North Carolina is the latest state to reduce unemployment compensation.
In case you’re unfamiliar with how unemployment compensation works, employers are assessed an unemployment insurance charge every month as part of their payroll. That money goes into a fund and then pays a benefit when an employee loses a job.
Many states had been paying into it for years and then were overwhelmed with claims during the Great Recession. States have either had to increase assessments on employers and maintain benefits, increase assessments and cut benefits or just cut benefits. As a result of North Carolina’s decision, unemployment compensation will be reduced to a maximum of 20 weeks from the former 26 weeks. And the maximum weekly benefit will drop to $350 from $535. Changes go into effect July 1.
North Carolina has some of the highest unemployment rates in America. Residents were eligible for federal benefits that extended the compensation for up to 78 weeks. But now they won’t be eligible for the federal plan going forward because the state will no longer meet the minimum requirements for the plan.
For employers, this will all mean much lower insurance premiums over the years.
There’s a deep philosophical divide in our country about social safety net programs like unemployment compensation. The question is, do you get greater economic growth with greater hazard to people by lessening social safety nets, or do you take slower economic growth and know you’re softening the blow for people who fall?
I can’t say which is the right answer. But our country has a big effort underway to scale back on expenses for businesses with the resulting reduction in the safety net.
