While the White House is still debating how to deal with the disappointing April jobs report and downplaying its implications for President Joe Biden’s expensive and expansive agenda, an increasing number of red states are taking matters into their own hands. Amid reports of a growing number of “Help Wanted” signs and would-be workers opting to keep receiving unemployment assistance rather than returning to work, 18 Republican-led states have ended or are moving to halt enhanced unemployment benefits.
For those wondering how these Republican-led initiatives are likely to play out, including those shrieking that this is “ill-informed and cruel,” there’s a recent example that should shed some light. Cue North Carolina 2013, my first year as governor. I inherited an unemployment rate of approximately 9.5%, the fifth-highest unemployment rate in the entire nation. To make matters worse, North Carolina had $2.5 billion from the federal government to pay our state’s generous unemployment benefits since levies on employers had come up short.
However, as I traveled in the state during my first months in office, I was told time and again by employers that they had numerous job openings that they could not fill. In the same breath, they routinely drew attention to the fact that North Carolina’s unemployment payments were among the highest in the Southeast.
It didn’t take a genius to realize the relationship between the two: If unemployment assistance is too high, it creates an incentive to stay home rather than to look diligently for a job. One business owner put it to me plainly: “Whatever you do, governor, just please do not keep extending these benefits and taxing us more to pay off the debt.”
In response, I gathered my staff, and, following an intense debate, we decided upon a three-pronged course of action. First, working with the Legislature, we lowered North Carolina’s unemployment payments to roughly the level of other states in the region. Next, we increased the requirements for seeking employment, and third, we reduced the amount of time one could remain on unemployment assistance (from 26 weeks to between 12 and 20 weeks).
Democrats and most media outlets in North Carolina pounced, accusing our administration of the usual charges: heartless, not caring about the plight of those down on their luck, and even waging a “war on the poor.” They also predicted imminent disaster. An editorial in the News & Observer in Raleigh declared that the changes to unemployment were “a boot on the necks of North Carolinians.” A coalition of liberal and left-wing groups began a well-organized and regular series of protests. Dubbed “Moral Mondays,” they excoriated my administration and the Republican Legislature’s approach to employment (and a slew of other issues). It also got personal, and I received profanity-laced verbal barrages nearly everywhere I went.
As we implemented our new policies, my advisers and I occasionally wondered if our critics were on to something. Would we come to find that the employment numbers were still stagnating? In the meantime, would our approach lead to greater suffering for families — not to mention businesses losing customers as unemployment checks got smaller?
Fortunately, though, within two months, our administration’s worst fears and our critics’ hysterics were put to rest when the workforce numbers began to change. Jobs were being filled, unemployment dropped, and, by January 2014, North Carolina’s jobless rate had plunged to 6.7%, which the New York Times identified as “the sharpest drop in the country.” By May 2015, I announced that the state would be paying off its full unemployment debt to the federal government. That was critical: It was important that North Carolina have fiscal capacity for the next time a crisis hits and not be too heavily indebted to respond.
Today, as it becomes clear that many on the left who are backing the newly ascendant liberal orthodoxies seem ignorant of the most basic tenets of economics, such as that incentives matter, a slew of Republican states will test the concept that too much government largesse disincentivizes work. Hopefully, Biden will also take note, get realistic about the very real effect that incentives have, and tailor federal unemployment policies accordingly. Fortunately, we have history to lean on in this debate. North Carolina’s 2013 response shows what, in all likelihood, is soon to come for states that prioritize getting their people back to work.
Pat McCrory served as the governor of North Carolina from 2013 to 2017.
