Businesses could face huge tab for unemployment crisis
Courtesy
The state unemployment remained at 3.5 percent in May.
Several months into a flood of new and continuing unemployment claims prompted by the COVID-19 outbreak, Massachusetts labor officials quietly estimated the fund used to pay out benefits will be billions of dollars in the red through at least 2024. As a result, businesses may need to pick up a huge tab.
The unemployment insurance trust fund outlook report for May, which the Executive Office of Labor and Workforce Development posted this month, forecasts that Massachusetts will need to seek federal loans and will likely increase payments that employers make toward unemployment insurance by as much as 65 percent compared to pre-pandemic levels.
As first reported by the Boston Business Journal, the latest outlook projects an unemployment fund deficit of $3.1 billion by Jan. 1, 2021.
Those shortfalls, which do not account for potential federal loans, are expected to last for years, rising to $6.1 billion in 2022, $6.6 billion in 2023 and then back down slightly to almost $5.9 billion in 2024. Officials do not currently expect the fund to bring in more than it pays out in benefits until 2023.
Through April, the fund had a balance of $1.4 billion. The massive, years-long deficit on the horizon is driven by an unprecedented level of unemployment aid, an obligation the state projects to be nearly $6.4 billion in 2020 -- more than five times as much as last year -- and $5.1 billion in 2021.
Business premiums generate the money distributed to laid-off workers, and those mandatory payments are set to rise starting in 2021. The May report projected the average cost per employee will rise from $562 in 2020 to $759 in 2021, $880 in 2022 and $922 in 2023.
In the meantime, the Baker administration will need to secure federal loans to keep unemployment benefits flowing while work continues on economic recovery.
WBJ Web Partners
Most Recent
Most Recent
1 Comments