Growth without prosperity

North Carolina’s defining economic challenges remain unaddressed

Fist-pumping and back-patting are all the rage in Raleigh these days. Some economists are talking about North Carolina’s economy hitting a sweet-spot and elected leaders are running out of ways to take credit for the good news.

It’s certainly true that the worst of the Great Recession is in the rearview mirror, but the recovery has left far too many people, families, and communities worse off. When you take a sober look at North Carolina’s economic reality, the breathless self-congratulations ring a bit hollow. Indeed, an alarming pattern has emerged: Economic growth is not producing broad prosperity, which is trouble for everyone.

First of all, there still are not enough jobs for everyone who wants to work. Before the recession, more than 60% of North Carolinians had jobs, but today that percentage is in the middle 50’s. There are a quarter-million people looking for work in North Carolina today, roughly 30,000 more than before the recession.

Because our economy is so heavily reliant on consumer purchases, unemployment is not just a problem for individuals or families; it undermines the economy of the entire state. When growth doesn’t provide a job for everyone who wants to work and people have fewer dollars in their pockets to spend, it makes all of North Carolina less prosperous.

We’ve also replaced a lot of middle-class careers with low-paying, dead-end jobs. Thousands of jobs have been lost in industries that were the bedrock of middle-class North Carolina for generations, particularly manufacturing and construction. These were jobs where hard work was rewarded with livable wages and opportunities for advancement, jobs that could support a family and jobs that offered a piece of the American Dream.

While good careers have been disappearing, we’ve seen an explosion in service jobs with low-wages and few opportunities to move up. The average annual wage in industries that have grown since 2007 – like hotels and restaurants – is almost $10,000 less than in industries that have declined. When growth doesn’t create good-paying jobs, the lack of prosperity reverberates through the entire economy. Entire communities suffer as people stop going out to eat, buying houses, getting new cars, and scale back in a host of other ways.

An hour’s honest work doesn’t buy as much today as it did in 2007. When you adjust for inflation, the average hourly wage in North Carolina has actually declined over the last seven years, forcing many North Carolinians to work more or get by on less.

Wage stagnation has been an issue across the United States in recent years, but the problem is particularly bad in North Carolina. Hourly wages nationwide have grown slightly faster than inflation, but a larger share of North Carolinians are working longer hours, falling into debt, or dealing with a lower standard of living. This erosion of buying power undercuts the economy, eating away at North Carolina’s prosperity.

The recovery has also completely bypassed huge parts of the State. The reassuring statewide data that economists and elected representatives cite are almost entirely driven by a handful of urban and suburban regions. Outside of these population centers, the story is very different. The majority of North Carolina counties have not gotten back to the number of jobs that existed in 2007. In some parts of the state, one out of every ten jobs is still missing. All of the economic growth happening in the urban cores of North Carolina is doing very little to create prosperity in many rural communities.

So, why all of the high-fives in Raleigh? In part, any good news is welcome given where we were a few years ago. We have taken a step back from the gaping maw of global economic collapse. However, survivor’s relief is not the best way for us to take measure and move forward.

Some parts of the state are doing very well. Business sales have roared back, along with corporate profits and incomes for people at the very top of the economic ladder. Construction cranes dot the skylines of Raleigh and Charlotte, and the economic view from many newly-completed apartments and office buildings is sunny.

Leaders in Raleigh need to be constantly reminded however, that we cannot settle for growth without the broad prosperity that created our middle class, gave low-income workers a chance to advance and lifted our entire economy. Too many people are out of work, too many paychecks are coming up short and too many communities are being left out of the recovery.

We have neglected the investments needed to provide our children a 21^st century education and our working men and women skills training; to build a transportation system that can move at the speed of business; to help small businesses withstand the competitive pressure of the modern market. This lack of investment has blunted the recovery and left the deepest problems with North Carolina’s economy unaddressed.

Instead of taking pride in finally escaping the recession, we should be focused on building a future that North Carolina can really be proud of.

Patrick McHugh is Policy Analyst at the North Carolina Budget and Tax Center.