Land of the Free and Home of the Unequal Income

A new report released last month by the Economic Policy Institute displays data on the extensive income inequality across the United States. With the gap between the rich and the poor increasingly widening, traversing what CityLab best describes as an income “chasm” can be exceptionally difficult for those at the bottom of the income distribution. A person’s ability to improve her economic security is inextricably linked to income and as the rungs in the ladder move further and further apart, the more momentum required to make the leap and the higher the risk of never scrambling to the next step. The share of all income controlled by the top 1 percent of the U.S. population has steadily increased for the past thirty years, climbing to 21.1 percent, the highest concentration of wealth controlled by the top 1 percent since before the Great Depression.

How did this happen?

Since the 1970s, those already at the top have reaped the benefits of productivity gains, while those lower on the distribution didn’t, as worker wages didn’t keep pace with increasing productivity. Because of the difficulty of upward economic movement, those at the top often stay where they are—and so do those on the lower end.

Income inequality in the South

Inequality varies across the South and from state to state and continues to be a pressing issue for many Americans. The stickiness at the top and bottom is a national issue, but it’s particularly problematic in the South, even though what you need to make to be considered in the top 1 percent is much lower here than in other parts of the country.

NC Income Inequality

In North Carolina, Kentucky, and Mississippi, an income of less than $330,000 would, at minimum, put you in the top 1 percent, while in some New England states like Connecticut and New Jersey, the top 1percent starts at more than $600,000. New York has the highest rate of income inequality, with the top 1 percent making 45.4 times more than the other 99. That 1 percent collects almost a third of New York’s entire income.

So while the South’s income inequality might not be as drastic as other areas, it’s harder to move up here than anywhere else—in large part because of policies that have concentrated affluence and poverty in different places, limited investment in public education and infrastructure, and reinforced racial inequity that limits the mobility of a large portion of Southerners. The South is home to centers of economic and cultural growth, but also elevated levels of poverty and socioeconomic stagnation.

With the right tools and resources, Southern states can work to alleviate the burden of income inequity and make upward mobility an achievable reality. Financial empowerment efforts to address the racial wealth gap and local programs to build strong connections between education and career advancement are key to creating a region where people can thrive—no matter where they start.

Expect More Jobs, Education, and Opportunity

When we talk about the future of work, we often look at the number of jobs likely to be created in aggregate, with special attention paid to entry level jobs for recent college graduates. The pipeline of labor and the strength of our economy are dependent on people believing that education has a great return on investment and that the investment increases the economic mobility of each generation—parents encourage their kids to go to college because they want them to do as well or better than they have.

And there’s plenty of evidence to support that belief: the economic trajectory of people with a postsecondary degree is far more secure than those who were not able to pursue education after high school:

  • Median earnings for bachelor’s degree recipients working full time is $21,000- $56,000 more than the median earnings for high school graduates
  • Over 10 percent of high school graduates age 25 and older live in a household that relies on SNAP (Supplemental Nutritional Assistance Program) benefits, compared to 2 percent for those with at least a bachelor’s degree
  • According to the Pew Charitable Trusts, only 10 percent of children born in the lowest quintile of the income distribution who get a four-year college degree remain in that quintile as adults, compared to 47 percent of those without a four-year degree

But in much of the South, too few jobs require a postsecondary education and allow for economic security. Arkansas, for example, added 40,000 jobs between 2010 and 2013 and the state is forecast to add 546,000 jobs by the end of 2023. Nearly 70 percent of current jobs are low-skill and only 30 percent of jobs require a postsecondary credential for entry-level employment. Low-skill jobs are also conflated with lower wages, producing a workforce that is unable to move up the economic ladder and generate significant economic growth through their consumption, investment, and tax dollars. In Arkansas, 87 percent of jobs that pay less than a family-sustaining wage are those that don’t require education beyond high school. Moreover, in 2013, 65 percent of the jobs in the state did not meet that yearly threshold of a family sustaining wage.

Arkansas is not alone in this issue. The low-wage, low skill economy is an issue throughout the South. MDC called attention to the lack of well-paying jobs across the region in the State of the South report, and we are currently preparing a study of economic mobility in North Carolina that raises similar concerns about the low-wage jobs in our home state. And as you can see from the maps below, the states with the most jobs for high school dropouts are in the South while the opportunities for growth for those with bachelor’s degrees are in the North and the Midwest.

Educational concentrations of total jobs by state in 2018

PS jobs

Source: Georgetown University Center on Education and the Workforce, Help Wanted: Projections of Jobs and Educational Requirements through 2018 (June 2010)

HS drop

Source: Georgetown University Center on Education and the Workforce, Help Wanted: Projections of Jobs and Educational Requirements through 2018 (June 2010)

The Winthrop Rockefeller Foundation, headquartered in Little Rock, Arkansas, understands that career opportunities that pay family sustaining wages are important for the Arkansas economy, and that students need to realize the return on investment of postsecondary education within their home state. The Foundation wants students, parents, policymakers, educators, and employers to EXPECT MORE. The EXPECT MORE campaign asks people in the state to change the status quo by investing in the right advanced-skills training and education, investing in every region of the state to attract family-supporting jobs, and redesigning career pathways that offer family-supporting wages. The goal is to reverse the 70-30 equation (of jobs that require no postsecondary education for entry-level employment compared to those that do) through a series of strategies to transform the Arkansas public education system and build a pipeline of family-supporting jobs across the state.

Check out more videos from the EXPECT MORE website to learn more about how Arkansans are building an Infrastructure of Opportunity for their future. You can join MDC and The Winthrop Rockefeller Foundation in a conversation about how Arkansans can make sure tomorrow’s jobs are better by live streaming the event today at 1:00 pm EST at the Clinton School of Public Service.

All the People, Not Just Some

“We the People.” Our Constitution begins with those three simple words, words we’ve come to recognize mean all the people, not just some; words that insist we rise and fall together, and that’s how we might perfect our Union.

In his final State of the Union address on Tuesday, President Obama covered a range of important issues—from foreign relations to scientific and tech innovation to a call for respectful bipartisanship (yes, please!)—but the theme that resonated most for us on the State of the South blog was about economic trends that have made it increasing difficult for working and middle class families to get ahead:

All these trends have squeezed workers, even when they have jobs; even when the economy is growing. It’s made it harder for a hardworking family to pull itself out of poverty, harder for young people to start their careers, tougher for workers to retire when they want to. And although none of these trends are unique to America, they do offend our uniquely American belief that everybody who works hard should get a fair shot.

This struggle for a fair shot has been particularly acute in the South, where even in our most economically dynamic places, people who grow up in low-income families are more likely to stay there as adults than almost anywhere else in the nation, and only small numbers make it to the middle- or upper-income levels. According to the Equality of Opportunity Project, intergenerational mobility is lowest in the South, as shown by comparing outcomes for adult children who grew up in families with the same incomes but in different places. In the following chart, the 100 largest U.S. commuting zones are ranked by the estimated percentage gain or loss in income for an adult child from a low-income family, compared to the national average. One way to think of this is that there is a greater “penalty” for people who grew up in low-income families in some places than in others. At 95th, people from low-income families in Raleigh earn an estimated 13 percent less as adults than those born in a place with average mobility. Nine out of ten of the lowest ranked metros are in the South; in the highest ranked third of metros, only two Southern cities, both in Texas, make the cut:

CZ Future Income

The problem is not just that too few people have a chance to escape poverty; there are large numbers working and middle class Southerners who are economically insecure. When so many people are unable to find consistent work that pays reasonably well, our whole economy suffers: people cannot build savings and wealth through critical investments like homeownership. They cannot afford to go back to school and build skills for a new career in an emerging industry. They cannot save up to take a risk and start a business. And, critically, they cannot invest in educational and extracurricular enrichment for their children or save for their postsecondary education. For every generation that is not adequately prepared for economic success, the situation remains the same for their children.

Say a hardworking American loses his job — we shouldn’t just make sure that he can get unemployment insurance; we should make sure that program encourages him to retrain for a business that’s ready to hire him. If that new job doesn’t pay as much, there should be a system of wage insurance in place so that he can still pay his bills. And even if he’s going from job to job, he should still be able to save for retirement and take his savings with him. That’s the way we make the new economy work better for everybody.

There are policies that can make supposedly “transitional” jobs in our economy quality jobs. Educational policies can support training with stackable credentials so people can move up the ladder from entry-level to a career. And, as President Obama said, there are policies that can support start-ups and small businesses and larger employers “who’ve figured out that doing right by their workers or their customers or their communities ends up being good for their shareholders.” But as important as good public policy is, it must be implemented through public and private systems and institutions—schools, colleges, social service agencies, and employers—that are often not working together to address barriers to economic security. Policy can provide direction and incentives for systems change, but changed outcomes at scale require changed systems.

This Washington Post story from Chico Harlan, demonstrates the massive systems failure —in access to and quality of transit, housing, education, and employment—for low-wealth people in the South. The story follows a woman in Atlanta who faces a two-hour journey on public transit to get to a job interview: sixty-nine stops on a bus; a nine-minute train ride; an additional 49 stops on a bus; a quarter-mile walk. All for what would have been a 27-minute drive. Harlan’s article reveals the additional barriers individuals face—those hardworking Americans mentioned above—when available housing and quality child care are far from job opportunities. Those barriers arise when systems—which may appear invisible to many of us, because they are working well enough for us—are not designed to achieve the outcomes we often say we want: a fair shot for everyone who is willing to put in the effort.

If you’d like to discuss your Southern mobility experience with the President, you can join a post-State of the Union interview today on YouTube at 2:15 ET. If you’d like to discuss mobility in the South with less presidential people like us, find us on Twitter and Facebook, #stateofthesouth.

Abby Parcell contributed to this post. 

Your Daughter’s Teacher Needs a Raise

The beginning of the year always makes me revisit my annual budget, evaluate my savings plan, and start to think about taxes. As I think about the additional amount of money I still need to save for my family to be comfortable in the future, I am reminded that there are many people I encounter on a daily basis that are not as fortunate. When it comes to having enough income to cover my basic expenses, I’m lucky. I can pay my bills and still save for my family’s future—assuming we don’t have any unexpected medical expenses that deplete our savings. My job pays me a family-sustaining wage, but what about the people I depend on to take care of my family and me on a daily basis?

Last year, Fortune reported that more than 42 percent of U.S. workers hold jobs that pay a low wage. The article assumes any job with wages below $15 an hour is a low-wage job. The $15 an hour rate is based on national studies which have calculated an equilibrium where wages are high enough to lift families out of poverty, but still low enough to not result in massive job losses. In North Carolina, the percent of jobs paying a low wage is 48.7 percent.

We often associate jobs that pay low wages in our economy with low skilled or unskilled labor. Many of us think of fast food jobs and teenagers. However, many of the jobs that pay a less than what is needed to maintain a normal standard of living are the very jobs our society depends on to take care of our family members and teach our children. As the Fortune article points out, low-wage jobs are held disproportionately by women, people of color, and persons 20 years of age or older.

Is $15 an hour enough?

Another definition of low-wage job is one that pays less than a living wage, which is defined as the amount of money a person must earn to cover their family’s basic living expenses. In 2014, MIT and the Living Wage Project calculated the living wage for North Carolina to be $10.53 for one person, living alone. The addition of children obviously increases a family’s expenses. Hence, one adult with a one child will need to make $44,990 a year ($21.63 an hour) to break even every month. This amount does not include emergency savings or funds to splurge on birthday and holiday gifts. Overall, 72 percent of our state’s workforce makes less than $44,990 a year. Here are the living wage calculations for other family configurations:

NC Living Wage

Many of the jobs that pay less than a living wage typically require postsecondary credentials and are occupations that are growing in our economy:

NC Occupations Wages

Half of the preschool teaching jobs in the state earn less than $11.35 an hour. At this wage rate, someone working as a preschool teacher, with a child at home, would not be able be able to cover his basic living expenses. He would not be able to save for his family’s future, and he is probably asking himself a different set of questions at the beginning of the year. All of the jobs listed in the table above require some kind of investment in postsecondary training; the very investment that is touted for getting ahead and securing employment that leads to economic security. But the investment can’t just be on the worker’s side of the equation. We have to invest in making those jobs that require skill and training—and there aren’t many jobs that don’t—quality jobs that provide wages commensurate with the training and value they bring to individuals and communities. Our society is dependent on a host of skilled labor to take care of our families, so we need policies and wage rates that help them take care of theirs.

Half a Million Halfway There: Young Southerners Not in School or Work

A recent update to the Annie E. Casey Foundation Kids Count Data Book shows that 1.3 million youth ages 16-19 in the U.S. were disconnected from both work and school in 2014. That’s a national disconnection rate of 7 percent. In all Southern states except Virginia, the rate is at the national average or higher:

DisconnectionRateinOlderTeens_LARGE

Source: Kids Count

In total, nearly half a million youth ages 16-19 in the South were disconnected from both work and school in 2014:

DisconnectionRateinOlderTeens_Table

Source: Kids Count

 

U.S. youth disconnection also is higher than average for OECD countries, as shown below.

What’s a NEET, you ask? That’s the UK acronym for young people that are Not in Education, Employment or Training. Wherever you are, a delay in high school graduation, postsecondary study, and employment can have life-long consequences, so national and local governments are investing in a variety of programs to get these youth on track. In the UK, that means apprenticeship grants and wage incentives for businesses that employ young people; sector-based work academies that offer training, work experience, and a guaranteed job interview; funding for local initiatives that support education; and training for these young people. In the South, we see some similar efforts, like the South Carolina Technical College System’s Apprenticeship Carolina initiative; All In Brownsville that is, among other things, increasing the college application rate of the Texas town’s high schoolers; and local partnerships like Made in Durham that are linking educators and employers to help young people stay connected.

But efforts like these are operating in a South that still doesn’t have enough good jobs. Poor labor market opportunities are hitting our young people—particularly our young people of color—the hardest: 27 percent of black 20- to 24-year-olds, and 14 percent of white 20- to 24-year-olds, are unemployed—twice the levels for workers 25 and older. And even if employed, those without education struggle to get ahead: in the South, the median income of high school graduates is $26,500; for people with some college, $32,299; and for four-year graduates, $48,317. All the more reason that we need to build an Infrastructure of Opportunity—the systems that provide pathways to opportunity and re-connection efforts—to ensure access to education, employment, and training for all the young folks on that map.