For unemployed, benefit changes loom

By Scott Mooneyham | Jan 17, 2013

RALEIGH -- Business leaders make a persuasive case that North Carolina policymakers should do more than simply sit back and allow employer-paid unemployment insurance to automatically rise

Absent some action by state lawmakers, those increases would occur through 2019, helping pay off $2.4 billion borrowed from the federal government over the last few years.

That debt is the result of the state's high unemployment rate.

Starting in 2008, as people lost their jobs and took unemployment benefits, the money leaving the system outstripped the unemployment taxes that businesses paid into it.

Now the tab is due, and the rates automatically increase until it is paid.

Andy Ellen, who heads the state Retail Merchants Association, notes that those increases will equal $189 per worker, from 2011 until 2019, without some action by state legislators.

That may not seem like a lot, not with North Carolina workers receiving an average annual wage of $41,250.

But Ellen says the increases will "stop any hiring momentum dead in its tracks."

He may have a point.

For an employer with 500 employees, the increases would mean almost $100,000 in additional costs. That may not break the bank for a big company, but it might cause an executive think twice about new hiring.

A legislative study committee has put together a plan to pay off the debt quicker, by 2015, thereby avoiding another four years of unemployment tax increases for employers.

On the plus side, the plan would tie benefits to the state economy.

In good years, when the state unemployment rate was low, the maximum duration of benefits would drop. When unemployment rates were high, a jobless worker could receive benefits for a longer period.

The change seems fair to employers and workers, even if labor groups and other critics don't like the idea.

The critics are even less happy with a proposal to reduce the maximum amount of weekly benefits from $525 to $350. They rightly argue that it will be nearly impossible for many workers to pay the bills and meet the necessities of life with the smaller check.

Reducing weekly benefit also is a bad idea because it will ultimately harm the economy.

Assuming we reach a day when the debt is paid off, and the state's dedicated unemployment benefits fund gets back into the black, circulating that money through the economy during the down times helps workers and businesses.

Those workers, after all, pay rent to landlords and make housing payments to banks. They buy groceries from grocery stores, and gas from gas stations.

Lost in the debate is another proposed change that may be worse: The draft legislation would set that $350 maximum in statute, meaning it could only change with more legislative action.

Right now, the maximum amount of unemployment benefits rises and falls with average wages, which, of course, are affected by inflation.

Creating a static benefit will lead to needless legislative fights in the future.

More importantly, it will foolishly harm workers.