Many left out of 'Carolina Comeback'

by Justin Guillory, Think NC First, published in News and Observer, February 16, 2015.

Gov. Pat McCrory has been bragging about a “Carolina Comeback.” Yet his words are falling on the deaf ears of millions of middle- and lower-income North Carolinians who have been left on the sidelines during the economic recovery. It may be the reason McCrory never used the words “middle class” during his recent one-hour and 20-minute State of the State speech.

McCrory proclaimed, “The state of North Carolina has come back even stronger.” He continued, “Our unemployment rate, which was the fifth highest in the nation just two years ago, has dropped substantially.” But that’s not the whole picture.

John Hood, former president of the conservative John Locke Foundation, once wrote, “When interpreting government statistics, you have to look at the details, not just the top-line number. ... [The unemployment rate] is a useful way to gauge how effectively an economy makes use of its available human capital – its stock of willing, capable workers. But it’s not the only gauge of labor utilization.”

Of course, that was back in 2012 before McCrory was elected and a Democrat was still in the Governor’s Mansion. Now Hood is part of the camp that supports McCrory’s view that a falling unemployment rate constitutes definitive proof of a robust recovery.

But the promotion of a single statistic to define our entire economy is misleading.

A more sensible view points to a broader set of labor market indicators, such as the historic decrease in the labor force participation rate, indicating that the state economy is weaker than the governor would like us to believe.

McCrory failed to mention in his State of the State that over 40 percent of working-age North Carolinians don’t have a job – an all-time high. And his omission of the “middle class” from his speech highlights the disconnect between our state’s current leadership and the pocketbook realities our residents are facing.

We need to expand the analysis to include another statistic that doesn’t get nearly enough attention, but has a more tangible impact on the typical North Carolinian: household income.

When the time comes to pay the monthly bills, nothing is more important than income. Yet for too many working households, their incomes are not keeping up with the cost of living.

Median household income, after adjusting for inflation, has been falling across the United States for several years now, with the Great Recession only having worsened the decline.

But since the Republican takeover of the General Assembly, median household income in North Carolina has fallen off a cliff. From 2011 to 2013, income fell by more than $5,000 a year to $41,208. That ranked North Carolina 47th in the nation – behind South Carolina and other neighboring states. And while North Carolina has the 47th-lowest median household income, our families have to deal with the 26th highest cost of living.

State policy is not the sole nor primary cause of the decline in income – just as state government cannot be credited with an unemployment rate rising along with the rest of the nation. But the policies of McCrory and the legislature have done more harm than good. And based on his State of the State address, McCrory does not even recognize the problem.

While McCrory mentioned creating jobs during his speech, just any job in today’s economy isn’t enough to support a family. According to the North Carolina Budget and Tax Center, 57 percent of the new jobs created in North Carolina since the Great Recession pay poverty-level wages for full-time work and only 17 percent pay above a true living wage.

Economic development is critical, but that’s a long-term investment in job creation. State officials can have an immediate impact on declining incomes via the tax code.

Yet the 2013 tax reform bill actually took more money away from working families at or below the median income, while most of the tax benefits went to the wealthy.

McCrory could have taken a stand for a more equitable tax system that would reward hardworking families by simply restoring any number of state tax benefits that he and his Republican colleagues in the legislature have wiped out. These include such measures as child care tax credits, tax benefits for college savings plans and the state Earned Income Tax Credit for working families earning up to $50,000 a year.

McCrory wants to declare victory when he talks about the North Carolina economy. The truth is that until the recovery reaches average working families. the “Carolina Comeback” won’t be a reality.

Justin Guillory is executive director of Think NC First.