Rising poverty: What does UI have to do with it?

Over the last decade, poverty in our state has been on the rise. UNC Economics Professor Patrick Conway, in his new paper Poverty in North Carolina since 2000, explains that “poverty in North Carolina until 2000 had been a chronic but declining disease,” a trend that has been cruelly reversed.

In the face of this disturbing trend, Conway examines the links between unemployment and poverty, with an important emphasis on the role of unemployment insurance.

The general link between unemployment and poverty is straightforward: conditioning on other factors, those without jobs are more likely to have income falling below the poverty threshold than those with jobs. Those without jobs, however, can be divided into two groups – those who qualify for unemployment compensation and those who do not. Unemployment compensation provides a support that will lift a portion of those receiving it once again above the poverty line.

Conway concludes that unemployment explains only part of the increase in poverty, but that “the unemployment insurance program has played an important role in keeping North Carolinians above the poverty line.”

It’s a timely message, given the lack of action to renew  federal Emergency Unemployment Compensation (EUC), ensuring that long-term unemployed workers in 49 states will lose benefits just in time for the holidays.

Of course, long-term unemployed workers in North Carolina have first-hand experience simply by living in the one state that has been ineligible for EUC for the last four months. Thanks to HB4, which reduced the number of weeks and the amount of state benefits for jobless workers, North Carolina’s long-term unemployed residents also lost access to the federally-funded EUC program.

Where have these cuts taken us? North Carolina is still lagging the nation in job creation and unemployment and even the conservative think tank the American Enterprise Institute is questioning the cuts made to NC’s UI program.

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