NC Budget and Tax Center, The State of Working North Carolina

The State of Working North Carolina: Policy Options for Addressing the Jobs Crisis

As shown in the recent report on the State of Working North Carolina, many families and workers across the state lost ground during the 2000s.  During this “lost decade,” workers experienced stagnant or falling wage growth, anemic job growth in the recovery from the 2001 recession, and the catastrophic job losses of the Great Recession of 2007-2009.  And in the three years since the formal end of the Great Recession, North Carolina has struggled to make up this lost ground—unemployment remains persistently high, with at least three workers for every available job opening.

In the face of this challenge, policy makers need to promote solutions that address the immediate crisis in employment and establish long-term path for building a sustainable employment base for the industries of the future.

Given the immediate need to bring down unemployment in the short term, policy makers can start by simply choosing to not make the problem worse through misguided public sector layoffs.  Just like 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 and hold 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.

Moreover, these misguided policies also hurt private businesses by reducing key public investments in education, roads, and research and development—investments that improve business productivity, grow profits, and create jobs and the conditions for long-term job growth.

A second important short-term solution geared specifically for the private sector involves promoting work-sharing policies among employers.  In work-sharing arrangements, employers who would otherwise be forced to lay off workers due to macroeconomic circumstances beyond their control (like a recession), could instead reduce full-time workers to part-time status, allowing companies to reduce labor costs without sacrificing productivity or incurring the cost of retraining when the economy turns around and they look to rehire.  These part-time workers are then eligible for reduced unemployment insurance benefits to make up the difference between their former full-time salary and their new part-time salary.

Such a proposal helps businesses keep skilled workers, and contributes to a strong consumer demand for the goods and services produced by other private businesses.  Work-sharing programs currently exist with strong employer support in 26 states, including Florida, Texas, and Arizona.

Along with meeting the immediate challenge, policy makers must prepare for the long-term economic demands of the future by targeting the right kind of firms—those that pay good wages, provide benefits, and are in industries likely to experience significant growth over the next decade—for attraction, retention, and small business development.

These are the jobs of the future, but in order to create these jobs, the state needs to prepare the workforce to take advantage of them. One key policy involves the creation of career pathways—programs that facilitate workers movement from low-wage work into higher-skill, higher-wage employment through multi-tiered training and certification standards tied to formal career mobility ladders in targeted private-sector industries.

One example of a formalized career pathway is the “work keys” program common in automotive manufacturing industries in the U.S. South. Work keys provide workers a series of widely recognized certifications demonstrating mastery of an increasingly difficult set of skills pegged to positions with increasing responsibilities within automotive manufacturing companies. This allows workers to integrate skill development with upward mobility within their industries, creating pathways to better training, higher wages, and ultimately more successful careers.

In the face of the jobs crisis facing North Carolina, these long-term and short-term policies can play a critical role in putting people back to work and ensuring widely shared prosperity for all of the state’s residents.

 

6 Comments

  1. Nonanon

    September 4, 2012 at 4:36 pm

    I see, don’t lay people off, and workshare, really?

    We’re in the midst of an inflationary depression, with no end in sight, and you would apply band-aids.

    The problem isn’t with state spending, it’s out of control federal spending, which has replaced private sector investment. Let’s call a spade a spade, and admit until federal spending is brought under control, nothing else will be fixed. If it isn’t, unemployment is going to seem a minor annoyance.

  2. Allan Freyer

    September 4, 2012 at 5:54 pm

    The problem with claiming an inflationary depression is the absence of either inflation or a depression. According to standard benchmarks, CPI comes in at about 1.4%, which is extremely low historically (http://inflationdata.com/inflation/Inflation_Rate/CurrentInflation.asp), and GDP has grown for 12 straight quarters, albeit anemically. By definition, recessions (or depressions) don’t occurr without two straight quarters of negative growth in GDP.

    So given the nonexistent threat of inflation, how is cutting federal spending good for the economy?

  3. Alex

    September 4, 2012 at 7:18 pm

    Allan , do you not understand what a $16 trillion deficit will eventually do to an economy… a debt that grows by $10 million every minute of the day ?

  4. david esmay

    September 5, 2012 at 10:35 am

    Alex, apparently Bush, Ryan, Boehner, and McConnell didn’t when they threw care to the wind on their massive right-wing spending spree.

  5. Nonanon

    September 5, 2012 at 10:50 am

    You’re using the CPI as the benchmark for inflation and BLS “seasonally adjusted” figures for unemployment, it’s no wonder you don’t see an inflationary depression.

    What about the food stamp rolls, employment rates, wealth inequality? Are any of these red flags for you?

  6. Allan Freyer

    September 5, 2012 at 11:40 am

    Nonanon, thanks for your comment. If you’re arguing that there’s been an increase in economic hardship since 2001, and a corresponding increase in federal assistance to help mitigate that hardship, I completely agree with you. This is pretty much the central focus of this year’s State of Working NC report (which I highly recommend).

    But while these hardships are clearly real and clearly present challenges to far too many NCers, they don’t constitute an inflationary recession. To have an inflationary recession, by definition, we have to have abnormally high inflation and two straight quarters of negative GDP growth, neither of which we have.

    I am sincerely curious as to what measure of inflation you would use instead of CPI that would show that inflation is indeed abnormally high and acting as a drag on GDP. And I’m definately interested in how you would define “depression.”

    Also, what’s wrong with using seasonally adjusted BLS data when talking about employment trends over time?