This spring, workers in Salisbury, North Carolina gathered to share how layoffs at a truck manufacturing plant had affected their families and communities. In the past, workers who were laid off when demand for new trucks had fallen turned to unemployment insurance, or UI, to make ends meet until the market improved. UI is earned insurance that nearly all American workers contribute to automatically when they earn wages. If workers are laid off, UI benefits are supposed to temporarily replace a share of their lost income while they search for a new job.
But their experience will be different this time. Not only is it unlikely that jobs will return quickly, but draconian changes in the state’s UI program have meant that workers can no longer rely on the program to help keep them afloat until their next job. One man shared that his UI benefits represent less than one-fifth of what he used to earn—only about half of what he would have received from the social insurance program during previous periods of unemployment.
He is not alone. A young woman who was laid off from her job at a non-profit in North Carolina’s capitol Raleigh—a city recognized for its relatively strong labor market—is still struggling to find work in her field and has taken part-time jobs since her unemployment insurance ran out. Despite her graduate degree and solid work experience, opportunities to continue in her career or pursue a new one have been stymied by the immediate need to pay for rent and food.
Meanwhile, prospects for workers are only getting worse, as solidly middle-class jobs in North Carolina’s remaining manufacturing counties continue to be lost. And, given how unlikely it is that these lost positions will be replaced by good jobs, these layoffs could spur a ripple effect in the local economy, harming every community business from the suppliers who sell parts to manufacturing plants, to local grocery stores and restaurants that serve the workers these companies once employed. In the past, UI benefits could have given cash-strapped unemployed workers money to spend, stimulating consumer demand that would keep these businesses operating—but North Carolina’s policymakers have crippled the program.
It’s clear that North Carolina’s workers—and its economy—need UI more than ever. However, extreme policy choices have left the state’s UI system unprepared to address the fallout of these layoffs, let alone the next economic downturn.
As a result of years’ worth of tax cuts for businesses, North Carolina’s Unemployment Trust Fund was quickly overwhelmed when unemployment rose during the Great Recession, and the state went into debt to pay the UI benefits it owed. In 2013, rather than restoring the program to solvency, leaders in the General Assembly instead pushed through cuts to North Carolina’s UI program that reduced the number of weeks workers could collect benefits, slashed UI’s weekly benefit amount, and limited job training and workforce development opportunities.
These changes have been devastating to North Carolina’s working families. As a result, North Carolina’s UI system went from being fairly average compared to other states to downright stingy. Today, just 1 in 10 jobless workers in North Carolina receives UI—the lowest level in the nation. And, although nearly a third of jobless workers are out of work for 26 weeks or longer, the state offers just 13 weeks of UI for them to fall back on. This is coupled with steep benefit cuts: The average weekly benefit has dropped to a meager $233—just one-third of what is required to meet the basic needs of a family with one adult and one child in North Carolina.
In the name of helping businesses, North Carolina’s leaders took an extreme approach that will actually hurt its economy: When the next economic downturn arrives, UI payments will be insufficient to ensure that workers who lose their jobs through no fault of their own can maintain their spending and thus generate the demand for goods and services produced by local businesses. Even more troubling is the fact that cuts to unemployment insurance—a program designed to sustain the American middle class—come at a time when North Carolina is experiencing the fourth-largest decline in the nation in the share of adults with middle incomes. Cuts to the UI program have likely exacerbated this trend: Many workers are now forced to take jobs for lower pay because they cannot afford to search for higher-quality employment. By tearing down UI—a program intended to ensure that job loss doesn’t push working families off the economic ladder—lawmakers have actually acted to expand the ranks of workers earning low wages.
It would be bad enough if North Carolina had stopped there. But unemployment insurance cuts have been made worse by state policymakers’ eagerness to pursue every punitive measure available to them across other critical programs.
For example, state leaders have implemented a time limit on access to food assistance in counties whose labor markets were deemed too weak to provide jobs to all those who want to work. In addition, they’ve refused to invest state dollars in specific skills training or career pathways that would allow jobless workers to prepare for future jobs and new careers. And they have made too little commitment to helping rural communities—and those struggling with the loss of manufacturing jobs—rebuild their economies.
Our state leaders must commit to pushing forward better policies that support jobless workers in North Carolina. However, the UI system is ultimately a state-federal partnership. So key federal reforms are important to ensure all those who are jobless and seeking work in our state have a better chance of staying connected to the labor market.
A first step for the federal reform is to set minimum standards for state systems—including North Carolina’s—that are based on what works to support the economy and connect unemployed workers to jobs. Such minimum standards must include the provision of at least 26 weeks of UI benefits for laid-off workers, and benefit amounts that are sufficient to support jobless workers while they seek a new job. Beyond that, federal investments should place a greater emphasis on re-employment services so that jobless workers can connect with local employers and access skills training they need to advance their careers.
North Carolina’s unemployment insurance cuts surpass nearly all other states’ in their harshness, and have been a disaster for jobless workers and their communities. What state policymakers are likely to discover when the next recession arrives—if not before—is that these cuts will come at enormous cost to our economy as well.