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Are we there yet?

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

Kids on car trips aren’t the only creatures who ask “Are we there yet?” Economists ask the same question, and in a variety of contexts.

In recent months, the context has been the labor market, where “Are we there yet?” has meant “Is the U.S. labor market back to where it was before the pandemic?”

Economists now have two good answers to that version of “Are we there yet?” One is: no. The other: yes. 

Before you vow never to listen to an economist again, allow me to explain.

No is a good answer to the question “Is the U.S. labor market back to where it was before the pandemic?” because capitalist economies change constantly. Change is fundamental to their nature. There is no “going back to where we were” in capitalism.

Further, the pandemic induced changes in technology, the way production is organized, and people’s perspectives on work and life that cannot be erased. The response to the pandemic shifted future economic growth and development to a different path.

To people who pore over labor market statistics, however, Yes – with a few qualifications – is a good answer to the “Is the labor market back to where it was” question.

Consider. In February 2020, the month before the pandemic hit, the U.S. labor force totaled 164,583,000, employment totaled 158,866,000, the unemployment rate was 3.5 percent, and the labor force participation rate was 63.4 percent.

Current figures show the U.S. labor force at 164,746,000, employment at 158,732,000, the unemployment rate at 3.7 percent (it was 3.5 percent in July) and the labor force participation rate at 62.4 percent.

The current figures are remarkably close to the pre-pandemic figures.

Two age groups account for the bulk of the percentage point difference in the labor force participation rate: 55 to 64-year-olds and 20 to 24-year-olds. The participation rate for men age 55 to 64 years is currently 70.3 percent, down from 71.8 percent in February 2020; the rate for women age 55 to 64 years is currently 59 percent, down from 59.7 percent in February 2020.  The participation rate for men age 20 to 24 years is currently 72.1 percent, down from 75 percent in February 2020; the rate for women age 20 to 24 years is currently 68.6 percent, down from 71.4 percent in February 2020.    

Lower participation of 55 to 64-year-olds is quite likely pandemic-induced: early retirement, lingering effects of the illness, cutting risk. Lower participation of 20 to 24-year-olds might be the result of people returning to college.

Supporting the “yes, the labor market is back to where it was” case is this significant fact: current labor force participation rates for women age 25 to 34 years, 35 to 44 years and 45 to 54 years are either the same as or higher than February 2020 participation rates.

Also supporting the “yes” case is private sector employment: 129,625,000 in February 2020; 130,510,000 currently.

The composition of private sector employment shows two major shifts, however.

Current employment exceeds February 2020 employment in nine of eleven major industries.  The gains are modest, with one exception: employment in transportation and warehousing has jumped by 13 percent since February 2020.

Health services and leisure and hospitality are the two industries with employment losses since February 2020. The employment loss in health services is modest: 0.4 percent. The loss in leisure and hospitality is not modest: 7.2 percent.

In accommodation, an industry within leisure and hospitality, the employment loss since February 2020 is 18.8 percent.

If hotel workers seem a bit frazzled these days, that last figure may have something to do with it.

New Minors Prepare Grads for the Workforce

Written by Roscoe Scarborough on . Posted in Reg Murphy, Roscoe Scarborough.

The College of Coastal Georgia has established four brand new minors this fall, including minors in Diversity and Inclusion, Sociology, Entrepreneurship, and Hospitality and Tourism. In this column, I will discuss how our new interdisciplinary minor in Diversity and Inclusion prepares students for success in today’s workforce.

Coastal Georgia is expanding the choice of minors available to our students. In addition to completing a major, many of our students elect to complete one of our 26 minors as a secondary specialization. Building on the University System of Georgia’s general education curriculum that exposes students to “diverse learning perspectives and ways of knowing,” minors facilitate personal and professional growth. Intellectually, completing a minor allows a student to pursue a subject of interest in greater depth. Students develop knowledge, skills, and a credential in another discipline that increases their marketability as they begin their careers after graduation.

The minor in Diversity and Inclusion is an interdisciplinary program that examines social inequalities related to human differences. Students are required to complete an Introduction to Social Problems course that teaches students about race, social class, gender, sexuality, ethnicity, and disability. Building on this sociological foundation, students select four more courses that examine social inequalities in Psychology, Communication, Education, History, English, Anthropology, Geography, American Studies, or Sociology. These courses offer students an opportunity to deepen their knowledge of social inequalities in a broad range of academic disciplines.

Students who complete the minor are able to identify and address patterns of conscious and unconscious bias and discrimination that produce social inequalities. Students utilize current research to recognize and assess patterns of prejudice and discrimination. There is an emphasis on developing cross-cultural understanding, intercultural awareness, and appreciation of social differences. Additionally, students apply what they learn to various media, social institutions, and their own interactions in day-to-day life. There is a focus on developing and implementing strategies to mitigate social inequalities and build more inclusive social institutions.

Many young people are attracted to curricular offerings that engage themes related to diversity and inclusion because they want to build a more equitable society. These students are often passionate about creating and maintaining an inclusive culture in their workplaces and other groups to which they belong. Conversely, other students are attracted to the minor in Diversity and Inclusion because it makes good business sense. Skills learned in the minor can be applied to facilitate belonging in the workplace, increase organizational productivity, and market products to diverse populations.

In a recent Murphy Center article, Dr. Heather Farley made “a good business case” for fostering equity in the workforce. Farley emphasized that addressing inequity allows organizations to leverage a larger talent pool, understand the needs of a diverse clientele, and generate more effective teams. Additionally, Farley noted that discrimination is an economic inefficiency; discrimination stymies productivity by preventing workers from being employed where they are most productive. Inequities impact workers, employers, and the community. Completing Coastal Georgia’s minor in Diversity and Inclusion equips students to understand and address these organizational and community challenges.

The minor in Diversity and Inclusion prepares Coastal Georgia graduates to address inequities in their workplaces and in the community. My colleagues at the College are always working to create innovative academic programs that meet the economic needs of our community and the state of Georgia. Find out more about the College of Coastal Georgia at: www.ccga.edu

Roscoe Scarborough, Ph.D. is interim chair of the Department of Social Sciences and associate professor of sociology at College of Coastal Georgia. He is an associate scholar at the Reg Murphy Center for Economic and Policy Studies. He can be reached by email at rscarborough@ccga.edu.

How are changes in higher education funding contributing to the accumulation of student loan debt?

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

President Biden caused a stir last month when he announced that his administration would cancel up to $20,000 in federal student loan debt for Americans making less than $125,000. My social media feeds went nuts with folks on one side of the issue celebrating the policy as a leap toward economic equity, and folks on the other side lamenting the policy as unfair to those who had already paid their higher education bills.

It’s often the case that the truth lies somewhere between the extremes, but in this case, I think the truth may actually be that both sides are right. This loan forgiveness policy will benefit a lot of low-income families who could really use the lift, and it’s not fair.

I’ll expand more on that in my next From the Murphy Center column. But, first, a little background on the higher education market. It’s not the free and efficient market of an economist’s dreams.

Loans aside, there is all sorts of government intervention in the market for higher education. Coastal is a state college, which means a big chunk of our annual budget comes from state appropriated (taxpayer) funds, and we operate within state policies that govern our operations including the programs we offer and what we can charge students in tuition and fees.

These are not necessarily bad interventions. As my colleague Dr. Mathews showed in his recent column on the local impacts of our graduates, higher education has a greater impact on communities than simply the impact on the individuals who earn that education. This is the sort of market where governments should get involved to encourage more participation.

And, overall, in the last half-century we have seen tremendous growth in demand for higher education. As demand for higher education has increased, though, so has the price of that education, and state governments are contributing less and less toward that price, driving up the cost to students. This trend has remained true even as demographic shifts have caused increasing demand for college to slow dramatically in the most recent decade.

In Georgia, the general funds budget, per-student for all public colleges and universities declined 1% from the 2009-10 academic year to 2018-19, largely driven by major consolidations in the University System. State appropriations per student fell 18%, and student-paid tuition and fees rose 37% on average per student. It’s no wonder that the percent of Georgia students originating a loan increased from approximately 46% in 2010 to approximately 71% in 2019.

At Coastal, consistently ranked among the most affordable colleges in the nation, our general funds budget per credit hour attempted by students increased 30% from the 2009-10 academic year to 2018-19. State appropriations per credit hour rose by only 2%, while student-paid tuition and fees per credit hour rose 128%. The percent of our students originating a loan increased from 40% in 2010 to 48% in 2019.

(These are all inflation-adjusted budgets, accounting for the fact that a 2019 dollar was less valuable than a 2009 dollar.)

This alone would not be a concern to an economist. Coastal and the University System had greater enrollment in 2019 than in 2009. Increases in demand should increase prices, and it is not unreasonable to ask the consumer to pay that price.

My cause for concern is not that increasing demand has increased price. My concern is one layer back, at the source of the increased demand, and this is where student loans come in.

Demand for investments—and for loans to finance those investments— should always be directly related to the expected returns from those investments. The return on investment to education is always positive. But, with the help of family and cultural pressures, the ease of access to education loans gives students a false impression of how high those returns will be relative to the cost of debt. The result is a lot more folks getting a lot more education than they would in a more honest market and getting into a lot more debt than they ultimately can afford.

More on how that happens and how to make it better in my next column. Stay tuned.

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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.

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College of Coastal Georgia Grads Contributing Mightily

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

Up for some good news? Take a look at our local economy.

It’s on a roll. Tourism is booming. Downtown Brunswick is hopping and looking sharp, with new businesses, renovated spaces and lots more foot traffic.

Serious entrepreneurship is happening downtown. And with the College of Coastal Georgia’s Lucas Center for Entrepreneurship off to a roaring start, one can’t help but think there’s much more to come.

Workers remain in short supply, but recent figures suggest that, at long last, the local labor force is beginning to grow. Glynn’s unemployment rate currently stands at 2.5 percent, below Georgia’s 2.9 percent and the nation’s 3.5 percent.

Five more reasons to be bullish on the local economy: Justin Henshaw, Maggie Hughes, James Laurens, Dylan Lukitsch and Olivia Pickering.

Over the past decade, the College of Coastal Georgia has been turning out some monster graduates who are making mighty contributions to our community. Many are nurses and teachers.  Justin, Maggie, James, Dylan and Olivia are graduates of CCGA’s School of Business.

Justin Henshaw is an entrepreneur extraordinaire. He started two businesses while attending the College of Coastal Georgia. The first was Island Sound. The second was Coasters, a food truck. Not bad for a kid in college.

Henshaw Companies now consists of Island Sound, four Fuse stores, two Jimmy Johns, two Smoothie Kings, one Salata and the Golden Isles Wedding Association. Mr. Henshaw is also about to roll out his – and Glynn County’s – first tech startup.

Maggie Hughes is the Partnership Manager with the Golden Isles CVB. Maggie is a real people person, poised and quick to smile. She is also grit personified, as folks who watched her play volleyball for the Mariners know well.

James Laurens is Associate Broker for Compass360 Realty, Inc.  James knows the Brunswick real estate market inside and out. He has renovated a historic property in downtown Brunswick and has another downtown project in the works. He’s also the Vice President of the Golden Isles Arts and Humanities Association.

Dylan Lukitsch is the Manager of Business Development and Economic Strategy with the Brunswick Downtown Development Authority. Not only is Dylan a top-flight researcher and number cruncher, he has become an expert on local taxation. His thesis for the University of Missouri’s online Master’s Program in Economics is on Georgia’s Local Option Sales Tax. I’ve read his thesis. It’s terrific.

Olivia Pickering is a Customer Finance Analyst with King & Prince Seafood. Olivia is taking her final course this semester and will graduate in December. She’s a sharp and imaginative thinker. A colleague recently told me, “When Olivia makes a class presentation, you’d think you were listening to a seasoned CEO.”

Being a college teacher is an extraordinary privilege. To be able to make a living reading, studying, thinking, writing and talking with people about economics, a subject that becomes more fascinating to me with each passing day, is good fortune beyond belief.

Topping off that good fortune are the marvelous people I cross paths with, the College of Coastal Georgia students who take a class or two of mine.

Whether a student likes or dislikes economics is not important to me. I look for grit and hard work.

Gritty students are a joy to teach. The joy is amplified by seeing the productive things they do after they graduate.

Justin, Maggie, James, Dylan and Olivia are unique individuals with a few things in common. They’re College of Coastal Georgia grads. They’re gritty; there’s not the slightest trace of entitlement in them. And they’re doing great work in our community.

How’s that for good news? 

A Million COVID Deaths Cause Rampant Mental Distress

Written by Roscoe Scarborough on . Posted in Reg Murphy, Roscoe Scarborough.

1 in 8 Deaths from 2020 to 2021 in the U.S. resulted from COVID-19, behind only heart disease and cancer, according to a recent study in JAMA Internal Medicine. This amounts to over 1,000,000 deaths from the pandemic in the U.S. alone. Many of these deaths were unexpected and occurred in isolation from family. This caused a dramatic rise in bereavement. These untimely and tragic deaths put those who lost loved ones at risk of depression, mental distress, and other mental health challenges.

A wealth of peer-reviewed research is revealing the social repercussions of the COVID-19 pandemic. In several related studies, a team of sociologists—Shawn Bauldry, Emily Smith-Greenaway, Rachel Margolis, Ashton Verdery, Haowei Wang, and other collaborators—conducted research that offers insight into mental health outcomes among those who lost a loved one in the pandemic. Their research, published in the Proceedings of the National Academy of Sciences, projects that more than nine million people in the U.S. have lost a close relative to COVID-19. They found that those left behind are vulnerable to a range of negative mental health outcomes.

The researchers show that COVID-19 deaths cause a lot of grief compared to many other types of death. COVID-19 deaths are perceived to be “bad deaths:” these deaths are often preceded by pain and distress, tend to occur in hospital settings where patients are isolated from family, and happen suddenly. The perception that these deaths were premature and untimely magnifies distress among family members left behind. The grief and distress associated with loss were exacerbated by the stress of the ongoing pandemic, long periods of social isolation, and economic precarity.

This same research team compared spousal deaths in the early COVID-19 pandemic to spousal deaths just before the pandemic in their recent article in The Journals of Gerontology. The researchers found that COVID-19 widows and widowers faced higher rates of depression, loneliness, and other mental health challenges when compared to pre-pandemic widows and widowers.

Certain groups have experienced a disproportionate share of mental health distress due to losing loved ones in the pandemic. Centers for Disease Control and Prevention data show that some populations experienced higher mortality rates from COVID-19 than others. The elderly and low-income persons were more at risk of experiencing a death from COVID-19. Blacks, Hispanics, and Native Americans saw higher death rates in the pandemic. In addition, those residing in rural settings and those who were uninsured suffered higher mortality rates.

Many health outcomes related to COVID-19 are improving, but there are nine million left behind who are at substantial risk of health problems correlated with losing a loved one. The bereaved face mental health problems associated with their loss, including grief, depression, and mental distress. These mental health challenges can lead to declines in physical health and increase one’s risk of death.

Inequities in access to health care are at the core of why certain demographics experienced divergent mortality rates and loss of loved ones during the pandemic. Health care inequities contribute to untreated and undertreated preexisting conditions among certain demographics. Additionally, these same health care inequities shape access to mental health services for the bereaved.

As deaths directly attributed to COVID-19 wane, it is essential that we address the mental health crisis in the United States that was exacerbated by the pandemic. The nine million in the U.S. who have lost a loved one can benefit from financial, social, and mental health support. It is essential to ensure that all Americans have access to health insurance and affordable healthcare, including treatment for mental health conditions.

Roscoe Scarborough, Ph.D. is interim chair of the Department of Social Sciences and associate professor of sociology at College of Coastal Georgia. He is an associate scholar at the Reg Murphy Center for Economic and Policy Studies. He can be reached by email at rscarborough@ccga.edu.

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Intrinsic Extrinsic Motivation

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

This week, I do not intend to offer a policy analysis or suggestion as we often do in this column. Instead, I want to share some of my recent observations and wonderings about human behavior. As a microeconomist, I study how folks- or firms- make decisions. More specifically, I have worked primarily in the subfield of behavioral economics, sort of the intersection of psychology and economics. I love to think about the motivations behind decision-making.

As you can imagine, I have plenty of opportunities for observing interesting motivations both as an educator and as a mom. Most recently, I have thought a lot about intrinsic vs extrinsic motivation in my home and in my classroom.

Intrinsic motivation is associated with performing a task for one’s own satisfaction. Extrinsic motivation causes one to act only to obtain an external reward or avoid an external punishment.

There isn’t much space in neoclassical economic theory for intrinsic motivation. The theory is built around Homo Econimicus, a fully informed and perfectly rational human being who responds to (typically external) incentives with behaviors that are in their own self-interest.

At home, I am currently parenting a small Homo Econimicus. Every couple minutes as he plays, I hear, “Mama! Watch this!” It is not enough that his play is fun for him; he also seeks reassurance that I approve and am entertained. And often before he chooses a particular behavior, he will ask me what his reward or consequence will be for that behavior. He is almost totally driven by external incentives, and I am in the weird space of parenting where I offer extrinsic rewards or consequences in hopes that he develops a sense of the intrinsic value of certain behaviors.

And, indeed, I have hope! Sure, we are all born primarily motivated by extrinsic factors; it’s an evolutionary necessity that a baby’s cry is met with the reward of food or comfort. But, despite what neoclassical economists assume, behavioral economists find strong evidence of intrinsic motivation in adult human behavior.

I have written for this column before about economics experiments in which participants demonstrate altruistic behavior, giving to others without promise of anything in return. These experiments are often conducted under complete anonymity. Participants are totally intrinsically motivated toward altruism.

Recently, I have personally observed behavior among my students that is almost certainly indicative of intrinsic motivation among them. Upon completion of a group project, I have students rate themselves and their teammates on a scale of 1 to 4 across several dimensions of teamwork. Their individual grades for their projects depend not only on the team’s submitted materials but also on their self and peers’ evaluation of their collaborative contribution. Each student completes the ratings individually, and I am the only person who will see their responses.

Every semester, I have several students who rate themselves lower than they rate their peers, and even more surprising, who rate themselves lower than their peers rate them. This summer, for example, 6 out of 37 students (16.2%) who completed the team evaluations rated themselves lower than their teammates rated them.

I always wonder why in the world a student, knowing that their self-evaluation has potential to decrease their course grade, would rate themselves anywhere below the highest score. I ask even more questions when they rate themselves below their actual level of contribution as reported by their teammates.

I can think of a couple of reasons students might do this: 1) They are afraid of how their teammates might rate them and want me to view them as honest, or 2) They are intrinsically motivated to honestly assess their own work as part of their team.

Neoclassical economics would say the former is the most rational explanation for rating oneself lower than the maximum score. But, I am not convinced students care that much about what I think. I think something deeper, more intrinsic is going on here. And, as odd as it is to me that students behave this way, I love it. It gives me hope that my little Homo Economicus and many of his peers will evolve into intrinsically motivated, morally driven social contributors.

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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.

 

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Two Popular Explanations of Inflation are Wrong

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

The two most popular explanations of the current inflation are: “Corporate greed is to blame for inflation” and “Joe Biden is to blame for inflation.” Each explanation is simple, clear and bogus.

Consider first the corporate greed theory of inflation. The country’s first bout of inflation occurred right out of the chute, during the Revolutionary War. Economic historians estimate that from 1776 to 1780, the average annual rate of inflation in the new nation was 12 percent, including 22 percent in 1777 and 30 percent in 1778.

That’s a problem for the corporate greed theory of inflation. There were no corporations in the U.S. until after the Revolutionary War.

The giant corporation of the modern sort did not make the American scene until the 1870s, and its economy-transforming proliferation took place roughly between 1890 and 1910. Those were the years of the “robber barons,” the “gilded age.”

What was inflation like during the gilded age? It wasn’t. Price indexes constructed by economic historians indicate that prices in 1910 were 26 percent lower than they were in 1870. If inflation is caused by corporate greed, then by logic deflation is caused by corporate generosity, which would make the robber barons saints of selflessness.

Inflation ran low from 1952 to 1967, perked up a bit from 1968 to 1972, surged from 1973 to 1982, ran low from 1983 through the first half of 2021, at which time the current bout kicked in.

It thus follows from the logic of the corporate greed theory of inflation that corporations were not very greedy from 1952 to 1967, moderately greedy from 1968 to 1972, quite greedy from 1973 to 1982, not very greedy from 1983 through the first half of 2020, and quite greedy after that.

For the theory to hold, corporate greed would have to be a sporadic mood swing. Seems a bit far-fetched.

Moving on, readers of Dr. Skip Mounts’ columns in this newspaper know that the “Joe Biden did it” theory of inflation has less hunt than a headless dog. Dr. Mounts, who never shies from an uphill battle, has painstakingly explained in numerous columns that modern inflation has only one source, a country’s central bank. Our central bank is the Federal Reserve, or “Fed,” for short.

A president does not decide federal tax and spending policies. Congress does. A president can certainly influence debate over taxes and spending, but Congress calls the shots.

More to the point, government spending does not “pump money into the economy.” Government spending is paid for out of tax revenues or financed with borrowed money – proceeds from the sale of Treasury bonds. The borrowed money is not new money. It came from the investors and institutions who bought the Treasury bonds.  

Only the Federal Reserve can “pump money into the economy.” Which means only the Fed can cause inflation.

What’s missing from much of the current criticism of the Fed is context. The current inflation is the consequence of the Fed’s response to the economic collapse in the first months of the COVID pandemic. The unemployment rate went from 3.5 percent to 14.7 percent in two months, while real GDP dropped by 35 percent in three. That’s depression-size contraction. Sheer panic in money and financial markets threatened to make the situation worse.

To prevent economic calamity during the pandemic, the Fed, along with central banks across the planet, opened every money floodgate they could find. Turns out they opened a few too many.

At any rate, there is an important lesson here. Don’t fall for bogus explanations of inflation. Don’t peddle them, either.

Material Hardship Worse for Low-Income Families

Written by Roscoe Scarborough on . Posted in Reg Murphy, Roscoe Scarborough.

Many Americans are struggling to make ends meet. Housing, gas, utilities, food, transportation, and most goods and services are more expensive than they were a year ago. Inflation in the U.S. reached 9.1% in June, the highest rate in over forty years. However, the impact of inflation is more pronounced on low-income households. These financial challenges set the stage for mental health problems and conflicts in the home.

Inflation erodes the value of real wages and savings, but these effects are not felt equally. With substantial disposable incomes, higher-income households are better equipped to absorb the rising cost of necessities. Conversely, there is little room in the already tight budgets of low-income households to cover the higher costs of essentials. Rising prices force low-income families to decide whether to buy groceries, pay the utility bill, refill a prescription, or purchase clothes for a child.

An empty checking account can cause family problems. A 2022 study published by Dr. Joyce Y. Lee and collaborators in Family Relations tested how economic insecurity contributes to mothers’ and fathers’ mental health and relationship conflicts. Specifically, this research focused on material hardship—everyday challenges related to making ends meet, including difficulties paying for housing, utilities, food, or medical care.

Lee and her research team found that it was material hardship, not low income itself, that set the stage for parental mental health problems that result in family conflicts. Material hardship impacted fathers’ mental health more than mothers’ mental health. Depressive symptoms noted among fathers included sadness, sleep problems, loneliness, and difficulty concentrating. Conflicts included putting down a partner’s feelings or opinions, blaming the partner for things that go wrong, and fights with accusations and name-calling. This sort of verbal aggression is damaging to relationships and harmful to young children who witness this behavior.

It should not be surprising that material hardship impacts families by hurting fathers’ mental health more than mothers’ mental health. Traditional gender roles pressure fathers to fulfill the breadwinner role. When fathers feel that they cannot alleviate economic stressors in their families, the outcomes are mental health problems and conflicts in the home.

During the COVID-19 pandemic, low-income households experienced high levels of unemployment, economic insecurity, and mental health problems. Now, inflation is bringing material hardship to more American households. A looming economic recession would further harm low-income families.

Access to mental health services for mothers and fathers is critical to support healthy family functioning. Tragically, health care has become a luxury. Low-income families often prioritize other essentials, including rent and food.

A range of solutions are warranted. Culturally, the U.S. must destigmatize mental illness. Additionally, all Americans need to be able to access mental health services. Health systems must be incentivized to provide mental health services in low-income rural and urban communities. Expanding telemedicine promises to increase access for folks in rural areas and those without transportation.

Expansion of Medicaid could increase access to mental health care for low-income households. At present, Georgia ranks among the bottom three states in rates of health insurance coverage. Full expansion of Medicaid offered under the Affordable Care Act would extend Medicaid eligibility to nearly all low-income individuals earning below 138% of the poverty line. This would provide insurance coverage to almost half a million more Georgians.

It is essential to pair expanded access to mental health services with institutional reforms that reduce rates of poverty and increase household income. Policies that ensure equitable access to quality public education and economic opportunities for low-income Americans are a good start.

 

Roscoe Scarborough, Ph.D. is interim chair of the Department of Social Sciences and associate professor of sociology at College of Coastal Georgia. He is an associate scholar at the Reg Murphy Center for Economic and Policy Studies. He can be reached by email at rscarborough@ccga.edu.

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Can raising wages increase employer profit?

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

When I teach labor economics, students and I discuss economic theory and empirical evidence on both sides of the minimum wage debate. Several weeks ago, I enjoyed watching some of my former students discover for themselves one of the reasons many economists believe increasing the minimum wage is feasible without causing the widespread unemployment other economists fear.

Several weeks ago, I had the pleasure of observing the senior capstone presentations for our graduating Business students. Each semester, seniors in this course work in teams to manage a multi-million – sometimes billion– dollar international business using the Glo-Bus online business simulation platform. They make decisions about R&D, production, marketing, business image, and responsibilities to shareholders. The simulation draws on actual market data to give feedback on students’ performance and profits.

Coastal business students do really well in the simulation, often ranking among the top firms globally on the platform that hosts almost 30,000 students from over 200 colleges and universities in 23 different countries. And for their professors who get to see their presentations, it is a really rewarding opportunity to see our senior students showcase their professionalism while describing the successes, failures, and lessons learned from running their own business.

One theme that came up in several presentations this Spring piqued my interest. Each group talked about raising wages or employee benefits as a strategy for increasing productivity in their firms. When I asked the students about this decision and its results, each group was able to demonstrate using their firms’ realistic productivity and profit data that investing more money in employee salaries and benefits led to improved productivity and increased profits for their firms.

This was interesting to me because it is not what should happen according to economic theory. Theory says that in a competitive labor market wages are set according to the equilibrium of labor supply and labor demand, and then firms hire workers until the market wage is equal to the value of the last worker hired. This value is the product of the worker’s productivity and the price the firm receives from selling whatever the worker produced.

Key to this theory is the assumption that workers are all the same and they are all working at maximum efficiency. If this were true, increasing wages would cause a firm’s profits to decrease, since they would be paying a worker more than that worker is contributing to the firm’s revenue.

What our senior students observed in their simulation is not surprising to most students of human behavior and is one of the major arguments used in favor of increasing the minimum wage. Most of us do not work at 100% efficiency 100% of the time. The assumption that we do is fundamental to the argument that an increase in wages will cause unemployment.

What if, instead, a wage increase is a mood-lifter or an incentive that causes employees to increase productivity? Or what if employee benefits are increased to improve wellness or encourage professional development? Then, increases in employee compensation could translate to increases in employer profits rather than decreases in employment.

A 2018 article in the Harvard Business Review about Amazon’s increasing their minimum wage predicted that this would cause an increase in competition for jobs at Amazon, which would necessitate an increase in productivity among employees wishing to keep their jobs.

It had been shown in a lab experiment published a couple years earlier that an unexpected wage increase induced a sense of reciprocity among workers, which caused them to work harder for their employer.

And here at the Murphy Center, we have heard real-world anecdotes of local businesses that raised wages to attract workers during the pandemic and were rewarded with increases in employee motivation and productivity.

I think our senior Business students are onto something. Increasing wages is a tried and true strategy for increasing employee productivity and employer profit.

I am proud of the insight our students display, and I am excited to watch how Coastal Georgia graduates continue to contribute to growing our local economy.

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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.

Is the Sinking U.S. Birth Rate a Problem?

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

The sinking U.S. birth rate has a lot of people worried.

To refresh your memory, the U.S. birth rate – measured as the number of births per 1,000 women aged 15 years to 44 years – has been sinking without interruption since 2007. The most recent birth rate measure of 56.0 in 2020 is a 19.4 percent drop from the 2007 birth rate of 69.5.

The birth rate decline has been widespread across demographic groups. Percentage decreases in birth rates from 2007 to 2020 by demographic group are: 64 percent for women age 15 to 19 years, 41 percent for women age 20 to 24 years, 23 percent for women age 25 to 29 years, 5 percent for women age 30 to 34 years, 38 percent for Hispanic women, 17 percent for non-Hispanic Black women, 11.5 percent for non-Hispanic White women, 18 percent for women without a high school diploma and 18 percent for college-educated women.

The consequence of a persistently low birth rate becomes clearer with the help of another demographic measure, the total fertility rate. Adding the birth rate at each age from 15 to 44 years yields the number of births per 1,000 women through their reproductive years. Dividing that figure by 1,000 yields the total fertility rate: an estimate of the average number of children a woman will have in her lifetime.

The total fertility rate necessary for a population to replace itself from one generation to the next – that is, the total fertility rate that generates zero population growth (ignoring immigration and emigration) — is called the replacement rate. The replacement rate for wealthy countries such as the U.S. is a total fertility rate of 2.1.

In 2007, the U.S. total fertility rate was 2.1. By 2020, the U.S. total fertility rate had dropped to 1.64.

The upshot: if current birth rates persist, the U.S. population will age and ultimately shrink.  Immigration could change the picture, but that would require ditching the restrictive immigration policies put in place several years ago.

What has people worried is today’s children are tomorrow’s workers and taxpayers. Fewer worker-taxpayers constrains both economic growth and the ability of federal, state and local governments to provide public services. Especially at risk: Social Security and Medicare.

Is the worry warranted?

No. After 44 years of wallowing in economics like a hog in slop, I’ve come to regard predictions of economic crisis as the sasquatch sightings of the college-educated. It takes more brain power to concoct a tale of capitalism’s next imminent crisis than to blow out a yarn about the hairy thing you saw for certain roaming the woods last night. As for reliability, tough call.  Sasquatch sightings might have a slight edge.

Oddly enough, sustained low birth rates are more likely to increase the labor force in the future than reduce it.

Consider the 64 percent decrease in the teen birth rate. The surest route to years spent out of the labor force and in poverty is becoming a single mother as a teenager. If the current low teen birth rate persists, it will bring a sizeable drop in the poverty rate and a sizable increase in labor force participation for years to come.

Lower birth rates translate to greater labor force participation for women in their 20s and 30s, as well.

Further, labor force participation rates for people age 65 years and older having been on the rise since the late 1980s. Today, one-third of 65 to 69 year olds and one-fifth of 70 to 74 year olds are in the labor force.

Low birth rate?  Not a problem.

  • Reg Murphy
  • Reg Murphy Center