Point of View

NC is not a land of opportunity

September 12, 2013 

America is supposed to be a country where anyone can succeed with talent and hard work, but a major new study shows that’s not true in North Carolina. Indeed, the nationwide study by a group of leading economists reveals that North Carolina has less economic opportunity than nearly any other state.

It turns out that although opportunity varies a lot across the country, it follows predictable patterns. Regions with better schools, more civic and religious engagement and less sprawl have more economic mobility. But that’s not all: Our analysis of the new study data shows that mobility is also strongly connected to the size of the middle class. Simply put, low-income children who grow up in places with big middle classes are more likely to get ahead than those who don’t. In fact, nearly half of the variation in mobility across regions can be explained by the middle class.

That’s bad news for a city like Raleigh, where the size of the middle class and mobility are both well below the national average. If you were born around 1980 and raised in a lower-income family in Raleigh, chances are you’re not making much more now than your parents did when you were growing up. But if Raleigh’s middle class were as large as the average city’s, you’d be earning nearly $5,500 more a year than you do now. When it comes to opportunity, the middle class matters.

The United States has experience building a robust middle class. In the decades after World War II, we created shared prosperity for millions of families by expanding the middle class. This “middle-out” economic strategy recognized that increasing the purchasing power of the American public would increase demand for American products and services and lead to a virtuous cycle of growth.

We also asked the wealthy to help fund major public investments in areas like education, infrastructure and scientific research. These investments cost money up front, but they yield big payoffs over time – we continue to reap the benefits of America’s post-war investments every time we attend a class at a community college, drive on the interstate or use the Internet. So although some politicians argue that cutting taxes for the wealthy will “trickle down” and unleash opportunity for everyone else, they’ve got it backward. The new nationwide mobility study – by four economists from Harvard University and the University of California, Berkeley – finds that places with lower state income taxes, especially on the rich, have less mobility.

It seems North Carolina’s leaders haven’t gotten the memo. Rather than asking everyone to pay their fair share, the new state budget gives wealthy North Carolinians $2.8 billion in tax breaks over the next five years. To pay for these tax breaks, the budget slashes funding for K-12 teachers, eliminates funding for 1 in 5 teacher assistants and cuts 2,400 pre-K slots for at-risk children.

Although North Carolina has the third-highest unemployment rate of any state, lawmakers have slashed unemployment benefits for 70,000 residents and another 100,000 residents will be cut off by the end of the year. And the state has refused to expand Medicaid, which would have extended health coverage to half a million North Carolinians and created more than 20,000 new jobs.

Instead of pursuing policies that further weaken the middle class and diminish opportunity, state lawmakers should focus on boosting wages and economic growth. A straightforward way to accomplish these goals would be to raise the state minimum wage from the federal floor of $7.25 an hour. According to the N.C. Justice Center, raising the wage to $10.10 an hour would increase families’ annual incomes by over $2 billion and expand the state’s economic output by $1.3 billion.

North Carolinians don’t want to live in a place where the size of a parent’s bank account dictates where a person ends up in life. But in a state where opportunity is already scarce, Gov. Pat McCrory and state lawmakers seem to be doing everything in their power to make it scarcer still. Rather than slash funding for schools to fund tax breaks for the wealthy, North Carolina should get to work building a stronger middle class.

Ben Olinsky is a senior fellow and Sasha Post is a special adviser at the Center for American Progress, a nonpartisan institute in Washington.

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