Report From CT Voices For Children Says State Lags Behind Nation In Growth Of Income, Jobs | CT News Junkie

“This report highlights several significant problems affecting Connecticut’s economy and workers, and then provides policy options to address those problems,” CVC’s annual The State of Working Connecticut report states. “The key economic problems highlighted include Connecticut’s lagging job growth, personal income growth, and economic output growth compared to the U.S. as a whole. These trends have limited the state’s ability to make critical public investments and to generate the necessary tax revenue, both for the critical public investments and for tax reforms that would support low- and middle-wage workers and their families.”

CVC’s analysis shows that since the pandemic-induced recession through 2023, Connecticut’s personal income growth is 6.8% lower than the national average, coming in at 18.2% for the state compared to 25% for the nation. The state also has a compound annual growth rate gap of 1.4%. Going back to the Great Recession, Connecticut lags behind by over 35%, with an annual growth-rate gap of 1.3%

These numbers are significant because of the way the state’s spending cap works. Budget appropriations are limited to a percentage increase based on either inflation or the compound annual growth rate in personal income over the preceding five years. As a result, Connecticut’s slow income growth directly impacts how much money the state government can spend. According to CVC’s analysis, slow personal income growth has cost the state an average of $205 million in public spending a year between 2020-2022, and over $5 billion since the Great Recession. 

The job growth rate for Connecticut also lags behind the national average. Since the pandemic, Connecticut has averaged only a 0.2% job growth rate, resulting in 55,560 fewer jobs than if the state matched the national average job growth rate of 3.4%. It took the state a year longer than the nation at large to recover the jobs lost during the pandemic. A partial explanation may be the lack of public sector hiring in the state. Public sector hiring is up 1.2% from February 2020 through January 2024 for the nation, while in Connecticut public sector employment is down 1.6% over the same period.

Both of these factors contribute to the state also falling behind in gross domestic product (GDP). From the Q4 of 2019 through the Q4 of 2023, the state’s nominal GDP growth has been 20%, compared to 27.6% for the nation. CVC’s analysis shows that the 7.6% gap in nominal GDP has cost the economy $22 billion in growth, and resulted in nearly $1.3 billion in missed tax revenue for the state. The numbers are even more stark if taken back to the Great Recession. Connecticut’s nominal GDP growth is 38.5% lower than the national average, resulting in $90.5 billion in lost economic growth and nearly $5.5 billion in lost tax revenue.

Connecticut also continues to be plagued by wage gaps based on gender, race, and ethnicity. In its analysis, CVC found that, when factors such as age, education, occupation, and others were included, women in the state have earned between $0.79 to $0.90 on the dollar since 2003. African Americans have earned between $0.78 to $0.92 on the dollar, and Hispanic citizens have earned between $0.85 to $0.98 on the dollar. Low wage workers tend to earn a comparatively higher amount on the dollar than middle wage workers.

There was some good news in the report regarding income inequality.

Low-wage workers in Connecticut saw the highest real growth from 2013-2019, reducing inequality within the bottom 90% of earners by 13.4%. This growth is attributed to the 2019 state law increasing the minimum wage in steps: to $11 in October 2019, $12 in September 2020, $13 in August 2021, $14 in July 2022, and $15 in June 2023. Beginning in 2024 and each year thereafter, the minimum wage increases based on the annual percentage change in the Employment Cost Index (ECI) for wages and salaries for all civilian workers. However, the report also notes that historically high inflation has eroded much of the income gains for low wage workers.

The report offers several policy recommendations, such as raising the minimum wage, filling public sector jobs, and improving the early care and education system. On taxes, the report suggests establishing a child tax credit, increasing the earned income tax credit and making the Connecticut Property Tax Credit fully refundable and available to renters.