Author: Sara Savat

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About Sara Savat

As a senior news director for social sciences, I write about political science, religion (and their intersection), sociology, education, anthropology, philosophy and linguistics. I have a passion for storytelling and enjoy working with our world-renowned faculty and members of the media to bring research to life for the public. Prior to joining the Public Affairs team, I worked in public relations at SSM Health and covered academic medicine at Saint Louis University. I have a master’s degree in communication from SLU. Outside of work, I am most likely to be found at a dance studio or cheering from the sidelines of a soccer field. My family and I also love traveling, camping and visiting national parks.


The economy and coronavirus pandemic were two of the top issues for voters in the 2020 election, according to exit poll surveys. Notably, 52% of voters said controlling the pandemic was more important, even if it hurts the economy. But what if we didn’t have to choose?

In communities where masks were mandated, consumer spending increased by 5% on average, showing that a safety rule can stimulate economic growth as well, according to a new study from the Olin Business School.

Researchers found the effect was greatest among non-essential businesses, including those in the retail and entertainment industries—such as restaurants and bars—that were hit hard by the pandemic.

​Thomadsen

“The findings exceeded our expectations and show that we can have a strong economy with strong, commonsense public-health measures. Mask mandates are a win-win,” said Raphael Thomadsen, professor of marketing and study co-author.

Thomadsen, along with Olin’s Song YaoNan Zhao and Chong Bo Wang, analyzed the impact of social distancing and mask mandates on both the spread of COVID-19 and consumer spending. They used cellphone location data to track the degree of social distancing in nearly every county in the U.S. and compared that with community voting patterns, coronavirus infection rates and consumer spending rates.

The researchers found social distancing has a large impact on reducing COVID-19 spread, while the evidence on mask mandates is mixed. But while social distancing reduces consumer spending, mask mandates has the opposite effect. They also found that social distancing decreased in communities with mask mandates, magnifying the positive effect on spending.

Feeling safer to spend

Yao

“Preventive measures such as social distancing and facial masks should be considered as pro-business,” said Yao, associate professor of marketing. “When people feel safer to spend, or more importantly, when the pandemic is kept at bay, the economy is more likely to have a quick recovery. Not to mention the lives that will be saved.”

Perhaps not surprising given the political lines drawn over masks, they also observed that political affiliation had a significant impact on social distancing. Even after controlling for local characteristics such as the population density, income and other demographics, counties that voted for President Donald Trump in 2016 engaged in significantly less social distancing than counties that voted for Hillary Clinton.

“If the entire country had followed low levels of social distancing seen in Trump-supporting areas, we estimate there would have been 83,000 more American deaths from COVID to date, which represents a 36% increase over the current death count of 225,000 Americans,” Thomadsen said.

They estimate the tradeoff would have been a relatively small boost in the economy. Consumer spending dropped $605.5 billion from April to the end of July, compared with the same time last year. The country would have recovered $55.4 billion, or approximately 9%, had all counties remained as open as the most pro-Trump areas.To put it in more dramatic terms, Thomadsen said this means that opening up is only a reasonable policy if one values lost lives at roughly $670,000 each or less. This value was determined by dividing the hypothetical $55.4 billion boost to the economy by the 83,000 lives lost in this scenario.

“The calls to open up the economy come with huge costs of COVID spread and only modest benefits of increased economic activity,” Thomadsen said. “Opening the economy before getting the virus under control only makes sense if you put a very low value on life.”




President Donald Trump has consistently touted the economy’s pre-COVID-19 success and recent rebound as one of his greatest successes as president, if not one of the greatest economies in U.S. history. But how strong is the economy really? And how much of that success can be attributed to the president? Three experts from the Olin Business School at Washington University in St. Louis weigh in on Trump’s record, the state of the economy and what to expect from a second Trump term or a Biden administration.

What the president can, and can’t, do to shape the economy

Horn

“The president has the ability to stimulate the economy in the short run through tax cuts. That assumes Congress complies with the president’s wishes. Longer term, presidents have much less control over the course of the economy,” said John Horn, professor of practice in economics. “What presidents have the ability to do is to manage the crisis that they are confronted with in order to minimize the impact. But no president can unilaterally create a well-functioning economy.”

Economic success is a lot like winning a football game, according to Glenn MacDonald, the John M. Olin Distinguished Professor of Economics and Strategy.

MacDonald

“Several things have to be done correctly, including offense, defense, play-calling. So no one element suffices to generate success, but failing on one generally means overall failure,” MacDonald said. “Presidential activities are very similar. If they do a good job, and various other things like technology and absence of wars cooperate, then the economy will do well. But, just like bad play-calling can lose a football game, poorly chosen government policies can undo a lot of other good things, and presidents play a key role in those policy choices.” 

Tim Solberg, professor of practice in finance, has used Standard and Poor’s market data — going back to the Great Depression — to study market cycles during presidential election years and subsequent years. Interestingly, his research shows Wall Street prefers a split government, meaning that the House, which initiates tax and budget bills, is controlled by the opposite party of the President — providing checks and balances.

Solberg

“To a large degree, market cycles and economic growth operate on long-term expansion and retractions that override who is in the White House,” Solberg said. “I often tell students that the Federal Reserve Bank controlling the interest rate and the supply of money has more immediate control over the economy than the President or Congress. The Fed didn’t need Congressional approval to increase the money supply by $4 trillion through quantitative easing to provide liquidity in the financial crisis of 2007-09.”

Grading Trump’s economic record

The biggest change by the Trump administration was the lowering of taxes, Solberg said. Because the U.S. corporate tax rate was higher than other countries, U.S. corporations were moving operations overseas to escape taxation.

“The controversial tax reform did lower taxes to meet international competitiveness and enabled corporations to ‘repatriate’ a trillion dollars held overseas from operations of their international divisions. There was a stimulus from that if they invested in capital expenditures such as plant and equipment or research. However, much of it was used to buy back their stock so it aided the stock market rise and benefitted shareholders but did not really affect the overall economy,” Solberg said.

From an economic standpoint, cutting regulations was a boost to the economy, but it came at the cost of reducing environmental protection, Horn said.

On the other hand, the trade war has helped to protect some American jobs, but not a hugely significant number, Horn said. “The economy would have grown faster without the trade wars, but it would have put continued pressure on the jobs of the lower-income workers,” he said.

MacDonald had positive marks for Trump’s first-term economic activity.

“President Trump’s policies have been generally in the direction of lower taxes, more carefully chosen regulations, improving international trade deals, and introducing/enforcing immigration policies, all of which have turned out to be generally good for economic activity,” he said.

How are we doing now?

COVID-19 and the resulting lockdown and ongoing restrictions tossed a massive wrench into the economy. Even today — seven months after the initial lockdown — it is difficult to assess the overall state of the economy. Standard metrics were designed to measure the extent of consumers, employees and businesses voluntarily interacting with one another, MacDonald explained.

“So, normally, high unemployment, for example, really means a decline in economically valuable opportunities for firms and employees to interact. In the present situation, as far as can be determined, there are plenty of opportunities for valuable activities. But the lockdown, then continued partial lockdown, are preventing these from occurring, thereby creating artificially high unemployment numbers. It is very misleading to refer to the current state of economic activity as a ‘recession.’ It is simply a policy-induced reduction in activity,” he said.

Unemployment is improving — down to 7.9% in early October from 14.7% reported in April — but is still above the normal 3-5% that would indicate a strong economy, Solberg said. Recent hiring surges by retailers like Amazon and Walmart have helped, but, on the flip side, there are continued job losses in restaurants, leisure, travel/airlines and small businesses, some of which may never return.

And, there is potential for future losses if there is not another stimulus package, Horn said.

Much attention has been devoted to the stock market, which has outperformed expectations in recent months, but the stock market is not a good indicator of economic stability.

“The stock market is an important indicator of corporate strength as investors invest based on what they think will be future earnings and worth of the companies. But it is one factor,” Solberg said.

Other factors to consider include the Gross Domestic Product (GDP), which shrank 7.1% in the second quarter when much of business was in lockdown. The third-quarter rate, which will be announced on Oct. 29, is expected to show a bounce back as businesses have started returning to work, Solberg said. Federal Reserve Bank of Atlanta is estimating a 7.8% jump for the nation’s economy in the third quarter.

With interest rates low and many people working from home, housing sales have been robust, Solberg said. Yet, as of August, consumer confidence remained low and people were showing caution in spending.

Overall, Solberg said the U.S. economy is surprisingly resilient after the stress of the past two quarters brought on by the COVID-19 shutdown. The economic impact on individual Americans, though, is a different story.

The most unequal recession in modern history

While stock market returns have been high, labor returns have been small. “When unemployment is high, employers don’t need to offer higher wages to attract workers,” Horn said. “The upper end of the income distribution is recovering nicely, while the lower end is staying flat. Estimates show that billionaires alone increased their wealth by over half a trillion dollars during the crisis.”

MacDonald said: “Every change in economic activity impacts different groups of people in different ways. The lockdown and partial reopening have been especially hard on restaurants, bars, hotels, movie theaters, etc., that employ significant numbers of low-wage workers. Thus, in that sense, people in low-wage occupations have been impacted especially hard.”

Looking ahead

Undoubtedly, reviving the struggling economy and decreasing unemployment will be top priorities for the president who emerges from the November election.

“The biggest challenge will be to generate strong, stable growth,” Horn said. “The bounce back in Q3 is partially due to the horrifically low numbers in Q2, not a long-term sustainable rate. Additionally, the president will have to manage relations with China, deal with slowdowns in other major economies, rising health-care costs and health-care insecurity — how the health-care sector is structured — and the aging baby boomer cohort and ramp up in their retirement. Overall, there are a lot of challenges.”

“The next president will have to deal with the significant increase in government expenditures that occurred in 2020 on top of the already serious federal deficit problem,” MacDonald said. “The deficit for 2020 will be around 15% of GDP, the highest since World War II. President Trump would likely deal with this through modest tax increases and more significant spending decreases. Vice President Biden would likely do the opposite.”




Over the years, policymakers have enacted consumer protection laws and regulations to ensure better access to credit for low-income and minority consumers at fair lending rates. While these regulations make it illegal for financial institutions to discriminate against borrowers when making loan approval decisions, they do not guarantee equitable outcomes.

New research from the Olin Business School at Washington University in St. Louis has exposed a significant increase in poor customer service, fraud and mis-selling — or misrepresentation of a product or service’s suitability — by retail banks in low-to-moderate income areas targeted by the Community Reinvestment Act, especially those with a high minority population.

Researchers believe the regulations’ quantity-based goals, meant to measure a bank’s compliance, are to blame. Their findings are forthcoming in the Journal of Financial Economics.

“Most regulations in the U.S. and around the world primarily focus on the quantity of loans to marginalized borrowers,” said Taylor Begley, assistant professor of finance and study co-author. “These goals may unintentionally encourage banks to engage in aggressive sales tactics or make loans to uninformed borrowers without proper disclosure as they seek to satisfy their regulatory requirements.”

Used CFPB data to track complaints

Taylor Begley
Taylor Begley

To measure the quality of the mortgage-related financial products and services, Begley and co-author Amiyatosh Purnanandam, of the University of Michigan, used Consumer Financial Protection Bureau (CFPB) data to track the incidence of consumer complaints against financial institutions.

These are typically not complaints that are easily resolved between the customer and financial institutions, otherwise they would have already been settled and not appear in the CFPB data, Begley noted.

“Mortgage products can be complex, and the transactions leave many potential borrowers at a substantial information disadvantage compared to sophisticated financial institutions,” Begley said.

“The complaints to the CFPB include allegations of hidden or excessive fees, unilateral changes in contract terms after the purchase, aggressive debt collection tactics and unsatisfactory resolution of mortgage servicing issues.”

The data, collected between 2012-16, included about 170,000 complaints from more than 16,000 ZIP codes. With this robust dataset, researchers were able to draw comparisons of complaint rates between Community Reinvestment Act-targeted areas and similar control areas with no such regulation pressure, as well as comparisons between areas with above- and below-average minority populations.

More complaints in certain ZIP codes

Overall, researchers found substantially more complaints in ZIP codes with lower education rates, lower incomes and higher minority populations. Of these variables, though, high minority status had the greatest impact on complaints — approximately two to three times more than the effect of low income or low education alone.

Even more telling: Within neighborhoods containing a below-median minority population, the complaint rates were indistinguishable between the Community Reinvestment Act-target and control areas. However, in target areas with an above-average minority population, complaint rates were about 35% higher than similar control areas.

“While banks face pressure to increase the quantity of lending in every target area, in high-minority areas they effectively have two sources of pressure for regulatory compliance — lending to low-income customers and lending to minority customers,” Begley explained.

“These results show that groups that are often the intended targets of consumer protection laws experience much worse outcomes in terms of quality.”

Since its formation in 2010, the CFPB has fined financial institutions almost $10 billion to protect consumers. While it is difficult to pin down the precise economic costs of complaints for financial institutions, Begley said banks with more complaints paid significantly higher fines.

The quantity-quality trade-off

Previous research has studied the quantity of lending to low-income customers and pricing, but this study is among the first to measure the quality of these products. Begley said better understanding the quantity-quality trade-off could have broad policy implications.

“Regulations such as the Community Reinvestment Act that aim to meet the needs of low- and moderate-income neighborhoods may be successful in increasing the amount of credit extended in those areas. However, it’s important to remember that the loan approval decision is only one part of the lending process,” Begley said.

“Our research shows that regulators’ outsize focus on the loan approval decision may come with unintended adverse consequences for consumers on other important, but more-difficult-to-regulate, dimensions, including the customer’s understanding of the mortgage, whether it is a good fit for them and how lenders treat borrowers during renegotiation.”


In less than a week, companies around the country have scrambled to transition their operations from traditional offices to — in some cases — entirely remote-based workforces. That swift transition coupled with the chaos of a global pandemic can wreak havoc on workflow and productivity.

“Businesses should expect a period of adjustment as people develop new routines, norms and shared understandings about how work will progress through a new medium,” said Andrew Knight, professor of organizational behavior at Olin Business School at Washington University in St. Louis. He offered the following advice for managers and employees for working through this unprecedented time.

What should businesses expect from their employees during this time?

AK: Although many people have worked remotely intermittently — or at least dealt with the intrusion of work into the home — this large-scale shift to remote work will disrupt organizational practices and shared habits. Employers must be open to questioning old ways of doing things given the new situation.

What are some best practices that  managers can implement to support their employees and encourage productivity?

AK: The most important best practice would be having a means for gathering and sharing new best practices that employees are learning. Rather than presuming that they know what will work best, managers should instead structure a mechanism (such as a brief morning briefing or an online community) for people to share with one another what’s working, what’s not working and what needs changed. This type of “bottom-up” adaptation will be most effective because this is an unprecedented situation.

A good example of this is the Army Center for Lessons Learned, which emerged as a way for soldiers to share with one another their knowledge and experience as the “boots on the ground.” Managers should similarly defer to the experts — the employees — on how to be most productive.

What recommendations do you have for leaders to support communication and collaboration during this time? 

AK: Zoom is a wonderful technology for getting people together for a shared experience. Teams can use this technology to continue to coordinate. However — and, frankly, this advice would apply to in-person meetings as well — managers should be reticent to overschedule synchronous meetings. These often are not productive uses of people’s time. This is particularly the case for web-based meetings.

When using synchronous meetings, leaders should adhere to a set of principles, such as the ones that Google uses:

  1. Meetings should have a single decision-maker/owner … “someone whose butt is on the line.”
  2. The decision-maker should be hands on (e.g., set objectives, determine participants, send agenda)
  3. Meetings should be easy to kill — if it’s not useful, kill it.
  4. Meetings should be manageable in size — no more than eight people.
  5. Attendance isn’t a badge of importance — if you aren’t needed, leave or excuse yourself ahead of time.
  6. Timekeeping matters — respect biological needs, leave enough time to summarize actions, and end on time.
  7. If you attend a meeting, attend the meeting — multi-tasking doesn’t work.

When coordinated work can be accomplished without a meeting, it should be. This is facilitated through file sharing (Box, Dropbox) and shared documents (Google Docs). For leaders to support communication and collaboration, they have to ride the line between giving sufficient information and overloading people with email blasts. Having a rhythm to communications is important: a Monday brief, a morning brief … depending on the rhythm of people’s work.

What are some best practices for employees to work successfully from home?

AK: The most important practice for people who haven’t worked remotely is to experiment with different approaches, take stock in a systematic way and adjust as needed. Applications like Rescue Time can help people figure out whether they need to be physically isolated to be productive or whether working from the living room couch with a partner or child in the room can work.

The important thing to remember is that people differ in their preferences for whether to integrate their home life with their work life. Some people are “segmenters” who prefer having work and life separate. For these folks, having a defined space and time in their home will be preferable. Others are “integrators” who are comfortable with and even enjoy bringing these two spheres of life together. These folks may be most productive with work and life activities coming together.

How do you think this experience will impact businesses going forward? Will we return to “business as usual”?

AK: This is a tragic event with respect to health outcomes. At the same time, as it is forcing people to work and live in new ways, it can also provide a stimulus for development, learning and growth.

I hope that employees, employers and society take this situation as a way to get better — as a way to work and live in more productive and meaningful ways. I’m not sure what we’ll learn; however, I suspect that we’ll learn (a) we’re resilient; (b) some aspects of work or ways of working aren’t as “critical” as we thought; and (c) we need social connection to thrive.