♪ (opening music) ♪ ♪ ♪ Welcome to this Week in South Carolina, I'm Gavin Jackson.

The summer is in full swing, which means vacationers and their money.

University of South Carolina research economist, Dr. Joey Von Nessen gives us an economic update on how the state is doing.

But first we talk with Lexington Republican, Senator Katrina Shealy.

She's the chairwoman of a subcommittee looking into the problems at the Department of Juvenile Justice, which has seen a director under fire, employees walking off the job and insufficient security.

Senator, Thanks for joining us.

>> Thanks for having me.

It's always a pleasure to see you.

>> Senator Shealy, you're the chairwoman of a subcommittee, looking into the problems going on at the Department of Juvenile Justice, especially in light of this recent Legislative Audit Council report on some issues over there.

Tell us just what's going on right now.

You've had multiple hearings already, hours of testimony.

What's going on with this agency?

>> Well, you know, it's, always been an agency.

Well, it's always going to be an agency that has issues because the type of situations that you deal with, you know, you have children that are in trouble.

You have families that are struggling.

So, it's not ever going to be an easy agency, but the agency has been at the top of its game.

And now it's, you know, it's at the bottom of its game, right now.

And there are children that are in danger.

There are employees that are in danger, and it's gone so far downhill now from where it was in say 2011, to where it is now, 10 years later, we're at 2021, and we had seen the worst decline in how it could be, because, well I want, let's say 2003, even back when Judge Byers started and you know, he was there, what nine years maybe, and the agency was thriving.

And like I said, it's always going to be a difficult agency because you're dealing with juveniles that are in trouble.

You have mental health issues.

You have juveniles that, you know, you have them from the really, really bad juveniles.

And back then, there were probably 300 juveniles just at Broad River Road.

And now they're like 70 or 80.

So he had a lot of children, but we, he kept them busy.

I always say we kept them busy, because I was a volunteer at it, Department of Juvenile Justice back then, that was way before I was a senator.

And, but they kept the children busy.

They had a lot of extra activities for them.

They had the welding program.

They had the upholstery program.

They had woodworking.

They had things that kept them really busy during the day.

And then they had outside activities at one time.

They even had a farm out there.

You know, that's been a long time ago, but they had things that kept the children busy, and now they don't have those things.

So what do you do if you're a child, and you sit around in a room all day and you don't get those outside activities, or you don't have something to do, you get bored and you sit around and think up things to do and you just get in trouble.

<Gavin> So is this a crisis?

>> - what's happened.

>> Is this a crisis at this point, in your opinion?

<Katrina> Yes.

I think, it's actually past a crisis, because, you know, we said just a couple of weeks ago when the employees walked out and you know, everybody thinks that I knew that was going to happen.

I did not know that was going to happen.

When I got that call on Friday morning.

I mean, and it was early Friday morning.

My phone started ringing, and people were telling me it was going to happen, or it had already happened.

They said it's already happened.

And then somebody from the director's office called me and whispered, I think there's going to be a walkout.

Well, I said, I'm sorry to tell you, but there's already been a walkout, cause they already called me.

But - <Gavin> And you went out there and you heard those complaints from those employees.

>> I think they walked out at about 7, but I got out there about 9:30 or so.

And you know, the people were already out.

I didn't know they were coming out.

And some of them had worked though, for 24 hours straight, and then somebody had come in during that period and picked up their timecards.

And that's what they were really concerned about.

They're going to make it look like we started a new day, when we didn't really start a new day.

And you know, some of them had been working 24, 36 hours straight and they had just - They're worried about their pay.

They're worried about all these things that - They're tired.

They worry about the kids.

These people that work out there, I'm sorry, you got to have a heart for children to work out there, and they have to take the punishment from the children, because they don't do anything when the children act up now.

You used to - there was consequences.

If you hit a guard or you spit on a guard or you threw urine at a guard, you got extra time added to your sentence.

Now what they do is they bring you cookies or pizza to try and calm you down.

And it's kind of like you get rewarded and they know that.

So they've kind of taken over.

And so I don't blame it on the kids, because that's what, I mean, heck, if you can get rewarded for being bad, what would you do?

<Gavin> Exactly.

>> Be bad.

<Gavin> It seems like, So I mean, there's a multitude of factors here.

You have people who are trying to do the right thing, and work there and put their time into it and make sure they're getting paid.

It sounds like the whole compensation system is kind of a nightmare when it comes to overtime, and it's not really incentivizing folks to want to work there.

And you talk about these difficult conditions where these children, these juveniles are being - Yeah and - >> People that have worked there 11, 12, 15 years.

And those people that have there for that long, they're not coming there for the salary,.

They're not coming there for the benefits.

They're coming there, because they love the kids, because I can tell you, some of those facilities or the conditions they work under are, not good anyway, but they keep coming back.

So they have to have a heart for children.

And when they see the people in the executive management team getting raises and they haven't, and the executive management team makes over that threshold where it's public knowledge.

So they can see.

I mean, they're not stupid people.

They can go online and look and see what these people are making and see the raises they get.

You know, then I would be frustrated too.

And I would say, you know, I'm boots on the ground.

I go to work every day and you know,, I don't have anything personally against a director, but I think that serious changes have to be made.

And it has to start at the top, because management is always responsible.

<Gavin> So, you're talking about replacing Director Freddie Pough >> Yes, because if I worked in a job in the public sector.

Let's take government completely out of it.

If I went into a job and it was already, you know, the person before me was doing a bad job.

Let's just say they were, and it was at the bottom and I didn't go in and improve it in the first six months.

My boss would really be on me, but he might give me a little bit longer.

But if in a year, I hadn't done better.

I can guarantee you, I would have been gone.

But if I had four years to make it better, my boss is either crazy, or he likes me a whole lot and there's something wrong with that.

>> Well, when we look at the Legislative Audit Council Report from 2017 till now, the LAC reports that we've seen incidents double out there, including juvenile and juvenile violence.

And it just seems like, and only 50% of those recommendations from that original report have actually been instituted compared to what was previously reported to state lawmakers that have been changed and implemented.

So what more besides replacing the director?

Do we need to start getting these people more money?

Like we saw with the Department of Corrections and law makers need to start funding more out there?

Is that a problem, too?

>> Right?

We do need to give them more money, and we put more money in the budget.

I mean, they didn't ask for the, they'll tell you one thing, but I can tell you, they didn't put in a budget request for some of the money we gave them.

We just gave it to him because we knew that it needed to be there.

And we put money in the budget to give these people a raise and give them bonuses.

And we know that they're like 150 employees short in the boots on the ground people, the JCOs, juvenile correctional officers, in the teachers, in the social workers.

They're short staffed, but they have hired more people than they had before, in the administrative part.

So I think that there's, they're very top heavy.

They could probably go in, and take some of those salaries out of the executive management team, because they have duplication of jobs and put that over in the funds for the people that really do the work.

We've got people over there that are - because what's the main job at a juvenile correction facility?

Watching the children.

It's not doing paperwork.

it's not, you know, typing memos and doing newsletters It's protecting the children of South Carolina.

And then making sure that those employees are safe.

It's teaching those kids a trade, so when they come out, they'll be rehabilitated, so they won't end up on the other side with Brian Sterling and the Department of Corrections in a couple of years.

And we're not doing that now.

>> Senator, we have less than a minute left here.

I want to ask you, because we've heard from all those employees before your subcommittee, talking about morale, be non-existent.

Teachers going to bat for these students and trying to get them technology, especially during the pandemic and then being terminated, for other issues.

I want to just get your thoughts on what needs to happen at this point.

We've already talked about a Freddie Pough needing to go, He's the director.

Whatdo you see happening now, going forward?

What's going to come out of your subcommittee.

>> Well, you know, we've done what, as far as the leadership we can do, we're going to get more money out there.

We've sent in a bonus proposal and along with the raise proposal for those employees.

We already sent that over to the agency.

The governor's put people over there to go through the management team and see what they can straighten out over there.

But you know, we're going to keep fighting for those employees.

We're going to keep fighting with those children and we're going to keep needing.

<Gavin> Well, we have to leave it there, Senator.

We'll be following up with you on this, because it is a very hot topic, a very important topic in South Carolina, and that's Senator Katrina, Shealy, joining us, talking about DJJ.

Thank you so much, Senator.

>> Thank you for having me.

I appreciate y'all following up with it.

Joining us now to discuss South Carolina's economy is Dr. Joey Von Nesson.

He's a research economist at the Darla Moore School of Business at the University of South Carolina.

Joey, always great to see you.

>> Great to see you, Gavin.

It's a pleasure.

>> So Joey, we last spoke in late April.

Things have changed since then.

One of the big things has been unemployment.

We've been seeing our numbers tick down just a little bit, month to month.

We're still waiting on May unemployment numbers, but I want to get your read right now as to where you see our state economically, good, bad indifferent, since we last spoke.

>> Well, overall, the economy is doing well and we're seeing very strong recovery in general.

I still think the best term to describe this economy, both at a state and national level is to use the term economic whiplash, because that's the reality of what we're facing.

We went through a sizable downturn last year, of course, in the aftermath of the pandemic between, March and April of 2020.

And we're basically seeing the inverse of right now, with a rapid increase in demand, particularly in the services sector, now that the vaccine is widely available and we're in the middle of tourism season.

And to put a specific point on that, if we look at the average growth rate among spending of the American consumer on services, it's about 4% per year over the last decade or so, but just in the last year and throughout 2021, it's been up about 20% year over year.

So, a large increase over what we're normally used to seeing.

And again, part of that is just ramping up as we see this economic recovery continue to thrive.

>> So what do you expect to see when we see those new unemployment numbers come out, next week for May?

Do you expect us to be maintaining that trend of solely adding jobs to our state's economy?

Where do you see us going?

>> I think we'll continue to see slow and steady job gains.

We do have a significant labor shortage right now, and that's for a number of reasons.

One reason is the unemployment benefits and the federal supplement to that, which has made it, basically allows that to be competitive with the employers who are looking to hire workers, and the cutoff is about $16 an hour.

So right now, through the end of June, if you were working full time, earning $16 an hour before the pandemic began, then you are better off financially on unemployment right now.

And so that's really affecting the service sector, especially where we see those wage rates that are comparable, and therefore they're having the most trouble pulling people back into the labor force, which is happening at the same time that their demand is growing so much.

So that's going to help, for the service sector in general.

The other element here is that we've seen workers that have been reluctant to go back because of childcare issues.

And so that's going to change directions in the fall.

So I think as we see these unemployment benefits expire, and then when we get to the fall and students go back to school in a more normal learning environment, then that's going to also alleviate this labor shortage as well.

>> Yeah, Joey, you mentioned that, we're talking about that federal unemployment incentive, that benefit coming from the federal government, $300 extra to the state benefits that folks are averaging about $236 a week from the state.

In a letter from the governor to Dan Ellzey, who's over the Department of Employment at Workforce, in May - excuse me.

The governor said that this in large part was contributing to our labor shortage, this federal unemployment benefit.

Has that been backed up by research?

I know there's a lot of different factors out there.

You also mentioned childcare, but is that enough to make it worth the while to kind of, maybe, you know, prompt people to get off unemployment to get back in there.

Do you think that the research backs this up?

<Joey> I think the research does back it up for the service sector.

And again, it really does depend on the industry because it gets back to that wage rate and whether or not it's competitive to the salaries that the, that the unemployed workers would be earning if they were in the labor force.

So if you look at a job in food service, for example, where the average wage rate is closer to $12 an hour, then in that case, that's going to incentivize people to come back in.

But if you look at construction and manufacturing, which are also facing significant labor shortages, the average wage rates there right now are closer to $30 an hour.

So that's a different challenge that those sectors are facing.

Ending the federal supplement is not going to help them.

Their challenge is more about, workforce development and training in order to get people skilled and to develop the skills, to move into those positions.

>> And when you talk about manufacturing, I know you had some research that we last spoke about, but is that industry doing, has it remained strong right now in the state?

Obviously we've seen the challenges and the pressures when it comes to labor for leisure/hospitality service industry, but are other industries in our state like manufacturing, remaining strong at this point?

<Joey> Yes, they're doing very well.

They are almost fully recovered in terms of their pre pandemic employment levels manufacturers in particular, they've been facing some supply chain challenges, especially with respect to the semiconductors.

And that has forced several manufacturers, auto manufacturers in South Carolina to have periodic and short-term shutdowns throughout 2020 and throughout 2021.

And that may continue for the foreseeable future.

This semiconductor shortage is likely to be something that takes, a period of months to resolve, not a period of weeks.

So I anticipate that that's going to continue into the fall, but in general, they are recovering and are seeing fairly strong demand.

>> Joey, just to stick with manufacturing for a minute, do you see a need to maybe re-shore more of these jobs?

I know we're talking about it.

We just saw the Senate pass a bill dealing with incentivizing these companies, when it comes to semiconductors.

There's a bill in the House.

They are going to be competing over this, We're trying to go head to head with China when it comes to closing that gap and providing incentives to these companies to create these semiconductors.

Obviously, not a big industry in South Carolina, but where do you see South Carolina manufacturing going in terms of when we're looking at the supply chain problems, and maybe thinking maybe we should bring some of that supply chain back either to our state or to the United States, how is that shaping up right now?

>> Well, I think in general, if we look at the supply chain for export oriented manufacturing in South Carolina, it's very efficient and it has taken years to develop the, the current supply chain relationships that many of these manufacturers have.

So that is a major strategic advantage that they maintain.

that's going to continue into the future.

Right now we don't see a lot of momentum to move away from that because it is such a such an advantage.

So I don't know that we'll necessarily see major re-shoring efforts or a major change in their strategic direction in terms of supply chain development, but having said that, these secondary suppliers, and backups, so to speak, are going to become more important so that if we continue along a path of just in time delivery and the efficiencies that we're currently, that we currently benefit from that we do have a way to supplement that in the event of significant shortages, or we go through something like a pandemic.

So there's going to be more sensitivity to it.

But I think overall in the long run, the efficiencies that the current structure, currently allows will prevent a major re-shoring effort that would significantly change the strategic direction of some of these manufacturers.

>> Gotcha.

I just want to kind of wrap up, with the labor demand situation too.

You know, we, we have seen places like Walmart go to $15 an hour.

Costco has gone to $16 an hour.

Amazon is increasing, wages on a variety of scales.

So is this something that's been a long time coming, this kind of reckoning?

It seems like a lot of these, the folks in the labor market labor side of things have a little bit more power than they've had before to kind of demand these higher wages.

Do you think that's to their advantage?

Do you think that there's the ability for these companies, maybe even small mom and pop operations to kind of go toe to toe with these bigger guys?

Or is this going to be kind of, a reckoning of sorts?

>> Well, I think it really depends on, on demand and it comes down to what their expectations are going forward.

I think labor shortage challenges is going to be, a defining challenge for the U S economy in the 2020s because we're looking at a number of different factors that suggest that the labor force, pulling people in and finding workers that the industries and companies need, is going to be a challenge.

Everything from, overall low immigration levels to the baby boomers, retiring to lower birth rates, all of this, basically converges on a significant labor shortage.

So I think wages going up is a consequence of that, or one consequence of that as employers look for ways to recruit more people.

And I think we're also going to see more trends, towards automation and towards other alternatives to labor, and it will accelerate some of the technological usage in the workplace for that reason.

>> And talking about labor trends, Joey, when we look at, you know, what's happening in the governor and DEW, they just rolled out a new workforce training initiative at all of the technical colleges in the state to help thousands of unemployed folks get retrained in short term to try new industry, find a certification for a different industry.

Is this something we're seeing in a broader trend, when it comes to folks maybe leaving, you know, food service and jumping into manufacturing, something a little bit more lucrative now that they've seen how much money they can earn, not only on unemployment, but what that could translate into as an actual wage if they were working for such wages?

>> Well, it's certainly an opportunity I think for workers in South Carolina, particularly in manufacturing and others, But there is a strong need right now.

This is a good time to be coming back into the labor force.

And so I think we need more of these types of programs that you're talking about to provide those opportunities for workers to find these, new positions, and to basically move up the economic ladder, because, we're in a, a strong economy right now.

We're recovering and workers can really take advantage of that.

<Gavin> Yeah.

Especially with some 80 thousand job openings in the state right now, I want to switch gears to inflation right now.

You know, we saw in may we saw core inflation jumped to, I think, a 30 year high, about 3.8% annualized rate, something that Fed Chairman Jerome Powell was talking about, has been calling this transitory for a long time now.

He spoke this week, as well.

What are your thoughts about what he was saying?

What do you see the Fed doing in relation to this inflation and how that's affecting people right now?

>> Well, one of the things that I think is important to recognize about inflation is that inflation accompanies economic growth.

And that's just a basic fact of economic expansion.

So, to a certain extent, we want to see some inflation because inflation goes along with, with economic growth and we've seen inflation at, or slightly below 2% over the past decade during the previous expansion.

So given that reality, now that we're seeing, again, this economic whiplash with this rapid increase in demand over a very short period of time, particularly in the service sector, that's going to drive these higher rates of inflation.

And so the expectation now among most economists and the Fed, is that it's transitory in the sense that increase in demand in the services sector will level off later this summer, as people get back to more normal spending patterns.

And as that happens, we expect that inflation will begin to settle down along with that, because the growth rate and the demand for services, that is temporary.

That can't be sustained once we get back to these pre COVID norms.

And so what the Federal Reserve is saying now is that they're seeing such strong demand and they are concerned about these higher rates of inflation, but they're also saying that going forward, it looks like the, the economic recovery is happening faster than they originally thought, which suggests that they may need to raise interest rates a bit sooner than they anticipated before.

But in general, that's a good sign because that means the economy is recovering.

I think most of the signs suggest that inflation is transitory at this point.

There are multiple reasons for that.

But it is the biggest threat to the economic recovery in the second half of the year, if inflation does stay elevated, and doesn't settle down.

>> And Joey, with just a few moments left here.

I want to ask you about the money that we're going to being seeing as a state from the American Rescue Plan to the tune of $8.9 billion.

You got $2.5 billion being allocated by lawmakers $3.4 billion for schools.

$1.6 billion for cities and counties.

That can be spent over the next few years.

I just want to ask you how you see that money affecting the future of our state when it comes to just how revolutionary this is going to be, this kind of windfall of money.

I know some people don't see it that way.

Some people are concerned about that kind of spending and voted against it, but how do you see that money affecting our state?

>> Well, I think it depends on how it ends up being used specifically.

It definitely has the potential to do a lot of good.

I think that if we look at, workforce programs and ways to support those, whether we're talking about K-12 initiatives or the technical college system but moving South Carolinians into positions to be able to take advantage of good jobs in the state, that's going to be critical.

I think broadband access is another critical issue for South Carolina to provide more resources, to expand access statewide.

So there are a number of things that, a number of positive things that these dollars can be used for that I think can really enhance our infrastructure, and allow us to sustain the great economic growth that we saw over the previous decade going forward.

But it, it really depends on the specific program,.

>> Before we go, Joey I just want to ask you about this Boeing and Airbus situation that trade dispute that's been going on for 17 years, which we have now seen, has been, mitigated over in Brussels between, President Joe Biden and the EU.

Just want to get your thoughts on what that means for South Carolina, especially being home to Boeing, the 787 plane, in North Charleston, and how this might affect them going forward in our state.

>> Well, I think right now Boeing and the airline industry right now is focused primarily on, on recovery and on looking at what demand is going to be in the next several years and how they are recovering from, from COVID.

So it's, I think a bit up in the air right now as to how that's going to play out, because there's so much uncertainty in, in that sector, but I think there's no question that Boeing's future in South Carolina is bright.

They've made that very clear they are consolidating their operations in South Carolina, in Charleston, bringing them in from, from Washington state.

So, I think the aerospace sector has a bright future in South Carolina as does Boeing, once we get past this transition period of recovery.

>> Gotcha.

Well, we have to leave it there, Joey.

And that's Dr. Joey Von Nessen.

He's a research economist at the Darla Moore School of Business at the University of South Carolina.

Thank you so much, Joey >> Thanks Gavin.

Always good to be with you.

>> To stay up to date with the latest news throughout the week, check out the South Carolina Lede.

It's a podcast I host twice a week and can be found on SouthCarolinapublicradio.org or wherever you find podcasts.

For South Carolina ETV.

I'm Gavin Jackson.

Be well, South Carolina ♪ (closing music) ♪ ♪