Job scarcity and low wages keeping millions in or near poverty


By Patrick McHugh - N.C. Justice Center



The path to economic opportunity and security in North Carolina needs weeding and repaving.

The Assets and Opportunities Scorecard, produced annually by the Corporation for Enterprise Development (CFED), shows that a tepid recovery and stagnate wages have left millions of North Carolinians within a few months of falling into poverty. The report’s topline ranking puts North Carolina 38th in the country in overall economic outcomes. While that ranking is disconcerting, the specific data points that contribute to our state’s poor showing are even more disturbing.

The report reaffirms that North Carolina is not creating enough full-time jobs for everyone that wants to work. Our official unemployment rate has increased over the last year while the rate nationally was falling, but the report shows that the problem is deeper than the official rate would indicate, with “underemployment” hitting 11.5% of North Carolina workers (35th in the country). Underemployment in this context includes everyone that cannot find work, people who have struggled so much to find a job that they have stopped looking, and workers who want full time employment but have been forced to settle for part time work.

Too few jobs and too few hours it not just a problem for people looking for work, it holds down wages for everyone else. When the economy doesn’t create enough jobs, many employers can avoid raising pay, particularly for employees at the low end of the pay scale. This pattern has depressed wages nationally, but is particularly acute here in North Carolina. Without income growth, too many North Carolinians cannot afford basic necessities, let alone build economic assets.

Scarce employment and wage stagnation keeps millions of North Carolinians in, or perilously near, poverty. The CFED report shows that over 25% of North Carolina households don’t have the assets needed to subsist at the poverty line for three months if they were deprived of income. CFED calls this measure “Asset Poverty” because it captures the number of people who at risk of falling into poverty because they have not been able to save the assets they would need to weather a layoff, illness, or other economic calamity.

The real depth of economic instability in North Carolina is even deeper when we account for the fact that many assets like homes and vehicles cannot be easily liquidated. CFED estimates that more than half of North Carolina households lack the liquid assets needed to stay out of poverty for three months, which is substantially worse than the national average. If North Carolina improved its performance to that of the best state in the nation, 930,000 fewer households would be liquid asset poor.

To improve these outcomes, the CFED Scorecard identifies the critical policies that state leaders should pursue, including raising the minimum wage, bringing back the state Earned Income Tax Credit, providing universal access to retirement saving, and greater access to financial institutions through Bank On initiatives. These kinds of steps will help to increase incomes, boost the economy, and reopen the path to economic security.

Patrick McHugh is an economic analyst for the N.C. Budget & Tax Center.

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By Patrick McHugh

N.C. Justice Center

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