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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 [1], 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 [2].  In North Carolina, too, productivity gains have not translated into wage growth [3].  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.