Prosperity Watch Issue 29

State of Working North Carolina: A steady state of low-wage jobs?

The week of Labor Day marks an important opportunity to revisit the impact of the Great Recession and the still-struggling economic recovery on the lives, jobs, and wages of North Carolina’s workers. This year’s report on The State of Working North Carolina provides a detailed snapshot of many of these trends, focusing particularly on how workers are faring in the middle of a historic transformation in the state’s economy.

Of particular importance in these times, the report shows that to truly measure economic progress, North Carolina’s policymakers must look at the growth in median wages not just productivity or job creation to ensure that the economy is thriving. 

Here are some of the quick findings in this year's report:

  • North Carolina's median wage is now lower than it was in 1999 (taking inflation into account). Nearly a quarter of workers earn less than $23,550 - the poverty threshold for a family of four.
  • The state has yet to recover from all of the jobs lost during the recession, and job growth is failing to keep up with population growth.
  • Many of the jobs that have been created are in lower-paying services such as food processing, retail, and hospitality, and now account for 83 percent of employment in the state.
  • Income inequality between the top wage earners and those at the bottom has skyrocketed. African Americans have been hit particularly hard, earning nearly $5 less per hour on average than their white counterparts.
  • Rural areas of the state continue to lose jobs, while large and small metropolitan areas are slowly adding jobs.  

Prosperity Watch Issue 29, No 2: Hard work not paying off for North Carolina's workers; wages fail to keep pace with productivity

For most of the past century, American workers and businesses saw hard work pay off—as workers increased their efficiency, they also increased the quantity and value of the goods they produced, generating additional profits for the employer and higher wages for workers. Beginning in the 1970s that connection between productivity and wages frayed, and the norm for workers in the 21st century has now become quite different. In fact, wages have fallen significantly behind productivity gains in the years since the Great Recession.

In contrast to the recoveries from the 1991 recession and the 2001 recession, both of which saw productivity gains accompanied by wage increases, workers in the current recovery have seen their productivity increases rewarded by a sharp decrease in wages since the end of the recession. As indicated by the chart, output per worker, as measured by the state’s share of real Gross Domestic Product, has increased dramatically over the period between the formal end of the recession in June 2009—the so-called “trough” of the business cycle—and the end of 2012, 42 months into the recovery. Over the same period, however, inflation-adjusted wages (in 2012 dollars) have either stagnated or fallen, suggesting that workers are not being rewarded for their more efficient work and increased output.

 

This stands in stark contrast to previous recoveries.  In the recovery from the 1991 recession, productivity exploded, seeing 7.4 percent gains over the same 42 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 3.5 percent gain. Similarly, workers in the 2007 recession increased their productivity by 6.4 percent after the 2011 recession, and saw relatively stagnant 0.7 percent wage growth over the same 42 month period. Meanwhile, workers in the current recovery have seen productivity gains of 3.3 percent coupled with a catastrophic 5.3 percent drop in their wages, 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 29, No. 3: Great Recession Drives Food Insecurity, SNAP Responds

One in 6 North Carolina households faced food insecurity in 2012.  This means that one or more members in those households reduced their food intake or their eating patterns changed during the year because of a lack of money or resources for food, according to the U.S. Department of Agriculture.   North Carolina’s level of food insecurity is the 5th highest in the nation, behind only Texas, Mississippi, Arkansas and Alabama.

Food insecurity increased by 2.2 percentage points since the start of the Great Recession.  And the continued high level of North Carolinians who are not able to meet their most basic needs in the recovery remains high because of the labor market.  The loss of jobs and the failure of the recovery to deliver enough jobs to meet the state’s workforce is the primary driver of this challenge. A secondary cause is the growth of low-wage jobs that don’t pay enough for a family to make ends meet.

The Supplemental Nutrition Assistance Program (SNAP) has responded effectively to the economic downturn by increasing support to families who are impacted by unemployment and poverty.  The program tracks closely the cycles in the economy: increasing support in downturns and decreasing support in recoveries.  North Carolina’s experience over the 2000s shows this increase in downturns and the leveling off of recipients in recoveries.  Given the nature of the low-wage job recovery, North Carolina has not seen the decline that is apparent in other states. 

Projections by the Center on Budget and Policy Priorities suggest that SNAP spending will fall significantly in future years as the economy recoveries and that it has already stabilized. The countercyclical economic impact of SNAP is well-documented.  For North Carolina families, the program provides a modest $1.33 dollars per meal support to put food on the table.  These dollars are spent locally and quickly, supporting grocery stores and retail outlets across the state.

Prosperity Watch Issue 29, No 4: Poverty Maintains Fierce Grip on Children, Particularly on Children of Color

Despite moderate economic growth from 2011 to 2012, North Carolina saw no meaningful improvement in either poverty rates or household incomes over the same period.  New US Census data confirm that children continue to be the poorest age group in the state and nation, with children of color facing a disproportionately higher poverty rate. As North Carolina shifts to a majority-people-of-color state, persistently high poverty rates among young children of color have long-term implications for the state’s economic future.

In 2012, North Carolina’s state’s child poverty rate was 26 percent in 2012, climbing well above the national rate of 22.6 percent. Poverty among the state’s children has grown by nearly 7 percentage points since the Great Recession began in 2007. Even more troublingly, children of color are facing crisis levels of poverty that are more than double the rate for white children in some instances. By the numbers, the child poverty rate was 40.9 percent for African Americans, 43.6 percent for Latinos, and 44.1 percent for American Indians compared to  18.8 percent for whites (see chart below). The federal poverty level was $23,492 annually for a family of four in 2012.

Startlingly, the poverty rate for children under 5 was even higher, jumping to 47.1 percent for African Americans, 46.5 percent for Latinos, and 53.2 percent for American Indians compared to just 22.2 percent for whites. Given these high rates of child poverty, it is clear that the Great Recession and its aftermath has exacerbated long-standing significant disparities in the economic conditions and opportunities between white North Carolinians and communities of color that have persisted throughout the state’s history.

Research shows that child poverty can have devastating consequences, damaging a child’s development that can play out negatively during K-12 years and dampen their earning potential during adulthood. Because child poverty is a leading indicator of North Carolina’s future, these disturbing trends underscore the critical importance of investing in family economic security and shared economic growth across communities of color and all North Carolinians.