When congressional Republicans blocked an extension of federal unemployment benefits, they did so based on a specific economic theory: the benefits hurt those struggling more than they help. The idea is, jobless Americans, if desperate enough, will re-enter the workforce. Cutting off benefits, Republicans said, will give people the “incentive” they need.
The theory has always been as dubious as it is ruthless, but in one important way, we already know the GOP’s argument is wrong. An experiment of sorts has been underway in North Carolina, where Republicans slashed the state’s unemployment program, reducing benefits and limiting the eligibility period to just 20 weeks.
Annie Lowrey takes a look at the preliminary evidence of how that’s working out for the state.
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. […][S]tatistics 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 largely out of sight, countless families have slipped deeper into poverty.
Also keep in mind, many of those who’ve re-entered the workforce out of desperation have done so by abandoning their profession and taking a job that pays far less.
It’s why the drop in the unemployment rate, at best, presents an incomplete picture.
Paul Krugman recently had a good piece on this.
The unemployment rate did fall – but this was due to a large drop in the labor force, as the number of people looking for work fell. Why? Well, a likely explanation is that some of the unemployed continued to search for work, and were therefore counted in the labor force, despite low prospects of finding a job in a depressed economy, because such search is a requirement for those collecting benefits. Take away the benefits, and they drop out. Now, labor force participation has fallen nationally as well as in North Carolina, and the state’s labor force began dropping before the benefit cuts, so that the case for claiming that reduced benefits actually reduced job search isn’t ironclad.Still, it’s worth emphasizing just how extraordinary the changes have been. North Carolina’s labor force drop has been much larger than the national change. And it has also been unprecedented in historical terms. There’s been nothing like the recent North Carolina decline – taking place at a time of modest recovery, not recession – in the state’s previous history.
Krugman added that there’s “no sign at all that North Carolina’s harshness has done anything except make the lives of the unemployed even more miserable.”
By all appearances, this is the model congressional Republicans are eager to impose on the nation.