KET Legislative Coverage

What's Behind Kentucky's Lagging Economic Recovery

by John Gregory | 07/23/14 9:39 AM

American employers added 288,000 jobs in June, corporate profits are soaring, the housing market is on the rebound, and Wall Street remains at record levels. So are these national economic trends trickling down to people in Kentucky?

Not so much.

That was the consensus among the panelists on Monday's Kentucky Tonight. Chris Phillips, economics professor at Somerset Community College, says top professionals and upper-tier workers are doing well during this recovery. But he says middle class employees continue to struggle as globalization and changing technology make it harder for those holding working-class jobs.

The extent of the recovery also depends on where you live in the state. Tom Dupree, a board member of the Bluegrass Institute for Public Policy Solutions, says Kentucky's small towns used to thrive. Now he says many of those areas are bereft of job opportunities whereas the metropolitan centers are doing well.

Anna Baumann, research and policy associate with the Kentucky Center for Economic Policy, contends that even with recent job gains, the commonwealth still needs to add about 90,000 jobs just to get back to pre-recession levels, and to match the growth the state has experienced in the working-age population since the start of the recession.

John Garen lays the blame for the slow recovery on what he calls the same old misguided government policies. The University of Kentucky economics professor says a growing economy would solve many of the challenges that the state still faces.

Why Kentucky Still Lags
The panel agreed that several factors hinder the state's job and wage growth. Chris Phillips says employment opportunities do exist, but it's difficult to match available jobs to the skill sets of those looking for work. He also contends that some people simply don't possess the basic knowledge of how to locate and apply for work.

Phillips and Anna Baumann concur that the loss of extended unemployment benefits has also hurt out-of-work Kentuckians. Without those payments, many people don't have the financial resources to cover expenses until they can find a new job. Phillips also contends the federal government's stimulus package wasn't enough to fully jump start the national economy.

But John Garen and Tom Dupree argue that unemployment benefits dissuade people from even looking for work. Garen says that five years of emergency unemployment payments should have been sufficient to help people through the tough times. He points to a study that shows the workforce in North Carolina actually grew when the state gradually removed unemployment benefits.

The Minimum Wage and Prevailing Wage
While the recovery slowly progresses, Garen says job creators still face a number of economic uncertainties, including costs to fully implement the Affordable Care Act, a shifting regulatory climate, and an inefficient tax system. He says prevailing wage laws should be repealed, calling them a welfare plan for construction workers.

Baumann says that would only hurt working-class families who depend on those wages to support a modest quality of life. She also argues that a minimum wage increase is long overdue. Baumann says if pay rates had increased along with productivity, as they once did, then minimum-wage workers would now be earning about $23,000 a year.

Dupree concedes the rural nature of the state makes economic development and job creation more challenging. He points to his native Harlan County as an example. It's difficult to reach by road and has traditionally depended on coal mining jobs, which are now in steep decline. Yet Dupree sees untapped opportunities for people to create employment around recreation, the timber industry, and agriculture. He says instead of complaining about a lack of jobs, people need to do something to make economic growth happen.

Watch the full Kentucky Tonight discussion.