Effects of 9/11 on Wages and Earnings
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The adverse effects of September 11 on Arab and Muslim men’s wages were greater in areas reporting higher rates of hate crimes related to religious, ethnic or country of origin bias, according to a study scheduled to appear in the spring 2007 edition of the Journal of Human Resources. The study measured changes in wages of first- and second-generation immigrants from countries with predominantly Arab or Muslim populations, between September 1997 and September 2005. Changes in wages were compared to wage changes for first- and second-generation immigrants with similar skills from other countries. The study is based on data from 4,300 Arab and Muslim men, ages 21 to 54, from 20 states where 85 percent of all Arab and Muslim Americans live. Data from the 2001 Federal Bureau of Investigation (FBI) hate crime report, the Current Population Survey for 1997-2005, and the U.S. Bureau of the Census 2003 were used, as well.
“I was surprised,” Robert Kaestner, study co-author and University of Illinois at Chicago Professor of economics, said of the findings. “We see an immediate and significant connection between personal prejudice and economic harm.”
Evidence suggests the events of September 11 reduced interstate migration, making Arab and Muslim men more reluctant to seek better opportunities in new destinations due to the uncertainty of their reception. The study also showed that changes in industry of employment among Arab and Muslim American men accounted for some of the lower wages post-September 11, Kaestner said. Hours worked were unaffected.
“After Sept. 11, Arab and Muslim Americans worked as often as they did before (the attacks), but they worked in different industries paying less on average than the industries they use[d] to work in,” Kaestner explained.
There is some evidence that the adverse wage and earnings effects are dissipating, the study concluded. Figures from the most recent period available (2005) indicated a rebound in wages and earnings for Arab and Muslim men.
Public sector wage earners in Manhattan, in contrast, are seeing salaries averaging more than $92,000, according to a report by the Empire Center, a project of the Manhattan Institute for Policy Research, a non-profit-non-partisan think tank. Not only do public sector employees in Manhattan earn almost double the state government salary of $48,741 and more than double the local government salary of $45,341, but their ranks have grown. New York State now employs around 180,000 people, Scott Reif, spokesman for the Division of Budget, told Reuters, while staffing has grown by 2.9 percent at the local level. Private employers have not yet regained all of the 300,000 jobs lost as a result of the September 11 attacks and the stock market’s decline, however, there are more jobs in the public sector than ever, Reuters reports
The public workforce in New York is also unique among public employees across the nation in that one out of every eight New York workers is a unionized government employee. In fact, union membership in New York has reached an all time high, exceeding 1 million union workers, according to the Empire Center report.
In other news related to the effects of September 11 on wages and earnings, Senator Olympia Snowe(R-ME), chair of the Senate Committee on Small Business and Entrepreneurship, announced the findings of a Committee review of the Supplemental Terrorist Activity Relief (STAR) loan program. Snowe’s review found that the Small Business Administration (SBA) and its participating lenders failed to properly document loan eligibility for small businesses damaged by the attacks.
“Congress intended the STAR program to be an economic stimulant for small businesses nationwide that were damaged by the September 11, 2001, terrorist attacks and its aftermath,” said Snowe. “Unfortunately, the inadequate implementation of the program by the SBA and its participating lenders allowed almost every small business in the country to be eligible for a STAR loan.
“The Small Business Administration failed to review documentation used by banks to demonstrate that certain businesses were eligible for the loans. Because of lower fees and a higher maximum loan cap, lenders had a financial incentive to make as many STAR loans as possible. Thus the responsibility for verifying eligibility rested with the SBA. The agency wholly abdicated that responsibility,” Snowe continued.
Snowe noted that while Congress intended the STAR program to be broad, the SBA pushed lenders to use the STAR program due to budget concerns with the standard, non-STAR 7(a) program. In addition, because the SBA told lenders it would not review STAR loan documentation, lenders were able to issue STAR loans at their own discretion, without any SBA oversight. As a result, most lenders did not maintain adequate documentation.
Key findings of the Report on the Small Business Administration’s Supplemental Terrorist Activity Relief include:
- No small business intentionally took unfair advantage of the STAR program, nor was it determined that any small businesses unaffected by the events of 9-11 and its aftermath purposefully sought a STAR loan.
- A random sample of 66 STAR loan files from 27 participating lenders were reviewed by Committee staff. A key objective was to determine if the participating lenders maintained clear documentation of borrowers' eligibility to receive STAR loans. The lenders were required to retain records in the borrowers' files supporting a clear connection between the 9-11 attacks and any adverse economic impact on the recipient small business as a result of that attack.
- 74 percent of files reviewed did not contain adequate documentation justifying borrowers' eligibility to receive STAR loans.
- Almost any small business could have been found by the lenders to be eligible for a STAR loan due to the vague design of the program.
- The STAR program became an alternate means of accessing funds after the standard 7(a) program became more burdensome to the lenders. STAR loans had a higher maximum loan cap and, for the majority of the existence of the STAR program, had a lower annual fee for lenders. This made the STAR program much more attractive to lenders than the standard 7(a) program.
- The SBA is also to blame for not maintaining oversight of lender documentation demonstrating STAR loan recipients' eligibility. Since lenders had a financial incentive to make as many STAR loans as possible, the responsibility for verifying eligibility rested with the SBA. The Agency abdicated that responsibility by telling lenders that the Agency would not review that documentation.
- While the intent of Congress for this program was broad inclusion, the manner of the implementation of the program by the SBA and the lenders meant that conceivably every small business across the country became eligible to participate in the STAR program.
“Small businesses in no way, shape or form are at fault,” stated Snowe. “This was not a case of the taxpayer money just being handed out to anyone, businesses or lenders. No direct payments for the government existed in the STAR program, with $75 million in appropriations serving as a fund to reduce the cost to the SBA of issuing guarantees from banks to small businesses.”