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Home / Washington Business - May/June 2005 / President's Message: High UI Benefits Require Worker Contributions |
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President's Message: High UI Benefits Require Worker Contributions |
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Written On: May/June 2005 |
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Written By: By Don C. Brunell, AWB President |
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Since Washington issued the first $15 unemployment check in 1939, there has been a tug-a-war over benefits and who pays. It not only pits employers against unions but employers against employers.
For example, over the years unions lobbied the Legislature for higher weekly payments while employers, who pay all the unemployment taxes, focused on costs. Those costs have grown to where our workers receive some of the highest benefits in the nation while our employers pay the highest taxes.
Unemployment insurance is now a key competitive disadvantage for Washington.
The other problem is employers with relatively few layoffs traditionally subsidized seasonal employers through higher rates. Over the years, as unemployment taxes rose, the chasm between stable industries and seasonal employers (construction, agriculture and fishing) with temporary workers not only grew but became bitterly divisive.
2003 Reforms Began to Close Chasm
The 2003 bipartisan reforms started to address that problem, yet the ink on those unemployment insurance reforms was barely dry when Gov. Christine Gregoire and Democrats cut the heart out of them in the recent legislative session.
EHB 2255, pushed by unions, unravels key 2003 reforms and the Employment Security Department says the legislation may cost the unemployment insurance trust fund as much as $200 million. But no one knows for sure because accurate cost data wasn’t available. Meanwhile, if the UI trust fund dips below certain levels, employer taxes automatically increase as they did in 2003 and 2004.
What worries employers most is if there is no agreement in the next year, the unions will pressure the Legislature to make the changes permanent.
So how do we ease the tension on the rope so eventually the tug-a-war ends?
High Benefits Require Worker Contributions
If the governor and legislators want to keep employers in Washington and still pay high unemployment benefits, then workers will have to pay a portion of the premium just as they do for workers’ compensation.
Three other high-cost, high-benefit states—Alaska, New Jersey and Pennsylvania—have workers contribute to their unemployment insurance. For example, in New Jersey average employer costs per worker, the seventh highest, are $413 while its average weekly worker benefit is second highest, $335.
So there is precedent for Washington’s elected officials to consider. Worker contributions could be experience-rated like employer contributions so stable workers wouldn’t subsidize seasonal workers.
While the unions may resist worker contributions, it may be the only way to maintain high benefits and keep jobs in Washington. Returning to the old costly system is not an option if employers are to continue providing paychecks.
Combined Costs Kill Jobs
Consider the impact if the governor and legislators let the unions revert back to the old system.
Washington employers pay an average $695 per worker while the national average is $228. According to the U.S. Labor Dept. unemployment statistics, our employer UI taxes are:
• 17 percent higher than Oregon.
• 3.5 times higher than California, Texas and Kentucky.
• 5 times higher than Utah and South Carolina.
• 13 times higher than Georgia.
UI rates, in combination with high sales, B&O and workers’ compensation taxes as well as rising energy, health care and liability insurance costs are making Washington employers increasingly unable to compete.
Whether we like it or not, costs of doing business matter more today than ever before. If we are going to keep jobs and employers in Washington, we have to find new ways to pay for high benefits.
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