One step forward, two steps back. If it feels like you took your own return to normal a little too much for granted this year, the same dynamic is playing out in many aspects of the economy and our financial lives. Fallout from the delta variant of COVID-19 has kept things from going as expected in a myriad of ways, whether you’re searching for a job, house hunting, trying to plan out child care, or navigating the suddenly vulnerable stock market.
But even if you’ve been following the big financial news, you may not know that some large cities are just sitting on huge piles of pandemic aid they got from the federal government. Or that a new scientific study shows that the more agreeable you are, the less money you’re likely to make in your lifetime.
To reach beyond the biggest headlines, we scoured the latest research, surveys, studies, and commentary to bring you the most interesting and relevant personal finance news you may have missed.
What We Found
Do Warm, Friendly People Earn Less Over a Lifetime?
Many factors influence how much money you will earn in your lifetime: your education, your choice of career, and even whether you get married. It turns out your personality also has a lot to do with it, according to a recent analysis of scientific studies on the topic.
You’ll earn more if you’re imaginative, self-disciplined and outgoing, and, interestingly, less if you’re friendly or nervous, according to Italian researchers who reviewed 65 previous studies and published their findings in August. The researchers analyzed papers that studied earnings and the so-called Big Five traits that psychologists use as the standard way to measure personality: openness (imaginative, curious, and unconventional); conscientiousness (being goal-oriented and self-disciplined); extroverted (being outgoing and desiring social relationships); agreeableness (friendliness, warmth, and sensitivity to others); and neuroticism (being prone to worrying and emotional instability).
The study found that higher scores for openness, conscientiousness, and extroversion on standardized personality tests were associated with higher lifelong income levels, while higher scores of agreeableness and neuroticism went along with lower earnings.
While the researchers didn’t reach any firm conclusions about why certain personality traits carry earnings penalties and bonuses, they did speculate that more neurotic people tend to suffer from a lack of focus and self-confidence that hurts them in their careers, while conscientious people derive career advantages from being more efficient, organized, and ambitious. Being more agreeable or sensitive, on the other hand, might not help or hinder directly, but it could lead people to take up lower-paid careers in occupations that involve caring for others.
Cities In No Hurry To Spend Emergency Coronavirus Money
The three major pandemic relief bills over the last year and a half not only created an unprecedented (if partly temporary) social safety net for individuals, but the most recent—the American Rescue Plan passed in March—gave $350 billion in federal funds to state, city, and local governments with broad leeway to use it however they wanted. So what have authorities done with this money? In some big cities studied by the Brookings Institution, so far, nothing.
Of 20 large cities examined by Brookings researchers, eight had spent none of their funds through July, while others had spent only tiny fractions of the aid they got. Overall, the cities had spent just 18% of the allotted funds so far. Cities that did spend reported using the money to replace lost revenue, house the homeless, create job-training programs, support small businesses, or even give money or food directly to households.
The state and local aid was controversial from the start, with Republicans criticizing it as a “blue-state bailout” for financially irresponsible governments, and Democrats saying it was necessary to prevent mass layoffs of police, teachers, and firefighters. Local leaders in both political parties are now deciding what to do with the funding, since so little of it ended up being used to cover emergency expenses.
Fortunately, there’s not necessarily any reason for cities to be in a rush to spend all that cash, the Brookings researchers said. (That’s in stark contrast to the federal government’s Emergency Rental Assistance Program, designed to help struggling renters stave off eviction, whose authorities are urging funding recipients to get the money out to applicants as fast as possible.) Indeed, the cities’ inclination to save for a rainy day is similar to what U.S. households have done. Individuals socked away record amounts of money during the pandemic—as much as $4.7 trillion in the second quarter of 2020, according to the Bureau of Economic Analysis.
Raising Minimum Wage Raises More Than Pay, Study Shows
It’s been more than six months since Democrats’ hopes of raising the minimum wage to $15 an hour nationally ran up against the Senate’s procedural rules, and, since then, some employers have raised their entry-level wages past that point anyway in an effort to fill a record number of open positions. Meanwhile, the debate among economists continues over whether raising the minimum wage would help reduce poverty, kill jobs, or both.
Past research on the issue has focused on the wage’s impact on pay and employment. However, higher wages could benefit more than just the workers themselves, according to a recently published study. When one city increased its minimum wage, customer service improved noticeably compared to places that left their minimum wage intact.
When the city of San Jose raised its minimum wage from $8 to $10 an hour in 2013, it gave researchers an opportunity to study what happened there versus the seven nearby cities that stuck with the statewide minimum wage of $8. Economists at the University of Southern California, Cornell University, and the National University of Singapore studied more than 97,000 online reviews of 1,752 restaurants in the eight cities over two years to see what happened before and after San Jose’s minimum wage went up.
As it turned out, the online reviews got more positive when it came to the courtesy and friendliness of employees at independent restaurants. Other aspects of the customer experience, like cleanliness, were unchanged, and chain restaurants saw no improvement in courtesy. (The researchers speculated the independent restaurants improved their ratings while the chains did not because independent owners were more motivated and better able to monitor their workers’ customer service than their corporate counterparts.)
“We think it’s an important aspect of the minimum wage concerns: If you pay employees more, they provide better service,” said Vrinda Kadiyali, a professor of management at Cornell and one of the researchers, in the official Cornell newspaper. “And there’s an incentive effect with independent restaurants, which can control the quality more than in national chains where everything is standardized. It’s in these kinds of industries where, if you see a change in minimum wage, you can significantly affect the consumer experience.”
Why Prices Ending in .99 Might Discourage You From Buying
Merchants often price items just below round numbers to make them seem cheaper: a pair of jeans for $79.95, a latte for $2.95, or even a house for $399,900. A recent study confirms that while this age-old marketing tactic can in fact make you perceive prices as lower, it might also make you less likely to spend in certain circumstances.
It turns out that this strategy—called “just-below pricing”—can discourage customers from going for upgrades by exaggerating the difference between the standard version and an upgraded version of a product, according to a study by researchers at Ohio State University who published their findings in the Journal of Consumer Research. If the original version is “just-below” a round number, and the upgraded version is just above it, the price differential can seem greater than it actually is.
For example, in one of seven experiments the researchers conducted, a coffee stand was set up on campus to test how many people would upgrade from a small to a large coffee at different prices—either $0.95 for a small and $1.20 for a large, or $1 for a small and $1.25 for a large. The customers were more willing to upgrade to the large coffee going from $1 to $1.25, even though it was more expensive, suggesting a resistance to crossing the $1 mark.
The researchers concluded that round numbers are a “psychological threshold” that feels expensive to cross. While more research is needed, the researchers said, their finding could have implications for how sellers of cars, plane tickets, and coffee might try to nudge you to upgrade in the future.
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