Prosperity Watch Issue 45, No. 4: An Exceptionally Unequal Recovery

A new report from the Economic Policy Institute shows that the Great Recession was over a while ago for the top 1% of income earners in North Carolina. Since the official recovery began in 2009, incomes at the very top have been growing, but for everyone else in North Carolina incomes have actually declined. Strikingly in North Carolina as in just 15 additional states across the country, all of the income growth from 2009 to 2012 was captured by those in the top 1 percent or those with incomes in North Carolina greater than roughly $311,000.

This lopsided growth in incomes during the current recovery picks up on the longer trend of incomes at the top in North Carolina outpacing the growth for everyone else since 1979. 

And yet, this recovery is unique in that it is the first of the past ten economic expansions dating back to 1949 in which the bottom 99 percent have seen their incomes fall as the economy grew. For eight of the past ten economic expansions up until the 2000s, the majority of North Carolinians benefited during periods of economic growth by seeing their incomes grow on average.  And while beginning in 1975 and moving forward, the top 1 percent captured an increasing share of income growth in North Carolina as in the nation, it was not until the 2001 expansion that the top 1 percent captured a larger share relative to everyone else.


 
During the expansion period from 2001 to 2007, the top 1% took home more than 60% of all income growth over that period.  By the 2009 expansion, the top 1 percent captured all of the income growth over the first three years of the recovery with the bottom 99 percent seeing their collective incomes decline.

The fundamental shift that has resulted in the growth not translating into better economic outcomes for the majority of North Carolinians could be linked to a number of factors:  the economic transformation that has seen many middle-wage jobs replaced by low-wage jobs,  corrections in the stock market translating to income gains for those with a greater reliance on investment income, the erosion of the value of the minimum wage and the growing difference in after-tax income.

Income growth has become so concentrated at the top that several years of positive economic growth have made little or no difference to the vast majority of North Carolinians whose increased productivity has made that growth possible. Without more broadly shared income growth, North Carolina’s economy will fail to meet its full potential.

 

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