NC Budget and Tax Center

Three Key Points in Assessing the Carolina Comeback

Our annual State of Working North Carolina report will be out next week and detail the ways in which the national recovery has yet to reach all North Carolinians and every North Carolina community. In the meantime, a debate playing out on the pages of the News & Observer deserves attention today

As Labor Day approaches, it is clear that a more careful consideration of the state’s economic well-being is needed instead of declarations of a “Carolina Comeback.”

Let’s be clear: There is nothing partisan about reviewing the data and considering whether the state is experiencing a strong recovery.  North Carolinians deserve an accurate accounting of how the economy is doing and where policy choices have fallen short of supporting better outcomes.

There is no debating that the state has seen employment growth, that wages appear finally to be growing, and that productivity (aka GDP) is on the rise. The latter is a fundamental requirement of an economic expansion (at least nationally) and the growth in jobs and wages should follow suit now that we are seven years past the start of the national recovery.

The issue is not whether these things are happening, but whether they have met our expectations for what an expansion should look like. When looking at the numbers relative to our neighbors, our nation and even our past performance, the current national economic recovery is failing to live up to expectations and our state’s great potential.

Here are some key data points that should be front and center when claims of the state’s robust recovery are cited.

  1. Employment growth is not keeping up with our state’s population growth, nor is it the envy of our neighbors.
    • North Carolina’s employment levels remain below pre-recession levels. 3 percent of the state’s population was employed in July 2016, below the 61.9 percent achieved before the recession.
    • North Carolina’s employment growth since 2009, when the recovery began, was 11.8 percent—on par with the rest of the South (12 percent) and slightly above the national average of 10.6 percent employment growth.
    • Starting at the arbitrary date of Governor McCrory’s inauguration month, January 2013, employment growth in North Carolina compared to the nation and our neighbors isn’t all that much different—even though the acceleration of the slow recovery notably began nationally in 2013 and 2014. North Carolina’s employment growth over that period was 7.8 percent.  That may be above the national average of 6.8 percent, but it’s behind our neighbors in Florida (11.7 percent) and Georgia (9.7 percent), as well as competitors like California (10.2 percent).
    • The state’s employment growth, again, has not been sufficient to meet the growth in the state’s population. There persists a jobs deficit in North Carolina of 397,000 jobs.
    • It has also been far below employment growth rates experienced in prior recession-recovery periods: 1 percent since this recession began, compared to 31.2 percent after the 1981 recession for the same amount of time and 22.2 percent growth after the 1990 recession for the same amount of time.
  1. Wages have not grown at a pace that signals a strong labor market or at a sufficient level to reach all workers in the state.
    • Nominal wage growth in North Carolina since the start of the recovery has been at an annualized rate of 2.4 percent. Economists generally agree that nominal wage growth needs to reach at least 3.5 percent to achieve widespread benefits to workers.
    • The average weekly paycheck in North Carolina is still roughly $80 below the national average.
    • The median worker in North Carolina in 2015, the last year for which data is available, was earning 3.8 percent less each hour worked than they were in 2009. That means with each work week, workers are bringing in less earnings than they were when the costs for housing and child care, for example, were much lower.
  1. Productivity is growing but has not delivered increased earnings or lower poverty.

There is much to be defensive about when the veil is lifted on the rhetoric of a “Carolina Comeback.”  The better response to finding that the data belies the strong recovery for all that we expect is to redouble our efforts and enact public policies that will actually deliver and ensure that more North Carolinians and communities across the state can benefit from the current economic expansion.

It will require rejecting the tightly held commitment to costly tax cuts and reductions to unemployment insurance for those who have lost their jobs through no fault of their own.  These policies are not delivering for the people and places in our state.

The great potential of the national recovery for North Carolina is squandered whenpolicy choicesexclude too many communities and people in North Carolina from the chance to work, earn and build the assets that will strengthen their families and communities.

NC Budget and Tax Center, TANF 20 Years Later

Redesigning TANF to lift more families out of poverty

The 1996 welfare law that created Temporary Assistance for Needy Families (TANF) has many shortcomings, as we’ve detailed in a blog series over the past week. Primarily, TANF fails to adequately support families with children who are poor through cash assistance and meaningful work activities—despite the law’s two core missions of providing a basic safety net and promoting work. The result has been grim, including a shocking spike in the number of destitute families living in crisis despite doing their best to get by.

Some folks ignore poor families’ lived experience over the past two decades and have declared that TANF has been a success overall. They often point to the impressive employment gains—often in low-wage jobs—among single mothers in the immediate years following the law’s implementation. Yet, they ignore the booming economy and the pro-work incentives built into an EITC expansion. Those benefits eroded in the aftermath of the 2007 economic downturn, which resulted in fewer jobs, deeper levels of poverty, and a sharp drop in TANF cash assistance. Economic context is key, and the uneven and weak economy has exposed the fault lines in the TANF design.

Overall, there is broad bi-partisan consensus that Congress needs to redesign the 1996 welfare law to strengthen TANF and support pathways to work that allow families to afford the basics. Big picture reforms should include ensuring that North Carolina and other states (1) serve a minimum level of families and children living in poverty and (2) set minimum levels for cash benefits. These floors would help prevent the drops in TANF’s reach that we experienced over the past 20 years, and, if set at a decent level, would restore some of the purchasing power that has since been lost. Congress should also require states to use more of their TANF dollars on core activities — work, work supports, and basic cash assistance. This reform would ensure that states use TANF to serve truly needy families, rather than supplant state funding and pay for tax cuts. Read more

NC Budget and Tax Center, TANF 20 Years Later

Welfare reform doesn’t reflect our best ideas about addressing poverty

This blog is the 4th post in a series that will detail how lawmakers have weakened Temporary Assistance for Needy Families (TANF) over the past 20 years, explain why TANF is a cautionary tale rather than a model for other work and income support programs, and map out a better way forward.

As North Carolina and the country continue to contend with elevated poverty levels despite seven years of an economic recovery, many have suggested that the principles of the 1996 reform of welfare (then AFDC, now Temporary Assistance for Needy Families or TANF) should serve as a model for addressing poverty in our state and nation.

The changes, made 20 years ago this week, to the way in which we ensure that people living in poverty can meet their most basic needs and have a pathway out of poverty were based on three core ideas:  that work was the pathway out of poverty, that states would know best how to meet the needs of their communities, and that services—from training to marriage counseling—could effectively replace cash assistance. While these ideas may not have been inherently wrong, they resulted in concrete policy directions:  time limits, work requirements, block granting and funding for services to agencies over direct payments to poor people.

A review of the evidence suggests that the guiding ideas behind welfare reform fail to deliver better economic outcomes across the board and have in fact increased the number of people living in deep poverty,  fallen short in times of economic distress and generated a whole host of unintended and negative consequences because poor households continue to lack income to meet basic needs.

It is these same ideas that have been suggested for every program that seeks to deliver support to low-income households, from food assistance to Medicaid.

Here are the problems with these specific ideas about poverty and the policy choices that stem from them: Read more

Commentary, TANF 20 Years Later

Punishing immigrants for being immigrants: Another component of U.S. welfare “reform” hits age 20

TANF-4002This is the third blog post in a series that will detail how lawmakers have weakened Temporary Assistance for Needy Families (TANF) over the past 20 years, explain why TANF is a cautionary tale rather than a model for other work and income support programs, and map out a better way forward.

Emma Lazarus’s 1883 poem, engraved on the Statue of Liberty welcoming the “poor, [the] huddled masses…the homeless” to America has never been reflective of a truly open stance toward the poor immigrants arriving at our shores. In fact, a year before Lazarus wrote her poem, Congress passed the Immigration Act of 1882, banning immigrants who were likely to become “public charges” or drains on the system. We have historically welcomed the poor if they are here to work, but not if they need temporary government assistance to raise their families and become economically secure in a new country.

Undocumented immigrants and those coming over on most temporary visas have always been excluded from our safety net assistance programs such as cash welfare, SNAP (formerly known as food stamps), and public housing. But the 1996 welfare reform law brought a new level of restrictions that excluded millions of legal permanent residents from accessing welfare and other benefits. The 1996 law instituted a new “five year bar,” which states that even if a person has entered the country lawfully as a legal permanent resident, he or she is barred from receiving federal public benefits (including cash assistance, SNAP, and Medicaid) for the first five years of lawful status.

The 1996 law also bars millions of other lawfully present immigrants from receiving the vast majority of public benefits, because they do not fall into the very narrow definition of a “qualified” immigrant.  To give one example, immigrants from certain countries are granted Temporary Protected Status (“TPS”) if their country suffers a major war, natural disaster, or other event that makes it impossible to return.  Some immigrants may live and work under this status lawfully for decades in the U.S., but they will never be eligible for federally-funded cash welfare, food assistance or Medicaid if they fall on hard times.

Many immigrants who need work and income supports are working immigrants—their language barriers and education levels often force them into jobs that don’t pay a living wage: domestic work, restaurant work, food processing, and seasonal work in agriculture or construction. Additionally, even immigrants who come here intending to work face unexpected life emergencies, like all of us. They may be laid off or be unable to find work, they may suffer health problems or become disabled, have children and need to stay home, or otherwise be unable to fully support themselves without temporary help that will allow them to make ends meet and regain their footing on the economic ladder. Immigrants in those circumstances who are not eligible for medical benefits may delay care until illnesses have progressed to a critical stage that is costlier to treat. Read more

NC Budget and Tax Center, TANF 20 Years Later

Twenty years later, TANF does little to relieve poverty and hardship

This blog is the second post in a series that will detail how lawmakers have weakened Temporary Assistance for Needy Families (TANF) over the past 20 years, explain why TANF is a cautionary tale rather than a model for other work and income support programs, and map out a better way forward.

TANF does little today to help families make ends meet or to connect them to work to reduce their need for supports—thus violating the purported intention of the 1996 welfare law to move people off welfare to work. Known as WorkFirst in North Carolina, TANF is a cautionary tale, not a model, for lifting families out of poverty.  Below are the top three reasons why.

1. WorkFirst provides a safety net for fewer families who are poor, despite increased need. Just 8 out of 100 North Carolina families with kids living below the federal poverty line benefit from the program today, as opposed to 74 out of 100 when the law was first enacted (known as the TANF-to-poverty ratio; see the chart below). There are only seven states with a lower ratio. In other words, cash assistance through TANF is simply inaccessible in North Carolina.

In fact, WorkFirst failed to cushion families against deep spikes in unemployment during the Great Recession and its aftermath. The TANF-to-poverty ratio either stayed flat or fell every year since the 2007 downturn. Since 2006-07, nearly 50,000 more families with children live in poverty, but caseloads dropped by more than 36 percent. One would expect, at minimum, for the cash assistance program to respond modestly to meet the surge in poverty, but WorkFirst failed completely to react and left a lot of needy families without the basics. Read more