North Carolina Income Growth Lags Behind The Nation

Sep 15, 2016

Credit 401(k) 2013 / Flickr

As a whole, median household incomes in North Carolina increased at a pace slower than the national average and middle of the pack compared to southern neighbors.

The overall median household income in North Carolina rose to $47,830 in 2015, a 2.7 percent increase from 2014, according to state-by-state data in the American Community Survey, released by the U.S. Census Bureau on Thursday. In a related data point, the percentage of North Carolinians living in poverty decreased to 16.4 percent, a decrease of 0.8 percentage points.

While the year-over-year increase in median household income is statistically significant, it is still lower than the national average. More than anything, this shows the continued disparity between North Carolina’s rural and urban economies.

During the recovery, North Carolina’s urban centers – Raleigh/Durham, Charlotte and Greensboro – have swallowed an outsized portion of the benefit, while rural areas, especially in eastern North Carolina, have not felt the economy come back. Some rural counties, for example, still have a lower total employment today than they did before the recession.

North Carolina lagged behind the nation and some Southern states in terms of year-over-year median household income growth.
Credit American Community Survey / Census Bureau

"North Carolina had a slower gain in income and a slightly larger increase in income inequality. These latter findings likely reflect the deep geographic divide in the North Carolina economy," says Mike Walden, a North Carolina State University economist. "Big metro areas are booming and small towns and rural areas are struggling. It will take a major revitalization of rural North Carolina to change this."

Some of the slower wage growth in North Carolina can be explained because state policy makers have set out to make this a low-wage state, says Gus Faucher, deputy chief economist of the PNC Financial Services Group. The minimum wage in North Carolina is exactly the federal minimum and union participation is nearly nonexistent. In 2015, only 3 percent of North Carolina workers were members of a union, the second-lowest percentage in the nation, ahead of only South Carolina.

"The state has made a decision to be competitive on the basis of wages," says Faucher.

This emphasis has attracted more low-paying industries like leisure and health care services, or non-durable goods manufacturing, which typically pays less than durable goods manufacturing.

The biggest jobs announcement in the state last year came from Sanderson Farms, which has promised to add 1,100 jobs to the poultry processing plant and hatchery expansion in Robeson County. While a big jobs infusion is welcome news to a county that still has an unemployment rate of 7.2 percent, these jobs will have an average annual salary of just $25,500, barely more than the federal poverty level for a family of four.

Even as a low-wage state, however, North Carolina’s employment rates haven’t shot ahead of the nation. Since the beginning of 2014, North Carolina has had a lower unemployment rate than the national average in just three months.

"That being said, I do expect income growth to improve," says Faucher.

Indeed, North Carolina had a 4.7 percent unemployment rate in July – one of the three months this state beat the national average – and Faucher says the lower unemployment levels will drive up wages. "The tighter job market is going to put upward pressure on wages," he says.

Although North Carolina lagged the nation in median income growth, it matched the national average in pulling people out of poverty, as nearly 61,000 fewer people lived in poverty in North Carolina in 2015 compared with 2014. Across the nation, poverty rates declined in 23 states and no state saw a poverty rate increase, according to Census.

Percentage of people living in poverty by state
Credit American Community Survey / Census Bureau

Income inequality in the state increased slightly, though not enough to be considered statistically significant. Income inequality in North Carolina was lower than the national average.

The American Community Survey also looks at rates of those with health insurance. In North Carolina, the uninsured rate again decreased, though was still higher than many other states. Across the nation, states that chose to not expand Medicaid have generally seen higher rates of uninsured people than those states which did not expand the program.