Economist hopes for tax reform over tax cuts, also eyeing wage growth

by Roby Brock ([email protected]) 414 views 

Economist Mervin Jebaraj likes what he sees in the current economy, but has his eye on several metrics and semantics to gauge future economic growth.

Jebaraj, interim director of the University of Arkansas Walton College of Business Center for Business & Economic Research, was a guest on this week’s edition of Talk Business & Politics. He said that while a new record was just reached in Arkansas employment – 1,329,979 – wage growth remains stagnant despite median income gains.

“Anytime we have such strong labor force growth, we see strong employment growth, and a low unemployment rate. You know, it’s time for Arkansas to be happy about it, to crow about it, so when you see that in combination with some other numbers we got from the census in the past few weeks about median income, which was up in Arkansas, the poverty rate was down, you can attribute that to the low unemployment rate, the high employment in Arkansas,” he said.

“What I want to see going forward is that the unemployment rate remains where it is, or goes a little bit lower because what we still haven’t seen is wage growth on an annual basis. You see median incomes go up, because more people are finding jobs and getting incomes, but all the people making an income at their jobs haven’t seen a pay raise in a long, long time,” Jebaraj said, adding that the national economy is in its third largest expansion in history – about 100 consecutive months and counting.

Jebaraj also said that early accolades involving President Donald Trump’s newly announced tax plan should possibly wait for more details to be revealed.

“I think whether it’s transformational or not will depend on whether we get a tax reform plan or a tax cut plan. A tax reform plan would be transformational for our economy, because we’ve been long overdue for some tax reform, both in the corporate tax side, as well as the individual income tax side. The prospects for tax reform, I think, are not so good, given the political setup in our country,” he said, noting that the budget reconciliation process has limitations.

“If we don’t get it paid for in a ten year budget window, don’t get rid of those deductions, then you will see a windfall for our corporations across North America, or at least here in the United States, but I would caution that whatever we do to reduce our taxes, that the other countries competing with us will probably reduce their effective rates as well to try to keep a hold of some of that money,” he said.


Jebaraj also shared his thoughts on the forthcoming medical marijuana industry in Arkansas. He sees potential for a variety of new job creation.

“We’re going to see a lot of growth in employment here, particularly in the cultivation and distribution business,” he said. “From what I’ve seen, from careful studies in states like Colorado that have done this for a long period of time now, is that you’ll see a lot of employment, especially specialized employment in cultivation and distribution, doing this on a professional business scale requires a lot of work, a lot of employment, so about 70 percent of the employment impact that we will expect to see from this would be in the cultivation and distribution, and some of that will be direct retail businesses as well.

“The remaining 30 percent of the employment impact that we expect to see from the medical marijuana industry, in Arkansas, will come from some of the spillover employment in other industries, in particular, we’d expect to see some security type jobs associated with this, a lot of legal consulting and legal work and accounting work, because there are a bevy of state, local, and national laws that all conflict each other on medical marijuana.

“Another industry that people don’t really think about is the HVAC industry, so you typically grow medical marijuana and marijuana, in general, at these professional operations, in very controlled environments. There’s going to be jobs in the HVAC industry, as well, and then real estate and construction to build these facilities, so a lot of spillover benefits in a lot of different sectors, and then we expect some business service innovations,” said Jebaraj.

He hopes to conduct a study to analyze the effects of the medical marijuana industry on the Arkansas economy.

Recently, Jebaraj shared new Census Bureau statistics regarding the state’s burgeoning craft beer industry. While it’s not a major employer, it contributes to the overall economy with its influence on millennials, in particular.

“Between 2013 and 2016, we’ve doubled the number of breweries that we have in Arkansas. We have about 16 breweries. Five of them in Pulaski County, five in Washington County, four in Benton County, and the employment has gone up to about 250 or so people employed. That’s an average of about 14 employees per brewery,” he said.

While the employment growth is nice, Jebaraj said that the beer industry’s contribution to culture may be more significant.

“I think one important benefit that the craft brewing industry provides in Arkansas is it’s an important cultural amenity, especially in regions like in central Arkansas and northwestern Arkansas. We’re trying to attract and retain millennials and young professionals, the kinds of people that partake in consuming the products from craft breweries. The importance of those craft breweries to maintain that population here is probably, right now, more important than the employment and wage impact that they’re generating in the state,” he said.

Watch his full interview below.