Do you scratch your head when leaders in Raleigh talk about how great our economy is doing?
Did you or someone you know lose a good job during the Great Recession and struggle mightily to recover ever since?
If so, you and they are not alone.
A new report by N.C. State University economist Mike Walden confirms once more that the middle class in North Carolina has fallen on hard times over the last decade. Too few middle-income jobs have been created, leading to what Walden refers to as the “hollowing out” of our labor market.
This slow-moving economic disaster has been wreaking havoc for decades, and, unfortunately, has not been met with a robust policy response from elected leaders in Raleigh. Some conservative politicians have either tried to distract us from the problem by focusing merely on the number of jobs being created, or have continued to assure us that just one more round of tax cuts will do the trick. Unfortunately, hard data and the hard truths working people face tell us that policy coming from Raleigh in the last several years has not stopped the decline of North Carolina’s middle class.
A bit of economic history is needed to fully appreciate what a dramatic reversal of fortune we have been witnessing, and to understand how we can get back on the right track.
For generations, North Carolina’s middle class grew thanks, in large measure, to a combination of smart public and private investments, building upon North Carolina’s natural and human resources and intentional policymaking to expand opportunity that propelled wages forward in North Carolina, taking our state from an economic backwater to a global force.
Starting in the late 1800’s, efforts like the Cotton Mill Campaign coupled with improved rail and road transportation infrastructure brought manufacturing to cities and towns across the state. The number of towns and cities in North Carolina that sprang up around mills and warehouses is a legacy of this effort to change North Carolina from merely a grower of raw materials into a producer of final product.
After World War II, North Carolina leaders devoted more resources to gaining a foothold in the emerging technology economy with major investments in public education (particularly the UNC system) and developments like the Research Triangle Park. These investments lured companies like IBM and birthed a string of wildly successful technology firms like SAS, Cree, and Red Hat, all of which emerged from university laboratories funded with public dollars.
Mechanization and digitization made North Carolina more productive, in turn driving up working wages to where we were nearly on par with the nation. But that generations-long wave or progress reached its high-water mark several years ago.
After more than a century of economic development and diversification, North Carolina’s workers had come within hailing distance of the national average. On the eve of the Great Recession, workers in North Carolina briefly surpassed 95 cents for every dollar earned by their peers nationwide and looked to be set for even better things to come.
Then two things happened.
First, the recession was particularly hard on North Carolina workers, primarily because deeply affected industries were more concentrated in our state. Working income dropped nationwide, but the crater was deeper in North Carolina and working incomes slid even further.
Second (and this is really the crux of the issue) workers’ incomes in North Carolina have not rebounded as much as in many other states. The average worker in North Carolina continues to earn less than 90 cents on the dollar compared to their counterparts nationwide.
This reversal of fortune is rooted in North Carolina’s inability to generate enough middle-paying jobs. North Carolina has created lots of high-paying and low-paying jobs in recent years, but the middle of the income scale has been sadly lacking. While the number of middle-paying jobs nationwide expanded by almost 6% since 2001 (hardly rapid growth, but at least in positive territory) North Carolina lost 5% of its middle paying jobs over that time.
Contrary to what many people think, this hollowing out of the job market is not limited to rural communities or small towns. Most of the cities in North Carolina have seen low-wage jobs grow faster than middle-paying jobs, and the middle class is losing ground even in parts of the state that are often put forward as economic bright spots. In Charlotte, for example, middle-paying jobs have grown by less than 2% since 2001 while the number of low-paying jobs expanded by almost 25%.
A lack of middle-paying jobs is something that crosses the urban-rural divide, and is happening in communities with very different political leanings, so it can be an opportunity to unite around a shared challenge.
Our state has a history of collective investments opening the way for new economic opportunities, a tradition that needs to be resurrected if we are going to reinvigorate North Carolina’s middle class. Economic reality does not try to pass ideological purity tests, or mold itself to the dictates of the electoral calendar. It is time to accept the fact that years of cutting taxes and scaling back on public investments have not worked, and to come together to address the challenges that will shape our shared economic future.
The state has done this before and it’s past time to get started in doing it again. Professor Walden deserves credit for helping to point us in this direction.
“High Pay” jobs are in the management, professional and technical services, financial services, and information economic sectors. “Middle Pay” jobs include positions in the construction, manufacturing, education, health care, wholesale trade, and transportation industries. “Low Pay” jobs are employment in natural resources, administrative services, leisure and hospitality, retail trade, and other services.
Dr. Patrick McHugh is a Policy Analyst at the North Carolina Budget and Tax Center.