Prosperity Watch Issue 14

Prosperity Watch Issue 14, No. 5: The Growing Importance of Immigrant-Owned Small Businesses in North Carolina

Last month, the Fiscal Policy Institute (FPI) released a report titled "Immigrant Small Business Owners" that describes the role of immigrant-owned small businesses in the US economy. FPI utilized data from the American Community Survey (ACS) that is administered by the Census Bureau.

In the report, immigrant small business owners were defined as foreign-born "people who own an incorporated business and whose main job is to run that business." Using this definition, 18% of small businesses in the US are owned by immigrants. Also, immigrant owned small businesses have $776 billion in receipts, which represents 13% of all small business receipts. It is clear that immigrant-owned small businesses are playing an important role in the nation’s economy, and their role continues to grow. From 2000 to 2010, the number of immigrant-owned small businesses grew at a rate of 62.6% which outpaced the 47.6% growth of the immigrant labor force - the total number of immigrants who are working or looking for work.

When looking at North Carolina specifically, analysis shows that immigrants make up 9.2% of all small business owners. While this proportion is lower than the national average, immigrant ownership of small businesses in North Carolina is growing by leaps and bounds. In 2000, about 1 in 19 small business owners in NC was an immigrant. By 2010, that ratio had changed to 1 in 11.

The immigrant labor force in the state is growing at a good clip and immigrant-owned small businesses are growing even faster. From 2000 to 2010, the immigrant labor force in North Carolina grew by 81% to a total of 469,320 individuals. Over the same time period, the number of immigrant small business owners grew by 123% to a total of 13,930. These trends translate into 42% excess growth of immigrant-owned small businesses above and beyond the growth of the immigrant labor force.

North Carolina has the 9th highest excess growth of immigrant small businesses in the nation. North Carolina's figure is over ten times the national average. 24 other states have had positive excess growth of immigrant small businesses over the last decade.

For more information about immigrant-owned small businesses in North Carolina, see our Fact Sheet.

Prosperity Watch issue 14, No. 4: North Carolina's Jobless Rate Has Improved Disproportionately Across the State

As of May 2012, the North Carolina jobless rate stood at 9.4 percent, a decline from 10.3 percent in May 2011. Despite this improvement, the jobless rate is almost twice as high as it was before the recession began (4.8% in November 2007) even though it has been two years since the recession officially ended.

North Carolina continues to have some of the worst labor market conditions nationwide. The state has the fourth highest jobless rate in the nation (seasonally adjusted). For many communities in the state, the reality is even worse. For example, the highest jobless rate in the state was a whopping 16.9 percent in Scotland county as of May 2012. Furthermore, the jobless rate in this county has only decreased by 0.1 percentage points in the last 12 months.

To analyze broader trends across different regions of the state, one can use North Carolina’s seven economic development regions. Each economic development region is comprised of geographically clustered counties, as few as 11 counties in the Southeast region to as many as 23 counties in the West region. There are differences in overall labor market conditions across regions, due to factors such as educational attainment and degree of urbanization, however one would like to see all regions of the state participate fully in the recovery, inadequate as the recovery may be at this time. Analysis finds that the recovery across the seven regions has been alarmingly disproportional over the last year, as measured by the annual percent decline in the jobless rate.

The average decline in the jobless rate from May 2011 to May 2012 was 7.55 percent. The Southeast and the Northeast regions lagged substantially behind the other regions of the state by this measure. The Northeast and the Southeast are unique in that they are the only regions that experienced shrinking numbers of employed individuals over the year, a sign of weak regional labor markets. Additionally, the labor forces – the total number of employed individuals and unemployed individuals looking for work – in these regions declined by more than the decline in the number of employed individuals. This suggests that unemployed people in the Northeast and Southeast regions may be leaving the labor force because they are unable to find work.

Prosperity Watch Issue 14, No. 3: North Carolina's Jobs Deficit Continues to Grow for Fourth Straight Year

In an improvement over the direction of the national unemployment rate (which increased last month), the state’s jobless rate stayed steady at 9.4 percent, according to new data released by the NC Division of Employment Security last week.   In a troubling sign of a stalling recovery, however, this represents the first time since September of last year that the state’s unemployment rate has not improved. Moreover, the labor force continued to shrink, down 5.4% since February 2012, suggesting that much of the steady-state in the unemployment rate is simply due to workers exiting the workforce and not being counted in the jobless rate.  As a result, the shrinking labor force may well mask an even higher real unemployment rate.

These short-term trends simply reinforce the picture of long-term stagnation in North Carolina’s labor market, as the state continues to experience a growing jobs deficit in the aftermath of the Great Recession.  This jobs deficit—the number of jobs the state needs to create to replace those lost to the 2007-2009 economic downturn and keep up with population growth—grew to 555,400 last month, up from 532,500 in April and up from 530,600 at the beginning of the year. 

Far more troubling, however, is the state’s long-term trend in the years since the recession began.  As seen in the following graph, the state has seen explosive growth in its jobs deficit over the past five years, from 50,344 in May 2008 to this year’s level of 555,400 jobs—a 1000% increase in the number of jobs the state needs to fill this shortfall.  And the bulk of this jobs deficit has been generated in the years since the recession formally ended in July of 2010, when the national economy experienced two consecutive months of positive economic growth.  This is suggests that national economic growth is not translating into significant job creation gains in North Carolina’s labor market, despite dramatically increasing business productivity in the state and corporate profits at the national level that have returned to pre-recession levels.

Prosperity Watch Issue 14, No. 2: Hard work not paying off for North Carolina’s workers:  Wages fail to keep pace with productivity

An important ideal embedded within American economic culture is the notion that hard work always pays off: that as a worker improves his efficiency, he increases the economic output of his employer while reducing his employer’s costs and expanding its profits.  As the employer increases production with lower costs, the resulting savings are passed along to the worker in the form of higher wages.  At least, they do so according to the most cherished principles of classical economics, which hold that these productivity gains—measured by the total amount of goods and services produced by each worker—are accompanied by commensurate wage increases.

Unfortunately, this general principle has not translated into reality for North Carolina’s workers over the past two decades, as wage gains have fallen significantly behind productivity gains in the last three economic expansions—the recoveries from the 1991 recession, the 2001 recession, and the most recent and brutal downtown, the Great Recession of 2007. As indicated by the chart, output per worker (measured by the state’s share of real Gross Domestic Product) has increased dramatically between the formal end of each recession (the so-called “trough” of the business cycle) and 30 months into the recovery, but inflation-adjusted wages (in 2011 dollars) have either stagnated or fallen over the same period, suggesting that workers are not being rewarded for their more efficient work and increased output.

In the recovery from the 1991 recession, productivity exploded, seeing 12 percent gains over the 30 month period from the end of the recession—likely due to a historically unique transition to computerization and the birth of the Internet—while wages saw a 3 percent gain, well ahead of wage performance over the same period in the 2001 recovery and 2007 recovery.  Both of these most recent recoveries generated only minimal productivity gains of close 1.6 percent, but while the 2001 recovery saw some moderate wage improvements of 1.2 percent, workers in the current recovery have seen their wages actually fall by a catastrophic 4.9 percent, despite their improvements in output and efficiency.  This suggests that employers are treating their workers differently than in past recoveries—choosing to keep the savings generated by productivity gains in cash reserves, or as profits distributed to shareholders— instead of rewarding hard work with higher wages, or investing in capital improvements that could reap additional productivity and wage gains for the future.

Prosperity Watch Issue 14, No. 1: North Carolinians lag behind Americans in economic mobility

According to a study conducted by the Pew Center on the States, North Carolinians lag behind Americans and Southeasterners in terms of average economic mobility, the term used to capture movement along the income scale. The study looks at individuals born from 1943 to 1958 and examines their incomes during their prime working years, the 10 years between ages 35 to 39 and 45 to 49.

As illustrated in the graph below, the study found North Carolinians ranked lower than Americans in absolute mobility, which the study defined as earnings increases over the 10‐year period. North Carolinians experience an average earnings growth of 14 percent during the 10-year period, compared to 17 percent for Americans. Similarly, North Carolina also ranked lower on relative upward mobility—the ability of individuals in the bottom half of the earnings distribution to move up 10 or more percentiles over the 10-year period. Only 26 percent of North Carolinians were upwardly mobile relative to their peers, compared to 34 percent of Americans.

Research shows that a complex mixture of factors beyond hard work and ingenuity significantly are linked to one’s economic mobility, including place of residency, family economic background, education, and race. Research also shows that higher rates of economic mobility help offset the country’s increasingly high rate of income inequality.