Archive for January, 2013

Latest Assets & Opportunity Scorecard ranks NC 45th among states

CFED released its latest Assets & Opportunity Scorecard, which looks at financial security of Americans and their access to economic opportunities. The Scorecard looks at 102 outcome and policy measures, including income, net worth, assets, business ownership, homeownership, housing burden, heath care coverage, and education.

The Scorecard looks at these indicators nationally and also by state. Overall, North Carolina ranks 45th among all the states. When it comes to financial assets and income, the state is ranked 37th, and is graded a D.

  • 16.2% of North Carolinians are living with income poverty
  • 26.8% are “asset poor” which means they cannot cover basic expenses for three months in the absence of an income
  • 49.9% are “liquid asset poor,” which means they lack those assets that they could liquidate quickly– bank accounts, stocks, mutual funds, retirement accounts, etc– in the case of an emergency


Even more troubling, North Carolina is ranked 49th and given an F grade for businesses and jobs. 16.1 percent of the population owns a microenterprise, ranking the state 41st, and 1.32 percent own a small business, ranking the state 41st.  The business ownership rate is 2.1 times higher for white workers compared to workers of color. Nationally, the rate is 1.5 times higher for white workers. Business ownership is also 2.7 times higher for men.

The scorecard has many more indicators and rankings, which together do not paint a very rosy picture for our state or for the nation. The findings give evidence for what we know is happening in communities and families everywhere– too many are still struggling to overcome their economic challenges, and unable to access opportunities to build financial security. As we’ve said repeatedly, a true and solid economic recovery will  not be possible as long as so many of our citizens continue to face such formidable challenges.

CFED does provide some solutions for the state– strengthening financial security by expanding the Earned Income Tax Credit or supporting savings programs, promoting job security by preserving unemployment insurance and extending wage subsidies, broadening access to heath care, and stabilizing affordable and accessible housing.  Included in the job security solutions is that the state should support the development of microenterprises among women and people of color, in order for them to create jobs for themselves and for others. This is exactly what CDFIs (community development financial institutions) and other smaller community-based lenders are working to do. The report we published in December shows that CDFIs are a critical player in expanding access to capital to small businesses that are increasingly left out of the financial mainstream.

There is much work to be done before the scorecard will present a better outlook, but there clearly are steps that can be taken to get us started on that path.



January 31, 2013 at 11:18 am 1 comment

“Why ending the corporate income tax won’t create jobs”

The Progressive Pulse posts an enlightening piece by Allan Freyer of the Budget & Tax Center on the assumption that eliminating the corporate income tax would incent corporations to reinvest savings back into the North Carolina economy and, thus, create jobs. In reality, corporations historically do not reinvest savings into the local economies, particularly multi-national companies that have operations in many other states and around the world. Much of the savings they gain by not having to pay corporate income taxes would right back go into their coffers– as stated in the post, corporations currently have $5.1 trillion in cash reserves. Or, these savings would got to shareholders.

As corporate profits have grown, even since the recession, corporations have yet to pass on the benefits of that growth to their workers, in the form of increased wages, or to their local economies. Since 2009, corporate profits have increased by 171 percent, but wages continue to stagnate. So what would make corporations act any differently than they historically  have? Given the history of how corporations operate, the outcome in North Carolina is not likely to change.

Instead, other job creation and economic development strategies could invest in our state’s resources and our future.  Workforce training, infrastructure, and education are all investments that we can make now to build up our economy on a solid foundation. Eliminating the personal and corporate income taxes would actually significantly reduce the amount of revenue we have to support these programs, and massive spending cuts would be needed in order to balance the budget. This is the opposite of what North Carolina needs to ensure a strong economy for future generations.



January 30, 2013 at 10:38 am 2 comments

Entering the corporate supply chain boosts small businesses

Although the needs and challenges of small businesses and large corporations are often divergent, they can in fact work together in ways that strengthen both types of businesses. An article in the Business Journal reports that large corporations can help to develop small businesses by encouraging their participation in the corporate supply chain. Large businesses need inputs and services  and often small firms can fulfill these needs. With a little help to overcome barriers and some mentoring, small businesses can achieve greater growth and success as a part of a corporate supply chain.

The Business Journal points to a report by the Center for an Urban Future, which looks at 200 small businesses in the U.S. and their experience as suppliers to corporations. The study found that small business suppliers experience significant growth in revenue and jobs. Businesses that supply large corporations saw their employment increase by 164 percent.  On the other side, building relationships with small firms is also good for the corporations, both in terms of social responsibility, but because it helps to diversify their supplier base.

The challenge is that many small business lack the necessary information to access supplier opportunities, and even when they are aware of them, often the process is prohibitively cumbersome. But, by creating a more supportive environment, in which corporations provide mentorship and ease of access (by streamlining applications and making information more readily available), more small businesses could take advantage of such opportunities. Lenders also play a role, as access to affordable capital is critical for small businesses to both develop their capacity to process orders and to be able to fulfill them.

The important thing about this article is that it highlights the potential for collaboration between businesses of all sizes. Too often, tangible economic development solutions get lost amid the political rhetoric about small and large businesses. Here are examples of how businesses of all sizes can work together on the ground, each playing a key role. Big corporations and small businesses don’t have to be opposed to one another. By recognizing their interconnectedness, each can help to strengthen the other, create jobs, generate growth, and support our economy.

January 29, 2013 at 10:45 am

Bus fare increase in Fayetteville would burden low-income riders

The Fayetteville Area System of Transit is proposing an increases in their basic adult bus fare, from $1 to $1.25, and in the senior bus fare from 30 cents to 50 cents. In addition, transfers would no longer be free. While this may seem like a small increase, the Fayetteville Observer reports that for many people who rely on public transportation to get to work and to get around town, these increases would be unaffordable.

An article today profiles one Fayetteville resident who works as a server at a Shoney’s restaurant. She commutes almost daily by bus, making transfers along the way, paying $2 each way. The proposed changes would increase her fare by $1. The problem isn’t that people like her are unwilling to pay the extra fare to support the city’s public transit system; it’s that the extra fares would not help make the system more accessible. As the article points out, the buses don’t run on Sundays, which require people like the worker profiled in the Observer to take taxis to work, which are much more costly.

For households with less disposable income, affordable public transit options are very important.  As we blogged about last month, public transit is critical to low-income workers across the state. Among those who commuted by public transit in 2011, 67 percent had incomes below $25,000.  With higher housing costs in the central urban areas, low-income people must live further away from these urban cores to find affordable housing– which also means that they’re further away from jobs. Developing public transportation that meets the needs of those who actually use the system would help connect people to jobs and to other services regionally.

Investing in transportation is not just a good idea for helping low-income workers; it’s also a good investment for generating economic development in the state. The American Public Transportation Association reports that  every $1 billion invested in public transportation supports 36,000 jobs.

Public transit also allows families to save when they don’t need to rely on multiple vehicles, helps to alleviate traffic and pollution, is a key link for people with disabilities and seniors, and it helps to attract to businesses to areas.

All in all, public transportation is a good investment locally and regionally. As we continue on the path of economic recovery, investments in things like public transit can help those regions that continue to struggle and lag in economic growth. However, any expansions or increases should be balanced with the needs of those who actually use the system. Keeping the needs and challenges faced by underserved communities and regions at the forefront will help to made any investments by the state a success for all.

January 28, 2013 at 8:44 am

Small business optimism up for 2013

Wells Fargo and Gallup have released their Small Business Index, which is a survey of small business owners on their current financial situation and their views on what the next 12 months have in store. The survey includes 601 small business owners, and was conducted during the first two weeks of this month.

The big takeaway from the survey is that small business owners are more optimistic about their prospects than last quarter. The index was up 20 points on overall optimism than in November 2012. This is due to business owners feeling positive about their performance in terms of revenues, capital spending, and jobs in the past year, and also feeling positive about their prospects for revenues, cash flow, jobs, and their overall financial situation in the year ahead. As states, this is  “a dramatic turnaround from the end of last year, when the part of the index that measures business owners’ future expectations plunged to its lowest level since the start of the financial crisis.”

On the down side, it does not appear that hiring will increase significantly. Seventy-one percent reported that there will likely be no change in the number of jobs at their businesses, while the number of businesses that will add jobs did not increase from the last quarter. Even those who say they will hire are expecting to hire fewer jobs than they ideally would need. The primary reasons for this include that they don’t need any more workers, they are concerned about having enough consumer demand to support new jobs, the state of the economy, and potential costs of health care. Coincidentally, those businesses that are expecting to hire say they will do so because of increased demand.

These findings corroborate previous small  business surveys that we have reported on. Although there are a variety of issues that affect business owners, consumer demand and economic stability rank as the top factors. In order for these businesses to be successful, they need people to purchase the goods and services they offer. As the economy overall improves– and as individuals and families regain financial stability– the prospects for small businesses will also improve.

In related small business news, it appears that banks are also taking stock of their prospects when it comes to small business lending. Business News Daily reports that Bank of America, in response to its perception of small business lending as a growing opportunity  will be stepping up its efforts in this area, as it has recently hired more than 1,000 small business lending bankers. On the other hand, Bloomberg reports that Citigroup will be letting go of small business bankers, as a “realignment” within the company.

The economic recession and its ongoing impacts have changed the landscape for small businesses dramatically. From consumer demand to accessing capital, small businesses have faced a great deal of uncertainty in recent years. The various surveys of small businesses and the shifting roles of both big and small lenders all show that businesses and lenders alike are still trying to figure out and adjust to these changing conditions. But until the underlying challenges are addressed, the uncertainty will persist.  Many of the challenges faced by both businesses and lenders will be alleviated when economic recovery really reaches all communities– particularly those areas where small businesses are the main generators of economic activity.

January 25, 2013 at 1:43 pm

Column illustrates impact of small businesses

The Coloradoan, a Fort Collins, CO news outlet, published a column by Gerard Nalexny, the CEO of a local bank, Verus Bank, on the importance of small businesses in communities. Although the column comes out of Colorado, the sentiments expressed can be shared across states. Nalezny clearly illustrates the difference between corporate CEOs and small business owners–  namely, that for small business owners and entrepreneurs, the success of their venture relies on their own blood, sweat, and tears. Small business owners invest their own personal wealth into their businesses– and often borrowed wealth from their family and friends. They work long and hard to make sure that they don’t fall into the 80 percent of businesses that fail in the first five years. As Nalezny puts it:

This is why successful entrepreneurs tend to “live” their business. Business owners typically work 24/7, and when they are not at work, they are thinking about the business. The business dominates family conversations and supersedes family events and vacations. Given most entrepreneurial ventures will make or break the family financially, it is not surprising that the needs of the business come first. Go into many of the successful businesses in our community, and often as not, you will see or work with the owner

CEOs of large corporations, on the other hand, are largely  buffered from this intense personal investment in the businesses that they manage. Yes, the stakes are high and they are accountable to their investors and shareholders. However, failure of the companies they are in charge of does not necessarily mean failure for these executives on a personal level. In recent years especially, we have heard of the generous severance packages and “golden parachutes” for outgoing CEOs. No such packages exist for small business owners.

This distinction between small businesses and corporate executives is important for two reasons. First, we continue to hear news about what small  businesses think about a range of issues, from taxes to regulation to consumer demand.  As we blogged about recently, claims about what small businesses want or need can be misleading if we don’t investigate which small businesses we’re talking about. The very small, often family-owned, businesses that are rooted in communities across the country have very different needs than big companies– they worry about consumer demand, they need a level playing field when it comes to regulations and taxes, and most importantly they need a strong and growing middle class. But too often, the real voice of small businesses is drowned out by others who tout their perspectives in the name of small businesses.

Second, lumping together corporate executives and small entrepreneurs diminishes the real and valuable impact that small businesses have on local economies. Small  businesses are the economic  backbone of communities across the country. They create jobs and employ workers, which helps to build wealth both for spending in the community and also for future saving. According to Shop Local Raleigh, for every $100 spent at a local business, $68 stays in the local economy, compared to just $43 if the money was spent at a chain store. In addition, both workers and business owners pay taxes, which increases local revenue for public services.

Nalezny does a great job at showing just how invested small business owners are in their ventures and, as a result, in the economic vitality of their communities. We do small business owners and entrepreneurs a disservice when we combine them with corporate executives. These are hard working, persistent, and passionate people who deserve recognition for their real impact on our economy.

January 24, 2013 at 11:20 am

The role of technology in the loss of middle-class jobs

The News & Observer ran the first of a three-part Associated Press series on middle-class job loss today, this one looking at the role of technology. As we’ve blogged about before (here, here, and here), this recovery period, which began officially in June 2009, has been marked by growing inequality, rise in low-wage jobs, and an overall lack of job growth at all. As the N&O reports, at this point we have only regained 47 percent of the 7.5 million jobs that were lost due to the Great Recession. Compared to previous recoveries, which regained the jobs lost within about two years, this recovery has been extremely  slow and most accurately described as a “jobless” recovery.

The article takes a deeper look at which jobs were lost, which jobs we are gaining, and possible explanations.  While half of the jobs lost were in mid-pay industries, only 2 percent of the jobs gained so far have been in mid-pay industries. The AP makes the case that advances in technology  have reduced the number of middle-class and middle-skill jobs that are available for workers. These jobs are now performed by computers and robots:

Software is picking out worrisome blots in medical scans, running trains without conductors, driving cars without drivers, spotting profits in stocks trades in milliseconds, analyzing Twitter traffic to tell where to sell certain snacks, sifting through documents for evidence in court cases, recording power usage beamed from digital utility meters at millions of homes, and sorting returned library books. Technology gives rise to “cheaper products and cool services,” says David Autor, an economist at MIT, one of the first to document tech’s role in cutting jobs. “But if you lose your job, that is slim compensation.”

So as more and more jobs and functions become automated, what are the prospects for the human workers who are left behind? The AP doesn’t offer much in the way of solutions, but others are working to find ways that workers can be retrained and find new jobs. Last summer, we blogged about Rebuilding America’s Middle Class, a group of community college leaders from around the country who are focused on the role of community colleges in building up the nation’s workforce.

Demand for community colleges has increased significantly since the recession, but federal and state support for these colleges has stagnated. With so many workers and high school graduates seeking to gain the skills they need to stay competitive in this changing economy, community colleges should be supported as avenues for providing the necessary training, education, and certification to help workers get and keep jobs. Despite changes in technology, the National Skills Coalition reports that half of the jobs in the state in 2016 will be middle-skill jobs. They may not be the same kinds of middle-skill jobs that we had in the previous decade, but nonetheless workers with these skills will be in demand.
While it’s true that technological advances are rapidly changing our world, it is also true that our public institutions, like community colleges, can do much to keep up with these trends and support workers at every skill level. We need a skilled workforce to attract the kinds of businesses to our state that will generate economic growth. To do so, we also need to be strategic in how we educate and train our workers.

January 23, 2013 at 11:23 am

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