What Happened When North Carolina Slashed Unemployment Benefits? People Got Jobs…Weird

By Charlotte Hays

Friday, January 17, 2014

A recent report on Market Watch—hardly a right-wing hangout—should be required reading for every Democrat who believes that extending “temporary” unemployment benefits is always the humane thing to do.

An experiment in North Carolina indicates that—as is all too often the case—Democrats actually may be hurting the very people they claim to be helping in their quest, temporarily halted, to extend unemployment benefits.

North Carolina, it seems, pressed for money and under the cruel sway of a Republican governor, resorted to drastic measures: slashing unemployment benefits and, as if that wasn’t draconian enough, cutting the number of weeks the unemployed could receive even these meager benefits.

“Within several months, the unemployment rate fell a few ticks and by November it fell to a five-year low,” Market Watch reported. The jobless rates declined similarly, if less spectacularly, in Georgia and South Carolina, where benefits were also reduced in 2012.

Market Watch was cautious not to conclude that the news from North Carolina is a vindication of critics of extending unemployment benefits. It noted that several states that did not cut benefits had also shown a decline in joblessness.

Nevertheless the North Carolina experience deserves a look. What happened in North Carolina is even more relevant because the state was particularly hard hit during the Great Recession. In dire straits, North Carolina availed itself of federal loans to help pay for unemployment benefits, which lasted 26 weeks.

When North Carolina ended up seriously in hock to the feds, Republican Governor Pat McCrory, who took office in 2013, faced a choice: raise taxes, a course of action McCrory maintained would harm businesses (which, after all, create jobs) or cut unemployment benefits. The brave governor cut benefits.

The maximum weekly benefit was cut from the previous high of $535 to $350, a not insignificant reduction. The time people could collect benefits was cut from 26 weeks to only 12 or 20. But that was not the end of the cruelty.

McCrory’s cuts imposed a further hardship on the unemployed: unemployed North Carolinians became ineligible for certain cash payments offered by the federal government, which requires states to pay a certain level of benefits to qualify for these payments. About 70,000 North Carolinians lost out on these payments.

If the congressional Democrats (and a few wayward Republicans!) who supported extending the benefits were right, McCrory’s cuts should have ushered in a humanitarian crisis that made the Armageddon that ensued from the sequester mild. Oh, wait…

Market Watch’s Jeffrey Bartash wrote:

    North Carolina’s jobless rate rose a notch to 8.9% in July and then began a steady descent: 8.7% in August, 8.3% in September, 8.0% in October and a preliminary 7.4% in November, according to U.S. Labor Department figures.

    That’s the lowest rate since late 2008, though monthly numbers are prone to sharp revisions.

This data doesn’t tell us what happened to everybody who is no longer classified as unemployed.

Market Watch speculated that some may have retired, ended up on welfare, or moved in with family. In other words, some of them may have gotten out of the work force, as many former workers across the nation have done, thus helping bring down the still dangerously high national employment rate.

Still, while there may have been people who didn’t get jobs, it is undeniable that North Carolina's unemployment rate declined. It is unarguable that more people were working than before the cuts, thus reducing the pool of human suffering.

The North Carolina success story should have been a rallying cry for Republicans when extending the benefits was debated on Capitol Hill.

It is unfortunate that some chose instead to focus on how to “pay for” extending the benefits, as if extending these benefits is inherently good, if only you can find a way to afford them.

They should instead have been willing to talk about the morality and utility of long-term unemployment benefits. As it happens, this is something about which I know a thing or two.

In the 1990s, living in New York and tossed by a publisher who didn’t like my column (talk about cruel!), I found myself receiving unemployment insurance benefits. I have to confess that they offered me peace of mind, especially at first, when life was raw.

I’ve written before about my experience with unemployment benefits. I should have headlined my saga “How I Lost My Benefits but Found a Job.”

Yes, ladies and gentleman, this rock-rib right winger, advocate of pluck and grit and elbow grease had been dawdling in her job search. I didn’t really realize I was lackadaisical, though in retrospect I know that some of my ideas for employment were fantastical. I won’t tell you which intellectual journal I tried to sell on the idea of my doing a gossip column for them!

But then the benefits were about to expire and the wolf is at the door: Mr. Wolf makes you lose your pickiness and take any job you can get. For me, it was a job I didn't really want but which turned out to be a long-term, life blessing. I am so glad I took it, but I might have spurned the offer if the benefits hadn’t stopped.

I hope that the next time unemployment benefits come up in Washington—and believe me, the issue will come up again—the Republicans will remember North Carolina and make an argument that is both moral and utilitarian. We shouldn’t be trying to “pay for” a “benefit” that keeps people on the dole.