Prosperity Watch Issue 48, No. 1: North Carolina should not look to its neighbors for how to build a strong economy

April 7, 2015

North Carolina’s economy isn’t working for everyone, and for some it’s downright broken. According to a Budget & Tax Center report released last week, many families wake up to financial insecurity every morning as the shortage of jobs paying family-supporting wages persists, household income idles in neutral, and the gap between the wealthy and everyone else widens. Strangely, some policymakers are actually looking for policy ideas in neighboring states with worse track records on addressing poverty.  

South Carolina and Georgia are increasingly held up as states that North Carolina should seek to emulate.  Both of these states have poverty rates higher than the Tar Heel State. North Carolina’s poverty rate was the 11th highest in the nation at 17.9 percent in 2013 but still below South Carolina’s poverty rate of 18.6 percent and Georgia’s rate of 19 percent. In fact, these two states have seen their poverty rates increase by 4.7 and 3.7 percentage points, respectively, since the start of the Great Recession a far greater increase than the national average increase of 2.9 percentage points, so its hard to see how these two state could be held up as exemplars of sound economic strategy.

There has also been steeper decline in the income of Georgians and South Carolinians in the middle of the income distribution.  In Georgia, the median income from 2007 to 2013 fell by more than $7,000 or 15 percent.  In South Carolina, the decline in median income was more than $4,000 or more than 10 percent. By comparison, North Carolina’s decline was roughly 9 percent from pre-recession levels.

The latest data from the Working Poor Families Project also shows that the percent of working families living in poverty continues to remain elevated for both states: in Georgia, 13.7 percent of working families earn poverty-level wages while in South Carolina, 12.7 percent have similar low earnings. These figures reflect an increase of 5.4 and 3.7 percentage points over pre-recession levels. Despite job growth rates that have been slightly better than North Carolina in the past year, these states are not making significant progress towards improving the quality of jobs or the economic well-being of their residents.

The pursuit of policies that cut taxes for the wealthy and maintains or grows heavier tax loads for the poor, all while underinvesting in economic opportunity through public schools and childhood well-being has characterized the approach of policymakers in South Carolina and Georgia.  Given what is known about the importance of education and infrastructure to growing the economy and ensuring improved income growth for the median worker, it is not surprising that these states have not achieved economic benefits for everyone.  

Poverty has consequences for us all.  The pursuit of targeted public policies to address poverty is made even more difficult when flawed strategies like cutting taxes for the rich are pursued and reduce the dollars available to make investments in the pathways to opportunity.  If North Carolina wants to achieve sustained growth and more inclusive prosperity, it is clear that the low-road models of South Carolina and Georgia just don’t make sense.

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