Requiring work searches isn’t the urgent fix that unemployment insurance needs

Last week, the Finance Committee of the North Carolina House approved a bill that would require jobless workers who claim unemployment insurance to conduct at least three work searches each week, if they are seeking benefits for a non-COVID-19-related reason.

This week, Gov. Cooper signed an executive order that will implement a work search requirement for all those claiming state unemployment insurance after March 14.

Neither of these actions will fix the real problem with unemployment insurance that threatens to derail our labor market: the fact that our state provides the lowest levels of support to jobless workers who have lost their job through no fault of their own.

The work search requirement is a punitive measure that adds obstacles to critical income supports that keep people connected to the labor market and looking for a new job. It is not a guaranteed bridge to employment for those who have lost their job through no fault of their own. Indeed, research shows that, while such a requirement may generate the intended effect of reducing the benefits paid out in the short term, the long-run outcomes are largely sub-optimal: People are less likely to move to good job matches and more likely to take on lower paying jobs.

A work search requirement also adds administrative costs as staff and technology must be employed to monitor implementation and the verification of claimant activity. These processes are even more complicated and costly during a pandemic when people can’t go back to work because of public health measures or because workplaces are not safe to return to.

The difficulty of separating COVID-19 and non-COVID-19 claims on top of shifting federal requirements is also likely to lead to further processing delays in a program that has struggled mightily ever since state funding was cut for the Division of Employment Security in 2013. Additional administrative rules could further disrupt the critical work of making sure eligible jobless workers receive wage replacement.

Several other factors in the current difficult environment make clear that a work search requirement isn’t the right focus of policymakers at this time, including:

  1. Job losses have been uneven — as they were in the last recession, as well — meaning that some communities don’t have the same number of job openings as others and that a recovery of jobs lost is far from complete. Many people looking for work in some areas of the state could quickly exhaust application opportunities as there are too few job openings for those looking for work. Moreover, job losses continue at elevated levels as the pandemic continues to wreak economic havoc in several regions and job sectors.
  2. Not all workplaces are safe; many workplaces are not providing the necessary protections for workers, so requiring people to search for and then be ready and able to work given the public health threat of the pandemic is bad policy.
  3. Many North Carolina households lack access to the high-speed internet needed to conduct work searches right now, either because they can’t afford it or because the necessary infrastructure in their community doesn’t exist. In different times, a trip to the public library may provide a connection to the internet and job search, but many public connections points remain closed.

States that want to ensure that work search requirements actually get people connected to good jobs must do more than simply set an arbitrary number of required work searches each week. They must assure that unemployed people have access to high-speed internet and assistance in conducting job searches from trained professionals. They must also commit to connecting the unemployed to adequately-funded job training programs and provide exemptions from the search requirement while people are engaged in job training, working part-time or temporarily laid off.

In short, the evidence in support of work search requirements as a tool to achieve a just recovery is weak. There is, however, a significant body of research to show that unemployment insurance that provides adequate wage replacement for 26 weeks supports stronger employment outcomes, alleviates negative health outcomes, and supports improved well-being over time. Right now, North Carolina’s unemployment insurance provides too few jobless workers with too little in wage replacement for too short a time.

We don’t have to aim high; even aiming to get to the middle of the national pack would be much better for the people struggling in every community in the state. An unemployment insurance program that is adequate and equitable would be much better for us all by stabilizing the economy and starting us on the path toward a more just recovery.

Alexandra Sirota is the Director of the Budget & Tax Center, a project of the NC Justice Center.

 

NC legislative committee takes yet another misstep on unemployment insurance

This morning, the Finance Committee of the North Carolina House approved House Bill 107, which, among its largely technical provisions, would make two significant changes to state unemployment insurance policy: 

  • it would reinstate work search requirements for individuals making non-COVID-19-related unemployment insurance claims, and 
  • it would hold the base tax rate for employers at just 1.9%, rather than following the planned increase that currently contained in state law. 

The decision to hold employer tax rates at the current low rate is a mistake. 

Back in 2013, when lawmakers and Gov. McCrory approved House Bill 4 — the bill that imposed significant cuts to worker benefits — they also included a trigger that would have raised the State Unemployment Tax Act (SUTA) base tax rate in order to ensure that employer contributions into the state Unemployment Insurance Trust Fund are sufficient to keep the system solvent — a major priority of legislative leaders.  

At present, North Carolina’s tax rate is the fourth lowest in the country.  

Meanwhile, as national experts, state researchers, and media outlets have repeatedly noted, North Carolina has the least effective unemployment insurance system in the country because it serves too few jobless workers, with too little wage replacement for too short a time. 

A glance at the latest data from the third quarter for southeastern states further demonstrates how our program has fallen behind. North Carolina trails only Florida for the number of people exhausting state unemployment insurance before finding a job, is only barely ahead of Louisiana, Mississippi, and Tennessee in the average weekly benefit amount it pays, and in 2019 was worst in the country in terms of the number of jobless workers who receive unemployment insurance.

Engaging in a “race-to-the-bottom” competition with other southeastern states when it comes to supporting the economy is not the right path for our state. If we have any hope of improving what research shows has been a very unequal recovery, North Carolina policymakers should be focused on driving policy toward achieving more equitable outcomes, and be deeply concerned that their policy choices are driving a wedge between people and critical supports. 

Policymakers should instead follow the expert advice of a wide array of economists to build an unemployment insurance system that: a) minimizes the harm to families caused by job losses, and b) stabilizes the economy by helping to maintains consumer spending. 

At present, North Carolina is failing on both counts by maintaining a system that: 

  • provides 14 fewer weeks than the standard 26 weeks of state benefits, 
  • pays extremely low benefits that, on average provide just 23 cents per dollar of the average worker’s in prior wages (the national standard is at least 50 cents), and 
  • reaches less than 9% of those who are jobless, compared to the standard of reaching at least 50 percent of the unemployed. 

A broken unemployment insurance system increases hardship, worsens health outcomes, reduces lifelong earnings and economic mobility for people, and doesn’t do enough to stabilize consumer spending — a key to supporting demand for goods and services of businesses (i.e. employers) and supporting economic recovery.?The National Employment and Law Project noted that due to its shorter benefit duration alone, a typical North Carolina jobless worker could have received as much as $24,000 less in unemployment insurance benefits over the course of the last recession thanks to the 2013 cuts. 

The bottom line: this legislation ignores the desperate need to repair and improve the system for jobless workers (click here for a list of simple and necessary policy changes that lawmakers should enact in 2021) and, indeed, erects another barrier by reviving administratively costly work search requirements. 

By keeping employer taxes low while refusing?to improve things for workers and their families, lawmakers have signaled that working people will continue to be an afterthought in legislative policymaking and are doubling down on an economic approach that will continue to serve us all poorly. 

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

 

NC passes a grim anniversary for the state’s workers

Eight years ago this week, then Governor Pat McCrory signed a bill that overhauled our state’s unemployment insurance system. And so began our state’s fall to the bottom of the national pack when it comes to helping jobless workers and protecting our economy from the spiraling effects that downturns can have on the well-being of families and, in turn, businesses and local economies.

Click here to read a letter from an array of advocates that McCrory ignored at the time.

Today in the face of the economic shock wrought by a global pandemic, North Carolina’s jobless claims remain elevated and people are losing state unemployment insurance benefits at alarming rates and only scraping by for the time being with the help of federal programs.

Tragically, our state system is woefully inadequate to handle the challenge of this moment.

North Carolina is:

  • 45th for the lowest duration in unemployment insurance benefits at 9.6 weeks
  • 47th for the lowest average weekly benefit amount at $215 per week, or less than 23 cents per $1 in prior wages earned
  • 2nd for the share of jobless workers exhausting unemployment insurance benefits

Despite, however, our incredibly stingy benefits, the state’s UI tax rate is the fourth lowest in the country. Employers in North Carolina pay only $143 on average in UI taxes per worker.

The result: North Carolina is falling behind in the work to secure the fastest and most equitable recovery. Make no mistake, these rankings and these policy choices aren’t putting us in a more competitive position or reducing our long-term costs or helping business.

The system put in place in 2013 was designed and continues to be one that does not provide the support that unemployed workers and communities across the state need.

Our legislative leaders can choose to act now to fix the deficiencies in this system that both threaten the health and well-being of us all and continue to delay a full and just recovery.

They can move immediately to raise the duration of time that unemployed workers may collect benefits in the state program to 26 weeks and make sure that both average and maximum weekly benefit amounts are connected to prior wages earned, not arbitrary figures or tied to formulas that no other state uses.

They can recognize that the changing nature of work requires a short-time compensation program and recognize that our system needs updating in order to address the needs of a workforce that is rapidly evolving and in which part-time work plays a bigger and bigger role.

What better time than an anniversary—even a traumatic one—to recommit to the values (like broadly shared economic opportunity and  prosperity and community well-being) that we all share?

With such a commitment we can construct just and lasting recovery. Without it, North Carolina will remain mired near the bottom of he pack.

Alexandra Sirota is the director of the NC Budget & Tax Center.

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.

We need a better state plan to help the people of NC

On Thursday, the General Assembly passed its first piece of legislation allocating funds that provide a down payment to enhance the state’s vaccine rollout, support elementary and secondary schools, and provide much needed rental assistance.

The legislation adjusts deadlines for certain CARES Act-funded initiatives in 2020, reallocates unexpended CARES Act dollars, and allocates federal dollars passed as part of the legislation passed by Congress in December — but after nearly a year of living in the house that COVID-19 built, a bigger, bolder commitment and plan is needed to ensure the needs of every family are met during this ongoing crisis.

On the very same day, the Governor provided his own proposal for supplemental spending to meet immediate COVID-19 needs, which, while quite modest, would tap into the significant unreserved state dollars available today to meet the urgent needs in communities to go beyond the federal dollars made available through the December legislation.

The $5 billion unreserved balance refers to state dollars that have not been appropriated, and it does not include additional money in the Rainy Day Fund or other special funds. The Governor proposes immediately appropriating 16.5 percent, or $698 million, of the unreserved balance.

North Carolinians agree that our state government needs to go all-in to meet the full scope of needs by fully funding people-first policies. Across a range of issues, North Carolina needs to not only adequately invest in a response that will address the harm facing people across a range of public health, economic, and housing threats but will plan for a long-term recovery that is just. The continuity of support requires increased capacity at public agencies and institutions and a longer-term commitment to adapting and shoring up the systems — from early childhood education to public schools to public health departments — that will need support to ensure the recovery from the COVID pandemic takes hold.

The General Assembly should therefore not only move immediately on the Governor’s proposal but go beyond it to fully address the challenges that are facing families, businesses, and communities as COVID-19 nears the one-year markRead more