Prosperity Watch Issue 16

Prosperity Watch Issue 16, No. 1: North Carolina’s suburbs see dramatic increase in poverty over 2000s

Poverty in North Carolina is commonly associated with the concrete jungles of the state’s inner-cities or isolated rural communities in the mountains, the Piedmont, and the Northeastern Black Belt.  And although poverty is certainly a reality for far too many of the state’s urban and rural communities, it is the areas in between—North Carolina’s suburban neighborhoods—that have seen the most explosive growth in poverty during the first decade of the twenty-first century.

Defined by a recent BTC report as those census tracts with midpoints (or “centroids”) within a metropolitan area but outside designated urban areas, the state’s suburban neighborhoods saw their number of poor residents skyrocket by 40% and their average poverty rate increase from 9.2% to 13.2% over the period from 2000 to 2006-2010 (the most recently available five-year average for poverty).  As seen in the following figure, this almost 4-percentage point increase in suburban poverty was greater than the 3.2-point growth in the statewide poverty rate and significantly higher than the minimal 0.3-point jump in the poverty rate for urban neighborhoods.

Driven in large part by the rising housing costs associated with resurgent and gentrifying central cities, these trends reflect the movement of poor people away from increasingly less affordable inner city neighborhoods and into the older “inner-ring suburbs” first developed in the aftermath of World War II.  In turn, the previous residents of these inner suburbs are either moving further out into less densely developed exurban communities or further into newly trendy and expensive downtowns, in turn displacing the poor, who then move to the suburbs.  These trends present critical challenges to policy makers, including the provision of de-centralized affordable housing, ensuring access to services over a wider geographic area, and providing necessary health and educational opportunities for these newly poor areas.

Prosperity Watch Issue 16, No. 2: Government layoffs increase unemployment

Recent trends in the national labor market demonstrate the harm inflicted on the economy by cutting government spending and laying off government employees in the middle of an already challenging economic recovery.  Just as with private sector layoffs, government layoffs increase the number of people out of work.  And given that there are already nearly three times the number of people looking for work than there are job openings, these public sector layoffs only serve to increase overall unemployment.

As a recent Brooking Institute report shows, several years’ worth of cuts to government spending across the nation—resulting in large-scale layoffs in the public sector—has contributed to the nation’s lagging labor market by increasing the pool of workers who need jobs.  Taken together, federal, state, and local governments have laid off 642,000 workers in the 36 months since the formal end of the Great Recession in June 2009.

Normally, the public sector accounts for a bit over 9% of the nation’s total employment, yet these government layoffs—coupled with additional spending cuts—have held back the number of government workers from keeping up with population growth. If the nation had maintained its average government employment levels over 2000-2007, the American labor market would have 1.7 million more jobs than it does currently today (see following figure) and the national unemployment rate would stand at 7.1% a full point lower than the current rate of 8.2%.

Previous issues of Prosperity Watch have examined the lagging recovery from the Great Recession of 2007-2009, and attempted to explain why this recovery is different from previous post-recession recoveries.  In terms of the national labor market at least, the trends in government employment explain part of the difference.  At odds with every previous business cycle since 1932, federal, state, and local governments in the current recovery have laid off workers and shrunk the public sector’s share of total employment, resulting in much slower overall job creation than experienced in previous recoveries.

While these government layoffs have clearly contributed to higher total unemployment, these public sector layoffs have also held back private sector job growth: those former government workers—now unemployed workers—no longer have paychecks to spend at private businesses, leaving these private businesses with less money to hire new workers. 

In short—and contrary to the beliefs of the proponents of austerity economics—increasing unemployment through government layoffs does not reduce unemployment.

Prosperity Watch Issue 16, No. 3: North Carolina’s jobs deficit grows to 546,000 in July

In another sign of North Carolina’s struggling labor market, the state’s unemployment rate rose from 9.4% to 9.6% last month, spurring a rise in the state’s jobs deficit from June to July, and signaling the possibility of a late-summer stall in the economy’s recovery from the Great Recession.

Since the recession’s onset in December 2007, North Carolina experienced 35 months of job loss and now has 220,000 fewer jobs than it did at the beginning of this period.  The state’s jobs deficit, or the difference between the number of jobs North Carolina has and the number it needs to regain its pre-recession employment rate, is 545,700. This includes the 220,000 jobs lost to the recession, plus the 325,700 jobs it needs to keep up with the 7.8% growth in population that the state has experienced in the 55 months since the recession began.


Prosperity Watch Issue 16, No. 4: North Carolina experiences decade of growing wage inequality

Over the past 30 years, North Carolina has experienced growing wage inequality, with income gains concentrated among high-wage earners.  North Carolinians in the bottom 20% of the income distribution have seen their wages remain flat while those in the top 20% have seen their wages grow by 32 percent.  The result is a growing gap between high- and low-wage earners.  In 1981, the gap between the top 20% and bottom 20% was $10.44 per hour but by 2011 the gap had grown to $15.85. 

The growth in income inequality has serious implications for all North Carolinians. More unequal societies are more likely to have low levels of economic mobility and enjoy shorter the periods of growth. In contrast, research has found that cutting income inequality in half can double the length of an economic expansion. 

As a result, inequality is receiving increasing attention from researchers, policy makers, and in popular culture alike.  One example in the popular culture realm includes an art exhibit entitled PoorQuality:Inequality, at the Duke University Center for Advanced Hindsight.  For more information click here.

The gap between high- and low-wage earners has grown over the past three decades.

Source: Economic Policy Institute, Current Employment Statistics.