Workers fair share

Published 6:43 pm Tuesday, May 12, 2015

When state legislative leaders cut benefits for North Carolina’s unemployed they maintained that they were merely bringing North Carolina more into line with surrounding states. The facts don’t support that line. The real impact was much broader than merely a 35-percent reduction in maximum benefits.

Changes to the unemployment insurance program went well beyond reducing the weekly benefit amounts. Before Senate Bill 4 the maximum benefit period in North Carolina was the same 26 weeks that 44 other U.S. states still maintain. The changes, which began to take effect on July 1, 2013, included reducing the maximum weeks available to 14 at the time. In addition, the law made various changes to eligibility criteria, payment formulas and administration of the program. The changes violated Federal Emergency Unemployment Benefits requirements ending this assistance for long-term unemployed North Carolinians.  The consequence is that the number of unemployed workers not covered by any unemployment benefits increased by 40 percent since the law went into effect. The reduction in benefit amounts doesn’t really tell the whole story because the amount actually received by most claimants is only $293. The poverty level for a family with two children is $466 week. The $293 is 37 percent below the poverty level. The average number of weeks people are unemployed is 31. So, a North Carolinian and his/her family will live at 72 percent below the poverty level while they are unemployed, if they receive benefits at all.

The Congressional Budget Office estimates that every $1 of unemployment insurance payments produces nearly $2 of economic activity. This happens because unemployed workers use their benefits to maintain basic purchases of goods and services to survive and keep up with auto, utility and mortgage payments. Overall, 170,000 people are estimated to have lost their unemployment assistance immediately when the new program went into effect, resulting in a net loss of $780 million in benefits to the unemployed and income for North Carolina’s economy. This may be one of the reasons that North Carolina has grown out of the Great Recession so slowly.

Because of rate cuts in the 1990s and 2000s, the State’s Unemployment Compensation Fund could not absorb the unemployed from the Great Recession. North Carolina had to borrow from the Federal Government. To help accelerate repayment, the Legislature required employers contribute an additional $42 yearly per employee. Unemployed workers contributed about $100 per week in reductions, plus 12 weeks of all their benefits. Starting in 2017, North Carolina employers will pay $700 million less a year for unemployment insurance than they paid in 2014, largely because of unemployed worker’s sacrifices. Like other insurance payments that money should be considered part of a worker’s benefits package. One major reason Moral Monday participants were so angered by the Legislature’s action is workers get nothing when the debt is paid back. If unemployed workers only received one half of the dividend, the weekly benefit could increase by $197, nine weeks could be restored to the benefit period or 14,000 new workers could be hired.

Jim Smith is the first vice chair of the Beaufort County Democratic Party.