The failure of the U.S. Senate to extend federal unemployment insurance programs that expired at the end of July means jobless workers have will soon have lost a month of income.
Economists suggest that the cumulative effect of that lost income could create a reduction in economic growth similar to that experienced during the Great Recession. Concerns are already mounting that consumer spending is slowing.
And with the latest data released by the Department of Labor on Thursday showing an increase in initial claims week over week, more than 600,000 North Carolinians are receiving or waiting to receive unemployment insurance benefits.
For jobless workers, their families, landlords, and neighbors, the loss of the federal $600/week boost will lead to real and immediate impacts on housing stability, access to food, and poverty rates, as well as the associated threats to health — both in the near and long-term.
The White House’s Executive Order is no substitute for congressional action. The inadequate proposal from the Trump Administration will push costs to states and create administrative challenges in implementation, all while using unsustainable sources of funds and failing to commit to keep supports in place through a secured recovery.
As legislative leaders and Governor Cooper have noted, North Carolina can take action to improve the rules governing our own unemployment insurance system—a system with the dubious distinction of being the worst in the nation after changes made by lawmakers in 2013.
The importance of a state fix, now and for the long-term, should be clear as we see the barriers to access that jobless workers have experienced during the COVID-19 pandemic and the broad-based ripple effects of job loss throughout our communities.
Here are four steps the North Carolina General Assembly can take to ensure our state unemployment insurance system can support an inclusive economic recovery:
- Revise the way North Carolina calculates weekly benefits, which NO other state uses and which disproportionately hurts workers whose hours get cut back before a layoff. These workers are eligible for lower weekly benefit amounts due to the current formula which doesn’t accurately reflect their wages and work experience. Instead, North Carolina should calculate benefits based on the highest quarter wages, as is done in South Carolina and Georgia.
- Increase eligibility for part-time workers by increasing the “income disregard” and adopting “Work Share/Short Time Compensation” option for employers. Part-time workers have been disproportionately impacted by the COVID-19 crisis and their lost hours make it difficult to stay connected to work and meet basic needs. Because of North Carolina’s low “earnings disregard” (one-fifth of the weekly benefit amount or $70 in the case of maximum benefit amount), a worker who makes $750 a week and has their hours cut so that they make only $420 would receive $0 in UI because North Carolina’s maximum weekly benefit amount is $350 and the “earnings disregard” is so low ($420 – $70=$350). Work-Sharing or Short-Time Compensation would allow an employer to reduce the hours of all or some workers instead of laying off a portion of the workforce. Workers with the reduced hours are then eligible for partial unemployment benefits to supplement their paychecks. The CARES Act provides $100 million in grants to states to implement, improve, and promote Work-Sharing.
- Increase the maximum duration of benefits from the lowest in the country to 26 weeks — It is clear that the duration of this downturn could extend well into 2021 and beyond and that our state’s current system of setting duration to unemployment rates could fail to account for remaining job opportunities and the public health crisis. Georgia recently took the step of increasing the maximum numbers of weeks in reaction to COVID-19.
- Establish a wage replacement standard and leverage federal boosts — North Carolina policymakers must be working to ensure congressional action on a more adequate unemployment insurance program at the federal level that extends the $600/week program to minimize administrative costs and ensure wage replacement that can stabilize the labor market and broader economy. The current arbitrary cap on the maximum state weekly benefit of $350 not only hurts experienced workers and those with higher wages but also has a dramatic impact on spending behaviors and hardship rates. Legislation introduced at the General Assembly would set that maximum weekly benefit amount at $500 but lawmakers should also consider the widely accepted and long-agreed-upon standard of replacing at least two-thirds of lost wages. A federal and state policy design that considers the unique challenge of this moment – in which job losses are driven by an out-of-control public health crisis and new work is necessary to reverse the income loss – must aggressively move to stabilize the incomes of working people who are the engine of our economy.
Unemployment insurance is an effective tool in a downturn at turning the trajectory to support recovery and minimizing the lasting harm of job losses to people, families, and communities. In response to the COVID-19 crisis, policymakers must focus on underlying issues in our labor market—such as sluggish job creation in non-urban centers and the rise in part-time work—alongside failed policy choices that minimized the contributions of workers to the well-being of businesses and local economies.
There should no longer be confusion on this point: ensuring our state’s unemployment insurance system supports workers is a support to the economy.