North Carolina got it right on unemployment benefits
Published July 5, 2014
By John Hood
by John Hood, John Locke Foundation and NC SPIN panelist, published in Wall Street Journal, July 4, 2014.
A year ago, North Carolina became the first state in the nation to exit the federal government’s extended-benefits program for the unemployed. Facing the prospect of job-killing hikes in payroll taxes to pay back Washington, Gov. Pat McCrory and the state legislature instead reduced the amount and duration of unemployment-insurance benefits, which had been higher in North Carolina than in most states. As a result the state lost its eligibility to participate in the extended-benefits program on July 1, 2013.
National media and liberal activists pounced. Citing the decision and several other “outrages” by the state’s first Republican-led government since Reconstruction—such as adopting a pro-growth flat tax, clearing out the state’s regulatory thicket, and rejecting ObamaCare’s Medicaid expansion—left-wing critics subjected the Tar Heel State to months of invective and ridicule.
Within the state, the so-called Moral Monday movement drew thousands of protesters to the capital on a nearly weekly basis. Hundreds of arrests were made for violating the rules of the state’s Legislative Building. Outside the state, liberal media outlets excoriated North Carolina for ending extended benefits. New York Times columnist Paul Krugman called it a “war on the unemployed.” Even some conservative columnists and policy analysts criticized the decision as unwise and inconsistent with the principles of their new “reform conservatism” movement.
North Carolina didn’t descend into the Dickensian nightmare critics predicted. For the last six months of 2013, it was the only state where jobless recipients weren’t eligible for extended benefits. Yet during that period North Carolina had one of the nation’s largest improvements in labor-market performance and overall economic growth.
According to the U.S. Bureau of Labor Statistics, the number of payroll jobs in North Carolina rose by 1.5% in the second half of 2013, compared with a 0.8% rise for the nation as a whole. Total unemployment in the state dropped by 17%, compared with the national average drop of 12%. The state’s official unemployment rate fell to 6.9% in December 2013 from 8.3% in June, while the nationwide rate fell by eight-tenths of a point to 6.7%.
As North Carolina began beating the national average month after month, defenders of the extended-benefits program said it was all a mirage. They said discouraged North Carolinians were simply dropping out of the labor force, not being nudged by a loss of benefits into jobs they might not otherwise have taken.
While North Carolina did experience a significant drop in labor-force participation, the trend began in February 2013 and was evident in a number of other Southeastern states. Unless you factor in time travel and massive cross-border unemployment-insurance fraud, it was impossible for North Carolina’s exit from extended benefits in July to have caused the phenomenon.
More important, broader measures confirmed that North Carolina’s labor-market gains after leaving the extended-benefits program weren’t statistical quirks.
July 5, 2014 at 9:16 am
Curmilus Dancy II says:
First of all I know who John Hood is and I know his mission.
My questions John what are you really saying?
Are you saying the people who were unemployed didn't want to work?
Are you saying if they did, they were not taking a job that they didn't want?
Could it have been they did not want to take a job that would pay them less money than what their unemployment was?
Are you saying these jobs were already out there, no new jobs created, I repeat no new jobs created and no one applied for them until after the Republicans stopped the Unemployment Extension?
I am not disputing your message here because I have not done the research. However I would just like to know that your message is not filled with half-truths based on opinions and not being totally based on facts.
Thanking you in advance.
July 6, 2014 at 7:03 pm
Norm Kelly says:
I think I dislike John's post most of all. He usually hits the nail squarely on the head. He always includes supporting documentation, sometimes even referencing supporting documents outside of his own writings, and outside of the Foundation. When John posts, it usually means I have nothing else to say about the chosen topic. Unlike almost all of the lib posters.
John holds true on this post as well.
The nation has seen a drop in unemployment numbers, as the government counts it, at the same time our state has. When conservatives told the libs that most of the drop was due to people simply giving up, the libs told us we were dreaming and making stuff up just because we hated the current occupier.
It appears this is another example of libs wanting it both ways. When it's the federal numbers they speak of, then the occupier gets ALL the credit. Labor participation rates on the national level are meaningless. When it comes to the state and the unemployment rate decrease, the libs want us to believe it's because the state labor participation rate is the reason. And how do their allies in the media almost always respond? They agree with the lib pols, confirming the labor participation rate is the blame for our good numbers. What's good for the goose is good for the gander. John is just pointing this out. And perhaps popping the lib balloon at the same time. It's always fun to pop a lib balloon, and John does it so well. Sometimes it's just too easy though!
Multiple studies have shown that overly generous unemployment benefits have skewed the labor statistics. Even countries in Europe, historically quite socialist in their policies, have started cutting back drastically on their benefits programs. Not only because they can't afford the programs, but because they have seen the results of both over-generousness and uncaring disregard. Neither is acceptable. Reducing the amount one can collect and restricting the length of time to collect has consistently shown that people will move off of unemployment when they are forced to. Taking a job that is not up to your expectations may not be the best solution to your government dependence. If you WERE making $100,000 at your last job and the best you can find now is paying $50,000, are you still better off on unemployment? Only because you get to take vacation and still get paid. But you and everyone else in the community are actually better off accepting $50,000 rather than staying on unemployment. While you are working that new $50,000 job, you could also be looking for something else that actually meets your rigorous standards. But when you are provided overly generous benefits for not working, you choose to pass on the $50,000. Suddenly, when you are told take a job or else, you suddenly find that your standards have changed. Is this heartless on the part of your neighbors? Or was it heartless on your part to not return to being a contributing member of society when you were first given the chance? There's a happy medium between being too cheap and being over-generous. When that middle ground is reached, people find themselves working again. And companies find themselves hiring people cuz they can afford it once again. Until the central planners step in and penalize employers for hiring people, that is.
