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Home / Washington Business - January/February 2005 / President's Message: Let's Keep the UI Reforms |
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President's Message: Let's Keep the UI Reforms |
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Written On: January/February 2005 |
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Written By: By Don C. Brunell, AWB President |
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Just as the 2003 unemployment insurance reforms are scheduled to kick in, some lawmakers heading to Olympia this month want to toss them out and go back to the old ways. That would be a bad idea.
Apparently, those legislators forgot the stern warning issued by Boeing Commercial Airlines President Alan Mulally in 2002 that Washington had the highest unemployment insurance costs of any of the 27 locations in which the company operates.
Today, almost three years later, we are still among the worst in the nation. According to the 2005 WashACE Competitiveness Redbook, our state leads the nation in UI costs. Employers pays $695 per year for each employee. Considering Washington has 2.7 million workers in the system, that’s more than $2 billion a year that can’t be spent for expansion or job growth.
Our unemployment premiums are almost three times the national average and five times what South Carolina charges. And our average weekly benefit of $312.10 is sixth highest in the nation — a full one-and-a-half times the U.S. median and more than $100 a week higher than South Carolina.
Why compare Washington to South Carolina? That state is providing $116 million in incentives to lure the manufacturer of the 7E7 fuselages and its 645 jobs.
UI Reforms Part of 7E7 Package
Lawmakers should be under no illusion; unemployment insurance reforms were the linchpin in securing the 7E7 assembly plant at Everett and its 1,200 jobs.
Those reforms were desperately needed. Washington was one of only eight states that computed its maximum weekly benefit on a worker’s highest two quarters of earnings. According to a 2002 WashACE study, changing the law to require four-quarter averaging — which is the way most states do it — would save about 15 percent. In effect, that change encourages seasonal workers to find year round employment.
The reforms also reduced the number of weeks a claimant can receive benefits from 30 to 26. Only Massachusetts and Washington allowed 30 weeks before the law changed in 2003.
Using UI to Avoid Work
When the unemployment insurance system was established, it was designed to pay workers until they found work. The 2003 reforms reinstituted much more stringent work-search requirements.
That is important, because studies show that the longer people are off work, the more they avoid it. According to Bill Conerly, an Oregon economist with a long history in social insurance systems, research clearly documents that less diligent job search requirements lead to longer spells of unemployment.
Research from the Upjohn Institute confirms these conclusions, indicating that, on average, a 10 percent increase in unemployment payments increases the length of unemployment by 2 to 8 days.
Statistics aside, there’s another reason our new governor and lawmakers should not undo the unemployment reforms. If they raise taxes, fees and operating costs — making it harder for Boeing to compete — they will be helping Airbus. While Boeing is in a fishbowl, those same costs affect all employers in our state who struggle every day against competitors from China to Charleston.
The 2005 Legislature and new governor need to focus on what it takes for our state to provide jobs and careers. Turning back the clock on reforms and increasing costs are not options if we want to crack a bottle of champagne against the fuselage of the first Dreamliner in Everett in a couple of years.
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