Election 2012 Issue Brief - Unemployment Insurance

Background

Unemployment insurance provides financial support for workers who have lost their jobs through no fault of their own. Unemployment benefits help families avoid financial disaster and give workers time to seek new employment.

  • More than 3 million Americans avoided poverty in 2010 because of unemployment insurance.
  • The average unemployment insurance payment in North Carolina is $290 per week. Workers receive roughly a third of what they were earning at their previous jobs.
  • The average unemployment benefits received each month falls $1,110 short of meeting basic needs for a family of three, based on the Living Income Standard, a conservative measure of how much income a family in North Carolina needs to afford the basic necessities of life.

Funding for unemployment insurance comes from federal and state payroll taxes and is saved in the Unemployment Insurance (UI) Trust Fund. The system should have a forward-financing design—employers pay into the system in good times so money is available to pay out benefits when the economy slows, unemployment claims grow and employer contributions shrink.

However, North Carolina significantly cut employers’ contributions to the trust fund during the boom times of the 1990s, resulting in a severe shortage of needed funds now. If North Carolina had required contributions from employers at the national average tax rate during the past two decades, the UI Trust Fund would have $2.8 billion today, erasing the fund’s current solvency issues.

North Carolina faces two challenges regarding its unemployment insurance system.

  • Benefits to Jobless Workers: Currently, there simply are not enough jobs available of all of North Carolina’s unemployed workers. Ensuring that workers continue to receive benefits is vital for the well-being of families and the strength of the economic recovery. Every dollar in unemployment benefits translates into $2 in economic activity.
  • Trust Fund Solvency: Thanks to short-sighted cuts to employer contributions, North Carolina’s UI Trust Fund is in a hole that took more than a decade to dig and will require time to resolve. Policymakers must put together a plan that ensures all employers contribute to the system.

 

Questions for Candidates

  • What would you do to shore up North Carolina’s Unemployment Insurance Trust Fund while protecting unemployment benefits for struggling workers?
  • How will you ensure that employers participate fully and equitably in financing the unemployment insurance system?
  • How would you improve services for jobless workers to ensure they connect to jobs when employment picks up?
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