Editorials

Welcome to the indentured servant economy

Source: Paul Coomes, Kentucky Chamber of Commerce

Gov. Matt Bevin probably didn’t entice many young people when he likened 21st century apprenticeships to colonial-era indentured servitude. But he did provide a useful metaphor — for Kentucky’s economy.

Two new reports underline how, despite an increase in jobs, Kentucky is not catching up economically with the rest of the United States, while areas in the state’s east and west are not even keeping up with Kentucky.

The state’s unemployment rate is low — just 4.3 percent — but the profits from Kentuckians’ work are not showing up in their paychecks. In that respect, Kentuckians are far from alone, as made clear by new household income data from the U.S. Census Bureau. The U.S. economy is distributing almost all of its rewards upward. The gap between the richest 5 percent to 10 percent of households and those in the middle keeps widening, while incomes for those in the middle and below have barely budged in decades.

Working people might as well be indentured servants, toiling for CEOs and big investors, who are living large, while the return of inflation threatens most households’ economic gains. Inflation-adjusted wages for the median worker in Kentucky were 0.5 percent lower in 2017 than they were in 2001. Even Kentuckians whose wages are in the top 10 percent, about $36 an hour, saw only 0.9 percent growth between 2009 and 2017, according to an analysis by the Kentucky Center for Economic Policy.

Home to few corporate headquarters, Kentucky remains a branch-plant economy to a great extent, recruiting jobs by promising tax breaks.

In 1999, Kentucky ranked 42nd in per capita personal income but had dropped to 47th by 2008 and was still 47th (behind Mississippi, West Virginian and New Mexico) in 2017. (Personal income includes money from wages, businesses, investments and government transfer payments.)

Bevin’s goal of making Kentucky a center for engineering and manufacturing makes sense. But Kentucky also must educate and support entrepreneurs, innovators, visionaries — people who will start companies and invent new products — if the state hopes to compete. Instead, Kentucky has cut support for higher education, even as other states reinvested in their universities.

Economic development is Bevin’s core message, but anti-union policies that he and Republican lawmakers enacted push down wages, while corporations and wealthy individuals will benefit most from recent state tax changes.

Kentucky is far from the only state that needs better policies from the federal government to spur growth in left-behind regions and protect working people from exploitation. The tax cuts that Congress approved last year mainly benefit the wealthy while helping to balloon the federal deficit by 32 percent compared to a year ago. The deficit is projected to hit $1 trillion in 2019.

Republicans will use the soaring deficit that they created as an excuse for cutting Social Security, Medicare, Medicaid and other government programs. Transfer payments from such federal programs accounted for about a quarter of personal income in Kentucky in 2016, according to a recent report by economist Paul Coomes for the Kentucky Chamber of Commerce.

Only six of Kentucky’s 120 counties — Boone, Fayette, Kenton, Oldham, Scott and Shelby — are less dependent on transfer payments than the national average of 17.4 percent of personal income, reports Coomes.

On the up side, Kentucky’s rate of jobs growth since 2009 outpaced five of our surrounding states, according to the Chamber Report, but lagged Tennessee, Indiana and the nation.

Job creation is slowing nationally and in Kentucky. In 2014 and 2015, Kentucky averaged 2,561 new jobs a month. In 2017 and the first seven months of this year, the state averaged only 1,073 new jobs a month, according to Bureau of Labor statistics cited in KCEP’s “The State of Working Kentucky.”

Kentucky’s personal income increased by 1.6 percent in the year 2017.

Republicans point to Kentucky’s manufacturing-fueled 5.7 percent growth in personal income in the first quarter of 2018 — the nation’s fourth highest — as a sign that the state’s economy is turning around. Let’s hope that trend holds.

The economic servitude in which so many Americans struggle — working extra jobs to pay off student debt, scrabbling to survive in depressed regions, choosing between buying medicines or groceries — will remain distant problems to those who inhabit the halls of power — until voters force them to care.

This editorial has been updated to show that Kentucky outpaced five of its surrounding states in job growth since 2009. An earlier version said Kentucky also had outpaced five surrounding states in wage growth. In fact, according to the Chamber report, Kentucky outpaced three surrounding states (Missouri, Virginia and West Virginia) in wage growth.

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