Half of North Carolinians have little or no savings, group says
RALEIGH, N.C. — The number of North Carolinians possessing little or no savings rose again in 2013, this time to 51.5 percent, according to a report released Thursday by the Corporation for Enterprise Development.
The nonprofit group, based in Washington with offices in San Francisco and Durham, titled its report “Treading water in the deep end.”
The group has provided a national scorecard of states’ business climates since 1988, though the format changed in 2007. It supports creating financial responsibility and opportunities for low- and middle- income families.
The group defines financial insecurity as people who lack adequate financial accounts, such as cash, bank deposits and investment holdings, to cover basic expenses for three months in the event of an emergency, such as a job loss or health crisis. The financial amount considered was the federal poverty level of $23,550 for a family of four.
The report also found 36 percent of N.C. households earning between $48,553 and $78,672 have less than three months of savings, considered as less than $5,887 for a family of four.
North Carolina received a failing grade in one of five economic categories – businesses/jobs — and an overall “outcome” ranking of 46th, according to the 2014 Assets & Opportunity scorecard. There were only four states to receive a failing grade in the business and jobs category.
“While North Carolina does well in policy areas, such as protections against predatory lending, the loss of the state Earned Income Tax Credit, the failure to extend unemployment insurance (UI) benefits and implement the expansion of Medicaid, and changes to the sales tax, have only increased challenges for families struggling to make ends meet,” the group said.
Donna Gallagher, with the N.C. Assets Alliance, said North Carolinians who are struggling with persistent financial insecurity “have limited opportunities to improve their circumstances” because of the changes cited by the group.
The group’s conclusions are likely to further stir the political and socioeconomic debate about how well North Carolina is doing in terms of gaining economic traction.
Gov. Pat McCrory and Republican legislative leaders oppose expanding Medicaid, saying the current system needs to be fixed first.
Democrat legislators and advocacy groups counter that McCrory and the Republicans leaders have been overstating the overall problems with Medicaid, though the N.C. Department of Health and Human Services has made major mishaps with the Medicaid claim and food-stamp application processing systems.
The state’s jobless rate dropped 0.5 percentage points to 6.9 percent in December. It is down from 9.5 percent in January 2013.
McCrory and the Republican leaders say reducing state UI benefits, in terms of weeks and maximum amount, is compelling people to take jobs they had passed on previously, even if it leaves them underemployed for their job skills.
Advocates and many economists say the state jobless rate has fallen because more than 110,000 North Carolinians have left the job market in the past year, and thus are not counted as unemployed.
Gallagher said helping North Carolinians gain more financial security needs to go beyond restoring those programs cited by the group.
“Establishing a 529 college savings account with a 529 matched savings option for low- and moderate-income families would expand the opportunity to pursue higher education for many of our state’s youth,” Gallagher said.
The group said the F grade for businesses and jobs came from its recent high jobless rate, North Carolina ranking 42nd in small business ownership rate and 42nd in disparities in business ownership by race, with white residents more than twice as likely to own a business as minorities.
North Carolina got a D grade in health care, primarily because of the high number of uninsured residents, particularly low-income children. It received C grades in financial assets and income, housing and homeownership, and education.
“Certainly it is to be expected that savings takes a back seat to paying bills and staying afloat during the kind of severe recession and slow job recovery we’ve had,” said Michael Walden, an economics professor at N.C. State University. “Unfortunately, a large number of households – particularly those with few or outdated jobs skills – are not looking at better prospects ahead.
“The long-run solution is getting more households trained for today’s middle-income jobs – thereby providing them with the incomes that will accommodate saving.”
Alexandra Sirota, director of the left-leaning N.C. Justice Center, said North Carolinians’ ability to save is directly related to their ability to earn and their access to savings vehicles.
“Those that may be able to save, even if a small amount each month, have less access to the appropriate savings vehicles either at their places of work or in their communities,” Sirota said.