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North Carolina’s disappearing middle class

March 18, 2014 / Carolina Small Business / Economic inequality, Economy, Jobs & Employment

The News & Observer ran an opinion piece yesterday that summed up the transition of our state’s economy over the past several decades, leading to a shrinking middle class. In light of yesterday’s report on jobs and unemployment in NC, this OpEd provides valuable context to the current economic situation of the state.

Yesterday’s jobs report showed that the unemployment rate had declined in January to 6.7 percent. However, the improved unemployment rate is due in large part to a smaller labor force. The labor force actually decreased, meaning that people who were unemployed simply stopped looking for work. Only four out of ten unemployed workers actually got placed in jobs over the past year. The bottom line is that NC’s jobs and employment landscape has been stagnant over the past few years.

unemployment, unemployment rate, jobs

From: http://goo.gl/87uVu6

The deeper issues, however, are spelled out in the OpEd. The state’s economy used to provide workers with quality, well-paying jobs in textiles, tobacco, and furniture. By investing in these industries, the state was able to build an economy that stood out from its neighbors, with a strong middle class and economic opportunity for workers of all incomes and skill levels.

But when the national and state economies shifted away from manufacturing, we saw a rise in lower-wage lower-skill jobs. This transformation fundamentally changed our economy and society. As such, economic inequality is growing in our state. NC is one of 17 states that has seen incomes decline for the bottom 99 percent of income earners since the Great Recession, as incomes for the top 1 percent have increased. As stated in the N&O:

North Carolina’s middle class, once a unique amalgamation of low-skilled and high-skilled workers earning decent wages in the manufacturing sector, has been split into a low-skilled lower class of workers, who are unable to escape the dwindling wages of the service sector, and a high-skilled upper class of workers, whose extensive education and training afford them access to high-wage employment opportunities.

These broader trends are important to keep in mind as monthly unemployment statistics are published, and as they are touted as showing progress. These longer-term trends are actually more indicative of the state of our economy. Rather than looking at month-to-month change, which could have been influenced by seasonal issues, looking at longer-term trends tells us more about our economy and where our challenges lie. The growth of lower-quality jobs is undermining our potential for economic growth, and unless these structural shifts are addressed, it won’t matter if there are nominal improvements in the unemployment rate.