Archives: Reg Murphy Pubs

Women economists help push the world forward

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

You may recall that the last time I wrote for the Murphy Center column, I wrote on Dr. Janet Yellen, one of the leading women in economics and one of my professional heroes. From the moment I finished and submitted that piece, my colleagues and I began naming other extraordinary female economists we would have liked to include.

So, although women’s history month is now behind us, I have decided to devote one more week to summarizing the contributions of a couple more economics heroes who are also women.

The first name that comes to my mind when I think of women in economics is Elinor Ostrom. Dr. Ostrom’s formal education was in political science, but she was the first — and, so far, the only — female to win the Nobel Prize in Economics. She was also a friend and co-author of my advisor in graduate school, so I “grew up” as an economist hearing about her and admiring her work.

Ostrom’s Prize-winning work was on effective management of common resource goods. These are goods, such as neighborhood dog park, which everyone may use but which will become unpleasant and/or unusable over time if no one takes responsibility for maintaining it. Ostrom showed that the successful management of such resources can be accomplished by small groups of invested and accountable individuals without government intervention.

My favorite Ostrom contributions are in the field of economic development. She spent much of her career studying developing economies and contributed much to our understanding of what types of aid are helpful and what types are harmful to local economies.

Another of the most influential women in economics is Anne Krueger. Many believe Dr. Krueger will be the world’s second female recipient of the Noble Prize for Economics. Dr. Krueger earned her PhD in Economics from the University of Wisconsin in 1958 and has spent her career both in academia and with significant stints at The World Bank and the International Monetary Fund. She currently holds research positions at Stanford, Johns Hopkins and the National Bureau of Economic Research. Her work is so extensive that her Curriculum Vitae is 44 pages long and begins with a table of contents.

Anne Krueger first became well-known for her work on a topic she named rent seeking. In this case, rent is best understood as profit, and rent seeking occurs when firms devote resources to obtaining and maintaining profit through political means. For example, Georgia Power, a regulated monopolist, has 30 lobbyists registered with the Georgia Government Transparency and Campaign Finance Commission in 2019. These lobbyists are rent seeking on Georgia Power’s behalf, working to maintain their monopoly and arguing against lowering utility rates. Krueger showed that rent seeking causes inefficiencies in markets since resources are being spent playing politics rather than improving production.

Since her publications on rent seeking, Krueger has spent her career working in international trade and economic development, including application of rent seeking in developing economies, where individuals or firms devoted immense resources to obtaining licenses to import goods, draining resources that could have been used to further production in those economies. She also showed that tariffs and protectionist policies do not benefit industry in developing economies.

This brings me to the common thread among my heroes, both male and female, in economics. They not only have incredible academic ability, but they devote that ability to making the world a better place for others.

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.

  • Melissa Trussell
  • Reg Murphy Center

1 Million Cups helps support entrepreneurs in Isles

Written by Skip Mounts on . Posted in Reg Murphy, Skip Mounts.

My next two contributions to this Murphy Center space will deal with local entrepreneurs, entrepreneurship in our community and at the College. Today’s column will update you on our 1 Million Cups program. As part of this, you are invited to our monthly meeting on May 1, 2019. This marks the end of the third year believe it or not.

When we started, several supporters asked me if I expected our meetings to last more than six months. Surely people will lose interest. There can’t be that many entrepreneurs out there. We are, after all, a hospitality and tourism driven market place. These folks are the nicest “doubting Thomas’s” I have ever met — and they come every month.

To tell the story, I need to begin at the beginning. What started us down this road?

You may recall that research by Dr. Don Mathews, Director of the Murphy Center and Professor of Economics at the College, showed our area to be the first, out of Georgia and the United States, into recession in 2007. His research also showed that our area was the last, out of Georgia and the United States, to recover. This is to say, we were in a deep recession for a long, long time. Everyone else looked at us in their rear-view mirrors.

Why? Lots of reasons — industry mix, labor force participation rates, etc. One reason that came out of discussions within the Murphy Center and with our Executive-in-Residence, Reg Murphy, was that our area lacked an entrepreneurial community and a supportive ecosystem. We needed to have people create businesses if we were ever to recover and hopefully catch up.

If this was really the case, then what could we do to stimulate entrepreneurship? In search of answers, we found the 1 Million Cups program developed by the Kauffman Center of Kansas City, the largest nonprofit studying and supporting entrepreneurship. Under this program, entrepreneurs and other interested parties would gather regularly to support others by listening to their entrepreneurial stories, learning about their ventures, helping with their problems and cheering their success.

So, after a year-long wait, 1 Million Cups-Brunswick began with a small number of supporters willing to take a chance. One of the few requirements of the folks in Kansas City was that the event should be held in a nonthreatening environment. Presenters need to be comfortable as many probably don’t like talking to strangers in strange places. While cities have incubators, innovation labs, etc., we have Tipsy McSway’s. What better place than a bar. We may be the only bar — with the best owner/supporter in Susan Bates — in the 1 Million Cups program. In fact, I have had other 1 Million Cups promotors tell me that we have the best place.

So, three years ago, Brunswick became site 78, and one of the first with monthly meetings. We joined Georgia sites in Savannah and Atlanta. Now, there are 181 cities with 7 sites in Georgia (Atlanta, Atlanta-South, Athens, Cherokee, Augusta, Savannah, and Valdosta). Now, the first Wednesday of the month, entrepreneurs, hopeful entrepreneurs, supporters, and the curious show up to listen, question, support, and drink one of a million cups of coffee.

So, come celebrate our third birthday. We will have one entrepreneur present and then we will revisit two entrepreneurial ventures that are bringing renewal to downtown; Eric Vonk of Richland Rum and Chris and Allyson Moline and Chris and Jeff Coyle of Silver Bluff Brewing Company that is growing out the ground as we write.

We have had 60 presenters, all of whom were filmed. You can see them at www.1millioncups.com/brunswick. Go look. Listen to their stories. Discover the entrepreneurs of downtown — bagels on St. Simons, haunted houses in Nahunta, a nonprofit looking to fund research for child cancer, a teenager and a cool food truck — and on and on. More importantly, do you see your story? Better yet. Come join us. It’s only one day a month — in a bar for gosh sake.

  • Reg Murphy Center
  • Skip Mounts

Yellen forged a path for women in economics

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

In January of this year, the annual conference of the American Economics Association (AEA) was held in Atlanta, and I had the privilege of attending. In a widely publicized session, the three most recent chairs of the Federal Reserve — Jerome Powell (current chair), Janet Yellen, and Ben Bernanke — participated in a panel discussion of top economic issues.

I attended the session, in part to hear the perspectives of our nation’s top economists, but mostly just to be in a room with one of my professional heroes, Dr. Yellen. When she walked into the room, I went whole fangirl, taking selfies with the stage in the background, texting all my friends, and grinning ear to ear. I was just as giddy to see Janet Yellen in January as I was to see Elton John last week.

Dr. Yellen rose to celebrity status as chair of the Federal Reserve Board from 2014 to 2017, through some of the most critical years of our recovery after emerging from the Great Recession. Prior to her appointment as Fed Chair, she served as faculty at Harvard, the London School of Economics and Political Science, and at UC Berkeley. She served several years on the Federal Reserve Board of Governors, chaired President Clinton’s Council of Economic Advisors and served as president of the Federal Reserve Bank of San Francisco.

These are all accomplishments worthy of great respect. But, what makes her a celebrity and my hero is that she earned her place at the top of a field not historically welcoming to women. This is also why I have chosen to focus on her here during Women’s History Month.

Dr. Yellen graduated from Brown University with a B.A. in economics in 1967 and received her Ph.D. in economics from Yale in 1971. An American Economics Association report published in 1973 surveyed 397 colleges and universities in the U.S. and found that in 1972, only 12 percent of all Economics Ph.D. students were women; 6 percent of all college Economics lecturers, instructors, or professors were women; and only 3 percent of full professors in economics were women.

An update of the same report showed that in 2017, 32.9 percent of Economics PhDs awarded were to women, 20.1 percent of tenure-track professors in economics were women, and 13.9 percent of full professors in Economics are women.

Things have gotten better for women in economics, but the numbers indicate there is still work to be done.

And, this is where our hero swoops in again!

During that panel session in Atlanta, all three of the panelists agreed that when we are not intentional about including women and minorities, “We’re losing a major source of talent and insight” (Bernanke). Ben Bernanke is the current president of the AEA, and Janet Yellen will be the next president. Bernanke and Yellen agreed that recruiting more women to the field and improving the professional environment for women “should be the highest priority for us.”

I can think of no one better than Dr. Yellen to lead this effort, and I look forward to being in a room with her again for an update — and maybe also an autograph.

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.

  • Melissa Trussell
  • Reg Murphy Center

Does immigration hurt U.S.-born workers?

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

People hold all sorts of beliefs about immigrants. A common belief is that immigrants depress wages and take jobs from U.S.-born workers.

And because the fraction of lesser-skilled workers is greater among immigrants than the U.S.-born, many people believe that the workers hurt most by immigration are lesser-skilled U.S.-born workers.

(In case you’re counting, here are the numbers. Among workers 25 years or older, 22 percent of immigrants have less than a high school diploma compared to 4 percent of the U.S.-born.)

Is the belief that immigration reduces the wages and employment of U.S.-born workers supported by the evidence?

Economists have done much research on this question and the results are clear: immigration has little if any effect on the wages and employment of U.S.-born workers, including lesser-skilled U.S.-born workers.

Peruse the dozens of studies that estimate the degree that immigration effects the wages and employment of U.S.-born workers and here’s what you’ll find.

First, immigration is as likely to increase the wages of U.S.-born workers, including lesser-skilled U.S.-born workers, as decrease them.

Second, the effects of immigration on the wages of U.S.-born workers, if there are any effects at all, are puny. In almost all studies, the estimated effect of a percentage point increase in the percentage of immigrants in a labor market ranges between negative 0.3 percent and positive 0.3 percent.

In two-thirds of the studies, the estimated effect ranges between negative 0.1 percent and positive 0.1 percent.

Let’s make clear what that means. Since 2000, the percentage of immigrants in the U.S. labor force has increased from 13.3 percent to 17.1 percent, an increase of 3.8 percentage points.

Suppose the worst case effect is true, that a percentage point increase in the percentage of immigrants in a labor market reduces the wages of U.S.-born workers in that market by 0.3 percent.

That would mean that all the immigration to the U.S. since 2000 has reduced the wages of U.S.-born workers by a total over all those years of 1.14 percent.

Again, that’s the worst-case effect. Research suggests the most likely effect is zero.

Do immigrants take jobs from lesser-skilled U.S.-born workers? On this score, the research is even clearer: no, they don’t.

So we have a puzzle. Immigration increases the supply of labor. Why doesn’t that depress wages?

Because, in addition to increasing the supply of labor, immigration increases the demand for labor. And increases in the demand for labor push wages and employment up.

Immigrants aren’t just workers, they’re consumers. More immigrants means a greater demand for goods and services, which means a greater demand for labor.

Immigrants are also more entrepreneurial than native-born Americans. In the U.S., the percentage of immigrants who become entrepreneurs is double the percentage of native-born Americans who become entrepreneurs. More entrepreneurship means a greater demand for labor.

Further, workers — including immigrant workers — are more likely to be complements of each other than substitutes for each other.

Do architects compete with carpenters in the labor market? Do pipe fitters compete with carpenters in the labor market? No. Workers with different skills complement each other. Each raises the productivity of the others.

Even workers with the same skills often complement each other. Do carpenters compete with carpenters in the labor market? Yes, but carpenters work in teams. Carpenters in a team complement each other; each raises the productivity of the others.

And the more productive workers are, the more valuable they are, and the greater the demand for labor.

Thus, immigration does not depress the wages of U.S.-born workers because immigration increases the demand for labor as much as it increases the supply of labor.

That’s what the evidence says.

  • Don Mathews
  • Reg Murphy Center

Creativity, freedom lead to tech that makes our lives easier

Written by Tedi Rountree on . Posted in Uncategorized.

Some of you may remember when MacBooks came in white plastic casing. If you do, I suspect like me, you are really old.

I had mine for about seven years and then it died. I turned it on one morning and the friendly little Apple symbol did not appear. I could hear turning and moaning but not much else. Plastic discs would not even go into their drive. I took it to the Mercer IT Department (my employer at the time), and they told me what I knew — it was dead. I was sad to see it go yet it had been wonderfully loyal — and I bought it over the phone and it came in the mail.

After it died, I went to Atlanta and to the new Apple Store at Lenox Square. There I saw what was going to become my new MacBook Pro.

In a silver metal case, seemingly indestructible, and it just made me forget my old plastic MacBook. Just like that I had forgotten my old friend.

My new computer was a number-crunching machine. It was with me during the best years of my publishing. I also had a good bit of consulting going on and the shiny metal case made everything I did look more impressive and more expensive. This new world was wonderful.

The only problem was setting it up and moving files from the old machine to the new one. After many calls later to Apple IT and the Help Desk, it was all good but it took a lot of time and the learning curve was quite steep.

For some reason, the other night I was cleaning out my desk and I found the original receipt for the Pro. To my disbelief it was 10 years old. Time had passed, and I was stunned that it was still working — a bit slower, however, just like me. We had grown old together, made a career and moved to the Golden Isles.

And then it happened. That night I had a dream. My dream was that my MacBook Pro died and that everything on it was lost forever. I woke up in a sweat. This could not happen. This omen was so startling, I made up my mind that I had to buy a new computer that day.

Almost instantly I started dreading the setup that I knew was destined to come. Also, I knew the sales person would look down on me and my lack of current computer knowledge.

I had to go to the doctor on Monday (my new hip is fine — thanks for thinking of me) and then on to the Apple Store at St. Johns Center.

This Apple Store was very different from the one at Lenox many years ago. Knowledgeable and friendly sales people everywhere, all of whom had some specialty. There I met my new machine upon which I am typing this article — a new MacBook Air. No more spinning hard drives, plenty of memory, lite, fast, thin and in colors – silver, gold or space gray. Space gray it was. Gold just seemed too over the top and silver seemed like something from the past.

Then the magic happened. “Would you like me to set it up for you? Should not take more than 5 minutes. Everything you have is in the iCloud. I can access it in just a few minutes.” (Cloud? I think it is a cave in Utah.) “Will this include all the passwords that I have forgotten but have stored in the old Pro.” “Absolutely!” She did not just say ‘yes.’ She said ‘absolutely.’ Her confidence was overwhelming and very reassuring.

She did not stop there. To experience all of my new computer’s features it should be connected in magical ways to my iPhone and to my iWatch. Bingo — I am now totally integrated across all platforms — even at my age. So many things in life are now so much easier, and the rate of getting easier is growing.

My point? Thank you, Steve Jobs. Thanks to all of the 47,000 Apple employees and the other 304,000 workers in U.S firms supporting Apple. Thank you for approximately 1.2 million workers in the rest of the world. Thank you for the average salary of Apple corporate employees of $124,053. Thank you for spending your income in many other places that creates jobs for other people. Thank you for freedom and entrepreneurship that led to the creation of all this.

Just think, Apple started in Steve Wozniak’s garage. Creativity and freedom made all the rest. Wealth was created and living standards raised. For those of you who think this is bad and immoral — you can simply kiss my space gray MacBook Air. I bet all those people who bought Apple stock for pennies a share are thankful too.

PS: I bet Amazon would love the Golden Isles. I know that 25,000 new employees all earning on average $150,000 would change the nature of this place. However, I would love to swap new problems for the old ones that we have now that, at times, we seem unable to solve.

  • Reg Murphy Center
  • Skip Mounts

Resiliency planning would benefit county’s future

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

Last year, I participated with a group of academic researchers and environmental professionals from around the state of Georgia (e.g. Emory University, College of Coastal Georgia, Georgia Department of Natural Resources, Georgia Tech, University of Georgia, Nature Conservancy, and the list goes on) to publish the results of the Climate Research Roadmap. Through a year-long information-gathering process and workshop, 40 experts from the natural, applied, and social sciences convened to construct a manuscript of the key climate research questions that could lay the groundwork for Georgia decision-makers to take effective, science-based action in our state.

Among these 40 questions, a few stand out as particularly relevant in the Golden Isles where our geography presents at least two unique risks — a coastal ecosystem and rural communities. I call these features of our geography “risks” because from a climate change perspective, we are facing specific threats according to the Fourth National Climate Assessment released by the Trump administration in late 2018 — rising sea levels, increases in heat waves, more widespread droughts, increasingly intense storm events, and extreme precipitation events. These factors are unpleasant to deal with at best, but are costly as well.

In Coastal Georgia, we have $1 trillion of our national wealth held in coastal real estate and as a state, agriculture contributes $73 billion annually to our economy. As sea levels continue to rise and storms continue to increase in intensity and frequency, our coastal real estate and infrastructure have become vulnerable assets that are already costing residents and businesses dearly. Though rebuilding after tropical storm and hurricane events in the Golden Isles has thus far been relatively successful, costs will escalate alongside escalating climate impacts. Agriculture is already seeing the impacts of increasing temperatures on soil quality and food yields, which is likely to have an impact on food prices not just in our state but nationally. And while all of us feel these economic stressors, economically underserved and disadvantaged communities bear the largest cost as they are least equipped to adapt. Low or no access to savings or emergency funds make low income communities particularly vulnerable to long term effects like uninhabitable structures and health risk exposure (e.g. mold). This is not welcome news for the 18 percent of Glynn county residents living below the poverty line.

Climate change impacts are being felt now, but the costs of those impacts are going to be felt well into the future. It’s a long game policy issue. Unfortunately, bureaucratic systems (particularly in a democracy) are not well-suited to addressing the long game. Bureaucracies can be bulky and take entirely too long to get things done. Elected officials in democracies are increasingly forced to answer to the immediate concerns of constituents and have difficulty tackling long term issues that may fall outside of the scope of their elected term of office. Clearly this is not always the case, but it seems to be closer to the rule than the exception.

How grim, so where do we go from here? What rural and coastal Georgians could benefit from is resiliency planning. Resiliency planning is both reactive and pre-emptive. It addresses current and anticipated needs. Several coastal communities are already engaging in this process including Tybee Island’s Sea Level Rise Adaptation Plan and St. Mary’s Flood Resiliency Project. Glynn County and the City of Brunswick have begun talking about this need through events like the recent “Rising Sea Level Predictions: What They Might Mean for Glynn County” symposium, but concrete, collaborative resiliency planning is not yet a reality.

I mentioned before that the Georgia Climate project landed on several questions that can help provide coastal Georgia decision-makers with credible, relevant data that can inform planning and policy-making. These questions address issues such as planning for and adapting to extreme weather events, understanding coastal risk factors, agricultural impacts, and impacts to rural infrastructure and communities. This research has the potential to contribute both scientific and historical/cultural knowledge to the process of resiliency planning.

A good next step would be to connect researchers working on these questions with decision-makers who can use the information to create a more resilient Golden Isles. Using relevant data to inform our planning, we can position ourselves to efficiently deal with the impacts of climate change and perhaps avoid unnecessary costs in the future.

  • Heather Farley
  • Reg Murphy Center

Our local economy – the good and the bad

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

For the most part, 2018 was a good year for the economy of Glynn County, and 2019 looks to bring more of the same.

Business growth in 2018 was steady and balanced across most local industries. Construction, manufacturing, wholesale trade, retail trade, health care and hospitality all posted increases in employment.

The job gains were especially impressive in construction. The sector added 120 jobs in Glynn in 2018, an increase of almost 9 percent.

The increase in manufacturing jobs here is a slice of the national trend. U.S. manufacturing employment has increased every year since 2010 — the longest sustained increase since the 1960s and a reversal of the downward trend that began in 1980.

Glynn’s manufacturing gains have been proportionally more modest than Georgia’s or the nation’s, but we are sharing in the larger trend.

Glynn’s unemployment rate now stands at 3.6 percent, down from 4.2 percent a year ago. Our current rate is below the national rate of 3.9 percent and dead even with Georgia’s unemployment rate.

Perhaps the most important labor market development is that the local labor force is growing again.

Between 2008 and 2014, Glynn’s labor force contracted by 9 percent — far greater than the 2 percent recession-induced contraction in Georgia or the 0.4 percent contraction in the U.S.

But since 2014, Glynn’s labor force has increased by 6 percent. Local economic growth is finally pulling people back into the labor force.

Glynn’s largest industry — hospitality and tourism — is growing nicely. Activity in the sector was up a modest 2.5 percent in 2018. More than 3 million overnight visitors came to the Golden Isles in 2018, generating $39 million in local tax revenue and a full economic impact of $1.7 billion.

The government shutdown hurt our hospitality and tourism sector bad, however. Many groups associated with FLETC canceled their visits. Hundreds of thousands of dollars in hotel stays alone were lost.

Glynn’s retail sector is cooking. Retail activity jumped 11 percent in 2018, the largest annual increase since 2006. The jump was most welcome, for our retail sector has truly struggled since the onset of the Great Recession in 2007.

Even with the bump in 2018, Glynn retail activity, adjusted for inflation, is still below its 2007 level.

Glynn’s construction sector also had a nice 2018. Residential building permits were up 6 percent for the year, while the value of residential construction was up almost 11 percent.

Activity at the Port of Brunswick was strong in 2018, but off a bit from the previous year. 525 ships visited the port, carrying 2.3 million short tons of cargo.

Look for those numbers to take off in the coming years, as the port significantly increases its capacity.

That’s the good news on the local economy.

The distressing news is that Glynn’s poverty rates remain stubbornly high.

The nation’s overall poverty rate — the percentage of people in the population who live below poverty thresholds — is currently 12.3 percent. Georgia’s is 15.1 percent. Glynn’s is 17 percent.

Child poverty rates are worse. The nation’s child poverty rate — the percentage of people aged 17 or less who live below poverty thresholds — is currently 17.5 percent. Georgia’s child poverty rate is 21.5 percent. Glynn’s child poverty rate is 29.4 percent.

Glynn’s economy has grown each year since 2014. Over the same time, its child poverty rate has fallen from 30 percent to 29.4 percent, a mere 0.6 of a percentage point. That’s distressing.

  • Don Mathews
  • Reg Murphy Center

Like physics, there are also constants in economics

Written by Skip Mounts on . Posted in Reg Murphy, Skip Mounts.

I don’t know about my colleagues at the Murphy Center, but I have found over my professional career that everyone has an opinion about economics and no one has an opinion about physics. I have wondered why this is so for many years.

I have a guess as to why. See, the toolbox of physics has constants in it like gravity, the speed of sound and the speed of light. You can’t argue about these for they are what they are. I have never heard an argument over gravity. Also, much of the world of physics comes from constants and, as such, there is really nothing to discuss.

Economics, however, appears to be absent of constants and is, therefore, largely theoretical and opinion. Here, personal positions are easy to stake out, and there is plenty to argue over.

This is however, wrong. There are economic constants that are as constant as gravity. Unfortunately, these are largely ignored. It is, after all, more fun to have an opinion than facts driven by constants. I want to discuss a few economic constants.

The first economic constant is that people have unlimited wants. You might have trouble with the word ‘unlimited’ because I could have said ‘infinite.’ At the very least, our wants are sufficiently large so that we could treat them as if they are infinite. This is an economic constant so much so that I could have called it economic gravity.

The second economic constant is that the resources that we use to fill our unlimited wants are, themselves, limited. I could have said finite. Our economic resources — land, labor, capital, and entrepreneurship — are combined in various ways to create good and services which we use to fill our unlimited wants. This, too, is like gravity. It is a constant that cannot go away. Your opinion does not change this.

Now if we combine our two economic constants, we create our third economic constant which could be called the economic problem. Combining the first two economic constants, we conclude that we can never fill all of our wants. We must make choices as to which ones we will fill. Choice is the outcome of two constants so it too is a constant.

Another way to describe the choice problem is to say that we must decide which wants will not be filled — which wants must we give up. This too is an economic constant. These unfilled wants are the true economic cost of our decisions. Money has no role in any of this other than to make exchange easier. After all, I simply use money to acquire goods and services I want and lets me avoid bartering.

Why am I using this space today for an opening economics lecture? I have tired a bit of hearing economic opinions that cannot be opinions. Let me give you an example — we need Medicare for all. A new Green New Deal. We need free college. We need free pre-k education. We need, we need, …… we need. This could have been presented as ‘changing priorities.’

Rather than tell us what they might give us or what priority is now important, I wish political leaders had the courage to tell us what they plan to take away from us, for take away they must do — more kindly, what priority is no less important.

It is easy to have an opinion about what we might need, it is another matter to have the courage to tell us what they plan to take away. You can’t avoid the ‘take away’ just like you cannot avoid gravity.

  • Reg Murphy Center
  • Skip Mounts

Income inequality, social mobility, and new politicians

Written by Skip Mounts on . Posted in Reg Murphy, Skip Mounts.

January 2019 not only brought the start of spring semester at the college with renewed expressions of hope by our student-scholars, it also marked the seating of a new Congress. This latter event brought a vocal minority of newly elected representatives to the House of Representatives who have a unique view of economics and economic success. First, they are calling for a new top marginal tax rate of 70 percent. Next, they cite the existence billionaires as an indicator of the immorality of the economic system.

I will not waste your time explaining that a 70 percent marginal tax rate destroys the incentive to do anything productive. If this is not, as a professor of mine would say, ‘intuitively obvious to the casual observer,’ then any explanation I could offer would do no good. I would, however, like to talk about bit about economics and morality.

As framed by the new politicians, my discussion will center around income inequality and social mobility. In recent years, the top income quartile (top 20 percent) earned 24 percent of personal income. This is up from 22 percent of personal income not that many years ago. Thus, income inequality is growing in the United States.

Social mobility refers to the probability that our children, when adults, will be in a higher income quartile than us parents. This is to say: will our children will be better off than we are today? Recent studies suggest that there is a one in three chance that our children will end up in a higher income quartile. This percentage has not changed in the past 30 years.

So, in the end, income inequality has increased but social mobility is the same. What are we to glean from this?

The first thing one needs to recognize is that the distribution of income is an outcome. It is what it is. It is the result of economic activity and many other variables. It is simply like a report of facts by an auditor. Social mobility, however, is probably a policy variable. There are things that can be changed that will enhance social mobility. In fact, this is probably desirable as we all want our children to be better off than we are.

Let’s start with billionaires and immorality. First, I know of no evidence that points to billionaires being billionaires because they did something to the rest of us. This would be the case in a zero-sum world. However, we know that the world is not zero-sum. Billionaires became billionaires because they did something special for the rest of us. Their income status is the outcome of doing things for others. Is this immoral? Or is taking something away from them because they simply exist immoral? (You can’t answer me using your iPhone, Facebook, Instagram, etc. or if you are holding a Starbucks Coffee from one of the 30,000 stores.)

Studies also show that increases in social mobility result from increases in human capital. The source of human capital improvement for most of us comes from education and training. So, should we limit the success of others or should we create an educational system that benefits everyone and allows the success of others to provide an incentive for the rest of us?

Where is the immorality? Access to education by everyone is probably one of the hallmarks of the United States. Why don’t we invest in it and promote access for all, encourage institutional efficiency and use this as a sign of our morality? I’m just saying.

Dr. Skip Mounts is the Dean of the School of Business and Public Management at the College of Coastal Georgia. He is also a professor of economics and an associate of the Reg Murphy Center for Economic and Policy Studies.

  • Reg Murphy Center
  • Skip Mounts

Are the ‘Barbarians’ really at the gate?

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

Claims that “Barbarians are at the gate!” are prolific these days. One such claim has it that some barbarians are already within the gate. The barbarians in mind are Chinese imports.

The claim is that cheap Chinese imports have gutted U.S. manufacturing, destroying millions of U.S. manufacturing jobs.

There are many problems with the claim.

For one, U.S. manufacturing hardly appears to be in decline, never mind gutted. Federal Reserve data show that U.S. industrial capacity is greater than it has ever been. It is 18 percent greater than it was in 2000, when trade with China was liberalized.

U.S. manufacturing production, too, has reached an historic high. Despite falling by 19 percent during the Great Recession, U.S. manufacturing output is now 9 percent greater than it was in 2000.

The idea that U.S. manufacturing is in decline is based on the decrease in manufacturing employment. Manufacturing employment reached a peak of 19.4 million in 1979. It was down to 17.2 million in 2000, and down to 13.5 million just before the Great Recession.

The recession pushed it down to 11.5 million. But it has increased each year since 2010, and now stands at 12.8 million.

Are Chinese imports to blame for the decrease in U.S. manufacturing employment?

Doubtful.

By far the most significant reason for the decrease in U.S. manufacturing employment since 2000 is technological advance. To be producing 9 percent more output with 25 percent fewer workers is an extraordinary increase in productivity.

A prominent 2013 study estimated that Chinese imports accounted for as much as one million of the four million decrease in U.S. manufacturing employment between 1990 and 2007.

More recent research suggests that estimate is incorrect.

The more recent research takes into account the fact that the bulk of U.S. trade in goods is in industrial supplies and capital goods, products that you and I, as consumers of retail goods, never see.

In 2017, 54 percent of goods imported by the U.S. were industrial supplies and capital goods; 23 percent were consumer goods. In the same year, 65 percent of goods exported by the U.S. were industrial supplies and capital goods; 12.5 percent were consumer goods.

Which U.S. firms import industrial supplies and capital goods? To a large degree, U.S. exporters. Purchasing lower-priced, quality inputs makes U.S. exporters more competitive and able to export more.

Which foreign firms import U.S. produced industrial supplies and capital goods? To a large degree, foreign exporters. Purchasing lower-priced, quality inputs makes foreign exporters more competitive and able to export more.

A consequence? U.S. imports and exports of goods stimulate each other.

The data show it. Since 2002, inflation-adjusted U.S. goods imports have increased by 88 percent, while inflation-adjusted U.S. goods exports have increased by 101 percent.

The same is true of U.S. trade with China. Since 2000, U.S. imports of goods from China have increased by 405 percent, while U.S. exports of goods to China have increased by 697 percent.

That also means that goods we import often have a significant amount of U.S. content, while goods we export often have a significant amount of foreign content.

That is especially true of Chinese imports. A Federal Reserve study published just two weeks ago found that 56 cents of every dollar in U.S. imports from China actually goes to U.S. firms and workers.

Taking all that into account, recent research suggests that Chinese imports have had little effect on U.S. manufacturing employment.

At times, there truly are barbarians at the gate. Far more common are cries of “Barbarians are at the gate!” when, in fact, there aren’t.

  • Don Mathews
  • Reg Murphy Center