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Rising poverty: What does UI have to do with it?

Over the last decade, poverty in our state has been on the rise. UNC Economics Professor Patrick Conway, in his new paper Poverty in North Carolina since 2000, explains that “poverty in North Carolina until 2000 had been a chronic but declining disease,” a trend that has been cruelly reversed.

In the face of this disturbing trend, Conway examines the links between unemployment and poverty, with an important emphasis on the role of unemployment insurance.

The general link between unemployment and poverty is straightforward: conditioning on other factors, those without jobs are more likely to have income falling below the poverty threshold than those with jobs. Those without jobs, however, can be divided into two groups – those who qualify for unemployment compensation and those who do not. Unemployment compensation provides a support that will lift a portion of those receiving it once again above the poverty line.

Conway concludes that unemployment explains only part of the increase in poverty, but that “the unemployment insurance program has played an important role in keeping North Carolinians above the poverty line.”

It’s a timely message, given the lack of action to renew  federal Emergency Unemployment Compensation (EUC), ensuring that long-term unemployed workers in 49 states will lose benefits just in time for the holidays.

Of course, long-term unemployed workers in North Carolina have first-hand experience simply by living in the one state that has been ineligible for EUC for the last four months. Thanks to HB4, which reduced the number of weeks and the amount of state benefits for jobless workers, North Carolina’s long-term unemployed residents also lost access to the federally-funded EUC program.

Where have these cuts taken us? North Carolina is still lagging the nation in job creation and unemployment and even the conservative think tank the American Enterprise Institute is questioning the cuts made to NC’s UI program.

19 Comments

  1. LayintheSmakDown

    December 20, 2013 at 4:09 pm

    Fortunately we are getting closer and closer to fewer people thrown into poverty by the Obama economy. NC is pulling out of the mess the democrats saddled us with and is making a trend toward better employment.

    http://abclocal.go.com/wtvd/story?section=news/local&id=9367327

  2. ML

    December 20, 2013 at 5:02 pm

    Great point by the author. Not that things aren’t getting better thanks to the Obama economy but they could have been much better if it had not been for our ultra partisan republican led state government.

  3. Alan

    December 20, 2013 at 5:45 pm

    LSD, yet again, completely ignores the fact that the Great Recession, which we’re still coming out of, was created by Republican policies under the Cheney/Bush administration. Try as hard as you may to pin the blame on Obama, but the facts are the facts, whether you like them or not.

  4. NitWitCharmer

    December 20, 2013 at 6:26 pm

    Unemployment compensation provides a support that will lift a portion of those receiving it once again above the poverty line.

    If those who were in a 1930′s soup line were representative of poverty why are those who find themselves on unemployment not likewise representative of poverty?

    Soup lines did not raise people out of poverty anymore than unemployment.

  5. LayintheSmakDown

    December 21, 2013 at 3:28 pm

    Alan,
    Actually the seeds for the “great recession” were sowed in the Clinton administration. That was when the government increasingly encouraged sub-prime loans leading to the bubble.

  6. ML

    December 21, 2013 at 3:35 pm

    Those in poverty are designated so by their level of income and not whether they are in soup lines in the 1930s. There is an objective standard used to determine the poverty level but everyone is free to their subjective belief of poverty. Although some may not think that those found objectively living in poverty are actually in poverty by their own personal views which is essentially your objection. But the author’s point is made in accordance with those objective standards at determining who lives in poverty.

    Many of those who find themselves unemployed today are lucky for the safety nets or handouts our government has set to keep them from slipping into poverty. That’s why they are not in soup lines bc every individual in this country deserves to live with dignity and an opportunity to work. As is the case with unemployment benefits, you MUST actively seek work and can’t turn down work if you receive offers to continue to receive the benefits.

  7. ML

    December 21, 2013 at 3:39 pm

    LSD you are correct about Clinton and the deregulation of many of those financial regulations under the belief and promise that the financial sector would self police themselves in a less constrained free market system. Instead the Great Recession showed the failure of free markets and deregulation. Thanks for pointing that out and by all means blame Clinton bc I agree he made a mistake their.

    Let’s not hold our breath for any conservative to admit they ever made a mistake.

  8. GOP Rules

    December 23, 2013 at 11:15 am

    ML,
    You are actually wrong. The market was skewed by the government intervention and pressure to loan to sub-standard credit risks. Without being coerced into it, most banks would not have loaned to the poor credit risks in the first place, thus the excessive initial profits would not have happened and snowballed into a large number of banks needing to make the high interest and risky loans to keep up. It is a textbook case of the mis-allocation of capital by government intervention.

  9. ML

    December 23, 2013 at 12:16 pm

    So your saying we can’t trust free markets to self regulate? No one was coerced when they were making so much money by offering loans they were not previously permitted to make. There is a responsible way and an irresponsible way to do things and the banks chose the irresponsible way.

    In the end it shows that free markets are incapable of self regulation.

  10. ML

    December 23, 2013 at 12:18 pm

    I think there’s compromise here GOP but by just stating one argument is right and one is wrong kind of stifles compromise. Don’t ya think?

  11. ML

    December 23, 2013 at 12:28 pm

    Anyways the real problem arose when banks and ratings agencies knowingly bundled all the bad loans with a triple A rating instead of their actual value.

    Had the banks taken responsibility for their actions (a conservative principle) and not relied on the govt bailout.

    But in reality it was loosening regulations that have caused almost every financial crisis. Look at the regulations in place in Canada and those in the US. Then look at the number of financial crises in Canada and the US. It is striking bc canada has zero since 1790…

  12. GOP Rules

    December 23, 2013 at 3:43 pm

    ML,
    The government required investment in these types of mortgages. I am not sure how the free market can self regulate when that is the case. The only way would be to pull out of the required areas, but then there were rules to keep you in certain markets.

    And there were many banks that were “told” to take the bailout money to cover for the true bad banks. Just go back and listen to the quarterly calls of the bank based in Winston Salem as a local to NC example. The government made out like a bandit on the bailout when they made those offers that could not be refused.

  13. ML

    December 23, 2013 at 8:48 pm

    The banks were “told” to merge not to take money to save their own butts. They had and requested bailouts bc only one of the 6 major banks that were bailedout faced absolute bankruptcy. There was no coercion. Also how is it a problem that the government made off like bandits in these bailouts(even though they technically took loses in some aspects of TARP)?

    If that’s case then not only did we keep the banks from failing but made some money of the deal to help pay down the deficit. Try and read the book “bailout” by Neil barofsky I think. You’ll get a better picture from a pretty good source.

  14. GOP Rules

    December 24, 2013 at 10:16 am

    ML,
    Research it. BB&T in NC was told to take the TARP money and did not need it. John Allison and Kelly King have said that a number of times in public statements that Paulson called them and others in to tell them what was going to go down. PNC and I believe US Bank were in the same crowd who were made an offer they could not refuse. BB&T was basically told to give the government a gift of $48,000,000 by the time they were given permission to pay back TARP. I know for a fact that BB&T was in absolutely no danger of failing during the last crisis…in fact they were well positioned to profit off it if the government had not interfered.

  15. ML

    December 24, 2013 at 11:32 am

    BBT is not a large investment/deposit bank, they are local to the southeast. If they were forced to take TARP money that may have been unfortunate and I don’t necessarily agree with that. Unless of course if it was seen as a necessity by the treasury and fed, in which case there was little effect on BBT and the likely purpose was so that the stronger banks could pick up the slack and continue lending while others rebounded.

    But this has little to do with the uibenefots except that the corruption in Washington and Wall Street fudged up big time. No politicking here, there’s plenty of corruption to go around blue or red.

  16. LayintheSmakDown

    December 26, 2013 at 8:45 pm

    Looks like the UI changes are having good effects:
    http://www.ncspin.com/2013/12/26/economist-nc-unemployment-drop-may-be-tied-to-benefits-changes/

    ML,
    I call $48,000,000 a pretty large effect on a regional bank. It actually decreased their ability to do a number of things such as pay dividends to the largely individual stockholder base (they are not as institutionally held as others…and are around the 10th largest bank in the US)….you know the little old lady who bought BB&T when it was a small tobacco bank way back and the dividend was a part of her fixed income to supplement SS.

  17. ML

    December 27, 2013 at 10:17 am

    So they couldn’t pay dividends with federal money or buy back stock to artificially inflate their share price. Your grasping once again.

    Thanks for making up a fictional person. What about the thousands of people who lost the homes, their credit, and their future by people who were dead set on making money no matter the human costs. Those are real, the old lady you made up that is living off her investments/401k/social service is just fine while bbt helps the Economy as a reasponsible corporate citizen bc of said social security.

    Moreover if this lady is as savy as you lead us to believe then likely diversified her portfolio and is racking in the cash. Also she isn’t real. Nice try.

  18. Alan

    December 27, 2013 at 11:53 am

    Perhaps she’s the “welfare queen”, but all grown up now?

  19. LayintheSmakDown

    January 2, 2014 at 6:14 pm

    No, not some special case. BB&T has many individual investors from their tobacco bank days in Eastern NC. A lot of people were significant investors from the mid-20th century and continue to use dividends as a major source of income. It has only been the last 20 years or so that BB&T has become a major regional bank on the radar of the institutional investor. Historically they were…and are somewhat again….a very good dividend payer. And I make no projection to how savvy an investor is, I just know the archetype exists in their base.

    And the point is that they did not need the federal money at all….so in fact they would not have used that money for dividends even if they paid it. And their share price actually has been in a low state for a long time so no artificial inflation there other than what the Fed is doing to the market.