This year’s State of Working Connecticut report, released earlier today by Connecticut Voices for Children, found the state to be lagging behind the rest of the country in post-pandemic economic recovery, specifically in GDP growth and job growth. The report made numerous policy recommendations to alleviate this stagnation, such as increasing its number of public jobs, expanding its tax credits, and improving the state’s tax structure.

“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,” read the report. “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.”

Connecticut Voices for Children, a New Haven based non-profit that provides “quality research, recommendations and advocacy that advance public policy and investments to improve the well-being of Connecticut’s children and families, specifically those that have been historically disadvantaged,” released its first State of Working Connecticut report in 2000. The goal of the report is to provide an overview of the state’s economy, evaluate wage dynamics for the state’s low and middle income workers, and present policy suggestions. The group utilizes numbers from the U.S. Bureau of Labor Statistics and Bureau of Economic Analysis, as well as statistics, surveys, and reports from various state agencies and think tanks, to synthesize its own reports.

The report found Connecticut to be significantly lagging behind other states in terms of economic recovery, both in the short-term since the onset of COVID, as well as in the long-term since the Great Recession of 2007. The report found that the state’s disparities in GDP and job growth, in comparison to the national average, have cost Connecticut billions of dollars in unrealized tax revenue and 248,000 potential jobs since 2007. On the other hand, it found that Connecticut has exceeded the national average in terms of wage growth among low wage workers, as well as in reduction of wage inequality, though post-COVID inflation has stifled these gains significantly.

On the subject of jobs growth, the report found the state’s growth numbers from Feb. 2020 to Jan. 2024 to be 3.3% lower than the national average, and a staggering 14.5% lower than the national average when observing the period from Dec. 2007 to Jan. 2024. The report attributes this below-average bounce back in job growth, both since the Great Recession of 2007 and since COVID, largely to what they deem to be an insufficient rate of public sector job creation.

“Like the recovery from the pandemic-induced recession, Connecticut’s slower job recovery from the combination of the Great Recession and the pandemic-induced recession is partly due to a slower recovery in public sector jobs,” read the report. “In the U.S., public sector employment (federal, state, and local) is up 3.4 percent from December 2007 through January 2024, whereas in Connecticut public sector employment is down 9.3 percent during the same period.”

As for the state’s GDP-growth, a measure of the increase in the total market value of goods and services produced by a region over a specific period of time, the report found Connecticut’s GDP-growth to have been 7.6% lower than the national growth rate since 2019. This equates to approximately $22 billion in missed economic growth and around $1.3 billion in lost tax revenue. Again, this trend is even worse when analyzed over the long-term; since Dec. 2007 through 2023, the report found the state’s GDP growth to be 38.5% lower than the national growth rate, representing an estimated $90.5 billion in missed economic growth and $5.5 billion in lost tax revenue.

Regarding the state’s wage growth, it found low-income workers to have benefited significantly above the national average, while finding stagnation in middle-income workers’ wage growth. 

“From 2019 to 2023, real wage growth in Connecticut was the highest for low-wage workers, averaging 11.4 percent and helping improve their standard of living,” read the report. “In contrast, real wage growth averaged -0.5 percent for middle-wage workers, making it more difficult for these workers to maintain their standard of living.”

For comparison, the national average in low-income wage growth over the same period was 6%. The report attributed the state’s wage-growth among low-income workers to legislation passed in 2019, which mandated annual incremental increases in the state’s minimum wage. This low-income wage growth also reduced the state’s wage inequality among the state’s bottom 90% of earners by an average of 13.4% from 2019-2023. This reduction in wage inequality was not applied evenly however, with the report stating inequality in the private sector to be 25.9% higher overall.

In spite of the positive indicators in regards to lower-income growth, the report found that much of this progress has been wiped away by post-pandemic inflation. When evaluating the state’s low-income workers’ real wage growth, the report states that average wage growth from 2021-2023 was only 2% in comparison to the 11.4% in overall growth from 2019-2023. Real wage growth is a measure of wage growth that accounts for inflation.

“This shows that most of the real wage growth occurred before the historic rise in inflation, which has since eroded much of the earlier gains and made it harder for low-wage workers to improve their standard of living,” explained the report.

In addition, inflation has made the stagnation in wage growth among middle class workers even worse. The report found that from 2021-2023, average real wage growth for the middle class was -4.8%, compared to the -0.5% growth from 2019-2023. 

“This shows that the historic rise in inflation has made it even more difficult for middle-wage workers to maintain their standard of living,” read the report.

Ultimately the authors made several policy suggestions to improve the state’s economic outlook. Regarding labor policy, the report recommended that the state eliminate subminimum wages (wages paid primarily to service industry workers that earn tips), increase its number of public sector jobs, impose tighter restrictions on private employers’ ability to use non-compete agreements and unpredictable scheduling cycles and increase subsidies on child care costs for families while simultaneously increasing wages for child-care workers.

“Addressing major problems in the labor market will increase the state’s labor force and job growth, leading to increased personal income growth and GDP growth, which in turn will increase the state’s spending cap capacity and tax revenue,” read the report. “It will also help to increase wage growth, reduce wage inequality, and reduce wage gaps.”

The report also advocated the state make a number of significant changes to its tax structure and credits. It asserted that a reduction in the state’s tax gap, elimination of high cost and high growth tax expenditures, and a reform of the state’s fiscal controls would generate additional revenue. The authors also recommended that the state establish a fully refundable child tax credit, property tax credit available to renters as well as homeowners, and earned income tax credit for childless workers, in an effort to support low and middle-income workers.

“Making the tax system less regressive will increase the post-tax income of low- and middle-wage workers and their families,” read the report. “The resulting increase in consumer spending will boost job growth, personal income growth, and GDP growth, which in turn will help to increase the state’s spending cap capacity and tax revenue.”

The Connecticut Voices for Children Report follows the publication of the Connecticut Business and Industry Association’s (CBIA) “Opportunity Connecticut” report last week.

Republish This Story

Republish our articles for free, online or in print, under a Creative Commons license.