State of Working North Carolina 2018: Crucial Connections

How public works can boost North Carolina’s work force and connect rural N.C.

Introduction: Public Works are a Public Good for Regional Economies

Across the country and here in North Carolina, concern is rising that our collective negligence in the face of eroding public infrastructure will have ripple effects through our economy — keeping us from reaching our full economic potential and hurting the health and well-being of people and communities. Indeed, across a range of public infrastructure projects that seek to deliver a public good to the broad community, the receding role of government is acute. It is also not an accident.

For decades, the federal government has reduced its commitment to funding public infrastructure projects, such as transportation, water systems, and schools, such that today investments by broad and narrow measures are below 1979 levels. And while state and local spending on infrastructure has increased as a share of total commitment to public works, it too is in decline, most notably in the post-recovery period. In April 2018, total construction spending on public infrastructure by state and local governments was $282 billion, down from a peak of $344 billion in April 2009. In North Carolina from 2002 to 2014, the state’s spending on capital projects declined by half a percentage point, the 24th highest decline among states.

The declining investment of public dollars in projects for the public good has quickened as prioritization of tax cuts and austerity have superseded the reality of community needs and a more viable path to sustainable and equitable economic growth. As Josh Bivens with Economic Policy Institute notes:

“Infrastructure investment is routinely estimated to be a more efficient fiscal stimulus than
almost any form of a tax cut, and it is significantly more efficient than those tax cuts whose
benefits fall mostly on high income households.”

And yet, across the nation and North Carolina, even as communities lift up the need for public works, policymakers have prioritized tax cuts for the wealthy few ahead of these foundational investments for all. Indeed, at the federal level, the recently passed federal tax plan will reduce annual revenue by trillions, while North Carolina will lose an estimated $3.5 billion annually under the tax code that will go into effect in January 2019, compared to what was in place in 2013.

The lack of revenue and failure to invest in public works is resulting in erosion in many of the quality of life measures in North Carolina. Children are being educated in classrooms and school buildings with leaking roofs and mold. Roads and bridges are deteriorating, making it more difficult to connect goods to market and workers to jobs, and transportation networks aren’t extending beyond existing roads to reach more places. Energy grids are failing to keep up with the emerging efficiencies and clean energy technologies that can facilitate cost-effective and sustainable energy use. Too many households still lack the basic utilities of clean water and wastewater management. Many more can’t connect to the global marketplace through reliable, affordable internet connections.

Moreover, North Carolina—and the country—is missing out on an opportunity to increase work opportunities for those looking for jobs. A federal jobs guarantee, much in the spotlight now, is one way in which researchers have noted public policies can specifically connect workers to the benefits of public projects to double the return for communities. Just as the Works Progress Administration and New Deal projects built the Blue Ridge Parkway and funded many arts, cultural and public health projects in North Carolina, a federal jobs guarantee today could match workers to the known need for infrastructure and public works.

A public commitment is needed

Current trends point to the need for public sector engagement in infrastructure investments. The
reality is that the private markets have not responded to the needs, and, in the meantime, many
North Carolinians are not able to connect to key opportunities to enhance their well-being. Many
infrastructure investments deliver what is considered a basic right or need, such as access to clean
drinking water. This contribution to well-being is significant even as it is most often ignored due
to a focus on maximizing profits. As well, a public commitment to fund infrastructure is critical in instances where it is difficult to assign a price to a service because the benefits are broadly distributed. In this instance, the role of public funds to ensure the delivery of a service is important to a broader community goal that benefits many, such as access to water for farms, household consumption and commerce, and which otherwise would be difficult to price for different users in the marketplace.

The importance of a public commitment to building out the connections across communities is particularly important for rural places. With more robust infrastructure and capital projects, the opportunities for workers expands in rural communities, additional resources can be attracted to move to rural places, and greater productivity in rural places can be achieved. By both ensuring that connections between goods and markets and workers and employers are made more quickly, and by providing a foundation from which private capital can invest in productivity-enhancing technologies, public infrastructure serves a role in forging the connections that are fundamental to maximizing the potential of the economy. Across a range of studies, analysts have found that public investments boost private-sector output and employment.

Public infrastructure also, again, delivers core services, like education and health care, that boost opportunities for people and the broader economy, enhancing well-being and improving quality of life.

For workers, and for workers in rural places, public works can be a direct point of connection to the labor market and can indirectly improve the quality and availability of jobs over the long-run. When investments are made in infrastructure, the research consistently points to an overall boost to employment through the creation of jobs and stabilization of the labor market. In research on the impact of American Recovery and Reinvestment Act of 2009 highway funds, researchers have found that employment fell less and began growing more quickly where federal investments in building highways was greater. Overall public infrastructure spending in states is correlated with higher employment across a range of studies. In the long-run, public infrastructure can increase the number of firms operating or expanding in a community, improve the quality of jobs both in terms of wages and career progression, and deter the out-migration of workers from rural areas.

As North Carolina grapples with the best way to build stronger regional economies, policymakers should consider the central and positive role that public infrastructure can play in deepening the connections for the state’s workforce to jobs, the state’s businesses to markets and the state’s residents to well-being.

This year’s State of Working North Carolina report presents the ways in which public infrastructure and local assets — specifically, anchor institutions — can help connect workers in rural areas to jobs, boost rural communities, and contribute to more equitable growth of the state’s economy. As each of the following chapters finds:

Connections are made possible through the design of systems that connect people to opportunity and communities to each other through public infrastructure. This research finds that rural places are highly connected to urban areas and that many points of connection are made possible through public investments and infrastructure.
Workers who can’t move to opportunity are faced with declining labor markets. Labor flows
throughout North Carolina and beyond to other states and countries are real and deliver
benefits to communities. For many, particularly in rural areas, the flow of labor is stymied when a lack of transportation infrastructure, for example, limits affordability and accessibility of opportunity.
Not every worker who wants a job can get one, and the lack of employment equity is holding North Carolina back from its full economic potential. Research from PolicyLink finds that employment equity would provide an $11.3 billion boost to the state’s economy. Among the best levers to drive employment equity are the design of public investments and policies that reach communities of color, connect communities to work force development and job vacancies, and invest in projects that can increase the number of jobs in a community.
Leveraging anchor institutions, particularly in rural places, has the greatest potential to drive better employment outcomes. As the role of anchor institutions and their impact is defined and measured, North Carolina institutions, particularly in rural places, have the potential to derive significant value from investing in strategies that specifically engage and train the local workforce, connect with local businesses and businesses owned by people of color, and otherwise ensure that their presence is intentionally driving better outcomes for their communities.
The next phase of public works for North Carolina is needed. A range of public investments and policies are central to current debates in North Carolina—from whether to welcome immigrants to how to close the coverage gap—and leaders and community members are clear that the public sector and policy choices and will make a difference for their well-being. Across a range of opportunities, North Carolina has the potential to set forward a comprehensive view of public works that seeks equitable economic and employment outcomes and drives benefits back to communities that are historically excluded and currently struggling to get a foothold in the economy.