Tuesday, January 14, 2014

NC Unemployment Insurance cuts hurting job growth

This past July, North Carolina's Unemployment Insurance (UI) program got leaner and a whole lot meaner when Governor McCrory and the Republican legislature cut both the number of weeks of state-funded compensation and the maximum benefit for workers. These cuts, in turn, led the federal government to cancel extended UI benefits for 70,000 long-term jobless people in the state.

Republicans claimed that the cuts would be a dose of tough medicine, spurring the jobless to accept work and leading to employment growth.

However, the cuts had the opposite effect--job growth, which was already anemic in the state, has actually slowed.

Moving the wrong direction in NC
June-November Job Growth before UI slashed
June-November Job Growth after UI slashed

Figures from the U.S. Bureau of Labor Statistics indicate that the number of non-farm jobs in NC increased 1.35 percent from June 2013 (the month before UI was slashed) to November 2013 (the latest month available).

Over the same months in 2012, when the more generous UI state and federal systems were in place, the number of non-farm jobs increased by 1.50 percent.

Nationally, job growth from June to November was faster in 2013 than in 2012, so NC's slowdown bucks the national trend.

Why did job growth slow? Although the elimination of UI for NC's long-term unemployed may have spurred a few desperate people to take jobs, it took money out of the pockets of many, many more. This reduced the demand for goods below what it would have otherwise been and thereby lowering the demand for labor.

The policy not only punished down-on-their-luck workers (eligibility for UI requires a history of work) but also punished businesses and other potential workers across the state.

Leaner, meaner, and dumber.