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NC Budget and Tax Center

In his press conference yesterday, North Carolina House Speaker Thom Tillis reiterated his desire to eliminate the state’s corporate income tax, expressing his earnest (but misguided) belief that abolishing the tax will ensure stronger job creation across the state. This belief is misguided because it rests on a fundamentally flawed assumption—that corporations will always reinvest the savings they get from the tax repeal into creating new jobs or paying existing workers higher wages inside North Carolina.

In reality, there is no guarantee that multinational corporations with locations and subsidiaries across the entire world will take their North Carolina state tax cut and reinvest it in their North Carolina operation. In fact, if we look at recent national corporate investment patterns, there’s actually no guarantee that these corporations will reinvest additional income in job creation (or higher wages) at all.  

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A new report from the Annie E. Casey Foundation suggests an entire generation of young Tar Heels is aging with limited work experience or job-readiness skills.

Last year, nearly 6.5 million American teens and young adults ages 16 to 24 were disconnected, that is they were not enrolled in school while also unemployed. In North Carolina, about one in every five young people in that age group were  disconnected.

“Far too many of our young people are not in school, not working, and have few employment prospects placing them at risk of chronic underemployment and reduced financial stability later in life,” said Deborah Bryan, President & CEO of Action for Children North Carolina. “The potential economic and social cost of youths’ lack of access to employment extends well beyond the lives of those young people affected; it undermines our state’s ability to achieve a prosperous future.”

According to the Casey Foundation, only 41 percent of North Carolina’s young people were employed in 2011, compared to 60 percent in 2000.

The report emphasizes the need to reengage high school dropouts and provide multiple pathways for disconnected younger workers to build their job-readiness skills. Advocates at Action for Children North Carolina note that when young people have no connection to school or jobs, government spends more to support them.

The entire report Youth and Work can be viewed online here. To view disconnected youth by race, click the image below.

 

NC Budget and Tax Center

As seen in the latest issue of Prosperity Watch, North Carolina’s persistently high unemployment rate is not only the result of having 3 workers for every available job, but also due to weaknesses in those industries that employ the majority of the state’s workers.  Only a fraction of the state’s employment base is concentrated in industries that are poised for long-term growth and pay decent wages, while the overwhelming majority of North Carolina’s workers are employed in industries experiencing long-term decline–a serious problem for ensuring the long-term economic competitiveness of the state. For details, see this week’s Prosperity Watch.

 

NC Budget and Tax Center

Our national economy may be doing better than we thought.  Despite a disappointing state unemployment report from DES last week, we got a jolt of good news this morning on the national economy, with the release of new numbers by the US Bureau of Labor Statistics that showed that the US labor market created 386,000 more jobs last year than we originally thought.  And as a result, the new numbers make it clear that the national labor market has now replaced the jobs lost since January 2009 and moved into positive territory to the tune of 125,000 net jobs created. 

As an interesting side note, these new numbers include 453,000 additional private sector jobs offset by the loss 67,000 more government jobs than anticipated, once again demonstrating how public sector spending cuts and employee layoffs are reducing the gains in private sector job growth.

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A new study from the N.C. Budget and Tax Center confirms what a lot of worker advocates have been saying for some time: average North Carolina workers are working harder and more productively than ever but their their wages are stagnant or falling. Meanwhile, high end jobs continue to grow, thus contributing to a two-tier labor market in which mid-level wage employment is disappearing as the jobs are outsourced overseas.

Here are the key findings:

  • The economic recovery from the Great Recession is different from any recovery in the last 30 years, as seen in unprecedentedly sluggish job creation and, perhaps most obviously, falling wages.
  • A unique feature of the current sluggish recovery is the productivity gap, in which—for the first time in 30 years—rising worker productivity (a key driver of economic growth) is not being rewarded with higher wages.
  • This productivity gap has contributed to the emergence of a two-tier labor market, with growth in low-wage and high-wage occupations, but little growth in between. The result is the worst wage inequality seen in 30 years.

Read the entire report by clicking here.