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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.

Commentary

As the good people at the great website Too Much Online regularly point out, U.S. inequality is now hitting astounding levels. Consider the following from the group’s recent newsletter:

“You can’t really appreciate how phenomenally unequal the United States has become until you take a gander at America’s peer nations. Consider the UK, for instance. Britain has emerged as one of the world’s most unequal nations. New official UK stats certainly reinforce that reputation.

In the UK, the new numbers show, the richest 10 percent hold 45 percent of the nation’s private wealth. The poorest half own just 9 percent.

But this UK inequality simply pales against the inequity across the pond. In the United States, the latest Federal Reserve figures point out, the top 10 percent owns 75.3 percent of our national wealth. And the households of the bottom half? Their wealth holdings add up to just 1.1 percent.”

Now check out the group’s new infographic about how our regressive tax structure contributes to this situation:

taxing-the-ultra-rich-a-little-history-1-638

Commentary

Another day in the absurdly unequal American economy, another one percenter (this time, the boss of a regulated “public” utility) getting paid to do nothing. The Charlotte Observer has the latest such story:

“Piedmont Natural Gas Chief Executive Officer Tom Skains will receive nearly $14.4 million in severance pay when Duke Energy completes its purchase of the Charlotte-based gas company.

The $4.9 billion acquisition, which was announced in late October, is expected to close in late 2016. Both Piedmont and Duke have said Skains’ decision to retire was his own.

Skains’ severance package includes over $5 million in cash, $8.6 million of equity and a bonus of $749,297, according to a securities filing this week….

Skains is the only Piedmont executive who has made public his plans to leave the company when the deal closes, making him the only one at this time eligible for the severance benefits.”

Skains’ big score calls to mind the great Calvin Trillin and the poem he authored for The Nation magazine a few years back:

The Best Thing You Can Be Is CEO

The best thing you can be is CEO.
No matter what, you always get your dough.
However many people out of work,
You still get every single little perk.
If fired, you are properly consoled,
By floating ‘neath a parachute of gold.
The best thing you can be is CEO.
No matter what, you always get your dough.

Commentary

It appears that journalists at the Fayetteville Observer have produced a new “must read” series on the disastrous consequences of poverty in North Carolina’s sixth largest city. “Poverty’s Price” debuted yesterday and will run through the week. Click here and here, respectively, to read the first two installments: “Poverty: What Fayetteville can learn from Baltimore” and “The poor stay poor.”

As they always do, the right-wing think tankers will dismiss such reports by ascribing lack of drive and initiative to the poor, but as the lead editorial in Sunday’s edition of the Observer explained, endemic poverty of this kind is something that all members of the community bear responsibility for:

“This is not a good place to be poor. In fact, Cumberland County is one of the worst places in the country for children born into poverty.

They won’t just stay poor here, but they’ll actually fare worse than their parents. And this cycle will repeat itself, generation after generation.

We were stunned, earlier this year, when we came across the national study that documented this dismal fate for Fayetteville’s impoverished children. Harvard economists studied the lifetime economic outcomes for children across the nation. They found that in some areas, poor children have a pretty good chance of doing better than their parents. In others, they’re likely to stay at the same income level.

But here, they can expect earnings that are 18 percent below their parents’. According to the study, children in only 13 of the nation’s 2,478 counties fare worse….

As today’s story points out, this extensive poverty has consequences, our crime rate foremost among them. The problem is well-known in cities across the country, so common that it has a self-descriptive name: the cradle-to-prison pipeline.

The syndrome that spins out of our poverty problem is making the rest of us poor, too. Fighting the crime and imprisoning the perpetrators is costing this community millions of taxpayer dollars every year. Breaking the cycle would have an enormous payoff. But that will require investment, and this state is moving in the opposite direction – cutting, for example, early-education funding instead of increasing it to meet community needs.

We hope our readers will follow ‘Poverty’s Price’ throughout the coming week and then begin a community conversation about what we need to do to improve our children’s chances in life. We’ve all got a lot riding on it.”

Let’s hope readers across the state pay attention. For while the problems of Fayetteville are certainly dire, the same could be said for scores of communities across North Carolina.