RALEIGH, N.C. -- With changes to its unemployment law taking effect this weekend, North Carolina not only is cutting benefits for those who file new claims, it will become the first state disqualified from a federal compensation program for the long-term jobless.
State officials adopted the package of benefit cuts and increased taxes for businesses in February, a plan designed to accelerate repayment of a $2.5 billion federal debt. Like many states, North Carolina had racked up the debt by borrowing from Washington after its unemployment fund was drained by jobless benefits during the Great Recession.
The changes go into effect Sunday for North Carolina, which has the country's fifth-worst jobless rate. The cuts on those who make unemployment claims on or after that day will disqualify the state from receiving federally funded Emergency Unemployment Compensation. That money kicks in after the state's period of unemployment compensation – now shortened from up to six months to no more than five – runs out. The EUC program is available to long-term jobless in all states. But keeping the money flowing includes a requirement that states can't cut average weekly benefits.
Because North Carolina leaders cut average weekly benefits for new claims, about 170,000 workers whose state benefits expire this year will lose more than $700 million in EUC payments, the U.S. Labor Department said.
Lee Creighton, 45, of Cary, said he's been unemployed since October, and this is the last week for which he'll get nearly $500 in unemployment aid. He said he was laid off from a position managing statisticians and writers amid the recession's worst days in 2009 and has landed and lost a series of government and teaching jobs since then – work that paid less half as much. His parents help him buy groceries to get by.
"I'm just not sure what I'm going to do," said Creighton, who has a doctorate. "What are we to do? Is the state prepared to have this many people with no source of income?"
With the changes to North Carolina law, state benefits will last three to five months – at the longer end when unemployment rates are higher. Qualifying for benefits becomes more difficult. Weekly payments for those collecting the current maximum benefit of $535 drop to $350, falling from the highest in the Southeast to comparable with neighboring states.
Wayne Bostick, 58, of Raleigh, said he lost his job in April 2011 and will lose extended federal benefits immediately. He said he earned about $700 a week in take-home pay, often working double shifts at a ConAgra Foods plant until it shut down after a fatal explosion. Since then, he said, the only jobs he's found matching his skills pay less than $10 an hour and are outside Raleigh. Now he'll have to revisit those or start a handyman business.
"I'd rather do that than bring home $200" after commuting and taxes, he said. "They are really putting the gun to your head now."
When the unemployed have less money to spend on necessities at local businesses, I guess there will be more people becoming unemployed shortly.
Unemployment benefits also help economic growth. Those who are unemployed use the money to buy basics, including shelter, food, and clothing. As a result, every dollar spent on unemployment benefits stimulates $1.64 in economic demand, according to a Moody's Economy.com study. How can $1 create $1.64? That's because of the ripple effect. For example, a dollar spent at the grocery store pays not only for the food, but also helps pay the clerk's salary, the truckers who haul the food, and even the farmer who grew it. They also buy groceries with their salaries, which pays more staff, and on it goes.
This ripple effect keeps demand strong, creating an additional benefit. Stores keep their employees to supply the goods and services the unemployed need. In fact, every $1 billion spent in unemployment benefits creates 19,000 jobs, according to study by the Congressional Budget Office. Without extended benefits, demand would drop and retailers would need to lay off their workers, adding to unemployment rates. Unemployment benefits work fast. The government just writes checks, which immediately goes into the economy.
Cutting unemployment benefits as drastically as we have, to me, does not seem like very sound economic policy.
How bad is this going to impact our economy? Do you think it will increase unemployment? Theft?
Relevant to the ever-widening wealth gap:
"There was a story recently about a Georgia man whose home was in foreclosure, savings running out. So he called 911, and when the responders arrived, he took them hostage. His demands? Getting his electricity turned back on. Now I’m not saying that’s a smart approach, but squeezing people economically so tight that they go all Django unchained, that’s not smart either.
If you’re rich you should be begging the government to redistribute your wealth, because you know what happens in countries where there’s a huge disparity between the rich and the poor? The rich get kidnapped. It happens 72 times a day in Mexico. Getting snatched out of your car is so common in South Africa that they actually make cars that do this.
(A video was shown of a car with flames being shot out of the sides where the front doors are.)
Do you really think your trophy wife is going to empty out the Swiss bank account to save your sorry ass? I’m talking to you, Donald Trump. Think about it. And remember, the difference between a mosquito and a hedge fund manager is a mosquito will stop sucking blood before it explodes." Maher
The above quote is from this video: