Unemployment Insurance: Will it put Boeing and other businesses
on a one-way flight out of the state?
5/31/03
Jason Mercier, Budget Research Analyst
Evergreen Freedom Foundation
Washington leaders are scrambling to find ways to convince Boeing
to keep its new 7E7 project in state. Almost everyone involved (with
the possible exception of labor officials) agrees reforming the states
current unemployment insurance (UI) system is a must. To address Boeings
concerns, meaningful action must be taken by June 20, the date the
states 7E7 application is due.
We suggest lawmakers address five key problems in our states UI system,
and not just for Boeings sake, but for all businesses suffering under
our current UI system.
1. UI rates are inflatedan unfair financial burden for employers.
2. UI benefits are inordinately highan incentive for workers to remain
unemployed.
3. The UI program suffers a lack of enforcement and accountabilityfraud
and overpayments occur too frequently.
4. Washington gets insufficient returns for money invested in the
federal UI program.
5. State officials play favorites when they disperse UI benefits.
These problems are not new. EFF has been talking about them for two
years, and Boeing CEO Alan Mulally made it clear as early as January
2002 that Washington has the costliest unemployment insurance system
of all the places the company does businessnot just in the nation,
but the world.
Unemployment Insurance Comparison
(Numbers provided by state UI departments and Boeing)
State
Maximum weekly benefit
Maximum # of weeks
Avg. annual cost per employee
Avg. Boeing cost per employee
Arizona
$205
26
$56
$38
Kansas
$345
26
$142
$105
Texas
$328
26
$151
$36
California
$370
26
$219
$378
Oregon
$405
26
$397
$482
Washington
$496
30
$734
$772
In the years since 1985 when Washingtons current UI system was created,
Boeing officials claim the company has paid $270 million more than
it actually costs to cover their employees. And Boeing is not the
only business affected by Washingtons costly and onerous UI policies.
Small businessesthe backbone of our state economyalso need relief.
Meaningful UI reforms should include:
1. Aggressive enforcement of the law.
In fiscal year 2001, the federal government reported that Washington
had an UI overpayment rate of 10.9 percent (See EFF PH 12-22). Eligibility
must be fully verified before payments are made. Misuse of UI by some
individuals is robbing other workers of funds which could be available
for wage increases. Contrary to popular belief, UI taxes are not exclusively
shouldered by businesses, but by employees as well in the form of
lower benefits, salaries, and job opportunities. That being the case,
rather than prioritizing expedient payment of UI claims, Washingtons
Employment Security Department (ESD) should instead focus on accurate
payments to those truly eligible. ESD must also return to the intent
of the law and shift the burden of proof back to unemployed instead
of the former business (See EFF PH 12-21). Finally, ESD should embrace
efforts to contract out some overpayment collections, as Colorado
and Oregon have done, which to this point the department has rejected.
2. Prompt job searches for claimants.
An immediate revision to the system requiring prompt job search and
re-employment is mandatory to improve our state's UI program. Much
like the Jobs Plus program in Oregon, if unemployed individuals in
our state are not able to quickly find a job, the state should find
one for them. Oregon data shows that when given the choice of finding
a job or having one chosen for them, more individuals will be motivated
to aggressively seek employment on their own. UI claimants should
also be required to report their job search activities to their former
employers. This would assure adequate oversight of job search activities.
Adopting Oregons short term approach would position the state to make
the transition to employee-owned UI accounts.
3. Adopt employee-owned trust funds.
State lawmakers should redesign the current UI system to allow employees
to set up unemployment insurance accounts that they own. A predetermined
amount of money would be deposited out of each employees paycheck
into a special, interest-bearing account that the employee would own
and could take with them if they left one job for another. Upon retirement,
unused funds would belong to the employee (See EFF PH 12-23). This
may require a federal waiver.
4. Request that Congress eliminate the state's mandatory contribution
to the federal program.
Washingtons congressional delegation should work to ensure that UI
funds contributed by our state's employers stay in our own community,
allowing us to creatively invest these funds for a larger state UI
trust. This also leaves the potential for lowering the tax burden
on businesses, while still maintaining a healthy UI trust fund (See
EFF In-Brief 11-4)
Prepared by Jason Mercier, Budget Research Analyst (360) 956-3482
Evergreen Freedom Foundation
A Non-Profit Public Policy Organization
PO Box 552, Olympia, WA 98507
(360) 956-3482, www.effwa.org
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Policy Highlighter
Volume 13, Number 24
May 30, 2003
Contact: Jason Mercier, Budget Research Analyst
(360) 956-3482