All Americans should be enjoying the benefits of the booming economy, right? Thousands of new jobs, record low unemployment, and wages ticking upwards are all positive trends.
Not necessarily. It can depend on where you live and what type of job you have.
KET’s Kentucky Tonight explored jobs and wages in the commonwealth with Jason Bailey, executive director of the Kentucky Center for Economic Policy; Jordan Harris, founder and co-executive director of the Pegasus Institute; Bill Londrigan, president of the state AFL-CIO; and Ashli Watts, senior vice president of public affairs for the Kentucky Chamber of Commerce.
A Snapshot of Kentucky’s Economic Recovery
A new report from the Kentucky Chamber shows that the state has experienced overall growth in jobs, wages and salaries, and population since the recession. Between 2010 and 2017, the state’s population grew by 2.6 percent, employment grew by about 10 percent or 180,000 new jobs, and wages and salaries across all industries have increased 36 percent.
Although the commonwealth still lags national averages on those metrics, it outperforms more than half of our border states. Indiana and Tennessee surpass Kentucky on each of the metrics.
But a deeper dive into the numbers reveals an uneven economic picture. In addition to the aggregate numbers, the report also breaks down the data among nine regions across the commonwealth. The regions that make up the so-called “golden triangle” between northern Kentucky, Louisville, and Lexington are booming. The remaining regions haven’t faired nearly as well.
“All of the different nine regions in Kentucky have had growth in jobs, and wages, and population, except for eastern Kentucky and the Ashland region,” says the Chamber’s Ashli Watts. “Eastern Kentucky has actually lost jobs since 2009, and actually since the ‘80s has lost a fourth of its population.”
Job growth has also been substantially lower in rural areas surrounding Lake Cumberland in south-central Kentucky, in far western Kentucky, and in the Owensboro-Henderson region. Those same areas have also experienced little population change, and lower rates of wage growth.
The personal impacts of the economic recovery not only depend on where you live but also on what you do. The AFL-CIO’s Bill Londrigan says those working in sectors like fast food, manufacturing, and state government have seen little if any wage growth.
“We don’t see this great economy really benefitting the vast majority of folks,” says Londrigan. “Most of the wage increases have gone to the upper level of earners, those in the high tech field or those in managerial positions. The rest of the workers have taken a significant wage cut with inflation or their wages have been completely flat.”
Wage stagnation isn’t just a factor in this recovery. Jason Bailey of the Kentucky Center for Economic Policy says wages have been flat for low- and middle-income workers for nearly 20 years. He says record-low unemployment rates have yet to drive a significant increase in most wages.
“When the recession was in its pit and there were lots of available workers, employers got to pick whoever they wanted and pay relatively low wages,” says Bailey. “Now as the economy has improved, they’re still wanting to get the pick of workers, but not pay them more.”
In fact, 30 percent of working Kentuckians earn less than $12.50 an hour, says Bailey. That amounts to only $26,000 a year for full-time work, but he says few of the jobs that pay that wage offer steady, 40-hour-a-week employment.
Another concern, according to Bailey, is that the state’s job growth appears to be slowing. In his report, The State of Working Kentucky, he notes that in 2014-2015, the state added about 2,500 new jobs a month. In 2016, the growth dropped to about 1,000 new jobs a month.
Several other factors play into Kentucky’s uneven economic recovery. Jordan Harris of the Pegasus Institute notes that of the 180,000 new jobs created in the state since the recession, half of those were located in Jefferson and Fayette Counties alone. The industries that have experienced the greatest rebounds have jobs that require advanced degrees, he says, but only 50 percent of Kentuckians have some level of education beyond high school. Kentucky’s workforce participation rate remains one of the worst in the nation, and the state’s average per capita personal income of just under $39,400 is $11,000 less the national average.
Harris says this has put the commonwealth in a prime position to benefit from policy changes designed to bolster economic growth.
“You’d be hard pressed to find a state in the last two years that has done more to help itself move in the right direction as it relates to fixing some of the problems that we’ve long had in Kentucky,” Harris says. “But the work is absolutely not done.”
Differing Views on Policy Impacts
In the past two legislative sessions, the Republican majorities in Frankfort have passed a state tax overhaul, workers’ compensation reform, right to work legislation, and a repeal of the prevailing wage law. Harris says he’s thrilled that Kentucky is finally enacting policies that he says can help the commonwealth better compete with neighboring states.
“Indiana and Tennessee were both in our rear-view mirror in 1958,” Harris says. “Today they have moved past us – they have about a 25-year head start on us, implementing the same sort of policies that we’ve seen the Kentucky state legislature act on in the last two years. Now Indiana and Tennessee both have stronger economies and their wage growth is stronger.”
Harris says it will take a decade for Kentucky to feel the full impact of these policy changes. He hopes lawmakers here will continue to reform the tax code to further lower individual and corporate rates and eliminate loopholes that are no longer necessary.
Bailey and Londrigan are less sanguine on those policies and how they will affect Kentuckians. Londrigan says right to work and prevailing wage changes will hurt unions and result in lower wages for all workers. Right to work removes a requirement for employees to pay dues to a union that operates in their workplace even if they choose not to be a member of that union. Prevailing wage guaranteed that individuals working on public construction projects (like school buildings or bridges) receive pay that is comparable to what people performing their trade skill already earn in that locale.
”When there’s high unionization, there’s higher wages for workers. The ratio between the highest paid of CEOs and the average worker declines,” Londrigan says. “So inequality has increased greatly over the time period where this major assault has been taking place on trade unions and collective bargaining.”
The state tax reform package passed earlier this year creates a single 5 percent tax rate for individuals and corporations, and applies the 6-percent sales to a wide range of services that had previously gone untaxed. Bailey contends that amounts to a tax increase on 95 percent of Kentuckians, and a tax cut for the wealthiest 5 percent.
“This is not an agenda about economic growth, this is about an agenda of accelerating the redistribution of income from ordinary people up to those at the very top,” says Bailey. “That’s not how economies grow. They grow from the bottom up and the middle out.”
Instead of sharing tax gains with workers in the form of higher wages, Bailey says corporations are using those funds for stock buybacks and dividends that he argues only benefit the wealthy. He says Kentucky should have a tax plan that eliminates many corporate loopholes and requires top income earners to contribute their fair share. He contends that would generate revenue the state needs to fund education, infrastructure, and public services.
But business leaders say many positive impacts are already accruing from the tax and labor policy changes. For example, Watts says Kentucky landed more than $9 billion in corporate investments in 2017 alone, which shattered the previous record of $5 billion set in 2015.
“So to say that the policies are not working… is absolutely false,” says Watts. “You can look at the data and know that jobs are up, wages are up, unemployment is down, and economic development is thriving here in Kentucky.”
Economic policies aren’t the only thing that can drive job growth. Watts also credits state leaders for emphasizing workforce development initiatives that give people the skills training they need to fill the thousands of jobs that are open in the commonwealth.
“However, one thing that we need to do, that businesses know works, is improve our infrastructure,” says Watts. “We know that job growth happens when there’s proper infrastructure and when there’s highways.”
Bailey agrees that the state has significant infrastructure needs. He’d like to see the federal government create a national jobs program akin to the New Deal projects of the 1930s.
“We put people to work to create an infrastructure that would benefit us and our economy for decades to come in periods when there are not enough jobs and in areas where there are not enough jobs,” Bailey says.
Medicaid Work Requirement
A Medicaid waiver sought by the administration of Gov. Matt Bevin would have required able-bodied Kentuckians covered under the Medicaid expansion to work or volunteer for 20 hours a week to qualify for benefits.
In June, a U.S. district judge rejected that plan, saying the federal government hadn’t adequately considered how the work requirement might affect access to health coverage for low-income individuals. After a new round of public comments, federal regulators are expected to issue a new decision on the state’s waiver application in the next few months.
“I think that the work requirement is one of the most positive things that’s happened over the course of the Bevin administration, ” says Harris. “I think we’re leading as a state on this question.”
Harris says the plan not only encourages people to work, but provides them pathways to get jobs. He argues that it’s reasonable to ask someone to work or volunteer in his or her community in exchange for getting government-provided health care benefits.
Arkansas is the first state to implement similar Medicaid work and reporting requirements. In the first three months under those policies, more than 4,300 people lost their health coverage, according to the Kaiser Family Foundation. The Arkansas Democrat-Gazette reports that thousands more are at risk of losing their coverage if they fail to comply with the new rules by the end of September.
Londrigan fears people here could face the same fate if work requirements are implemented in the commonwealth.
“Tens of thousands of Kentuckians are going to lose coverage after we’ve made these huge gains under the Affordable Care Act when more people were covered by health insurance than had ever been before,” Londrigan says. “That’s not good for the economy, [and] that’s not good for people.”