Prosperity Watch Issue 22

Prosperity Watch Issue 22, No. 1: Economic Disparities Persist across North Carolina's Counties

The economic recovery that began in mid-2009 has failed to make progress against poverty in North Carolina. In 2011, the number of people living below the federal poverty level topped out at almost 1.7 million North Carolinians, a figure that continues to remain well-above pre-recession levels. But the reality of poverty for many North Carolinians may be even starker than the topline poverty rate suggests, given that statewide estimates tend to mask differences in poverty and economic hardship across different regions in the state. Fortunately, reviewing county-level estimates of poverty helps provide us with this kind of regional picture of poverty.

According to Small Area Income and Poverty Estimates (SAIPE) released in December 2012 by the United States Census Bureau, the sluggish economic recovery has been more devastating to certain geographic communities in state than others. As illustrated in the map below, the state experienced significant differences among county-level poverty rates in 2011. For example, county-level poverty rates ranged from a low of 9.3 percent in Union County to a high of 30.9 percent in Robeson County. Thirty-four counties had poverty rates equal to or below the state rate of 17.8 percent and 66 counties had poverty rates above 17.8 percent.

Regional differences in poverty levels were even more pronounced when comparing rural and urban areas. Of the state’s 100 counties, only 15 of are designated as urban counties, while the remaining 75 are designated rural. In 2011, the average poverty rate for North Carolina’s rural counties was 19.2 percent, a full 2.8 percentage points higher than the average for urban counties. In 2011, the 45 highest county-level poverty rates were all concentrated in rural counties, including Robeson County (home of the highest poverty rate in the state) where nearly 1 in 3 residents lived in poverty. Year after year, Robeson County consistently ranks as the poorest county in the state. In contrast, the highest poverty rate among urban counties reached 19.5 percent (Durham County) while the lowest poverty rate stood at 11.6 percent in Wake County.

Children have also been disproportionately affected by poverty, with the child poverty rate climbing as high as 25 percent in 2011. Looking across all 100 counties, poverty rates ranged from 14.4 percent in Union County to 44.4 percent in Scotland County, while overall, 69 counties had child poverty rates above the state rate. As troubling as it is to have more than 1 in 4 children living in poverty in our state, a couple of counties—Scotland and Robeson—had child poverty rates that were approaching nearly 1 in 2 children.

Economic disparities among counties in North Carolina are driven by a range of factors, including job availability and industry changes, inequitable public and private investments, and, in some instances, long-term economic exclusion. Ensuring a robust recovery and broadly-shared prosperity requires consistent attention and investment in those communities that are falling behind the rest of the state—and especially those communities with persistently high poverty rates.

Prosperity Watch Issue 22, No. 2: Jobs deficit presents clear need for policy solutions

As the General Assembly prepares to take final action on unemployment insurance reforms, December’s jobs report from the NC Division of Employment Security reinforces the bleak outlook for North Carolina’s labor market and the fundamental lack of available jobs to meet the needs of unemployed workers.  Taken together, these realities have profound consequences for the unemployed if policy makers adopt unemployment insurance reforms that significantly scale back benefits for jobless workers.

According the December report, the true nature of the state’s labor market challenge—the lack of available jobs—is best reflected in a number of different indicators that tell the same story.   First, the unemployment rate increased from 9.1 percent to 9.2 percent in December. Even more troubling, the ranks of the long-term unemployed—those out of work for six months or more—make up almost half of the total pool of jobless workers. 

Many of these long-term unemployed are unable to find work largely because of another and even more consequential problem with the North Carolina’s labor market—the inability of to create enough available jobs to meet the needs of the jobless. Specifically, the state’s 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—now totals 518,500.  At a time when there are almost three workers for every available job opening across the Southeast, the jobs deficit reinforces the lack of employment opportunities as the fundamental driver behind the struggling labor market.  

Taken together, the inability of the unemployed to find work can be seen largely as the result of the state’s jobs deficit and corresponding lack of job openings. In turn, this reality generates significant consequences if unemployment insurance reform significantly reduces benefits for jobless workers. If unemployed workers still outnumber available job openings when unemployment benefits run out, then these workers will face significant ongoing financial hardship without realistic alternatives to find work and the means to support themselves.

Prosperity Watch Issue 22, No. 3: The Earned Income Tax Credit Benefits Low-Income Working Families Across North Carolina

As tax filing season rolls around, many North Carolina families and communities across the state will benefit from the Earned Income Tax Credit (EITC). The federal EITC, created in 1975 and designed to reward work and offset federal payroll and income taxes paid by families earning low wages, is a powerful tool for poverty reduction. In 2008 North Carolina established a state credit worth 5 percent of the federal credit. The tax credit helps address the upside-down nature of the state’s tax system, which requires low- and moderate-income families to spend a larger share of their income on state and local taxes compared to wealthy households.

The reach of the EITC is vast, with tax filers in each of the state’s 100 counties claiming the tax credit. According to the North Carolina Department of Revenue (NCDOR), one in five North Carolina tax filers – more than 906,000 tax filers – claimed the EITC for tax year 2011, indicating the importance of this credit in a state suffering from persistently high unemployment and a statewide poverty rate of 17.8 percent.

Given the significant differences in wealth, poverty, and economic distress across the state, it is unsurprising that the number of EITC recipients also varies widely across different regions of the state.  The map below provides a county-level assessment of the percent of total tax filers that claimed the EITC, levels that ranged from a low of 12.5 percent in Orange County to a high of 41.7 percent in Robeson County. Of the 100 counties across the state, 42 counties had at least a quarter of their total tax filers claiming the EITC. Unsurprisingly, the majority of these counties are rural in the eastern region of the state, underscoring the extent to which eastern North Carolina continues to lag behind the rest of the state in recovering from the Great Recession.

This tax credit is particularly important to low-wage earning families, as North Carolina’s workers have seen their wages fall since the end of the Great Recession despite increased productivity.  Moreover, the EITC has been demonstrated to provide a temporary support. The majority of taxpayers claim the credit for one or two years, which indicates that the EITC helps promote economic mobility for low-wage earning families. As the state continues to recover from the Great Recession and low-wage workers seek to meet family needs, the state EITC provides a modest, yet vital, support.