Friday, October 31, 2008

Georgia Headed into Troubled Economy Before Fully Recovering From 2001 Recession

A report released today by the Georgia Budget and Policy Institute concludes that even as the current economic slowdown hit, Georgia families were still trying to recover from the 2001 recession and its aftermath. The report, State of Working Georgia 2008, examines job growth, unemployment, income, and benefits, using data from the Current Population Survey and American Community Survey, among other sources.

The key findings surrounding the current economic slowdown include:

* From September 2007 to September 2008, Georgia lost 61,100 nonfarm jobs and was one of only five states to experience a statistically significant employment decrease, according to preliminary Bureau of Labor Statistics (BLS) data.
* The number of unemployed workers rose by roughly 100,000 between September 2007 and September 2008, for a total of 317,500 out-of-work Georgians in September 2008. Georgia had the 15th highest unemployment rate in the nation in September.

Data for 2007 on underemployment, incomes, and benefits show that Georgia workers had not fully regained the ground lost during the 2001 recession. In short, before the 2008 economic crisis started, Georgians were still trying to recover from the 2001 recession, as was the case in many states. Data from BLS and Census Bureau surveys show:

* About 8 percent of workers were underemployed in 2007, compared to 6.3 percent in 2001. Underemployed includes unemployed workers, marginally attached workers, and part-time workers who would like full-time jobs.
* Median household income in 2007 remained statistically unchanged compared to 2001, after adjusting for inflation.
* The poverty rate remained high at 14.3 percent in 2007, compared to 11.7 percent in 2001.
* In 2006-2007, 59.9 percent of non-elderly Georgians were covered by employer-sponsored health insurance, compared to 64.4 percent in 2000-2001. The percent of Georgians lacking health coverage rose from 15.0 percent in 2000-2001 to 17.6 percent in 2006-2007.

"The employment conditions in Georgia pose both short-term and long-term challenges, as policymakers must confront the current slowdown and the continued effects of the 2001 recession," noted Sarah Beth Gehl, Deputy Director of GBPI. "For the short-term, our leaders must protect vital public services as workers face unemployment and increased income insecurity. For the long-term, policymakers should focus on raising adult education levels and strengthening work and income supports for workers in low-paying jobs."

The report also examines employment conditions and income based on race, gender, and education, as well as income earned by each income quintile. The report provides budget and policy recommendations for both the current economic crisis and the long-term economic challenges faced by low-income working families.

Short-term recommendations -

* Call on Congress to pass an economic recovery package that includes additional weeks of unemployment benefits, a temporary increase in Food Stamp benefits, and state fiscal relief. (For estimates on the additional funds Georgia would receive under U.S. House and Senate packages, find tables at the end of this report by the Center on Budget and Policy Priorities.)
* Target budget cuts to lower priority programs. With a potential $2 billion state budget shortfall, the state has made across-the-board budget cuts to most state agencies. As Georgia families experience dramatic financial strain in 2008, leaders must ensure that vital government services are adequately funded. Medicaid, PeachCare, child care, and education, to name a few, should be spared as much as possible.
* Raise revenues through strategic tax increases. Rather than relying overwhelming on budget cuts, there should a balanced approached to the budget shortfall, including strategic tax increases. Raising the cigarette tax or implementing a temporary income tax surcharge, for example, would provide needed revenues to avoid further cuts to public services.
* Use the revenue shortfall reserve. Through good fiscal management, Georgia has a $1 billion rainy day fund. Now is the time to use it.

Long-term recommendations -

* Increase the capacity for adult basic education. Georgia invests around $14 per adult without a GED in adult basic education, compared to the national average of $64. Georgia should increase its investment in this area, along with outreach efforts towards nontraditional students and support services for families seeking education opportunities.
* Undertake additional outreach efforts for Medicaid and PeachCare. Of the 300,000 uninsured children in Georgia, an estimated 200,000 are eligible for Medicaid or PeachCare, but not enrolled. Getting eligible children and families enrolled in existing programs can increase the efficiency and effectiveness of available healthcare programs. The federal government covers a majority of the cost of these programs, with an almost 2 to 1 match for Medicaid and 3 to 1 match for PeachCare.
* Increase child care assistance for low- and moderate-income working families. Georgia uses federal dollars to assist low-income families with child care costs, but continues to have a waiting list for assistance. At the same time, Georgia subsidizes child care through the tax system, with millions of forgone tax dollars subsiziding child care for upper-income families. Policymakers should end the child care subsidy for higher-income Georgians and more fully assist low-income working families.
* Create a state earned income tax credit (EITC), enhance outreach efforts around the federal EITC, and raise the state minimum wage to the federal level.

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