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NC Budget and Tax Center

While the first storm of winter was heading our way yesterday, prominent economist Jared Bernstein discussed a low pressure system of a different type, how the persistent failure to achieve full employment is pushing wages down and contributing to growing wealth inequality.

Drawing on his work on the importance of full employment, Dr. Bernstein discussed how underemployment is responsible for much of the wage stagnation we have seen in recent decades. Particularly as attacks on organized labor have reduced the power of workers to directly pressure employers for better pay, and with a lack of political will to increase the minimum wage, workers’ only tend to see better pay when employers have to actively compete with each other to attract employees. When the economy isn’t creating enough jobs, and a large pool of unemployed people are desperate to find work, employers are not compelled to increase wages, which is precisely what we have seen in recent years.

Unemployment with Missing WorkersThe problem of underemployment depressing wages is not unique to North Carolina, but it is particularly pressing here in the Tar Heel state. Included in our End of the Year Chartbook for 2015, the two charts included here indicate that the dynamic Dr. Bernstein identified is alarmingly active here in NC. First, if we include all of the “Missing Workers” who were forced out of the labor pool during the recession due to lack of jobs, the real unemployment rate in North Carolina is likely still in the double figures. With so many people still looking for work, employers in many industries are not raising wages, which means that workers are receiving less of the value they create.NC Workers Receiving Less of the Value they Create

Dr. Bernstein argued that we don’t have to accept this state of affairs. There are policy responses that could get us closer to full employment and deliver wage growth, but a lack of political will at both the state and federal levels is preventing those remedies from being administered. So long as state leaders pursue tax cuts instead of raising the minimum wage, expanding educational and workforce investments, and wage supports like the Earned Income Tax Credit, Dr. Bernstein worries that we will continue to see inflated unemployment and wage stagnation and miss the critical opportunity to make the economy work for more people.

NC Budget and Tax Center

With the sounds of Small Business Saturday in the air, it’s a good time to take stock of how main street businesses in North Carolina have fared over the last several years. The end of the Great Recession certainly improved the prospects for small businesses, but the recovery here in North Carolina has had a decidedly big-business bent. Most small businesses have not seen the level of growth that their larger competitors have enjoyed during the recovery, a clear sign that we have not done enough to help Main Street to prosper.

Small Business Saturday Blog Post - NC Growth by Firm Size 2009-2015

As can be seen to the left, the fastest growth in employment during the recovery has occurred in larger businesses. The biggest businesses (more than 1000 employees) have expanded their collective workforce by more than 15% since 2009, the next largest set of establishments (between 500 and 1000 workers) by almost 12%. In contrast the smallest businesses in North Carolina have struggled to take advantage of the current period of prolonged economic growth.

The growth gap between larger and smaller businesses that we’ve seen in North Carolina has not happened to the same degree in many other states. Large firms have added jobs faster than smaller companies over the last six years nationwide, but the difference in North Carolina is much more pronounced. Growth for the largest US companies was twice that of the smallest, while here in North Carolina the largest companies lapped the smallest group five times.Small Business Saturday Blog Post - NC and US Growth by Firm Size 2009-2015

This imbalance is an economic problem because small businesses are the veins circulating capital through local economies. Owners with roots in a community often source more locally, spend more of their earnings nearby, pay better, and invest in their communities. All of that helps to keep money flowing around and creating jobs. None of this is to denigrate how many large companies can help communities, but when local businesses don’t prosper, growth doesn’t always translate into deeper economic health.

Recent economic results call for a different approach to supporting small businesses. Instead of continuing to focus on cutting the corporate income tax, which mostly helps big companies, we should be plowing more resources into programs that help small businesses get loans, find new customers, and retrain their workers. The General Assembly did take a few steps in the right direction this last session, like appropriating funds to The Support Center which makes loans to small companies. But, particularly compared to the tax breaks lavished on large companies over the last few years, the assistance provided to small businesses has not been up to scratch.

So when you hit the shopping trail this season, head to your local small businesses first, particularly if they pay their workers well, offer benefits, and are invested in your community. Big box stores have their place, and some are good corporate citizens, but it’s the small businesses in North Carolina that could use a boost.

Commentary

PV-contingent-work1Our new report, “The Age of Contingent Employment: How changes in employment relationships are impacting worker wages, power and prospects”, highlights the explosive growth of the use of temporary staffing agencies to supply workers and how that harms our economy. Meanwhile, a heart-wrenching piece on the Huffington Post today shows just how devastating temp work can be for workers (and their families) who have no other options but to accept temp jobs.

The article tells the story of Jeff Lockhart Jr, a Virginia man who got a job at the new Amazon fulfillment warehouse outside of Richmond after a long period of unemployment and died on the job a couple months later.  Although he worked at the Amazon facility, he and most of his colleagues were temp workers hired, supervised, and paid by a temporary staffing company.  The article also explains why the use of temps by large companies is on the rise.

When it comes to low-wage positions, companies like Amazon are now able to precisely calibrate the size of its workforce to meet consumer demand, week by week or even day by day. Amazon, for instance, says it has 90,000 full-time U.S. employees at its fulfillment and sorting centers—but it plans to bring on an estimated 100,000 seasonal workers to help handle this year’s peak. Many of these seasonal hires come through Integrity Staffing Solutions, a Delaware-based temp firm. The company’s website recently listed 22 corporate offices throughout the country, 15 of which were recruiting offices for Amazon fulfillment centers, including the one in Chester.

This system isn’t unique to Amazon—it pervades the U.S. retail supply chain. Read More

Commentary

New from our colleagues at the Budget and Tax Center:

Much of North Carolina has still not recovered from the Great Recession, according to the latest employment data for May.

Roughly two-thirds of North Carolina’s counties have fewer people working today than before the recession, and almost a quarter of the counties in North Carolina saw employment decline since May of 2014, a distressing sign given that it comes amidst generally strong national growth.

“The picture in many small towns and rural communities is not good,” said Patrick McHugh, Economic Analyst for the Budget & Tax Center, a project of the NC Justice Center. “Even in some cities that are largely seen as doing better, wages have not kept up with inflation over the last seven years.”

Notable data from the labor market release include:

  • 88 of North Carolina’s 100 counties have more people looking for work today than before the Great Recession.
  • 64 of North Carolina’s 100 counties have not gotten back to pre-recession levels of employment.
  • 14 of North Carolina’s 15 metropolitan areas still have more people looking for work than before the recession.
  • Adjusting for inflation, only metropolitan areas (Charlotte, Durham-Chapel Hill, Greenville, New Bern, and Wilmington) have seen better than 4 percent growth in wages over the last year.
  • Wages have not kept up with inflation in eight of North Carolina’s 15 metropolitan areas.

“The current period of economic growth is not creating enough jobs in many communities and most workers are not seeing their paychecks grow,” McHugh said. “We’re doing better than a few years ago, but this economy still isn’t working for a lot of working North Carolina.”

The Budget and Tax Center provides summaries of each county’s current labor market data, and how each county has fared since the start of the recession.

NC Budget and Tax Center

The March employment numbers out today show another month of positive, but relatively lackluster economic performance in North Carolina. The unemployment rate in North Carolina has now been essentially flat for the last five months and the number of unemployed North Carolinians has actually increased in the first three months of 2015.

According to analysis of the latest labor market data by the Budget & Tax Center, employment levels have edged up in the last year, but are still well below the pre-recession norm. In fact, a smaller share of North Carolinians have a job today than during the worst of the recession that followed the 9/11 attacks.

“The North Carolina economy has been idling along for several months and continues to be weaker than it was in 2007,” said Patrick McHugh of the North Carolina Budget and Tax Center. “The worry now is that we’ll see a new normal, with lower levels of employment and paychecks that don’t go as far.”

Other highlights of the March data include:

  • Unemployment rate not making gains: After falling dramatically from 2009 through the third quarter of 2014, the state and national unemployment rates have flattened out in recent months. Even while the state continues to add jobs, growth is not enough to push unemployment below the 5% threshold that most economists see as the top-end of a healthy labor market. Part of the flattening out may be attributable to people coming back into the labor force, which would be good news. However, it is still troubling to see the labor market falling well short of full employment.
  • Still more North Carolinians out of work than before the Great Recession: Even though the ranks of the unemployed have declined over the past year, there are still more than a quarter-million North Carolinians looking for work, approximately 10% more than at the end of 2007.
  • Percent of North Carolinians employed still near historic lows: March numbers showed 57.5% of North Carolinians were employed, which is up 1 percentage point from March 2014. However, this still leaves North Carolina well below the level of employment that was commonplace before the Great Recession. In the mid-2000’s, employment levels were generally between 62% and 63%. Moreover, the level of employment in North Carolina has fallen behind the national average, when the state was generally at or above the nation in the pre-recession period.

For more context on the current state of the North Carolina economy, check out a recent report that reviews the last seven years of economic data and the Budget & Tax Center’s weekly Prosperity Watch platform.