August 31, 2007
Where’s the money for roads?
Anyone who drives knows that North Carolina's roads have gotten busier, and many need not only expanding but also major repairs. Some estimates put the backlog in road construction and maintenance at between $25 billion and $65 billion. Mike Walden outlines the debate over where the money will come from.
"This is a big issue in North Carolina, and we may have actually a special meeting of the General Assembly to deal with it. There are many options," says Dr. Walden, a professor of agricultural and resource economics. "Many people have heard the fact that there is some money –- it's about $170 million -- that's transferred each year out of the highway fund into what's called the general fund for non-road uses.
"And some say, 'Well, we ought to just take that.' Well, that's actually a swap because when a particular sales tax was put in -- a sales tax on cars -- and that money was devoted only to road use, that sales tax used to go to the general fund, and so this is really a compensation," he explains. "So if we take that $170 million out of the general fund, a replacement would have to be found.
"Some people say that there are things in the highway fund that are paid for that are paid for that aren't road construction and maintenance -- things like the highway patrol, the D.M.V., and drivers' training. Well, again, if you take that money and use it for roads, you'll have to find other money to pay for those functions," he says.
"We could increase the gas tax. No one wants to hear that, but every penny we go up with the gas tax would yield about $50 million.
"And then finally the state could say, 'Let's just let counties build roads.' In North Carolina the vast majority of road building and maintenance is done at the state level. Most other states share that function between counties and the state," Walden says.
"So what North Carolina can say is, 'Alright counties, we are going to allow you to tax your residents through a property tax or maybe a special gas tax -- whatever you'd like to build roads in your area.' So we could have that movement to deal with this shortfall."
August 30, 2007
The disassembly line
It was Henry Food who invented the assembly line in manufacturing, putting together entire cars in one factory. But now the exact opposite is happening in some cases. Mike Walden explains.
"In many cases we've gone from the old assembly line to what many are calling the disassembly line. And what's happening is that you have pieces of the product manufacturers put together in different locations," says Dr. Walden, a North Carolina Cooperative Extension economist.
"In fact they may be in entirely different countries, and what businesses are finding is that although they will have higher transportation costs -- and in some sense higher coordination costs. That is, they need to have each piece get to its proper place in the right time period -- but they are finding that those additional costs can be more than made up by the lower cost if the site is the most cost-effective, in particular in having the best-skilled labor or perhaps having the cheapest labor.
"Of course what's happening today is that we have air travel much more predominant, and so it is fairly easy to, for example, put together a piece of a product in one location, maybe one country; later that morning ship it by air to another location. Another piece is put together, and so on," he adds.
"I think this is one more feature of the global economy, where now it's many countries working together to produce one product."
August 29, 2007
What spooked the stock market?
The stock market has been up big one day but down big the next. Just what's causing all the volatility? Economist Mike Walden weighs in.
"That's the big question today ... and I think that experts say that the cause is centered in the financial market, particularly over companies that have high-risk mortgage loans," says Dr. Walden, a professor of agricultural and resource economics at N.C. State University.
"What has really set the table for this is that, for a number of the recent years, we've had a situation where interest rates are very low, there's available money, and rising home prices have made lenders want to push the envelope, if you will, in making loans to homebuyers," he adds. "Now, many people say, the chickens have come home to roost, because house prices have stalled, interest rates on many of these loans now have gone up, and as a result we have seen an increase in delinquencies and bankruptcies -- certainly not on all home loans, but on a significant percentage.
"And the stock market, I think, is just coming to realize the extent of this problem. On the other hand, the economic fundamentals of the economy remain very good. So I think the seesaw nature that we've seen in the stock market is really reflecting these two issue: On the one hand, the bad news coming out of the financial markets, when that dominates the market goes down. On the other hand, the relatively good news coming out of the broader economy, when the market focuses there the market goes up.
"This is a constant tug of war, and we have yet to see which side will win."
August 28, 2007
The Medicaid switch
North Carolina legislators have worked out a plan for the state to take over the local share of Medicaid payments. N.C. State University economist Mike Walden explains why this change is important -- and who wins and loses.
"First of all ... Medicaid is the governmental program to help pay the medical costs for low-income people. And it is a rapidly growing program at all levels," explains Dr. Walden, a professor of agricultural and resource economics. "North Carolina has been one of the few states where counties are forced to share in those costs. And the problem for many counties is that we see in low wealth counties -- the poorest counties -- those counties typically have the highest number of clients relative to their population receiving Medicaid. And so the poorest counties have had to be paying the biggest part of their budget for Medicaid, and that obviously inhibits them from doing other things like improving their schools, public safety, et cetera.
"So this has been an issue that has been well known in North Carolina, and finally the General Assembly said we are going to have a plan where we are going to now say to counties, 'You don't have to share in the cost of Medicaid. We are going to take that over, along with the federal government.'
"In exchange the state, though, is taking back one-half percent on the sales tax that counties did have to use," Walden continues.
"Now in terms of winners, clearly low wealth counties are going to win. But some of the high wealth counties -- like Wake and Mecklenburg -- where Medicaid is not so much of an issue, they are probably going to lose because they are going to lose more by seeing that half cent on the sales tax removed."
August 27, 2007
Increasing lottery prizes
Playing the lottery in North Carolina is about to get more lucrative, as the state raises the payout in prizes. But will increasing the rate of winning work against the lottery's goal of raising money for education? N.C. State University's Mike Walden says not necessarily.
"It would … if nothing else changed. But what the state is banking on is that if they increase the degree of prizes -- that is, if they increase the chances of people who play the lottery of winning -- that's going to attract more people to play the lottery, and even though the rate of winning has gone up, because you have expanded the base of players so much that the state will actually end up with more money," says Dr. Walden, a North Carolina Cooperative Extension specialist.
"It's sort of like a business [that] cuts the price of their product. You might say, 'Well, their profit is going to go down.' Well not if by cutting that price they attract more buyers. It's the same thing here," he adds.
"And indeed this is not unusual: If you look at other states that have instituted a lottery, usually there's a lot of hype -- a lot of excitement -- about the lottery when it's first instituted, and then sort of the newness fades out and people have to be lured back into the lottery by the prize rate -- the rate of winning -- going up," he says.
"Now what studies show is that when you do increase the rate of winning, that will attract more people and the state will actually get more money. But that will also fade over time and the state will have to up the rate of winning again later.
"So it's kind of a constant tug-of-war here that the state will have to play in getting people to be interested in the lottery."
August 24, 2007
Who's in the middle class?
Many of us have a conception of the typical middle class family as being like the one on the old sit-com "Leave It to Beaver." This was a family with one working spouse and children. But does this describe the typical middle-class family of today? Dr. Mike Walden, an N.C. State University economist, says no.
"Let's actually focus today on the children part, because quite frankly the vast majority of households have two working spouses. And if we define middle class as households in the middle of the income distribution ... then the direct answer to your question is no," says Dr. Walden, a North Carolina Cooperative Extension specialist. "If we go back to 1960, which you were alluding to, half of those in the middle class were married families with children, just like on 'Leave it to Beaver.'
"Today it's only 18 percent -- only 18 percent of middle-class families are married families with children. The majority of middle-class households today are ... single heads of household, either with or without children," he adds. "The only household category -– the only household category -- where married families with children are close to majority are now those in the very highest income group -- that is, those with the top 20 percent of income.
"So clearly," Walden concludes, "who's in the middle class has dramatically changed in the last half century."
August 23, 2007
Will good paying jobs leave, too?
The United States continues to lose many manufacturing jobs to foreign countries, where the labor costs are much lower. And now we are beginning to see the same thing happen with some well-paying professional and technical jobs. N.C. State University economist Mike Walden considers whether these jobs eventually be leaving the country in droves, too.
"Quite frankly, some will," says Dr. Walden, a professor of agricultural and resource economics. "These are mainly going to be jobs that are perhaps professional jobs, but where personal contact isn't important and where the tasks are not that complicated to where they can't be done in one country and essentially shipped electronically to the home country.
"So we are talking about perhaps some basic jobs in computer programming, straightforward accounting, maybe even some mundane tax work," he adds. "But we shouldn't really I think extrapolate from that and say that, 'well we are eventually going to lose all of high paying jobs,' because a lot of the high-paying jobs -- many, perhaps the majority -- require personal contact.
"What I do ... teaching. Obviously doctors, you need interaction with patients. Even jobs like architectural jobs and engineers -- yes, they will do the plans, but then they perhaps need to go and supervise the construction," he explains. "Also I think you have to keep in mind as those foreign countries that are perhaps attracting some of those higher-paying jobs, as they develop they are going to have a greater internal demand for those occupations at home. And that will lessen their desire perhaps to attract those jobs from other areas.
"And then one final thing on this," he concludes, "It's interesting to note that when we look at the import-export numbers, ... I think most people know that the U.S. has been running a big trade deficit (that is, importing more than we are exporting). [But] we actually run a trade surplus in private professional services."
August 22, 2007
What's up with construction?
The housing market nationally continues to take hits and some blame the bad news from residential construction for the recent stumbles on Wall Street. But N.C. State University economist Mike Walden says there's a part of the construction market that's doing well.
"It is the nonresidential part of construction that's doing well -- that is, the construction of office buildings and commercial buildings," says Dr. Walden, a North Carolina Cooperative Extension specialist. "In fact recently nonresidential construction has accounted for almost third of all economic growth in the economy. And while residential construction has been a drag on the economy in the last year, nonresidential construction has actually been a big plus.
"Now this is encouraging -- one reason being that nonresidential construction is a long-run investment," he adds. "Investors are putting down millions of dollars betting that people will come to use that office building or use that commercial building.
"And so real estate investors, which really nonresidential people are, are indicating by the money that they are putting their money down that they are bullish on the economy over the long run," Walden concludes. "And despite the fact that we may have some economic stumbles going on right now, if long-term investors are bullish that's obviously good for things down the road."
August 21, 2007
Why China all of a sudden?
One country has dominated the world's economic news in recent years, and that is China, a very old country with a long commercial tradition. What changes have occurred that have allowed the country only recently to become a force in international trade? N.C. State University economist Mike Walden cites two major developments.
"The first came in 1978 when new Chinese leadership came in, and that leadership was worried about China's economic plight. In fact, China was really a basket case at that point economically," says Dr. Walden, a professor of agricultural and resource economics. "And the leadership looked around at the rest of the world, and they decided that 'you know, we need to stimulate a free market here.'" And so they loosened things up. They allowed for private decision-making. They actually allowed for private ownership of property, which you couldn't have done under the previous Chinese leadership. They allowed for profit.
"And this rhis really unleased all the ingenuity [and] all the productivity in the Chinese economy," he adds. "They started first doing that in agriculture and then moved to industry.
"The second big change came later, starting in 1999 when there was a major trade treaty between China and the U.S. that really opened up each country to the other in terms trade," he adds. "And then finally China joined the World Trade Association in 2001, which really nade china part of the world trading community. So this has clearly benefited China.
"China, in fact, right now is on track to become the third largest economy in the world," he concludes, "right behind the U.S. and Japan."
August 20, 2007
The financial markets are always coming up with innovations and new products. N.C. State University economist Mike Walden explains one of these innovations -- one that's popularly known as a death bond.
"Well a market has arisen whereby that person owning the life insurance policy can actually sell the policy to an investor and get cash for it. The cash will be somewhere between 20 to 40 percent of the death benefit. The investor then continues to make payments on the life insurance policy, but then when the initial owner of the policy dies the investor collects the full amount of the death benefit," Walden continues.
"And since they paid only 20 to 40 percent of it, and they are going to get 100 percent of the death benefit, that's where the investor has made money.
"Now some people ... call these death bonds because the investor is not going to make money until the original owner of the policy dies," he concludes. "But ... as an economist, I tend to look at this more as, well, this is a trade that's mutually beneficial. The owner of the policy needed the cash, an investor wants to earn some money, and the two meet and they are both better off with the trade."
August 17, 2007
Stock market gyrations
Recently the stock market, by one index, hit a record high that was followed within a week by a 300-point sell-off. N.C. State University economist Mike Walden discusses why investors' attitudes can change so dramatically in such a short period of time.
"If I had the answer to that, we would be on an island somewhere with our own private beach, because this is a question that students of the stock market have really been asking ever since stock trading began," says Dr. Walden, a professor of agricultural and resource economics.
"I guess the best answer that I can give is that on any given day there will always be a combination of positive and negative factors in the economy, and investors will look at that collection of positives and negatives," he adds. "On some days, they will put the emphasis on the positive, and the market will go up; on other days they will put more emphasis on the negative and the market will go down.
"And that's what makes predicting the stock market so very difficult, because you are not just dealing with information but you are also dealing with how that information is interpreted by many, many people.
"Now, that said," he adds, "we have had a good run in the stock market this year. The stock market has gone up in a fairly healthy way for the first half of the year. And many analysts thought that some pullback was expected. That is, oftentimes what you have is the market going up and sort of overreaching -– it's gone too high and needs to pull back.
"But, again, I think the best strategy for the average investor is always to take these ups and downs in stride," he concludes, "and invest for the long run."
August 16, 2007
There’s a movement afoot in Congress to allow the United States to sue OPEC, the organization of the major oil-producing companies. N.C. State University economist Mike Walden explains that it's an attempt to get lower gas and oil prices, but he doesn't think it will be successful.
"OPEC is what we call a cartel. That is, the countries in OPEC get together, they decide on how much oil collectively they are going to produce, and they try to set the price of oil," explains Dr. Walden, a North Carolina Cooperative Extension specialist. "Now that kind of activity is actually illegal under U.S. laws. So the notion here is that since OPEC is effectively doing business in the U.S., we are going to sue them -- just like we would sue U.S. companies who did the same thing -- in order to break up that cartel. And, of course, I think the purpose here would be to bring oil prices down.
"Now there are two problems with this approach: One is economic. The recent price hikes we have seen in oil are primarily due to increasing demand, not to restrictions on the supply side," he adds.
"The second issue is legal. OPEC is an organization of countries, not an organization of companies, and scholars are divided on whether the law -- the U.S. law, that is -- can apply to countries as it does to companies," he goes on.
"So I would not look for a lot to come out of this: If Congress passes it, even if it became U.S. law, I'm not sure this is the way we are going to get oil prices down."
August 15, 2007
Where will the jobs be?
Jobs are the key to our economy, providing the fuel for making products and services and for earning the income that keeps households running. People want to know not only if there will be jobs available but what kind of jobs there will be. N.C. State University economist Mike Walden says a new study sheds light on this important question.
"We have a new study that is just for North Carolina that looks at job projections over the next decade. The good news is that the study projects that North Carolina will add about 65,000 net new jobs each year," says Dr. Walden, a professor of agricultural and resource economics.
"Also in the good news category is that the fastest-growing jobs will be those at the top end of the wage scale -- professional and technical jobs like physicians, engineers and accountants," he adds.
"Also fast growing will be jobs in the, say, two-year college degree area: nurses, medical technicians, auto mechanics. The only category where job growth will be very slow, interestingly, will be for high school graduates," he says. "In fact, those kinds of jobs are really drying up. They are going to increase at only a third of the rate of college-level jobs.
"And I think what's going to happen to many high school graduates if they don't go on to college is that they are going to be pushed down to jobs that high school dropouts can fill," Walden concludes. "So really what we are seeing in North Carolina, if these projections are right, is that the two ends of the job markets are going to be the fastest-growing."
August 14, 2007
Pay for performance
Rewarding workers based on their performance is good in theory, but until lately it's proven hard to implement. Today's technology is making it easier to track performance and link it to pay, says N.C. State University economist Mike Walden.
"A new study (that) just came out shows that more firms are linking pay to performance. And this is because ... the ability and the cost of gathering and monitoring performance data have gone down," says Dr. Walden, a professor of agricultural and resource economics.
"So it is easier for firms to do this. I think it is also a result of pressures being put on individual businesses from more competition in the economy, both from domestic and foreign sources," he adds.
"However what this means -- and this new study confirms this -- is that we are seeing greater variation in pay, even within the same specific jobs. That is to say that a business now that has performance data for two people who are manufacturing widgets, the one person who is making more widgets per hour, they are going to get paid more than the other person," Walden says.
"So this could create some source of conflict within the firm. It's also another source of the widening income inequality gap," he concludes. "But clearly there are pressures that are pushing firms to do this, and this linkage -- this increased linkage -- of pay to performance is probably not going to go away."
August 13, 2007
Competing roles for transportation dollars
How North Carolina spends its highway funds is a topic of intense discussion. Urban areas generally claim they are being shortchanged because they have all the traffic and congestion. But rural areas counter that they need roads to achieve economic development. Who's right? N.C. State University economist Mike Walden weighs in.
"This is a case where actually both are right, and it reveals the multiple roles that we ask highway spending to take on," says Dr. Walden, a North Carolina Cooperative Extension specialist. "Some statistics do show that urban areas are getting much less highway spending per mile driven by their residents. And these same statistics do show that rural areas are getting a lot more money.
"But also rural areas can make the point that, in general, they lag in economic development, and studies show that improving transportation infrastructure can be a big tool to spur business investment," he adds. "So here you have got roles -- you've got two roles -- that the transportation budget is supposed to fulfill, and they are obviously competing.
"Now what are some solutions? Well, one solution would be to divide the state gas tax and highway spending into two explicit parts: One part would go only for projects in counties where the funds were raised so people were assured that that money was going back to their region or county. But the second part would be spent anywhere in the state and, obviously, could be used to spur economic development in particular regions," Walden continues.
"So this is an idea where we explicitly point out the two different roles that we ask highway spending to fulfill and allow taxpayers to see those roles enacted."
August 10, 2007
Marriage and income inequities
The increasing level of income inequality in our country is an issue of constant debate, with explanations ranging from globalization to education differences to tax changes. And now, says N.C. State University economist Mike Walden, some are pointing to a marriage factor.
"The notion here is that, for most of us, we tend to marry people with similar educational characteristics as ourselves," says Dr. Walden, a professor of agricultural and resource economics. "For example, on average -- this is certainly not applied to everyone, but more so than not -- college graduates will marry other college graduates. And high school graduates will marry other high school graduates. And those who drop out of high school tend to marry those also who drop out of high school.
"It probably has something to do with interests and opportunities for meeting people -- of course that's beyond my area of expertise," he adds. "But when you take that into account and then you add the fact that education has been one of the biggest driving forces in creating more income inequality, you see where these marriage choices can actually compound that income inequality.
"Because here you have, for example, a household that has two college graduates. They are actually doing well in our economy. They are getting big pay raises," he elaborates. "You contrast them to perhaps a household where two high school dropouts have married, they are doing unfortunately poorly in this economy, and you can see where this really creates a great deal of income inequality."
August 09, 2007
Zero sum or net gain
Shoppers often have the attitude that the seller is in the driver's seat. Economists call it the "zero-sum attitude," and N.C. State University's Mike Walden explains an alternate view.
"The idea is that most of us have to have products or services -- that the seller is going to get as much as they can; we are going to get less. And really the seller is coming out on the long end of the stick; we are coming out on the short end of the stick," Walden says of the attitude.
But "economists have a different take on this: We think that actually trading —- which is really what you do when you buy things -- results in gains for both parties," he continues. "Obviously the seller is gaining if they are able to sell that product at more than what it cost them to make.
"But we also argue that buyers gain. Most of us do have alternatives to buying something," adds Dr. Walden, a professor of agricultural and resource economics. "For example, if you are looking at a car and you think car prices are too high well, one idea would be to carpool or take public transportation or live closer to work. I know these are all hard things to think about, but they are all alternatives.
"So if you do buy a car, even though you may think you paid too much for it, presumably at least at some level you think you are getting more benefit out of that car than you had to pay," he says. "The benefits (are) ... having accessibility and flexibility in driving to work and shopping and to school and to vacations and so forth.
"So economists argue that trading actually results in net gains overall: gains to both the seller as well as to gains to the buyer."
August 08, 2007
Helping the poor
Finding ways to help those with less income and fewer economic opportunities is always an important issue. N.C. State University economist Mike Walden discusses the fundamental differences in two potential approaches: increasing the minimum wage versus raising the earned income tax credit.
"Well, of course, increasing the minimum wage would help those low-income workers who are, indeed, earning not much income. It's a way that obviously forces the employer to pay those low-income workers more," says Dr. Walden, a North Carolina Cooperative Extension economist. "Now a big potential downside is, What if the employer says, 'Alright,' to that worker, 'You are now not worth the higher wage I'm forced to pay you, and I'm going to lay you off.'? And in fact studies show this can happen in a significant percentage of the cases. So that's one issue with raising the minimum wage.
"Now the other approach, or one of the other competing approaches, is something ... called the earned income tax credit. This is a government program that doesn't require employers to pay low-income workers more. They continue to receive whatever wage they are receiving, but the government, in essence, supplements the earnings of those workers," he adds. "So the costs are now put in the hands of the government -- that is, the taxpayer.
"But this program avoids the potential problems with the minimum wage that if, again, the worker is judged not to be worth that higher wage, the employer will let them go.
"So these are really two competing approaches," he concludes. "Both have advantages and disadvantages, but I think they are worthy of discussion in this issue of how to help the working poor."
August 07, 2007
Are Americans paying too much for health care?
Much bas been written about the premise that the cost for health care in the U.S. is too high, and statistics show that a much higher percentage of national income goes in the United States for health care than in other countries. N.C. State University economist Mike Walden points out factors that help put the issue into perspective.
"We do pay a higher percentage of our national income, about 16.5 percent, for health care in our country," says Dr. Walden, a North Carolina Cooperative Extension specialist. "It's much higher than in other countries. Typically, a western European country might pay 10, 12 or maybe 14 percent.
"But I think there are two issues that you need to address before you reach a conclusion that we are paying too much," he adds. "First of all you have to ask, 'Is our care better? And is our care quicker?'
"Now some statistics say yes -- not all. For example, there are some statistics that show that waiting time for procedures is a big issue in many other countries that have lower cost of health care than in the U.S.," Walden says. "Many statistics also indicate that our care, our technology, is better. So that's an issue you must address.
"Secondly you have to address the issue of how are you going to ration health care," he adds. "Any product has to be rationed. We all want more of everything. We can't have it. In the U.S., for health care, we use price much more as a rationing device, as we do in many other aspects of our economy.
"If you don't use price to ration, you are going to have to have something else. You are going to have to have rules. You are going to perhaps have bureaucratic procedures. So that's a question you have to address if you are going to move to the further question, 'Are we paying too much for health care?'"
August 06, 2007
Is the deficit no longer a problem?
In recent years the federal deficit has been cut in half to around $200 billion today. While this figure seems high, some say the deficit is no longer a problem. N.C. State University economist Mike Walden explains why.
"First of all ... whenever we talk about the deficit, we have to contrast it to the national debt," says Dr. Walden, a professor of agricultural and resource economics. "The deficit is what we are adding to the national debt -- the extra we are borrowing each year. The debt, of course, is the total amount that we have borrowed in the past and haven't paid off.
"Now we are not talking about reducing the debt: We are talking about that annual increase to the debt," he continues. "It has been cut in half in the last couple of years. It's now around $200 billion.
"Now of course that's a big number to anyone, but when you have such big numbers -- when you are talking about economywide numbers -- the best thing that you can do to put it in perspective is to look at it as a percent of national income," Walden explains. "And at $200 billion, the deficit right now is 1.5 percent.
"And many economists think that is a sustainable amount," he says. In other words, it's an amount we can add to each year without harming the economy.
"The reason the deficit has been coming down is because we are in the sweet spot, if you will, of the economy. We are growing. Interest rates are very affordable. And that's helped particularly tax revenue grow tremendously for the federal government.
"So I think as long as the economy grows, the deficit is going to remain low," he concludes. "But look out: Next time we have a slowdown or a recession we'll likely see the deficit rise again."
August 03, 2007
Why car parts in North Carolina?
Vehicle parts manufacturing is a major industry in our state, but it hasn't always been that way. N.C. State University economist Mike Walden explains what changes have made our state attractive to the industry.
"First of all North Carolina has long been an attractive state for manufacturers of any kind. We have very high labor productivity rates –- that is, what our workers produce compared to what they get paid -- and that's very much valued by manufacturing," explains Dr. Walden, a North Carolina Cooperative Extension specialist. "But I think there are several specific factors that have made us attractive for car parts:
"First of all, much of that industry has migrated south, away from the Midwest, to take advantage of, again, lower labor costs and accessibility to the growing population in the South -- and of course North Carolina is part of the South," he says.
"Secondly, North Carolina is close to several vehicle assembly plants. We don't have any of those yet, but there are vehicle assembly plants in states like South Carolina, Tennessee and even Alabama," Walden adds. "And usually manufacturers want the parts factory to be no more than a day's drive from the assembly factory. So that puts us in a good position there.
"And then lastly," he concludes, "if special training is needed to attract, for example, a parts factory here, our community colleges in North Carolina have an excellent reputation of providing that kind of specialized training."
August 02, 2007
When people consider new jobs, they naturally ask about the pay, and they also want to know about the benefits. N.C. State University's Mike Walden says that the value of these benefits is rising.
"The benefits component of what we in essence get paid has been rising. And so it is important for, I think, workers to know what are these benefits and how they are changing," says Dr. Walden, a professor of agricultural and resource economics. "Actually the largest component -- the single largest component -- of worker benefits are employer contributions to Social Security and Medicare. They make up over a quarter -– exactly 27 percent -- of all company or all job benefits.
"Next in line comes health insurance at 26 percent, and indeed this component has been rising quite a lot.
"Third in line comes probably the benefit that most of us most think about -- and perhaps many people ask about -- when they are considering a job, and that is vacation leave. Vacation leave accounts now for about 23 percent of all worker benefits," Walden adds.
"And then finally, coming in at the rear but still important, [are] the contributions that companies make to the worker’s retirement. That accounts for 14 percent.
"And, again, this is all important because company benefits -- worker benefits -- have actually been rising faster than salaries, and so when a worker looks at a job they need to account not only for those salaries and wages they earn but also the value of the benefits."
August 01, 2007
Some NC farmers grow more tobacco
Recent reports indicated that more tobacco is being raised in some North Carolina counties, particularly those along I-95. While this might come as a surprise because of the reduced incidence of smoking in the U.S. and the dismantling of the tobacco support program, an economist predicted it two decades ago.
Dr. Mike Walden, an economist with North Carolina Cooperative Extension at N.C. State University, said one of his colleagues predicted the increase 20 years ago when he looked at the impact of dismantling the tobacco price support program.
He "predicted that more tobacco could actually be grown in North Carolina when that program was dismantled. And here is the reason: North Carolina has some of the best physical characteristics for growing what's called flue-cured tobacco. The tobacco program, though, specified where that tobacco could be grown, and you couldn't easily move production around within a county or even within a state," Walden explains. "Now that that program is gone and anyone really can grow tobacco, what's happened is some of that production has migrated to North Carolina because we are very well-suited for growing tobacco. We are one of the best regions in the country for growing this type of tobacco.
"So really this should not have been surprising," Walden concludes, "and I think what it is saying is that tobacco can still be a money maker if you have the right conditions, and we do in many places in North Carolina. One trend, though, is that we've seen tobacco farms become much larger than in the past."