Income Inequality in North Carolina: The Disconnect between Wages and Productivity

In addition to the data on poverty that was released by the US Census Bureau recently, there was also a host of data points about income trends in the nation and North Carolina.  These trends, like the poverty numbers , demonstrate a troubling trend for the fabric of our society and the ability of our economy to grow sustainably over the long term.

As we reported in our analysis of the Census data, the top fifth of households in North Carolina held more than half of all income in the state in 2011, compared to 14.5 percent and 3.3 percent held by the middle and bottom fifths, respectively. 

Growing income inequality is driven by many factors that we plan to detail in a series of blog posts this week.  One of these factors is the disconnect between wages and productivity growth.  In North Carolina, too, productivity gains have not translated into wage growth.  In fact, over the Great Recession and recovery, wages have fallen by 4.2 percent while productivity grew by 1.5 percent.

Left unchecked, research has shown that wage inequality drives much of income inequality and adversely affects health and increases economic hardship.  A growing body of research also finds that economies with higher levels of hardship and greater income inequality experience shorter periods of growth.

It is therefore critical that policymakers address income inequality.  One step would be to reconnect wage and productivity growth starting with the alignment of our wage standards with the cost of living and ensuring that workers can collectively bargain.

8 Comments

  1. Frank Burns

    October 2, 2012 at 9:21 am

    Nonsense. Supply and demand are the solutions to wage inequality. Unions are not welcome in NC as they result in consumer costs to go up, and productivity to decline.

  2. david esmay

    October 2, 2012 at 10:44 am

    Frank, once again you have no idea what you’re talking about. In 1986 I came to NC to build the UPS distribution center in Greensboro, I worked for a company out of Iowa that wasn’t union, but paid union wages, at the time I made 19.75/hr as a journeyman concrete finisher. We specialized in big flat work, and primarily did work for Wal-Mart, K-mart, and Corps of Engineers projects. The reason my crew was brought here was at the time there were no companies in the southeast capable of performing large pours and meeting the engineering specifications they required. We worked longer, harder, smarter, and produced a quality product that was unmatched in the U.S.. Most of the guys that taught me had been union finishers and up held the trade standards that required. The company made lots of money and we were compensated for our performance. I came back in 1988 to stay, the top pay in NC was about 9.00/hr for the same job, the only difference, besides the low pay, was poor quality of work.
    The companies in this part of the country get the same square footage price everyone else does, they just don’t pay their labor, hence the poor quality of the work. You want to motivate people, pay them and they will care more about the quality of the products they produce, it’s called incentive. In regards to manufacturing, with today’s automation labor comprises about 7% of the cost of manufacturing, so labor is not the problem. Of that 7%, less than 10% of that is union, so unions aren’t the problem. Where Mfg goes, so goes hightech/ design, engineering, and the small businesses that supported the 60,000 factories that closed during the Bush administration. Our economy is driven by the buying power of the middle class, to have that we need a well educated well paid work force. The greed of corporations and their GOP lap dogs are cutting the throats of the middle class, and their own by default. Your ignorance and the ideas of those you regurgitate on this blog is breathtaking.

  3. Frank Burns

    October 2, 2012 at 11:45 am

    David, I have experience in the construction industry as well, so please don’t give readers the impression that only unions do good quality work. From what I’ve seen from non union construction workers, they want as much work time as you can give them and they do good quality work. They want overtime work. They are paid based on their experience and skill levels. So I’m not sure what your point was other than to insult me since what you stated does not disagree with what I wrote. Supply and demand determine wages.

  4. david esmay

    October 2, 2012 at 3:58 pm

    Non-union workers, because I’m one of them, have to work as much OT, weekends, holidays as they can because their wages are low, it’s not because they like to work 60-80 hours a week, and from what I’ve seen a construction superintendent, no they do not do quality work unless you stand on top of them. My statement is based on thirty years of experience in trades and management, your’s is based on tired GOP cheap labor conservative drivel aimed at tearing down the middle class. I’ve worked 60 hr weeks, 80 hr. weeks, 100 hr weeks. I’ve worked 42 hr straight and 84 in four days, not because I wanted to, but because I had to support a family on low wages. NC and the South in general has always lagged behind the rest of the country as far a wages go.

  5. jaykimball

    October 2, 2012 at 9:40 pm

    The US Gini Index – a measure of inequality – is at an all time high, in the ranks of Rwanda and Uganda.

    Last week I heard veteran investigative reporter and Pulitzer Prize winner Hedrick Smith, speaking on “Who Stole the American Dream?” He talked about the destruction of the middle-class – how it happened, and what to do about it. It explores the rise of corporate lobbying, and social engineering that moved wealth from the middle-class to the corporate elite. I posted a video of that talk, here: http://8020vision.com/2012/09/24/hedrick-smith-who-stole-the-american-dream/

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