NC Budget and Tax Center

New Report Finds Impact of Immigration is Positive

The National Academy of Sciences (NAS) has just released a new report measuring the impact that immigrants have on federal and state budgets. The report follows up on a 1995 NAS study on the same topic. Since the release of the previous report, the United States immigrant population has more than doubled, from 24.5 million immigrants to 42.3 million in 2014.[1]

The issue of how immigration affects state and local costs as well as the economy overall is a pressing one where rhetoric on this topic has often trumped facts.  The authors find that in addition to the positive net benefits of immigration at the federal level, second generation immigrants produce a long-term net benefit for state and local economies, so long as states educate immigrant children.

Here are some other key findings from the report:[2]

  • Between 2020 and 2030, the only increase in our labor force population will come from immigrants and their children. Therefore, in order to sustain our labor force, a level of immigration is needed going forward.
  • Immigrant workers grow the size of the economy by approximately 11 percent each year. That would amount to approximately $2 trillion in 2016.
  • Immigrants today have more education than previous generations, making them stronger contributors to government finances than immigrants in the past.[3]
  • Second generation immigrants have an overall higher positive impact on the nation’s economy than other immigrant groups.
  • Overall, there was little impact on the economy in terms of wages and employment. The only negative impact was on native-born residents who do not hold a high school degree.

The report also adds to a growing body of research about the economic effects of immigration in North Carolina. In June, for example, the Budget and Tax Center released a report that underlined the benefits of immigration to the state’s economy. The report pointed out the contributions of immigrants as business owners, consumers and workers – pointing out that the long-run effect of immigration was the growth of most native-born workers’ wages.[4] Similar to BTC’s findings, a 2014 report from UNC’s Kenan-Flagler School of Business found that immigration produced a net fiscal surplus for the North Carolina when immigrants’ estimated public cost was subtracted from their estimated tax contributions.[5] The government’s challenge going forward is to introduce immigration policies that better support immigrants as participants in our economy and labor force, and as students in our education systems.

[1] The National Academies of Sciences, Engineering, and Medicine. (2016). The Economic and

Fiscal Consequences of Immigration. Washington, DC: The National Academies Press. doi: 10.17226/23550.

[2] The National Academies of Sciences, Engineering, and Medicine. (2016). The Economic and

Fiscal Consequences of Immigration. Washington, DC: The National Academies Press. doi: 10.17226/23550.

[3] The National Academies of Sciences, Engineering, and Medicine. (2016). The Economic and

Fiscal Consequences of Immigration. Washington, DC: The National Academies Press. doi: 10.17226/23550.

[4] McHugh, Patrick. Smart Choices in an Era of Migration. Rep. Raleigh: Budget and Tax Center, 2015. Web.

[5] Johnson, James H., Jr., and Stephen J. Appold. Demographic and Economic Impacts of International Migration to North Carolina. Rep. Chapel Hill: Kenan-Flagler Business School, 2014. Web.

NC Budget and Tax Center

Tax Foundation’s newest ranking leaves much to be told

We are once again hearing about North Carolina’s business climate moving toward top-ten status among states according to a new ranking by the Tax Foundation, a tax policy research organization that favors tax cuts. North Carolinians should be leery of jumping on the celebration band wagon, however.

As I’ve highlighted before (see here and here), this ranking provides no insight whatsoever regarding the actual fiscal and economic health of the Tar Heel State. Instead, the ranking simply continues to applaud more tax cuts that have largely benefited the highest income earners in the state and profitable corporations. The ranking tells us nothing about the negative impact of the more than $2 billion in annual revenue loss once all tax changes are in place. These tax cuts represent lost resources that could be used to boost investments in public schools, provide health services for the elderly and poor, and ensure that all communities across the state can thrive.

A smart business leader understands that simply being told how much revenue a business generates tells her nothing about whether the enterprise is profitable. Furthermore, a prudent business leader understands the importance of making adequate investments to ensure the long-term success of the business.

North Carolina’s move up the Tax Foundation ranking just means lawmakers have prioritized tax cuts over important public investments in things like public schools so they can offer every child a high quality education. This flawed priority may zip the state up the Tax Foundation ranking, but this supposed short-term gain poses a huge potential long-term cost.

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.

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