Upgrading North Carolina’s UI system could help advance equity in employment and stabilize communities

Lawmakers should be focusing on improving NC’s unemployment system instead of policies that require work search or offer short-term incentives to get people back to work

RALEIGH (May 28, 2021) – Instead of focusing on labor shortage misinformation and policies around work search requirements and one-time incentives to get people back to work, state lawmakers should devote their energy to upgrading North Carolina’s stingy Unemployment Insurance (UI) system. More than one year after the pandemic drove unprecedented job loss, data show that UI plays a critical role in the labor market, stabilizing households and communities and advancing equity by race and geography for employment outcomes in North Carolina.

“North Carolina leaders have to decide: Do they want our state to be a place where people reach their full potential and make the greatest contributions to their community and economy? Or do they want people to work for the lowest wages?” said Alexandra Sirota, director of the Budget & Tax Center, a project of the NC Justice Center. “Unemployment Insurance with higher wage replacement and a standard duration of 26 weeks is more likely to lead to better job matches that ensure jobless workers don’t fall behind prior earnings and employers have the stable, strong workforce that they need.”

Several unemployment trends evident from the past year require a response from policymakers at the state level, according to a new report from the Budget & Tax Center.

Federal UI was critical to stabilizing income in the past year; without it, many households would have faced even greater hardship. Federal UI has kept the economic devastation of the COVID-19 pandemic in check, but North Carolina will be vulnerable if our state benefits remain inadequate, especially in the absence of federal assistance. North Carolina was one of eight states where income from federal UI represented 80 percent of the total UI income received in the past year. These states have systems that offer fewer weeks of state UI than the national standard of 26 weeks (North Carolina provides for just 12 weeks), provide lower wage replacement, and have higher monetary eligibility requirements.

Jobs are not fully recovered, and too many North Carolinians who face barriers, like low child-care access, can’t rejoin the labor market. Public health risks attached to returning to work remain, and many working families struggle to find child care, transportation, and stable housing. Refusing to address much-needed changes to our state system or accepting federal unemployment assistance will create further hardship for far too many North Carolinians.

UI plays a critical role for communities that experienced higher economic distress before COVID-19 and for people of color who face greater barriers to employment. Black workers represent a greater share of the overall labor force in North Carolina, as in other states that heavily rely on federal maintenance of their labor market through UI. The current outcomes are, in part, traceable to the power wielded by white landowners who dictated the early federal-state design of UI so that state policy choices could further exclude Black workers.

Read the full report at this link.

North Carolina’s UI system continues to fall short in ensuring that job loss doesn’t further grow hardship or destabilize economic well-being. State policymakers’ failure to provide adequate wage replacement and equitable access to UI generates greater uncertainty for the trajectory of the recovery overall, contributes to inequities in the current recovery, and is likely to generate a host of negative outcomes for health and well-being in the long run.

“Our state’s unemployment system is the worst in the country at this point, and policies like a one-time $1500 incentive or work search requirements aren’t going to do much beyond enticing unemployed people to take low-wage work that will result in long-term poverty,” said Bill Rowe, Director of Advocacy for the North Carolina Justice Center. “There are multiple reforms lawmakers can and should make to the state UI system that would meaningfully help people get back to working while also stabilizing North Carolina’s families and the economy, but a bill to enact those reforms is still sitting in a committee without so much as a hearing.”

More background

• Why return-to-work bonuses are the wrong medicine for what ails the labor market (Alexandra Sirota, Budget & Tax Center)
• Leisure and Hospitality was bolstered by Unemployment Insurance at critical moments in pandemic (Alexandra Sirota, Budget & Tax Center)
• Unemployment insurance changes needed in North Carolina (Bill Rowe, Workers’ Right Project)