South Carolina lawmakers will study whether to follow other states tying unemployment benefits to economic conditions as a way to return displaced workers to the labor force more quickly.
The joint federal-state insurance program provides temporary payments to individuals who lose their jobs through no fault of their own.
Several states, including North Carolina, Florida and Alabama, have revised their benefits plans in recent years. They passed legislation that links the length of time an out-of-work individual can receive benefits to the number of jobs that are available.
The programs work by allowing recipients to stay on unemployment for shorter periods — typically three months — when unemployment rates are low and jobs are plentiful. Conversely, if the jobless rate creeps up, the duration of benefits would increase.
The idea is in the early stages in the Palmetto State.
“We do have a bill that this committee will propose that will go through the normal committee process that is available for any committee member who wants to be on the bill,” said state Rep. John “Jay” West, R-Belton, who chairs the panel studying the proposal.
State Rep. Jay West, R-Belton, chairs the committee that will consider whether to tie unemployment benefits to economic conditions. File/AP
The S.C. Department of Employment and Workforce said it is ready to respond to any questions the General Assembly has. It also noted that the state’s current employment situation doesn’t reflect an immediate need for the change.
“South Carolina is going through a very good economic time and, fortunately, our unemployment rate is very low at 3.2 percent,” DEW said.
The department said that most residents who file jobless claims return to work and don’t collect benefits, which range from $42 to $326 a week, for the entire 20-week maximum in the existing law.
Yet over the past three years, 183,000 workers in the Palmetto State maxed out their unemployment benefits, said Joe Horvath, visiting fellow at Opportunity Solutions Project, a nonprofit organization that seeks to increase worker participation.
The “concerning reality for South Carolina,” Horvath told legislators during a committee meeting last month, is the long decline in the workforce participation rate that began well before baby boomers started retiring and has accelerated since.
The state’s labor force participation rate, or the number of residents working or actively looking, increased by 11,040 in March to 2.4 million, the latest jobs report from the DEW showed. That was nearly 15,000 more compared to the same month last year.
Although the gain nudged the participation rate up to 56.1 percent from 55.9 percent, the figure remains well below the national average.
DEW said, in general, the idea of “indexing” benefits to the job market isn’t “likely to have a measurable impact on the labor force participation rate because those drawing unemployment benefits are already included in the state’s labor force estimates.”
But Horvath said indexing the duration of the state’s unemployment benefits to the average unemployment rate when job growth is robust would promote a rapid return to work for workers who recently left their jobs.
“The first step in overcoming the state’s labor shortage problem is to ensure that recently unemployed workers become reemployed as quickly as possible,” he said.
Horvath added that newly displaced workers are “the most available talent to fill new jobs.”
Horvath said case studies by the Opportunity Solutions Project showed “dramatic and consistent” results in states that adopted indexing systems.
“Unemployed workers generally returned to work 30 percent faster,” he said.
States that index unemployment also typically outperformed in terms of trust fund solvency and unemployment tax competitiveness.
South Carolina has more than $1.5 billion in its Unemployment Trust Fund. DEW said that as “a general rule, indexing would result in lower unemployment taxes for employers” that pay into the system.
The S.C. Chamber of Commerce agreed that this type of plan could provide greater solvency to the trust fund and continue to stabilize or even reduce unemployment taxes for employers, spokesman Payton Lang said.
Lang noted that every other Southeastern state has indexed their benefits to the unemployment rate.
“So effectively, in low unemployment periods, South Carolina has the highest benefits duration in the Southeast,” she said.
The chamber “strongly supports” efforts to index unemployment as employers in the state are looking for “any and every solution to address the worker shortage,” Lang said.