Bad for business, bad for workers

Bad for business, bad for workers

- in Weekly Briefing

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New reports show why NC employment policies are just making matters worse

Conservatives and progressives disagree on a lot of things, but there is one basic objective that you would think ought to find broad support in both worldviews – namely that widespread prosperity is a good thing. Simply put, it’s good for a state (or city or country) to have as high a percentage as possible of healthy, educated and comfortably well-off people.

For the last several years, of course, such widespread prosperity has been on the wane in North Carolina. Oh sure, for a chunk of the population near the top, things are better than ever, but for most North Carolinians, times are tougher. Incomes are falling or flat, essentials of modern life are more expensive and, in general, the future just seems more fragile and uncertain.

In a sane world, such a state of affairs would give rise to a coordinated and all-out effort by state government in all of its guises to reverse these trends. After all, save for securing basic safety and freedom for the citizenry, what could be more important?

Regrettably, such an effort has not been forthcoming. After several of years of tepid and partial efforts by Democrats in which the chief objective seemed to be to hold things together with duct tape and baling wire, the current state leadership is moving aggressively to remove government from the prosperity enhancement business.

For Governor McCrory and the General Assembly, the objectives in this realm have pretty much dwindled down to just two things: a) cut taxes and regulations and b) recruit corporations from elsewhere.

Unfortunately, neither strategy – particularly the new “hands off” approach – has shown much prospect of curing what ails the state’s workforce and economy in any kind of holistic fashion.

The damning data

A new and comprehensive report from the North Carolina Justice Center – the annual “State of Working North Carolina” report – paints a portrait of this sobering reality in painful detail.

Consider some of the following findings:

  • North Carolina’s median wage is now lower than it was in 1999, when inflation is taken into account. Nearly a quarter of workers earn less than the poverty threshold for a family of four — $22,811 in 2011.
  • North Carolina has yet to recover all of the jobs it lost during the recession, and job growth is failing to keep up with population growth.
  • Most of the jobs created since the end of the recession have been in lower paying services like 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 grown markedly. 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.

In other words, North Carolina is in the midst of what amounts to a prolonged economic emergency. Its stock of good paying, prosperity-enhancing jobs has been in a free fall for some time and general societal well-being has suffered mightily.

Crafting an effective response to the crisis

So, what to do about this disastrous situation? How does North Carolina find a way out of the mess?

As even a moment’s reflection would tell the thoughtful observer, a strategy that relies solely upon “the genius” of an unfettered, minimally-taxed market is almost surely a loser. After all, the state has already long been lauded for its “business-friendly” environment – a category in which it ranked near the top in several national journals for many years under Democratic leadership. If a high business-friendliness quotient was all it took, state prosperity would have rebounded years ago.

(Ironically, the state’s ranking has actually fallen in multiple indexes in this field since Republicans assumed power three years ago – proving yet again that businesses care about more than taxes and environmental regulations.)

While no one has a magic, let alone instant, solution, the new “State of Working North Carolina” report gets to the heart of what’s clearly the best hope: building an educated, highly skilled workforce. As the report notes:

The returns on a robust investment in education are clear: In North Carolina, the median wage for a worker with a bachelor’s degree is $23 an hour, while it is only $13 an hour for a worker with just a high school diploma.”

Common sense confirms the conclusions that naturally follow from these data. After all, how in the world can a state with a shortage of high wage, high-skilled jobs expect to turn that situation around merely by throwing tax breaks and incentives at corporations? Who will those corporations employ?

A recent report by analysts Peter Fisher and Noah Berger at the national think tank known as the Economic Policy Institute (a report featured prominently in the “The State of Working North Carolina” entitled “A Well-Educated Workforce is Key to State Prosperity”) puts it this way:

  • Overwhelmingly, high-wage states are states with a well-educated workforce. There is a clear and strong correlation between the educational attainment of a state’s workforce and median wages in the state.
  • States can build a strong foundation for economic success and shared prosperity by investing in education. Providing expanded access to high quality education will not only expand economic opportunity for residents, but also likely do more to strengthen the overall state economy than anything else a state government can do.
  • Cutting taxes to capture private investment from other states is a race-to-the-bottom state economic development strategy that undermines the ability to invest in education.
  • States can increase the strength of their economies and their ability to grow and attract high-wage employers by investing in education and increasing the number of well-educated workers.
  • Investing in education is also good for state budgets in the long run, since workers with higher incomes contribute more through taxes over the course of their lifetimes.

In other words, states that invest more in their most important resource – their people – ultimately attain much higher levels of prosperity. Those that don’t, don’t.

Going forward

The policy implications of these new studies for North Carolina are not hard to discern. Most notable among them is the fact that recent cuts to education at all levels are virtually certain to abet and hasten the state’s prosperity decline.

Could a rising national tide and other factors help soften the blow? Sure. As states like Florida have demonstrated through a series of Ponzi-like cycles in the past, national booms combined with local influxes of retirees and other new residents to populate industries like tourism can fuel housing and development booms which can, in turn, prime the economic pump for a while.

Over an extended period of time, however, a state that bases its economy on investment and education is virtually certain to enjoy much greater prosperity than one that relies on extraction and near-term greed.

There was a time in America in which such a conclusion would have seemed obvious to both conservatives and progressives. Sadly, however, that era is, for the time being, a distant memory in North Carolina.

About the author

Rob Schofield, Director of NC Policy Watch, has three decades of experience as a lawyer, lobbyist, writer and commentator. At Policy Watch, Rob writes and edits daily online commentaries and handles numerous public speaking and electronic media appearances. He also delivers a radio commentary that’s broadcast weekdays on WRAL-FM and WCHL and hosts News and Views, a weekly radio news magazine that airs on multiple stations across North Carolina.
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