North Carolina Unemployment Benefits


It’s tough.  It really is.

There’s a ton of us out there without work; we all know someone who’s looking for a job, a shot.  And as long as they’re out there, shouldn’t we do what we can and give ’em the support they’ve worked for all these years?  Isn’t that the right thing to do?

No.

And I’ll tell ya why.

Unemployment benefits carry a cost that must assumed by someone.  There is nothing that government can do that will create the resources required to pay for these benefits.  All of them, every cent of them, will be a cost to someone, somewhere.

And these costs can come in several forms:

  1. Raise the cost of employment
  2. Raise the tax burden of all of us
  3. Create an incentive not to work

First the first:

From the perspective of an employer, it is irrelevant how the costs of labor are broken down.  For example, a grocer doesn’t care if it costs him $9.00 an hour to hire an employee and all $9 go to the employee of if he hires that same worker and pays $7.75 in wages and $1.25 in taxes.  9 bucks is 9 bucks.  Bottom line.

The same is true when the cost of an employee goes up due to the need for extended unemployment benefits.  As those benefits continue to increase, either due to higher unemployment rates or due to extended eligibility, the cost of those benefits will be passed on to the employer.  The rest is Econ 101.  The more expensive a thing is, the less of that thing people will buy.

In other words, when you make the cost of hiring someone go UP, fewer people will be hired.

Next the Second:

The second point is perhaps the hardest of the three to internalize.  Currently, the extended unemployment benefits are fully funded by the Federal Government.  In other words, it isn’t “costing” North Carolina a thing by allowing these benefits to be extended.  We’re neither contributing or PROMISING to contribute any money.

But that doesn’t mean that money is free.

These benefits are coming from the Federal Government.  And the only way that the Federal Government can obtain that money is to levy taxes.  Taxes on things, like cars and sugar, or on labor, like income taxes.  So, as the Federal Government continues to hand out money in the form of unemployment benefits, that same Federal Government is going to have to raise taxes on ALL of us.

What this means is best described in two parts:

  1. Federal taxes ARE a tax on North Carolinians.
  2. In the same way that I don’t want California dictating how MY money is spent, I don’t want someone in Wyoming having to wonder how North Carolina is spending THEIR money.

Finally the Last:

The continued practice of extending unemployment benefits has a negative affect on the folks trying to find jobs.  I’m speaking in the aggregate here, not the specific.  In general, when large numbers of people are incented to act in a certain manner, some significant number of those folks will react in such a manner that we may not want.

For example, consider the duration of unemployment in Denmark:

As you can see from the chart, it doesn’t matter if benefits are extended for 4 or for 5 years.  Folks find work as those benefits begin to end.  The result is especially clear on the green line where benefits end after 4 years.  From year 1 to year 3.7 there is virtually no change.  But the transition spikes just at the time those benefits end.

The point?

Incentives matter.

And insofar as we want folks in North Carolina to work and to drive down our unemployment rates, we should create those proper incentives.

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9 comments
  1. audrey said:

    Okay, so your an Idiot! Do you really think its okay for any child or person to go w/o food or shelter? Keep your ignorant comments and illustrations to yourself! I mean really, what rock did you crawl out from under, SHAME ON YOU! Take a good look in the mirror and ask yourself, who the hell am I to pass judgement on anyone. Period!

    • pino said:

      Do you really think its okay for any child or person to go w/o food or shelter?

      No. Not at all. I think it’s critical that we get North Carolina back to a level of unemployment that’s healthy. And right now, we’re a long way from that place.

      Keep your ignorant comments and illustrations to yourself!

      Employment is nothing but a series of tradeoffs. Each day, we wake up and decide to go to work only insofar as the rewards are worth more than the sacrifices. We take jobs only if the compensation is “worth it”.

      And that’s the problem with the current system; the rewards of work are not “worth it” when the unemployed individual has to overcome the disincentive generated by unemployment benefits.

      For example, consider Pino who doesn’t work and yet earns $300.00 in benefits per week. When offered a job that pays $400.00 per week, Pino is going to see that his 40 hours of labor result in a net gain of $100. NOT $400. And he isn’t going to wanna go to work for 100 bucks. So he won’t. ut when the benefits end and his labor results in $400 of benefit rather than $100, hell be much more willing to take that job.

      who the hell am I to pass judgement on anyone.

      I don’t understand. I’m not passing judgement. I completely understand the incentive drive for the unemployed. My point is that our government should let natural and normal incentives run thier course–NOT build wrong incentives.

      Thanks for stoppin’ by though!

    • Keep your ignorant comments and illustrations to yourself!”
      Well it is his blog, shouldn’t he have a right to make his comments here?

      I live in the second most unemployed state in the country. I care for two seniors who would have had a very serious and difficult time keeping the lights on, food in the fridge, and their lives going had their benefits not been extended, but here’s the thing – they wouldn’t have starved. They didn’t want to go and get the McDonald’s or Wal-Mart greeter jobs, but by the same token, had the benefits not been there or me to help them, they would have. I think that speaks to Pino’s point. Sure, there are some who those benefits truly are a last resort, but there are those for who they’re actually not, even though they feel that they are.

      As with welfare and other benefits we’re so worried about being PC that we won’t even try to determine who actually deserves them or not. We just automatically assume that everyone is hard working, is dirt poor, and is “trying” when the amount of people cashing their benefit checks and walking straight over to the slot machines tells a different story. With respect, the “shame on you!” should be directed at them.

      Low-income houses didn’t get repairs because the Davis-Bacon act prevented enough people from getting hired. Let’s have the unemployed but able picking up the slack. Let’s let actual work determine who’s entitled to extended benefits and who isn’t rather than just lumping all of them out of laziness into the same pity party.

      • pino said:

        Well it is his blog, shouldn’t he have a right to make his comments here?</i

        Heh.

        had the benefits not been there or me to help them, they would have. I think that speaks to Pino’s point.

        That is exactly my point.

  2. Matthew said:

    There ARE ways for government to get a return on their unemployment benefits payed out. Make the people receiving the benefits work for the benefits. Put them to work around the city. Let them mow and beautify the parks. Get them to clean up the graffiti we see on the city buildings and structures. Pick up the garbage on the streets. There are plenty of things in the community that need to get done that the government can’t afford. Well, we are paying the people, why don’t they work for it? And just like finding a job as the benefits are about the expire, if a person doesn’t like cleaning the city, he/she will work harder to find a better job.

    • Matthew said:

      2 Thessalonians 3:10

      For even when we were with you, this we commanded you, that if any would not work, neither should he eat.

    • pino said:

      Make the people receiving the benefits work for the benefits. Put them to work around the city. Let them mow and beautify the parks. Get them to clean up the graffiti we see on the city buildings and structures. Pick up the garbage on the streets. There are plenty of things in the community that need to get done that the government can’t afford.

      I’ve long been an advocate of this concept. I know that we cant ask for 40 hours, the folks should be out looking for work, but we can ask for 40 hours in combination of labor and job search in the unemployment office.

    • “Put them to work around the city. Let them mow and beautify the parks. Get them to clean up the graffiti we see on the city buildings and structures. Pick up the garbage on the streets.”
      But then the unions would complain that 1) the government is using “scabs”, and 2) that the unemployed worker is making them look bad by actually doing their job better than they do. haha!

      I’m far less in favor of shortening benefits to curb the cost of unemployment and more in favor of adding crap work to it so it’s not free money, which I think is a great incentive for someone to find other work. Plus, you feel productive which makes one feel more resourceful than just sitting on their a$$.

      • pino said:

        I’m far less in favor of shortening benefits to curb the cost of unemployment and more in favor of adding crap work to it so it’s not free money, which I think is a great incentive for someone to find other work.

        Government needs work done. I have zero issue with the government getting it done however they can!

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