California employers will soon experience one of those small but annoying prices we pay for doing business in the Golden State — higher costs for unemployment insurance.
That’s partly because the state has borrowed billions of dollars from the federal government — California is one of 27 states that owe Uncle Sam nearly $38 billion to cover the cost of benefits that have been extended to 99 weeks for millions of unemployed workers. According to a recent release from the California Employment Development Department or EDD, there will be a federal tax increase of $21 per worker to pay just the interest on the loans and most states are assessing companies one-time charges of $12 to $40 per worker to make the interest payments. Recently the EDD asked for businesses to comment about the current desperate straits of the Unemployment Insurance Trust Fund. Our thoughts:
• No hidden fees. The costs business owners are paying per employee to cover the shortfall should be separately listed on our payroll reports and noted as such.
• Benefits should be frozen indefinitely. Since 1984, benefits have nearly doubled from $230 per week to $450 per week and rates have increased substantially — for many companies they are now more than 6 percent on the first $7,000 in wages per employee.
• Training should be mandatory. For laid off workers who can’t find a job in 13 weeks, the state should require they get an assessment and retraining in a new field or help in starting a new business. Having unemployed workers sitting around for an additional 86 weeks wishing and hoping their job comes back is counterproductive.
• Until the economy improves substantially, costs for employers must not go up. Unemployment insurance payments are a tax imposed on companies every time they add a worker. If the real problem is unemployment, then taxing companies when they make a new hire will only compound the problem.
• Consider co-pays. Perhaps employees should make a matching contribution to a fund that pays for training or tuition reimbursement in case of a long-term layoff.
The bottom line is that in California, unemployment insurance has gone from an emergency stop-gap to a long-term subsidy for those who have been laid off. Clearly the Great Recession requires a reset to the unemployment insurance system, but a reset that discourages employers from creating new jobs in California will do no good.