From The Wall Street Journal:
North Carolina Got It Right on Unemployment Benefits
Unemployment in the Tar Heel State dropped by 17% in the second half of 2013 after extended benefits expired.
By John Hood | July 4, 2014 5:33 p.m. ET
Raleigh, N.C. — A year ago, North Carolina became the first state in the nation to exit the federal government’s extended-benefits program for the unemployed. Facing the prospect of job-killing hikes in payroll taxes to pay back Washington, Gov. Pat McCrory and the state legislature instead reduced the amount and duration of unemployment-insurance benefits, which had been higher in North Carolina than in most states. As a result the state lost its eligibility to participate in the extended-benefits program on July 1, 2013.
National media and liberal activists pounced. Citing the decision and several other “outrages” by the state’s first Republican-led government since Reconstruction—such as adopting a pro-growth flat tax, clearing out the state’s regulatory thicket, and rejecting ObamaCare’s Medicaid expansion—left-wing critics subjected the Tar Heel State to months of invective and ridicule.
Within the state, the so-called Moral Monday movement drew thousands of protesters to the capital on a nearly weekly basis. Hundreds of arrests were made for violating the rules of the state’s Legislative Building. Outside the state, liberal media outlets excoriated North Carolina for ending extended benefits. New York Times columnist Paul Krugman called it a “war on the unemployed.” Even some conservative columnists and policy analysts criticized the decision as unwise and inconsistent with the principles of their new “reform conservatism” movement.
So, what actually happened in the Tar Heel State?
North Carolina didn’t descend into the Dickensian nightmare critics predicted. For the last six months of 2013, it was the only state where jobless recipients weren’t eligible for extended benefits. Yet during that period North Carolina had one of the nation’s largest improvements in labor-market performance and overall economic growth.
According to the U.S. Bureau of Labor Statistics, the number of payroll jobs in North Carolina rose by 1.5% in the second half of 2013, compared with a 0.8% rise for the nation as a whole. Total unemployment in the state dropped by 17%, compared with the national average drop of 12%. The state’s official unemployment rate fell to 6.9% in December 2013 from 8.3% in June, while the nationwide rate fell by eight-tenths of a point to 6.7%.
There’s more at the link, including a discussion of whether the North Carolina figures are some sort of statistical mirage, or show real progress.
But, I’ll give you a hint as to the answer: it’s not a statistical mirage!
Now, things aren’t perfect in North Carolina, but, then again, things aren’t perfect anywhere this side of heaven. But the unemployment picture is getting better, faster, in a state where the recession hit particularly hard, than is the case for the nation overall. And I’ll be extremely blunt here: job seekers in North Carolina are being motivated by hard necessity. Unemployment insurance is meant to cushion the blow for people who have lost the jobs they once held, to tide them over until they can find other employment, without losing everything. But when unemployment can last for years, the hard motivation of the loss of housing and an empty stomach ebbs, and the experience in Carolina1 indicates that that bitter necessity is yielding employment gains.
Thomas Carlyle is credited with giving economics the appellation of “the dismal science,” and a truly dismal field of study it can be. It is, at heart, a study of how human beings will react to different economic conditions, without a single shred of concern for humanity involved. Too often, people like Paul Krugman believe that a concern for humanity, a sympathy for the plight of the individual, can somehow be added to economics, and government economic policy, to make things better for people, and so very often such ideas fail, because they simply fail to understand, to believe, that economics doesn’t care about the individual.
Economics is, at its most basic level, the aggregate of billions of people taking tens of billions of economic decisions every single day, and those decisions are based upon what each individual sees as being in his best interests, either for himself or his family. What individuals see as their own best interests do not always coincide with what would be in their neighbors’ better interests, and, when you have someone making national economic policy based upon notions of what would be the best thing for our citizens, that someone very frequently estimates wrong concerning the economic decisions that individuals will take concerning various economic stimuli. That is why Marxist economics never worked, and that’s why socialist systems have to try to impose ever greater controls and restrictions on the decisions people can take.2
And thus you have the lingering problem of unemployment insurance. The idea, among the left, is that the extended benefits would simply give the recipients more time to find jobs in this rough economy, but the reality has been, as proved by the experience in North Carolina, that the extended benefits enabled displaced workers to wait longer, living on the benefits, than they needed to actually find jobs. The oh-so-humanitarian policy of making unemployment more bearable resulted in unemployment being more livable, and thus more of an economic choice. The hard edge of privation has proved to be a much stronger motivating force.
Is that nice? Is that kind? No, absolutely not, not in the slightest. But it is real, it is the truth, and it’s high time we did something really radical like told the truth.
- To anyone who has ever lived in southeastern Virginia, North Carolina is usually just Carolina. ↩
- Karl Marx based his entire economic theory on the notion that, eventually, everyone would agree and everyone would take their economic decisions the same way. A ten-year-old could have seen that such was a ridiculous notion, but far, far too many adults never could. ↩