Kebko on North Carolina’s unemployment insurance experiment

From the comments:

#5: I think Evan is being a bit too broad with his interpretation of the labor market in North Carolina. There have been two distinct phases of labor force adjustments:

1) Between the passage of the law and its implementation, there was a small decrease in unemployment. But, mostly, on net, there was a decrease in employment and a corresponding decrease in labor force participation. The movement was from employment to not-in-labor-force. I don’t know if there is a straightforward way to interpret this, but I don’t believe Evan is addressing it cleanly in the article.

2) After the implementation of the law, labor force participation stabilized. Since that time, there has been a decrease in unemployment and an increase in the Employment to Population ratio. People are moving from unemployment to employment.

The first phase could have a number of interpretations. The second phase is clearly what opponents of Emergency Unemployment Insurance would have predicted. At this point, I think we still need to give it a few months to see if the rebound in the employment to population ratio continues. If it does, then this article by Evan will have been unfortunate.

Here is my post on the issue, with some graphs:


His post may need more explanation. I don't get where the numbers are coming from - and in particular, why his top graph shows very small narrowing of the two EPR lines, but his last one seems to show much bigger narrowing. From a very quick look at very simple data from BLS, I see no narrowing. So he must be doing something more sophisticated here. Anyone know what?

Though on a second look, it may be an optical illusion why it looked like there was a difference between the first and last graph to me.

That's one reason we probably need a few more months of data. These series are a little noisy. A lot of what I see in the 2nd phase may be an anomaly from the national employment data in October. There were some odd moves in labor force participation that may have been related to the government shutdown.

I think the state data for November comes out tomorrow. It will be interesting to see if there is a reversal in the recent trend.

Kebo? Kebo on North Carolina’s unemployment insurance experiment?

The graphs here look a little easier to read:

But in either case, I agree with the poster above that 5 months isn't a lot of time to collect employment data.

What if unemployed persons in North Carolina decided to migrate to other states that continue EUI? Is it possible to migrate to another state and not suffer an interruption in EUI benefits?

Migration could explain the initial decrease in the Employment to Population Ratio.

No, even if living in another State, the State where the work was done is where the benefit is calculated and paid for, even for extended benefits paid by the Federal government based on the unemployment rate in the work State.

Here's a careful paper by Farber and Valletta that finds that extended benefits keep people in the labor force as opposed to out of employment (PDF):

I agree that Evan's analysis is too coarse but the extended UI benefits have more than just employment effects. The social safety net has failed the long-term unemployed in this recession and it is not clear that cutting them off from work-related assistance is the answer, though to be fair neither is extending UI benefits forever. It is a very sad situation.

As if the changes in UI were the only political activity in North Carolina...

At the same time, North Carolina was criminalizing looking like a Mexican....

And trying to argue that illegals were taking jobs from Americans and then trying to bus the unemployed to have them employed in the fields to meet the demand for migrant farm labor.

Given looking "Mexican" subjected even citizens to arrest or detention, lots of people left the State.

One data point (one state) is hardly an "experiment" that can give useful information.

The "experiment" would be far more valuable if instead of just slashing the amount and duration of unemployment benefits it modified the program to start with a relatively high benefit, and then decreased that linearly.

That is, the "experiment" would be a system that disbursed the same total funds if one remained on unemployment for as long as possible, but with that linearly declining benefit to discourage waiting until benefits were practically exhausted before getting serious about seeking employment

This would also encourage a more graduated approach to job-seeking: rationally, one would initially look for "good" jobs (however one defined that) but if unsuccessful one would then consider employment that was increasingly less attractive.

A change that can best be described as punitive is not much of an experiment, especially when it combines reduced benefits with reduced duration of benefits. Is "Punishment shalll continue until morale improves!" a worthwhile experiment?

(BTW, I recall having to submit a form every two weeks, signed by prospective employers, in order to continue collecting unemployment benefits. Presumably this was dropped because employers grew tired of dealing with "applicants" who showed up with a form, and simply asked "Sign my form, please?". As well as the forgeries, which could be found only by phoning the employers- which further annoyed them, and was costly.)

Here are the updated November numbers. I would say the trend we have seen since July is continuing. North Carolina unemployment dropped by a whopping 0.6% in November.

Nice work.

Mr. Soltas?

Here are a couple more follow-ups:

Comments for this post are closed