North Carolina thought they'd create an "incentive" for the jobless by slashing their benefits. It's not going well.
The state’s unemployment rate has plummeted to 7.4 percent from 8.8 percent, the sharpest drop in the country. In part, that is because more jobless workers are connecting with work. But an even greater number of workers have simply given up on finding a job. […] [S]tatistics don’t tell the full story. North Carolina still has nearly 350,000 listed as officially unemployed, and many more, including those living in depressed rural areas, have given up even looking for a job. For them, the safety net is gone, and largely out of sight, countless families have slipped deeper into poverty.
The unemployment rate did fall – but this was due to a large drop in the labor force, as the number of people looking for work fell. Why? Well, a likely explanation is that some of the unemployed continued to search for work, and were therefore counted in the labor force, despite low prospects of finding a job in a depressed economy, because such search is a requirement for those collecting benefits. Take away the benefits, and they drop out. Now, labor force participation has fallen nationally as well as in North Carolina, and the state’s labor force began dropping before the benefit cuts, so that the case for claiming that reduced benefits actually reduced job search isn’t ironclad. Still, it’s worth emphasizing just how extraordinary the changes have been. North Carolina’s labor force drop has been much larger than the national change. And it has also been unprecedented in historical terms. There’s been nothing like the recent North Carolina decline – taking place at a time of modest recovery, not recession – in the state’s previous history.