Unemployment insurance – the bosses' next target
by Tom Condit
June 16, 2004
Now that the legislature has nearly-unanimously gutted of Workers’ Compensation, the employers’ next target is Unemployment Insurance. Employer groups like the State Chamber of Commerce have already begun a chorus of whines about the “broken” unemployment insurance system and its cost.For once, there’s some truth in their propaganda campaign. The Unemployment Insurance system isn’t broken, but it is broke —thanks to the employers and their friends in Sacramento. Since 1990, there have been only five years (from 1996 through 2000) when the Unemployment Insurance Trust Fund didn’t pay out more money than it took in. With rising unemployment and a tax base which can’t support the system, the situation has grown steadily worse since 2001.
The reason is simple: employers are taxed for Unemployment Insurance on only the first $7,000 of an employee’s pay in California, the same amount as in Mississippi or South Carolina. This is the minimum amount allowed by the federal government and is the lowest taxable wage base as a percentage of average pay of any state. That means when workers go on unemployment, there isn’t enough money in the fund to pay them a decent percentage of their wages. The $7,000 amount hasn’t been raised since 1983.
This affects the solvency of the UI system and also its equity. Employers in lower-paying industries carry a greater share of the load than those in higher-paying industries. Since unemployment insurance is part of the “wages fund” of salary and benefits received by workers, the workers in those industries are also disadvantaged. Moreover, it means that employers with a stable work force are subsidizing seasonal and project-based industries like construction and movie production.
The first step toward “fixing” the unemployment insurance system is to raise the taxable wage base to $25,000 per year. This would still be lower than Idaho, Hawaii, Washington, Oregon or Alaska, and wouldn’t be much higher than Nevada’s base of $21,500. Then we need to index it to the state’s average wage so it doesn’t fall behind again. That’s the first step toward solvency.
But we want more than solvency from the Unemployment Insurance system. We want equity.
*We need to get rid of the crazy system which bases your unemployment payments on what you made months ago instead of what you were making when you got laid off.
*We need to raise the percentage of wages covered by UI benefits from the present average of 31.4% (45th among the 50 states) to at least 50%.
*We need to make it easier to get unemployment insurance. Right now only 46% of California’s unemployed workers get UI benefits.
*We need to extend the period you can get UI to reflect the rise in long-term unemployment.
All this isn’t necessary just to aid unemployed workers. Unemployment Insurance helps keep money in circulation at the bottom of the economy where it can do some good, instead of letting it all flow out to time-share condos in Bermuda.
(Get more info from California Budget Project, www.cbp.org)