What Does the Euro Mean for Alabama Business?

• July 29th, 2019

What Does the Euro Mean for Alabama Business?

In 1999 Alabama businesses with a global reach will be faced with two unusual problems: year 2000 computer compliance issues, and the “euro,” the new European currency. Although businesses have more than a year to get their computers ready for 2000, the euro will become a fact of life in a few months. Starting January 1, 1999, the euro will be a fully effective currency among the 11 “in” countries of the European Union (EU).

The first 11 countries admitted to the European Monetary Union (EMU) with the euro as their common currency are Austria, Belgium, Finland, France, Germany, Ireland, Italy, Luxembourg, Netherlands, Portugal, and Spain. The United Kingdom, Sweden, and Denmark are also qualified to join the Union, but due to domestic political pressures they opted not to join in the first phase. Greece did not qualify under the Maastricht Treaty criteria. These four “out” EU countries will probably join by the year 2001. Euro coins and notes start circulating in 2002. As more countries, particularly in Eastern Europe, join the EU, the euro will become more and more important.

Even before the coins and notes begin circulating among residents and tourists, the euro will be a real currency. The currencies of all the “in” countries will be fully convertible to euro and with each other at a fixed exchange rate. Starting in January 1999, all firms conducting business in EMU countries will have to have a system in place capable of pricing, invoicing, and accepting payments in euros. The exchange value of the euro is expected to be approximately 1.10 against the U.S. dollar. However, the true value will not be known until the euro is actively used and traded.

The first 11 “in” countries constitute an economic area with a gross domestic product (GDP) close to that of the United States. Euroland, as EMU countries are generally referred to, will have a combined GDP of $6.3 trillion versus $8.1 trillion for the United States. Euroland’s population will be larger than that of the United States- 290.8 million versus 268.2 million for the United States. The economic clout of this Union is going to have a significant impact on global businesses.

In 1997 Alabama’s exports to EMU countries totaled $964 million, or a little over 14 percent of total state exports. When the remaining four EU countries are included, total exports increase to $1.4 billion, or about 21 percent of the total exports from Alabama.

Euroland’s share of world exports will be much larger than the United States’ share. This new factor, plus the strong initial demand for the euro, could keep its exchange rate value strong against the U.S. dollar. Having a strong euro could provide opportunities for Alabama-based companies to increase their market share by being more price competitive. A common European market with a single currency presents chances for Alabama businesses to increase their exports without the foreign exchange risks of trading with each individual country.

Although exchange rate risk will be eliminated against each individual country, it will continue to exist against the euro itself, however, the exchange rate volatility is expected to dampen. Exporting firms can concentrate more on the overall Euroland economy and less on the business and political cycles of each individual country. A single currency will offer Alabama businesses greater investment and borrowing opportunities due to removal of currency restrictions and more transparent financial markets.

However, new opportunities in Euroland also present new challenges. If the exchange value of the euro compared to the U.S. dollar is low (instead of high, as expected), euro-based firms could then undersell their U.S.-based competitors. During the transition period, from 1999 to 2002, the euro will be in effect at the wholesale level only. It will be introduced at retail in 2002. Businesses will have to determine what share of their Euroland trade is considered wholesale and what portion is retail. Also, with this new single currency, firms doing business in more than one of these 11 countries will have to keep their prices uniform. Price differentials based on exchange rates will not be possible within EMU countries and could affect a dollar-based firm’s profit margins. Despite these challenges, a single market of this size will present tremendous opportunities for Alabama businesses involved in international trade.

Ahmad Ijaz

**09/98

Alabama’s Tax Burden

• July 29th, 2019

Alabama’s Tax Burden

State Tax Revenues

Tax collections per resident by the State of Alabama were among the lowest in the nation in Fiscal Year 1997. According to data recently released by the Census Bureau, state tax revenues totaled $5.48 billion, or $1,269.78 for each man, woman, or child in Alabama. This compares to an average of $1,660.36 for the United States as a whole. Alabama ranked 46th on state taxes paid per person, ahead of only New Hampshire, South Dakota, Texas, and Tennessee. State taxes were highest in Alaska and Hawaii, and among the contiguous states, in Connecticut, Minnesota, and Delaware.

Across the nation, an average of 33.7 percent of state tax revenues came from general sales taxes in FY 1997, with 32.7 percent from individual income taxes. The other primary state revenue sources were selective sales taxes on items, including alcoholic beverages, insurance premiums, motor fuels, public utilities, and tobacco, generating 15.5 percent of revenues nationwide.

Alabama’s tax structure differs substantially from that of the average state. Individual income taxes brought in 30.8 percent of state tax revenues in FY 1997. At $390.74 per capita, Alabama’s income tax burden ranked 38th, higher than five states that tax income (Arizona, Louisiana, Mississippi, North Dakota, and Tennessee) and seven states with no state income tax. General sales tax revenues to the state amounted to 27.4 percent of total tax revenues, for an average of $348.63 per person, higher only than Vermont and Virginia among states that tax general sales. Five states do not have a general sales tax.

The primary difference in Alabama’s state tax structure falls in the selective sales tax category, where Alabama generates 24.8 percent of its revenue compared to 15.5 percent for the average state. Public utilities sales taxes are especially high, with the average Alabamian paying $95.87 in FY 1997 compared to the average across all states of $32.22. Only residents of Hawaii, New Jersey, and West Virginia paid more. Sales taxes on alcoholic beverages brought in $27.09 per capita compared to an average of $13.77 nationwide, while taxes on tobacco products amounted to an average of $16.18 in Alabama compared to $27.89 for all states. Taxes on insurance premiums and motor fuels were slightly above average.

Total Tax Revenues

Of course, state tax revenues do not tell the whole story of the tax burden. Federal taxes are the largest share of the cost, while there are local tax revenues from sources such as property taxes and the local portion of the general sales tax. Recent data from the Tax Foundation provide an estimate of tax burdens across states. Total taxes in Alabama (federal, state, and local) for Fiscal Year 1998 averaged an estimated $7,468 per person, compared to the U.S. average of $9,881. Of this total, $5,322 was paid in federal taxes and $2,146 as state and local taxes. Total taxes took up 32.9 percent of the income of the average Alabama resident, compared to 35.4 percent across all states. At 9.5 percent of income in FY 1998, the state and local burden brought Alabama a 46th place ranking. Only residents of Alaska, New Hampshire, Tennessee, and Wyoming spent a smaller percentage of income in the form of state and local taxes. State and local taxes cost the average American 11.4 percent of their income in FY 1998.

However, Alabama’s federal tax burden was close to average, amounting to an estimated 23.5 percent of per capita income in FY 1998, compared to the national average of 24.0 percent. The state ranked 39th in federal tax burden in FY 1997. An estimated increase in federal taxes paid by the average Alabamian of 3.5 percent from 1997 to 1998, compared to a 3.1 percent increase for the United States as a whole, would drop the state’s ranking to 38th in FY 1998.

Carolyn Trent

**09/98

Good Education for Good Jobs

• July 29th, 2019

Good Education for Good Jobs

Educational attainment is one of the most important influences on economic well-being. More education tends to reflect greater socioeconomic success for individuals and for the state. The good news is that recent estimates from the Census Bureau show Alabama’s educational level improving. In fact, there is a dramatic improvement in educational attainment by those groups who have historically been less educated. The findings are based on a survey conducted in 1997 and refer to the population 25 years old and over.

In 1990 one out of every three Alabama adults did not have as much as a high school education. By 1997 that average had dropped to about one out of five. Alabama’s overall educational level remains below the national average, but is catching up. Significant differences remain with regard to age and race, but the percentages of whites and blacks with a high school education attained a record level in 1997. Among whites in the state, 81 percent were high school graduates or more, different from the 67 percent recorded for blacks. The black/white educational attainment gap is narrowing as the proportion of black students obtaining a high school degree has increased considerably during the past decade.

Over the last 20 years high school completion among young adults has been higher than earlier periods of Alabama’s history. During the past decade the proportion of the young adult population with a bachelor’s degree has also increased, although more modestly. Younger people tend to be better educated than older Alabamians. The educational level of the total adult population will continue to rise for some time, as younger, more educated, age groups replace older, less educated ones.

There are also educational differences between men and women in the state, and some of the differences seem unexpected. Women in Alabama are just as likely as men to have a college degree. Nationally, more men than women have a bachelor’s degree or more. College-educated people are fewer in Alabama than average for the nation. We are narrowing the gap, but we have a long way to go. Nineteen percent of Alabama adults have a bachelor’s degree or more, compared to 24 percent nationwide.

The South has the lowest educational attainment level of any region of the country. Of the bottom tier of states by percent of high school graduates (Alabama, Mississippi, Rhode Island, South Carolina, West Virginia, Arkansas, Tennessee, Louisiana, and Kentucky), only Rhode Island is not a Southern state. Educational attainment and economic well-being are closely linked. Average earnings increase at each progressively higher level of education. This relationship holds true not only for the entire population, but also across each subgroup of gender and race.

It is important for Alabama to continue to increase its educational levels because education yields returns to the state as well as to the individual. Research and development, innovative business practices, and technology advances are some of the offerings of a well-educated population. High employment levels in well-paying jobs are other advantages. Product design, market research, engineering, tooling, transportation, and advertising: these functions can employ more people-and at higher wages- than the factories that produce tangible goods. Most of these business services jobs require education beyond high school. How well Alabamians are educated will strongly influence both the state’s long-term prosperity and the well-being of its labor force.

Educational Attainment in the South, 1997
    (persons aged 25 years old and over)

Percent of the adult population who have:
             High School Diploma,         Bachelor's Degree,
                        or More                      or More

Alabama                  77.6                       19.3
Florida                  81.4                       21.7
Georgia                  78.8                       22.3
Mississippi              77.5                       20.9
North Carolina           78.4                       22.6
South Carolina           77.3                       19.2
Tennessee                76.1                       17.1
U.S. Average             82.1                       23.9



Source:  U.S. Bureau of the Census, P20-505, Table 13.

Annette Jones Watters

**12/98

Alabama Shows Dramatic Improvement in Education Attainment; State Remains Below National Average But Is Catching Up

• July 29th, 2019

Alabama Shows Improvement in Black Education; Two Counties National Leaders in Percent of Black Citizens

• July 29th, 2019

Alabama Shows Improvement in Black Education; Two Counties National Leaders in Percent of Black Citizens

Estimates released by the U.S. Census Bureau in advance of Black History Month show black Americans are improving in educational attainment, although blacks still lag behind whites, the Alabama State Data Center at The University of Alabama reports.

“The educational attainment level of the black population in Alabama has been rising through the decade,” said Annette Jones Watters, assistant director of the Center for Business and Economic Research and manager of the Alabama State Data Center in UA’s Culverhouse College of Commerce and Business Administration. “We continue to see that trend.”

In the state, 73 percent of black adults have at least a high school diploma compared to 81 percent of whites. Nationally, 88 percent of blacks ages 25 to 29 were high school graduates in 1998. The racial gap in education on the national level has narrowed to the point where there is no statistical difference in whites and blacks between the ages of 25 and 29, the Census Bureau reports.

The Census Bureau counts the U.S. population every 10 years. Between censuses, the Bureau produces estimates on population trends. The Bureau packaged some of the prior estimates in advance of Black History Month, celebrated annually throughout the month of February. Most of the estimates focus on national trends.

“A lot of what is estimated at the national level is not estimated at the state level,” Watters said.

Recent population estimates for the state of Alabama show two Alabama counties are national leaders in percentage of black residents. Macon County has the second highest percentage (86.4 percent) of blacks in the nation. Only Mississippi’s Jefferson County (87 percent) has a higher percent of its population made up of blacks.

Alabama’s Greene County ranks fifth in the nation for percent black population at 81 percent. Claibourne County, Miss., (82 percent) and Hancock County, Ga., (82 percent) rank third and fourth nationally.

Alabama’s Jefferson County has the highest total black population in the state, with 242,653 black residents. The county has had a 6.2 percent increase in black population this decade. Mobile, Montgomery, Madison and Tuscaloosa counties round out the top five Alabama counties in black population.

“People find Jefferson County an attractive place to live,” Watters said. “The county’s population is increasing and African Americans find it an easy place to find a good home.”

Dallas County, Ala., shows an increase in the percent black population (59.3 percent) although the total population has decreased in the county. The other nine counties with a majority black population are Macon (86.4 percent), Greene (81.0), Lowndes (75.7), Bullock (72.9), Sumter (71.8), Wilcox (69.6), Perry (66.3), Hale (60.7) and Marengo (52.4).

The University of Alabama’s business school, founded in 1919, first began offering graduate education in 1923. Its Center for Business and Economic Research was created in 1930, and since that time has engaged in research programs to promote economic development in the state while continuously expanding and refining its broad base of socioeconomic information. This enables it to serve as a reservoir for business, economic and demographic data.

Annette Jones Watters
Assistant Director, Center for Business and Economic Research
and Manager, Alabama State Data Center

Alabama’s Hispanic Population Continues to Increase

• July 29th, 2019

Alabama’s Hispanic Population Continues to Increase

Alabama was home to 39,304 persons of Hispanic origin as of July 1, 1997, according to estimates released by the Bureau of the Census. These estimates are the official estimates for the state, but they are almost certainly too low. The way the Census Bureau arrives at these estimates has its foundation in the 1990 census and relies on trends that were in effect before 1990. In places where there have been unusual changes in demographic patterns in the past decade, these estimates do not pick up those trends. Many counties in Alabama have had a significant influx of Hispanics during the 1990s, sometimes in support of the poultry industry or another specific industry in a county.

Estimating Demographic Characteristics. The Census Bureau is much better at estimating the demographic characteristics of the nation, or even the states, than counties. The data sources they use for county-level estimates may indicate the total number of people living in that county, but they do not indicate the characteristics of those people-whether they are black, white, Hispanic, etc. In order to make estimates by county by age, or race, or Hispanic origin, the Census Bureau uses a ratio method that assumes the ages, the racial distribution, and the ethnic origin of people in a county have not changed substantially since the last census. When there have been noticeable demographic changes, the estimates don’t pick up the new trends.

International Immigration. At the national level the Census Bureau can track international migration. They can account for how many legal immigrants have come into the country; they can estimate how many illegal immigrants have come in; and they can account for the people who legally emigrated out of the country. But, there is no way to know in which county of which state these people have settled. We will have to wait until the 2000 census for people in Alabama to report about themselves before we will really know about the changing Hispanic population in Alabama.

The 1997 estimate represents an increase of 14,675 over the 24,629 Hispanics counted in Alabama in the 1990 Census. Despite a 59.6 percent increase between 1990 and 1997, Hispanics make up less than one percent of the state’s residents-0.9 percent of an estimated 4,319,154 persons in 1997; up from 0.6 percent in 1990.

Counties with the largest numbers of persons of Hispanic origin in 1997 include Baldwin (2,060), Calhoun (1,925), Dale (1,806), Jefferson (3,999), Madison (5,038), Mobile (4,845), Montgomery (2,500), Shelby (1,136), and Tuscaloosa (1,482). Alabama has ten counties where Hispanics comprise one percent or more of the 1997 population: Autauga (1.1 percent), Baldwin (1.6 percent), Blount (1.2 percent), Calhoun (1.6 percent), Coffee (1.8 percent), Dale (3.7 percent), Madison (1.9 percent), Mobile (1.2 percent), Montgomery (1.1 percent), and Russell (1.0 percent).

**02/99

Alabama Per Capita Income Grows 4.2 Percent in 1997

• July 29th, 2019

Alabama Per Capita Income Grows 4.2 Percent in 1997

Alabama’s per capita income rose a moderate 4.2 percent in 1997, below the U.S. average increase of 4.7 percent. Still, the 4.2 percent increase was more than double the 1.9 percent increase in prices paid by consumers during the year. State per capita income of $20,699 was 81.8 percent of the national average of $25,298. Alabama ranked 39th among the 50 states on per capita income in 1997.

In 1987 Alabama’s per capita income ranked 44th in the nation. Over the past ten years, per capita income in the state has grown at an average annual rate of 5.3 percent, compared to an average growth rate for the United States of 4.7 percent.

States with the strongest growth in per capita income in 1997 include Connecticut (6.3 percent), Texas (6.1 percent), Washington (5.8 percent), Kentucky (5.8 percent), and Massachusetts (5.6 percent). Connecticut, at $35,954, had the highest per capita income among the 50 states, while Mississippi’s $18,087 was the lowest.

Among the 12 states in BEA’s southeastern region, Alabama was sixth in 1997, with South Carolina and Kentucky close behind. Virginia’s per capita income of $26,172 was the highest in the region. Other states ranked in the top five in the Southeast include Florida ($24,795), Georgia ($23,893), North Carolina ($23,174), and Tennessee ($22,752).

**02/99

Alabama Nets Residents from Migration

• July 29th, 2019

Alabama Nets Residents from Migration

Alabama netted 10,423 new residents from interstate and international migration between 1996 and 1997, the most recent period during which IRS tax return address data are available. While 87,804 Alabamians moved out of the state, 94,329 individuals moved into Alabama from other states and 3,898 moved in from foreign countries. The largest gains were from Georgia, which contributed a net of 2,423 new Alabamians, followed by Florida (1,057), Illinois (969), New York (851), California (800), Michigan (781), Pennsylvania (588), and Louisiana (561).

From 1996 to 1997, Alabama experienced a net loss of residents to 11 states. Tennessee drew 873 more people from Alabama than it sent into the state. North Carolina gained 424, Kansas 127, and Arizona 111. The states of Washington, Colorado, Nevada, Oregon, Montana, North Dakota, and Rhode Island together netted 263 former Alabama residents.

Alabama fared better than several southern states in attracting new residents and holding onto current ones. From 1996 to 1997, Louisiana saw the net loss of 13,698 residents due to migration, while Mississippi gained 4,188 and Kentucky netted 7,883. However, most southern states did considerably better than Alabama. Florida topped the tally with 122,753 net migrants, followed by North Carolina (60,746), Georgia (60,409), Tennessee (29,270), and South Carolina (22,256).

The Internal Revenue Service also calculates median adjusted gross income (AGI) for in-migrants and out-migrants. For Alabama, the median AGI of those who moved out of the state between 1996 and 1997 was $18,770, while incoming residents has a slightly lower median AGI of $18,366. At $21,772, median AGI for Alabama residents who stayed in the state was higher than for those moving in or out. This pattern was generally true among southern states; only Florida, Mississippi, and South Carolina showed higher median adjusted gross income in the group moving in compared to the group moving out.

Note that these IRS data do not provide a complete count of migrants since they only count taxpayers and their dependents. The Census Bureau uses additional Medicare records to arrive at its estimate of total net migration into Alabama from 1996 to 1997 of 13,212. By Census Bureau estimates, Alabama gained 111,022 residents from migration between April 1, 1990 and July 1, 1997. However, no detail of interstate movement is available for these totals.

**02/99

Alabama’s Population Gain Moderate in 1998

• July 29th, 2019

Alabama’s Population Gain Moderate in 1998

Alabama added 29,886 new residents between July 1, 1997 and July 1, 1998, according to estimates released by the Bureau of the Census. Alabama’s 1998 population of 4,351,999 was 0.7 percent higher than the revised 1997 total of 4,322,113. An estimated 11,431 more people moved into the state than moved out during the year. From the 1990 census through July 1, 1998, the state’s population increase totaled 311,610, a 7.7 percent gain that ranks the state twenty-second in population growth for the 1990s. Alabama was the twenty-third most populous state in 1998. In 1995 the state slipped from the twenty-second place ranking it held in the 1990 census as a result of Arizona’s rapid population increase.

Overall, the nation’s population rose 1.0 percent from 1997 to 1998 to total 270,298,524. Led by Nevada’s population gain of 4.1 percent and Arizona’s 2.5 percent increase, the West was the fastest growing region in the country with an average gain of 1.6 percent. California showed the largest numerical increase of any state with 484,432 new residents, representing a 1.5 percent increase. At 1.3 percent, the South ranked second in overall regional growth. Georgia led the South with a population increase of 2.0 percent. Texas posted a 1.9 percent increase, while Florida and North Carolina each gained 1.6 percent. Population growth in the nation’s Midwest averaged 0.4 percent, while the Northeast saw a 0.3 percent gain. Pennsylvania’s population was down 9,827, the largest numerical loss of any state.

**02/99

A Revised Economic Forecast for 1999

• July 29th, 2019

A Revised Economic Forecast for 1999