Women Own More Than Third of Businesses in State

• August 6th, 2019

Women Own More Than Third of Businesses in State

Women own more than 71,000 businesses in Alabama, which is more than a third of the business firms in the state, according to U.S. Census Bureau data released earlier this week by the Alabama State Data Center.

“Women-owned firms generated more than $7.2 billion in sales and receipts in 1992, the latest year for which we have available data,” said Annette Watters, ASDC manager. “Many firms in Alabama are one-person operations with no paid employees, but women own a quarter of all the firms in the state that do have employees.

“In terms of payroll generated, women-owned firms in Alabama are responsible for more than $1 billion,” said Watters, whose center falls under the direction of The University of Alabama College of Commerce and Business Administration and its Center for Business and Economic Research. “That means more than one payroll dollar out of every six in the state is paid by a business owned by a woman.”

On the national front, she said, Census data shows that most women-owned firms are individual proprietorships, although an increasing number of females own corporations or partnerships. And while businesses owned by women have traditionally been in the retail trade of service sectors, beginning at the start of the 1990s an increase was seen in the number of wholesale trade and manufacturing businesses owned by women.

California recorded the most women-owned firms in 1992, with Texas coming in second. Also, while New York was slightly behind Texas in the number of firms, it did rank second in terms of receipts from women-owned businesses.

“Nationally, within retail, women are particularly concentrated in apparel and accessory stores, where they own 54.2 percent of all firms and account for 34.3 percent of gross receipts,” said the Data Center manager. “For miscellaneous retail stores, women-owned firms are 53 percent of all firms and are responsible for 31 percent of gross receipts.

“We are also seeing a growing national trend with women owning automotive dealerships and gasoline service stations,” she said. “And, the number of women-owned construction businesses in the country nearly doubled between 1987 and 1992.”

Watters said more detailed data on the types of women-owned businesses in Alabama and each of its counties will be released in April.

The Center for Business and Economic Research is a division of research and service of UA’s College of Commerce and Business Administration, and the Alabama State Data Center works closely with the U.S. Census Bureau to track demographic, economic and population statistics. Periodically, CBER publishes the Economic Abstract of Alabama, which provides voluminous data on every county and city in the state.

**03/96

Alabama’s Population Shows Strongest Growth in the Suburbs

• August 6th, 2019

Alabama’s Population Shows Strongest Growth in the Suburbs

In the first half of the 1990s, Alabama’s population grew 5.3 percent, a rate triple the 1.7 percent growth rate seen from 1985 to 1990. From April 1, 1990 through July 1, 1995, the state added 212,593 new residents, according to U.S. Census Bureau estimates released by the Alabama State Data Center at The University of Alabama.

More than 40 percent of Alabama’s population increase was due to net migration, a positive reflection on the state’s attractiveness as a place to live and work. Since the 1990 Census, an estimated 91,073 more people moved into Alabama than moved out.

Strongest growth in the 1990s has focused on the suburban counties in Alabama’s larger metropolitan areas. Shelby County in the Birmingham MSA grew at the fastest pace, adding 24,137 residents for a 24.3 percent gain. While this total includes 18,467 net migrants, it is bolstered by the county’s youthful population. Shelby had the highest rate of natural increase through mid-1995 of any county in Alabama — for every death there were 2.6 births compared to a statewide ratio of 1.5 births per death. Madison, Lee, and Dale were the only other Alabama counties with a ratio of 2.0 or higher.

The Birmingham MSA placed two other counties among the top growth leaders. St. Clair’s population increased by 7,902, a 15.9 percent increase, while Blount County added 3,473 residents for an 8.8 percent gain. Growth in the Birmingham MSA as whole was a more modest 5.0 percent as a net of 9,610 residents exiting Jefferson County contributed to the population gains in Shelby, St. Clair, and Blount.

Baldwin County, in the Mobile MSA, added 21,918 residents for a 22.3 percent gain. At 19,347, Baldwin had more net inmigrants than Shelby, but its niche as a haven for retirees contributed to a slower rate of natural increase. Elderly accounted for 15.2 percent of Baldwin County’s population in 1995 compared to 13.0 percent for the state and just 7.5 percent for Shelby County.

With the population of Mobile County growing by 18,770 for a moderate 5.0 percent gain, the Mobile MSA posted a growth rate of 8.5 percent. This was the highest of any of Alabama’s metropolitan areas.

Growth in the suburban counties of the Montgomery MSA was strong with Elmore County adding 7,861 residents for a 16.0 percent gain and Autauga growing by 15.1 percent, or 5,159 people. Montgomery County, where slightly more people moved out than in during the half-decade, saw growth of 4.7 percent. Overall, the Montgomery MSA growth rate of 7.8 percent ranked third among Alabama’s ten metropolitan areas.

Despite cutbacks in key areas of its economic base since 1990, the Huntsville MSA has continued to grow, posting a second highest 8.4 percent population increase. Gains were strongest in Limestone County where 5,209 new residents boosted the county’s population by 9.6 percent. Still, Madison County grew by an above average 8.1 percent.

Russell County, in the Columbus, Georgia MSA, added 4,576 residents for an increase of 9.8 percent.

With the strongest population growth in the 1990s centered in its suburban metropolitan counties, Alabama is gradually becoming more urban. At mid-decade, 66.3 percent of the estimated 4,252,982 Alabamians were living in its ten metropolitan areas, up from 65.9 percent in 1990.

Still, rural Alabama is not dying. While population growth rates between April 1, 1990 and July 1, 1995 vary considerably among the 46 nonmetropolitan counties, estimates show that all but seven counties have been growing. And only one, Macon County, has shown a significant population decline.

Two nonmetropolitan counties, each bordering three or more metropolitan area counties, rank among the ten fastest growing in the state. In North Alabama, Marshall County posted a 10.4 percent gain. And the population of rural Bibb County increased by 8.2 percent.

The population of eight other rural counties also grew at or above the state’s 5.3 percent growth rate. These counties and their growth rates include: Lee (7.9 percent), Cherokee (7.6 percent), Chilton (7.6 percent), Cullman (7.2 percent), Winston (6.5 percent), Coosa (5.6 percent), Franklin (5.4 percent), and Coffee (5.3 percent).

Alabama’s 10 Fastest Growing Counties

                   Population             Change
               4/1/90    7/1/95       Number  Percent

Shelby         99,363   123,500       24,137     24.3
Baldwin        98,280   120,198       21,918     22.3
Elmore         49,210    57,071        7,861     16.0
St. Clair      49,811    57,713        7,902     15.9
Autauga        34,222    39,381        5,159     15.1
Marshall       70,832    78,195        7,363     10.4
Russell        46,860    51,436        4,576      9.8
Limestone      54,135    59,344        5,209      9.6
Blount         39,248    42,721        3,473      8.8
Bibb           16,576    17,942        1,366      8.2

**5/96

Changes in Retailing in Alabama and Alabama MSAs, 1987-92

• August 6th, 2019

Changes in Retailing in Alabama and Alabama MSAs, 1987-92

With sales and employees up and the number of stores down, the average Alabama retail establishment was larger in 1992 than in 1987. Alabama counted 24,059 retail establishments in 1992, a drop of 33 stores from 1987, according to data collected by the Census Bureau in the 1987 and 1992 retail censuses. In contrast, total retail sales grew by 30.4 percent, or 5.7 percent when adjusted for inflation. Current dollar sales in 1992 amounted to $27.7 billion, up from $21.3 billion in 1987. The number of Alabamians employed in retail trade reached 269,662 in 1992, an increase of 7.9 percent during the five years.

Growth in Alabama’s retail sector exceeded that of the nation, where inflation-adjusted sales were up 2.8 percent and employment increased by 3.5 percent. Almost every Alabama retail category saw fewer stores and higher sales. While the number of general merchandise stores dropped 1.6 percent, real sales climbed 19.2 percent. Sales of gasoline service stations were up 19.2 percent also, with a 2.0 percent decline in businesses. The largest contrast was a 20.3 percent increase in constant dollar drug store sales in the face of a 12.0 percent decline in stores.

While still Alabama’s largest retail sector when measured by sales in 1992, the automotive category was the only group to report a decline in real sales, amounting to 7.3 percent for the five years. There were 106 fewer automotive establishments and 2,284 fewer employees in 1992.

Apparel and accessory stores saw the greatest attrition; there were 413 fewer stores in 1992 for a drop of 16.8 percent since 1987. Eating and drinking places bolstered their status as the most frequent type of retail business across the state: the 5,326 establishments counted in 1992 represents a 14.7 percent increase. However, with constant dollar sales increasing a lesser 11.2 percent, sales per eating and drinking place were actually down across the period. The automotive sector was the only other category to see declining average inflation-adjusted sales per establishment.

Surveying Alabama’s retail landscape in 1992, eating and drinking places were the most plentiful and the most labor-intensive. Sales per employee averaged just $28,369 in 1992, compared to an overall retail average of $102,846. These establishments employed 32.6 percent of all retail workers in 1992 while generating just 9.0 percent of total sales. With 3,128 stores and 46,202 employees, the food sector was the second most prevalent retail establishment and employer. Food stores accounted for 17.1 percent of retail employment and 20.5 percent of sales.

While Alabama counted only 818 general merchandise establishments in 1992, stores were large relative to other retail categories. An average 41 employees and $4.77 million in sales per store compares to an average 11 employees and $1.15 million in sales across all retail businesses. With 14.1 percent of sales and 12.3 percent of employees, general merchandise ranked as the third largest retail category.

At $288,868, automotive sales per employee were considerably higher than for any other group; gasoline service stations ranked second at $185,481. Alabamians continued to spend the largest share of their retail dollars on automobiles and other vehicles and parts: in 1992, 22.3 percent of all retail purchases were made in the automotive sector.

Retail Sales in Alabama MSAs

Alabama’s ten metropolitan areas dominate the state’s retail economy. In 1992, 67.3 percent of Alabamians lived in its 21 metropolitan counties (including Russell, which is part of the Columbus, Georgia MSA). And, according to the 1992 Census of Retail Trade, 74.2 percent of all retail sales were transacted in these MSA counties.

Urban stores tended to be larger than their rural counterparts; these establishments employed 74.8 percent of retail workers while accounting for 68.0 percent of all retail businesses. Employment per store averaged 12.3 in metropolitan area counties and 8.9 elsewhere. Overall, the 16,374 retail establishments located in metropolitan areas employed 201,613 and generated almost $20.6 billion in sales in 1992.

The Birmingham MSA, with 20.7 percent of the state’s 1992 population and 24.3 percent of retail sales, reported the highest sales per capita at $7,837. Mobile ranked as the state’s second largest retail market: the Mobile MSA produced 13.0 percent of total sales in 1992, but placed just sixth in per capita retail sales. Dothan, Florence, Huntsville, and Montgomery all surpassed the U.S. average of $7,429 in 1992 per capita sales. Sales were weakest in the Decatur and Gadsden metropolitan areas, falling below the statewide average of $6,703 per person.

Average retail salaries ranged from a high of $11,946 in the Birmingham MSA to a low of $10,308 in Anniston. Only Birmingham, Huntsville, and Mobile reported a higher payroll per employee than the statewide average of $11,083 in 1992.

Changes in Alabama’s metropolitan area retail economies varied during the five years from 1987 through 1992. Most saw inflation-adjusted sales rise. Retail sales climbed 14.1 percent in Florence and 9.2 percent in Decatur. Sales gains also exceeded the statewide average of 5.7 percent in Mobile, Huntsville, and Montgomery. But two MSAs saw the value of sales fall during the period: constant dollar sales dropped 7.7 percent in Gadsden and 3.8 percent in Dothan.

The number of retail employees was up in all areas except Gadsden; double-digit gains were seen in Montgomery, Decatur, Florence, Tuscaloosa, and Huntsville. Just four of the ten MSAs posted increases in the number of retail establishments, however; these included Montgomery, up a sizeable 9.8 percent, Decatur, Huntsville, and Anniston.

Some MSAs saw marked increases in specific retail categories. The number of general merchandise stores climbed 26.1 percent in the Dothan MSA and 16.7 percent in Anniston between 1982 and 1992. The Decatur MSA saw a 28.2 percent increase in lumber and hardware stores and a 25.0 percent gain in gas stations. Eating and drinking establishments were up 28.3 percent in Montgomery, 20.2 percent in Florence, and 19.4 percent in the Huntsville MSA. The number of food stores in the Montgomery MSA increased by 12.9 percent.

**6/96

Dimensions of Alabama’s Black Population

• August 6th, 2019

Dimensions of Alabama’s Black Population

POPULATION

Most (55 percent) African Americans live in the South. Seventeen percent live in the Northeast, 20 percent in the Midwest, and 8 percent in the West.

In the United States there are about 33 million African Americans–about 13 percent of the total U.S. population. However, in Alabama, African Americans make up about 25 percent of the total population.

The black population is not evenly distributed throughout the state. There are 10 counties in Alabama where blacks are a majority of the population. They are, in rank order:

County                            Percent Black Population
Macon County                                86.2
Greene County                               80.6
Lowndes County                              74.9
Bullock County                              72.7
Sumter County                               70.7
Wilcox County                               69.2
Perry County                                64.8
Hale County                                 59.7
Dallas County                               58.3
Marengo County                              51.1

Source: 1990 Census of Population and Alabama State Data Center, special tabulation.

Alabama’s black population is growing faster than the white population. Alabama’s black residents are more concentrated in younger age groups, while at the same time the white population has more concentration than the black population in ages over 45. In the coming decades a larger percentage of black women than white women will be of child bearing age.

In 1990 white women in Alabama averaged 1.8 children in their lifetime, while nonwhite women averaged 2.45. These fertility rates are expected to continue into the next century, and in this respect Alabama is following a national trend.

BUSINESSES

Alabama ranks ninth in the nation in percentage of black-owned businesses. In Alabama, the number of black-owned businesses increased from 10,085 in 1987 to 14,707 in 1992, or a 46 percent growth rate.

During the same time period, sales and receipts of black firms in the state went from $439,966,000 in 1987 to $535,000,000 in 1992.

EMPLOYMENT

There are more black women at work in Alabama than black men. Of employed black Alabamians, 53 percent are women and 47 percent are men.

Nationally, there are more black women than black men in the executive, administrative, managerial, and professional specialty occupations. The same trend holds true in Alabama. Seventeen percent of employed black women in our state hold executive, managerial, or professional positions, whereas 10 percent of black Alabama men work in these occupations.

Alabama                                  Total        Women       Men
Employed black persons                    100%         100%      100%
Managerial, executvie, adminis             14%          17%       10%
Technical, sales, and adminis support      22%          30%       13%
Service                                    23%          29%       16%
Farming                                     2%           1%        4%
Precision production, craft, repair         9%           3%       16%
Operators, fabricators, laborers           30%          20%       41%

Source: 1990 Census of Population and Alabama State Data Center, special tabulation.

**7/96

Alabama Retail Sales Post Strong Gains

• August 6th, 2019

Alabama Retail Sales Post Strong Gains

Total unadjusted sales for all retail stores in Alabama were an estimated $2.89 billion during March 1996, the latest month for which sales data are available. Sales increased 15.0 percent over February 1996 and 3.5 percent compared with March 1995.

Data from the Alabama Department of Revenue, compiled by the Center for Business and Economic Research at The University of Alabama, show that total retail sales for the first quarter of 1996 were 5.7 percent higher than sales in the first quarter of 1995. Nationally, retail sales gained an average of 6.8 percent, according to numbers from the U.S. Department of Commerce.

Strongest sales growth in Alabama came from the general merchandise category where sales for the first quarter of 1996 were 8.6 percent higher than 1995 first quarter sales. This outpaced average U.S. gains of 5.0 percent. Apparel and accessory sales were up a substantial 8.4 percent over year ago sales; nationally apparel sales rose 4.6 percent. Other retail groups with above average growth for the quarter include hardware and lumber, up 4.6 percent; food, up 6.4 percent; and eating and drinking places, up 5.5 percent.

The state’s automotive group posted a gain of 4.7 percent for the first quarter, relatively weak compared to the 12.5 percent increase seen nationwide. Furniture sales, up 3.1 percent, also grew at less than half the national average, while gasoline service station sales declined.

Looking at 1995, total retail sales for the year reached $32.8 billion in Alabama, 5.9 percent higher than the $31.0 billion reported in 1994. Strongest gains came from automotive sector sales of $6.3 billion, up 8.2 percent over the previous year. Sales of eating and drinking establishments increased a healthy 5.9 percent. Sector sales by category are reported in Table 1.

Current dollar sales in the state’s ten metropolitan areas all increased in 1995, with gains ranging from 6.6 percent in the Dothan MSA and 5.5 percent in Mobile down to 3.0 percent in Montgomery and 2.3 percent in the Huntsville MSA. Alabama’s 46 nonmetropolitan counties outpaced the metro-area counties with retail sales gains of 9.5 percent during 1995. However, nonmetropolitan county sales amounted to just $9.4 billion, or 28.5 percent of the state’s total. Sales in the 21 metropolitan counties totaled $23.5 billion in 1995, up 4.5 percent for the year. MSA and county retail sales are summarized in Table 2.

        Alabama Total Retail Sales, 1990-1995

               Sales ($1,000)     Percent Change

     1990        24,499,160
     1991        24,703,232            0.8
     1992        26,728,109            8.2
     1993        28,758,049            7.6
     1994        31,007,474            7.8
     1995        32,837,858            5.9

**8/96

Alabama’s Housing Units and Households Increase

• August 6th, 2019

Alabama’s Housing Units and Households Increase

Alabama had an estimated 1,783,000 housing units on July 1, 1995, up from 1,670,000 reported on April 1, 1990. This 6.7 percent increase compares to a 5.6 percent gain for the U.S. According to the Census Bureau, the number of households in Alabama grew 6.4 percent, increasing from 1,507,000 on April 1, 1990 to 1,602,000 as of July 1, 1995. Gains nationwide amounted to 5.6 percent.

The aging of the baby boom generation boosted the number of Alabama households with a householder aged 45 to 54 by 22.3 percent between April 1, 1990 and July 1, 1995 and those with householders 35 to 44 by 10.4 percent. Alabama households with householders aged 15 to 24 increased 3.5 percent; 55 to 64, 1.5 percent; and 65 and over, 4.6 percent. Only the state’s households headed by 25 to 34 year olds declined (-3.8 percent); the U.S. saw declines in households for heads aged 15 to 24, 25 to 34, and 55 to 64.

With 13.7 percent of 1995 households headed by a 55 to 64 year old and 22.6 percent by a householder 65 and over, Alabama households are more elderly than average — 36.3 percent of households are in these two categories, compared to 34.2 percent of U.S. households. Shares of Alabama households by age of householder include ages 15-24, 5.9 percent; 25-34, 18.2 percent; 35-44, 21.6 percent; and 45-54, 17.9 percent.

Persons per household in Alabama were estimated at 2.60 in 1995, compared to 2.64 for the nation. Alabama reported an average of 2.62 persons per household in 1990.

Users may access the Census Bureau tables of 1990 and 1995 housing units and households to obtain information for all states.

Alabama Households by Age of Householder July1, 1995

                    Age             Number   Percent of Total

                    15-24           94,000           5.9
                    25-34          292,000          18.2
                    35-44          347,000          21.6
                    45-54          287,000          17.9
                    55-64          220,000          13.7
                    65+            363,000          22.6

                    Total        1,602,000         100.0

**10/96

Alabama Population Gains Steady Through 2025

• August 6th, 2019

Alabama Population Gains Steady Through 2025

Alabama will see the 17th largest net gain in population over the next three decades, enabling it to hold its place as the country’s 22nd most populous state. The state will continue to be home to 1.6 percent of the nation’s residents, according to new population projections for states from the U.S. Bureau of the Census. And while the average Alabamian will be older, the race and sex composition of the population will keep looking – statistically speaking – just about the same.

From an estimated 4,253,000 Alabama residents in 1995, a projected gain of 198,000 will bring the state’s population to 4,451,000 in the year 2000. This 4.7 percent increase is just below the 5.1 percent gain estimated for the first half of the 1990s. Another 773,000 new residents are expected between 2000 and 2025, for a gain of 971,000 during the three decades from 1995 to 2025. The Census Bureau projects that Alabama’s population will total 5,224,000 in 2025.

Two-thirds of the projected population increase will be due to net migration, which is a positive reflection on Alabama’s attractiveness as a place to live and work. In particular, about 577,000 more people are expected to move into the state from other states than move out between 1995 and 2025, ranking Alabama 9th in net internal migrants. The state will continue to see slower gains from international migrants, with an expected 71,000 ranking just 34th. Natural increase will account for another 196,000 residents.

One statistic that will change is the age composition of Alabama’s population. The population aged 18 and over is expected to increase from 3.2 million or 74.6 percent in 1995 to 3.3 million or 75.2 percent in 2000. By 2025, the voting age population should reach 4.1 million or 78.2 percent of the total.

The number of youth (under age 20) in the state will grow by just 67,000, or 5.6 percent, during the three decades. This lack of growth will have important planning implications for educators and employers. From 28.3 percent of Alabama’s population in 1995, the percentage under 20 will drop to 24.4 percent in 2025.

As the first of the Baby Boom generation reaches retirement in 2011, the growth of the population aged 65 and older will accelerate. Alabama is expected to see 20.5 percent of its population falling into the 65+ group in 2025, up from 13 percent in 1995. That should give the state the 20th highest proportion of elderly in 2025. Marketers and activities catering to this age group can be poised for the tremendous gains expected from 2011 to 2025.

Slow growth in the youth population and more rapid growth in the elderly will contribute to slowing growth of the labor force. The number of Alabamians aged 20 to 64 is expected to increase by 385,000 from 1995 to 2025, a 14.7 percent gain. The dependency ratio – the number of youth and elderly for every 100 persons of working age will rise from 70.4 dependents per 100 workers in 1995 to 81.3 in 2025.

During these three decades, the segment of the population that is very old will grow slowly but steadily. From 58,000 Alabamians 85 and over in 1995, it will reach 104,000 in 2025. Providers of care for the very old should be prepared for a surge in demand after 2030 as baby boomers enter this age group.

Alabama’s population will continue to be about 52 percent female throughout the projection period. And the ethnic composition of the population will change only slightly. The percentage of the population that is non-Hispanic white is expected to decline from 72.8 in 1995 to 71.3 percent in 2025. At the same time, the African American category will increase from 25.5 percent of the total population in 1995 to 26 percent in 2025. The Hispanic population is projected to grow from 0.7 to 1.2 percent. A little less than 2 percent of the state’s population will be Asian or American Indian in 2025.

Between 1995 and 2025, the number of non-Hispanic white Alabama residents should increase by 630,000, compared to a gain of 275,000 for African Americans. There are expected to be 7,000 more American Indians, 28,000 more Asians, and 32,000 more persons of Hispanic origin in 2025.

Finally, the number and proportion of Alabama’s voting age population that is non-Hispanic white is projected at 2.5 million, or 74.8 percent in the year 2000. At the same time, the African American voting age population should total 782,000, or 23.4 percent.

**10/96

Revised Alabama Per Capita Income Growth in 1995

• August 6th, 2019

Revised Alabama Per Capita Income Growth in 1995

Alabama’s per capita income rose a moderate 5.1 percent in 1995, slightly below the U.S. average increase of 5.3 percent. At $19,181, the state’s per capita income was 82.6 percent of the national average of $23,208. In its September 24, 1996 release, the Bureau of Economic Analysis (BEA) also revised Alabama’s 1994 per capita income upward from $17,922 to $18,256, or 82.8 percent of the 1994 U.S. average.

In 1995, Alabama ranked thirty-eighth among the 50 states on per capita income. Among the twelve states in BEA’s Southeastern region, Alabama was sixth, just ahead of South Carolina, Louisiana, and Kentucky, and trailed by Arkansas, West Virginia, and Mississippi. However, Tennessee, ranked fifth in the Southeast with a 1995 per capita income of $21,038 seems securely ahead of Alabama.

Users can access the BEA tables of state per capita and total personal income for a complete report.

**10/96

An Alabama Lottery: What Could We Expect?

• August 6th, 2019

An Alabama Lottery: What Could We Expect?

Could Alabama support a state lottery, and how much would it add to the state’s economy? Some believe a lottery could make significant contributions, but what monies are likely from a lottery?

Per Capita Revenues Are Misleading

One way to estimate potential lottery revenues is to use an average from other states with lotteries. In 1993 the per capita net income to states with lotteries was $47.42. With a population of approximately 4.2 million, Alabama would net an estimated $198 million. However, the range among lottery states is considerable, with a high of $96 in Massachusetts and a low of $19.63 in Missouri.

It would be a mistake to assume that the national average would apply to Alabama when the variance among states is so large. Many factors determine lottery sales-income, relative size of the tourist industry, proximity to other states with legalized gambling, age of population, etc. We are left with the strong belief that national averages are simply not applicable.

Look at two lottery states which are similar to Alabama in per capita income ($17,925 in 1994). The two are Idaho ($18,403) and Montana ($17,824) where revenues per capita averaged $27.52 and $20.17, respectively, for an average of $23.84. Based on this average, Alabama might expect total revenues of approximately $100.1 million, nearly $100 million less than the revenue projected using a national per capita figure. Broadly interpreting these results, it appears that Alabama could expect somewhere between $85 million and $115 million in revenues from a lottery. That is between 1.8 and 2.5 percent of total state tax revenues.

A Very Inefficient Tax

Some people argue that a lottery would provide needed state revenues. Essentially, a lottery is a voluntary tax, since only those who choose to purchase a ticket contribute to the revenue base. That argument is fine as far as it goes, but it fails to point out the very high administrative burden associated with this tax. If Alabama followed Florida’s and Georgia’s examples, the gross lottery revenues would be broken down in the following manner: 50 percent in prizes, 2 percent to the ticket providers, 6 percent to retailers, 1 percent for advertising, 3 percent for lottery employees, and 38 percent for state revenues. Clearly a tax which costs 62 percent of revenues to administer is not very efficient.

What Will Determine the Outcome?

In spite of the high administrative costs and the extremely low probability of winning (in Florida, the odds of winning typically run 1 in 14 million or more), 66.8 percent of Alabamians say they support a state lottery. The Birmingham News reported a 1993 survey in which nearly a third of those surveyed claimed to have bought a lottery ticket with the past 12 months. Indeed, five of the ten busiest ticket outlets in Georgia are in towns near the Alabama border.

The odds are poor and the costs are high, but lotteries are politically expedient. And that is probably the best explanation why 72 percent of the states (plus the District of Columbia) now have legalized lottery sales.

James G. Youmans
William D. Gunther

**01/97

Want to Earn A Million Dollars? Go to College !

• August 6th, 2019

Want to Earn A Million Dollars? Go to College !

The popularity of state lotteries, sweepstakes, and casinos attests that many people dream of becoming millionaires. Each year, Americans spend more than $10 billion on state lotteries. But there is a way to acquire a million dollars that has less risk than playing the lottery: invest in higher education.

The Cost of an Education

Of course there is price for obtaining a degree, just as there is a cost for playing the lottery. Let’s see if the cost is worth the benefit. Suppose that a high school graduate who did not go to college could earn $6 per hour and worked 40 hours a week. That is an annual income of $12,480. What does it cost for him to go to college instead?

Suppose that college tuition and books amount to $3,000 per year. His food, clothing, and lodging may not amount to much additional expense, since our hypothetical student needs clothing, lodging, and food whether he is working or going to college. Moreover, research has shown that most college students actually work 20 hours a week in a part-time job. Thus, what the high school student is giving up by going to college is the opportunity to work the other 20 hours a week, not 40 hours per week. Finally, suppose it takes five years to complete the degree requirements. Under these assumptions, the cost of a bachelor’s degree, including the opportunity cost of not working 20 hours a week for five years, is $46,200. What can our student expect from such an investment?

The Financial Benefits of a Degree

In 1995 the average starting salary for all University of Alabama bachelor’s degree recipients (no matter what field of study) was $25,500. Let’s assume that our graduate is 23 years old upon graduation and will work until age 65 (42 years). If earnings, adjusted for inflation, grow at 1.17 percent a year (based on national averages), our student could expect to earn $1,415,000 over his or her work life. That’s 41.5 percent more than a million dollars. And, of course, some graduates may even earn more!

The Return on Investment

Now it is true that this income is received over a person’s lifetime, but that does not diminish the value of this investment. First, consider that student would have had some income even if he never went to college. We assumed that without a college degree the student would begin earning $6.00 per hour. Let’s say his salary would grow at an inflation-adjusted rate of 1/2 percent. (Actually, the data show real incomes falling for workers with only a high school diploma.) The student would have earned $675,000 over his 48 year working life. So the gain in lifetime income from obtaining a bachelor’s degree amounts to $739,384 in nominal dollars. Using the difference in the present values of these future income streams ($548,707) and dividing the gain by the cost of the education ($46,200), our student will earn the equivalent of a 24.7 percent average annual real rate of return on his investment in education.

Where can you find a better deal?

**01/97