The time to fix NC’s broken unemployment insurance system is right now

By: and - March 18, 2020 5:30 am

[Editor’s note: Workers’ rights advocates, experts, and affected individuals will host a press call this morning (March 18) at 9 a.m. to call for changes to North Carolina’s unemployment insurance system in order to meet the challenges facing workers and the economy as a result of the new coronavirus outbreak.

Speakers will address the effects North Carolina’s unemployment insurance system has on workers, local communities, and economies, and whether the current system can handle the challenges of a recession. Interested parties can register at this link. After registering, you will receive a confirmation email containing information about joining the meeting.

The following essay summarizes some of the issues that will be discussed on the call.]

Experts say it is a certainty that there will be an economic slowdown as a result of the coronavirus outbreak. Businesses will see demand decline for their goods and services as a result of people isolating or quarantining themselves, or having to stay home with schoolchildren and infected or otherwise vulnerable family members. Businesses will experience disruptions to their supply chains of goods and products as a result of challenges with interstate and global trade. Workers will be laid off or unable to come to work. Income losses could be catastrophic for families and communities and only serve to deepen the economic harm.

Once upon a time, North Carolina’s unemployment insurance program was well-positioned to deal with such crises by not only providing critical assistance to laid off workers and their families, but also by helping to shore up the economy when times got hard. Families’ rents, mortgages, utilities and other necessities got paid for with unemployment insurance benefits while they weathered the downturn. Unfortunately, that assistance is no longer available at the scale that is needed to protect workers from further harm and contain the ripple effect of this shock to our economy.

In 2013, the North Carolina General Assembly and then-Gov. Pat McCrory approved House Bill 4 with the stated objective of bringing solvency to the state’s Unemployment Insurance Trust Fund, which is funded by taxes on employers and pays unemployment benefits to laid-off workers.

Ultimately, the bill achieved solvency for the trust fund, but only by permanently cutting the amount, duration, and eligibility for benefits for all unemployed workers. All told, the changes enacted in North Carolina amounted to the most severe cuts ever enacted by any state during the 80-plus-year history of American unemployment insurance. At the time, legislators claimed that when the trust fund was solvent, these draconian cuts would be revisited.

That time has clearly arrived.

The debt that the state owed to the federal government has been paid off, a temporary tax on employers has been lifted, the Trust Fund balance is now at $3.9 billion, and the system is near the bottom of the national pack in terms of its capacity to assist workers. Even prior to the enactment of HB 4, the conservative Tax Foundation ranked North Carolina’s unemployment insurance program fifth most favorable for businesses in the U.S.

The cuts made in 2013 have resulted in three enormous problems and deficiencies for the state’s program.

  • First, only 8.6 percent of jobless workers in North Carolina received unemployment insurance in the third quarter of 2019, ranking the state 51st in the country (including the District of Columbia and Puerto Rico).
  • Second, the average duration of unemployment insurance in North Carolina is just 8.6 weeks, ranking last in the country. This short duration is, in part, a function of the state’s arbitrary sliding scale that ties the number of weeks of benefits to the state unemployment rate.
  • Finally, North Carolina provides just $264.70 each week on average to jobless workers and a fixed maximum of $350, despite the average weekly wage in the state being $986. The state is replacing just 32 cents for every $1 in lost income, circulating far fewer dollars than recommended by economists who typically seek a replacement rate of at least 50 percent.

The upshot of all this is that a very big “I told you so” moment is about to occur in North Carolina unless state leaders (starting with the General Assembly) take action to rebalance the state’s unemployment insurance program. Being last in how we help unemployed workers and their families is not something to be proud of, especially in these unsettling times.

MaryBe McMillian is the President of the North Carolina State AFL-CIO. Rick Glazier is the executive director of the North Carolina Justice Center (the parent organization of NC Policy Watch).

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