Let’s Amend, Not End, Capitalism

The United States prides itself as being the “land of opportunity”.  With the U.S. being a favored destination for immigrants across the world, that distinction still has merit.  However, there are disturbing trends where many are questioning the value of capitalism due to its contribution to income inequality.  Even so, we must acknowledge the role that capitalism played in lifting not only Americans out of poverty and into prosperity, but in Canada, Europe, and all parts of the world.  Having said that, we must recognize that our current economic system needs to be amended to level the playing field.

Many Americans are divided on the moral implications of income redistribution.  On one hand, there are those that believe that extravagant wealth is immoral and that there should be a limit on executive pay.  In fact, Japan has embraced this culture and have stifled executive pay.  Their executives must publicly disclose their pay if it exceeds $1.1 million and only 7.5% of them exceeding this baseline.  That is dwarfed by American executives, whose top 10 earn between $43 to $131 million in annual salaries.

Then there are others, who believe too much income redistribution is immoral because it unfairly penalizes hard work and achievement.  When an individual makes sacrifices in their education and career, why should they be forced to give up a portion of their earned pay to subsidize an irresponsible individual, who squandered opportunities by not valuing their education early in life?  If taxes are increased substantially as your income rises, then the payoff of extra work and risk is lowered.  Why go through the rigors of medical school, engineering, and law school, when one can make a similar amount in a less demanding field?

In deciding between two competing narratives, the difference comes down to economic mobility.  Is our present economic system more conducive to promoting competition between social classes?  Unless one believes that effort and ability is only consigned to the affluent, one would think that the U.S. economy and its promotion of economic liberty would result in healthy movement between the poor, middle class, and upper class.  However when compared to our peers, we are laggards.  Markus Jantti’s study comparing the U.S. with the United Kingdom, Denmark, Norway, Sweden shows that Americans are less likely to rise from poverty across generations than any of those four countries.

Certainly, it is fair that a successful professional, who has excelled at their craft, should be able to pass their hard-earned dollars to their children to help them compete.  One of the motivations to taking on additional responsibilities on a project or working 60-70 hours a week is to provide a better life for our children.  That means living in a better neighborhood and access to superior schools.  However, should there be limits imposed on those advantages in the form of higher taxes?

Specifically, there’s a growing body of research that income inequality imposes significant costs on the economy.  In order to counter these costs, there are policy initiatives that would boost equality and shift the economic gains would shift from the affluent to the low and middle class.    When there is too much income inequality, it can actually inhibit economic growth and cause more instability.  Raghuram Rajan elaborates on this view in Project Syndicate.  Specifically, he blames deregulaton and legislative acts promoting home ownership as the root causes of the financial crisis as low- and middle-income households took on too much debt to maintain their standard of living in the face of declining income growth.

With rising inequality, the occurrence of rent-seeking is more prevalent.  This is where individuals use their financial resources and influence to affect policies that benefit their interests over society.  The prevalence of special interest groups and less restrictive campaign financing laws provide the potential to seek loopholes and other avenues to enrich themselves at the expense of others.  Columbia University economist Stiglitz pointed to lack of effective oversight of the financial industry where irresponsible mortgage products caused our steep recession.  Then there are exploitations of the tax code where societal benefits are minimal when these advantages boost corporate balance sheets, rather than worker payrolls.  Lastly, it stunts the progress of competitors who are not able to buy influence.

It is imperative that we achieve legislative reform that minimizes the influence of special interests and replace it with investments toward minimizing the skills divide.  A two-pronged attack is necessary.  First, we need a quick fix in updating adult skill sets that are struggling to meet the requirements of a technology-based economy.  As for schools, they must find ways to increase academic performance within low-income and middle-income households despite challenges within family structures and less than ideal neighborhoods.  This must start with better parental training and access to early child education resources.  Both will require more funding and resources.

Capitalism remains the ideal economic system in the world, but ignoring the negative effects of income inequality can lead to its demise.

Ridding Ourselves from Sharecropper Mentality

In this era of abundant access to credit, it is too easy to be engulfed in debt.  Whether it is through credit card companies, department stores, or various financial companies, we are susceptible to purchasing items that we really cannot afford.  It is deceiving because a swipe of a plastic card can provide us with the luxuries of life.  However, the unintended consequences are accumulation of debt that has serious consequences for not only your life, but future generations.

This predicament reminds me of the lifestyle shared by many of the freed slaves of the South, who became sharecroppers as a means of survival.  After the end of the Civil War, they received their freedom, but were hampered by the legacy of slavery where access to education and job opportunities were shunned to them.  Faced with dire circumstances and little means to acquire private property, they were forced to accept undesirable credit terms as a means of survival.

For most sharecroppers, the terms were prohibitive and designed to consign them to perpetual poverty.  With no means to independently acquiring the raw materials and land to farm successfully, they entered into arrangements where their crop income was never enough to service their debts.  Therefore, they would find themselves incurring heavier debt levels each year and eroding any potential for generating wealth.

Thankfully, sharecropping slowly died off as industrialization presented individuals with expanded job opportunities.  However, it has been replaced with another insidious curse that is hampering many households.  Rather than be beholden to landowners, too many Americans are now beholden to creditors.

Fortunately, this latter predicament can be rectified through better discipline and a changed mindset.  We must rid ourselves from the costly chain of interest costs and ballooning balances.  This can be done through developing a budget and adjusting our lifestyle to adhere to monetary constraints.

If your total debt is significantly higher than your income, realize that it will not disappear overnight.  Instead of fretting over it, be proactive in consistently lowering your debt load.  Rather than thinking paycheck to paycheck, picture where you will be year after year.  If you have $20,000 in debt, focus on how to get down to $19,000, then $15,000 until you get to $0.  This means not only establishing a monthly plan, but a five-year plan to debt reduction or wealth accumulation.

Fight the urge to give up on drowning finances and think about the big picture.  Your children will soon grow up and will need help in financing the high cost of college.  Eventually, you will want to retire and not be stressed on how to make ends meet when your income-earning potential evaporates.  Then there is an obligation to pass down wealth upon your death to your family members and show them the path to prosperity.

In order to accomplish the goal of eliminating debt, start with carefully tracking your expenses over a month’s time before setting a budget.  By visually accounting for various household and personal transactions, you will gain a greater understanding of what is a necessity and a luxury.  This will assist your preparations of devising reasonable financial goals.

Maintain a humble nature and stop trying to impress others with your personal possessions.  Is it necessary to always buy name brand items or would a cheaper alternative suffice?  Do you really need the latest electronic gadget?  It may be necessary to curtail your cable, internet and phone subscriptions.  If you greatly value entertainment after a hard day’s work, then investigate options where you maintain your internet services, but cut out cable TV.  Many of your favorite TV shows can be viewed online for free.

Discipline yourself through better decision-making.  First, find ways to prepare more meals at home.  It is very expensive eating out and finding ways to prepare more meals at home, along with leftover lunches for work, can relieve a great burden on your finances.  Rather than shop at pricey department stores, consider shopping at discount outlets.

It is time to break free from that sharecropper mentality and embrace a wealth-generating mentality.

Use The Tax Refund To Reward Yourself

With the deadline on filing taxes ending recently, this is an ideal time to spend our tax refund the right way.  With all of the hard work that we put in each day, it is time to reward ourselves.   Rather than thinking about purchasing the latest iPhone, big-screen HDTV, and a luxurious vacation, reward yourself with less stress by boosting savings and reducing debt.

It is essential to build up an adequate level of savings.  Unless you have two months or more of your income in emergency savings, it would be helpful to devote half of your refund in replenishing your safety net.  One can never foresee a car breaking down, costly medical surgery that is essential, or losing a job.  However, you can prepare for those instances by having an ample amount of saving to alleviate a crisis.  Otherwise, you will be tempted to make ends meet by using your credit card, which should be avoided at all costs.

In our pursuit of wealth and prosperity. we first need to rid ourselves of the curse of debt.  Try to commit at least half of your refund toward eliminating debt.  Credit card debt leads us down a path of despair and misery.  You have already committed to an austerity budget where you will mostly spend on necessities, rather than spend frivolously on items that are not needed.

When eliminating debt, focus on the interest rate, rather than the balance.  If you have multiple forms of debt, resist the urge to pay down small balances that have low interest rates when you have large balances with much higher interest rates.  Recognize that high interest rates will do more damage to your wealth than low interest rates.

Debt reduction means setting mini-goals.  If you have $10,000 in debt and earn a low or moderate income, then it is not possible to pay it off within a year.  Assume that you earn $40,000 a year.  If that is the case, commit to paying off 10% of that debt each year.  Depending on the interest rate, it might take up to three years or more to eliminate it.  That is a long time and can lead to discouragement.  Therefore, set moderate goals that can be met throughout the year.  One example is rewarding yourself with a small impulse buy when your debt balance is reduced by $1,000.

Discipline yourself through a mindset of delayed gratification.  We only live once, so it is fine to splurge on the finer things of life.  However, let’s pursue moderation by identifying one item, rather than multiple items.  In addition to paying down your debt, set aside extra funds over time toward buying that special outfit or home furnishing or modest vacation over time.  By resisting the impulse buy, you have time to pay it with cash rather than debt.  Also, by waiting, you might be able to take advantage of special deals and discounts.

Stop punishing yourself through satisfying temporary pleasures and seek more permanent rewards through more disciplined money management practices.

Is The U.S. Economy Turning The Corner?

This Bloomberg report from Carlos Torres and Catalina Saraiva on April 12, 2013 highlights some good news about the U.S. economy.  Despite gridlock and an increase in the payroll tax, consumer spending was quite resilient and they expect economic growth of 3% of real gross domestic product.  Real gross domestic product measures economic activity with adjusting for inflation.  If these estimates prove to be accurate, then that will be surprising news.  However, the Bureau of Economic Analysis will release their first estimate on April 26th.

If this economic performance proves to be accurate and it can be sustained throughout the rest of the year, it will be a welcomed relief if the momentum of the first quarter extends through the rest of the year.  What is often misunderstood is that actual economic performance is usually a result of past events.  Due to a sustained recession and slow recovery, industry has been slow to build up capacity.  That will soon change if they think that greater consumer demand will be sustainable.

There are two events that can explain why consumers are spending despite an increased tax burden and a sluggish labor market.  First, housing is on the rebound with both home sales and prices rising.  When people are buying homes, that leads to more spending with household appliances and new furniture is needed to fill up their space.  This also enhances the wealth of those selling homes because they are receiving higher prices.   Then there is strong performance of the stock market where its improved rate of return is boosting overall wealth.  When their stock portfolio rises in value, then households are more opt to spend.  Economists call this the wealth effect.

The quick improvement in growth prospects also speaks to the labor flexibility built within the U.S. economic system.  While Americans certainly do not appreciate how firms are quick to fire workers when economic prospects take a turn for the worse, firms are also able to quickly reverse their actions when the economy brightens.  This can be attributed to our economic system where it is less burdensome for firms to hire and fire workers.  That is in contrast to Europe where worker protections make it harder for European companies to lay off workers.  Even though it softens the blow during economic downturns, they are more reluctant to hire workers when an economic recovery starts to emerge.  That is one of the reasons why the U.S. has been more resilient in recovering from the financial crisis than Europe.

We can draw some optimism from this news, but it is still premature to say that we are out of the woods.  The impact of the sequester will not be fully felt until the second and third quarters of 2013.  Then there’s the uncertainty from events in North Korea.  However if the impact from those two events are less than expected, then we might see the U.S. economy perform above expectations.

Alternative Route To Diversity at Elite Schools

David Leonhardt of the New York Times writes about an interesting initiative aimed at improving socioeconomic diversity at elite colleges.  Due to sticker price shock, many low-income families automatically assume that highly-selective, expensive private colleges are not practical options.  Instead, they opt to go to public schools with lower tuition rates.  While it is true that the tuition for private colleges is much more expensive than public schools, poor families might actually get a better deal at private colleges because financial aid is more substantial.

An experiment was conducted by ECO-Comprehensive Intervention group where they actively sought out high-achieving, low-income students.  With the support of schools, such as Stanford, Princeton, and Northwestern, specific mailings were sent to these targeted families in order to encourage them to apply.  Actually, there were two control groups with similar SAT schools with one low-income group receiving the mailings, while the other did not.

The results showed that the targeted group was much more successful at gaining admission (54%) compared to the non-targeted group (30%).  If more elite institutions of higher learning boosted their efforts in recruiting high-achieving, low-income students, then they would be more successful in achieving economic diversity,

Economic diversity is where a college has a mix of students of varying income groups.  When looking at Ivy League colleges, most of the students come from affluent families due to its enormous cost.  This is problematic because it is a barrier to social mobility, where the U.S. lags most advanced countries.  Lower social mobility is exemplified by the severe rates of income inequality that we have experienced over the last couple of decades.

Previously, elite colleges were mostly interested in racial diversity in order to counteract past discriminatory practices.  With affirmative action, many talented African Americans were able to gain access to selective colleges and have been very influential in the U.S.  American Express CEO Kenneth Chenault and the current President of the United States, Barack Obama are two Ivy League African American graduates that come to mind.  While it is not certain what role affirmative action played in the admission of either, Harvard’s increased focus on attracting more minorities helped increase access to an exclusive network, which undoubtedly played a role in their ascension in the corporate and political realms.  Their sustained level of success shatters the stereotype that minorities cannot compete at the highest levels.

Providing preferential treatment based on socioeconomic status will be important with the existence of affirmative action in jeopardy.  The U.S. Supreme Court is considering a challenge to affirmative action and might end it due to a perception that we live in a post-racial society.  Even though one can argue that the legacy of slavery and racial segregation has a negative impact that can be felt through psychological scars and stereotypical behavior that exists today, the intent of affirmative action was always temporary and many Americans feel that the vestiges of discrimination have been eliminated.

However by basing admission decisions on socioeconomic status, that would pass constitutional muster and achieve similar goals due to minorities more likely being low-income than whites.  If that is the case, that can be an effective way to promote social mobility where the U.S. lags many of their peers, while maintaining racial and cultural diversity.

Achieving social mobility is a noble goal that was once a tenet that made America so great.  The U.S. used to be known as the land of great opportunity where one can rise to great heights from humble beginnings.  Unfortunately, those opportunities are scarce due to inequitable access to education and unstable family structures.  These environmental barriers are analogous to two baseball players where one faces tough conditions with inferior equipment, while the other enjoys ideal conditions with superior equipment.

Would an affluent student score as well as a comparative poor student on the SAT if they had limited access to enhanced test preparatory services or received less support and encouragement from their parents?

If your answer is no, then supporting preferential treatment based on socioeconomic factors would be one way to level the playing field.

How to Succeed in an Economics Course

Reblogged from Close to the Edge:

From Marc Bellemare, via the Frances Woolley post linked on Monday, here's a link (PDF) to one man's view of how to succeed in an economics course. The sheet includes advice on working on problem sets and test preparation, and is, in my mind, very valuable - particularly for students in the courses I teach, such as Intermediate Microeconomics and Game Theory.

Read more… 238 more words

This blog might be interesting to any students trying to be succeed in an economics course.

Unemployment Rate Falls, But Prospects Are Dimmer

The March job report was deceiving.  While the unemployment rate fell from 7.7% to 7.6%, there was only modest job growth and a contracting labor force.  Even though job growth was 88,000, it was far less than projections ranging from 125,000 to 160,000 and just a little more than a third from last month’s rate of new jobs.  In fact, the only reason why the unemployment rate did not rise was due to people dropping out of the labor force.

There are a few ways to quantify the extent of the shrinking labor force.  The traditional measures include the labor force participation rate and the employment-population ratio.  The labor force participation rate answers what portion of the non-institutionalized adult population is either working or actively seeking work.  Even though it would not count individuals who are incarcerated or institutionalized with mental illness, it would include those who are happy to not be working, such as a homemaker or retiree.  The employment-population ratio is similar, but only focuses on those working in relation to the non-institutionalized adult population.

There are somewhat mixed signals with the labor force participation rate falling, but the employment-population ratio remaining stagnant.  Over the last year, the labor force participation rate has fallen from 63.6% to 63.3% over the last 12 months, but the employment-population ratio was the same at 58.5% after adjusting for seasonal factors.  However, a closer look shows that the labor force participation rate trend more accurately reflects the labor market.  From the Bureau of Labor Statistics, Table A-16, they show that of the 90,483,000 people not in the labor force, 6,399,000 million want a job.  That is an increase of 358,000 from last March.

If enough people are dropping out of the labor force, then a falling unemployment rate can be misleading.  Here is a quick example to demonstrate why.  Assume that there are 10 people in the labor force with 8 working and 2 not working. Since the unemployment rate is the number of unemployed workers divided by the sum of workers and unemployed workers (labor force), we would show an unemployment rate of 20% (2 divided by 10).  Now let’s assume that one of the unemployed workers dropped out of the labor force due to diminished job prospects.  Then that will change both the number of unemployed workers and the labor force.  The new unemployment rate would be 11.1% (1 divided by 9). Even though the unemployment rate fell, it was due to a worsening job market not a better one.

Ironically, a falling unemployment rate shows a picture dimming, rather than brightening.

Will Health Care Reform Hit A Snag?

Nick Gillespie of Reason.com reports that a key target of the Affordable Care Act signed by President Obama in 2010 appears ambivalent about buying health insurance.  Specifically, the young and healthy have so far not been interested in buying health insurance.  However, it is still early and none of the insurance exchanges have been set up.  Plus, it is possible that they are waiting until the last minute before having to pay a fee for not being insured.

One of the key elements of health care reform was the individual mandate.  The individual mandate requires most Americans to buy health insurance by 2014.  However, there are exemptions available to avoid paying the fee.  Examples include having a low income, being cost-prohibitive to buy health insurance; or not wanting health insurance for religious reasons.

Due to the number of potential exemptions and relatively low penalty compared to purchasing health insurance, it is possible that the estimates of the uninsured by 2014 might be underestimated.  Of the approximately 48 million uninsured before health care reform was passed, more than half remain uninsured.  That is far more than the 6 million estimated by the Congressional Budget Office.

This could potentially be a significant problem, especially if those opting out are the young and healthy.  The combination of increased regulations that will force insurance companies to provide more preventive care and enhanced benefits, along with less than expected enrollment into insurance plans that was expected to offset some of the costs of extra benefits, could prove troublesome.  That could mean the federal government will have to subsidize more of the cost in providing health care and drive up federal deficits.

Gillespie highlights some of the challenges in getting more people to sign up for health insurance.  For the young and healthy, they cite the cost and less likelihood of needing health care services because of their age.  Then there is the group described as the “passive and unengaged”, who procrastinate and do not take the time to assess the health care options available to them.  Both groups have little motivation to enroll and the penalty might not be significant enough to change their minds.

The above scenario is a prime example of adverse selection.  Adverse selection means that private health insurance companies are faced with covering less healthy, more expensive individuals, while the more healthy, less expensive individuals decide to not buy insurance.  In order to remain profitable and cover rising health care expenses, they will likely have to raise premiums.  While the penalties can offset some of the subsidies that will be used to boost the number of the uninsured, it might not be enough to offset the cost of enhanced benefits.

Another troubling consequence is that employers might face higher than expected costs in providing health insurance to their workers.  In fact, this uncertainty was pointed out by the Fed’s Beige Book as why a number of firms were reluctant to add to their payrolls.

Unfortunately, there remains many unknowns, so we will have to wait and see.

Why Government Is Essential, Yet Inefficient

My motivation for this blog stemmed from a funny analogy made by Thomas Sowell, whose simple, yet outrageous example, speaks to the inefficiency of government.

Suppose a governmental agency has only two tasks:

1. Build a statue of Benedict Arnold.
2. Provide vaccinations for children.

When budget cuts are imposed, they decide to do away with child vaccinations, rather than stop building statues of a man reviled in U.S. history.  Why would they do that?  Because that will make it more likely that the budget cuts will be reversed because the general public will demand the vaccinations be reinstated.

How does that relate to today’s politics?  With the sequester imposed on March 1, we learned that the Department of Homeland Security has released a number of illegal aliens due to lack of funding from the spending cuts.  We can also look forward to cuts to educational grants to disabled children and low-income school districts.  While there is waste within all federal agencies that could be cut, those inefficiencies are hard to eliminate due to lack of competition. Additionally, these appropriations may be a drag on economic growth by drawing tax dollars away from more productive activities, such as freeing up more income toward investment spending.  However, they do provide more social stability and relief to the vagaries of poverty.

We live in a dangerous world where there are vast disparities in wealth between nations.  With the advent of YouTube and various social media outlets, it is much easier for people to compare and contrast their way of life with others.  This creates envy, anger, and frustration that can result in dangerous associations aimed at disrupting the lives of the more affluent.  Religious fanaticism and grinding poverty can lead people to resort to extreme measures and even death to lash out at what they believe are unfair outcomes.  That is where the Department of Homeland Security and our military forces come in to protect the general public from acts of terrorism.

Then let us transition to poverty where health care and lack of jobs are barriers to advancement.  Even though most people might believe that anti-poverty programs are limited to only its recipients, there are external benefits to society.  Providing access to preventive health care services to the impoverished can minimize the burden on emergency care facilities that must treat all individuals, regardless of their ability to pay.  If this can be reversed, then this should theoretically lower insurance premiums because private insurance companies would no longer need to shift the cost of uncompensated care to middle-income and high-income individuals.  Other factors, such as lack of resources toward education and workforce training, contribute to large disparities in wages.  In an economy that places more value on intellectual skill, rather than manual labor, there is great frustration and discouragement that leads to unproductive behavior, such as crime and immoral behavior.  If workforce skills are enhanced and job marketability increases, then criminal and immoral activity from the poor will be less attractive and that will bring relief to everyone else.

Even though the $85 billion is an infinitesimal portion of annual government spending, its cuts will be from discretionary spending, rather than mandatory spending.  This is an important distinction because the federal budget primarily consists of mandatory spending, such as Social Security, Medicare, and Medicaid.  Neither will be touched with the sequester.  Since these cuts will cover a smaller portion of federal spending, its impact will be potentially larger.  Most of the negative impact will go to national defense where there will be cuts approximating 9%, while other federal agencies will see their budgets slashed by 5%.

When one asks why the sequester did not allow more flexibility to make cuts to government, it is because both political parties value government in different ways.  While Republicans value national security where business interests are protected abroad and our citizens are shielded from terrorism, Democrats favor a compassionate government that promotes social mobility and provides an adequate safety net for the rigors of life.  The policymakers thought that this process will lead to compromise and common ground where both sides gave a little.  Of course, we found out how inflexible and rigid both parties were.

Over the next few months, it is my suspicion that both sides will recognize the important role that government plays in our overall well-being.  It will just be for different reasons.

Immigration Enhances Local Economies

Immigration is a divisive topic.  Whenever a new segment of workers enter the market, it causes apprehension and distrust.  In the early 20th century, it was African American laborers, who were despised as they were willing to do jobs at wages that whites were not willing to take.  In the late 20th century and 21st century, it is foreign workers, who come from countries that pay much lower wages.  Even when it comes to highly skilled jobs, they are willing to work at a fraction of what Americans are accustomed to.   Both caused dissension and angst with many Americans not fully grasping the role that both workers played in our country’s prosperity.

While Arizona, Georgia, and Alabama are passing laws to restrict immigration, St. Louis is openly courting immigrants in order to stem a steady loss of population.  Loss of industry and perceived unfriendliness to minorities are key factors for the steady decline in population since 1950.  In order to counter this negative trend, city leaders have been openly courting immigrants to reverse it.

Even though many are aware of the negatives of immigration, Jack Strauss, Director of Simon Center for Economic Forecasting at St. Louis University, paints a different picture.  He mentioned that many of the foreign-born immigrants are highly skilled and offer needed skills to the area.    Finding ways to increase their presence would improve the vacancies that are a large burden to the area, along with boosting home prices.  Even when considering low-skilled immigrants, their impact is not as bad as the public would believe.  That is because they are less likely to use food stamps and receive less financial assistance than other low-income groups.

In Strauss’ estimation, St. Louis has not been able to maximize their economic potential.  This includes missing out between 4-7% of income growth for the city and 7-11% for the overall region.  They could have reversed poor job growth inflicting the region where they could have experienced 4-5% more job growth.  Lastly, the unemployment rate for both whites and blacks would have dropped by approximately 2%.

The rate of entrepreneurism among immigrants is much higher than native-born Americans, so they are job creators rather than job takers.  Strauss’ study showed that immigrants are 60% more likely to be entrepreneurs.  In particular, Bosnians have been very successful in revitalizing parts of South St. Louis by moving into older neighborhoods and starting businesses in diverse sectors such as bakeries, butcher shops, coffee shops, construction, heating and cooling, and even a truck-driving institute.

Despite the efforts by some St. Louis area officials, they have been hamstrung by a Missouri state legislature bent on restricting the flow of immigration.  Even though many of the measures led by Republicans have not been successful, it might create a climate of unfriendliness that turns off immigrants to St. Louis.  In comparison to other top metro areas, their proportion of immigrants within the St. Louis region is low at 4.5%.  The low number of immigrants is one reason cited for their poor economic growth and stagnant income growth.

Despite public support from St. Louis Mayor Francis Slay and St. Louis County Executive Charlie Dooley toward immigrants, Strauss suggests further strategies are necessary to attract foreign-born talent.  He cites efforts in other metropolitan areas where they are openly courting a more diverse workforce.  This includes connecting them with key resources from governmental and nongovernmental agencies, assistance with various social services, and offering career and leadership opportunities.

Of course, it would be ideal if job creation could occur from domestic citizens.  Most income earned from domestic residents will circulate within the same communities.  On the other hand, immigrants, who have left family back in their home country, are likely to give money back there.  That will offset the gains that their presence brings to the U.S.  However, occupying one vacant home, creating one job from a small business, and paying sales taxes from income earned on a job is better than experiencing neighborhood blight, rising unemployment, and declining services from lack of tax revenue.

It is time that we open our blinders and embrace immigration.  They enhance, rather than hurt communities.