RALEIGH – How does North Carolina stack up? In previous columns along these lines, I’ve taken a look at regional and national comparisons of tax burdens, educational outcomes, economic performance, and transportation. Today’s subject is unemployment insurance, one of the most significant government programs that state government runs – but one of the least-scrutinized by the state legislature, because its funding stream is federal.

The UI program is designed not just to provide income support during spells of unemployment but also to create opportunities and incentives for workers to become gainfully reemployed as soon as possible (which, studies show, is generally good for both workers and taxpayers). Over the years, the John Locke Foundation has been one of the few policy institutes to devote significant attention to potential UI reforms, discussing such issues as the opportunity cost of maintaining large trust funds and alternative models for personalized UI savings accounts to give workers more control over their money and more options when they find themselves unemployed.

Another organization thinking along similar though not identical lines has been the American Institute for Full Employment, an Oregon-based organization. Its latest set of progress reports on state UI systems provide useful information with which to compare North Carolina’s performance to that of key competitors.

The Institute’s reporting system evaluates three main indicators of performance: effectiveness, efficiency, and cost. Effectiveness refers to how long jobless claimants stay out of the job market, and how many of them use up their UI benefits without having found reemployment. Top-performing states in effectiveness use innovative ways to link up their UI beneficiaries to potential employers and training firms, while creating financial incentives for recipients to secure jobs sooner rather than later.

North Carolina isn’t exactly the worst in the nation in effectiveness, but there is a still a lot of room for improvement. North Carolina’s UI recipients stay out of the workforce an average of 13.4 weeks, ranking us 17th in the nation, compared with an average of 11.2 weeks for the five most-effective states (including #1 Georgia, an economy with many similarities to ours). More worrying is that about 40 percent of North Carolina’s UI recipients exhaust their benefits entirely without finding a new job, ranking us 43rd in the nation. The top-five states in this category have only an 18 percent average exhaustion rate.

The second criterion is efficiency – the extent to which industries with high amounts of job turnover are subsidized by other industries and workers (remember that employees share some or perhaps even most of the incidence of UI taxes in the form of lower take-home pay). Here North Carolina looks quite a bit better, ranking 10th in the nation with about 22 percent of our costs exported to the general population of taxpaying firms and workers (compared to a national average of 26 percent).

Finally, the Institute ranks the average cost of state UI programs, expressed as tax dollars per worker. North Carolina’s costs ($351 per worker) are a bit higher than the national average ($304) and significant above those of nearby states such as Alabama ($125), Florida ($135), Tennessee ($135), Virginia ($148), South Carolina ($154), and Georgia ($158).

What could be done to improve the performance of North Carolina’s system? The American Institute for Full Employment advises states to explore four sets of reform ideas:

• Use UI dollars to subsidize the jobs of newly reemployed beneficiaries, rather than just paying them to remain unemployed.

• Make it easier for employers and employment firms to access the database of those who apply for UI benefits, while maintaining strong privacy protections.

• Recognize the significant growth of the private market for job placement and training services, shifting the state’s role to working with these firms rather than attempting to supplant or compete with them.

• Be smart and creative in enforcing the rules to ensure that UI claimants are actively seeking work (this is widely known as the George Costanza problem, from Seinfeld).

Sounds like a good game plan for North Carolina policymakers to follow – or at least those willing to look past the state’s General Fund budget and exercise real oversight over federally funded but locally administered programs.

Hood is president of the John Locke Foundation.