CULVERHOUSE COLLEGE OF COMMERCE AND BUSINESS ADMINISTRATION
CENTER FOR BUSINESS AND ECONOMIC RESEARCH
Fall 2001 / Volume 70, Number 4
In this issue:
Economic Outlook—Quarterly Update
October 2001
3
Selected Economic Indicators
7
Alabama’s Changing Population, 2000 to 2025
8
Some Implications of an Alabama
Telecommunications Industry Tax Reform
11
Age Makes a Difference
12
THE UNIVERSITY OF
ALABAMA
B U S I N E S S
This report is also available in PDF format on the
Internet at
http://cber.cba.ua.edu
The Center for Business and Economic Research has
available at this site downloadable data on various
topics including population, retail trade, and
employment. Research briefs are also available.
CENTER FOR BUSINESS AND ECONOMIC RESEARCH
Alabama Business
Associate Dean for Research
and Technology
Carl Ferguson
Associate Director
Samuel Addy
Assistant Directors
Deborah Hamilton
Annette Jones Watters
Authors
Samuel Addy
Ahmad Ijaz
Carolyn Trent
Annette Jones Watters
Graphic Design
Sherry O’Brien
Addtional Contributors
Randall Minor
Sunja Park
The University of Alabama’s Center for
Business and Economic Research (CBER)
will hold its 2002 Economic Outlook
Conference on January 17, 2002 in
Montgomery at the Embassy Suites Hotel.
The Conference will feature Nariman
Behravesh, Chief Economist with DRI-WEFA
presenting the latest national forecast and
Carl Ferguson, Director of CBER, giving the
Alabama forecast. The luncheon speaker will
be David Bronner, CEO of the Retirement
Systems of Alabama.
Conference participants will receive CBER’s
Alabama Economic Outlook, an award
winning publication, that covers output and
employment by sector. Current economic
conditions and trends and their likely effects
on the national and Alabama economies are
also examined in the Outlook.
For additional information:
Phone: (205) 348-6191
Email: [email protected]
Alabama Business is a quarterly publication of
the Center for Business and Economic
Research, Culverhouse College of Commerce
and Business Administration, The University of
Alabama.
Articles reflect the opinions of the authors, but
not necessarily those of the staff of the Center,
the faculty of the Culverhouse College of
Commerce, or the administrative officials of
The University of Alabama.
All correspondence should be addressed to:
Editor, Alabama Business, Center for Business
and Economic Research, The University of
Alabama, Box 870221, Tuscaloosa, Alabama
35487-0221.
For information on the Center for Business and
Economic Research, the Culverhouse College
of Commerce and Business Administration or
The University of Alabama:
http://cber.cba.ua.edu
http://www.cba.ua.edu
http://www.ua.edu
CBER
Economic Outlook –
Quarterly Update
Gross Domestic Product
Annual Percent Change
Over Same Quarter Previous Year, 1996 Dollars
6
5
October 25, 2001
4
3
United States
The U.S. economy took a turn for the worse after the
tragic acts of terrorism on September 11th. Our last
forecast (July 2001) called for some sort of recovery
by the fourth quarter of 2001, but any chance of that
now is gone. Furthermore, the current economic
slowdown could extend well into the first half of
2002. Although the manufacturing sector was
already in a recession, there were signs that a
manufacturing recovery could have been close. The
inventory cycle was nearing an end, and there was
optimism that lower interest rates could revive capital
spending. Furthermore, the index of leading
indicators had edged up four consecutive months
prior to September. However, after the attack,
everything was different.
Uncertainty overtook both consumer and business
sentiment, causing a sharp drop in both. The
University of Michigan’s Index of Consumer
Sentiment had fallen to an eight year low even before
the attack, mainly due to continuous warnings from
businesses regarding profitability, declines in stock
market valuations, and an acceleration in layoff
announcements. At the first of September there was
still a 50/50 chance that consumer spending would
keep the economy from sliding into a full blown
recession. However, after the terrorist attacks
consumer sentiment plunged and the effects could
last a long time. Housing markets, which were
holding up remarkably well through the summer,
have also softened since September 11th.
Our current forecast calls for a mild recession that
probably started at the end of the third quarter of
2001 and will last through at least the first quarter of
2002. Gross domestic product had been expected to
increase by around 1.7 percent in 2001, but currently
the forecast for 2001 is for 1.0 percent. Prior to the
attacks, the forecast for GDP for 2002 was 2.4
percent, but now the increase is expected to be about
1.3 percent. Most growth in consumer spending
occurred during the first half of 2001. Consumers
seem to be more reluctant to buy durable goods than
2
1
0
-1
1
1
1
1
1
1
1
1
1
1 Q4
1
1
/Q
/Q
/Q
/Q
/Q
/Q
/Q
/Q
/Q
/Q /
/Q
/Q
90 991 992 993 994 995 996 997 998 999 000 001 2001
19
1
1
1
1
1
1
1
1
2
1
2
Source: U.S. Department of Commerce, DRI-WEFA, and Center for
Business and Economic Research, The University of Alabama.
Consumer Expenditures
Annual Percent Change
Over Same Quarter Previous Year, 1996 Dollars
6
5
4
3
2
1
0
-1
1
1
1
1
1
1
1
1
1
1
1
1 Q4
/Q
/Q
/Q
/Q
/Q
/Q
/Q
/Q
/Q
/Q
/Q
/Q 1/
90 991 992 993 994 995 996 997 998 999 000 001 200
1
19
1
1
1
1
1
1
1
1
2
2
Source: U.S. Department of Commerce, DRI-WEFA, and Center for
Business and Economic Research, The University of Alabama.
nondurable goods or services. The 2001 increase in
spending on durable goods is expected to average
around 3.4 percent, significantly lower than the 9.5
percent increase experienced in 2000. Softened
consumer spending is taking its toll on the overbuilt
retailing sector. Consumer spending will pick back
up, albeit moderately, during the first half of 2002.
Manufacturing, as well as retailing, is facing a
considerable slowdown. The industrial production
index dropped almost 6.5 percent during the third
quarter of 2001, and manufacturing orders are still
declining. With a lack of demand in both domestic
and foreign markets, and worldwide excess capacity,
we may not see any rebound in manufacturing until
the second half of 2002.
However, there are still bright spots in the economy.
Home owners are benefiting from the current
3
refinancing boom, which is providing them with
additional discretionary income. The aggressive
monetary policy stance taken by the Fed will begin at
some point to kindle capital and investment
spending. Federal government spending is also
expected to stimulate the economy. The $40 billion
fiscal stimulus in tax disbursements in 2001 and
almost $70 billion tax relief scheduled for 2002
should revive the U.S. economy.
Industrial Production Index
Annual Percent Change
Over Same Quarter Previous Year, 1992=100
6
4
2
0
Payroll employment is not one of the bright spots. It
is a lagging indicator that does not recover from a
downturn as quickly as some other economic
indicators. Payrolls will continue to decline at least
through the third quarter of 2002.
-2
-4
-6
4
1
1
1
1
1
1
1
1
1
1
1
1
Q /Q
Q
Q
Q
Q
Q
Q
Q
Q
Q
Q
Q
0/ 91/ 92/ 93/ 94/ 95/ 96/ 97/ 98/ 99/ 00/ 01/ 001
9
20 2
20
19
19
19
19
19
19
19
19
19
19
Source: U.S. Department of Commerce, DRI-WEFA, and Center for
Business and Economic Research, The University of Alabama.
Alabama
Alabama Nonagricultural Employment
Change in Number of Jobs
September
1999 to
September
2000
Total Nonagricultural
Mining
Construction
Manufacturing
Durable Goods
Lumber Products
Primary Metals
Fabricated Metal
Industrial Machinery
Electrical Machinery
Transportation Equipment
Stone, Clay & Glass
Nondurable Goods
Food Products
Textile Mill Products
Apparel
Paper & Pulp Products
Printing & Publishing
Chemicals
Rubber and Plastics
TCPU
Wholesale & Retail Trade
FIRE
Services
Total Government
Federal Government
State Government
State Education
Local Government
Local Education
14,400
-600
3,800
-5,900
-3,700
-1,700
-2,000
300
-1,700
300
600
-100
-2,200
-100
1,200
-3,000
-300
500
-700
200
600
5,900
500
7,700
2,400
-1,300
600
900
3,100
2,000
Source: Alabama Department of Industrial Relations.
4
September
2000 to
September
2001
-26,100
0
-300
-17,200
-9,000
-1,600
-1,600
-1,000
-1,600
-1,300
-200
-300
-8,200
500
-2,900
-2,100
-900
-300
-1,000
-1,400
-1,800
-6,900
-300
400
0
-200
1,300
700
-1,100
-2,500
Employment. Alabama’s economy had already
slowed down significantly before the September
11th attacks. Although most of the layoffs and
job losses were concentrated in the manufacturing sector, other sectors of the economy,
particularly retailing and services-related
businesses, were also feeling the effects. From
September 2000 to September 2001, the state
lost 26,100 jobs. These losses were spread across
the board. Except for 400 jobs gained in
services and 1,300 jobs in state government,
every other sector of the economy lost jobs.
Manufacturing, which accounts for almost 18
percent of the nonagricultural jobs in the state,
lost 17,200 jobs. Although Alabama’s manufacturing sector has been in a recession for over
a year now, layoffs and job losses have increased
significantly in recent months. Besides a
significant slowdown in the U.S. domestic
economy, a slump in the world economy is
making matters worse for manufacturers who
rely on international sales. During the last
twelve-month period, the textiles and apparel
industry lost approximately 5,000 jobs. But
every manufacturing sector in the state has also
lost employment. Almost 9,000 jobs were
eliminated in durable goods industries,
including 2,900 jobs at electrical and nonelectrical machinery and equipment manufacturers. Alabama’s steel industry, like the
rest of the nation’s steel industries, has been
overwhelmed by cheaper imports in recent
Alabama Total Wholesale and
Retail Trade Employment
Annual Percent Change
Over Same Quarter Previous Year
Alabama Total Nonagricultural Employment
Annual Percent Change
Over Same Quarter Previous Year
5
3
4
3
2
2
1
1
0
0
-1
1
1
1
1
1
1
1
1
1
1
1
1
2
/Q 1/Q 2/Q 3/Q 4/Q 5/Q 6/Q 7/Q 8/Q 9/Q 0/Q 1/Q /Q
1
0
9
9
9
9
9
9
90
0
9
9
9
20 200
19
20
19
19
19
19
19
19
19
19
19
Source: Estimates based on Alabama Department of Industrial Relations data.
1
1
1
1
1
1
1
1
1
1
1
1
2
/Q 1/Q 2/Q 3/Q 4/Q 5/Q 6/Q 7/Q 8/Q 9/Q 0/Q 1/Q /Q
1
90
9
9
9
9
9
9
9
9
9
0
0
19
19
19
19
19
19
19
19
19
19
20
20 200
Source: Estimates based on Alabama Department of Industrial Relations data.
years. During the last year Alabama’s steel
manufacturers lost 2,600 jobs.
The services sector in recent years had added as many
as 10,000 to 11,000 jobs a year, but now this sector is
also showing considerable weakness. During the
most recent twelve-month period, services-related
businesses added 400 new jobs, compared to 7,700
jobs added during the same period last year. Hotels
and lodging places, which mainly depend on tourism
and convention business, lost 400 jobs, while health
care-related concerns lost 300 net jobs during the last
12 months.
Alabama Total Manufacturing Employment
Annual Percent Change
Over Same Quarter Previous Year
4
2
0
-2
-4
-6
Retailing, together with services, had been one of the
fastest growing segments of the state’s economy. But
the last year has not been kind to retailing. Retailers
lost 6,200 jobs during this time. Wholesalers haven’t
fared well either. They lost 700 jobs over the last
year. During the same period the year before
(September 1999 to September 2000), the trade
sector in the state had added almost 6,000 jobs.
These recent job losses can be attributed to the
significant slowdown in consumer spending, an
increase in manufacturing layoffs, and the lack of
growth in consumer incomes. In the last decade, the
growth in retail and wholesale trade had mostly been
concentrated in metropolitan areas of the state. Not
surprisingly, most of this year’s job losses have also
been in these areas. For example, the Birmingham
metropolitan area, the largest retailing center in the
state, lost 3,700 trade jobs between September of
2000 and September of 2001.
1
1
1
1
1
1
1
1
1
1
1
1
2
/Q 1/Q 2/Q 3/Q 4/Q 5/Q 6/Q 7/Q 8/Q 9/Q 0/Q 1/Q 1/Q
90
9
9
9
9
9
9
9
9
0
0 00
9
9
9
9
9
9
9
9
9
9
9
0
0
1
1
1
1
1
1
1
1
1
1
2
2
2
Source: Estimates based on Alabama Department of Industrial Relations data.
Alabama Total Services Employment
Annual Percent Change
Over Same Quarter Previous Year
7
6
5
4
3
2
1
0
1
1
1
1
1
1
1
1
1
1
1
1
2
/Q 1/Q 2/Q 3/Q 4/Q 5/Q 6/Q 7/Q 8/Q 9/Q 0/Q 1/Q 1/Q
0 00
9
0
9
9
9
9
9
9
9
90
9
0
9
0
9
9
9
9
9
9
9
9
9
2
1
2
1
1
1
1
1
1
1
1
1
2
Source: Estimates based on Alabama Department of Industrial Relations data.
5
this year and about 1.1 percent in 2002. Employment conditions are not expected to improve
significantly until the second half of 2002. Total
state nonagricultural employment is expected to
decline by 1.4 percent. At the end of this year,
28,000 jobs throughout the state will have been lost.
For 2002, job growth will rebound a bit; the state
could add approximately 21,000 jobs.
These job losses in metro areas run counter to our
expectations. Alabama had been accustomed in
recent years to a trend where most job losses
occurred in non-metro counties of the state. The
metro areas grew; the non-metro areas did not.
However, during last 12 months, 60 percent of the
jobs lost in this state were jobs inside our metro
areas. Of the 26,100 total jobs lost, 15,700 were in
metropolitan counties.
Tax Revenues. The slowing economy that has been
the focus of this essay is also causing a shortfall in tax
revenues. During FY2000-2001, ending in September, state tax receipts dropped by 0.73 percent over
the previous fiscal year, a decline of $43.9 million.
In the last fiscal year total receipts were up by almost
$490 million. While individual income tax revenues
increased 1.2 percent, sales tax receipts fell 1.1
percent and corporate income tax fell 30.2 percent.
Total individual income tax revenues were up $28
million, while corporate income tax receipts dropped
by almost $78 million. Sales tax receipts, which are
heavily dependent on economic conditions, declined
by almost $17 million. With the state’s economy
expected to remain weak at least through the first
three quarters of the current fiscal year, the forecast
for tax revenues is not optimistic.
Appropriations made to the Alabama Education
Trust Fund totaled $4,113 million, a shortfall of
$110.8 million dollars in FY00-01 over the previous
fiscal year. Appropriations to the state’s General
Fund were up by $32.9 million, for a total of $1,136
million.
Outlook. The state’s economy is expected to remain
weak at least through the first half of 2002. Gross
state product is expected to increase only 0.6 percent
6
Employment in the manufacturing sector is expected
to remain weak throughout the forecast period.
Unless there is a major turnaround in both domestic
and international economies, we do not expect any
net new jobs in manufacturing industries in the state.
Although the construction sector is expected to add
some jobs in 2002, most job growth in 2002 is
expected to be in services-related businesses, and
even this growth will be modest.
Barring any other major shocks to the economy, the
aggressive monetary and fiscal policy stimulus
currently underway will help pull the economy out
of its current state. We could see a clear turnaround
in the economy by the second half of 2002.
Ahmad Ijaz
ALABAMA ECONOMIC OUTLOOK
TAKES TOP AWARD FOR 3RD TIME
The 2001 edition of the Alabama Economic
Outlook, designed and published by the Center for
Economic and Business Research in the
Culverhouse College of Commerce and Business
Administration, has won the Award for Excellence
in Publications presented by the Association for
University Business and Economic Research
(AUBER).
The Alabama Economic Outlook won in the category
of economic outlooks, special studies, technical or
contract reports. This is the third time the
publication has won the award. The award was
presented at the annual AUBER meeting in
Gulfport, MS.
AUBER is the professional association of business
and economic research organizations in public
and private universities.
Selected Economic Indicators
United States
Gross Domestic Product (billions)
Percent Change
30-Year Treasury Bond Rate
3-Month Treasury Bill Rate
Consumer Price Index
Inflation Rate
Housing Starts (millions)
Percent Change
Total Employment (millions)
Percent Change
Unemployment Rate
Alabama
Total Nonagricultural
Employment (thousands)
Percent Change
Total Manufacturing
Employment (thousands)
Percent Change
Durable Goods Manufacturing
Employment (thousands)
Percent Change
Nondurable Goods Manufacturing
Employment (thousands)
Percent Change
Total Wholesale and Retail Trade
Employment (thousands)
Percent Change
Total Services Employment (thousands)
Percent Change
Alabama Unemployment Rate
Initial Benefit Claims (thousands)
Manufacturing Weekly Hours
Total Tax Revenues (millions)
Percent Change
Total Income Tax Revenues (millions)
Percent Change
Total Sales Tax Revenues (millions)
Percent Change
2000/Q1
2000/Q2
2000/Q3
2000/Q4
2001/Q1
2001/Q2
9,102.5
4.2
6.3
5.5
170.3
3.3
1.7
-2.4
135.0
1.6
4.1
9,229.4
5.2
6.0
5.7
171.5
3.3
1.6
0.8
135.2
1.5
4.0
9,260.1
4.4
5.8
6.0
173.0
3.5
1.5
-8.8
135.0
1.1
4.0
9,303.9
2.8
5.7
6.0
174.3
3.4
1.5
-7.0
135.6
1.0
4.0
9,334.5
2.5
5.4
4.8
176.1
3.4
1.6
-2.5
135.9
0.6
4.2
9,338.4
1.2
5.7
3.7
177.4
3.4
1.6
2.2
135.1
0.0
4.8
2000/Q1
2000/Q2
2000/Q3
2000/Q4
2001/Q1
2001/Q2
1,914.1
0.9
1,939.8
0.9
1,932.3
0.5
1,948.6
0.6
1,926.3
0.6
1,928.1
-0.6
361.6
-2.3
363.0
-1.8
361.3
-1.4
357.8
-1.8
352.1
-2.6
348.3
-4.0
195.5
-0.2
196.1
-0.7
193.7
-1.5
191.4
-2.5
188.2
-3.7
185.7
-5.3
166.1
-4.6
166.9
-3.1
167.6
-1.2
166.4
-1.0
163.9
-1.3
162.5
-2.6
439.1
0.9
462.7
3.9
4.7
29.6
41.9
1,578.1
10.5
628.0
5.8
383.5
8.0
447.0
0.7
472.2
3.3
4.5
18.9
42.1
1,683.4
11.1
865.6
20.2
384.4
1.3
447.2
-0.1
475.7
3.0
4.6
25.7
41.8
1,441.1
-0.6
617.4
-5.0
378.2
1.0
455.9
0.8
476.7
3.1
4.6
28.0
41.7
1,351.6
-0.2
541.9
-2.6
381.4
-0.7
445.5
1.5
472.9
2.2
5.0
37.0
41.0
1,471.2
-6.8
621.2
-1.1
370.2
-3.5
446.5
-0.1
477.1
1.0
4.8
28.0
40.6
1,730.5
2.8
832.2
-3.9
381.2
-0.8
Note: All percent changes indicate change over same period of the previous year.
Source: U.S. Bureau of Labor Statistics, U.S. Department of Commerce, Alabama Department of Industrial Relations,
Alabama Department of Revenue, and Center for Business and Economic Research, The University of Alabama.
7
is driven by measured demographic change—
population growth between 1990 and 2000, birth
and death rates, and residual migration. Although
assumptions have been made for the state and each
county concerning migration patterns, these
projections are closely tied to population trends
between 1990 and 2000. Future economic-based
changes that alter the rate of population growth
cannot always be anticipated.
Alabama’s Changing
Population,
2000 to 2025
Alabama’s population totaled 4,447,100 on April 1,
2000, an increase of 10.1 percent since the 1990
census. Population gains are expected to continue
during the 25 years from 2000 to
2025, although the rate of growth will
be gradually slowing. Projections by
the Center for Business and
Economic Research at The University
of Alabama indicate that Alabama
will be home to almost 4.84 million
residents in 2010, a gain of 8.8
percent since 2000. By 2025,
Alabama’s population is expected to
approach 5.39 million, an increase of
11.3 percent during the 15 years after
2010. Altogether, there should be
about 939,000 more Alabamians in
2025 than there were in 2000.
The projection series covers the state
and its 67 counties. Detail is available
by five-year age groups and sex for
racial categories white and nonwhite.
Projections are generated by a
cohort-component methodology that
8
In 2000 individuals from
the post-World War II baby
boom ranged from 36 to 54
years old. The age structure
of Alabama’s population
will change slightly through
2010, with the number of
residents aged 55 to 64
increasing most rapidly.
From 2011 forward,
however, strongest
population growth will be in
the 65 and over age group.
This aging swell will impact
all aspects of the Alabama
economy, from housing to
consumer spending to
health care needs, as a large
Alabama Total Population 2000 and 2025
85+
85+
80-84
80-84
2025
2000
75-79
75-79
70-74
70-74
65-69
65-69
60-64
60-64
55-59
55-59
50-54
50-54
Age Groups
Population growth is driven by the
age structure of the state’s residents,
which affects births and deaths, and
by the pull exerted to attract new
residents through economic
opportunity, retirement living
options, etc. The aging of the baby
boom generation (the oldest boomers
turn 65 in 2011) will push up the
state’s death rate and slow the rate of
natural increase, despite a gradual rise
in the number of women of
childbearing age and a resulting
increase in births. Statewide,
migration is expected to contribute
approximately the same number of
new residents over each five-year
period from 2000 to 2025 as it did on
average during the five-year intervals
between 1990 and 2000.
Age Distribution
45-49
45-49
40-44
40-44
35-39
35-39
30-34
30-34
25-29
25-29
20-24
20-24
15-19
15-19
10-14
10-14
5-9
5-9
0-4
0-4
-10.0
-8.0
-6.0
-4.0
-2.0
0.0
2.0
4.0
6.0
8.0
10.0
Percent by Age Group
Source: Center for Business and Economic Research, Culverhouse College of Commerce, The University of Alabama.
Alabama Population by Age Group
2000 and Projected 2010 and 2025
Age Group
2000
Number
Percent
2010
Number
Percent
2025
Number
Percent
0-4 years
295,992
6.7
310,512
6.4
332,677
6.2
5-19 years
960,177
21.6
967,839
20.0
1,000,398
18.6
20-64 years
2,611,133
58.7
2,890,407
59.7
2,999,839
55.7
65+ years
579,798
13.0
670,054
13.8
1,053,083
19.6
85+ years
67,301
1.5
87,438
1.8
122,605
2.3
4,447,100
100.0
4,838,812
100.0
5,385,997
100.0
Total
Note: 85+ population is also counted in 65+ group.
Source: Center for Business and Economic Research, The University of Alabama.
segment of the population shifts from work to
retirement. Alabama counted 579,798 residents 65
and over in 2000. By 2010, this number is expected
to reach 670,054, a 15.6 percent gain. During the 15
years from 2010 to 2025, the number of Alabamians
aged 65 and above is expected to increase by over
383,000, a 57.2 percent gain. More than a million
residents will be 65 and over in 2025 and the age
group’s share of total population will approach 20
percent. The number of very old Alabamians will
increase steadily, reaching almost 123,000 in 2025.
The oldest boomers will not enter the 85 and over
group until 2031.
While the original baby boom lasted 19 years, the
echo boom that occurred from 1977 to 1994, when
many of the baby boomers had children, lasted 18
years and produced almost as many offspring.
Members of this generation will be having their
own children during the projection period. Consequently, while the number of women of childbearing age will drop slightly between 2000 and
2010, it will increase steadily from 2010 to 2025.
Coupled with a gradual increase in birthrates in line
with national projections, the number of births in
Alabama is expected to rise through 2025.
The number of preschool children in Alabama
should increase steadily, with the gain more rapid
after 2010. While the state counted 295,992 children
aged 0 to 4 in 2000, there should be almost 332,700
in 2025, a gain of 12.4 percent. Alabama’s
school-aged population, broadly defined as ages 5 to
19 due to the limitations of the cohort-component
methodology, is expected to grow very slowly
through 2010, adding about 7,700. A modest
decline from 2010 to 2015 will result from a drop in
the 15 to 19 year-old
group. After 2015,
the school-aged
population will grow
more rapidly,
increasing by about
36,600, or 3.8
percent between
2015 and 2025. For
2025 compared to
2000, there will be
over 12,200 more
Alabamians aged 5
to 9, about 12,400
more 10 to 14 year
olds, and over
15,500 more 15 to 19 year olds.
Although the number of Alabama residents aged 20
to 64 will increase through 2025, the rate of increase
will fall rapidly between 2010 and 2025. This trend,
coupled with the surge in the state’s elderly
population and a modest increase in the number of
children, will push up the dependency ratio. The
dependency ratio measures the number of children
and elderly for every 100 persons of working age,
defined here as 20 to 64 year olds. This ratio, which
stood at 70.4 in 2000, will fall to 67.1 in 2010. From
68.6 in 2015 it will rise rapidly, reaching 72.7 in 2020
and 77.8 in 2025. A rising dependency ratio
indicates heavier demands on social security, health
care, and other services that must be supported by
working people. Also, slower growth in the
working-aged population and an aging workforce will
create increased demands for retraining, on-the-job
education and training, and retirement benefits.
Individuals aged 45 to 64 comprised 38.9 percent of
Alabama’s working age population in 2000; they will
account for 44.3 percent in 2025.
Racial Composition
Race reporting became more complex in the 2000
census, with individuals allowed to mark more than
one race. There were 44,179 Alabamians who chose
this option. For the purpose of the population
projections, these individuals were grouped in the
nonwhite category. Population projections by race
were further affected by the apparent confusion
among Hispanics over Hispanic origin being
regarded by the census as an ethnicity, not a race.
Responses to the race question suggest that many
9
Hispanics do not know what to choose for race—26,375,
or 34.8 percent of Alabama’s Hispanic residents selected
the category “some other race;” 48.8 percent chose
white; and the remainder primarily selected black or two
or more races. Alabama’s nonwhite population category
now reflects the state’s increasing diversity, with 10
percent of residents in this group making a race selection
other than black alone.
If we categorize all who did not mark white alone as
being nonwhite, Alabama’s population was 71.1 percent
white and 28.9 percent nonwhite in 2000. From 1990 to
2000, the state’s nonwhite population increased 21.2
percent compared to a white population gain of 6.1
percent. A number of factors contributed to the
differential growth rates: a larger percentage of nonwhite women are of childbearing age and birth rates are
higher; a larger share of the white population is 65 and
over, resulting in more deaths; and nonwhites migrated
into Alabama at higher net rates during this time. All of
these trends are expected to continue throughout the
projection period.
In 2010, Alabama’s population is expected to be 68.4
percent white and 31.6 percent nonwhite. By 2025, the
state should be home to over 3,463,000 whites, an
increase of 9.5 percent since 2000, and almost 1,923,000
nonwhites, a gain of 49.7 percent during the 25 years.
Population gains will be particularly affected by the age
structure of the two racial groups. In 2025, 22.4 percent
of the state’s white residents will be 65 and over
compared to 14.4 percent of nonwhite Alabamians.
And while 22.6 percent of whites will be under 20, 28.6
percent of nonwhites are expected to fall into this age
group. Alabama’s population should be about 64.3
percent white and 35.7 percent nonwhite in 2025.
Carolyn Trent
Alabama Population
Projections, 2000-2025
The Center for Business
and Economic Research
has just completed
detailed population
projections for Alabama
and its 67 counties for
Center for Business and Economic Research
Culverhouse College of Commerce
five-year intervals from
The University of Alabama
2005 to 2025 and for
single years from 2001 to 2004. Data from the
1990 and 2000 censuses drive the forecasts.
Projections are available on CD-ROM only.
The CD-ROM contains an Excel workbook for
the state and for each county. Each workbook
has 11 sheets including census data for 1990 and
2000 and projections for 2001-2005, 2010, 2015,
2020, and 2025. The projections are detailed by
five-year age groups broken down by race (white,
nonwhite) and sex. Sheets are conveniently
tabbed and the entire CD-ROM is menu-driven
and easy to install. A summary file of total population and a description of the methodology are
also included. Cost of the CD-ROM is $55.
To order: Make check payable to The
University of Alabama and send with name,
complete mailing address, and telephone
number to:
Center for Business and Economic Research
The University of Alabama
Box 870221
Tuscaloosa, Alabama 35487-0221
(205) 348-6191, FAX (205) 348-2951
Alabama Population Change by Race
1990 to 2000 and Projected 2000 to 2025
Year
1990
2000
2005
2010
2015
2020
2025
Total
Number
Change
4,040,389
4,447,100
10.1%
4,644,503
4.4%
4,838,812
4.2%
5,028,045
3.9%
5,211,248
3.6%
5,385,997
3.4%
White
Number
Change
2,980,489
3,162,808
6.1%
3,240,514
2.5%
3,309,584
2.1%
3,369,311
1.8%
3,420,766
1.5%
3,463,368
1.2%
Nonwhite
Number
Change
1,059,900
1,284,292
21.2%
1,403,989
9.3%
1,529,228
8.9%
1,658,734
8.5%
1,790,482
7.9%
1,922,629
7.4%
Note: Nonwhite category includes all races except white alone.
Source: Center for Business and Economic Research, The University of Alabama.
10
Some Implications
of an Alabama
Telecommunications
Industry Tax Reform
Is there a need for a telecommunications industry
tax reform in Alabama? Currently, wireless and
wired local services are taxed at 4.0 and 6.7 percent,
respectively. Wireless local services refer to local or
intrastate cellular or mobile telephone services.
Wired local services are the local or intrastate
landline telephone services. The Alabama
telecommunications tax structure provides an
effectively lower tax for large consumers of
telecommunications services. Wireless providers
alone are exempted from Class I utility classification,
enabling them to pay lower Class II property taxes.
Class I property is assessed at 30 percent and Class II
at 20 percent for property tax purposes. Interstate
telecommunications services are not taxed in
Alabama. Thirty-five states currently have
sales/excise tax on interstate telecommunications
services, up from only five in 1984.
Proponents of a telecom industry tax reform in the
state will point out the unfairness of the current tax
treatment and note that it hinders competition.
Opponents might raise the need to support an infant
industry argument, in response to which proponents
might question the infancy of cellular and interstate
telephone. In any case, inequitable advantages and
disadvantages within any industry adversely impact
the state economy.
An industry-wide classification for property taxes and
a uniform tax rate on telecommunications services
seem more equitable. Such treatment will inevitably
result in revenue losses and gains for taxing
jurisdictions, as well as revenue distribution
requirements. Thus, mechanisms for maintaining
revenue neutrality for taxing jurisdictions and Funds
must be considered in any tax reform. For example,
collecting interstate services tax as gross utility taxes
would benefit the Education Trust Fund.
Some implications of an industry-wide Class II
property tax classification and a uniform 5 percent
tax rate on local, intrastate, and interstate
telecommunications services for the past five years
are shown in the chart below. Net revenues increase
over the period, since taxable telecommunications
revenue grows much faster than the industry’s
property tax payments. Focusing on 2000, class II
property tax classification for the entire telecommunications industry would have reduced property tax
receipts by $14.2 million. Lowering the tax rate on
wired local and intrastate services to 5 percent results
in a loss of $23.2 million. However, $53.7 million in
interstate tax revenue would have been generated for
a net revenue gain of $16.3 million.
The analysis in the preceding paragraph does not
include the impact on cellular, since cellular
telephone taxes are collected separately and not as
utility gross receipts tax. Applying the proposed
uniform 5 percent to cellular would have raised an
extra $7.0 million in 2000. Of course, higher
uniform rates would raise even more revenue. The
proposed changes create a fiscal atmosphere
conducive to furthering competition in the industry
with its attendant benefits of choice, improved
quality, and lower prices for consumers. Uniform
taxes are transparent and fair, simple, and cheap to
administer.
It is important to note that revenue generation
implies a tax increase on consumers, although it may
be negligible as is the case here. Telephone service
expenditures constitute only about 2 percent of
household expenditures. The 5 percent tax rate
proposed here will increase household telephone
expenditures by only 0.01 percent of total household
expenditures. This may be more than offset by the
decreasing price effect of increased competition and
the extra government services that the tax revenues
could provide.
Samuel Addy, Ph.D.
11
Age Makes a Difference
workweeks, and job sharing are other pioneering ways
baby-boomers have affected the business world.
Alabama’s census results tell us many things about
ourselves, and our ages are among the most
interesting data. Baby-boomers represent 26 percent
of Alabama’s population—that’s more than a quarter
of all the people in Alabama. These Alabamians
were born between 1946 and 1964; in 2001 they are
between 37 and 55 years old. Baby-boomers have
had an effect on society in every decade they have
moved through. When they were small, local
governments had to build new elementary schools
to accommodate all of them. When they were
young adults, they influenced the course of the war
in Viet Nam. Now that they are middle-aged and
approaching seniorhood, they are influencing
corporate policymaking.
But businesses are also paying attention to the needs
of age groups other than baby-boomers. For
example, children and teens are a big market. Not
only do they command a portion of their parents’
incomes (pediatrician visits, particular brands of
cereal, cookies, tennis shoes, or blue jeans), but many
of them have access to money for which they control
the purchases (CDs, videos, or hamburgers).
Children through age 18 make up about 27 percent
of Alabama’s population—roughly the same
proportion as the baby-boomers. School-aged
children account for roughly 20 percent of Alabama’s
population and the infant and pre-schooler set
comprises another 7 percent. In total Alabama has
almost 1.2 million child citizens.
Because baby-boomers are the actual policymakers in
many companies, sometimes the needs of this age
group get prominent corporate attention. Nowadays
businesses are recognizing that more workers,
especially among the boomer cohort, have to assume
caretaking responsibilities for their aging parents. An
increasing number of companies offer eldercare
referral services or other benefits. Benefit trends also
reflect boomers’ needs in the other direction as well;
firms are pitching in to help with college tuition.
Some offer scholarships for family members and
even the middle-aged employees themselves. Larger
businesses are more likely to participate in such
programs. Flextime, telecommuting, compressed
Retailers, marketers, brand managers, and advertisers
are attuned to the age structure of their target
audiences. These professionals know the number
and percent of people in different age groups by
locality. They decide what products to carry, what
brands will be successful, and what advertisements to
run, based in part on data about the numbers and
ages of people in their market areas.
The University of Alabama
Center for Business and Economic Research
Box 870221
Tusscaloosa, Alabama 35487-0221
Address service requested.
Census 2000 has begun to have important business
implications for Alabama in policymaking,
marketing, human resources management, and other
areas. For more information about the age structure
of Alabama, go to the CBER website at
http://www.cba.ua.edu.
Annette Jones Watters
Nonprofit Organization
U.S. Postage Paid
Permit Number 16
Tuscaloosa, AL 35401