Prosperity Watch Issue 39, No. 3: Unemployment Insurance Cuts Harm Jobless Workers, Threaten the Economy

 In an economy where workers are laid off through no fault of their own and there remain too few jobs for those who want to work, unemployment insurance provides some support. This allows those workers to meet their basic needs while they look (and wait) for a new employment opportunity.  Unemployment insurance helps workers, employers, and the entire economy, as workers are able to stay engaged in the labor force and buy goods and services in their local communities.

July 1, 2014 marked the one-year anniversary of the enactment of a series of cuts to the unemployment insurance system that disproportionately impact jobless workers.  These cuts included reductions in the maximum number of weeks available to jobless workers, changes to the way benefit amounts are calculated that reduced benefits, artificial caps placed on the maximum amount available to jobless workers despite prior earnings, and limits on eligibility, among many others.  The result is that nearly two-thirds of North Carolina’s unemployment insurance debt is being paid down by jobless workers while employers are paying far less. In fact, what employers are contributing is due to federal requirements placed on employers when a trust fund is in debt, not efforts by state policymakers to achieve balance and a fiscally responsible path to financing the unemployment insurance system.

This unbalanced approach to reforming the unemployment insurance system has hurt workers in a variety of ways.  Most prominent among the changes are the fewer weeks available and the decline in average weekly benefit amounts. Combined, these changes mean that jobless workers only have a maximum of 14 weeks available to them, rather than 26 weeks. As a result of changes to the way in which benefits are calculated, average weekly benefit amounts have dropped by $300 each month to just $227.91 per week under the newly enacted plan.

Each month, the average jobless worker receiving unemployment insurance receives $300 less under the new unemployment insurance system enacted a year ago by the General Assembly and signed into law by Gov. Pat McCrory. This is equivalent to the cost of half a month’s rent, two trips to the grocery store, five tanks of gas or a health care premium for one adult and one child.  The decisions that families face as a result will mean greater hardship and less spending in local communities.

The ability of the state’s unemployment insurance system to serve its major functions—to support jobless workers as they continue their search for work despite the lack of available jobs, and to ensure the economy does not further decline—is compromised under these changes. For the economy to remain strong, the labor force must continue to grow and without supports it is more difficult for jobless workers to stay engaged in their job search.

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