NC Budget and Tax Center

Separating Fact from Fiction About North Carolina’s Unemployment Benefits

A lot of bad analysis and outright false claims are being circulated about unemployment in North Carolina and recent cuts in the state’s unemployment benefits that are hurting workers and their families.

Let’s clear the air with some facts.

An unemployed worker can’t move to NC and receive unemployment insurance here.

If a person is unemployed, moves to another state and applies for unemployment insurance, the benefits would be paid by the state where his or her former employer was located. To suggest, as Gov. McCrory did recently, that unemployed people were flocking to North Carolina to collect benefits from the state reflects a fundamental misunderstanding of how unemployment insurance works.

The evidence is also clear that there has not been a mass influx of unemployed workers to North Carolina.

The drop in North Carolina’s unemployment rate is largely due to people leaving the labor force, not the cut in unemployment benefits.

As we have noted elsewhere, as have numerous well-respected economists here, here and here, the superficial improvement in the state’s unemployment rate is not signaling a much-improved level of employment.  Rather, the unemployment rate is dropping largely because many jobless North Carolinians have stopped looking for work, shrinking the state’s overall labor force. Why? There are simply not enough jobs for those who want to work.  And that is happening while the working-age population is growing.

In fact, the number of working-age North Carolinians who are employed   continues to lag the nation and the number of employed people has declined.  Our   job growth in the last calendar year has been worse than in any other year  since the official recovery from the recession began.

North Carolina’s unemployment insurance benefits were  in the middle of the pack, not overly generous, and employer contributions were below the national average.

Before the cuts were enacted, North Carolina’s   average weekly unemployment benefit amount ranked us 23rd in the nation, not 9th as our Governor claimed. Our employer contributions to the unemployment insurance fund, per employee, ranked 30th in the nation.   The argument that we were overly generous to jobless workers or overly onerous for employers just doesn’t match reality.

In fact, our weekly benefits fell far short of what a family needed to meet its  most basic needs  month to month . The cuts enacted by the governor and the legislature will only make that worse,   undermining the system’s temporary wage-replacement function.

Moreover, employers will be contributing far less to the unemployment insurance fund over time than they would have under previous law, putting the system at potential risk when another downturn happens.

Lawmakers could have taken other steps to address NC’s unemployment insurance debt without harming unemployed workers and their families.

While state policymakers needed to address the unemployment insurance debt that had built up during the recession and the painfully slow recovery, they  had a range of tools available to them but ignored the most fundamental:  ensuring employers were making adequate contributions to the system.  The debt, after all, was in part created by tax cuts for employers in the 1990s, which set the system up to fail even before the worst economic collapse since the Great Depression.

Instead, legislators chose to reduce the debt largely by cutting benefits.  Nearly 75 percent of the “savings” under this new law will come from benefit changes, while just 22 percent will come from state and federal tax changes.

It’s time to stop trying to justify bad decisions that hurt workers and their families with bad analysis.  We can debate policy choices, but let’s all agree that there are facts that cannot be disputed.

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