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Outside the Box: The growth gap is widening at the expense of states with lower vaccination rates

The last decade saw considerable concern over rising income inequality in the United States. Over the past few years, several researchers, including my colleagues and I at Ball State University, have argued that regional inequality is an equal if not more pressing worry than widening income inequality between individuals. 

Counties in the U.S. have been growing more unequal since the 1970s, reversing a century or more of economic convergence. This is creating places that grow either richer or poorer. Now COVID is worsening that regional inequality, creating a vicious cycle of poor education leading to low vaccination rates, which reduces already weak economic growth.

The most recent two monthly jobs reports for states marks the first jobs report to capture the employment effects of the 26 states which ended early the special payments of an extra $300 a week in unemployment benefits under the CARES Act. It is also the first jobs report to capture the resurgence of COVID that is now moving quickly across parts of the country. 

What is striking is the geographic clustering of COVID and economic performance.

From April to June, the 26 states which cut off the extra $300 during the summer grew at about 72% as fast as the rest of the country, according to my calculations. The most charitable understanding of their policy decision was a hope that it would spur employment. But from June to July, as all these states cut benefits, their job growth slowed substantially. From June to July those states grew only 64% as quickly as those who left benefits intact, my math shows.

“Each percentage point increase in the vaccine rate is correlated with a 1.2 percentage point increase in job growth.”

A study published in August provides some clues as to why this may have happened. Using banking data from these recipients of unemployment insurance, the authors reported that few recipients who lost benefits found jobs, and nearly all had exhausted family savings. These cuts ended economic stimulus from these states, slowing job growth.

But more than just a short-term policy mistake is contributing to this differing outcome between states.

From April to June, the 25 least-vaccinated states saw job growth around 80% of that of the 25 most-vaccinated states, according to my calculations. That was before COVID started its resurgence. From June to July, these states saw employment growth drop to just 67% of that of the 25 most-vaccinated states.

I found that the correlation between vaccination rates and job growth is unambiguous. Each one percentage point increase in the vaccine rate is correlated with a 1.2 percentage point increase in job growth. But the economic performance across states isn’t just about a few months of pandemic stimulus cuts or resurging COVID. This is where vaccination rates collide with regional inequality – that rich areas are getting richer while poor areas are getting poorer.

Educational attainment plays a surprising role in vaccine rates. A recent study reports that 76% of college graduates are vaccinated, while only 53% of high-school graduates are. Educational divergence in healthcare outcomes are common, but this one is different in two important ways. First, large differences in vaccine rates by education are uncommon. Before COVID, vaccines were almost universally accepted. Second, older Americans are disproportionately vaccinated. Roughly 85% of those 65 and older have been vaccinated, while barely half of the 25-to-40-year-old crowd are.

The education and age differences are odd since the educational attainment of young adults is markedly higher than older Americans. So, with a little algebra it becomes clear that it is younger, less-well-educated adults who are disproportionately unvaccinated. And they tend to be poorer.

No easy fix

All of this makes clear the growing policy challenges of rising inequality across America’s counties, cities and states. It turns out that income inequality between families is relatively easy to fix. We simply continue to tax affluent people more and transfer those dollars to poor people, as we’ve been doing for a century. That remedy has largely banished the sort of Dickensian penury that remains common in much of the world. 

However, there is no easy policy tool to remedy the economic inequality between places. The circular challenge presented by COVID should make this clear. Low levels of educational attainment in a state result in lower vaccine rates. Lower vaccination rates suppress job growth, and result in weaker economic conditions. This in turn persuades elected leaders to embrace policies that treat symptoms instead of causes. 

In the case of the COVID pandemic, these policies further weaken the economy, lessening the resources to boost educational attainment. It is a hamster wheel of despair and fertilizer for populist demagogues, the root of the populist backlash that fueled the presidential campaigns of both Bernie Sanders and Donald Trump.    

I use COVID only as an example. The pandemic didn’t cause these problems, it merely magnified and exposed them. While improved educational attainment will reduce economic inequality, that’s not the whole of the problem. After all, vaccines don’t just provide individual protection from disease, but also protect neighbors, friends and their children.

The dark impulses that refuses vaccines are not just about ignorance. They manifest a rejection of individual responsibility that is hostile to the success of a vibrant, modern economy. It’ll take more than good schools to remedy this problem. But, until we do find a solution, expect continued divergence between America’s rich and poor places.   

Michael J. Hicks is the George and Frances Ball distinguished professor of economics and the director of the Center for Business and Economic Research at Ball State University in Muncie, Ind. Follow him on Twitter @HicksCBER

More from Michael J. Hicks: Texas, California and Indiana offer surprising lessons about low taxes and economic growth

Also: This is the dark side of cities’ boasts about their low cost of living

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