The Southern Economic Development Strategy
Rooted in Racism and Economic Inequality is a new series from the Economic Policy Institute that describes, in detail, the Southern economic development model and shows how this model has failed workers and families across the region.
The Southern economic development model is characterized by low wages, regressive tax systems, few regulations on businesses, weak labor protections, a paltry safety net, and fierce opposition to unions. We refer to this as the Southern economic development model because this model developed out of the desire of Southern elites to maintain–to the extent possible–the exploitative economic model that had enriched them under slavery.
One example of the Southern model in practice is the near complete rejection by state lawmakers across the region to raise their state minimum wage above the federal minimum, which has been stuck at $7.25 since 2009. EPI research shows that the purchasing power of the federal minimum wage is lower today than at any time since 1956. While 30 states across the country have addressed this by raising their state minimum wages, most states in the South have minimum wages at or below the federal minimum. Five Southern states – Alabama, Louisiana, Mississippi, South Carolina, and Tennessee – have no state minimum wage at all – the only states in the country to have made this dubious policy choice. Further, when the Biden administration attempted to raise wages for federal contractors, the attorneys general of Texas, Louisiana, and Mississippi responded by suing the administration to keep all wages low.
Another key component of the Southern economic development model is strong opposition to unions. This component of the model is critical. When workers join together across racial, ethnic, and gender lines in unions, it undermines the racial and gender hierarchies critical for maintaining the Southern economic development model. Unions also empower workers to demand higher wages, better benefits, better safety, and a voice in the workplace, all of which further undermines the Southern economic development model.
The Evolution of the Southern Economic Development Strategy
In recent years, as more workers across the region have come together to demand that their right to collective bargaining be respected, Southern lawmakers have continued to pursue legislation to undermine worker organizing. Governors across the region have publicly fought worker organizing drives, explicitly stating that they view unions as a threat to the Southern economic model. Of course, Southern lawmakers’ hostility to unions is nothing new and the historical fight against unions in the region highlights the true intent behind the Southern economic development model.
While the model is marketed as the way to bring businesses into the region, with the implicit promise that this will generate an abundance of jobs and broad economic prosperity, it has unambiguously failed as a strategy for improving living conditions for most workers and families in the region. In fact, the model was never designed to create shared, widespread prosperity.
The roots of the Southern economic development strategy grew out of the antebellum period when the labor of Black men and women could be compelled without compensation. It developed further after emancipation to ensure that powerful and wealthy Southerners could continue to extract the labor of Black Southerners with as little compensation as possible. This is evident in policies and practices across the region including the use of sharecropping, convict leasing, and the expansion of tipping, all of which allowed the continued extraction of Black labor with little to no compensation.
With sharecropping, for example, many Black freed men and women were forced to continue to farm the land of former enslavers, often the same land they had been enslaved on, and the landowners would take half or more of their crops. Similarly with convict leasing, laws were put in place that allowed Black men and women to be arrested, often on bogus charges, and hired out to private businesses. The offense could be something as simple as being unable to prove that they were employed. This practice of extracting labor from incarcerated workers with little to no pay continues to this day. So does forcing workers to rely on tips for their wages. After emancipation, Black men and women were hired as porters and maids on Pullman rail cars and were forced to rely largely on tips for their wages, a situation that remains true for most Southern tipped workers, who can legally be paid as little as $2.13 per hour by their employers, according to federal law.
The Southern Economic Development Model Ensures that Workers and Families Across the Region Suffer While the Wealthy and Powerful Benefit.
Though the Southern economic development model’s original design was to enrich businesses and the wealthy through the continued exploitation of Black workers, the policies adopted under the model have harmed workers across racial and ethnic groups in the region. As a result, the data show that workers and families throughout the South fare worse than workers outside the region. On indicator after indicator, the data show that economic conditions for workers and families in the South have lagged other regions. Here are just a few examples.
Figure 1 shows that more than 1 in 5 workers (22%) across the South are paid less than $15 per hour compared with 16.6% in the Midwest, 11.5% in the Northeast, and just 9.7% in the West. The higher prevalence of low hourly pay results, unsurprisingly, in typical Southern workers having lower annual earnings than workers throughout the rest of the country. Importantly, the differences in earnings are not resolved by differences in the cost of living. In our analysis, we show that even when we adjust for regional cost-of-living differences, median earnings across the South are still lower than in other regions of the country with most Southern states’ medians falling in the lower half of all states. In 2022, 13 of the 16 Southern states in our analysis had regionally adjusted median earnings below the national average, with 5 of the 10 lowest earning states – Florida, Mississippi, Arkansas, South Carolina, and Oklahoma – being Southern states that embrace the Southern economic development model.
Figure 1. More than one in five workers in the South are paid less than $15 per hour: Share of workers paid less than $15 by region, 2021
Source: Economic Policy Institute. 2023. Current Population Survey Extracts, Version 1.0.40.
Of course, the harm caused by the Southern model’s low-wage, anti-worker policies goes beyond just the workers themselves; it results in worse living conditions for Southern children and families. The South has significantly higher poverty rates than other regions, especially among children. Figure 2 shows that most children living in households where the head of household is paid less than $10 per hour–53.4%–live in Southern states.
Figure 2. More than Half of Children in Households Where the Head Earns Less than $10/hr Are in the Southern United States.
Source: EPI analysis of 2018-2021 pooled CPS ORG data
Figure 3 shows the resulting child poverty rates for states across the South. These data show that most Southern states have child poverty rates above the national average. In six southern states – Alabama, Arkansas, Kentucky, Louisiana, Mississippi, and West Virginia – more than 1 in 5 children live in a family whose income is below the federal poverty line. With the exception of the District of Columbia, these are the states that embrace the key components of the Southern economic development model most closely. Delaware and Maryland – states that do not embrace the Southern economic development model – and Virginia have much lower child poverty rates.
Figure 3. 14 of the 17 Southern states have child poverty rates above the national average; 6 have child poverty rates above 20%: Child Poverty rates by state, 2022
Source: Author’s analysis of American Community Survey Table S1703.
Change is Yet Possible
The Southern economic development model was not designed to benefit workers, their families, or their communities. It was never meant to ensure the economic security of Southerners. This model was and is, instead, intended to keep workers divided and to ensure business interests continue to have access to a large pool of labor without providing adequate compensation. And that model has worked as intended.
Throughout this series, we show how the policies adopted by lawmakers in most Southern states have failed workers and families over and over again across a range of indicators. Yet despite the persistence of many Southern institutions designed to divide and exploit, the South is changing. It is growing and becoming more diverse, and in recent years, more workers and communities have come together to organize and bring workers together. And when voters have had the opportunity to raise labor standards and demand stronger public supports, they chose to reject the Southern model. In other words, there is hope.
