When work fails to pay, the economy loses a key boost

December 8, 2015

For most of the twentieth century, a central idea remained at the heart of the social contract in the United States—the core belief that if you work hard and play by the rules, you should earn enough to make ends meet and achieve upward income mobility over the course of a lifetime. Thanks to long-term changes in the global economy and policy choices that eroded higher wage employment opportunities, however, North Carolina has seen a boom in low-wage work, and the prospects of basic financial security and upward mobility are dimming for a growing number of working families in North Carolina.

For decades, working families benefitted from an abundance of manufacturing jobs in industries like textiles, tobacco, and furniture, that provided solid incomes and a pathway to middle class status. Work boosted the broader economy as employees made enough income to afford the basics—to put food on the table, put gas in the car, build assets, and put away some money for retirement. North Carolina’s economy flourished, as rising paychecks boosted sales and profits at local businesses, which in turn gave employers the necessary capital to hire more workers.

Yet global competition—exacerbated by federal trade and tax policies—shifted the economic landscape in North Carolina, shipping manufacturing jobs overseas and replacing them with jobs in the services sector that pay a lot less. As a result, work no longer paid off for an increasing number of workers, who labored full-time but remained stuck in poverty or near-poverty. This trend only accelerated in the aftermath of the Great Recession. More than half of all jobs created since the recovery began came in industries that didn’t pay enough to make ends meet, according to the Living Income Standard.

The following figure shows the results: the percentage of low-income working families in North Carolina—those families with a working parent living at or below 200 percent of the federal poverty line—has steadily risen over the last decade, from 29 percent in 2005 to 37 percent in 2013. Despite working, these families remain on the brink of poverty, struggling to make ends meet just a lost job or medical emergency away from bankruptcy.

Even more troubling, the state has a bigger share of these working low-income families than the national average, reinforcing recent evidence that the national economic recovery is starting to leave North Carolina behind. Indeed, the Tarheel State now has the 12th highest percentage of low-income working families in the nation—and the 14th highest percentage of children living in these families, according to the Working Poor Families Project.

Even more troubling, the state has a bigger share of these working low-income families than the national average, reinforcing recent evidence that the national economic recovery is starting to leave North Carolina behind. The Tar Heel state now has the 12th highest percentage of low-income working families in the nation—and the 14th highest percentage of children living in these families, according to the Working Poor Families Project.