NC Budget and Tax Center

Major decision tomorrow on jobs and wages

On December 16th,  the Federal Open Market Committee of the Federal Reserve Bank will meet to consider whether to raise interest rates.  This decision to raise interest rates has real implications for the well-being of North Carolina’s working families.  Yet often the policy decisions of the Fed are not accessible to working families or the organizations that work with them.

As Robert Reich shares in this explainer, the Fed’s monetary policy has very real implications for jobs and wages.  And in fact, many data points right now point to ongoing challenges in the labor market that make a move to raise interest rates counterproductive to efforts to improve working families well-being.

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In a recent piece by the Economic Policy Institute, analysis of the oft-ignored role of the Federal Reserve Bank and monetary policy to the well-being of working families makes clearer just how important this upcoming decision is and the mandate of full employment overall for the health of our economy.

It is one that should be front and center as North Carolina contends with employment levels still below pre-recession levels and falling wages.

 

NC Budget and Tax Center

Best BTC Reads of 2015

If you are like me, one of the great activities of December is scouring the year-end lists for the great reads, music and tech developments of the past year.  So here is one more list to add to the pile that features Budget & Tax Center publications that are must reads from 2015.  Happy Reading!

  1. North Carolina’s Greatest Challenge: Widespread Struggles Remain a Grave Threat to Economic Growth and Us All provides a comprehensive analysis of poverty and income data for North Carolina and demonstrates how we ignore the economic challenges of some in our state at our own peril.
  2. Smart Choices in an Era of Migration examines how the growing immigrant population in North Carolina has contributed to the economic vitality of the state and highlights common-sense steps that can help immigrants to become fully integrated into the North Carolina community.
  3. Diminished Expectations and the Resulting Drag on NC’s Economy: A Summary of the 2015-17 Budget analyzes the final budget to demonstrate how sharply constrained the state’s ability to make public investments in widespread prosperity and a growing economy due to tax cuts.  For where we hoped that the budget would take us, here is our pre-session outline of what our state needs to move forward for bonus reading.
  4. Growth without Prosperity: Seven Years After the Great Recession Started, Recovery Still Eludes North Carolina assesses various metrics on economic well-being to tell the story that the recovery is still uneven and failing to deliver economic security to all in the state. For more recent updates to the data, visit our Prosperity Watch platform for weekly nuggets on data trends.
  5. This year’s State of Working North Carolina report, The Future of Work and Ensuring Job Quality in North Carolina, refocuses the discussion of how automation is changing the nature of work to analyze and propose ways to ensure that job creation efforts deliver economic well-being and reflect the characteristics of economy-boosting jobs.

Sign up here to get BTC reports and analyses in your inbox in 2016.

NC Budget and Tax Center

Benefits of investing in early childhood education

A new report published by the Washington Center for Equitable Growth provides more evidence to the robust body of research that demonstrates the economic power of early childhood investments.  The report finds that public investment in voluntary, high quality universal prekindergarten education that is available to all 3 and 4 year old children in the United States would support broadly shared goals of generating faster and more widely shared economic growth.  It does so by improving children’s developmental achievements in the early years and educational and employment attainment in the out years.

The quality of the programming matters to achieving the greatest economic returns however.  The authors point to the standards that must be considered, not just in terms of the child’s experience, but inclusive of having the physical space to deliver a conducive learning environment to supporting the professional development and adequate compensation of the early childhood workforce.  Specifically, features of high-quality programming identified in the report are:  low child-to-teacher ratios, small class sizes, highly paid, well-qualified teachers and staff and instruction that is supportive and stimulating alongside services that meet not just the cognitive but the emotional, nutrition and health needs of children as well.

For North Carolina the results would be an estimated $8.7 billion in economic benefits and a return on investment of more than $7 for every $1 invested in the effort.  But as the report points out, it is critical to move beyond just budgetary impacts–and quantifiable returns–of early childhood investment to consider the value of delivering a high quality of life for every child and securing a competitive position for the state in the future.  It is these benefits, often difficult to monetize, that can have a catalytic impact on a state’s economic trajectory.

This new research, with specifics for how states can lead in implementing universal voluntary pre-K programs, should prompt deeper discussion in North Carolina.  In the current budget, the state continues to underinvest in prekindergarten in North Carolina providing fewer slots for 4 year old children than were served before the Great Recession started.  Growing the economy equitably demands an accessible pre-K program in North Carolina.  State leaders would be smart to invest today  to reap the greatest benefits in the future.

NC Budget and Tax Center

Grateful for the anti-poverty power of the federal EITC

New research out the Carsey School of Public Policy at the University of New Hampshire shows the powerful anti-poverty effect of the federal Earned Income Tax Credit in states.  North Carolina, it turns out, has seen one of the greatest shares of its population benefit from this policy in the country.

A full 3 percent of the overall population would have been poor in North Carolina were it not for the federal EITC. Such a growth in poverty would have further held back the economy from reaching its full potential as working families struggle to maintain spending and make investments in their careers and families that can boost the economy.

The boost to the economy from the economy occurs in the short- and long-term.  Children in families that receive the EITC also are more likely to do better in school and have increased lifetime earnings.

Here are some of the key findings from the report for North Carolina: Read more

NC Budget and Tax Center

North Carolina needs a better balance to our unemployment insurance system

The Governor has announced that another $600 million tax cut for businesses will be implemented after the state has reached an arbitrary balance of $1 billion in the Unemployment Insurance Trust Fund through drastic cuts that have harmed jobless workers by reducing the accessibility of the program, eliminating support for skills training and shrinking the critical wage replacement function of the program.

After jobless workers contributed more than two-thirds of the dollars to get North Carolina to this moment in lost wage replacement, now must be the time to re-balance the choices made in 2013 to reflect the principles of a sound unemployment insurance system.

That means recognizing that the economy needs jobless workers to maintain their consumer spending at a basic level in order to sustain demand for businesses goods and services.  Without temporary wage replacement, the ripple effect through the community of North Carolinians (who have lost their job through no fault of their own) not being able to shop for groceries, pay utility bills or mortgage payments or put gas in the car to get to job interviews holds back our communities from a strong recovery and growth.

As we have written about in the past, the Unemployment Insurance Trust Fund was ill-prepared for the Great Recession after policymakers cut taxes for employers in good times.  With the announcement today, North Carolina appears poised to make the same mistake: underfunding the program in good times leading to ineffective stabilization of the economy in bad times when jobless workers lose their jobs through no fault of their own.

In the meantime, jobless workers today still face a labor market with too few jobs for those who want to work, limited skills training opportunities and a system that is increasingly inaccessible.  North Carolina had just 13 percent of jobless workers receiving unemployment insurance in the second quarter of 2015 down from 39 percent in the second quarter of 2013 and ranking us 49th in the nation. Our economy needs a system that works for jobless workers and employers alike: the current approach continues to do neither.