North Carolina has just run an experiment about what happens when unemployment benefits run out: Many jobless people go get jobs.
The state’s unemployment rate has fallen markedly, and this may be linked to the end of extended unemployment benefits, the Charlotte Observer has reported.
Wells Fargo Securities economist Mark Vitner examined the plunge in the state’s unemployment rate. North Carolina’s unemployment rate has been among the highest in the nation since the Great Recession began. But, the paper reported,
“The state’s unemployment rate started the year as one of the highest in the country but has fallen two percentage points from a year ago to 7.4 percent in November, according to state commerce department data. The state’s unemployment rate is now .4 percentage points higher than the U.S. average, compared with 1.6 percentage points higher in November 2012.”
The Washington Post also reported the sharp decline in the jobless rate, from 9.4 in November 2012 to 7.4 in November, adding, “That two-point drop was the steepest decline of any state year over year.”
Gee, what could have caused that? I went to some of those Monday protests this summer, and heard speakers bewail the terrible fate of those whose extended unemployment benefits were being cut off. The General Assembly had petitioned the federal government to allow the state to pay lower unemployment benefits for the extended period, only to be rebuffed by the Washington bureaucrats. Facing a budget crunch, lawmakers decided to let the extended benefits expire in July. Left-wingers predicted doom.
Instead, miraculously, the state’s unemployment rate has sunk. According to the article, one inference is that unemployment “benefits have two impacts on the labor force: They raise the required wage for someone to take a job, and they keep people seeking jobs because it’s a requirement of receiving benefits.” In other words, if you pay people not to work, many will not work — until they can find a great job.
Vitner’s study backed up that possibility because the civilian employment in the state climbed by 39,400 over the most recent three months, the newspaper said. In contrast, in the first eight months of the year, employment dropped by 45,100.In other words, give people incentives to stay home, many will stay home. Give them incentives to work, and many more will work. This isn’t a knock on people out of work. It is simply to note that people will respond rationally to incentives.
Moreover, our experience could have lessons for the nation as a whole, Vitner wrote, with Congress debating ending extended unemployment benefits: “If Congress does not extend them, the same results seen in North Carolina may begin to show up in the national unemployment figures.”
While I applaud the policies adopted to encourage employment, I caution others to consider our success in a relative manner. For example, if the economic conditions in our nation take a “nose-dive” in 2014, NC will likely do the same, however, with sound policies in place, we have a better chance of a more shallow dip than states who embrace short-sighted policies which encourage unemployment (such as handing out jobless benefits for extended periods of time). Thus, it may be wise to consider our relative success.
Mary: You are partially correct. An economic nosedive caused by poor government policy as occurred in 2008 would likely cause a downturn in NC; however, the key is we are beginning to stop digging the hole now rather than to continue digging it deeper. Read the article on how to keep poor people poor by Brian Balfour for this and many other lame brained ideas the left have manufactured over the years win elections.