Dr. Wayne Vroman, an economist and a leading expert on unemployment insurance, has a subdued manner, but when he spoke to a General Assembly committee Wednesday even his soft-spoken delivery couldn’t hide the drama of his numbers.
Vroman of the Washington-D.C.-based Urban Institute said that since legislation approved by the Republican controlled General Assembly North Carolina overhauled the program in 2013 unemployment benefits have fallen to the worst in the nation.
Previous to the changes, North Carolina was in the middle of the pack nationally in terms of average weekly benefits and the duration of benefits. Now, among all states and the District of Columbia, North Carolina’s average weekly benefit of $247 ranks last in the nation and 50th in the duration of those benefits.
The decline was rated an achievement by Rep. Dana Bumgardner, R-Gaston. “I think where we are is a good thing,” he said.
North Carolina’s low ranks reflect extreme cuts. The legislation reduced the maximum weekly benefit from $530 to $350 and changed the typical 26 weeks of eligibility to a sliding scale based on the unemployment rate that can go as low as 12 weeks. Meanwhile, qualifying for unemployment has been tightened to the point that only 10 percent of the state’s unemployed people are eligible for the benefits, a rate that ranks 51st in the nation.
As the numbers show, North Carolina historically took a moderate approach that sought to assist the unemployed without unduly burdening businesses. But now Vroman said North Carolina is leading other Southern states backward. Several are following it adding a sliding scale to the duration period.
Republicans justified the cuts as a way to eliminate the state’s $2.8 billion debt to the federal government for funds it borrowed to cover a surge in unemployment claims during the recession. The state needed to pay off that debt and did; it was paid off nearly three years ago though a temporary federal tax on employers. But the benefit cuts have remained permanent. As a result of so little being paid out, the state’s unemployment trust fund has ballooned to $3.17 billion.
Given that cushion, Republican legislators could increase benefits without increasing the tax employers pay into the fund. What’s more likely is a move to cut the tax on employers and leave North Carolinians who lose their jobs through no fault of their own with meager unemployment insurance benefits.
Republicans who welcome the reduction in unemployment compensation say it helps the economy by holding down unemployment taxes on employers. The average tax rate for 2018 is .83 percent of wages up to $23,500, or $195.05 per employee per year. Some employers pay a lower or higher rate depending on their history of layoffs.
But any tax savings to employers will be more than offset by the damage to the economy when a recession hits and the newly jobless can’t pay their basic bills. The unemployment program doesn’t just help the beneficiaries; it cushions the overall impact of an economic downturn.
The cost of this austerity is not so apparent now in a time of low unemployment, but when the next recession hits thousands of laid off workers will discover what they’ve paid to lighten this minor tax burden on employers.