CEPR: North Carolina Proves Cutting Unemployment Insurance Pushes People Out of the Labor Force
Last year North Carolina undertook a radical overhaul of its unemployment insurance system. Among the changes, legislators sharply reduced the amount and length of regular unemployment insurance, cutting the maximum weekly insurance amount by 35 percent and reducing the maximum duration of compensation from 26 weeks to, currently, 17 weeks. By implementing the cuts in weekly benefit amounts in July, North Carolina forfeited its ability to participate in the federally-funded Emergency Unemployment Compensation program, and consequently, an estimated 70,000 individuals immediately lost long-term unemployment insurance, while another 100,000 individuals who still would have been eligible through the fall saw their insurance lapse sooner than would have happened.
According to the legislation’s elected supporters, the overhaul was a “difficult decision” needed to fix “a welfare-dependent program” and push unemployed workers to get serious about finding a job--any job.
We’ve now had some time to test this view and the initial results do not look promising for proponents of the cuts. The statewide unemployment rate has in fact fallen sharply since the cuts were implemented, dropping from 8.8 percent in June to 6.9 percent in December.
This drop, however, did not come about because people rushed out and found jobs. Employment as measured by the household survey used to determine the unemployment rate rose by 41,364 persons (1 percent) between June and December, far too little to explain the sharp drop in the unemployment rate. According to the household survey, only 13,414 more persons (0.3 percent) were at work in December 2013 compared to a year earlier.Read rest here