North Carolina workers are seeing less and less of the value they create. Workers only took home 51% of the economic pie in 2013, which puts our state near the bottom nationally (37th out of 50 states) and below all of our neighboring states. The dwindling share of economic output going to compensation hurts workers and undermines our economy. Consumer spending is what drives our economy, so shrinking compensation costs North Carolina jobs by reducing demand for goods and services.
Compensation—the combined value of wages and benefits—as a share of total economic output has declined nationally over the last few decades, but the drop off in North Carolina has been particularly acute. As can be seen above, North Carolina workers received nearly 57% of the value of all goods and services produced in the state in 2000, almost on par with workers nationwide. In the subsequent years, however, a substantial gap has opened up, cutting off North Carolina’s workers from more of the financial benefits from their work.
North Carolina’s position near the bottom of the national pack is not merely a function of regional economic forces. Several other southern states including Virginia, South Carolina, Georgia, Missouri, and Tennessee see an above average share of their economic output translate into compensation.
To understand the cumulative financial impact of these trends, we calculated how much income North Carolina workers have lost as their share of economic output has declined. If North Carolina workers still received the same share of income as in 2000, an additional $24 billion in compensation would have been paid out in 2013. Those additional dollars would have meant more North Carolinians could afford to buy a more reliable car, or new clothes for the start of school, or even a few more dinners out. But that’s not what happened. Billions in economy-boosting consumer spending didn’t happen, jobs that could have been created weren’t, and lots of North Carolinians have not seen their economic fortunes improve.
North Carolina can do better. Revitalizing our economy and reinvigorating the American Dream hinges on whether we make sure that everyone shares in the fruits of economic growth. A recovery that does not improve compensation is not the kind of progress that North Carolinians demand.
Patrick McHugh is a Policy Analyst at the North Carolina Budget and Tax Center.