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NC Budget and Tax Center

Yesterday, Lawrence Mishel from the Economic Policy Institute made the compelling case that policymakers have missed the mark by focusing on tax levels rather than wage stagnation in their pursuit of improving growth rates and the economic well-being of the majority of Americans.  As Mishel points out:

Wage stagnation is a decades-long phenomenon. Between 1979 and 2014, while the gross domestic product grew 150 percent and productivity grew 75 percent, the inflation-adjusted hourly wage of the median worker rose just 5.6 percent — less than 0.2 percent a year. And since 2002, the bottom 80 percent of wage earners, including both male and female college graduates, have actually seen their wages stagnate or fall.

At the same time, taxation does not explain why middle-income families are having a harder time making ends meet, even as they increase their education and become ever more productive. According to the latest Congressional Budget Office data, the middle 60 percent of families paid just 3.2 percent of their income in federal income taxes in 2011, less than half what they paid in 1979.

Mishel goes on to detail a policy agenda that is far better targeted than tax cuts for delivering benefits to the majority of American workers and the broader economy.  This agenda includes some familiar proposals also appropriate for state policymakers: addressing wage theft and misclassification, raising the minimum wage and protecting workers rights to collectively bargain.  It also includes important macro-economic and trade policy choices like stopping the offshoring of jobs through trade deals like the Trans-Pacific Partnership and ensuring the Federal Reserve holds interest rates down until wage growth is more robust.

Again in Mishel’s own words:

Contrary to conventional wisdom, wage stagnation is not a result of forces beyond our control. It is a result of a policy regime that has undercut the individual and collective bargaining power of most workers. Because wage stagnation was caused by policy, it can be reversed by policy, too.

Commentary

raise the wageIn the giant banana republic of haves and have nots that the U.S. economy has increasingly come to resemble, any bump in the pay dosed out to front line workers by a company as huge and generally predatory as Wal-Mart — however modest — is a good thing. When a half-million people are able to take home a few more bucks a week, that’s good for them and good for the companies with whom they shop…like Wal-Mart. So hooray for the news.

Lest anyone get too moist in the eyes, however, and/or start cranking out humanitarian award nominations for the Walton family gozillionaires, it should be noted that the raises (1.1 percent for the average full-time wage over the next year, to $13 an hour and 5.2 percent for part-timers to an average $10 an hour, by February 2016) still leave those workers bringing home incomes much too low to live on. As the Associated Press reports about the new wage rates:

“Both fall below the $15 an hour ‘living wage’ many union-backed Wal-Mart employees have been pushing for. Driven by rising income inequality and a decades-long decline in middle-class jobs, workers are also campaigning for steep wage hikes at other major non-unionized employers, including McDonalds and other fast food chains….

In Fayetteville, Arkansas — near the company headquarters — a single parent of one child would need to earn $16.85 an hour, almost $4 an hour more than Wal-Mart’s pay raise for full-time workers, according to a living wage calculator created Amy Glasmeier, a professor of economic geography at the Massachusetts Institute of Technology.

The calculator examines the costs of food, housing, transportation and medical care around the country.

In pricier parts of the country, the living wage is far higher: In Philadelphia, it rises to $19.68 an hour. In San Leandro, California, one of the San Francisco Bay Area’s more affordable suburbs, a single parent’s living wage is $23.22.”

The living income standard for a worker with one child in North Carolina averages $16.21 per hour.

Of course, the real solution to the problem of poverty level wages for workers across America would be a sizable bump in the federal minimum wage. President Obama has proposed raising it from $7.25 per hour to $10.10, but obviously, a genuine living wage would be significantly higher.

As the Los Angeles Times editorialized this morning, Wal-Mart’s actions should send a signal to Congress that it’s well past time for such action. Let’s hope fervently that such a message gets through ASAP.

But don’t hold your breath.

Commentary, NC Budget and Tax Center

In case you missed it, economist Patrick McHugh at the Budget and Tax Center, poked some new and truck-sized holes yesterday in the glowing tale of a “Carolina Comeback” that continues to be spun by state leaders. As McHugh reports, worker wages remain stuck in the mud even as corporate profits soar:

A strong recovery should mean bigger paychecks. And yet, wage growth has been decidedly lackluster in the last several years, a sure sign that North Carolina’s comeback is far from complete. Despite corporate profits being at an all-time high and productivity increasing, the recovery has not translated into improved earnings for the average worker….

The latest data from December 2014 shows that across the state average wages have remained flat year over year and in eight of the state’s fourteen metro areas average wages have fallen. Economists generally say that wage growth needs to be at least 3.5 to 4 percent to deliver returns to worker’s paychecks or at least to ensure that labor is enjoying a stable share of the benefits of a recovering economy….

While average nominal wage growth was stronger from 2009 to 2011 in North Carolina, since 2012 nominal wage growth has been negative or flat year over year. Indeed for North Carolina workers, wage growth of 4 percent year over year since 2009 would have meant that the median worker would have been earning $3.00 more each hour in 2014.

The failure to achieve strong wage growth means that many North Carolina workers continue to struggle to keep up with rising costs and basic family needs….Until earnings growth improves, the strength of the economic recovery remains in question and the share of benefits that are going to workers limited.

Read the entire brief by clicking here.

Commentary

More than three-million Americans will get a raise tomorrow thanks to common sense new laws in 20 states. Not surprisingly, North Carolinians will not be on the list. This is from a post this morning at Think Progress:

On January 1, 20 states will raise their minimum wages, while one — New York — will increase its wage on Wednesday.

That means that all told, 3.1 million American workers will ring in the New Year with a pay raise.

Eleven states and Washington, DC are increasing their minimum wages thanks to changes in the law either by legislation passed by lawmakers or referenda passed by voters. Nine others will see an automatic increase because their wages are indexed to rise with inflation. Currently, 15 states have automatic increases built into their minimum wages, unlike the federal law.

The January 1 raises range from a 12-cent boost in Florida, whose minimum wage will increase to $8.05, to a $1.25 increase in South Dakota, bringing its wage to $8.50.

The increases in the New Year will mean that in 2015, the majority of states — 29 and Washington, DC — will have minimum wages set above the federal level of $7.25 an hour. They will also mean that 60 percent of all American workers will live in a state with a higher minimum wage.

Another half million workers will get a raise later in 2015, when legislation passed in Delaware and Minnesota to raise their wages goes into effect.

Meanwhile, of course, the minimum wage here in Pope-land remains stuck at a miserly $7.25 with essentially zero prospects of rising anytime soon and the inhabitants of the right-wing think tanks calling for its abolition.

Happy New Year!

minwage-2015

NC Budget and Tax Center

We keep hearing that North Carolina’s economy is turning around. But while it’s true that we’re slowly making progress in replacing the jobs lost during the Great Recession, the bad news is that the overwhelming majority of these new jobs just don’t pay enough to make ends meet. In fact, many don’t pay enough to keep workers out of poverty, despite working full time. Check out the latest Prosperity Watch for details.