On Friday, Gov. Pat McCrory (R) told residents that the state’s drop in its unemployment is thanks to the decision to get rid of benefits for those who are out of work.
“There’s nothing worse than if you have a job opening and someone decides to take a government check instead,” he said, according to The News Herlad.
We made a decision. And that decision alone is the one lone factor, in comparison to any other state, which I think has helped North Carolina lower its unemployment rate drastically in the last five months. We’ve had the largest drop… We’re in the top 5 percent in the country regarding the drop in unemployment rate — is that not amazing? We were at 9.6 percent, and now we’re at 6.7 percent.
In June, North Carolina lawmakers made such drastic cuts in unemployment benefits that the state was dropped from the federal Emergency Unemployment Compensation program, which made sure those who were out of work past their state-level benefit cutoff, typically around 26 weeks, still got benefits. The number of people receiving benefits fell to 45,000 by December, a 40 percent drop, both because people lost eligibility and because new people weren’t signing up. People are making initial benefit claims at half the rate of the year before.
While it’s true that the state has seen a rapid decline in its unemployment rate, that doesn’t necessarily mean everyone went back to work. More than 22,000 people in the state found a job after the benefits were cut off. But a huge number of people in North Carolina have given up looking for a job altogether since the cuts, which also lowers the unemployment rate, given that people who are still job searching are considered to be unemployed but those who stop looking aren’t. In fact, the state is experiencing the largest drop in its labor force in its history, with 77,000 fewer people working or looking for a job in October compared to the year before.
Meanwhile, the state’s job growth looked similar to that of the rest of the country both before the benefits were cut off and afterward, while the decline in its labor force has been much bigger than for everyone else.
Unemployment benefits can help people stay in the labor force and keep looking for work for a few reasons. The biggest is that in order to get them, recipients are required to actively search for work, and those who receive them spend more time doing just that than those who don’t. Other research has confirmed that getting these benefits doesn’t discourage people from trying to get back to work. Benefits also help job seekers afford the costs of internet access to search job listings and send out applications, gas money to get to interviews, and new clothes for those interviews that they might have to cut back on otherwise.
Here’s what happens when people lose benefits: their poverty rates rise, they turn to public assistance, and they fall back on family members or nest eggs. In 2012, the Government Accountability Office found that the poverty rate of people who had exhausted benefits was 5 percent higher than the general rate and 40 percent lived on the brink of poverty. A third turned to government programs to make ends meet, while 90 percent relied on a family member or money from retirement or savings.
North Carolina’s experience has larger implications, as what happened to the unemployed there is now happening for the whole country. Congress let those federal unemployment benefits lapse in December, cutting off more than 2 million people. Republican filibusters have kept them from restoring the benefits, and while lawmakers in the Senate have worked out a tentative deal, House Speaker John Boehner has already said it won’t pass the House.