As Congress considers cutting unemployment insurance - which has been expanded considerably following the financial crash of 2008 - and legislators debate the consequences of doing so, North Carolina went ahead and did it this past July.
Wonkblog analyses the consequences, but points out that the data does not tell a clear story:
So what happened in North Carolina? As it turns out, the data is still fairly ambiguous and there are two conflicting interpretations here:
1) Many workers may have dropped out of the labor force. Everyone agrees that North Carolina's unemployment rate kept dropping, much as it did in the rest of the country, after benefits got cut.
But that might have been a bad omen: According to data from the Bureau of Labor Statistics, the number of people in the labor force has plummeted in North Carolina since last summer (even as it rebounded slightly in the rest of the nations).
. . . some people who saw their jobless benefits lapse may well have found jobs — perhaps they decided to take a lower-paying gig than they otherwise would have, out of desperation. But a greater number of workers appeared to have simply given up looking altogether, possibly because jobs are still extremely difficult to come by, and they no longer have to keep searching to qualify for benefits.
2) ...or perhaps employment actually increased. Yet other data sets seem to tell a different tale. A more optimistic view of what happened in North Carolina comes from a new paper (pdf) led by Marcus Hagedorn of the University of Oslo. He and his three co-authors sifted through the Census Bureau's "household survey" and the "establishment survey" for the same period. And the results were striking.
What they found is that overall employment has actually gone up in North Carolina since benefits got cut in June of 2013. The household survey in particular showed a big increase in both employment and labor force participation. But both surveys suggested that North Carolina's labor force is growing, not shrinking.
Hagedorn's paper suggests that, by and large, workers in North Carolina do seem to be finding jobs ever since unemployment insurance got cut. And it's not clear that these are lesser jobs or lower-paying jobs: The data suggests that overall hours in North Carolina went up, and there was little change in wages and earnings.
Evaluating the outcomes of a policy change seems to be trickier than one would expect. Does this throw cold water on the "states as laboratories of democracy" thesis?
