This week, Goldy and Paul talk to Chandra Childers, a senior policy and economic analyst at the Economic Policy Institute and author of their recent report on the Southern economic development model. Although the Southern economic development model is touted as a business-friendly strategy, it has devastating consequences for workers and families in Southern states. Childers explains how this economic model is rooted in racism and economic exploitation and has led to lower wages, weaker safety nets, and fewer opportunities for workers. They also discuss how some Southern states are bucking this trend and attempting to adopt more progressive policies, as well as the potential impact of renewed unionization efforts in the region.
Chandra Childers is a senior policy and economic analyst with the Economic Analysis and Research Network (EARN) at the Economic Policy Institute. Her work is primarily focused on supporting EARN’s state and local policy research and advocacy network in the Southern United States. Before joining the EARN team at EPI, Childers was a Study Director at the Institute for Women’s Policy Research.
Twitter: @ChandraChilders
Further reading:
Breaking down the South’s economic underperformance
The evolution of the Southern economic development strategy
Rooted in racism and economic exploitation
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Middle-out economics is the answer.
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This is Pitchfork Economics with Nick Hanauer, a podcast about how to build the economy from the middle out. Welcome to the show.
Speaker 4:
Paul, hello. You’re not Nick.
Paul:
I am not Nick. I am comma-deficient, unfortunately.
Speaker 4:
So Nick couldn’t make it this week. So, Paul, thank you for joining us on this podcast to actually talk about one of the things that’s kind of near and dear to our hearts in a way, or maybe it’s the inverse of it. We’re very much into, in case long-time listeners haven’t realized, we like a high-wage model. We think that economies work better when wages are high across the board, low, middle, even rich guys like Nick. It’s okay if he’s making some money as long as we’re taxing the hell out of him.
And herein, our office has always worked from the very beginning. In fact, Nick and I met over the $15 minimum wage, the fight for the $15 minimum wage in Seattle, in Washington, throughout the country. And we know we’re not perfect here in Washington, but we feel like this high-wage model works very well for us. It certainly works to the benefit… People are better off with a high minimum wage with 15, $20 an hour than they would be at the federal 7.25, which would be a starvation wage here in Seattle. But that’s not the model everywhere, Paul.
Paul:
It is not. It is not. We are a laboratory of democracy here in the United States, right? And so, yeah, different states do it differently.
Speaker 4:
Yeah. And that’s a great metaphor to bring up, that laboratory of democracy idea, because different states choose different models. And it turns out that throughout much of the former Confederacy, really all of the former Confederacy, they have pursued a different economic model, one of low wages, one of less regulation, one of opposing organized labor.
And, well, we do the same thing here, low taxation on the rich, but we’re not perfect, as I said. And to talk with us about that today, we have Chandra Childers, a senior policy and economic analyst with the Economic Analysis and Research Network at EPI, one of our favorite think tanks, and she is the author of a recent report, Rooted in racism and economic exploitation: The failed Southern economic development model.
Paul:
Great. I’m really excited. So let’s talk to Chandra.
Chandra Childers:
My name is Chandra Childers. I am a senior policy and economic analyst with the Economic Policy Institute. Specifically, I work with our state and local policy group, and my work focuses on the Southern states in particular. And so, the work that I am here to share today is focused on the Southern economic development model. It’s a project called Rooted in racism and economic exploitation. And what we do with this work is show that the model in place across the South is an intentional model, and it’s a model that’s failing workers and families across the region.
Speaker 4:
In our office, we sometimes like to refer to the high-wage model here in Washington State as Cascadian capitalism. It’s not perfect. We have a terrible tax system here and a lot of inequality, but there’s a lot going for it as well. If you could describe the defining characteristics of what you call the Southern economic development model and how that differs.
Chandra Childers:
Yes. So the Southern economic development model has several key components to the model. One of the defining characteristics of the Southern economic development model is low wages for workers. And so, what we see is, looking across Southern states, most have lower median wages than we see in states outside the region. A second component is a lack of regulation of business. So there’s less regulation of businesses. We see a weaker safety net across the region to protect workers when they face economic hardships or economic downturns.
We also see a high use of economic subsidies and, I would say, very regressive tax system. You mentioned taxes. The tax systems across the region are very regressive, which means that poorer workers are paying more of their income in taxes than wealthier residents of these states. And a key component is anti-union. I mean, strongly anti-union across the region, and that is a critical component for a number of reasons, which we can get into.
Speaker 4:
And you say that this model is, the historical roots are intentionally racist. Explain how that works.
Chandra Childers:
Sure. So we refer to this as rooted in racism, because the model that’s in place, while today the model has been kind of… They’ve cleaned up some of the historical roots, and they portray it as this business-friendly model that’s intended to attract business and job growth, which, theoretically, should lead to broad prosperity, widespread, shared prosperity.
But when we look at this, what we see is that this model actually grew and developed out of efforts of wealthy and powerful Southerners after the end of slavery to continue to access the labor of free Black men and women, again, without giving them fair compensation. So a good example of that here is, many states, they passed laws against being idle. So Black men and women needed to show that they were gainfully employed. Yet, the jobs that were available to them were quite often the same jobs they’d had under slavery, so this is like sharecropping or domestic work, tipping.
These are the same jobs that many of them… The same work that they had done before. And so, when we think of maids and porters, they were encouraged to rely on tips for payment instead of being paid a fair wage. Sharecropping, they’re still doing the agricultural work, and what they’re growing, a large share of it is being taken by the landowner. So we’re seeing this same process. It’s just a new name. Today, incarceration. Slavery is illegal unless you’re convicted of a crime.
And so, it’s the same effort to keep extracting labor from these workers without compensation. And you can see that, for example, in the Fair Labor Standards Act, where what are the jobs that are excluded in order to get support from Southern lawmakers? You exclude agricultural work, domestic work, and tipped work, these jobs where these Black men and women are disproportionately employed, and we see that till today.
Paul:
You talked about this as being pitched to people as a pathway to greater prosperity, right? By cutting regulations and basically giving more money to the wealthy few, supposedly they’ll create jobs and create prosperity. Can you talk a little bit about the ways that this model’s policies and practices have either broadly benefited or failed the residents of the South?
Chandra Childers:
Yes.
Paul:
What’s it like for the people out there?
Chandra Childers:
Yes. No. Absolutely. So here, we can talk about, for example, I mentioned low wages. So we know that workers across the South have lower wages than workers in other regions. One of the things that we’ve done, because one of the things we hear quite often is that the wages are lower, but that’s okay because the cost of living is lower.
We adjusted wages for differences in the cost of living, and we found that wages across the South still remain lower than wages outside the region. Larger shares of workers across the South are paid less than $15 than in other regions outside the South. If we look, for example, and this is one of my favorites, the minimum wage law, I feel like I’m all over the place, because there’s so many pieces of this.
Speaker 4:
And we love minimum wage here, so get into the details.
Chandra Childers:
Yeah. So the federal minimum wage is, what, 7.25 an hour, where it’s been stuck since 2009. Despite all the talk about inflation and the high prices, we don’t see a push to raise that minimum wage. Many states outside the South, though, they did push up their wages, because they recognize that their workers can’t live on that. But if you look across the South, the South, if I’m not mistaken, it’s like 10 states. The minimum wage is either at the federal minimum wage or lower. Five Southern states actually have no state-level minimum wage.
So these are states where they’re not even trying to meet the… The federal minimum wage takes place because it’s the law, but their state wages are actually lower than the federal minimum wage. And that’s the wage piece. Another piece, the weak safety net. If you look, for example, unemployment insurance, while most states provide 26 weeks, some states across the South provide 12 weeks, so that’s less than half. The maximum weekly amount that’s paid is lower.
Another piece of the safety net is TANF, and you asked earlier about the rooted in racism piece. In the report, we actually get into some of that history of racism and who could access those benefits. Now, TANF is Temporary Assistance to Needy Families. It was originally Aid to Families with Dependent Children, which allowed for cash dollars to be provided to families to be able to care for children.
We see rates as low as monthly rates for a family with two children that’s less than $300 in some places across the South. I don’t know quite how families are expected to live on that, but that is what they receive in benefits. And I mentioned that unionization piece. Unions are one of the primary ways that workers are able to join together with their coworkers and lift their wages, but what we see across the South is these right-to-work laws. We see strong opposition to workers being able to join together to form unions.
Recently, we’ve just had a few states pass laws saying, while they do love giving subsidies to corporations, if a corporation voluntarily accepts workers’ decision to sign union cards, that they can’t no longer receive subsidies. So we see that workers are being harmed at every step of the way. They’re not receiving enough a living wage. There’s no safety net for them, their ability.
We see, at the state level, states passing laws preventing local cities and counties from having better policies. So if you live, say, in a city where you’re able to elect people who would uplift you and raise wages, then states are using preemption to prevent that to make sure that you don’t have access to be able to influence the policies that you live under.
Speaker 4:
And the argument today, nobody is going to say, “Oh, we’re doing this to keep Black and brown people down.” They’ll say they’re doing it because it’s pro-business and it’s good for the economy. How are the economies doing in these Southern states?
Chandra Childers:
Well, that’s another. What we see when we’re looking across these states, for example, they tend to have lower GDPs than states outside the region. And one interesting thing is, one indicator that we quite often look at is unemployment rates. And one of the things that we find is, while unemployment rates across the South do tend to be low, that since the unemployment rate does not include those who have given up either because of being unable to find a job, because even if they could find a job, they don’t have access to supports like childcare or transportation, that they don’t get counted.
So what we find is, when we just look at what share of the prime-age population has a job, that is lower across the South. And again, I highlight, the reason for that is because there are not supports, for example, like childcare, eldercare. And we know that lots of moms and dads and people who are that sandwich generation caring for children and elderly or disabled parents, or other family members, without those supports, they’re not able to actually actively participate in the labor force.
We also see some of the highest incarceration rates, especially of Black men, across the South. And we know research tells us again and again that that’s a key barrier to being able to access employment once they’re released.
Paul:
Have there been any recent policies adopted or initiatives aimed at addressing these economic disparities in the South?
Chandra Childers:
I don’t know about at the state level.
Paul:
Mm-hmm. Is there anybody doing any work on the city level that’s interesting or hopeful?
Chandra Childers:
I think there is where the preemption kicks in. If cities or counties or localities start trying to do things to benefit their workers, then that’s where you’ll see states come in with preemption to prevent them from doing so.
Speaker 4:
And that’s where Black and brown communities have the largest political influences at the local level.
Chandra Childers:
Yes, that’s exactly right. That’s where they would be able, especially in some of the larger cities across the region. We talk about segregation. We know that there are some large, majority-Black, or predominantly Black cities where they are able to push for policies, but that’s where you get state preemption coming in.
Speaker 4:
Are some Southern states doing better than others? You can see politically states like Georgia and Virginia and North Carolina, and you include in this, in your definition of the South, the District of Columbia and Delaware. Is there a movement in some of these more developed states to go in a different direction?
Chandra Childers:
Yes. And that is one thing. We definitely include Maryland, Delaware, D.C. One, that’s how the Census Bureau defines it, but it also allows us to contrast those Southern states that adopt the Southern economic development model and those Southern states that don’t. And with Virginia, Virginia is a little mixed, but because it’s part of the District of Columbia, Maryland, Virginia area, we see that Virginia tends to do better. D.C. definitely tends to do better. Maryland tends to do better. These are states that are more likely… They’re more likely to have higher wages. They’re more likely to provide, for example, paid leave for workers, definitely higher GDPs.
We left D.C. out of the calculation of GDP, because it’s the seat of federal government. But we do tend to see that these states do better and sometimes on par with states outside the region than states that I think most people think of when they think of the South. When people think of the South, they think Florida, Mississippi, Louisiana, you mentioned Georgia. So we do see very different results depending, because across this project, we look at indicator after indicator after indicator, and what you see is pretty much more or less the same states are at the bottom on all of the indicators. So we see that over and over.
Speaker 4:
And what role is the federal government playing or not playing in this? I know we had Dorothy Brown on the podcast a while back to talk about her book, The Whiteness of Wealth, and it was really eye-opening in the ways that federal tax policy, even if it didn’t look like it was designed to do it, advantaged white families over Black families. Has the federal government made any impact in terms of countering the Southern economic development model, or is it pretty much par for the course?
Chandra Childers:
I think there’s two ways. There’s two things that immediately come to my mind. So first of all, when I think about the role of the federal government, we know that earlier, the federal government made certain concessions to the South in order to get certain policies that they wanted and they needed Southern support for.
But as I think about today, the policies, I think, that very well could counter, to some degree, the Southern economic development model, I think about the federal infrastructure spending that we’re seeing, like the IRA, the Inflation Reduction Act, the Bipartisan Infrastructure. In these bills, it includes things that could definitely help, like prevailing wages, community benefits agreements, project labor agreements. These are all things that can help lift up wages. It’d help empower workers, help close those gaps. And again, that also could be reducing racial and gender inequalities as well as empowering workers.
Some of those are included, like some of the direct pay credits, which is part of the Inflation Reduction Act. They really incentivize employers providing good jobs rather than just any jobs or exploiting workers. So I think those can be seen, as well as, for example, the NLRB, like the appointments there, so that it really is, those appointments who runs those agencies can have a potentially really big impact on what workers are experiencing in the region.
Paul:
Recently, we’ve seen the United Auto Workers’ push to unionize automakers in the South, in states that have historically leveraged low wage, nonunion labor to attract manufacturing jobs, and they’ve had some success. They unionized one factory. The other one, the union narrowly voted it down. That vote’s been contested. I was wondering if you’ve had any thoughts on these recent union actions and where they might go.
Chandra Childers:
Yeah. So the one where they did unionize was the Volkswagen plant in Tennessee. Yeah. I found that very exciting. And it’s not just the UAW. I know the Union of Southern Service Workers are also pushing, and my understanding, one of the groups they’re organizing is Waffle House workers that are fighting to get… They’re still paid $2.13 an hour, plus tips.
And I always like to note that when I was raising my son, I worked at an IHOP, where I was paid $2.13 an hour. He is now in his 30s, and it’s still $2.13 an hour, plus tips. And so, we’re seeing workers across the region begin to really recognize the importance of organizing, of being able to come together. But I think also, again, some of the things we’ve talked about, a lot of workers are scared. A lot of workers, they know that there is no safety net for them.
And some of the automakers that are moving into the region, they are moving into some rural communities, where there may not be a lot of other options for workers. And so, even though they may be treated poorly, paid poorly, it may still be better than any alternatives that they have. But the fact that we are seeing them push forward, that we are starting to see that shift, it makes me really hopeful. And another thing I note is that as the population of the South, as it grows and becomes more diverse, that may be another opportunity for us to hope that we might have change coming down the road.
Speaker 4:
We focus mostly on how this model impacts low-wage workers. How has it impacted the middle class? How’s the middle class doing in the Southern states?
Chandra Childers:
There is a measure of inequality that I look… Well, there’s a couple measures. And one, it looks at the share of all household income that goes to the top 5% and to the top 20%. And that, of course, is not the middle class, but the fact that that share is increasing indicates that the middle class is being squeezed. But also, some of the other indicators that we look at, for example, the share of workers that have health insurance coverage with their job, the share of workers receiving pensions. Many of the Southern states don’t provide things like paid leave. And so, these would be benefits for middle-class workers, but we know that they are much less likely to receive these benefits than middle-class workers outside the South.
Speaker 4:
Let’s get to the benevolent dictator question we like to ask. This is no political constraints. What would you change to fix this? What are the priorities?
Chandra Childers:
Are we saying that there’s a single thing?
Speaker 4:
No. It could be a list of an agenda, a list of priorities. What would you do if you were a powerful governor of a Southern state with a legislature that would back you up?
Chandra Childers:
The details and specifics of that, I would think each state, the people in the states. But I think at a minimum, it’s reversing that Southern economic development model. Instead of taking that low road, provide supports. If workers were allowed to unionize, that’s one step right there that empowers the workers themselves to be able to demand better wages.
One of the things we didn’t even mention when we talk about lack of regulation of businesses is worker safety. Worker safety is not being taken serious in many instances. So protecting workers, making sure that they are able to afford to provide for themselves and their families. But I think unionization is definitely one way to do that. I think raising wages to a livable wage would definitely be a key on the agenda, strengthening the safety net. And I’m not just talking about unemployment insurance or Temporary Assistance to Needy Families, but making sure that workers have what they need.
For example, access to affordable, quality childcare, access to the transportation, especially in rural communities. There are many rural communities across the South where people don’t, because Medicaid didn’t get expanded. Their hospitals are closed. They don’t have access to adequate medical care. And if they don’t have a car, then how do they get to where they need to go? They don’t have maybe grocery stores nearby. I’ve heard some people talk about having to do their grocery shopping at dollar stores.
So I think providing people and workers with what they need to be able to meet their basic needs, to be able to fully, actively participate in the labor market, and to be able to care for their loved ones and their family. I think those are some of the key, raise wages, make sure workers have access to healthcare, transportation, childcare, and, again, a livable wage.
Paul:
There’s a question we ask everyone on this podcast: Why do you do this work?
Chandra Childers:
I do this work because, one, as I mentioned before, I grew up as one of those waitressing, $2.13 an hour, trying to figure out how I was going to feed my child. I do this work, because even though I am now no longer in that position, I still see so many people who are, and so many people who are even worse off, and it saddens me to my core.
And I think that we should do whatever we can do in order to make things better for everyone. I believe that everybody does better when everybody does better. As long as we have the system that we have in place, I believe everyone’s life is somewhat worse for, and a lot of people’s are a lot worse, but everybody should be able to live a life of dignity.
Paul:
Amen.
Speaker 4:
Thank you for your work, and thank you for talking with us about this today. It’s not like I didn’t know some of this, but it’s always kind of depressing to read it again in black and white.
Chandra Childers:
Yeah. Thank you for having me. We really feel that this message, we really want to get it out to people on the ground. And so, I think that’s really important.
Speaker 4:
Great. Well, thanks for the work you do and everybody at EPI-
Paul:
Yeah. We really appreciate it.
Speaker 4:
… a really important organization.
Chandra Childers:
Thank you.
Paul:
In this conversation, I was thinking a lot about the early 2000s, when I was a young liberal in Seattle, and it was right when the idea of red America and blue America had really taken off, the idea of conservative states and liberal states. And there was really a sort of snide understanding among liberals, in Seattle at least, snide and, in retrospect, kind of racist idea, where we were like, “Well, if people don’t want to live in these states, why don’t they just move?” or “If people wanted to live under better economies, why don’t they just move?” And it was an incredibly condescending understanding, right?
Speaker 4:
Right. One reason why they might not move here is because we won’t build them the housing.
Paul:
Well, sure, yes, that’s another episode, I think. But I think it’s really important to consider race. For one thing, when we talk about economics in the South, we can’t just talk about it as a matter of high wage versus low wage, because there are generations upon generations of structures built to create this low-wage model that will cause workers to vote against their own best interests in union drives, because, honestly, there’s no better options available to them.
And you can’t just expect people to pick up and leave when their economy isn’t working for them, because their family is there. Their friends are there. Their whole lives are there. And also, they don’t have the resources, as you pointed out, to move to Seattle or to move to a blue city that’s beyond expensive. And so, it’s really important to hear from economists and from people like Chandra, who have the experience from waiting tables at IHOP, to really doing a deep dive into the economic lives of these workers in the South.
Speaker 4:
Right. And the thing that stood out to me about this, Paul, is that this Southern economic model, for the most part, it’s straight-up trickle-down. It’s low-wage suppression and deregulation of the powerful, and tax cuts for the rich, resulting in a highly regressive tax structure, disempowering workers, the anti-labor laws throughout much of the South and elsewhere.
But we don’t talk about it enough, and it’s sometimes easy to ignore the racism that is built into trickle-down, that civil rights and economic justice have always been connected. In fact, the iconic Martin Luther King speech, the I Have a Dream speech, was given at a… Essentially, it was a march for economic justice, in which one of the demands was the equivalent… Today, it would be around an $18-an-hour federal minimum wage. That was one of the demands. It was the right to organize, and this livable minimum wage.
Those were two of the demands of that march, and it was always understood that these issues were intertwined. And, of course, the history in the South, as Chandra told us and lays out in detail in the report, is really clear. This model was developed after the Civil War in order to continue to exploit the labor of former slaves either for free or for very little, at very little cost.
She mentioned, by the way, and we didn’t get into it in more detail, laws against idleness. There were these laws against idleness and vagrancy. And if you were picked up by the police and you couldn’t prove that you had a home and a job, it was a felony. You would be imprisoned, and then they would essentially rent out your labor. So it was essentially straight-up slavery, and that went on for many, many decades throughout the old Confederacy. It’s a deep part of yet another episode of our shameful history that’s still with us today.
Paul:
Yeah. And trickle-down definitely benefits from that legacy of racism and exploitation, because if there’s one thing that exploitative bosses like, it’s workers who are divided. And in America, the easiest way to divide people is across racial lines. And so, it’s an exploitation of America’s original sin in a way that only benefits a handful of superrich people and corporations, as often is the case.
Speaker 4:
And it turns out, when you look at the economic metrics, this allegedly pro-business economic model isn’t really all that good for business.
Paul:
Right.
Speaker 4:
Right? Not great for the local economy. Anyway, if you want to read more, highly encourage you to look in the show notes, where we provide a link to Chandra’s report, Rooted in racism and economic exploitation: The failed Southern economic development model.
Speaker 7:
Pitchfork Economics is produced by Civic Ventures. If you like the show, make sure to subscribe, rate, and review us wherever you get your podcasts. Find us on Twitter and Facebook, @CivicAction and @NickHanauer. Follow our writing on Medium, @civicskunkworks, and peek behind the podcast scenes on Instagram, @pitchforkeconomics. As always, from our team at Civic Ventures, thanks for listening. See you next week.