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Economist: Conservatives dreaming if they think unemployment insurance cuts helped NC

Dean BakerIn case you missed it, be sure to check out the latest from one of the nation’s sharpest economists, Dr. Dean Baker on the one-year anniversary of North Carolina’s harshest-in-the-nation cuts to unemployment insurance. In a post that originally appeared on the website of Baker’s Center for Economic and Policy Research, Baker specifically takes one of North Carolina’s right-wing think tank denizens to task for his recent column in the Wall Street Journal celebrating the cuts.

As Baker notes, the local pundit is simply and plainly wrong in his contention that the cuts are responsible for a job boom in the state — or that such a boom is even occurring:

“North Carolina did have more rapid job growth than the rest of the nation in the period since it cut benefits, but it also has had more rapid job growth than the rest of the nation for the last four decades, before many of the benefit cutters were even born. This is because it is in the South, which has been growing more rapidly than the Northeast and Midwest for quite some time. (My explanation is air-conditioning, but you’re welcome to throw in other items.)

If we look at North Carolina’s labor market over the last year (May 2013 to May 2014) we find that the number of jobs, as measured by the Labor Department’s establishment survey, grew at 1.92 percent rate. This beats the 1.86 percent rate for the rest of the South Atlantic region, but the difference certainly is not enough to employ all the people who were cut off from the unemployment rolls. (The South Atlantic region is a grouping of states from Florida to Maryland. It has been used by government agencies for many decades.) If the argument is that the ending of benefits put the fear of God in the unemployed and made them finally get serious about working, these numbers don’t do much to support the case.

The situation gets even worse if we pull out the Charlotte-Gastonia-Rock Hill area. The reason for pulling out this relatively fast growing region is that it straddles the border with South Carolina. Many of the workers who have gotten jobs with companies in North Carolina actually live in South Carolina. If unemployed workers’ past employment experience had been in South Carolina, they will not have any additional motivation to find work as a result of North Carolina cutting benefits….

Actually what is most striking in the data for 2014 is the sharp drop in labor force participation. The labor force participation rate is down by an average of 0.5 percentage points from the first six months of last year to the first six months of this year. This corresponds to roughly 1.3 million people leaving the labor force. Usually labor force participation rises during an upturn, so this is certainly consistent with a story of many unemployed workers giving up looking for work when their benefits expire.

In short, if we look at the data instead of playing games with it, the story is pretty clear. There is zero evidence that cutting unemployment benefits in North Carolina or the rest of the country did anything to spur job growth. There is much evidence that it led those who saw their benefits to end to give up looking for work and to drop out of the labor force.

 

2 Comments

  1. Must remove McCory & his administration

    July 9, 2014 at 11:40 am

    Dr. Baker’s blog speaks nothing but truth. After working for a major corporation for over15 years, I am now involved in the unemployment insurance scandal. Administrators have developed policies and procedures that target invidivuals to get a reduction of the already reduced insurance rates and length of time to receive the insurance. It is obvious of a McCory’s intentions. Unemployment insurance is one issue but their are also issues such education assistance cuts. He obviously has no Christian and moral values based on the laws he has put in place. As citizens of NC, we must do something about his ambiguity against the middle and lower classes!

  2. Josh

    July 14, 2014 at 10:43 am

    Dr. Baker’s comments about how cutting unemployment benefits does not insure job growth are very true. I wish more people would bring this to light. The only reason unemployment numbers are decrease is because a significant number of the job force has quit looking for work. We need to do something about this. Until it is brought to light it will only get worse.