Low work-participation rate fuels NM income gap

A new report from the Center on Budget and Policy Priorities says New Mexico’s rate of income inequality — the gap between the incomes of the rich and poor — is the 12th-highest in the nation. Earlier this year the Economic Policy Institute said New Mexico had one of the lowest levels of income inequality, ranking No. 44 among the states.

The Center on Budget and Policy Priorities — a nonpartisan think tank that analyzes policies from a progressive perspective — says the gap has worsened over the past three-and-a-half decades, and that the top 1 percent’s share of income doubled between 1979 and 2013, from 10 percent to 20 percent. The Economic Policy Institute — a nonprofit think tank that says it researches “the economic status of working America” — compared the average income of the top 1 percent to the average income of the remaining 99 percent.

But before anyone argues a tax on New Mexico’s so-called 1 percenters is the answer to all budget woes, it’s important to note that while their income is about 16 times that of the remaining 99 percenters, it takes just $231,276 a year to enter the realm of the so-called super-rich in the Land of Enchantment. (In Connecticut you would have to earn $659,979 to join the lofty few.)

Elizabeth McNichol, who authored the Center on Budget and Policy Priorities report, argued that “income inequality is bad for the economy because it reduces opportunities for working people. If New Mexico wants to improve its economic situation, it will need to address the divide between the richest households and the rest of the state.”

While there are valid arguments over how to view income inequality — zero isn’t great if it means everyone is dirt poor — there are some obvious ways to tackle the issue here. We can start by addressing how many people are — or aren’t — working.

In the Dec. 5 edition of the Journal’s Business Outlook section, reporter Marie C. Baca provided a sobering profile of the state’s civilian workforce. Only 57.5 percent of the state’s workforce — defined as those 16 and older (no upper limit) who are able to work — actually “participate” in the workforce. Conversely, 42.5 percent, or about 686,000 individuals, who could do not “participate.”

Those numbers are mitigated to some degree: Those “not participating” could be retirees, non-working college students, women with care-taking responsibilities or workers who have been out of work so long they’ve stopped looking for a job.

Or folks who can’t pass a pre-employment drug test. An October Business Outlook report quoted one business owner as saying for every 10 drug tests, four candidates fail and another four never show up to take the test.

Still, the numbers indicate there are a lot of New Mexicans capable of working who, for whatever reasons, aren’t.

The state’s high unemployment rate is reflective of the workforce participation numbers. And it doesn’t help on the income inequality score. New Mexico’s unemployment rate was 6.7 percent in November — the second-highest in the nation. (Alaska was No. 1 with 6.8 percent.) New Mexico has had that same dubious honor for the past four months. Meanwhile, the national unemployment rate for November was 4.6 percent.

Like other studies, the income-gap reports can be pitted against each other to support an ideological bent, or they can be used to focus on the real bottom line — that to shrink its income gap New Mexico first and foremost needs to quite literally get working, and part and parcel with that is balancing the state budget, reforming the tax structure, better educating the workforce, diversifying the government- and oil-dependent economy and convincing new college graduates to stay and thrive here.

The income gap is simply one more indicator we need to do better.