POSTED: 1:30 a.m. HST, Jan 22, 2014
RIEGELWOOD, N.C. » After losing her job as a security guard in June, Alnetta McKnight turned to food stamps and unemployment insurance to support herself and her 14-year-old son. But her jobless payments ran out after 20 weeks, and now they are living on close to nothing.
"I worked for 26 years; I lost my job through no fault of my own," McKnight said, sitting in her darkened living room — she keeps the lights off to save money — in this small town about 20 miles from Wilmington, N.C. "This is what I get?"
Had McKnight been laid off a year earlier, she almost certainly would have qualified for more than a year of unemployment insurance payments, helping keep her family out of penury while she sought another position. But last July, North Carolina sharply cut its unemployment program, reducing the maximum number of weeks of benefits to 20 from 73 and reducing the maximum weekly benefit as well.
The rest of the country is now following North Carolina's lead. A federal program supplying extra weeks of benefits to the long-term unemployed expired at the end of 2013, and congressional Democrats failed in an effort to revive it. About 1.3 million jobless workers received their last payment Dec. 28. Starting Jan. 1, the maximum period of unemployment payments dropped to 26 weeks in most states, down from as long as 73 weeks.
With that move, the country's safety net for jobless workers has undergone a sudden transformation, from one aimed at providing modest but sustained protection to workers weathering a tough labor market to one intended to give relatively short-term aid before spurring workers to accept a job, any job.
It is still early, but the results in North Carolina suggest there are both gains and losses from cutting back on support for the jobless. The state's unemployment rate has plummeted to 7.4 percent from 8.8 percent, the sharpest drop in the country. In part, that is because more jobless workers are connecting with work. But an even greater number of workers have simply given up on finding a job.
North Carolina's move also highlights a sharp political divide playing out on the national stage. In Washington, Democrats are making an election-year charge that Republicans are pulling the safety net from under struggling families at a time when the economy remains weak and is operating far below its potential.
"North Carolina still has a higher-than-average unemployment rate, so this is important to this state," President Barack Obama said last week as he unveiled plans for a new manufacturing research center in Raleigh. "Folks aren't looking for a handout. They're not looking for special treatment. There are a lot of people who are sending out risumis every single day, but the job market is still tough."
Republicans, in response, say that Democrats have done nothing but make unemployment and poverty more comfortable, while overseeing scant job growth. They argue that what they see as overly generous government support only encourages dependency and that a thinner safety net would actually be more effective, pointing to North Carolina's falling jobless rate as prime evidence.
"Employers were telling me they had vacant jobs, but people would say, 'Hold that job until my unemployment benefits end.'" said Gov. Pat McCrory, a Republican who is the prime mover behind the policy. "I heard that time and time again. Now, employers are telling us that people are coming in and filling out applications to accept jobs, not to meet the requirements of unemployment."
Nonpartisan economists said it was difficult to definitively show the impact of the change to the unemployment insurance program on the state's labor market. Employment increased from June through November by more than 22,000 people (reaching a total of more than 4.3 million). But for every worker who found a job, more than two dropped out of the labor force entirely, according to the latest survey by the Bureau of Labor Statistics, which recorded a decline of more than 50,000 from June through November.
It is hard to separate the effects of the unemployment cutbacks from overall changes in the regional and national economy.
"We don't have enough data to know what is happening for sure," said Mark Vitner, who studies the regional economy for Wells Fargo.
He said it was clear, though, that some of the unemployed were prodded back to work.
"If someone had been receiving unemployment benefits for a long enough time, odds are they exhausted their savings, and they're probably going to go ahead and take a job they wouldn't have been taking previously," he said.
Nationally, economists expect the economy to respond much as North Carolina's has. The unemployment rate, at 6.7 percent, is likely to fall further, both as the number of discouraged workers rises and as more unemployed workers accept positions. Michael Feroli of JPMorgan Chase has estimated that the loss of extended benefits might lead to a 0.25 to 0.5 percentage-point drop in the unemployment rate.
But statistics don't tell the full story. North Carolina still has nearly 350,000 listed as officially unemployed, and many more, including those living in depressed rural areas, have given up even looking for a job. For them, the safety net is gone, and countless families, largely out of sight, have slipped deeper into poverty.
That includes McKnight's. She still applies for jobs every day and is hoping to be retrained as a certified nurse's assistant. But in the meantime, she has sold her son's dirt bike. She has stopped sending money to her mother, who has cancer, or to her daughter in college. A friend sold a set of decorative car rims to help her pay her electric bill. She has started visiting a local food bank for groceries.
"Two interviews so far out of 150 applications," McKnight said. "If unemployment were for a year or a year and a half, that's enough time to get established and get a job. Now, it's over before it starts. That's not enough time to find a job in an economy as bad as it is."
Even conservative proponents of the North Carolina policy said there were downsides along with the upsides: Many jobless workers are accepting jobs for far less pay than they made before, and in many communities, there are simply not enough jobs.
"We anticipated that in more urban areas, and with younger workers, there would be a bigger impact," McCrory said, pointing to improvements in the state's major cities. By contrast, he said, rural areas might be hardest hit, and job retraining and economic development initiatives were what those areas needed.
For now, that is little consolation for those who have lost a critical lifeline. "Our economies have been deconstructed," said the Rev. Mac Legerton, the executive director of the Center for Community Action, a nonprofit in nearby Lumberton, one of the poorest communities in the state.
"We're having to build new economies, which takes a significantly long period of time," he said. "The assistance from extended unemployment benefits really provides one of the very few support systems for people who've been impacted by decisions far beyond their control."