NC Budget and Tax Center

New analysis: NC is not creating enough middle class jobs

In case you missed it the latest installment in the N.C. Budget and Tax Center’s Prosperity Watch series, economist Patrick McHugh reported some new and frustrating (if not terribly surprising) data regarding North Carolina’s increasingly divided economy this week. Here’s the post:

Middle-income jobs are essential to the long term health of a state’s economy, and North Carolina has not generated nearly enough of these opportunities during the current growth period. The lack of middle-income jobs is a national problem, but it is particularly acute in North Carolina, a trend that threatens to drive an economically damaging wedge between highly paid professional employees and everyone else.

Three of the industries that have formed the traditional bedrock of middle-income employment in North Carolina have lagged behind the nation, and our region, since the economy officially exited the Great Recession in July of 2009. Construction jobs have grown by 16.4 percent over that period in North Carolina, well below the 22.6 percent expansion in the South Atlantic and 22.4 percent nationwide. Education and Health employment has grown by more than 20 percent nationally and in our region, but North Carolina has only posted a 13.9 percent jobs gain in these industries. Manufacturing has been slow to grow across the country with an increase of only 9 percent nationwide and 9.9 percent in the South Atlantic, but North Carolina’s 7.9 percent employment gain has been significantly below even those relatively meager job gains.

The lack of middle income job creation is leading to an increasingly divided employment market, with excellent opportunities for highly trained professionals but few options that actually pay a living wage for everyone else. Emblematic of this divide, the two industries that have seen the fastest growth in North Carolina are Professional and Business services, which saw employment grow by 41.3 percent since the start of the recovery, and Leisure and Hospitality, which expanded by 27.6 percent. Jobs in the first industry generally pay very well, offer substantial benefits, and create opportunities for career growth, while positions in the latter industry typically come with none of these desirable qualities.

If these trends continue, with most of the growth clustered at the very top and the very bottom of the employment ladder, it will become increasingly difficult for people to work their way up from entry-level positions into jobs that can support a family. That kind of divide is not only bad for the majority of people who would become trapped in low-paying jobs, it will harm overall growth as more people lack the opportunities to maximize the economic value of their skills and energy.

NC Budget and Tax Center

State lawmakers’ response to Hurricane Florence is an inadequate first step

In this morning’s special session, the NC House and Senate both passed the Hurricane Florence Emergency Response Act. The storm, which hit the North Carolina coast on Sept. 14, resulted in 39 deaths, power losses for 880,000 people, over 5,200 emergency rescues and evacuations, more than 1,600 road closures, and the displacement of thousands.

The bill, which is a first step, appropriates a total of $56.5 million in funding to help communities recover. In addition to funding recovery efforts, the bill extends the voter registration period in impacted counties to Oct. 15, and states that Historically Underutilized Businesses should be prioritized vendors for recovery funding.

Although we do not yet have a total dollar figure on the amount of damage caused by the storm, the $56.5 million figure is clearly less than what is actually needed based on what we do know. It also fails to create certainty for North Carolina communities that the state will be willing to invest in their rebuilding efforts. The uncertainty that lingers over the eastern part of the state makes it difficult for families and business to plan their own rebuilding efforts. That certainty, that funding will be and is available to embark on projects to rebuild, is a clear lesson from disaster efforts in North Carolina and across the country.

Hurricane Matthew, another 500-year storm which hit the eastern part of North Carolina just two years ago, caused $2.4 billion in damage and $2 billion in lost economic activity. The General Assembly’s initial disaster recovery funding bill in 2016 was for $200.9 million. And, in fits and starts, they returned to commit dollars to the effort which made for uneven planning and deployment of funds that contributed to delays in rebuilding.

Of the $56.5 million dedicated to Florence relief, $6.5 million will go directly to the Department of Public Instruction in order to compensate school lunch employees who are hourly and lost wages due to school closures. This is an excellent use for disaster recovery funding. Getting money into the hands of workers, many of whom are low wage, will ensure that local economies have the ability to bounce back and that individuals are shielded from the double burden of losing property and wages.

The remaining $50 million in appropriation, however, is not designated. State lawmakers plan to use a significant portion of the remaining dollars as a state match for any federal disaster assistance they may receive. It is a requirement to secure the federal funds and it will just supplement federal commitments not address the gaps that federal commitments often present in rebuilding work.

So what does this mean for our neighbors?

It means that although lawmakers have built up a Rainy Day Fund of $2 billion, as well as leaving $500 million in revenues last year unappropriated, they will choose to spend a tiny amount of state dollars in helping hundreds of thousands of North Carolinians who have been displaced and whose lives have been turned upside down.

It seems that rather than leading, our leaders will sit and wait for the federal government to help while their constituents sit in shelters. If lawmakers should have learned anything from Hurricane Matthew, it’s that the federal government will not do their jobs for them. Just two years ago, after waiting for six months to hear from the Trump administration regarding a $930 million disaster relief request, North Carolina was told it would only receive $6.1 million.

We cannot wait. The families who are displaced, workers who are out of work, small businesses who are losing revenue, and farmers who have lost crops cannot wait.

Rather than waiting, we must commit the dollars that we have available now to build a robust plan for a resilient eastern North Carolina: a plan that recognizes the importance of a range of immediate service needs — from temporary housing to food access to legal services — and supports families, small businesses and farms to address their losses in housing, profits and product; a plan that focuses on making sure that everyone is served regardless of who they are, what language they speak or where they live and that services are accessible to people have been displaced and have limited resources; a plan that puts people at the center of planning and decision-making to strengthen the systems that monitor our water quality and environmental contaminants, encourage affordable housing development outside of floodplains, and build the institutional infrastructure to create thriving communities with good, quality jobs and sustainable businesses.

State lawmakers have the tools, the resources and know-how to lead a recovery that is not only adequate and equitable, but builds and invests in resilient communities that are stronger than ever before.

Brian Kennedy II is a Policy Analyst with the Budget & Tax Center, a project of the North Carolina Justice Center.

immigration, NC Budget and Tax Center, Trump Administration

Trump administration sets a historically low ceiling for refugee admissions

Last week, Secretary of State Mike Pompeo announced the maximum number of refugee admissions for the next fiscal year has been set at 30,000. Breaking even last year’s historic low, this ceiling cap sets a new low and further restricts humanitarian aid to a growing number of displaced people seeking safety from violence and persecution. This announcement is part of a series of efforts from the current Administration that seek to undermine the Refugee Resettlement Program and to create new roadblocks to many of the world’s most vulnerable who are attempting to flee serious persecution to start a new life in the United States.

Historically, the United States had demonstrated a strong commitment to refugee resettlement by successfully integrating refugees into communities across the country. This commitment resulted in strong contributions to the national economy and labor market. In 2015, refugees across the United States contributed $20.9 billion in state and federal taxes. This same year, refugees in North Carolina contributed almost $274 million in federal and state taxes while holding $831 million in spending power. These numbers demonstrate a glimpse of the positive impact immigrants have in local communities across the country.

Still, the current administration continues its devastating battle against immigrants. From incorporating a ban on refugee admissions and threatening programs such as DACA to gutting long-standing principles of asylum law and expanding family detention, this administration has weakened refugee and humanitarian policies, pulling the United States back from its historical commitment to strengthen human rights. In a time where 68.5 million people have been forcibly displaced by conflict and the number of refugees has reached 25.4 million, it is inexcusable to disregard the current humanitarian crisis and turn our back on vulnerable people living in danger.

Unfortunately, the real decline in refugee resettlement may be even more dramatic than the lower cap would indicate. The annual ceiling sets the maximum number of refugees allowed to legally enter the United States, but it does not require the country to accept a specific number of refugees. In the 2018 fiscal year, the United States had a historically low admittance cap set at 45,000, but it actually accepted less than 22,000 refugees. These figures demonstrate a strong likelihood of refugee admittance falling below the 30,000 cap during the coming 2019 fiscal year.

In a country whose moral and economic strength is rooted in welcoming people searching for a better life, these policy reversals should be seen for what they are: a violation of our history and a threat to our future.

Lissette Guerrero is an intern with the Budget & Tax Center and with Immigrant Refugee Rights, projects of the NC Justice Center.

NC Budget and Tax Center

Proposed Federal Tax Cut 2.0 will not help North Carolinians. Here are three things to know

What is happening?

Under the heading “Tax Reform 2.0,” the House Ways and Means Committee has introduced new proposed legislation that follows the federal tax plan that was passed into law by President Trump late last year. The proposed Tax Cut 2.0 would permanently preserve a number of provisions that went into effect in 2018 and are currently scheduled to “sunset” after 2025.

The House is expected to begin the voting process as early as next week (September 24).

Why is this concerning?

The Congressional Joint Committee on Taxation estimates the bill “Protecting Family and Small Business Tax Cuts Act of 2018,” would reduce federal revenue by $631 billion in the next decade (2019-2028) and an additional $3.15 trillion between 2029-2038. Furthermore, this proposed second round of GOP tax cuts would add $3.8 trillion to the federal deficit over the next two decades, according to a report released  by the Urban-Brookings Tax Policy Center.

In other words, the proposed federal tax cut 2.0 would mean a further cost shift to the states and paves the way for even more significant reductions in the federal programs and services that ensure the economy is functioning efficiently and effectively, and that more people are connected to opportunities.

What happened last time?

The last time Congress rushed a federal tax plan was last year when in 2 months it rushed a tax law at a cost of $1.9 trillion over the next ten years. As a result our country’s tax code has now been changed in a way that benefits wealthy taxpayers and foreign investors while asking more from low and middle-income taxpayers. In North Carolina the richest top 5 percent received half of the total tax cut benefits. Meanwhile, the poorest 20 percent only received 1 percent of the benefits.

Luis A. Toledo is a Public Policy Analyst for the Budget & Tax Center, a project of the North Carolina Justice Center.

NC Budget and Tax Center

The growth of income inequality in N.C. and how not to make it worse

North Carolina’s top 1 percent are doing quite well, according to research by the Economic Policy Institute that provides a unique view of income inequality by comparing the incomes of the top 1 percent to the bottom 99 percent in states and counties across the country.

Since the recovery began in 2009 until the last available data in 2015, the top 1 percent in North Carolina have captured more than all of the income growth.  How is such a thing possible?  When the income of the bottom 99 percent of North Carolinians declines over the same period.  Those two staggering facts should be enough to give us pause that something is truly wrong with how our economy works.

But there is more data from the Economic Policy Institute for a shorter time period (2010 to 2015) due to data availability at the county level that shows that income growth for the top 1 percent maps to geographic inequities in North Carolina.  In the state’s urban counties, the top 1 percent have incomes that are 23 times that of the bottom 99 percent, whereas in the state’s rural counties that ratio is 14 times.  Twelve counties saw the income of the bottom 99 percent of North Carolinians in those communities decline.  For these communities, the stabilizing force of people spending locally and building assets is weakened and, with it, the potential for the community to thrive.

It doesn’t have to be this way.  North Carolina’s recent history shows that income growth for the top 1 percent doesn’t have to be out of balance with what is happening nationally nor does it have to so significantly outpace that of their neighbors in the bottom 99 percent.

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