NC Budget and Tax Center

Leaders in Raleigh need to face facts – North Carolina’s economy is far from healthy

LABOR-JOBS market graphic2cWe all know that individual numbers can mislead. Low-carb doesn’t mean food is healthy, good gas mileage doesn’t mean a car is high-quality, and we’ve all said “sure but it’s a dry heat” at some point or another.

Somehow this simple wisdom is regularly ignored in Raleigh, with a lot of leaders cherry-picking individual data points to justify claims that our economy is doing great (it isn’t). New data released over the last week show that leaning too heavily on individual statistics is sloppy thinking, bad economics, and can lead to blatantly misleading proclamations.

missing-workersFirst, August showed once again that the headline unemployment rate doesn’t tell the whole story. The unemployment rate has declined slightly over the last few months, but the number of jobs in the state has actually been basically flat, or even down. This might seem contradictory, but is really just a quirk of how the unemployment rate is calculated. As any economist will acknowledge, the headline unemployment rate does not really count all of the people who can’t find a job.

As shown here, when you include the thousands of North Carolinians who have dropped out of the labor force (missing workers), unemployment in North Carolina is probably more than double the official rate. This is no surprise to most people who follow economic data closely, and certainly isn’t news to the hundreds of thousands of North Carolinians who can’t find decent work, but it stands in stark contrast to the happy tune some folks in Raleigh have been whistling lately.

We see more of the same when it comes to income. Early last week, a number of leaders in Raleigh claimed that median income grew faster in North Carolina than any other state over the last few years. Sounds great, but its also not true. Those assertions were based on using the wrong survey, and when the more reliable data came out it showed that North Carolina has posted one of the worst rates of income growth in the nation since 2013.

Mistakes happen, and sometimes even the best data does not reveal the full truth, but relying on an individual statistic can often cross from error into recklessness. Until leaders honestly face the fact that our economy is far from healthy, we won’t get down to the real work of fixing it.

The next time someone tells you our economy is red hot, ask if that’s a dry heat.

Back to School Series, NC Budget and Tax Center

Back to School: Meaningful educational interventions for low-performing schools

This is the fifth installment of a Back to School blog series (see Part 1, Part 2, Part 3, and Part 4) that highlight various issues to be aware of as the 2016-17 school year kicks off.

As North Carolina’s school children and their families settle back into the rhythms of the school year, thousands of these students will attend schools that have been labeled by the state as low performing. These are schools that received a school performance grade of D or F and failed to exceed expected growth based solely on test scores.

The controversial school grading system, which began during the 2013-14 school year, has been rightfully criticized as unnecessarily labeling schools as failures by using a ham-fisted measure that correlates with poverty rather than the educational quality of a given school. But the grading system has had the unexpected benefit of identifying high poverty schools that require additional interventions to help low-income students overcome the educational obstacles commonly found in impoverished communities.

Unfortunately, the vast majority of North Carolina’s low-performing schools do not receive meaningful additional support from the state. The existing program that aims to improve low-performing schools is known as Turning Around North Carolina’s Lowest-Achieving Schools (TALAS). TALAS, enabled initially by federal Race-to-the-Top funding, invests in professional development, school improvement planning, and instructional coaching and mentoring for school leaders. While these services are important, this limited intervention focuses primarily on training school leaders and fails to boost additional support services for students.

Studies on the program have been mixed thus far, and the gains that have been realized are jeopardized by the high level of turnover among the teachers and administrators who have benefited from the enhanced professional development and leadership coaching. Even this modest intervention is only provided in 79 of the 581 schools that were labeled low-performing during the 2015-16 school year. No major legislation has been discussed in recent years to help these schools other than the recent creation of a controversial “Achievement School District” (ASD) that will serve just five schools with a charter school takeover model that has not shown promising results in other states. The ASD debate demonstrated a  belief held by many lawmakers that we simply do not know what educational interventions will help children so we have to try something new even if it is unproven or shows poor initial results.

Thankfully that is not the case. There is a growing body of educational research based on an improved understanding of the way children’s brains develop and a vast body of empirical research on educational programs from across the entire country that point to specific educational interventions that can help make a real difference in a child’s educational development.

At some point, policymakers must recommit to improving the public school system that educates the overwhelming majority of North Carolina’s children through additional state funding and support services. In North Carolina, possible research-based interventions that would immediately help students in low performing schools include 1) increasing access to North Carolina Pre-Kindergarten and other early childhood services, 2) recruiting and retaining high quality teachers, and 3) investing in up-to-date textbooks, instructional materials, school technology, and broadband access.

Less than one in five low performing schools are receiving targeted state interventions designed to help them improve outcomes for students. That has to change now if North Carolina is to prepare its students for postsecondary education and careers that will enable them to support their families and enhance the state’s overall economic well-being

NC Budget and Tax Center

New research points to critical role of unemployment insurance in lessening hardship from job loss

JP Morgan Chase has a study out that shows the powerful role of unemployment insurance based on a review of a unique dataset:  their customers’ financial behavior.  The findings are particularly telling for North Carolina where policymakers have moved in the opposite direction of modernizing the system, dismantling many of the best practices the state had in place when they overhauled unemployment insurance in 2013 (and many that the JP Morgan Chase study highlight as important).

As we have written about in many other spaces, the result of such changes in North Carolina has been an unemployment insurance system that is providing too little support for too few weeks to too few of the state’s jobless workers.

The JP Morgan Chase study is important to providing further evidence that job loss without unemployment insurance takes a greater toll on consumer spending—the key to America’s economic engine.  Here are key findings:

  • Unemployment insurance softens the drop in family income from job loss to just a 16 percent drop compared to a 46 percent drop in monthly income without unemployment insurance.
  • The higher wage replacement that a state provides through unemployment insurance the lower the drop in spending. Unemployment insurance payments reduce the spending drop associated with job loss by 74 percent.

Read more

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.