No, Cutting Unemployment Benefits Didn’t Boost North Carolina’s Workforce

North Carolina Gov. Pat McCrory (R) with wife CREDIT: AP PHOTO/GERRY BROOME
North Carolina Gov. Pat McCrory (R) with wife CREDIT: AP PHOTO/GERRY BROOME

Last year, North Carolina made such drastic cuts to its unemployment insurance program that it got kicked out of the federal program that gave states money to keep the long-term unemployed receiving benefits after they exhausted the state-level ones. That meant any unemployed person out of work longer than 20 weeks was cut off from getting a check.

Republican proponents of the move claimed that it would “put North Carolinians back to work” by pushing them harder to find a job. And Gov. Pat McCrory (R) has since claimed that the reduction in benefits has been “one lone factor” in reducing the state’s unemployment rate.

But the results of that experiment actually show the opposite. As a new report from the Economic Policy Institute (EPI) finds, the ratio of people who are employed to the total population for those between the ages of 25 and 54 — in other words, those who aren’t likely to be out of the workforce because they’re in school or retired — had already begun to rise rapidly before the benefit cut took effect. It kept rising for two months afterward, meaning more of its prime-age workers were getting jobs, but then it started to decline, “gradual at first, and then more pronounced.”

And perhaps even more importantly, the state’s labor market looked about the same as in nearby states. Compared to five other southern neighbors — Florida, Georgia, South Carolina, Tennessee, and Virginia — in the period between North Carolina’s cut took effect and a nationwide cut in long-term unemployment benefits hit all states, the share of people with jobs “differed very little,” the report notes. “This outcome provides little reason to believe that North Carolina’s cuts fundamentally improved the labor market in the state,” it concludes.

At The Upshot, a similar analysis came to the same conclusion. Economist Justin Wolfers compared employment growth in North Carolina to similar neighbors. He found that while employment grew by 1.3 percent over the last year in the state, it grew by 1.5 percent in South Carolina. It grew faster in Georgia and Tennessee as well, and only Virginia, which was hit hard by the government shutdown, saw slower growth. “The bottom line is that North Carolina looks quite similar to its peers, and certainly not better,” he writes.

While more than 22,000 North Carolina residents found a job after the benefit cutoff, 77,000 fewer people were working or looking for a job in October compared to the year before, the largest labor force decline in the state’s history. Those people are likely ones who gave up trying to get a job altogether, either because they were discouraged or they sought out school or retirement.

The EPI report also notes that North Carolina wasn’t alone in reducing how many weeks the unemployed could get benefits (although it was alone in reducing how much they got, which is why it was kicked out of the federal program). And the states that reduced the duration of benefits didn’t see a whole lot of benefit. “[S]tates that cut the duration of their unemployment insurance benefits saved very little money by doing so,” it notes, ranging from six cents to 14 cents saved per person each week.

The evidence all points to the fact that cutting off unemployment benefits doesn’t do much to help the unemployment rate or the economy, but it does hurt the people who need the money to get by. After Congress failed to reauthorize the program that gave the long-term unemployed benefits, more than 3 million people are going without the support. That money often helps people not just survive but find a new job by covering things like internet service for job applications or gas money for interviews.

But as in North Carolina, results in Illinois show that four out of five people cut off from checks still weren’t making money two months later. Instead, they’re probably turning to government programs, family members, or money shored up for retirement or savings to get by, and some are likely falling into poverty.