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People Without Paychecks: Unemployment’s Hidden Costs

Updated: May 7, 2022

Misguided and shortsighted political sparring and foot-dragging over expanded unemployment insurance (UI) will continue as long as elected officials fail to recognize the hidden costs of joblessness, which far exceed payouts.

One dollar of unemployment compensation returns $1.90 to the economy because it gooses demand for goods and services at times when consumer spending plunges. People who live paycheck to paycheck, as half of American workers do, spend more of their pay than wealthy people do.

Voters should choose candidates who recognize and acknowledge the devastation joblessness brings to workers and families, candidates who are willing to strengthen UI benefits, one of the few benefits available to workers in non-union states. Unemployment compensation was established by the Social Security Act of 1935, as the U.S. crawled out of the debilitating Great Depression. It’s designed to give people without paychecks time to find new jobs without starving or going broke. Boosted by stimulus checks and expanded UI, consumer spending jumped from minus 12.9 percent in April 2020 to 8.2 percent in May; in June and July, as benefits dwindled or expired, spending dropped to 6.2 percent and 1.9 percent respectively. North Carolina’s July 2020 unemployment rate was 8.5 percent. Some jobs, especially in the service sector, won’t bounce back. Especially if Covid rates spike again.

During the Great Recession, from 2008 to 2012, unemployment compensation fended off approximately 1.4 million foreclosures, and an additional 18 percent shortfall in gross domestic product (GDP), according to the Center for American Progress.

Economic research into joblessness reveals less obvious but equally troubling costs to individuals and society. Unemployment affects physical and psychological health; it can even take years off your life. People without paychecks may need Supplemental Nutritional Assistance well beyond the federal SNAP benefit levels; the jobless may lose health insurance, and forgo medical care. This swells Medicaid rolls, even as North Carolina legislators refuse to expand eligibility, forcing more patients to seek emergency care. As unemployment drags on, workers stop saving or raid retirement funds. This robs their future spending ability. Their skills deteriorate. This hurts not only future employment, but also re-employment wages, which may be 5 to 15 percent less than workers who did not lose their jobs.

Unemployment demoralizes people and affects future planning. Workers may fail to invest in training or education that might improve prospects. They may forgo investments in children’s education, which deprives the next generation of talents and skills necessary to maintain a strong stable economy.

And some unemployment compensation ends up as taxes, contributing to state revenues, which states desperately need, since they must balance budgets.

The Economic Policy Institute reports that despite August gains of 1.4 million jobs, the U.S. is still 11.9 million jobs shy of February 2020 employment levels. Without additional federal aid to avoid layoffs, North Carolina could lose another 156,500 state and local government jobs.

N.C. Gov. Roy Cooper’s buy-in to Trump’s offer of $300 per week of unemployment compensation, for three weeks, may be better than nothing, but by the time you read this, it’s probably run out. Likewise, the General Assembly recently ratified a $50 per week increase in UI, but did not approve Cooper’s proposal to extend benefits to 24 weeks and raise the maximum benefit to $500 per week.

Unable to weather months without income, or pay rent, many businesses, especially small ones, will close for good. Meanwhile, mortgage delinquencies and evictions are rising. Despite an eviction moratorium, payments will eventually come due. The money is still owed. And by mid-August, according to the Bureau of Labor Statistics, 46 percent of North Carolina’s unemployed had been without work for 15 to 26 weeks.

Support candidates who will advocate for increases in N.C.’s weekly benefit calculation, allowable maximum benefits, and duration. Without adequate compensation for those who are out of work, through no fault of their own, people without paychecks impose future costs on everyone.

Note: At press time, additional virus aid had failed to pass the U.S. Senate.

Betty Joyce Nash reported for the Hendersonville Times-News and the Greensboro News & Record before moving to Virginia where she worked as an economics writer. She co-edited Lock & Load: Armed Fiction, published in 2017 by the University of New Mexico Press; the anthology probes Americans’ complicated relationship to firearms. She writes for Carolina Commentary. For more information, see

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