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NC's unemployment policy: Get a job

May 24, 2014 

North Carolina’s Republican-sponsored race to the bottom is nearing another milestone.

Come July 6, anyone who applies for unemployment benefits will be able to collect for a maximum of only 14 weeks, the shortest period in the nation. The next shortest is 18 weeks in Georgia. Most states offer 26 weeks, as North Carolina did until the Republican-led legislature “reformed” the unemployment program last summer.

The reduction in weeks comes because the legislature not only cut the maximum weekly payment from $535 to $350, it also tied the duration of benefits to the unemployment rate. Now that the rate has dropped below 6.5 percent, the maximum payment period will tighten from the current 19 weeks to 14.

The unemployed searching in a still tight job market will have less time to find a job in their field or one that suits their skills. When their shrunken unemployment checks run out, they’ll have to take whatever job they can find, usually at a pay level well below what they previously earned.

This is a Dickensian level of callousness toward North Carolinians facing an income crisis, but what makes it particularly irksome is that Republicans are hailing it as a jobs program. In July 2013, Republican lawmakers began punishing the jobless who were fortunate enough to qualify for unemployment benefits. The federal government was offering to pay for extended unemployment benefits so long as states didn’t change their unemployment programs. North Carolina’s lawmakers changed the program anyway, cutting off about 70,000 people from the federal benefits. North Carolina was the only state to do so.

That forfeit and the state cuts have coincided with a sharp drop in the state’s unemployment rate. It fell from 8.3 percent before the law took effect to 6.2 percent in April. Some construe the cuts followed by the rate drop as a cause and effect, the implication being that what unemployed workers needed was motivation to get off the couch. But this is largely fiction. It’s true that the economy is improving and more people are finding work, but much of the drop in the unemployment rate is caused by people exiting the labor force either for retirement or out of discouragement (and sometimes the two are related).

The idea that cutting benefits prompts the unemployed to find work was debunked by a recent state study in Illinois. The survey found that four out of five long-term unemployed workers were stillout of work two months after Congress let long-term unemployment insurance expire.

“This notion that temporary unemployment benefits provide people a reason not to return to work really needs to end because it is not supported by the data,” said Jay Rowell, director of the Illinois Department of Employment Security, in a press release.

Chad Stone, chief economist at the Center on Budget and Policy Priorities in Washington, says cutting benefits to push job seeking is bad policy. “You don’t want people taking the first job necessarily because it might not be the best job for them,” he says. “You don’t want square pegs jammed into round holes.”

North Carolina’s current approach reflects a misunderstanding of the purpose of unemployment insurance, says John Quinterno, a principal with South by North Strategies, a Chapel Hill research consultancy that specializes in economic and social policy. The benefits are supposed to stabilize the economy and protect workers during economic down cycles. Instead, he says, unemployment insurance is being treated like welfare. By pressuring the unemployed to take whatever job they can find, Quinterno says, the program “becomes a tool for pushing people down the wage ladder” rather than helping them hold their place or adjust and move up.

Republican leaders say the unemployment program needed to be reduced to accelerate the repayment of $2.8 billion borrowed from the federal government to meet a surge in unemployment applications during the Great Recession. But it’s unknown whether shortening the period during which employers pay a surcharge toward the debt translates into job creation, as Republicans claim. Meanwhile, once the debt is repaid, the reductions in the unemployment system will remain.

Douglas Perschbacher of Cary has been looking for full-time work since he lost his job as a drug company vice president a year ago. His wife took on part-time work. He’s drawing on his 401(k) and paying a 10 percent penalty. He’s had 25 serious interviews but no offers. At 57, he says even entry-level jobs are closed to him. Employers tell him he’s over-qualified. Now he’s doing sales work that pays only commission.

Perschbacher has advice for lawmakers who, in the name of spurring the economy, are cutting taxes for the rich and benefits for the unemployed.

“When you’re helping the unemployed, you’re not just helping the unemployed. You’re helping the whole culture of who they shop with,” he says. “If you’re looking for an economic stimulus, that’s what you should do.”

Editorial page editor Ned Barnett can be reached at 919-829-4512, or nbarnett@newsobserver.com.

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