The Simple Economics of Discrimination

Diversity is a topic that comes up quite frequently, whether having debates on affirmative action policies or hate crimes against a particular marginalized group in society. I'm surprised when working in higher education when the topic of diversity does not come up. It could just be me, but I get the perception that the voices I usually hear  are the loud voices of those who feel there is too much government interference on hiring minority candidates and those who feel that American Society is still as racist as it was in the Early 1900's. 

Considering the diversity conversations usually get brought up by the confronting fringes of society, I wanted to bring this topic more down to earth and explore the economics behind discrimination. This article will take a micro-economic approach that views the production of a business firm selling a good or service to consumers. The one assumption to this analysis is that discrimination of a producer leads to a direct or indirect action. It then also leads to them not selling to a consumer or indirectly influencing the consumer not to buy that good or service on the basis of feeling discriminated against. 

Pretend you are an owner of a mid-sized grocery store that is located in a mostly Caucasian neighborhood, but also has a noticeable group of African Americans and Latinos in the area. Down the road, there is also a gay bar. being realistic, people do not see "white only" signs anymore or business owners that bluntly kick anyone out due to their backgrounds. However, there are times where people show visible signs of being uncomfortable with a minority cultural group whether intentional or not (microaggressions). In this particular example: If the grocery store owner is prejudice against gay people and has had limited interaction with other racial groups, these minority groups will go elsewhere for their grocery needs and give negative publicity online via social media and review sites about the business. This means less products being purchased in the store and less revenue for the owner. 

Below is a short run supply and demand curve that shows when a business owner engages in discriminatory behavior with marginalized/minority consumers. The demand curve (slanting left to right) shifts to the left because the owner has a change in the consumer base, excluding the marginalized groups. The supply curve (slanting right to left) does not change because the production does not change in the short run. As you can see, Q1 goes to Q2 showing a decrease while there is also a decrease in price from P1 to P2. Although the price drop is good for the loyal consumers in the short run, it stagnates the growth of the owner's business and  decreases its comparative advantage to the business' competitors. (more text below graph).

With this analysis, one could come to an economic and realistic understanding why it is important not to discriminate against marginalized/minority groups. If one looks at it in more of a macro-level perspective, one could argue that the economy can be hindered by discriminatory activity. Especially if a big portion of private or public sector engages in such activity. 

Breaking News: Tom Barrett wins Wisconsin Primary

As mentioned last night in the last blog article, it was to be expected that Barrett would win the election. While Kathleen Falk was there in the beginning, I believe she had too much support from the unions. That made more centered democrats worried what radical policies a Falk Administration begin.

What was more surprising that the fake lt. Governor candidate Isaac Weix got more votes than Ira Robins. Regardless, the round two battle between Walker and Barrett will mostly be on the economy. If Walker can lower the unemployment rates in Wisconsin, he can coast through an election win. If now, expect Barrett to hammer Walker on a poor economic record.

What also still remains is how the state election could be the bell weather election for the national presidential election. If Walker keeps his position as Governor, does that smell trouble for the Obama Administration. The reverse could happen for the Romney Campaign. Final thought: As Carville put it yesterday... "wake up Democrats, You could lose this election." Democrats must not be too confident that they have any election in the bag, considering the Economy has not made up its mind on being a bull or a bear (going up or going down).

The Growing "American" Hatred of Higher Education

 DISCLAIMER: I am writing this article fully knowing I am working in the Higher Education Field. I fully recognize my bias of supporting higher education. I also fully recognize that we must look at the criticisms of higher education to validate the importance of our economic labor producers.

As early as the 19th Century, higher education played a pivotal role in maintaining and creating economic markets by providing skilled labor. Even today, many desired positions with desired income levels require or prefer some sort of advanced degree above a high school diploma. Not only is this an economic necessity, it has also become part of the American middle class social status. That is, you may be looked down upon in many middle class circles if you do not have a degree. 

With the obvious benefits being stated, the United States must look at why there is a growing hatred for higher education institutions to calm down social tension as well as finding more effective and efficient ways of creating the skilled labor force. This, now more noticeable, hatred can be described by economic, political, and social reasoning. 

Economic

The economic reasoning for this hatred is quite simple noticing the economic hardship we are seeing today. Since higher education institutions have played a pivotal role in the labor markets, people are wondering why job vacancies are left unfilled due to lack of skilled laborers in those particular fields.

Political

The primary reason for any anger politically are taxes. Since tax dollars are used to support higher education and unemployment at a record high, Americans are upset that institutions are not living up to their pivotal role to appease the economic labor markets. A typical tax-hating citizen would wonder why they have to pay into a system that doesn't work.

Digging more historically in the political hatred, Americans, in general, have had an individualistic ethic. From the British Government to the New Deal of President Roosevelt, there has always been American anxiety of public expansion. When noticing the history of higher education, one can see a consistent growth of access to higher education, number of institutions, and federal/state programs that help increase access to all who want it. For example, the GI Bill (allowing funding for soldiers to go to college) was a significant policy that some regard the gate opening allowing many who, before then, could not go. One could tie the American anxiety of large public entities to the modern growth of higher education.

Social

Last but not least, there has been a modern social trend in which high school students are socialized by numerous social institutions to get a college degree, regardless of what students want to do. Adding that to the graduated college student struggling to find work in a sluggish economy, one can see the social uproar towards any higher education institution. 

With this being a general overview of criticisms, one can point out many specifics that could demonize higher education institutions. At the the end of the day, we have to realize the importance of higher education, as well as how we can accommodate the criticisms that have been highlighted in the bad economic times in the 21st Century. Higher education has become a beacon of opportunity for many students. Unfortunately, the more students have access to such opportunity, the more students have to separate themselves from the growing pack.

The Situationalist

Written by Mike Lampe

Obama and the "Buffett" Rule

As stated in a previous article, President Obama's Administration has provided details on the Jobs Plan he promised to release after Labor Day. This plan is set to cost around 300 Billion Dollars and seems to be round 2 of where Speaker Boehner and the President ended last time while discussing the debt ceiling. 

Besides the tax cuts that are set to give incentives for businesses to hire within the United States, media outlets are hooked on has been coined the "Buffett" Rule. Obama discussed the situation in which Warren Buffett, A successful investor on Wall Street, pays less taxes that his receptionist does.

Therefore, the Obama Administration proposed that when "Buffett"-like tax situations millionaires get into,  their taxes would default to the middle class tax rate. Thus eliminating the complicated minimum alternative tax as well as changing the concept of a "flat tax," only the flat tax would be for the wealthy income earners. 

In the article, Lampe: Its the Economy Stupid, Mike Lampe had recommended to get rid of the Bush Tax Cuts to the rich and implement a tax break that is more job specific. Although not getting rid of the Bush Tax Cut for the wealthy entirely, this approach sends a message of compromise and the perception that fresh ideas are going through the Oval Office at the White House. 

Although it is quite clear that Obama will not get everything he asks for, it will be interesting to see how the Republicans will respond to this bill. There is already the anti-tax movement of the Republican Party that suggest the government should not tax "job creators."

Lampe: Expect a Debt Ceiling Vote Late Sunday Evening

Heres the scoop since yesterday:
- Boehner's plan cuts $838 Billion in Spending
- Reid's plan cuts a little over $2 Trillion in Spending
- Both plans have little chance passing both houses

However, as Chris Matthews put it, "the pre-game" strategies are now over and the real negotiations begin. As reported yesterday morning, the tea-party freshmen Republicans reluncantly got their "asses" in line (Boehner said it, not me). In this time of constant political positioning for candidate campaigning, it only makes sense that a grand deal will happen in the final hours of Sunday Evening, hours before the opening bell of the markets begin to panic, or sigh in relief. I believe a repeat congressional performance of the health care bill will happen with the debt ceiling vote.

According to a recent poll, it seems like Obama is winning the rhetoric on this issue of compromise (56% of Americans Agree) with the Democrats holding their guns with the "shared sacrifce" anti-tax for the rich strategy and the Republicans trying to blame the President for lack of leadership. Hopefully the political theatre will die down considering the tea party policy shift on the debt ceiling issue.

Considering some bill will pass that has the debt ceiling saving us from credit rating catastrophe, I start to wonder if the debt ceiling debate should be part of the political arena. Just like the interest rates and printing money, shouldn't the debt ceiling be considered on the same circumstances. After all, if we do not raise the debt ceiling, global economic calapse is highly likely. Therefore, I believe that the debt ceiling should be under the Federal Reserve, the entity that allows our economic power to flow freely without any governmental disruption.

Although, for the markets' sake, we can get this debt ceiling crisis done earlier, these modern political times trends to the likeliness of last minute politics. Where the last bill will likely be the foundation of the grand compromise. If you listen to the news today, you are hearing that a 'new bill' is in the works. Let's see what that bill is... Didn't someone mention 'grand compromise'?