Unemployment Insurance – Changes Harm Jobless Workers, Broader Economy

Cuts to unemployment insurance in North Carolina have made it harder for jobless families to make ends meet and get back on their feet in an economy that is still providing too few jobs to go around. Contrary to what proponents of the cuts claim, a recent decline in unemployment in North Carolina is largely driven by people leaving the workforce because they cannot find jobs, not due to employment growth. And far from helping the state’s economy, the cuts have left thousands of North Carolinians with less money to spend on food, clothing and other necessities, which also harms local businesses.

Specifically:

• The average weekly benefit for unemployed North Carolinians plunged to $245.98 in December 2013, from $301.89 in June, the month before the new law started taking effect. Over the course of a month, the cut means an average of $224 less for a family hit by unemployment, equivalent to a family of two’s monthly food budget.
• The recent drop in North Carolina’s unemployment rate is largely due to people leaving the workforce because they can’t find jobs, not due to significant job growth. Only 11 percent of the decline in unemployment is due to people getting jobs.
• Fewer than two in 10 unemployed workers in North Carolina are receiving unemployment insurance, and the recipiency rate declined by 13.2 percent in North Carolina from November 2012 to November 2013, compared to only a 4.7 percent drop for the nation as a whole. The drop in recipiency may be related to fewer claimants entering the system due to more restrictive eligibility rules, more people leaving the system due to fewer weeks available or more restrictive “suitable work” requirements.
• Permanent benefit cuts and an almost sole reliance on temporary increases in employer contributions are a result of this legislation. Permanent state tax changes represent just a $24 million increase for employers, even though reductions in their previous contributions to the state’s unemployment fund were a major reason North Carolina ran out of money to pay benefits during the recession and had to borrow federal funds.
• Unemployed North Carolinians are shouldering two-thirds of the cost of paying back money the state had to borrow from the federal government to pay unemployment benefits at the height of the Great Recession. Employers are contributing only 22.5 percent to the repayment.
• Nearly 30 percent of unemployed North Carolinians aren’t getting their benefits in a timely manner. While federal guidelines suggest that at least 87 percent of unemployed workers should get their fi rst benefits within two weeks after the week ending date of the first compensable week, only 71.4 percent are in North Carolina.