Time to call it: NC experiment with jobless benefits has failed

From left, N.C. House Speaker Tim Moore, Gov. Pat McCrory and Senate President Pro Temp Phil Berger applaud state legislators for working together to pay off the state’s debt to the federal government for unemployment insurance.
From left, N.C. House Speaker Tim Moore, Gov. Pat McCrory and Senate President Pro Temp Phil Berger applaud state legislators for working together to pay off the state’s debt to the federal government for unemployment insurance. hlynch@newsobserver.com

When Supreme Court Justice Louis Brandeis dubbed the states “laboratories of democracy,” he was talking about the many differing policy decisions states make to create innovative approaches to solve public dilemmas. And while experiments yield both successes and failures, the line of distinction is generally clear between the two. But here in North Carolina, that line is decidedly blurry.

When the North Carolina General Assembly drastically slashed unemployment insurance benefits in 2013, the argument was that giving the newly unemployed a shorter safety net would encourage them to return to work faster. At the time, many, including myself, argued that this reckless experiment of cutting benefits to only $350 a week and limiting the eligibility to only 13 weeks would only cause more people to fall out of the labor market – and ultimately have the opposite effect on increasing employment. Yes, it would cut the official unemployment rate, but it would do nothing to actually help these people get the full-time, sustainable employment they need.

Before the changes went into effect, North Carolina was about average when it came to most measures of unemployment. The state had 39 percent of unemployed workers receiving unemployment insurance in the second quarter of 2013 (which ranked us 24th nationally), the average weekly benefit was $301.06 (25th nationally) and average benefit duration was 15.9 weeks (31st nationally).

Now three years on, we don’t have to guess at the results of this great experiment. If it had worked, we would have seen the share of people with jobs increase after cuts went into effect. Instead, we saw exactly the opposite. The share of employed North Carolinians actually fell well below the national average when we started out above the average. In fact, North Carolina’s prime-age employment-to-population ratio fell nearly 3 percentage points below the national average after the cuts.

This leaves vulnerable North Carolina workers in a very precarious position. In the latest data available from the third quarter of 2015, just 11 percent of the state’s unemployed receive unemployment insurance, dead last in the country. Our average duration for collecting benefits, 11.5 weeks, is also the lowest in the country. The state’s average weekly benefit was $233.69 (now 46th nationally) and the average weekly benefit as a percent of average weekly wage was 27 percent (now 44th nationally).

This is all to say that the drastic and draconian unemployment insurance cuts North Carolina made in 2013 were a complete failure. The share of people with jobs in North Carolina did not grow nearly as quickly as it did in states that did not make these cuts, and there was no discernible increase in the share of the population with a job. Instead, tens of thousands of job seekers were forced into part-time jobs, forced into underemployment or fell out of the job market completely. In all cases, these people would not show up in the official unemployment numbers but are certainly still unemployed by any sensible measure.

Moreover, the most vulnerable of our population fared even worse than the average. While the official unemployment rate for whites in the state was 4.1 percent in the second quarter of 2015, the unemployment rate for blacks and Hispanics was 9.3 percent and 10.1 percent, respectively. That means the cuts to unemployment benefits hit minority households more than twice as hard as white households.

But the story doesn’t end there. Women, who already face across-the-board wage disparity, also face an unemployment disparity. While it is true that women have regained a large number of the jobs they lost during the Great Recession, their gains are highly concentrated in low-wage occupations. Sixty percent of the increase in employment for women between 2009 and 2012 was in the 10 largest occupations that typically pay less than $10.10 per hour. In contrast, these 10 low-wage occupations accounted for only 20 percent of men’s employment growth over the same period.

If the states are truly laboratories of democracy, then North Carolina is surely the domain of mad scientists. When the goal of a policy is to get more people employed quickly, and the result is more people without jobs, it matters little with what catchy term the results are branded. For those still unemployed and without assistance, it’s easy to see where the experiment has failed.

The mad scientists in the General Assembly still have time to fix their creation before it becomes full-fledged Frankenpolicy. They should.

Kevin J. Rogers is the director of policy and public affairs for the advocacy group Action NC and a lecturer of political science and government at William Peace University in Raleigh.