Editorial: Straightening Out Unemployment In The Bay State
Businesses got a reprieve when Gov. Deval Patrick signed a bill into law on Feb. 18 freezing the Massachusetts unemployment insurance rates.
The rate freeze prevented an automatic 40-percent increase in UI taxes that surely would have delivered a body blow to struggling Bay State businesses. The increase was meant to shore up the state’s unemployment insurance fund. To make up the gap, Massachusetts secured federal loans at little or no interest.
The Associated Industries of Massachusetts, the state’s most vocal statewide business advocacy group, is asking their members to write to the governor and their representatives in the Senate and the House to thank them for passing the UI rate freeze. We support that call, and urge our readers to the do the same.
But we also urge the Legislature to take a hard look at the unemployment insurance system. Every year, this threat of a double-digit rate hike comes around. And at the last hour, businesses get a reprieve. It’s time to stop this cycle of threats and then last-minute legislation. While this downturn has bottomed out, there remains uncertainty in the economy. The housing sector, while showing signs of volume increase, is still vulnerable. And now, unrest in the Middle East is having ripple effects all the way to our gas pumps. Both those factors can make or break an already-delicate economic recovery. The state needs to take a hard look at its unemployment policies and take the steps to shore up the fund so we are no longer reliant on federal dollars to keep our system afloat.
Focusing On The Fix
A study by the Boston-based Pioneer Institute for Public Policy in conjunction with the Massachusetts High Technology Council makes several common-sense recommendations of ways to reform the state’s unemployment insurance system that would not only save money and reduce headaches for business owners, but also create jobs.
The study makes four simple reform suggestions. The first is to reduce the duration of unemployment benefits from 30 weeks (the most generous length of any state in the nation) to 26 weeks (the standard rate for the majority of states).
The study also recommends a change to how a person qualifies for state unemployment. Under the current system, someone who works for only 15 weeks is entitled to the same benefits as someone who has been in the workforce for 20 years. The Pioneer Institute suggests extending that so-called attachment period from 15 to 20 weeks and requiring that employment is over two quarters instead of just one.
The third recommendation is to charge employers who are heavy users of the unemployment system a higher rate.
And the final recommendation is to lengthen the payroll base for the calculation of unemployment taxes to smooth out short-term volatility. Currently, the state bases a business’s contribution in part on its average payroll over a 12-month period. The Pioneer Institutes recommends extending that average to three to five years, which would help bring some stability to the system.
None of those four recommendations will put the unemployed out on the street. They are reasoned suggestions that would put Massachusetts more in line with its peers across the nation and instill some needed fairness into a dysfunctional system.
According to the study, those four simple reforms will result in 10,000 additional jobs, $3.8 billion in additional wages, $7.5 billion in economic output and $30 million in additional tax revenues.
If those estimates are even only half right, we will come out ahead in the long run.
So while you’re thanking your governor and your legislators for the unemployment insurance rate freeze, we suggest you also encourage them to adopt the reforms proposed in the Pioneer Institute report. We’ll provide a link to the report at WBJournal.com. You can also find it at www.pioneerinstitute.org/pdf/Unemployment_Insurance. It’s time to fix the unemployment system in Massachusetts once and for all.
WBJ Web Partners
Most Recent
Most Recent
0 Comments