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Tuesday, June 12, 2012

Hands off unemployment benefits

Pro-business factions in North Carolina politics -- mainly Republicans -- are advocating a reduction in unemployment benefits. Here's the background: each state operates its own unemployment benefits program under supervision of the feds. Each state levies a small payroll tax directly on employers to fund the program. Unfortunately for North Carolina, the tax rate on employers was reduced some years ago when it appeared that the program was accumulating too large a reserve. Since 2008 we have seen why the large reserve was, in fact, needed. North Carolina's program is now broke. The N.C. Chamber of Commerce argues that to restore the program to financial health, benefits should be cut.

After 24 years at Nortel, I was laid off in August 2009. It wasn't my fault that I lost my job: the company was bankrupt, and I outlasted 90% of my former colleagues. The bankruptcy meant no severance payout even though I was entitled to seven months of runway. Given the recession, my age, my career, and my desire not to relocate, the literature predicted 6-18 months for me to find new employment comparable to former employment. This turned out to be accurate.

I did create income by consulting while looking for work, but I'm not ashamed to say that I drew unemployment benefits for several months before the consulting gig started. During that time, I received the very level of benefit -- about $500 per week -- that the business lobby criticizes as excessive. From my point of view, the benefit was a small fraction of what I had been making at Nortel. In conjunction with help from the Obama administration on COBRA cost, however, the short-term benefit kept us from going deep under water. This is exactly how the program is supposed to work.

Comparisons against benefit levels in nearby states are merely a race to the bottom that North Carolina must avoid. As readers of my blog know, I am an occasional defender of capitalism and big business. This time, they're being greedy.

Disclaimer: my father worked in Alabama's unemployment compensation program for 30 years, was subsequently appointed by the Governor to chair the statewide Board of Appeals for the program, and still consults for the AFL-CIO on unemployment benefits.