North Carolina now unprepared for next recession

By: - January 28, 2016 4:55 am


When last week’s blizzard hit, North Carolinians got another reminder that tough times are easier to handle if you’re prepared. Those who stocked up on food and made sure they had a good snow shovel fared best.

It’s the same with the economy. The preparations, of course, are different. What a state needs to weather hard times can’t be bought in stores. We depend on our elected officials to make decisions in good times that will help us get through an economic storm. And the distressing reality is that actions they’ve taken in the past few years actually leave North Carolina more vulnerable – not less.

Three important areas stand out as examples of where North Carolina lawmakers have reduced our preparedness for the next recession.

  • They’ve lost focus on the dual challenge of wage stagnation for the majority of North Carolina workers and the great difficulty growing numbers of families have in making ends meet.
  • They’re limiting the ability of unemployment insurance and food assistance to stabilize the economy and keep people out of destitution.
  • They’ve failed to support basics like education at the level it takes to nurture learning and innovation.

Many political leaders’ fixation on the fact that North Carolina’s unemployment rate is lower than it was in the Great Recession seems to have blinded them to real job challenges across the state. The vast majority of counties still have more jobless workers than jobs available. And the state is moving in the opposite direction of the country over the past year – seeing the unemployment rate go up even as the nation’s has gone down.

Not only that, but more than half of the jobs being created in North Carolina are in occupations that pay less than it takes to get by. The number of people who can’t make ends meet – whether they are working or not – is growing even in suburban communities. And the purchasing power of wages for nearly all but the very rich has stagnated or fallen.

Only with robust wage growth can we have sustained employment growth because only then can working men and women afford the basics and generate demand for goods and services. If we don’t have that in reasonably good times – like now – then families are less likely to be able to set aside savings for bad times.

The decision to reduce the stabilizing force of two of the most effective tools – unemployment insurance and food assistance – that help local economies in a downturn is astounding in its audacity.

Today, in supposed good times, the state’s unemployment insurance system has been so damaged by decisions by the governor and General Assembly that only 1 in 10 jobless workers receives unemployment insurance. And even for those “fortunate” ones, the temporary wage replacement is far lower as a share of wages than workers in similar situations receive in most other states. The governor and General Assembly have also prohibited the state from waiving a harsh time limit on food assistance for childless adults – one for which 77 counties in North Carolina qualify – that will leave more than 100,000 at risk of losing support to bring food to the table – again, in supposed good times.

What our children should have

Meanwhile, even after seven years of post-recession economic expansion, North Carolina still refuses to replace the worst cuts made in important public investments during the recession. Lawmakers do this even though more kids are in school now than before, and other needs also grow.

The result is that we continue to debate whether children should have textbooks, should get more one-on-one attention in the classroom (and up to what grade), should have the opportunity to get ready for kindergarten during early childhood, should have help to pay for college. And since we haven’t moved beyond these very basics, we can’t even begin the necessary conversation on how to build an innovative economy ready for technological transformations sure to come.

It is always difficult to predict when the next recession is going to occur. But that doesn’t mean it won’t. It is time to prepare for the economic challenges we will face in the future. Failing to make policy choices that will help us respond makes North Carolina less secure today and erodes our competitive position in the future.

Alexandra Forter Sirota is director of the N.C. Budget & Tax Center. This article appeared originally in Raleigh’s News & Observer.

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