The safety net debate has long been a great political divider in the U.S. and it’s once again rearing its head in Washington. Is it best to provide citizens with a leg to stand on during hard times or do benefits create too much dependence on the government?
The issue could be a deciding factor in the upcoming midterm elections after a federal program that extended unemployment benefits expired at the end of 2013 despite Democrats’ best efforts to renew it. Now a number of states are decreasing the maximum number of weeks an individual can receive unemployment insurance.
The results have been mixed; North Carolina has cut the maximum benefit time from 73-weeks to 20 and subsequently reduced its unemployment rate from 8.8% to 7.4%. Food banks are feeling the strain that these cuts are putting on families and have had trouble keeping up with demand from struggling households.
Yahoo Finance’s Jeff Macke suggests that the decrease in unemployment may not be connected to the reduction in state jobless benefits. Instead, jobs are coming back to the United States from abroad, he argues.
“What’s really happening is the idea that we could go all over the world and production costs would be lower in China than they would be anywhere else including import costs including everything else -- that’s over,” says Macke. “The globalization effect means it costs almost as much to hire people in China and India as it does to bring jobs back to North Carolina.”
The low rate in unemployment could also be a product of low participation. For every worker who found a job between June and November, more than two left the labor force.
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