By Michael Hicks | Ball State University
The last decade saw considerable concern over rising income inequality in the United States. Academic work by Thomas Piketty and the populist backlash that fueled the presidential campaigns of Bernie Sanders and Donald Trump brought this concern to mainstream America. Over the past few years, several researchers, including my colleagues and I at Ball State, have argued that regional inequality was an equal, if not more pressing, worry.
This column noted before that counties across the U.S. have been growing more unequal since the 1970s, reversing a century or more of economic convergence. This is creating places that grow either richer or poorer. Increasingly, poor people live in poor places, while rich people live in rich places. This diverging map of prosperity has many causes. However, it seems increasingly apparent that over the short-term, COVID is worsening regional inequality.
Employment losses in 2020 were concentrated among the lowest-wage workers. These workers are geographically in ways that exacerbate regional inequality. While labor markets have strengthened since the most turbulent year in American history, just the last few months of data make clear how deep and intractable regional economic inequality is becoming.
The most recent state-level monthly jobs report is the first in its series to capture the employment effects of the 26 states that ended Pandemic Unemployment Insurance early. It is also the first jobs report to capture the resurgence of COVID that is now moving quickly across parts of the country. What is striking about this report is the geographic clustering of COVID and economic performance.
From April to June, the 26 states that ended the pandemic Unemployment Insurance early grew about 72% as fast as the rest of the country. The most charitable understanding of their policy decision was a hope that it would spur employment. However, from June to July, as all these states cut benefits, their job growth slowed substantially. From June to July, the states who cut Pandemic UI grew only 64% as quickly as those who left these worker benefits intact.
A study published this week provides some clues as to why this may have happened. Using banking data from these UI recipients, the authors reported that few recipients who lost benefits found jobs, and nearly all had exhausted family savings. These cuts ended the economic stimulus from these states, slowing job growth. Still, more than just a short-term policy mistake is contributing to this differing outcome between states.
From April to June, the 25 least-vaccinated states saw job growth at about 80% of that of the 25 most-vaccinated states. That was before COVID started its resurgence. But, from June to July, these states saw employment growth drop to just 67% of that of the most-vaccinated half of states. The correlation between vaccination rates and job growth is unambiguous. Each 1.0% increase in the vaccine rate is correlated with a 1.2% increase in job growth. That’s considerably stronger than the role cuts to Pandemic UI played on growth. Still, the economic performance across states isn’t just about a few months of pandemic stimulus cuts or resurging COVID.
Educational attainment plays a surprising role in vaccine rates. A recent study reports that 76% of workers who are college graduates are vaccinated, while only 53% of workers who are high school graduates are. Educational divergence in healthcare outcomes are common, but this one is different in two important ways. First, large differences in vaccine rates by education are uncommon. Before the pandemic, vaccines were almost universally accepted. Second, older Americans are disproportionately vaccinated. Roughly 85% of 65-and-older Americans have been vaccinated, while barely half of the 25-to-40-year-old crowd are.
The education and age differences are odd because the educational attainment of young adults is markedly higher than older Americans. So, with a little algebra it becomes clear that it is younger, less-well-educated adults who are disproportionately unvaccinated. I surmise that older Americans recall polio summers, chicken pox and mumps. It turns out that very useful knowledge is derived from successfully navigating a long life. Of course, that is why we have schools that accumulate and share knowledge acquired over centuries of painful trial and error.
All of this makes clear the growing policy challenges of rising inequality across America’s counties, cities and states. It turns out that income inequality between families is relatively easy to fix. We simply continue to tax affluent people more, and transfer those dollars to poor people, as we’ve been doing for a century. That remedy has largely banished the sort of Dickensian penury that remains common in much of the world.
However, there is no easy policy tool to remedy the economic inequality between places. The circular challenge presented by COVID should make this clear. Low levels of educational attainment in a state result in lower vaccine rates. Lower vaccination rates suppress job growth, and the result is weaker economic conditions. This in turn persuades elected leaders to embrace policies that treat symptoms instead of causes. In the case of the pandemic, these policies further weaken the economy, lessening the resources to boost educational attainment. It is a hamster wheel of despair, and fertilizer for populist demagogues.
I use COVID only as an example. The pandemic didn’t cause these problems, it merely magnified and exposed them. While improved educational attainment will reduce economic inequality, that’s not the whole of the problem. After all, vaccines don’t just provide individual protection from disease, but also protect neighbors, friends and their children. The dark impulses that refuses vaccines are not just about ignorance. It is a rejection of individual responsibility that is hostile to the success of a vibrant, modern economy. It’ll take more than good schools to remedy this problem. But, until we do, expect continued divergence between America’s rich and poor places.
Michael J. Hicks, PhD, is the director of the Center for Business and Economic Research and the George and Frances Ball distinguished professor of economics in the Miller College of Business at Ball State University.