U.S. senators propose long overdue unemployment insurance reform

U.I. Improvement Act would be a down payment on improving the nation’s system of jobless benefits — especially in states like North Carolina

This week, U.S. Senators Ron Wyden, Michael Bennet and Sherrod Brown introduced legislation that would take some important first steps toward a building better federal-state unemployment insurance system for workers, businesses and the economy.

North Carolina Senators Richard Burr and Thom Tillis would do well to support this effort to make sure the federal budget includes the necessary changes in unemployment insurance that will keep the program relevant to (and supportive of) the modern economy. The measure will be essential to keeping North Carolina on equal footing with other states in the provision of wage replacement that is necessary for a just recovery.

The Unemployment Insurance Improvement Act would set a minimum standard for regular unemployment insurance payments of 26 weeks and attach the calculation of benefit amounts to a formula based on the most recent calendar quarters worked, and include at least four quarters to ensure adequate wage replacement to support people as they look for a new job. The legislation would also ensure access to unemployment insurance for those seeking part-time work and support upgrades to program administration in order to help assure more timely- eligibility determinations.

North Carolina currently provides a sliding scale that can drop as low as 12 weeks of benefits, which has led to the state providing the shortest duration of support in the country. This short duration means people are more likely to lose wage replacement before they find a new job and, in the current context, create a greater reliance on federal unemployment insurance programs. In fact, North Carolina has a “recipiency rate” that is among the lowest in the country with somewhere around only 10% of unemployed workers receiving unemployment insurance benefits. Eighty percent of North Carolina’s unemployment insurance revenue in the past year came from federal programs. Those dollars not only stabilized households—indeed, recent data show a big impact in keeping many out of poverty—but also aided in steadying the state economy and ensuring the state’s revenue collections were more stable than would otherwise have occurred in the downturn. This, in turn, helped ensure the state didn’t have to make deep budget cuts.

North Carolina also uses a formula that no other states use for calculating weekly benefits, effectively looking only to the two most recent quarters of wage data. This has the effect of reducing a person’s unemployment benefit payments because jobless workers often see their wages reduced before a layoff. For North Carolina jobless workers, the average weekly benefit amount provides just 23 cents for every $1 in lost wages and thus fails to effectively stabilize their income.

It is clear that North Carolina jobless workers would benefit from federal unemployment insurance reform that sets a universal minimum standard for what states must provide when people lose work through no fault of their own. It should also be evident that the severe reductions and cuts to North Carolina’s unemployment insurance program enacted in 2013 have hurt our competitive advantage in workforce and economic development, and are now actively harming our economic recovery from the pandemic and greatly contributing to human suffering.

The pace and strength of the economic recovery will depend on whether jobless workers remain connected to the labor market and connected to jobs that allow them to reach their full potential. Right now, labor force participation rates remain below pre-COVID-19 by 2.1 percent and employment levels are down by 2.5 percent.

The bottom line: The Senate proposal would advance important first steps toward an unemployment insurance system redesign that would enable it to meet the needs of working people in today’s economy.  The bill should have the support of the North Carolina congressional delegation and provide the momentum for the additional reforms that will be needed.

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

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