Category Archives: Economy

TPM’s Deep, Deep Dive into the Economics of Inequality

Source: Jared Bernstein, Talking Points Memo, TPM Features, December 2015

Understanding the growth of economic inequality in the United States is both simple and complex. The simple part, which is also the most important part, is that by virtually all the relevant metrics, types of income, and data sets, inequality has significantly increased since the 1970s. The complex part is that to understand this increasing trend in some depth, one needs to undertake some degree of immersion in all those different metrics, data sets, and income types. That means we’ll need to look at the growth of inequality by wages, incomes, and wealth; we’ll have to understand the strengths and limitations of the various data sets.

Economic Gains for U.S. States from Educational Reform

Source: Eric A. Hanushek, Jens Ruhose, Ludger Woessmann, National Bureau of Economic Research (NBER), NBER Working Paper No. w21770, December 2015
(subscription required)

From the abstract:
There is limited existing evidence justifying the economic case for state education policy. Using newly-developed measures of the human capital of each state that allow for internal migration and foreign immigration, we estimate growth regressions that incorporate worker skills. We find that educational achievement strongly predicts economic growth across U.S. states over the past four decades. Based on projections from our growth models, we show the enormous scope for state economic development through improving the quality of schools. While we consider the impact for each state of a range of educational reforms, an improvement that moves each state to the best-performing state would in the aggregate yield a present value of long-run economic gains of over four times current GDP.

A Region Left Behind: Lost Opportunity In The Deep South

Source: Chico Harlan, Washington Post, 2015

….It is a downbeat reality for a region that for much of the second half of the 20th century was actually closing its gap with the rest of the country, helped by the federal war on poverty and the end of legalized segregation. But during the past 15 years — and particularly since the Great Recession — the catch-up has stalled. By some measures, it has reversed. Somebody born today in Mississippi, Alabama, Louisiana, Georgia or South Carolina is far more likely than someone born elsewhere in the United States to attend a poorer school, drop out before high school, work a low-paying job, struggle with debt, go to prison and die young, according to national health, labor and education statistics. …. But the troubles in the Deep South go well beyond race to include frayed state finances, which have eroded the safety net for the poor, as well as public school underfunding, which leaves those who can afford it scrambling to private schools. And it extends to a growing technological divide that has left significant rural areas without access to the digital world; a rise in single-parenthood, which is a major indicator for generation-to-generation poverty; and the decline of rural job opportunities in states that have long relied on agriculture rather than on urban hubs….

Articles include:
An opportunity gamed away
Source: Chico Harlan, Washington Post, July 11, 2015
For a county in the Deep South that reaped millions from casino business, poverty is still its spin of the wheel. …. What went wrong in Tunica is a matter of perspective. For many African Americans — and the county’s current officials — it was a story of a largely white political leadership that did not grasp the depths of poverty facing many black residents and did not choose to use the casino revenues that flowed into the county in an equitable way. So instead of funding skills training and providing programs for the vulnerable, they poured money into a riverfront wedding hall, an Olympic-size indoor swimming pool and a golf course designed by a former PGA Tour pro — all while implementing a massive tax cut that primarily benefited the wealthy. …..

Graduating, but to what?
Source: Chico Harlan, Washington Post, October 17, 2015
Poor students in the Deep South who successfully navigate traumas at home and dysfunction at school find few opportunities afterward. ….The Deep South’s paralyzing intergenerational poverty is the devastating sum of problems both historical and emergent — ones that, in the life of a young man, can build in childhood and then erupt in early adulthood. Students such as Davis deal with traumas at home and dysfunction at school — only to find themselves, as graduates, searching for low-paying jobs in states that have been reluctant to fund programs that help the poor. That cycle carries implications not only for the current generation, but also for the ones to come, and holds back a region that has fallen further behind the rest of the nation….. In recent years, shriveling job prospects for the high-school-educated and scant state support for the poor have combined with the Deep South’s more timeworn problems — single-parenthood and under-education — to diminish the chances of a middle-class life for somebody born into poverty….

A grim bargain
Source: Chico Harlan, Washington Post, December 2, 2015
Once a weakness, low-skilled workers who get paid little have become the Deep South’s strength. ….In wide swaths of the Deep South, public schools struggle, turning out workers who lack basic skills. Agricultural work has long faded, while job opportunities in once-prosperous industries such as textiles and timber have been lost to cheaper options in Latin America or automation at home. Politicians say they must give freebies to lure companies here, or offer nothing at all and watch the region — which already lags behind the rest of the country on most measures of well-being — fall even further behind. But in some cases, when opportunity arrives, it highlights a grim bargain: Jobs come at great cost but offer only a slightly better version of a hard life. The region’s weaknesses — a low-skill workforce that doesn’t expect particularly high wages — become its competitive strengths. And suddenly, the only opportunity for somebody such as Deshler becomes a Chinese company looking for a place from which to do more business in the United States….

Organizational Network Activities for Local Economic Development

Source: Hyunsang Ha, In Won Lee, Richard C. Feiock, Economic Development Quarterly, Published online before print November 18, 2015
(subscription required)

From the abstract:
There has been considerable interest and study of local and regional economic development networks in recent years. Local governments forge informal and formal network ties with a variety of organizations, the most prominent of which are private, private/public development, community/residential, and public. Extant research has examined networks but not the processes of network partner choice and their networking. This research begins to fill these lacunas by empirically examining various explanations for economic development networks and their influence on each of these four types of networking. The findings reveal that the factors shaping network ties in each organization type are different. Except for community/residential organization network ties, local governments’ networking is significantly related to the development incentives that they offer. Network ties with public organizations are related to government structures. Network ties with community/residential organizations are distinguished by their relationships with financial conditions and citizens’ opposition to development. The factors influencing network activities for economic development with organizational types are shaped by the predisposition of each organizational network; thus, the factors promoting local economic development activities and the factors stimulating network activities for local economic development are different.

State of State Business Incentives 2015

Source: Council for Community and Economic Research (C2ER), 2015

From the blog post:
C2ER recently completed its annual update of the State Business Incentives Database. As part of the database review process, C2ER researched every U.S. state and territory to ascertain information on what programs have been created, repealed or altered during each state’s most recent legislative sessions. Based on this research, combined with extensive outreach to representatives in every state and territory, the Database now reflects the present status of the more than 1,900 state business incentives in operation around the country.

The State of State Business Incentives 2015 report summarizes the findings from this review. Most striking is the overall growth in the number of state business incentive programs. Since the new millennium, the overall number of state incentive programs targeted to businesses has more than doubled, from less than one thousand in 1999 to nearly two thousand today. The report takes a closer look at the different types and purposes of business incentive programs administered by states and how state incentive portfolios have changed over the past few years in response to recent economic trends, with notable examples of recent state incentive activity.

The Growth Mirage: State Tax Cuts Do Not Automatically Lead to Economic Growth

Source: William G. Gale, Aaron Krupkin, Kim Rueben, Tax Policy Center, September 8, 2015

From the abstract:
Cuts in top state income taxes are intended to raise economic growth, but could instead force punishing spending cuts, as revenues fall and states confront borrowing constraints. Previous work shows no clear impact of state taxes on growth. In new research, we build on a widely cited study that identifies a robust negative relationship between tax rates and state growth. We find that the negative effects disappear when we extend the sample beyond 2000 and that the relationship is unstable over time and across taxes. Likewise, examination of recent state tax cuts reveals little evidence of tax cuts driving growth.

Shortchanging Small Business: How Big Businesses Dominate State Economic Development Incentives

Source: Greg LeRoy, Carolyn Fryberger, Kasia Tarczynska, Thomas Cafcas, Elizabeth Bird and Philip Mattera, Good Jobs First, October 2015

From the press release:
Governors and state legislators routinely praise small businesses for their contributions to economic growth and job creation, but states actually give big businesses the dominant share of their economic development incentive awards. An analysis of more than 4,200 economic development incentive awards in 14 states finds that large companies receive dominant shares: 70 percent of the deals and 90 percent of the dollars. The deals, worth more than $3.2 billion, were granted by programs that are facially accessible to both small and large companies. More than 500 other state incentive programs were disqualified for analysis because they have barriers to entry that exclude small businesses and favor big businesses. …. The 14 states where the awards were analyzed are Florida, Indiana, Kansas, Kentucky, Louisiana, Missouri, North Carolina, New Mexico, Nevada, New York, Pennsylvania, Vermont, Virginia and Wisconsin. …..

Trends in collective bargaining coverage: stability, erosion or decline?

Source: Jelle Visser, Susan Hayter & Rosina Gammarano, International Labour Organization (ILO), Labour Relations and Collective Bargaining Issue Brief no. 1, 29 September 2015

From the press release:
New research from the ILO quantifies changes to the coverage of global collective bargaining after 2008. While some countries have experienced increased coverage, most have seen declines…. Figures from a new ILO database on industrial relations show that collective bargaining has come under pressure in many countries since the start of the global financial crisis in 2008. The new IRData tool includes indicators on trade union density and collective bargaining coverage in 75 countries. It was launched together with a brief highlighting the major trends on collective bargaining. According to the brief, collective bargaining coverage varies significantly between countries, from just about 1 or 2 per cent in Ethiopia, Malaysia, the Philippines and Peru to nearly 100 per cent in France, Belgium, Austria and Uruguay….

Stronger Together: How Unions Help Strengthen Families and the Nation

Source: Democratic Staff of the U.S. House Committee on Education and the Workforce, October 2015

…. Unions could help these workers bargain for a better deal. But for too long, Republican lawmakers have been trying to kill off unions by weakening the protections available under the law for workers’ organizing efforts. And all too often, employers manipulate the law and engage in illegal tactics that make it extremely difficult for workers to form a union. Despite these obstacles, as this report documents through data analysis and workers’ own accounts, joining a union and bargaining for better wages and working conditions has been and remains among the best ways to raise wages, reduce inequality, and restore the link between productivity and prosperity. The workers who share their views on the critical importance of unions in this report make a powerful case for strengthening protections for workers’ fundamental right to choose a union. Lastly, there are steps Congress can take to restore workers’ ability to bargain for their fair share. This report offers important recommendations toward that end. …..