Economist Morton Marcus discusses Elkhart County economy, virus relief bill

Prior to dipping into his predictions for the COVID-19 relief bill, Marcus first provided attendees with a few statistics surrounding Elkhart County’s economy.

According to data from 2019, just less than $5 of every $100 of Indiana’s Gross Domestic Product, or the value of all goods and services produced in the state, came from Elkhart County.

“And that’s really not a bad number when you consider that Elkhart County has only 4.3% of the state’s population, which means that Elkhart County really is overproducing, or, as I would really like to say, other parts of the state are under-performing on a sort of per capita basis,” Marcus said.

He noted that the average annual wage in Elkhart County was about $50,000 in 2019, while the average annual wage for proprietors, or people who own their own businesses, was about $48,000.

“The average annual wage, exclusive of government and private insurance contributions, is above what the proprietors make. So, the proprietors must be getting something else,” he said. “Part of it, I believe, is some of the tax benefits that an ordinary, average employee doesn’t get.”

As for GDP, he noted that the value of all goods and services produced in Elkhart County was most recently listed at $16.2 billion a year.

“Indiana is a $380 billion economy, and the nation is $21.4 trillion. ... President Biden is talking about a $1.9 trillion program, and that’s in the neighborhood of under 10% stimulus to the entire economy. It’s a large figure, a larger percentage, but still, you have to look at it in the context of the magnitude of the (entire) economy,” Marcus said. “My feeling is that we don’t do that. What we do is, we compare that to government spending in general, we compare it to the debt that will be added to the debt of the United States. But really, the important thing is, how much of a stimulus is it? Well, it’s just under 10%.”

STIMULUS BILL

Among the first items to be discussed by Marcus regarding the potential impact of Biden’s stimulus bill on Elkhart County was the proposed $1,400 stimulus check.

In 2019, Elkhart County boasted a population of just more than 206,000, which, depending on eligibility requirements, could translate into about $289 million coming into the county through the new round of stimulus checks.

“The real question is, where are you going to spend your $289 million, when are you going to spend it, and on what are you going to spend it? If you want to talk about what’s going to be the impact on Elkhart County, you have to be able to answer these questions,” Marcus said. “You have to be able to know whether or not, first of all, if you’re going to spend it, or whether you’re going to save it. ... I think that a lot of people are going to hold onto that money for some extended period of time, not knowing whether or not they’re going to get that job back.”

Marcus also predicted that once the county’s residents do decide to spend the stimulus money, it’s likely much of it will not actually be spent in Elkhart County, which in turn will lessen the impact of the stimulus money on the county.

“My belief is that the amount that would necessarily be spent on Elkhart County in terms of retail trade is relatively small, because when you think of people making not just the routine purchases of every day, but the purchases of every week and every month, they’re much more inclined to be going out to Costco ... and they’ll be going to many places that don’t have stores in Elkhart County, but they’re over there in St. Joseph County, etc.,” Marcus said.

CAUSE OF INFLATION?

Marcus also explored the question of whether the new stimulus bill will cause inflation, which is when the value of money goes down, thus requiring people to pay more for the everyday things that they buy.

“Many people are inclined to believe that inflation is caused by labor unions. This was a very popular idea 30 and 40 years ago, because unions were asking for more money, and now unions are just asking to hold onto their jobs. Other people say no, it’s big business, just this tremendous drive for profits,” Marcus said. “And of course there are the economists who love to argue that, no, inflation is just money, and when you have a lot of money floating around in the economy, then prices will go up. Well, that was the standard view that economists had for a long, long time.”

But according to Marcus, there is a group of economists who oppose that idea, arguing instead that it is an economy’s idle resources, or the lack thereof, that determine when it is hit with inflation.

“Their argument is that as long as there are idle resources — as long as we’ve got unemployment, as long as we have factories that are not at capacity, as long as we have vacant retail spaces, as long as we have large inventories, all of those things — you can have more money in the economy and it will not cause prices to go up,” Marcus said. “So, I am very glad to see that Mr. (Jerome) Powell, the chairman of the Federal Reserve System, is very conscious of the unemployment situation, and supportive of the stimulus, because he doesn’t feel it will cause inflation because we have so many underutilized resources. All you have to do is drive around and look at the number of stores that are for rent, or the buildings that are for lease, and you will have a great measure of underutilized resources.

“I think that the likelihood of inflation is relatively small, and the inflation that we may have is probably going to be fairly short lived,” he added. “That’s all supposition. There’s no way of proving that one way or another until we actually see the data.”

MINIMUM WAGE HIKE

Marcus also touched briefly on the proposal to gradually increase the federal minimum wage to $15 an hour, which could potentially be included in the final stimulus plan.

Earlier this week, the nonpartisan Congressional Budget Office predicted that raising the minimum wage to $15 an hour by 2025 would lift almost a million people out of poverty and raise wages for 17 million more — but it would cost the economy 1.4 million jobs.

“Minimum wage has always lagged behind the real needs of people, and a minimum wage of $15 an hour says, at best, something like $30,000 a year. It’s hard to imagine an individual living on $30,000 a year. ... A single mother who is supporting children at $30,000 a year is in real serious trouble,” Marcus said. “Would jobs be lost at the Burger (King) or other firms that are operating in Elkhart County? Undoubtedly. But at the same time, there would be a lot of adjustments made by a lot of different companies about how to deal with the higher wages that they’re going to be paying.”

WORKER TRAINING

Speaking to funding for worker training, Marcus noted that while such funding could very well be included in the plan, it’s not likely to have much of a positive impact on Elkhart County workers.

“This is part of almost every spending program that any administration comes up with. It’s never been really successful, and a large part of it is because you really can’t train workers aside from them being at the place of work with the people they’re going to work with,” Marcus said. “We try to do worker training in classrooms, and it doesn’t work. We try to do it in laboratories or in workshops in facilities like Ivy Tech, or even in our high schools, and it doesn’t work. Workers need to be trained by the people they’re going to work with, and that means getting employers to be willing to pay people who are in training, and we don’t have very much of that at all.”

One way to encourage more employers to get on board, he said, would be to create a government program that pays full wages to workers while they are in training.

“It’s got all sorts of shortcomings, and you can imagine the way people might misuse it,” he said, “but it might be the best way of getting people into work situations where they can be trained for the jobs that they’re actually going to have.”