Two simple fixes that would dramatically improve North Carolina’s unemployment insurance system

Governor Cooper released a proposal last week to deploy available state dollars to immediate COVID-19 relief and address the hardships facing North Carolinians.

One of the greatest barriers to securing an economic recovery, however, is a state unemployment insurance program that isn’t working as it could to keep jobless workers connected to the labor force, consumers spending at businesses, and dollars circulating in the state’s economy. The added uncertainty over the past year as to whether and how the federal government would act to support this state and federal program also disrupted progress in the labor market.

Last week, jobless claims remained elevated and January claim levels brought the country back to levels not seen since mid-October.

Given the significant role unemployment insurance plays in promoting the well-being of businesses, the economy, and indeed, all North Carolinians, the Governor’s modest proposal should include essential, immediate fixes by the General Assembly, including:

  • Moving the maximum duration to 26 weeks, like most states, rather than having a lower sliding scale, would remove the inequities facing jobless workers who lost work at the start of the pandemic. It would also level the playing field for our state in the effort to secure a strong recovery by ensuring that all jobless workers in North Carolina receive closer to the same level of support as most jobless workers in other states.
  • Establishing a cap on maximum benefit amounts at $500 or 50% of the average weekly wages in North Carolina would ensure people who have lost work receive the level of wage replacement that economists recommend. In doing so, this would position North Carolina’s unemployment insurance system to better stabilize spending and, in turn, the economy.

State action is essential and possible under the current Trust Fund conditions.

First, fixes to duration and maximum benefit amounts must occur at the state level. The federal government is not able to address these in its unemployment insurance policies and North Carolinians cannot afford to wait.

Second, as the Governor’s supplemental recommendation points out, the state’s unemployment insurance system is solvent, with more than $2 billion in the coffers and annual contributions by employers of nearly $1 billion under the current tax structure over two years. The increased benefits that would result from these two changes amount to a maximum cost of $620 million over the next two years.

Most importantly, unemployment insurance is a proven policy that stabilizes the economy and would hasten a recovery. When combined with programs for businesses, like short-time compensation, the system provides a tool for ensuring that layoffs don’t have lasting harm on workers’ well-being and businesses’ long-term productivity and efficiency.

The more effective the program is now, the quicker the economy will move forward—particularly if our state also commits to working to control the pandemic and accelerate vaccinations so that public health and economic well-being goals can be achieved.

The General Assembly should make improvements to our unemployment system a top priority this week.

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