North Carolinians are working harder than ever before, but the economy doesn’t seem to be working for them. At least, that’s the verdict of a new Budget & Tax Center report, which finds that during the current economic recovery, North Carolina’s workers have increased their productivity and gotten paid less for the first time in 30 years, yet another sign that the current economic recovery is barely living up to its name. In fact, this productivity gap—in which rising worker productivity is not rewarded with new job creation or higher wages—is one of the most troubling features of the current recovery.
A key measure of economic growth, productivity, can be measured by the amount of goods produced by each worker. As a worker improves his efficiency, he increases the economic output of his employer while reducing his employer’s costs and expanding its profits. In past business cycles (including the recoveries from the recessions of 1981, 1990, and 2001), these savings were passed along to workers in the form of new job creation and higher wages. Unfortunately, the reality of the current recovery is very different than in the past—despite increasing productivity by 1.5% since the end of the Great Recession, North Carolina’s workers have seen their wages fall by 4% and employment fail to return to pre-recession levels, the report finds.
Additionally, this productivity gap has contributed to the emergence of a two-tier labor market, with growth in low-wage and high-wage occupations, but little growth in between. According to the report, the result is the worst wage inequality seen in 30 years, in which earnings for the bottom fifth of wage-earners fell at almost three times the pace of the top 10% of wage earners.
In order to reverse these troubling trends, the report highlights the importance of workforce development and career pathway programs for providing the vehicles for workers to improve their skills, increase their productivity, and do so in occupations that earn higher wages.