The U.S. is about to cut the maximum duration of public support for the unemployed. The federal extension of unemployment insurance expires on Jan. 1. To see the consequences, look at North Carolina.
I’ve been watching the state since July, when it cut the maximum length of benefit from 99 weeks to just 19, and reduced the weekly check from $535 to $350.
Across the country, the unemployed will lose from 14 to 47 weeks of insurance when the extension ends. Five other states will join North Carolina in providing fewer than 26 weeks of payments -- the standard in the U.S until this year. What’s happened in North Carolina since July is an indication of what will happen nationwide. The picture is troubling.
As intended, presumably, the number of North Carolinians receiving unemployment benefits has collapsed. It’s down by 45,000, or 40 percent, since last year. Expiring benefits aren’t the only reason for this. Far fewer are filing a claim in the first place. Initial claims are running at about half last year's rate. Unemployment insurance is a thinner safety net than it has been in decades.
In addition, North Carolina’s labor force began to shrink. The state is experiencing the largest labor-force contraction it's ever seen -- 77,000 fewer people were working or searching for work this October than a year ago. This should, but won’t, settle a partisan debate. Cutting unemployment insurance apparently hasn’t encouraged the unemployed to look harder for work: It has caused them to drop out of the labor force altogether.
To get unemployment insurance, you have to actively search for work and prove that you're doing so. The drop in the labor force suggests that this incentive was effective. Without it, more people just give up.
Meanwhile, the burden of easing the financial distress caused by unemployment has shifted from public programs to private charities. According to Alan Briggs, executive director of the North Carolina Association of Food Banks, they're struggling to cope.
"The local pantries are saying, 'Give us more, give us more, give us more,'" Briggs said. "All that the county social workers can do now is give those in need the phone number for the local food bank." As he told a local news station, his food banks had been "asked to be the safety net of the safety net."
Ron Pringle, a food-bank director who oversees seven counties and 230 organizations in the state’s southeast, says they’ve seen on average a 17 percent increase in need since last year. "We’re seeing requests for food from our agencies well outside of our planned growth," Pringle said. "Some of our member agencies have been able to meet that need, but many have not."
"They’ve had to expand pantry hours, add additional days to the schedule, and take on new volunteers because they’re unable to meet the greater need," he said. "These decisions have created a whole new community of folks we're going to have to serve."
Some 1.3 million Americans will lose unemployment benefits immediately in 2014, according to a report from National Employment Law Project. An additional 850,000 will lose them by the end of March. North Carolina just ran this policy experiment. Does Washington like what it sees?
(Evan Soltas is a contributor to the Ticker. Follow him on Twitter.)