NC Budget and Tax Center

Raleigh, we have a problem

There are some who are championing the latest data from the US Census Bureau as further evidence of some unique experience in North Carolina driven by policy changes that dismantled and restricted many of our best income- and economy-boosting tools.

The John Locke Foundation erroneously claimed that North Carolina had the fastest growing median household income in the country this week from 2013 to 2015 using the survey not designed anymore to answer over time questions.  The data from the U.S. Census best suited to the question at hand actually shows that North Carolina’s median household income grew at the third slowest rate over the period cited by the Locke Foundation.  That rate 2.4 percent for NC was half the rate of the national average (4.9 percent).  Those data are more in keeping with the experience of the many North Carolinians who everyday still aren’t feeling the benefits of the national recovery.

And of course the claim that there would be some connection between economic outcomes and the policy choices made by the Governor or General Assembly—which has never been supported by any rigorous tests of a causal relationship—received an additional blow this week.  The same Census data release demonstrated many of the very tools—EITCs, unemployment insurance, food assistance—eliminated or reduced by elected leaders have effectively lifted millions out of poverty across the country.

Those touting the policy changes made by the Governor and the General Assembly as causing an economic improvement that hasn’t reached many often select years to make their case that tell us little about whether we have made progress from the lowest point in the recession or since the expansion began.

In doing so, they can show improvements that are important but not sufficient to undo the damage of years of recessionary conditions or capable of setting the state on the trajectory needed to capitalize on the national expansion.

But again, North Carolina is not leading on the critical measures of wages and income even under these time periods. Looking at the period since 2012, North Carolina’s median household income has grown by 2.6 percent, half the national growth rate—a pattern that continues if you move the year forward to 2013 as noted above.  In fact, North Carolina had the slowest meaningful growth in median household income over the period 2012 to 2015 and third slowest since 2013 when the national economic expansion appears to have taken hold.

So here are the data on median household income for North Carolina:

  • When compared to other states, North Carolina ranks 41st for its median household income level of $47,830 in 2015.
  • North Carolina’s median household income is roughly $3,200 lower than it was in 2007 when adjusting for the rising costs of goods and services.

The failure of the income of the median NC household to fully recover means that households can’t cover a very modest household budget for a family of four for an entire month in a year.  More than likely it means that throughout the year households are curtailing their spending, taking on more debt, working more hours and dipping into savings that are supposed to build assets and that hurts the broader economy and us all.

A renewed focus on what the Census Bureau data shows us works to lift Americans out of poverty and deliver strong income gains should be the top priority in North Carolina.

Back to School Series, NC Budget and Tax Center

Back to School: Food for the stomach, food for the mind

This is the fourth of a Back to School blog series (see Part 1, Part 2, Part 3 and Part 5) that highlight various issues to be aware of as the 2016-17 school year kicks off.

Ensuring that students arrive to class with enough food in their stomach is an important ingredient for student success. Adequate nutrition reduces the negative effects of hunger on a student’s academic performance and behavior in school and promotes other positive outcomes.

Access to adequate nutrition is a vital support service that contributes to a high quality education. This is accomplished largely through school meal programs – breakfast and lunch meals – which are available to students during the school day. The state’s uneven economic recovery has left many North Carolina’s workers and their families more vulnerable, and food insecurity is a reality for many students and families across the state.

Half of North Carolina’s public school students qualify for free or reduced school meals, which highlights that a significant number of students reside in low- and moderate-income households that face persistent economic challenges. Moreover, one out of every five children in North Carolina attends a high-poverty school – defined as a school in which 75 percent or more of students are eligible for the federal subsidized school lunch program. Among students of color, that number is one in three. With more than 1.5 million students in public schools, that means that many of our schools serve a large number of economically disadvantaged students.

Recognizing the connection between adequate nutrition and student success, many North Carolina schools have taken steps to boost access to school meals. Last school year, more than 750 schools across the state participated in a nation-wide Community Eligibility initiative, which provides school meals to all students free of charge. With nearly 60 percent of eligible schools participating in this initiative, this is promising progress to build upon and expand access to nutrition to more students.

Other opportunities exists that would help ensure that students arrive to class fed and ready to learn. State lawmakers can boost state funding for child nutrition programs, which would allow for more federal dollars to flow to the state for child nutrition. As are result, these additional state and federal dollars would free up local funds that are now used to cover costs related to school meal programs – these dollars could now be directed to the classroom. Furthermore, increasing participation in school breakfast programs offers a promising return on investment. Research shows that children who eat breakfast – closer to class and test-taking time – perform better on standardized tests than those who skip breakfast or eat breakfast at home.

As we embark upon a new school year, we should consider access to adequate nutrition a core component of a quality education. Greater support at the state level can help make sure that schools have the resources needed to provide a quality education for all students, which includes access to adequate nutrition.

NC Budget and Tax Center

Higher earnings and decreased poverty point to a slow but positive recovery

New data from the Census Bureau’s Current Population Survey sheds new light on the nations and North Carolina’s efforts at economic recovery. Here are a few takeaways from the nation-wide data:

  • Between 2014 and 2015, the national poverty rate decreased by 1.2 percent, bringing the official rate down to 13.5 percent, or 43.1 million people. This is not insignificant as it is the largest annual poverty rate decrease since 1999.
  • In 2015, median household incomes rose to $56,516, 5.2 percent higher than in 2014. This is the first year in which median household incomes have increased since 2007, a year before the recession began.
  • Not everyone has benefited from these positive national trends. Despite an overall increase in income, household earnings in rural communities across the nation remained unchanged. Additionally, income inequality, the gap between the wealthy and the poor, has remained the same.

Although state-level data released today is a preliminary estimate, it too paints a picture of slow, relative progress:

  • The CPS estimates that 15.3 percent of North Carolinians were in poverty in 2015. That is down from 17.1 percent in 2014.
  • While it appears that poverty is decreasing, it is still well above pre-recession levels. Additionally, North Carolina still lags behind its neighbor, South Carolina, which saw a 2.2 percent decrease in poverty from 2014 to 2015.

Robert Greenstein, president of the Center on Budget and Policy Priorities, praises the positive national measures and highlights important policy choices to ensure this growth continues:

“The welcome progress of 2015 reflects both reasonably “tight” labor markets and improved government policies.  As the economy neared full employment, average real earnings rose.  In addition, state and local minimum wage increases gave many low-income workers a further income boost.  And health reform reversed the once-stubborn trend of shrinking health insurance coverage, fueling coverage expansions.  Even so, standards of living still haven’t fully rebounded to where they were before the Great Recession caused income to fall and poverty to rise substantially….

To sustain across-the-board progress, the Federal Reserve should continue to promote tight labor markets, especially given continued low inflation.  In addition, federal policymakers should move forward as planned to implement a new rule making more salaried workers with moderate incomes eligible for overtime, and the President and Congress at long last should raise the federal minimum wage, which has lost considerable purchasing power.  Policymakers also should further expand refundable tax credits for the working poor and expand access to child care for low-income families with children.”

While there is much to celebrate, there is still plenty of work still to be done.

As Elise Gould, Senior Economist at the Economic Policy Institute, points out, “It is certainly a good start. But, we’ll need a run of years like this to restore the income losses suffered during the Great Recession for most American families, let alone make up for a generation of income growth that lagged far behind the economy’s potential.”

Commentary, NC Budget and Tax Center

Labor Day 2016: The hard truth about the supposed “Carolina Comeback”

The North Carolina Budget and Tax  Center released the “State of Working North Carolina 2016” today and, as in recent years, the story it tells about the North Carolina economy is not an especially pretty one. The following is from the release that accompanied the report:

SOWNC 2016Hard work is supposed to provide the income to allow people to get by and set their children up for future success. North Carolina policymakers have violated that promise, both with their policy choices that make it more difficult for North Carolinians to connect to good jobs and with their failure to enact the policies that make sure work translates into greater economic security.

The national economic recovery began in 2009, but it has yet to reach North Carolinians across the state. Too many workers have failed to find work or left the labor market for lack of jobs in their community.  Far too many who are working find their wages falling short of what it takes to make ends meet and otherwise contribute to their communities’ improvement.

The precarious state of working North Carolina in the so-called “Carolina Comeback” is a result of policymakers’ failure to embrace the current reality: We need a policy response to address a number of long-term trends, including:

  • The economic transformation away from manufacturing and towards a service economy;
  • The changing nature of work and relationships between workers and employers; and
  • Demographic shifts in the workforce.

State policy choices have instead prioritized trickle-down economics over common sense, which makes North Carolina workers’ struggle for economic well-being even greater in the current context.

Our 2016 analysis of the State of Working North Carolina demonstrates clear evidence that contradicts the trumpeting of a “Carolina Comeback” —and shows that low taxes, low regulation and lax labor standards largely do not lead to better economic outcomes nor address the challenges facing North Carolina.  The following pages detail critical ways in which overall economic growth, jobs, and the changing nature of industry opportunities are falling short of what our economy, our communities and our people need to thrive.

While North Carolina has benefited somewhat from the national economic expansion, the state has not done enough to make sure this period of economic expansion reaches every North Carolinian and every community.

Workers across the state and from diverse backgrounds are at a disadvantage relative to their peers across the country and in the South — even relative to the generations of North Carolina workers before them — because of bad policy choices. Policymakers have chosen to shrink investments in institutions that have built bridges to new careers and protected workers from poverty, and to reduce the standards and guidelines that make it possible for businesses to compete, new markets to expand and workers to thrive. These choices hurt all North Carolinians.

Click here to read the report.

NC Budget and Tax Center, Uncategorized

Bipartisan agreement to address persistent poverty

The persistence of poverty in certain regions and communities across the country and within North Carolina has long held back the broader economy from performing at full capacity and delivering the greatest benefit to the most people.  In North Carolina, there are still 10 counties where poverty rates have remained above 20 percent for more than three decades.

That is why the emerging bipartisan consensus on setting a reasonable target to direct federal funds to these communities is encouraging.  The plan states that at least 10 percent of a federal program’s funds should go to counties where at least 20 percent of the population has lived in poverty for at least 30 years.  In the upcoming months, there may be several opportunities for the plan to be incorporated into the guidelines for funding the federal government.  In the meantime, from this Politico article, it is clear that a broad swath of the country could stand to benefit and that those affected by persistent poverty are diverse.

Nearly 500 counties across the United States suffer from the kind of persistent poverty that would make them eligible for the plan’s targeted funding, [Representative] Clyburn says — and it would give more Republican lawmakers something to brag about to constituents than Democrats. In 2009, Clyburn likes to note, 84 Republicans represented those counties, compared with 43 Democrats. The GOP held 311 counties and Democrats represented 149. (In terms of total population, the parties were more evenly split, with Republicans representing 8.3 million people from those counties and Democrats representing 8.8 million; another 14 counties with 5.3 million people were split between Republicans and Democrats.)