North Carolina Is a Case Study in Jobless-Benefits Cut - State's Experiment Provides Some Answers to a Prickly Policy Question

From The Wall Street Journal (3-3-2014):

Six years after the country plunged into recession, politicians and economic-policy makers face a prickly question: What happens when the government ends long-term unemployment benefits meant to help the jobless through the downturn and its aftermath?

One state, North Carolina, is running an experiment that offers some real-life answers.

Long-term unemployment benefits ended in North Carolina in July, six months before the federal government ended $25 billion in long-term jobless benefits for all the other states at the start of the new year.

The Tar Heel State's unemployment rate since then has plunged, as people who were receiving benefits scrambled to find jobs or stopped looking for work. Employers report a flood of applicants.

But the experience in North Carolina has exposed two persistent problems dogging the workforce: many experienced workers are settling for lower-skill jobs, and a lack of skills is blocking many other workers from settling into an abundance of openings.

 

Many of the long-term unemployed have taken jobs for which they appear to be overqualified, based on experience or education, and some are piecing together multiple part-time jobs to fill the benefits gap.

 

At the same time, some employers say they face challenges finding the right people to fill openings.

 

The shifts in North Carolina have been dramatic since lawmakers in the state changed the law early last year to trim benefits by more than 30% and to include more work requirements.

 

That move disqualified North Carolina from extended federal unemployment benefits, which ended in July.

 

The jobless rate plummeted from 9.5% at the start of 2013 to 6.9% at the end, as 110,930 people left the labor force and overall employment rose by 13,414, according to data compiled by South by North Strategies Ltd., an economic- and social-policy research firm in Chapel Hill.

 

North Carolina Gov. Pat McCrory, a Republican, said there was great uncertainty over what would unfold when benefits in his state were curtailed. But his administration, he said in an interview, kept hearing from employers "saying people weren't taking jobs that were available."

 

"We made the decision, 'let's try something different, because whatever has been tried for the last three years wasn't working,' " Mr. McCrory said.

 

At Charlotte Works, a public-private partnership that tries to align job training with skills needed by local employers, Steve Partridge has seen the job scramble up close.

 

"Some people have jumped into employment, but they are clearly underemployed," said Mr. Partridge, the group's president. "You've got someone who has an associate's or bachelor's degree, and they are working at a retail store to make ends meet."

 

Eddrena Morris, 51 years old, was laid off from her marketing job in 2012 and lost her long-term unemployment benefits in July. She has some college credits and is working to get a degree in graphic design but said she took temporary work at conventions to earn some income.

 

She has applied for between 75 and 100 jobs in the past year, including one stocking shelves at a Wal-Mart store, she said, adding, "I didn't even get called."

 

Several employers, though, point to a misalignment between jobs and the necessary skills in a state that has struggled for decades to rebuild its labor force after heavy job losses in manufacturing, tobacco and textiles.

 

Kip Blakely, vice president of industry and government relations at Timco Aviation Services in Greensboro, said his airline-maintenance company is trying to fill roughly 75 jobs in the state, though the jobs almost always require extensive certification.

 

"It's not real practical when someone is unemployed, out of work and underemployed" to tell them to spend two years getting certification from a local community college, Mr. Blakely said.

 

At the same time, competition for lower-skill jobs has been intense.

 

David Burleson, superintendent of the school district in Avery County, in the western part of the state, said dozens of people recently applied for a single job that paid between $20,000 and $22,000 annually, a trend he says has intensified in the past six months.

 

"When we post a clerical position, especially those positions that have limited skills, we just are flooded," Mr. Burleson said. "We have tried to figure out ways to reduce the number of eligible people by including some skill tests, because interviewing that many people really drains your staff."

 

The skills gap is something that Democrats and Republicans are weighing as they try to continue to address the elevated unemployment rate across the nation.

 

Mr. McCrory said it was going to be a particular focus in North Carolina, and the White House is reviewing all federal job-training programs to see if there is a better way to avoid duplication and more closely align training with job demand.

 

How closely—and quickly—the politics align with economics could determine whether policy can be effective in tackling long-term unemployment.