Point of View

How North Carolina's middle class is careering toward extinction

March 17, 2014 

  • 37 The percentage decrease, since 2000, in employment in North Carolina’s manufacturing sector 15 The percentage increase in the service sector over the same period 19 The percentage increase in the number of low-skilled jobs that pay less than $23,484 annually 10 The percentage decrease in the number of low-skilled jobs that pay between $28,787 and $43,950 annually 3 The percentage increase in the number of high-skilled jobs that pay more than $43,950

Nearly a century ago, North Carolina’s economy was significantly different from those of its neighbors. Unlike the rest of the post-Reconstruction-era South, North Carolina had the resources to venture into new industries, particularly those of textiles, tobacco and furniture.

The state’s investment in these industries provided low-skilled workers the opportunity to earn decent wages and established a strong foundation for the middle class.

All changed when the state’s economy paralleled the national economy in its transition from a reliance on manufacturing to a reliance on services.

Since 2000, employment in the manufacturing sector – which pays, on average, about $3,430 more than the state’s median household income – decreased by nearly 37 percent, while employment in the service sector – which pays, on average, about $3,570 less than the state’s median household income – increased by almost 15 percent.

The low-skilled lower and middle classes bear the brunt of the state economy’s transition.

The number of low-skilled jobs that pay less than $23,484 annually has increased by 19 percent, and the number of low-skilled jobs that pay between $28,787 and $43,950 in annual wages has decreased by 10 percent.

The number of high-skilled jobs that pay more than $43,950 annually, on the other hand, has increased by 3 percent.

The requirements necessary to attain a high-skilled job, such as completing higher education or undergoing extensive training programs, are substantial obstacles for less-skilled lower and middle class workers who desire to earn higher wages.

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.

This has resulted in the effective elimination of the middle class and a deepening of economic inequality between the lower and upper classes.

North Carolina is one of only 17 states that have experienced income growth for the top 1 percent and income depreciation for the bottom 99 percent since the Great Recession.

In addition, the average income of the bottom 99 percent of North Carolinians is $39,145, well below that of the South and the rest of the nation.

If the effects of the economic transition did not deepen the divide between the classes enough, the General Assembly made sure to take up the slack.

The state’s progressive personal and corporate income taxes were lowered and flattened, while the estate tax was repealed and the sales tax expanded to encompass currently untaxed items.

When considering the repeal of the earned income tax credit – which financially assists 907,000 low-income workers and ensures that 298,000 of them remain out of poverty – the net effect is an increase in taxes for over 80 percent of North Carolinians, including everyone who makes between $17,000 and $151,000 annually.

The shifting of the tax burden away from the upper class and the repeal of the earned income tax credit, among other policy changes, ensure the gradual erosion of the middle class and the increasing division between the lower and upper classes.

There has been much research into the negative effects of economic inequality. Among the most important findings, according to the Center for American Progress, is “that a trade-off exists between high and growing levels of inequality,” particularly income inequality, “and economic growth.”

This is because income inequality decreases economic mobility, discourages entrepreneurship, results in poor educational outcomes, shortens economic expansions and, accordingly, lengthens economic contractions.

So, what’s to be done?

The N.C. Budget and Tax Center recently reported that, in order to address the state’s economic inequality, policy leaders ought to adopt an integrated, “all-of-the-above” approach to economic development.

This entails targeting employment opportunities that pay at, or above, the average living income standard, including medical device manufacturing and pharmaceuticals; stimulating stable industries that are competitive and best-poised for expansion, such as electronic instrument manufacturing, data processing and chemical preparation manufacturing; and investing in career pathways programs, such as the BioNetwork training programs administered by Wake Technical Community College, which guarantee that low-income workers can better their skills and earn increasingly higher incomes over time.

Even if state government adopted an “all-of-the-above” approach to economic development, North Carolina will possibly never again see the day in which its middle class flourishes.

Mousa Alshanteer is a sophomore and Doris Stroupe Slane Trinity Scholar at Duke University.

News & Observer is pleased to provide this opportunity to share information, experiences and observations about what's in the news. Some of the comments may be reprinted elsewhere in the site or in the newspaper. We encourage lively, open debate on the issues of the day, and ask that you refrain from profanity, hate speech, personal comments and remarks that are off point. Thank you for taking the time to offer your thoughts.

Commenting FAQs | Terms of Service