The persistent joblessness across North Carolina as evidenced in today’s labor market report, as well as federal inaction are leaving workers without the supports to weather the current public health and economic crisis. In combination with state policy choices in recent years, the result is that North Carolina’s unemployment insurance program is blocked from delivering the critical stabilizing support to families and communities that is necessary for a full and just recovery.
Last week, the U.S. Department of Labor released the latest weekly data on unemployment insurance claims, showing not only that the number of jobless workers remains elevated but also that initial claims increased week over week. Nationally, initial claims last week were greater than the second worst week of the Great Recession.
More than 19,000 initial claims in North Carolina were filed the week of Oct. 10, compared to 15,500 initial claims last week and 3,700 initial claims in the same week last year.
Since policy changes in 2013, North Carolina’s unemployment insurance has been designed, to do very little to bolster workers through job loss and economic crisis. Instead, changes were meant to pay down debt quickly so employers would not have to pay more in taxes after unemployment insurance tax cuts in the 1990s.
The state system is particularly ill-equipped to handle the unique characteristics of this recession, as it excludes many of the workers — those who are part-time and earn low wages — who have been hit hardest by the COVID-19 recession.
Indeed, North Carolina’s bad UI policy is putting jobless workers at a greater disadvantage in this recession and pandemic than jobless workers in other states. It means that North Carolina is leaving federal dollars on the table that could be helping jobless workers now. It will make the pathway to recovery for the state economy steeper overall.
Here are three examples of how features of our state Unemployment Insurance system are blocking jobless workers from the support that is needed to keep consumers spending and economies on the road to recovery.
- The length of time that a jobless worker can receive unemployment insurance in North Carolina is capped at 20 weeks (unlike the national standard of 26 weeks), but it can also drop to as low as 12 weeks based on the unemployment rate averaged over a set of months.This sliding scale that is not based on the immediate experience of the labor market meant, when the pandemic hit, that jobless workers could only receive 12 weeks of unemployment insurance at the start of the pandemic. For many workers who lost their jobs then, state unemployment insurance expired back in June.
When jobless workers exhaust their state unemployment insurance, they can move to the federal Pandemic Unemployment Compensation program and then the Extended Benefit Program. The duration of the Extended Benefit program decreased this fall because it too, is tied to the state’s duration.This means North Carolina’s jobless workers will have three and a half fewer weeks of unemployment insurance even if, during this pandemic, there aren’t jobs to go back to. At a time when many people have been out of work, the duration of Unemployment Insurance is being held down by policy choices, not by need for support.
- Another announcement this fall was that the Lost Wages Assistance program has ended in North Carolina, meaning that jobless workers have reverted to the weekly benefit amount that they are eligible for under the state system. In September, the average weekly benefit amount received by jobless workers had dropped to $210. The goal of unemployment insurance is to replace lost wages at a level that keeps workers from being pushed into deeper hardship and stabilizes the economy. Economists generally agree the goal should be 50% wage replacement. The September average weekly benefit amount represents approximately a 25% wage replacement rate.
- Finally, legislative leaders attempted to address the issue of inadequate benefits this fall — and loss of the federal $600 per week boost — and enacted a temporary increase of $50/week for jobless workers. Because of the design of the program and the timing, jobless workers who exhausted state benefits before Sept. 6 and are now on federal benefits are likely to be excluded.
North Carolina’s exhaustion rate was already high pre-COVID-19 due to the short duration of state unemployment insurance. But the number of jobless workers who are losing unemployment insurance without finding new work is higher than the total starting unemployment insurance since June. Nearly 300,000 jobless workers exhausted state unemployment insurance through August 2020.
The issue of too little wage replacement for too short in time for jobless workers matters for the ability of people to pay rent, keep food on the table and keep businesses open that depend on people spending locally. It also means that North Carolina has cut off workers, businesses and the economy from the full benefit of federal unemployment insurance programs at a critical time.