Keep State Unemployment Insurance Rates In The Deep Freeze
Every new year brings with it a fresh set of resolutions. For 2012, we hope for a stronger economy and resolve to push for a more favorable business climate in Massachusetts.
This is also a time when state and local governments begin to address their spending plans for the next fiscal cycle, along with their own budget wish lists. At a time when businesses really need to regain traction after several challenging years for the state’s economy, Governor Patrick and legislative leaders need to create an environment that can help business grow. They have already begun to do that in three notable ways:
• The tax rate on corporate income fell to 8 percent from 8.25 percent as of Jan. 1.
• The state Legislature last week approved a freeze in the rate by which businesses pay into the unemployment insurance fund.
• The state Division of Insurance is allowing small businesses to join cooperatives that will allow them to buy health insurance coverage for their employees at a lower cost.
These changes are especially welcome news to small businesses, which make up most of the Central Massachusetts landscape. With the economy continuing to recover from the Great Recession, the state — as well as cities and towns — must play the role of gardener by nurturing the seeds that entrepreneurs and investors have recently planted.
Mass. Jobless Rate Keeps Falling
A freeze on unemployment insurance rates especially makes sense now that the commonwealth’s jobless rate (6.8 percent in December) ranks among the top one-third of the 50 states, is well below the nation’s rate, and has been falling steadily since it peaked at 8.8 percent two years ago. Further, Massachusetts’ unemployment insurance trust fund generated a surplus in 2011 of about $100 million, hence the need to keep the rates at current levels, or even consider dropping them during the year.
"Our system’s cost is amongst the highest in the country” and provides among the most generous benefits, said Bill Vernon, state director for the National Federation of Independent Business. “The unemployment insurance premium is really a direct tax on jobs, so the higher it drifts, the less attractive Massachusetts becomes as a place to keep or create new jobs. We can’t ignore the reality forever. At some point, the law of gravity prevails and the people who suffer are unemployed workers whom everyone wants to help.”
A Potential Drag On Pay Raises
At the same time, Massachusetts businesses are watching economic trends and trying to determine the right time to give their staffs raises — if they can at all. In its annual Human Resources Practices Report, the Associated Industries of Massachusetts, which lobbies lawmakers on behalf of Bay State businesses, says employers across the commonwealth are planning smaller salary increases for this year than their counterparts around the nation, in the 2.53-percent to 2.8-percent range versus a nationwide range of 2.92 percent to 3.01 percent. An increase in unemployment insurance rates would go a long way toward reducing — or even squashing — raises, creating a double whammy that can cut into worker morale and force some to look elsewhere for jobs.
We applaud the state for lowering the corporate income tax and enabling more companies to join health insurance cooperatives. We also commend the Legislature for taking that a step further by approving another freeze on unemployment insurance rates. As economic conditions improve, stimulating business growth and remaining competitive are critical issues for Massachusetts – and ones this legislature and governor understand.
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