New Report Says NC Must Invest in Its Workforce

By Rob Schofield

Quick Take:

• North Carolina continues to struggle with the difficult transformation from a manufacturing economy to a knowledge-based economy.
• The state is experiencing dramatic growth in its economic and geographic divides and its reliance upon trickledown economic approaches has done little to help.
• Now is the time for an aggressive recommitment to a broad-based public investment strategy designed for the long-term.

Seven years into the new century, North Carolina remains in a state of profound economic transition. Though growth rates are relatively solid of late and the early-decade recession is now an increasingly distant memory, all is not a picture of health. The ongoing demise of the traditional manufacturing sector and the middle class jobs that accompanied it haunts the state. Large and growing inequities (amongst groups of people and geographic regions) are a persistent and dangerous problem that is becoming increasingly chronic.  

Trickledown Economics

Though the state’s challenges are widely acknowledged, policymakers and advocates differ as to the appropriate response and have, in recent years, generally grouped themselves around two differing approaches to addressing these problems.

Approach #1 can be thought of as the “passive trickledown” method. This approach is favored by market fundamentalists who call for a general disengagement between government and the economy. This group calls for dramatically lower taxes – especially on upper income individuals and corporations – and dramatically reduced public investments in everything from education to highways. Passive trickledown advocates call for policies that would deemphasize public solutions in the expectation (hope?) that the “genius of the market” would expand an entrepreneurial class, which would, in turn, expand the creation of wealth. This group does not lose too much sleep over the distribution of the new wealth – either among groups or regions. Though loud and persistent, this group has met with limited success in advancing its policy agenda of late.       

Approach # 2 is the “affirmative trickledown” method. By far the most popular and widely applied approach in recent years, this system emphasizes the idea of empowering and unleashing an entrepreneurial class, but favors direct government subsidies as a part of the strategy. Proponents see this as an inexpensive way for public investments to spur private development. This is the approach that gave North Carolina the Dell and Google deals and the explosive use of direct business subsidies though programs like the Job Development Investment Grants (JDIG) initiative and the One North Carolina Fund. Though not averse to other public investments, affirmative trickledown advocates see their approach as the politically realistic alternative to the market fundamentalists because of its lower cost and quick results.

A Third Way?

The two trickledown approaches are not, of course, the only way to tackle economic renewal and development in today’s challenging environment. North Carolina, in fact, has a rich tradition of pursuing a third approach to economic development that can be referred to as the “grassroots investment” method. As the name suggests, this approach eschews the “hands off and hope” tactics of the market fundamentalists and the “quick fix on the cheap” methods currently favored by many policymakers.

With the grassroots investment approach, government invests for the long-term. Public resources are amassed and directed in sufficient quantity to alter the landscape on which markets will grow and work their magic. Human and physical infrastructures are substantially and purposefully enhanced and significant emphasis is given to the promotion of broadly shared and widely distributed prosperity. As with a family that sacrifices in the present so that all of its children will succeed later, the grassroots investment method is a sober, un-sexy approach that looks to the big picture and the future rather than the narrow and the immediate.

In the early parts of the twentieth century, North Carolina was one of the South’s (if not the nation’s) leading practitioners of the grassroots investment approach. Examples of these past successes can be seen today in the state’s extensive university and community college systems and the large role played by state government in funding schools and roads. 

New Momentum for Grassroots Investments

Though largely shunted aside in recent decades, the grassroots investment approach is enjoying a bit of a renaissance of late. Earlier this year, the North Carolina Commission on Workforce Development, a creature of the state Department of Commerce (normally  the home base and leading cheerleader for the affirmative trickledown method), released a special report entitled State of the North Carolina Workforce: An Assessment of the State’s Labor Force Demand and Supply 2007-2017.

According to this report, North Carolina is in a fix. Its workforce is increasingly stratified and needy and future prosperity depends on the state’s ability to change that reality. Here are the “eight key trends” that the report highlights:

• Many of North Carolina’s traditional manufacturing industries continue to shed jobs as part of an on-going economic transition.
• North Carolina’s traditional “middle jobs”—those that paid a family-sustaining wage and required minimal formal education or training—are disappearing as part of this transition.
• New job creation is concentrating in certain fast-growing metropolitan areas.
• Many areas of North Carolina are not prospering from the economic transformation.
• The future prosperity of all North Carolinians depends on achieving higher educational attainment levels for all citizens.
• Impending baby-boom retirements will exacerbate an emerging skills gap among experienced, skilled workers.
• High-skill in-migrants will help fill part, but not all, of this skills gap.
• Low-skill in-migrants present both opportunities and challenges in meeting the state’s workforce needs.

The report makes clear that North Carolina must do significantly more to improve the education and preparedness of all of its workers.

“Simply put, the more education that an occupation demands, the higher the average earnings. Workers with no post-secondary education or certification are finding it increasingly difficult to compete for jobs in high wage occupations.”

It goes on to say, in effect, “If we build it, they will come”:

“As North Carolina’s economy continues to change and create many new well paying jobs, business and industry will continue demanding an increasingly educated, skilled and adaptable workforce.”

In many ways, State of the North Carolina Workforce echoes a number of the key findings of last year’s special report by the North Carolina Justice Center entitled North Carolina’s Unfinished Transformation: Connecting Working Families to the State’s Newfound Prosperity.  According to that study, now is the time for North Carolina to re-create its past commitment to the grassroots investment approach:

“Wise public investments in North Carolina’s physical infrastructure and people helped transform the state into one of America’s most metropolitan, economically competitive, and fastest growing places. Today, this prosperity stands at risk…. Educational deficiencies and a lack of crucial skills prevent many low-income working families from thriving in a world where education and knowledge are prerequisites for success.”

North Carolina’s Unfinished Transformation argued convincingly that North Carolina must intentionally tackle these roadblocks that stand in the way of sustainable, broad based prosperity through an aggressive and expanded commitment to:

• Post-secondary education for all;
• Adult basic education and literacy programs;
• Improved income supports for low income workers so that they can pursue education and training;
• Reforming state business incentive programs to require better wages and socially responsible behavior from subsidy recipients;
• A stronger social safety net to correct for the inadequacies and inequities of the market economy.

Looking to the Future

The coming decade will reveal much about the face of 21^st century North Carolina. Will it prove to be one state, economically modern and united by a broad-based prosperity or two states, divided for the foreseeable future by class and geography? The answer, it appears, will be a function of how much we care and whether we’re willing to make sustained, collective sacrifices and investments for the good of our children.