MEDIA RELEASE: Changes in unemployment insurance are hurting North Carolina workers, communities

Three years after lawmakers made changes to unemployment, jobless workers are worse off

RALEIGH (March 3, 2016) — Mass layoffs will soon take place at facilities in Eden, Salisbury, Gaston, and Rowan, resulting in a significant test to an unemployment system that has already proven to be ineffective in serving jobless workers and their communities.

Things have only gotten worse for unemployed North Carolina workers since changes were made to the unemployment insurance system in 2013, according to a new report from the Budget & Tax Center, a project of the NC Justice Center. Those who lost their jobs through no fault of their own now have a worse chance of collecting unemployment insurance or, if they do, replacing prior wages. The state’s unemployment insurance system – designed to provide enough temporary, partial wage replacement to avoid a drop in overall consumer spending – is not only doing less to stabilize the temporarily unemployed but also failing to establish sufficient solvency to keep the state from having to borrow money from the federal government in the event of another economic downturn.

“The worse job that unemployment insurance does in helping jobless men and women meet basic needs and stay attached to the labor market, the more it erodes purchases of goods and services,” said Alexandra Forter Sirota, director of the Budget & Tax Center and author of the report. “An inadequate UI system doesn’t just hurt the jobless; it hurts the businesses where they would shop and, by extension, the economy as a whole.”

Here are a few of the key findings from the report:

• Prior to changes made by lawmakers in 2013, the state’s unemployment insurance was by no means generous – it fell in the middle of the pack among all states on most measures. In the third quarter of 2015, only 11 percent of jobless North Carolinians received unemployment insurance payments and the average weekly payment was just under $234, ranking the state 46th in the country.
• The 2013 changes to the unemployment system are also worsening the state’s uneven economic recovery, as many communities continue to struggle with unemployment while others fare better. The maximum length for receiving unemployment payments fluctuates based on the state’s unemployment rate, meaning right now jobless workers can receive a maximum of only 13 weeks until the duration is once again reset based on January 2016 data. In December, 55 counties had unemployment rates higher than the state; 14 of those counties exceeded the state rate by 2 percentage points.
• Changes made in 2013 not only disrupt household budgets but also make the state and its workers less adaptable to the changing nature of work brought on by automation. North Carolina is now the only state to require jobless workers to wait a week before they receive unemployment insurance each time that they make a claim, delaying crucial support for a family’s everyday needs. Additionally, the lack of dedicated funding to help jobless workers receiving unemployment insurance get retrained for new occupations hurts the state’s ability to help people adapt to changing opportunities in the labor market and aquire skills for jobs in emerging industries.

It is time to ensure the state reaches a solvent UI Trust Fund. Policymakers justified benefit cuts as necessary to pay back the federal loan made during the Great Recession, when North Carolina had to borrow money to make UI payments thanks to the state’s inadequate Trust Fund which was too low even before the recession hit. The state should ideally keep the fund solvent in good times so they can pay benefits in a downturn without significantly changing the tax structure for employers. Unfortunately, the current law’s threshold is too low to ensure that the system can provide adequate temporary wage replacement or even sustain existing payments without borrowing in a future downtown. As it stands, an employer tax cut will occur once the Trust Fund reaches a reserve ratio of $1 for every $1 in insured wages. Economists suggest that a reserve ratio of $2 for every $1 in insured wages is a healthier goal, meaning North Carolina would need a Trust Fund balance of at least $3 billion.

“There is much work to be done to establish an effective unemployment insurance system in North Carolina,” Sirota said. “It is critical that North Carolina re-balance its system in order to provide support for jobless workers and their communities and to prepare for a strong economic future.”

Read the full report at this link: https://www.ncjustice.org/publications/changes-in-state-unemployment-insurance-hurting-workers-and-communities/

FOR MORE INFORMATION CONTACT: Alexandra Forter Sirota, Alexandra@ncjustice.org, 919.861.1463; Bill Rowe, bill@ncjustice.org, 919.856.2177; Jeff Shaw, jeff@ncjustice.org, 503.551.3615 (cell).