Countdown to the Unemployment Cliff: North Carolina is Setting itself Apart

As we wrote yesterday, the implementation of HB4 – the radical restructuring of North Carolina’s unemployment insurance system – is just around the corner. Next Monday, on July 1^st, North Carolina will set itself apart. Our state will have the dubious distinction of being the ONLY state in the nation to:

• Reject participation in the 100% federally-funded emergency unemployment compensation (EUC) program. Due to the implementation date of July 1, North Carolina breaks a non-reduction rule prohibiting states from making benefit cuts while participating in the federal EUC program. As a result of the decision to implement changes in July 3013 instead of January 2014, 70,000 jobless workers in North Carolina will abruptly lose benefits next week. No other state has rejected federal participation in order to pursue benefit cuts.

• Have a sliding scale for the minimum number of weeks available. Prior to HB4, North Carolina fell in line with the majority of states by providing 26 weeks of benefits – a length of time also recommended by two federal advisory bodies and the U.S. Department of Labor. HB4 includes a provision that establishes a sliding scale for the minimum and maximum duration of weeks based on the state unemployment rate. No other state has a sliding scale for the minimum number of weeks while only two states  – Florida and Georgia – have a sliding scale for the maximum number of weeks.

• Calculate benefit amounts using a formula no other state uses. North Carolina’s current average weekly benefit amount is right in the middle of the pack compared to other states, with a state ranking of 25^rd.  And the way benefit amounts are currently calculated is in line with the majority (29) of other states. North Carolina will become the first state in the nation to calculate benefits based on the “last two completed quarters.”  North Carolina’s new method of calculating benefits will likely result in lower benefits for many workers, especially those who have varied earnings due to irregular schedules, reduced hours, or seasonal fluctuations.

• Cut the maximum benefit by as much as one-third. North Carolina’s current maximum benefit amount is indexed to the average weekly wage – this is how most states calculate the maximum. For middle class earners – those making approximately $37,000 per year or more – the cut to a flat maximum benefit amount of $350 will be close to one-third.  No other state has cut its maximum by this much. Moreover, the value of the maximum benefit, already a fraction of what it takes to makes ends meet in North Carolina, will likely to erode over time relative to cost of living increases and wage fluctuations.

The temporary wage replacement for workers who have lost their jobs through no fault of their own helps workers and their families meet their basic needs and stabilizes the economy. North Carolina currently has the 5th highest unemployment rate in the country. Is making the most severe cuts to unemployment insurance really how we want to distinguish ourselves?