Prosperity Watch Issue 44, No. 1: Number of North Carolina's jobless workers not covered by unemployment benefits grows three times faster than national average

More and more jobless North Carolinians are not able to access unemployment benefits that help them make ends meet at time when a troubled economy just isn’t creating enough jobs for those who want them. Policy changes enacted in 2013 dramatically cut the amount of time workers are eligible to receive benefits and made various changes to eligibility criteria, payment formulas and administration of the program.  Since those changes have taken effect the number of jobless workers not covered by the state’s unemployment insurance system grew twice as fast as the rest of the South and more than three times as fast as the national average.

Unemployment Insurance plays a critical role in helping jobless workers survive until they find new employment while also ensuring that the broader economy is able to maintain a foundation of consumer spending that helps business as well. These broader benefits to the economy have been well documented by researchers and demonstrated to be even greater during the Great Recession when the Congressional Budget Office estimates that for every $1 of unemployment insurance payments, nearly $2 of economic activity is sustained.  This economic activity happens as a result of jobless workers being able to maintain their purchases of basic goods and services to survive and keep up with payments to utility companies and mortgage companies, for example.

The decline in the coverage of unemployment insurance means that the system is less able to provide these broad economic benefits and more likely to underserve jobless workers who have lost their jobs through no fault of their own.  The following figure uses an indicator designed by the Working Poor Families Project of unemployment insurance recipients relative to the total unemployed and considers how it has changed over time. There are two reasons that the number of jobless workers receiving unemployment insurance would go down, changes in the labor market that would make jobless workers ineligible or changes to the program rules that would restrict access.In 2013, policymakers in North Carolina enacted the most significant overhaul to a state unemployment insurance system.  The changes began to take effect on July 1, 2013 and included reductions to the weeks available (moving from the standard 26 week maximum to now 14 weeks), changes to the benefit formula reducing weekly benefit amounts, caps on maximum benefit amounts, elimination of various eligibility provisions that allowed for coverage of certain workers and various changes to the way in which the program was administered and applications were received.

North Carolina has seen the number of unemployed workers not covered by unemployment benefits skyrocket by 40% in the period since the changes to the state’s unemployment insurance program went into effect. This is more than three times as fast as the national average and double the rest of the South. This suggests that something more than labor market conditions are at play in driving down coverage of the program and that the changes made to the program have contributed to lower reach of the unemployment insurance system at a still critical time in the recovery.

Reducing the amount of time jobless workers can receive unemployment benefits or restricting their entrance into the unemployment insurance system doesn’t improve the economy or encourage workers to find jobs faster.  It either forces the jobless to go without or to take jobs for which they are grossly overqualified and that pay significantly lower wages than what they earned before. This has the double effect of trapping high-skill workers in low-wage jobs, thus reducing the competitiveness of the state’s workforce, while pushing less skilled workers out of the jobs filled by high-skilled workers. Both end up effectively reducing the customers (since workers need money to buy things), pushing down sales, and hurting the very businesses that are needed to hire unemployed workers.

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