13 August 2018
Our economy is currently healthy in several respects. Unemployment is low, and median household incomes have increased.
However, there is a radical imbalance in how the benefits of growth are shared among Kentuckians.
According to the University of Kentucky Center for Business and Economic Research, changes in Kentucky household income from 1979 to 2015 are as follows (Income level; percentile; Kentucky; U.S.):
• Lower income level – 10 percent, down 0.8 percent in Kentucky, up 7 percent in U.S.
• Lower middle class income level – 25 percent, down 1.1 percent in Kentucky, up 11 percent in U.S.
• Middle class income level – 50 percent, up 3.6 percent in Kentucky, up 16.7 percent in U.S.
• Upper middle class income level – 75 percent, up 18.7 percent in Kentucky, up 33.6 percent in U.S.
• Upper income level; 90 percent, up 33.0 percent in Kentucky, up 50.7 percent in U.S.
This trend has been described as the “hollowing out” of the middle class.
In 2015, over one-quarter of Kentucky households had incomes of $25,000 or less. Our current median income of $42,400 is 75 percent of the U.S. median. Earned income per capita is 47th among states.
In 2016, our poverty rate was 18.5 percent and our child poverty rate was 24.5 percent , both 47th among states.
So, while our economy has grown, it has not benefited all Kentuckians.
Our low unemployment rate (4.9 percent) and high poverty rate (18.5 percent) reveal that many people work at below-poverty wages. The federal minimum wage of $7.25/hour is 60 percent of the poverty level. Twenty-nine states and the District of Columbia have adopted higher levels, but Kentucky has not.
How do families make ends meet? Through taxpayer-funded public benefits, including Food Assistance, Child Care Assistance, etc. A full-time worker at $9/hour receives half of his compensation from his employer, and half from taxpayers. This is not sensible.
Poverty and economic stagnation exact other costs. Outwardly the frustration, fear and anger so prevalent today take the form of violence, crime, mass shootings, and civil unrest. Internally they result in depression, addiction, mental illness, domestic violence and suicide.
Kentucky needs a more thoughtful approach to growth. Henry Ford, no liberal, was once asked why he paid his workers so well. “So they can buy the cars they make,” he replied. He knew that a robust marketplace requires consumers with the means to participate in it.
The most direct path to improved wages is for employers to direct more of their increased profits to employees. Of existing public policy options, raising the minimum wage is the simplest and most effective.
Recent actions by the legislature – eliminating the prevailing wage, instituting “right to work” which weakens unions and lowers wages, refusing to increase the minimum wage, reducing Worker’s Compensation benefits and pension benefits – might appear to benefit employers. But such benefits are short-lived, coming at the cost of a stable and productive workforce.
There is nothing wrong with the business community pursuing its interests. Strong businesses are the foundation of our economy. And they are doing a good job. Profits are at an all-time high.
But as the data make clear, directing these benefits almost exclusively to the highest income Kentuckians insures a lower standard of living and quality of life for most other Kentuckians.
This is not healthy. We need to change it.
This is part of why I am running for state representative in House District 69.
Col Owens of Fort Mitchell, candidate for state representative in House District 69.