This Labor Day has renewed focus on the reality that wages for working families have been stagnating across the country and declining here in North Carolina.
This focus is a welcome change for our state where the full-throated defense of tax cuts as the solution to working families’ economic challenges has hit a hard reality. Income tax cuts have increased the tax load for many working families in North Carolina and generated untold costs for communities in the form of foregone education investments, crumbling infrastructure and more.
Still policymakers in North Carolina remain relentless in their pursuit of more income tax cuts. The final budget contemplates another $110 million in tax cuts for individuals on top of the already costly tax cuts for profitable corporations that will cost $100 million this year and $350 million next.
In our State of Working North Carolina report this week, we documented the fall in wages for the median worker since the start of the official recovery in 2009. The result is that working people don’t have the same buying power that they did before the Recession and that means businesses don’t have the same level of consumer demand for the goods and services they produce. Under such conditions, it will be hard to sustain growth in the economy and ensure that more are included in the benefits of that growth. No tax cut, especially one paid for through increased costs elsewhere, will fix that.
Policymakers have an immediate and direct mechanism in the final budget for addressing the state’s wage problem. By aligning state workers’ pay with what it takes to make ends meet, policymakers can boost the economy and strengthen the private sector. After all, state workers in North Carolina shop in privately owned grocery stories, bank at private financial institutions, purchase lawn services from private landscaping companies, and on and on.
Some would say that policymakers are trying. They have proposed an across the board $750 bonus for all state workers and bumped up the starting pay for teachers to $35,000. But by stopping their pursuit of flawed tax cuts, policymakers could actually make sure wages for public sector workers boost the economy.
Here are a few fast facts about wages and the reality for the state workers who run our courts, clean state buildings, manage permitting and support to businesses, and educate our children:
- Analysis by the Office of State Human Resources finds that “salary increases in state government have …cumulatively trailed CPI (aka inflation) by 4 percent over the last ten years, effectively decreasing employee “buying power.”
- The average weekly wage for state employees of $901 lags the national average and ranks the state 39th for its low pay.
- Those serving as housekeepers, health care technicians and office assistants in state government earn well below the statewide Living Income Standard for one adult, one child. In 12 out of 16 jobs that serve as benchmarks for the Office of State Human Resources, the base salary is below market rate.
- Base pay for a number of public-sector workers, including the teachers who educate our children, falls below what it actually takes to make ends meet today. The proposed starting pay for teachers of $35,000 is still below the statewide Living Income Standard for one adult, one child in 6 North Carolina counties. The average pay for teachers in elementary and secondary schools has fallen by $5,000 since 2009 reducing their purchasing power even as the national economic recovery began.
The myopic interest in tax cuts on the part of policymakers has not only failed to boost the economy, it has also generated significant cost to the state. State agencies experienced a voluntary turnover rate of 7 percent in FY 2013-2014 which equates to roughly $201 million in cost to the state. Human capital is hard to replace and that is why competitive compensation and a positive work environment is critical. In the public university system, the state has lost a reported 3 out of 4 retention battles. Researchers who have left state universities took grants totaling $91 million and likely significant intellectual property of far greater value to the state.
It is time for policymakers to take seriously the wage challenges facing workers in North Carolina. Starting now with the budget to increase the buying power of state workers is the first step, the next one is to follow 29 other states and raise the minimum wage for all workers.