Liberal and conservative economists universally agree that income and wages can increase for everyone across an economy only when productivity increases. There are a number of ways government can increase productivity, including through investments in public infrastructure such as better transportation and communication systems and increased utility capacity, increased technological innovation at public universities and other institutions and through increased education and training for workers. The private sector can increase productivity by increased capital investment in such things as machinery and more efficient buildings, improved workflow and developing improved processes and technological innovation. Productivity increases resulting from private investment largely benefit the private investor. This is the area where the so-called “One Percent,” the wealthiest Americans, have shown such disproportionate gains in income compared to the “Ninety-nine Percent” of other Americans. To achieve rising incomes for average people, two things need to happen; productivity needs to increase creating more income overall, and new income generated from their increased productivity needs to be returned to workers in the form of higher wages.

States derive much of their resources by taxing everyone., As the tax system becomes more regressive through increasing taxes on consumption, sales taxes, and lowering income tax rates, the cost of government investment in productivity falls increasingly on workers. If we are to maximize the return to the “Ninety-Nine Percent” we must focus our public investment on increasing workforce productivity. More and more, however, States such as our own are turning to a short-term, shortsighted approach to economic development by concentrating on luring employers from other states with strategies that do not lead to rising incomes because they don’t make their workforce more productive. Even worse this focus drains resources from the more important path to increasing productivity, investments in education.

North Carolina should be investing heavily in workforce productivity. Tax breaks, especially for higher income individuals, have hindered North Carolina’s ability to invest in its once well-regarded university system. Adjusted for inflation, state funding for higher education has been cut by more than 20 percent since 2008. According to the UNC student newspaper, The Daily Tarheel, due to funding cuts and in an attempt to mitigate rapidly rising tuition, the system’s Board of Governors recently voted to cut 46 educational programs. The impact on staff and faculty is still unfolding as the North Carolina House and Senate continued to debate differing budget proposals, which may ultimately result in even more cuts. Many students are taking on unsustainable levels of debt. Funding cuts and rapidly rising tuition are creating a daunting barrier to economic opportunity for students from low- and middle-income families and the communities where they live. North Carolina needs to maintain its constitutional commitment to ensure post-secondary education is “free as far as practicable.” That means funding our higher education systems adequately. Only by renewing this commitment will we begin to address the economy of the average North Carolinian.

Jim Smith is the first vice chairman of the Beaufort County Democratic Party.