How North Carolina Transformed Itself Into the Worst State to Be Unemployed

By March, when the coronavirus began accelerating through the United States, Shawn Hill-Watkins had been working as a cashier at a Food Lion supermarket in High Point, North Carolina, for seven months, taking three buses to work and back each day. She couldn’t afford the groceries she was ringing up for customers, but she had always been outgoing and knew how to keep the mood upbeat. Older regulars at the market sought out her line. They knew her by the colorful silk flowers she had sewn for herself, which she would wear behind her ear.

Hill-Watkins is 50, with six children and nine grandchildren. For years she’s lived around Virginia and in Philadelphia, making ends meet as a hairdresser, a seamstress and a house cleaner. Last June she came to North Carolina with her youngest son, Devan, after one of her daughters, who was in an abusive relationship, called her for help. Her daughter later left, but Hill-Watkins decided to remain. She had gotten the grocery job and eventually moved into a room with a kitchenette in an extended stay hotel just off Interstate 40 in Greensboro. Devan, who is 15, had made friends on a local football team. Hill-Watkins had been running around trying to help her children for two decades, she said, “and I felt like I couldn’t run with them anymore.”

Despite the rising risk of COVID-19, Hill-Watkins and her fellow cashiers were not wearing masks in early spring. It wasn’t long before she came down with something that seemed to be the virus. She was too sick to work — sleeping for hours and coughing up phlegm — but not sick enough to go to the hospital for testing. By the time she got back on her feet, a week and a half later, the store had reduced her hours to zero, where they’ve stayed ever since. (Food Lion said it doesn’t comment on “any specific associate matters” and that it “continues to follow guidance” from all health authorities.)

On April 20, Hill-Watkins filed for unemployment. For two months, she didn’t hear a word from the Division of Employment Security, or DES, the agency that operates North Carolina’s unemployment insurance system. By June 19, when her $1,261.60 monthly rent was due, she had $30 to her name. “There is a real possibility that we will be outside tomorrow,” Hill-Watkins told me a day before her rent deadline. “I wake up thinking about it. I go to sleep thinking about it.”

Hill-Watkins’ attempts to chase elusive benefits will sound familiar to the estimated 44 million Americans who have had to follow the absurdist script that often constitutes the application process: The obtuse online forms. The bewildering notifications and empty emails. The understaffed hotlines with half-day wait times. The fleeting transfers to a human operator, followed by a sudden disconnection.

Much of this bureaucratic ineptitude predates the pandemic. Nearly every unemployment system, run by each of the 50 states, has been plagued by outdated technology and administrative hurdles — and all have been overwhelmed by the sudden and historic spike in claims.

But as real as those problems are, they ignore a more fundamental issue: Some state unemployment systems have long been designed to exclude applicants. “People are frustrated and complaining everywhere. But there are degrees of how well states are handling this based on their approach to the program,” said Andrew Stettner, a senior fellow at The Century Foundation, a progressive think tank. “The states that are doing the worst at this have historically done a bad job of it.”

Among the worst, historically and at present, is North Carolina. At the end of 2019 — when the economy was humming and pandemics were the stuff of horror fiction — fewer than 1 in 10 jobless people in North Carolina received unemployment benefits. That’s the lowest rate in the country and well below the average of 26%.

The maximum number of weeks someone in the state can draw benefits is currently 12, compared with the national standard of 26 weeks. And those who receive benefits get less money than they used to: Between 2008 and 2019, the percentage of a worker’s wages replaced has fallen from 53% to 38%. North Carolina also ranks as the worst state for getting benefits to workers in a timely manner.

These outcomes are the result of a long campaign by North Carolina legislators to restrict and reduce benefits. In 2013, only a few years after the last economic cataclysm, the state’s Republicans made the deepest cuts to any unemployment insurance system in the country. “It’s fair to say that we don’t want people on unemployment in North Carolina and that we want them to have jobs,” state Rep. David Lewis, a Republican who helped draft the 2013 legislation, told ProPublica.

The overwhelming need for benefits today, and the delays that millions of Americans like Hill-Watkins have in getting them, has set off a national awakening about the sorry state of unemployment insurance systems. That reckoning is acute in North Carolina, where jobless people will be particularly vulnerable when the $600 weekly unemployment payments from the federal CARES Act expire at the end of July.

Before the pandemic, the state averaged 3,000 claims a week, according to the DES. In the first six weeks of the pandemic, its system was flooded with an average of 136,000 claims a week. “Despite those challenges, if there are no issues with a filed claim, a person usually receives their first payment within 14 days of filing,” said David Rhoades, spokesman for the DES. In the same statement, he also noted that “in the last five years, DES lost 20%, or $10 million, of its administrative funding.”

Hill-Watkins is certain that she would not have been as eager to remain in North Carolina had she known what was to come. If she’d been working in, say, Massachusetts when her hours were reduced to zero, she might have quickly received her benefits, which average $557 a week, for up to 30 weeks, the longest duration in the country. In Massachusetts, 66% of new applicants got their unemployment insurance payments in March, compared with 29% nationally and fewer than 10% in North Carolina, according to a Pew study. “I could have been anywhere else in the country,” Hill-Watkins said. “And here I am in the worst place to be.”

Among economists, it’s generally accepted that unemployment insurance is one of the most effective and cost-efficient policies to aid recovery. The premise is simple: Employers pay into the system in good times, which distributes benefits to employees laid off for economic reasons. The temporary cash payments only partially replace lost wages and are spent on basic necessities, providing a direct stimulus to local economies.

Economists may agree on this point, but politicians don’t. Democrats tend to highlight the positives: The benefits help families and promote consumer spending. Republicans typically point to the negatives: The tax is a burden on employers and a potential disincentive for employees to return to work. These divides have led to stark partisan and regional contrasts: Many Southern states have reduced benefits, while other parts of the country have maintained or even expanded their payments.

For decades, North Carolina’s program was in the middle of the pack. Then came the rise of the Tea Party and James Arthur Pope, a retail heir who’s been a major funder for the state’s libertarian movement. In 2010, Republicans took control of both houses in the legislature and in 2012, secured the governorship, putting the GOP in full command of the state for the first time since Reconstruction.

Among the first items on the new administration’s agenda was an overhaul of the state’s unemployment program. In less than two weeks, the GOP supermajority passed HB 4, a bill that made the deepest cut to any state’s unemployment compensation in American history. “In terms of governing, this was the Republicans’ coming out party,” said Mac McCorkle, a former Democratic political consultant who now teaches at Duke University.

The bill slashed the duration of benefits and lowered maximum weekly payment amount from $535 to $350. It also changed how benefits were calculated — from the highest quarter of a claimant’s earnings in the last year to an average of the most recent two quarters. Since many workers have their hours and pay reduced in the quarter prior to layoffs, this resulted in smaller payouts. At the end of 2019, the national average for weekly payments was $378; in North Carolina, it was $277.

The key impetus for these cuts, according to Lewis and two other Republican legislators who supported HB 4, was to pay back the debt — some $2.5 billion — that the state owed the federal government. In the wake of the 2008 financial crisis, 35 states, including North Carolina, had to borrow from the federal government to sustain their unemployment payments. Those loans came with interest and in 2012, the federal government triggeredan increase in the amount that each state’s employers had to pay into the state’s unemployment trust fund. These higher taxes, Lewis said, “made North Carolina less attractive to a potential employer because you didn’t have to only factor in business expenses, but you also had to factor in your percentage of repaying this debt.” The goal, he said, was to create “a business climate that is good for business and employees.”

In truth, unemployment insurance taxes in North Carolina were already low. The year before HB 4 was passed, The Tax Foundation, a policy think tank, ranked the state as having the seventh most favorable unemployment tax for employers. (It scored less favorably in other categories.)

Not all states that owed money to the federal government took the same path as North Carolina. Some, like Rhode Island, temporarily raised the amount of taxes employers paid into the system. Others slowly paid off the debt without making changes, added programs that expanded eligibility or supported short-term compensation for reduced hours (known as work sharing). “We were fully aware that there might have to be some cuts to pay back the debt,” said Bill Rowe, the deputy director of the North Carolina Justice Center, a progressive policy organization. “But we were shocked about how severe and permanent they were. Anything that had previously benefited workers was taken out of our law.”

HB 4 also limited “attached claims,” a feature that had previously streamlined the application process by allowing employers to file in bulk for an entire group of workers who have been laid off. And the bill disqualified people who had lost a job for “good-cause” reasons, such as family caregiving or to follow a spouse who has to relocate for work, from collecting unemployment. “You couldn’t just say my husband has been transferred,” said state Rep. Julia Howard, a Republican who was one of the bill’s primary sponsors. “We made it reasonable, so it was not just a gimme.”

When the law went into effect on July 1, 2013, the effect on people collecting benefits was immediate and madenationalheadlines. Before HB 4, residents had received extended benefits through the federal government’s 2009 stimulus package. But this federal aid, which lasted through 2013, required that states maintain their benefits structure. By rushing to implement their changes, rather than waiting until the end of the year, North Carolina’s Republicans forfeited their constituents’ eligibility for this program, stripping an estimated 170,000 people of benefits. It was the only legislature to do so.

That decision was “deeply unpopular” in the state, according to The American Conservative, in a 2013 article titled “How Raleigh’s Republicans Forgot the Working Class.” That analysis noted that North Carolinians were collecting extended unemployment not because it was comfortable but because “there are simply no jobs to be found.” At the time, the state had the fifth highest unemployment rate in the nation.

The cuts to the state’s unemployment program were part of a broader makeover by free-market ideologues, according to Gene Nichol, a law professor at the University of North Carolina. “Between 2013 and 2017, there was a real shift in the theory of the role of government, some might generously call it,” he said, noting the general assembly’s elimination of the state’s earned income tax credit, an anti-poverty program popular with conservatives, and its decision not to expand Medicaid through the Affordable Care Act. “I call it waging a war on poor people.”

Still, a central goal for the law was achieved: North Carolina was able to pay off its debt to the federal government by 2015 — four to five years earlier than it otherwise would have and even more quickly than those who had crafted the bill had anticipated.

At that point, Democrats hoped the assembly would restore benefits to their previous levels, according to three state Democrats. Instead, the Republican majority cut deeper. It pared taxes on employers and added provisions to further restrict eligibility by requiring claimants to contact five potential employers each week.

North Carolina was not the only state to slash benefits. The “realignment,” as Howard, the Republican state representative, put it, was adopted by other states in the region. “We have had numerous other states call us and ask us if we would send them a one-sheeter on what we did and how we did it.”

Between 2011 and 2015, eight other states, mostly in the south, reduced how long people can collect benefits. These cuts can have a disproportionate impact on Black workers, who average 25.9 weeks of unemployment, compared with the average white worker who remains unemployed for 19 weeks, according to the National Employment Law Project.

It’s a “troubling trend,” said Harry Holzer, a professor of public policy at Georgetown University and former chief economist for the Labor Department. There is a real risk, he said, that employees may find unemployment to be too comfortable and that employers might flee to states with lower taxes. But “so many states now go way too far in the direction of not wanting to upset the employer community,” he said. “And the states that let the pendulum swing so far are doing permanent damage to workers and households.”

Hill-Watkins has never been the type of person who is easily discouraged by bureaucracy and paperwork. She used to volunteer with a tenants union and is meticulous with records. She sent the DES every piece of information it requested. Every week she uploaded her schedule, listing zero hours. She called the hotline, messaged the chatline. “No one wants this for me more than I do,” she said.

In May, Hill-Watkins said, she waited for hours on hold to talk to someone at the DES, with 189 people ahead of her. When it was her turn, she was told there was nothing anyone there could do for her over the phone: The agency already had the materials to process Hill-Watkins’ claim, it said. She just needed to wait for someone to do so. “I know there’s a lot of people going through the same situation I’m going through,” Hill-Watkins said. “But it’s ridiculous that the wait time is 14 days to six weeks. And that’s just to know whether you are even eligible.”

When asked about the delays that Hill-Watkins faced, Rhoades, the DES spokesman, said the agency does not comment on individual cases. Generally, he said that the agency was prioritizing claims that were filed earliest, having adjudicated 96% of claims filed since mid-Mid March and delivered 82.8% of its first payments within the 14-day standard. The massive influx in the volume of claims, short staffing levels, and new procedures introduced by the CARES Act have slowed down the timeliness of some payments, he said.

Hill-Watkins had never filed for unemployment before. “I worked,” she told me in early June. “No matter what it is, I work.” She was holding the phone with one hand and cooking dinner for her son — some chicken, onions and bell pepper she’d picked up from the food bank — with the other. “I raised six children on my own.” Before working at the supermarket, she had earned a living as an independent contractor by tapping into a network of longtime clients, references and friends. She knew who needed a babysitter, who wanted a dress made or who was due to get braids done. If there weren’t a virus to worry about, she knew she would have been able to make do on her own after her hours were cut. The problem was that “there’s no social distancing in any of those jobs,” and with high blood pressure, she couldn’t take the risk.

Since losing work, every day had become a blur of emails sent, numbers dialed, calls unanswered. She shared her resume with employers on Indeed. She scoured the lists of food banks, local charities and low-income housing opportunities. She wrote to social service agencies and social workers, to legislators and churches. The subject line read: “Scared single mother.”

Few people responded and when they did, there always seemed to be a catch. Like the homeless agency that told her she didn’t qualify for a shelter because she was already living in a hotel. Or the fact that the most promising lead she found for remote work — providing customer service from home — required her to get her own landline. To get a landline, she needed an apartment, but without a job, she couldn’t fill out an apartment application.

These dead ends left her at the mercy of the state. “I never wanted to be sitting and waiting for somebody to justify giving me money to survive,” she said. “I would rather be out there scraping and scratching and hustling than waiting for someone to validate my life with their little change.”

One of the few consolations for Hill-Watkins was that she wasn’t alone. Several other workers — and even state legislators trying to file on behalf of their constituents — described the same difficulties she had with the program’s application process. For instance, if applicants make a single mistake, it’s not possible to go back into the form to change it. Instead, they have to call a hotline, with a wait time that often ranges between two and seven hours. And when someone from the hotline says they are transferring the call, more often than not the applicant will get disconnected. The DES confirmed that, in order to prevent fraud, it limits the changes claimants can make to their application.

A contractor working with the DES call center, who asked to remain anonymous, confirmed that these frustrations are in fact standard features of the system. “If the whole queue is full, then the line gets dropped,” she said, and applicants “have no choice but to call back and go through this process over and over again.”

The unemployment system, she said, is just as opaque and chaotic for those working inside it as it is for those on the outside. Call center employees do not have the authority to adjudicate claims in North Carolina, the contractor said; they are merely a conduit through which residents can vent their frustration. Some of the people she speaks with have lost their houses and jobs and want to scream about it. Others just want to sit on the phone with her and cry. “I’m the only voice they can talk to,” she said. All she can do is listen and tell them to keep waiting. (The DES responded, “We are training call center representatives to build their skill sets so they can assist as many people as possible. However, more complex issues may need to be handled by the more experienced staff.”)

These headaches are not surprising to experts like Michele Evermore, a senior policy analyst with the National Employment Law Project. The coronavirus may have been unexpected, Evermore said, but the collapse of unemployment systems in many states was not. Evermore published a prescient report in early March, warning that the depth of North Carolina’s cuts to its unemployment benefits and staffing had left the state unprepared for the next recession. “These systems that were undermined for the past decade are very hard to turn around,” she said, comparing the process to steering a barge.

Such an attempt to reverse course is precisely what’s happening in North Carolina right now. Since March, Roy Cooper, the state’s Democratic governor, has signed severalexecutiveorders to temporarily remove some of the obstacles from the application process. The orders waive the requirement that applicants search for work; eliminate the one-week waiting period between filing for unemployment and receiving benefits; and allow employers to file claims for entire groups of workers who have been laid off. (The DES, according to Rhoades, its spokesman, has also acted to “improve its processes, technology and staffing levels to respond to the surge in claims,” including by adding an online chat feature and increasing staff from 500 employees to 2,600.) The orders show, Evermore said, that “when the government decides to clear away the roadblocks to paying benefits, it can.”

Still, none of those changes are permanent; they expire when the governor rescinds his declaration of the state of emergency. North Carolina Democrats hope the crisis will create an opportunity to make permanent changes, just as the 2008 recession did for their Republican counterparts.

So far the signs have not been promising. In May the Republican-controlled state assembly rejected a Democratic measure, previously passed in the senate, to temporarily increase the maximum benefit amount from $350 to $400. (The extra costs would have been fully covered by the federal government as part of its extension of state benefits.) “I’ve pushed back pretty hard about making changes during this time frame,” Howard said. “I do not think that now is the time — when the ship is on fire — that we need to be trying to change things.”

On June 17, nearly two months after she had applied, Hill-Watkins received an update on her unemployment application. The notice, which she accessed through the state’s online portal, was the sort of oddity that is common in the unemployment process. It laid out the amount she would receive — $150 per week for up to 12 weeks — if she were deemed eligible for state benefits. The notice was silent as to whether she would be found eligible and made no mention of when that decision might come. Whether due to a glitch in the system or an overzealous administrator, she was sent this same correspondence three more times: once at 1:30 a.m. and twice at 5 a.m.

To Hill-Watkins, the agency’s timing was curious. The day before, ProPublica had asked the DES about Hill-Watkins’ application. “Am I not worthy of this unless someone else speaks up for me?” she wondered, “I did the work. And I’m the one sitting here without the money.” (The DES did not respond directly when asked whether ProPublica’s questions influenced the agency’s timing or decision; its spokesperson said that Hill-Watkins’ claim was referred to a team “dedicated to resolving the oldest and most complicated claims.”)

Hill-Watkins tried calling the DES to find out more. She wanted to know when she might obtain or qualify for these payments and whether she would also receive the additional $600 per week from the CARES Act. As usual, she couldn’t get anyone on the phone. Each of the four times she called, the automated message politely suggested she call back another time.

“I don’t have any more time, though, is the thing,” she told me on June 19, the day her rent was due. She wondered if she would have to wait another eight weeks for the unemployment office to find her eligible. Or to pay her. “It’s unbelievable they can keep you waiting for this long,” she said, “and expect you to survive.”

By this point, she had missed her rent payment. Managers at the hotel had come by and asked her to leave the room. She told them that, because she had stayed in the hotel for more than 30 days and it was her primary residence, she believed she qualified as a tenant and was entitled to the same protections against evictions.

That argument did not appear to sway the manager. Hill-Watkins’ keycard for the room was deactivated. Unsure if she and Devan would be able to get back in if they left for even five minutes, they stayed in the room the entire weekend. (The hotel manager did not respond to a request for comment.)

On Monday, June 22, came the news Hill-Watkins had been waiting two months to hear: She was eligible for unemployment benefits. At 12:21 that afternoon, $750 was directly deposited into her bank account. Hill-Watkins compared the feeling to the moving of a great mountain.

She allowed herself a moment of optimism. She has long dreamed of saving up enough money to buy an RV. If she had it her way, she would camp forever. With the car, she and Devan could shelter in place in any state. She wouldn’t have to worry about a checkout date or the hazards of social distancing. The next time one of her children called her for help, she could ride to them and then ride away. They would never have to worry about being homeless again.

Ariana Tobin contributed reporting.