- NC Policy Watch - http://www.ncpolicywatch.com -

Yes, North Carolina can restore unemployment compensation

unemployment400 [1]With the General Assembly whipping through its short session at breakneck speed, there is still time to restore some of the deep cuts made last year to the state’s unemployment compensation system. Restoring these cuts would benefits some of the neediest citizens in the state as well as the entire economy; we could restore these benefits without breaking the state’s budget; and we could still pay back what the state owes the federal government to replenish the Unemployment Insurance Trust Fund without making the least among us bear that burden.

Restoring last year’s cuts would give the average person receiving unemployment benefits $225 more each month; money that needy families would then spend almost immediately on rent, food, medicine, and other necessities. Every dollar spent generates another dollar of economic growth—thus, the unemployed keep the wolf a little further away from their doors and the state’s economy expands with the new consumer spending.

Offering reasonable unemployment compensation does NOT impact the state government’s budget. Employers pay into an Unemployment Insurance Trust Fund, which the federal government administers, as protection against the risk that job loss driven by economic cycles has on their businesses. Unemployment compensation is paid out of these funds, and states can get loans from the federal government to help pay claims during times of recession and high rates of job loss.

Cutting benefits is also not the fair way to pay back what the state has already borrowed from the federal government. In good times, back in the 1990s, the legislature cut taxes for employers so that they had artificially low rates and thus failed to build up the Trust Fund for when it was needed, like today as workers often still struggle to find jobs in the wake of the Great Recession. Unemployed North Carolinians (through reduced benefits) are shouldering two-thirds of the cost of paying back money the state has had to borrow from the federal government to pay unemployment benefits over the past five years. Employers are contributing only 22.5 percent to the repayment. So those least able to bear the burden are asked to sacrifice their modest compensation while businesses continue to pay lower unemployment taxes.

Finally, to address the biggest canard of all on this subject, cutting unemployment benefits has not motivated more people to find jobs. The recent drop in North Carolina’s unemployment rate is largely due to people leaving the workforce because they can’t find jobs, and not because of significant job growth. Only 11 percent of the decline in unemployment is due to people finding work. Many people cut off from unemployment compensation have given up hope of finding a job, drifted into the ranks of “discouraged workers,” and plunged further toward the fringes of our society and economy.

Returning to an unemployment compensation system that offers those in need a modest income to prevent destitution, and that is paid for by a reasonable tax on employers, is what we all owe to the most vulnerable of our fellow citizens. Such a system is just and compassionate, as well as good for rebuilding our economy, society, and moral conscience.

David Zonderman teaches history at NC State University.