Tying economic life support to employment equity goals would be better for all

A new report from the Economic Policy Institute shows that the cutoff of federal unemployment insurance will reduce incomes and curtail spending, further increasing hardship and likely slowing the progress toward a full recovery from the COVID-19 pandemic downturn.

In North Carolina, an estimated $2.3 billion in income will be lost annually, which in turn will reduce household spending and demand in the broader economy.

As North Carolina deals with the fallout from this federal cutoff, it is worth reflecting on the role that policies aimed at stabilizing the economy play in a downturn and a recovery. So-called “automatic stabilizers” are key tools that increase assistance to people when times are bad and pull back on support when conditions are improved.

When the American Rescue Plan passed in March, federal unemployment insurance benefits were set to expire on September 6. This arbitrary date for the cutoff was scheduled to arrive, regardless of where the country stood in recovering from the pandemic and economic downturn. And on September 6, the cutoff happened — even though the Delta variant surge was well underway and labor market measures were already suggesting a slowdown in the economy.

In short, a key support for jobless workers and the economy ended too soon. The flaw in tying a policy change to a certain date rather than connecting it to the desired economic outcomes is the threat of a slower and less equitable recovery.

When people have not recovered from a recession, neither has the economy.

Policymakers should learn a lesson from this failure and redesign our systems and policies so that the response to a crisis is both timely and sustained until all those harmed by a recession have secured a foothold on the path to financial security.

The well-documented inequities in the economic damage caused by the pandemic recession require that policymakers not just ensure that our economic stabilization tools are automatic but also tie them to indicators of how those most harmed by this recession and historically excluded from assistance are faring. Acting in this way — not based on the average unemployment rate, but instead based on such indicators as the unemployment rate for Black workers, who experience deeper job losses in downturns and slower returns to employment — would benefit everyone

In North Carolina, the latest data from the second quarter of 2021 showed that the unemployment rate for Black and Latinx workers was 7.7 percent and 7.5 percent respectively, compared with 3.5 percent for whites. The reality is that barriers to employment and re-employment persist for workers of color in particular, and the harms of COVID-19 have disproportionately impacted these same workers because of segregation in the workforce, lower wage work, and generational barriers to wealth building.

Without a combined commitment to reach full employment for all workers and systematically remove barriers to employment for all workers, disparities will persist and hold back the economy. During the last effort at expansion, research from PolicyLink showed that North Carolina stood to gain $11.3 billion annually in economic activity from pursuing full employment for all by reducing the barriers to work for Black and brown workers and all rural workers.

Policies that center Black and brown workers are a boon for our entire economy. North Carolina and the nation would be better served if we tied our commitment to strengthening the economy to how people are faring. Enacting such automatic stabilizers is an essential step in building a more resilient and inclusive economy.

Alexandra Sirota is the Director of the N.C. Budget & Tax Center.