NC Budget and Tax Center

Now is the time to rebalance the state’s unemployment insurance system

New research from The Century Foundation released today finds that the recovery of Unemployment Insurance Trust Funds nationwide presents an opportunity to rebalance the approach taken during the Great Recession and its aftermath.

The approach taken in several states, including North Carolina, included significant changes that reduce the weekly unemployment insurance amount, the duration of weeks and limited eligibility across a range of other measures.

Given the opportunity of the ongoing economic expansion, states are able now to ensure that the Unemployment Insurance system is well-positioned to serve its role in stabilizing the economy during a downturn.  Doing so will require ensuring that the weekly benefit amounts achieve an adequate level of wage replacement, that the weeks available ensure workers can find new jobs or be retrained (as is increasingly necessary) for new careers, for example.

Here are the core findings from the report:

  • Unemployment insurance tax rates in 2017—currently at a nationwide average of 59 percentof wages—are lower than they were in all but four other years in the history of unemployment insurance programs (1999, 2000, 2001, and 2002).9 The ability to keep UI tax rates low during this period of economic growth is a boon to employers.
  • Workers have not shared in this return to economic prosperity: most states that enacted cost-cutting reductions in benefits have left them in place during this time, even as UI tax rates have plummeted. Critically, nine states have cut benefits back below the level of twenty-six weeks, and twelve states have lowered the level of benefits as compared to before the recession.
  • The percentage of jobless workers collecting benefits has plummeted over the first two decades of the century. The biggest contributor to the decline has been the shortening length of benefits and, in recent years, the decline in jobless workers applying for UI. Since 2010 alone, the percentage of jobless workers applying for benefits has tumbled from 78 percent to 48 percent. In recent years, several states have rolled out poorly designed online UI applications and new eligibility requirements, discouraging workers from applying.
  • With state UI programs currently almost $50 billion in the black, the long recovery creates an opportunity to bring the system into balance—before the next downturn when families and the entire economy will depend on it. States should be encouraged to take the lead and enact these reforms, and future legislation should put teeth into long-standing recommendations around minimum benefit levels.

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