Op-Ed: Kentucky Workers Face Eroding Wages and Too Few Jobs

Published in the Lexington Herald-Leader on August 30, 2013.

On Labor Day many Kentuckians pause from their daily responsibilities to celebrate the contributions workers make to our state and our nation. But today also gives cause to reflect on the substantial challenges Kentucky workers face: four years after the official end of the Great Recession, too many people are without jobs, wages are stagnant or even in decline and rising inequality is hurting our economy, communities and politics.

The jobs picture remains grim. When you factor in job growth that is needed to catch up with population growth over the last six years, Kentucky has gained back substantially less than half of the jobs necessary to recover from the recession. And looking at raw job numbers can be overly optimistic, in part because more than 20 percent of Kentucky workers in part-time jobs would rather be in full-time work, but can’t find it.

What’s more, many of the jobs that are available don’t pay enough for families to get by. And with so much available labor, employees have little bargaining power for higher wages. In inflation adjusted dollars, wages fell across the board between 2001 and 2012, earning the label “the lost decade” for American workers.

In 2012, Kentucky’s low-wage workers at the tenth percentile saw their inflation-adjusted wages fall 1.5 percent; their wages have fallen 6.5 percent since 2001. At the median, wages went down 2.8 percent in 2012 and have declined 7.1 percent since 2001. That means less money in Kentuckians’ pockets for back-to-school supplies, groceries, car repairs and the upcoming holidays.

Kentucky workers have not only lost ground compared to where they were a decade ago, but also compared to the national median wage: in 2001, the median Kentucky worker made 95 cents to each dollar the median American worker brought home, but in 2012, that number had dropped to just 90 cents.

While low- and middle-income workers are seeing their living standards erode, the wealthiest Kentuckians are doing quite well. Between the late 1970’s and the mid-2000s, the average real income of the poorest fifth of Kentucky households fell by 11.8 percent, while the average income of the richest fifth of households grew by 61.7 percent. The last few years have magnified this trend: a record share of corporate income is going to profits instead of being shared equitably with workers.

Meanwhile, Congress is contributing to the shrinking middle class and harming the economy by cutting funding for Head Start, social assistance programs, public schools and more, at the same time it preserves some of the most costly tax cuts and loopholes for the wealthy and for corporations. In the last few years, Washington became wrongly obsessed with immediately cutting the deficit, which is already down to sustainable levels in the short- and medium-term.

There are clear policy solutions to our economic problems: Congress should be making short term investments in infrastructure; providing resources to plug the holes in state and local budgets for schools, human services and more; strengthening the safety net while times are still tough; and increasing the federal minimum wage. By directly creating jobs and the demand necessary to speed up job growth for the economy as a whole, these policy solutions offer a way forward.

This Labor Day, Kentucky workers are ready for new opportunities. But first they need Congress to change its course.

Anna Baumann is a research and policy associate at the Kentucky Center for Economic Policy.

Investing in Education Will Build a Stronger State Economy

The best way for Kentucky to grow its economy is by investing in a well-educated workforce, according to a new paper from the Economic Analysis and Research Network (EARN), a project of the Economic Policy Institute.

In A Well Educated Workforce is Key to State Prosperity, Noah Berger, president of the Massachusetts Budget and Policy Center, and Peter Fisher, research director at the Iowa Policy Project, find a strong link between the educational attainment of state workforces and both productivity and median wages. Expanding access to high quality education will create more economic opportunity for Kentuckians and do more to strengthen Kentucky’s overall economy than anything else.

 median wage of workforce with bachelor-700x520

Overwhelmingly, high-wage states are states that have a well-educated workforce, while states with less-educated workforces see lower wages. In 2012, just 26.2 percent of Kentucky’s workforce had attained at least a bachelor’s degree, lower than 42 other states. That same year, Kentucky’s median wage of $14.63/hour was lower than 44 other states. In the three states where more than 40 percent of the population has a bachelor’s or more education, median wages are $19 to $20 an hour, nearly a third higher.

According to the paper, ways to increase the educational attainment of Kentucky’s population include: working to slow the growth of college tuition, increasing financial aid, investing in quality K-12 education and offering universal preschool programs.

Meanwhile, strategies such as cutting taxes to lure employers and capture private investments from other states are shortsighted, and promote a race to the bottom which undermines states’ ability to invest in and attract an educated workforce. The paper finds no clear relationship between a state’s tax rates and its wages.

The full report is available at http://www.epi.org/publication/states-education-productivity-growth-foundations/.

Op-Ed: Cuts to Snap Would Hurt Kentucky

Published in the Frankfort State Journal, August 17, 2013.

House Republican leaders are calling for even deeper cuts to nutritional assistance for low-income adults and kids after the cuts they considered last month didn’t go far enough for some House members. As a poor and rural state still struggling with the aftermath of the Great Recession, those cuts would harm Kentucky’s recovery and make it harder for many families to make ends meet.

The new proposal would immediately kick up to 88,000 Kentuckians off the Supplemental Nutrition Assistance Program (SNAP, formerly called food stamps) and would curtail states’ ability to provide more than three months of benefits every three years to childless adults who can’t find a job during bad economic times or in a region of high unemployment. The cuts go beyond those that a House committee approved in May and would come on top of cuts that will automatically shrink SNAP for all recipients on November 1.

SNAP participation has been up the last few years, but it’s not because of out-of-control spending. It’s because job growth is still slow, unemployment is still high and too many people are stuck in low-wage jobs. Even so, those calling for cuts are overstating the level of SNAP participation. SNAP use and spending growth have already slowed substantially, and as the economy continues to recover costs will go down.

Kentucky is especially vulnerable to cuts in SNAP because unemployment remains high. Even though the recession officially ended over four years ago, Kentucky’s employment rate has gained back less than half of the ground that it lost in the downturn.

We’re also vulnerable because we have regions like eastern Kentucky that struggle with chronic poverty. Just as eastern Kentucky’s economy is reeling even further from the loss of 5,700 coal jobs over the last two years, House leaders would deny many families the basic nutrition and regular access to food that SNAP provides. The cuts would, for example, kick many families off SNAP just for owning a modest car—an essential asset to finding and keeping a job in much of Kentucky.

Cutting SNAP runs counter to what should be our main goal: helping the economy grow. Along with unemployment insurance, SNAP is one of the most effective programs for stimulating a faster economic recovery. That’s because families in need who receive SNAP quickly spend the money in local grocery stores, thereby creating jobs. Cutting SNAP would weaken an already-sluggish economy.

Claims like those made by Congressmen Rogers, Whitfield, Guthrie and Barr in a recent Lexington Herald-Leader op-ed about “waste” in the program are just wrong. Fewer than 2 percent of SNAP benefits go to households that do not meet all of the program’s eligibility requirements, a record-low rate of error. Most SNAP recipients who are able to work and can find a job in fact do so. The program is designed to help make work viable—many who receive SNAP are working low-wage jobs that don’t pay enough for their families to get by.

SNAP is an efficient and effective program to reduce hunger, stimulate the economy and help families make ends meet in hard times. In 2011, it kept 4.7 million Americans out of poverty. Kentucky’s congressional delegation should reject cuts to this critical safety net program, and turn their focus to short-term federal investments that can help bring about the full economic recovery needed in Kentucky and the country.

Jason Bailey is director of the Kentucky Center for Economic Policy.

Forecast: Kentucky Revenue Growth To Remain Sluggish

Revenue Forecast Shows Continued Deterioration of State Tax System

The new long-term revenue forecast of the state’s Consensus Forecasting Group (CFG) suggests that Kentucky’s tax system will continue to deteriorate over the next four years, meaning tight funding for education, health care and other vital services.

In its first in a series of projections that will culminate in January with an official revenue estimate on which Kentucky’s 2014-16 budget will be based, the CFG chose a modest forecast for General Fund revenue growth. But as a share of the state’s economy, General Fund revenue is expected to decline.

GF as share of personal income-700x506

Source: KCEP analysis of Bureau of Economic Analysis, Global Insight and Office of the State Budget Director data; 2014-2018 data is from the control forecast adopted at the August 15, 2013 Consensus Forecasting Group meeting.

As the figure shows, the trend is not new. In 1990, state lawmakers passed new revenue measures as a part of the Kentucky Education Reform Act (KERA) to generate and sustain adequate funding for equitable, quality K-12 education—the largest portion of General Fund expenditures—that did not come at the cost of other essential public services. But because additional necessary reforms have not been made to the state’s inelastic tax code, the level of funding KERA achieved has eroded over time. Experts have predicted that if the state’s tax system is not reformed, the gap between revenues and expenditures could grow to $1 billion by 2020.

The poor performance of Kentucky’s sales tax, for example, can be partly attributed to its outdated, narrow base that does not tax most services. Sales tax revenue has actually declined three of the last five years. The income tax, corporate taxes, property tax and other taxes don’t perform as well as they should because they have too many exemptions, exclusions or other structural problems.

Slow growth in employment and wages and weak economic growth overall are also driving the revenue forecast. The General Fund estimate for FY 2014 is still below its prerecession level once you adjust for inflation.

The modest revenue growth the CFG predicts for FY 2015 ($259 million) is less than what the state budget director says is needed ($400-420 million) to replace $157 million in one-time funds used on recurring expenses, make full payments towards Kentucky’s pension system ($128-$148 million) and pay for inflation in health care prices ($115 million). That would mean no new money for education, health, human services and other areas that have been cut by $1.6 billion over the last 7 years, and no money for employee raises.

On top of a weak economy, years of funding cuts and freezes, a still-short pension fund and a deepening structural deficit, the next state budget will also be squeezed by decreased federal funding through sequestration and other cuts. Our leaders in Frankfort and Washington must find the will to fund the public services that are so critical to our economic future.

Improving Reentry in Kentucky through Education and Supports for Inmates and Ex-Offenders

Click here to download a pdf of the full report.

Greater Investment in Education and Supports Can Keep Ex-Offenders Out of Prison

Report recommends that Kentucky expand education and supports for inmates and ex-offenders in order to improve reentry

With nearly 31 percent of Kentucky’s former inmates recidivating—returning to prison—within two years, a new policy report from the Kentucky Center for Economic Policy (KCEP) recommends that the state invest more in providing education and supports to inmates and ex-offenders to reduce the likelihood they will return to jail.

“Kentucky passed major legislation in 2011 aimed at reducing rising prison costs in the state budget, but inmate levels continue to be high,” said KCEP Research and Policy Associate Ashley Spalding, the report’s author. “To truly reduce recidivism and cut costs, we must do more to help inmates and former prisoners access the education and supports they need to make their lives better.”

The report, “Improving Reentry in Kentucky through Education and Supports for Inmates and Ex-Offenders,” indicates that about 20 percent of the state’s prison inmates currently participate in educational programs (adult, vocational and postsecondary education) offered through the Kentucky Department of Corrections (DOC), but many more could benefit if resources were available. There are waiting lists for these programs, and access to postsecondary education is especially limited. Educational opportunities in the community after release can also be difficult for inmates and ex-offenders to access.

“Without a decent job, it is difficult for an ex-offender to rebuild his or her life,” said Spalding. “And most who are incarcerated need further education in order to get a job with wages that will support a family when they are released. Unfortunately, many inmates spend years waiting for a slot to open up in one of the DOC’s educational programs.”

The report also emphasizes the importance of supports to reentry. For instance, while incarcerated, inmates who have drug problems need access to treatment. And former inmates who are looking for work and/or furthering their education can benefit greatly from income supports like Temporary Assistance for Needy Families (TANF) and the Supplemental Nutrition Assistance Program (SNAP) while they get their lives back on track. Unfortunately there are few such resources available. There are long waiting lists for drug treatment programs in prison, and most ex-offenders who were convicted of drug felonies do not qualify for TANF and SNAP.

The report calls on the state to:

  • Further invest in in-prison DOC education programs to increase access, promote educational attainment and otherwise improve educational opportunities. Additional funding could reduce waiting lists and increase GED, vocational certificate and postsecondary degree attainment among inmates.
  • Increase access to educational programs outside of prison by better funding postsecondary and adult education and providing more financial aid options for ex-offenders who often do not qualify for federal or state financial aid.
  • Enable ex-drug-offenders to receive TANF and SNAP. Currently those convicted of drug-related felonies in Kentucky do not qualify for these programs unless they successfully complete drug treatment (which can be very difficult to access) or are pregnant. Income supports like TANF and SNAP can help provide support while ex-offenders look for employment and/or further their education.

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The Kentucky Center for Economic Policy is a non-profit, non-partisan initiative that conducts research, analysis and education on important policy issues facing the Commonwealth. Launched in 2011, the Center is a project of the Mountain Association for Community Economic Development (MACED).

Improving Reentry in Kentucky Report

Reclamation Money Could Fuel Recovery

“Reclamation Money Could Fuel Recovery”

By Tarence Ray and Willie Davis

Kentucky’s Joblessness a Big Reason to Protect SNAP

House Republican leaders are calling for even deeper cuts to the food stamps program, known as SNAP (Supplemental Nutrition Assistance Program), after the cuts they considered last month didn’t go far enough for some House members.

The new proposal would immediately kick up to 88,000 Kentuckians off of SNAP, and would curtail states’ ability to provide more than three months of benefits every three years to childless adults who can’t find a job during bad economic times or in a region of high unemployment. The cuts are on top of those that a House committee approved in May and in addition to cuts that will automatically shrink food stamps for all recipients on November 1.

Proponents of more cuts argue that the increase we’ve seen in food stamp participation the last few years is evidence of out-of-control spending. But the reality is that participation remains up because job growth is still slow and unemployment is still high. Even so, the level of food stamp participation is overstated. SNAP caseloads and spending growth have already slowed substantially, and as the economy continues to recover costs will go down.

Kentucky is especially vulnerable to cuts in SNAP because of our continued high unemployment and because regions like eastern Kentucky struggle with chronic poverty. In Kentucky we’ve closed substantially less than half of the gap created by the recession between the jobs we have and the jobs we need to get back to the pre-recession employment rate (see graph below). And just when eastern Kentucky’s economy is made worse by the loss of 5,700 coal jobs over the last two years, House leaders would deny many families access to the basic nutrition and food security that SNAP provides. The new cuts are in addition to cuts proposed in May that would, for example, kick many families off SNAP just for owning a modest car—an essential asset to finding and keeping a job in much of Kentucky.

Cutting SNAP is counterproductive to what should be our main goal: helping the economy grow. Along with unemployment insurance, SNAP is one of the most effective programs for stimulating a faster recovery. That’s because more people become automatically eligible for SNAP as incomes decline during a downturn, and those who receive SNAP quickly spend the money in local grocery stores, thereby creating jobs. Cutting SNAP now, like cuts in the federal budget known as sequestration, weakens an already-sluggish economy.

Claims like those of Congressmen Rogers, Whitfield, Guthrie and Barr that the program needs “reformed” are just wrong. Error rates are at record lows and less than 2 percent of benefits go to households that don’t meet all of the eligibility requirements. Also, most SNAP recipients who are able to work and can find a job in fact do so. The program is designed to make work viable—many who receive SNAP are working low-wage jobs that don’t pay enough for their families to get by.

SNAP is an efficient and effective program to reduce hunger, stimulate the economy and help families make ends meet in hard times. In 2011, it kept 4.7 million Americans out of poverty. Kentucky’s congressional delegation should reject cuts to this critical safety net program, and turn their focus to short-term federal investments that can help bring about the full economic recovery needed in Kentucky and the country.

 Kentucky Jobs Deficit_0

Source: Economic Policy Institute Analysis of Bureau of Labor Statistics data

House GOP Ups Nutrition Cuts

Coal Severance Expected to Decline