for the day. In addition, at any time, only 35 percent of the land area can be developed. Like Sea Island, Jekyll is uniquely special. From the history connected to the island itself, the initial conversations leading to the creation of the Federal Reserve, to the best graduation venue (the Convention Center) in the world (CCGA has graduation there), Jekyll Island remains a state park.

Economic impact studies are very interesting. They are largely based on the idea that one person’s spending is another person’s income. Both Sea Island and Jekyll Island have part-time and full-time employees whose income come from the spending of all sorts of visitors. Yet, after work, employees spend their income. So a second person and business is impacted. This is to say, to know economic impact we need to understand what is called a multiplier process.

What do the Selig studies tell us about their respective economic impacts on Glynn County? They are virtually identical. In gross revenue, Jekyll has the advantage with $700 million in sales compared to Sea Island’s $670 million. Sea Island’s impact in jobs totals 6,254 (direct, indirect, and induced) with $200 million in labor income. Jekyll Island’s employment numbers 7,170 with $249 million in labor income. Sea Island contributes $370 million to local GDP, while the activity on Jekyll Island contributes $416 million to GDP. Both contribute around $25 million in tax revenue.

Even more impressive is when you combine the two economic equals. They account for 22 percent of gross sales and for 28.5 percent of all jobs in Glynn County. This analysis is not to dismiss the importance of others in the hospitality and tourism industry. Yet, these are two economic powerhouses.

Economic impact is only one of the many margins Sea Island and Jekyll Island that can be used for comparison. Also consider their awards and recognitions, histories, community advancement and engagements, and on and on. For this space, let us celebrate their combined economic presence. We are very fortunate that both Sea Island and Jekyll Island are in our community and the opportunities they provide our citizens.

Four miles can make a big difference. According to an article posted to Livestrong.com last September, an average adult can lose about a pound a week if he or she walks four miles a day (about 10,000 steps) without increasing caloric intake.

Marathoners will tell you that pacing in the first four miles is crucial to how well one will finish the race. Four miles below earth’s surface lies molten rock hot enough to provide electricity to Iceland, and four miles above sea level stands the peak of Denali, North America’s highest summit. (Denali was known as Mount McKinley until it was officially renamed by President Obama in 2015.)

Just as in fitness and geography, four miles can make a big difference in economies and in individual or household welfare. The most striking example of this difference I have ever observed up close is here in Glynn County. You have probably already guessed what four miles I am referring to — the four miles of causeway between St. Simons Island and downtown Brunswick.

A casual glance at data from the U.S. Census Bureau begins to tell a story of two very different communities on either side of the causeway. St. Simons (not including Sea Island) has a population around 16,000, 93 percent white, while a little more than 22,000 individuals call Brunswick home, 62 percent of them racial minorities. The median age on the Island is in the mid-50s and in Brunswick is under 40. Ninety-six percent of Island residents have a high school diploma, but only 80 percent of Brunswickians can boast the same.

The story of our four-mile divide gets stronger when we begin to look into economic welfare.

In a list of Georgia zip codes ordered from highest average income to lowest, Sea Island ranks first, Saint Simons 39th (sixth among zip codes outside metro Atlanta), and Brunswick is 940th (out of 953).

The median household income in St. Simons is nearly $76,000, while in Brunswick, it is under $28,000. More than one-third of Brunswick’s residents live below the poverty line, and over 95 percent of Islanders live above it.

But, wait! There’s more!

Since so many of our residents are retirees, measures of current income really only tell half the story of the economic divide between Brunswick and St. Simons.

A more complete picture — and even greater divide — emerges when we look at residents’ accumulated wealth, or net worth. The median net worth of an individual in Brunswick is less than $15,000. The median net worth for census tracts on the southern end of St. Simons ranges from slightly more than $118,000 to just over $200,000. And for the area north of Sea Island Road and east of Federica Road, the median net worth is above $500,000.

Given these facts, the stark differences between end points of the F.J. Torras Causeway are undeniable. How we respond to the facts is a subject of great debate among economists and policymakers and is a discussion that will require more space than I have remaining for this week’s column. (Look for more on this in coming weeks.)

But, isn’t it amazing what a difference four miles can make?

Economics is a data driven social science. It is a social science because economists are trying to understand why people do what they do. It is data driven because economists hardly ever agree on anything.

Beginning with the first course in economics as undergraduates and continuing into graduate school, economists learn about many alternative types of theories. Over time, after being exposed to these alternatives, economists tend to become comfortable with those theories they think “work.” By “work,” we mean that these theories seem to do the best in explaining why people do what they do. For example, I tend to fall into the free market category. In my understanding, theories based on free market principles do a good job explaining human behavior.

The next thing we do is to see if our preferred theories are supported by real world data. This is why economics is beautiful. The theories that we love and use must be consistent with data collected from real world observation. Remember, the goal — we want to know why people do what they actually do. Theories that are not supported by the data may be a great brain exercise, but they are useless in helping us understand reality.

Here is a piece of data. Between 1968 and 2015, in the aggregate, the percent of national income going to income tax collections is 17.35 percent. A horizontal line set at 17.35 percent nicely represents a graph of the actual individual annual percentages. Yet, over this same period, the top tax rate has ranged from a high of 77 percent to a low of 28 percent while ending at the current 39.6 percent. Viewed another way, no matter how hard the federal government tries to capture our income through tax collections, they ultimately only get 17.35 percent. At a top rate of 77 percent, we work very hard to find ways to not pay taxes. As the rate falls we don’t work so hard at tax avoidance.

So, if Congress is currently working on tax reform, why not go all the way to work on tax simplification and let it be data driven. If, in the end, all we are going to give the government averages 17.35 percent, why not just have one tax rate of — go figure — 17.35 percent. Do away with all deductions and the like state and local taxes, mortgage interest, childcare — all of them.

Have one standard deduction based on family size, period. In this world, every one will use a post card and the IRS bureaucracy could be reduced. This is what the data tell us. Should we listen? Or better yet, should our political leaders listen?

On the first Wednesday of every month at 9 a.m. a group of people gather at Tipsy McSway’s in downtown Brunswick to listen to two entrepreneurs talk about their businesses or nonprofits. We hear it all — beginnings, histories, successes, problems and challenges. Such is the nature of 1 Million Cups, Brunswick. These meetings have been going on for 18 months so it is time to tell the citizens of the Golden Isles what we have learned about our Brunswick entrepreneurs.

In general, entrepreneurs are an interesting lot. Regardless of where one goes, you tend to find them in unexpected places. They value their individuality. And they all have interesting stories that have led them to do what they do. In many cases their calling is so strong they have to do what they do.

Almost 42 percent of our entrepreneurs and presenters and their enterprises can be found in downtown Brunswick. It seems like there is a general impression in our community that not much is going on in downtown. While there is often news of renewed hope of a hotel and conference center development project, entrepreneurs are filling the void. Entrepreneurs will often go where others will not. Opportunity has many different faces and between Norwich and Newcastle streets may offer such an unexpected place.

Nearly 53 percent of our 1 Million Cups entrepreneurs are women. This is very unusual relative to other communities that support a 1 Million Cups forum. Entrepreneurs are, more often than not, go-it-alone, risk-taking pathfinders. Here, success is its own reward where judgment is only found in the ability to please customers. Opinions based on arbitrary characteristics such as gender do not find a home in the world of entrepreneurs.

To affirm these points about our Brunswick entrepreneurs, new freedoms and social liberalizations are being introduced in Saudi Arabia through the influence of reformer Crown Prince Mohammed bin Salman. One of the first signs of the impact of these small initial changes is the appearance of entrepreneurs and their food trucks in the capital city of Riyadh. One of the most popular, judging by the line of men wanting to buy coffee, is run by a woman and her daughter.

Finally, Brunswick entrepreneurs have some amazing stories. Entrepreneurship is more than just starting a business. It involves the beginning creativity necessary to identify unmet needs of others or problems that need to be solved. In the case of our Brunswick entrepreneurs opportunity and creativity have been found in the napkins of a grandmother, in the hearts of rescue dogs, in the wellbeing of veterans, in the desire to give kids their own places to read at home, to just know that there is opportunity in the vacant buildings in downtown Brunswick and on and on. All are special and unique. Entrepreneurial storytelling is alive and well in Brunswick.

Data from studies of the Kauffman Foundation of Kansas City show that since 1980, businesses aged 0 to 5 years show positive net job creation — more jobs are created than destroyed. Businesses 6 to 10 years of age show zero net job creation over the same period while businesses older than 11 years show negative job growth. So, economic prosperity and job creation is found in new firms. The ecosystem that generates new businesses is the land of the entrepreneur. From the experiences presented at 1 Million Cups, Brunswick, our ecosystem is alive, well and very special.