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Some hard truths about the North Carolina economy

[1]Several years of tax cuts have not fixed our economic problems, and more of the same won’t either

In a yearly ritual as reliable as weird weather and parents stressing about finding summer camp for the kids, late spring finds some legislative leaders in Raleigh flogging another round of tax cuts, all the while claiming that past rounds of tax reductions have magically “fixed” North Carolina’s economy.

Unfortunately, this argument ignores hard data and an obvious reality that we can feel in our collective gut. The hard truth in 2017 North Carolina is that pathways out of poverty have actually narrowed and paychecks for vast numbers of people are shrinking or stagnant. Meanwhile, a growing number of occupations are being taken over by machines and Wall Street is gobbling up more and more of our national treasure.

Consider the following.

North Carolina has seen steady employment growth for several years, but not nearly enough to satisfy the need. Data tracked by the NC Department of Commerce show that there are more people looking for work than jobs available in 88 of North Carolina’s 100 counties. In almost half of our counties, there are two job seekers for every position on offer. Whatever impacts past rounds of tax cuts have had, they clearly have not unleashed a wave of job creation that ensured a position for everyone that is willing and able to work.

And as hard as it is to find work in many communities, landing a job does not necessarily deliver escape from poverty. Poverty haunts children with two working parents, shackles young people trying to break into the workforce, and waylays older workers who find their once reliable occupations disappearing. Almost one-third of workers in North Carolina’s smaller cities (10,000-50,000 in population) earn poverty wages [2].

Many working North Carolinians who technically earn enough to surpass the federal poverty line still can’t make ends meet. Statewide, one in five families in North Carolina doesn’t earn enough to pay for basic necessities [3] like food, housing, and medicine.

This problem has deepened in recent years with an explosion in minimum wage jobs. From 2007 to 2015, the number of workers in North Carolina earning at or below minimum wage almost tripled, from 46,000 to over 120,000. After years of sluggishness, the buying power of minimum wage income has now effectively collapsed, particularly in parts of the state where housing costs have soared. In Wake County for example, minimum wage workers barely take home one-third of what it takes to cover the basic necessities of life.

Even many mid-career professionals aren’t getting paid enough to support themselves or their families. An obvious case in point can be found in the brave souls who nurture (and wrangle) our youngest children. More than half of the professionals who teach young children can’t afford the basic costs of living in their community [4].

With too few jobs to go around, and many of those that that do exist paying meager wages, we are losing ground on the American Dream. Even in comparatively prosperous parts of the state, economic mobility has become shockingly uncommon. Researchers with the Equality of Opportunity Project [5] found that for every 100 children born into Charlotte households in the bottom 20 percent for income, only five would make it into the top 20 percent of income-earning households in their lifetime.

Against this backdrop of low wages and not enough jobs, defending recent North Carolina tax cuts that have mostly gone to wealthy people and profitable corporations ought to be a tough sell.

If tax cuts were the answer, we wouldn’t see entire communities cut off from economic opportunity, or parents forced to choose which of their children go hungry, or formerly middle-class families sliding into poverty. These are the stains on the economic fabric of our state, and they are not going to disappear by simply doing more of what has already been tried.

In the weeks ahead as they put the finishing touches on a new, two-year state budget and tax package, let’s hope that lawmakers acknowledge that we have not addressed many of North Carolina’s deepest challenges and craft policy that does not leave millions of North Carolinians out in the economic cold.

Dr. Patrick McHugh is a Policy Analyst at the North Carolina Budget and Tax Center [6].