Legislature Poised to Roll Back Unemployment Reforms
February 2006
As state legislators race toward their scheduled March 9th adjournment, a last-minute effort is underway to roll back important cost-saving reforms in the state's unemployment insurance program. The roll-back would leave the state unprepared for a future spike in the jobless rate, and would likely mean new taxes for Washington businesses.
A few years ago, Boeing's decision to move its headquarters out of state set off a scramble among lawmakers to improve Washington's sluggish business climate. One of the most important reforms corrected the formula for calculating a workers' benefits. The reform provided for benefits based on a worker's earnings averaged over four quarters of work, instead of two. That results in a more accurate measure of benefits for employees who work only part of the year, and fairer treatment for employees who worked the full year.
Another important reform fixed the "liberal construction" clause in state law, which had slanted the burden of proof unfairly against an employer in legal disputes with labor. Ending the mandatory "liberal" reading of state labor law re-established a level playing field, so now both sides can get a fair hearing in court.
The push now underway in Olympia would repeal both of these important reforms, which in turn would stifle new jobs and move our state in exactly the wrong direction. Washington's tax-based unemployment system already imposes the highest per-employee cost in the nation. Employers in Washington pay taxes on the first $30,500 of salary for each worker. Other states are able to fund their unemployment plans by taxing just the first $7,000 to $10,000 of workers' salaries. Also, Washington's maximum weekly unemployment benefit payout, at a generous $496 a week, is nearly the highest in the country.
Naturally, these state-imposed costs are passed directly on to consumers in the form of higher prices and a costlier standard of living. It also often knocks Washington out of the running as business leaders across the country look for good places to expand or start up a new enterprise. Similarly, Washington-based companies find it harder to expand and add new jobs.
Employers are certainly not opposed to employees who collect unemployment checks - they know workers need temporary help as they transition to new jobs. Employers also know unemployment benefits help keep skilled workers available, so they can be quickly rehired once business picks up again.
What employers are frustrated with is the startling inefficiency of the state-run system itself. Unemployment taxes cost more here than in just about any other state, and many employers are stunned that some lawmakers want to make the situation worse by re-instating the damaging policies of the past.
Last November, Washington Policy Center hosted two Small Business Conferences, one in Eastern Washington and one in the Puget Sound area. Over 400 small business owners and policymakers attended the two events. In a series of lively discussion sessions, participants developed practical ideas for improving the state's business climate. Small business owners uniformly pointed to the need to ease taxes on employment as the best way to stimulate job creation. Retaining and improving on current unemployment reforms was one of their top recommendations. (The full report on the conferences, "Reviving Washington's Small Business Climate," is available free by contacting the Washington Policy Center.)
Whether an enterprise has one employee or a workforce of thousands, business owners know that making it in a tough competitive environment is hard enough without the state adding artificial barriers. Even with recent reforms, unemployment taxes are a major cost-driver for employers. Our elected leaders should help businesses succeed, not turn back the clock to the days when companies like Boeing found Washington's business climate less than welcoming.