Massachusetts employers should be encouraged that Governor Deval Patrick and House Speaker Robert DeLeo (right) have both affirmed in the past 24 hours their support for reforming the commonwealth’s antiquated Unemployment Insurance system.
AIM strongly urges lawmakers to ensure that the reform is substantive.
“This is the year we are going to improve our Unemployment Insurance system,” DeLeo said during his annual address to the House this afternoon.
Linking unemployment reform to a push to increase the minimum wage, the speaker told House members that “any increase in the minimum wage must be paired with meaningful improvements to our unemployment insurance system.”
Speaking from the same podium during his State of the Commonwealth address Tuesday night, Governor Patrick said: “We ought to change the incentives in our UI system to encourage the hiring of the long-term unemployed, to make it easier for those on unemployment to start their own business, and to make it more straightforward for companies to comply. I submit that we can have a system that encourages hiring, not one that raises even a second thought about it.”
Massachusetts UI costs, driven by high wages, lenient qualification requirements and an overly generous benefit structure, are among the highest in the country. AIM has long supported changes to the system through which benefits are paid to unemployed workers.
It is a system that has generated dizzying uncertainty for employers during the last six years as lawmakers have been forced to freeze automatic rate increases that were not needed to maintain the financial stability of the Unemployment Insurance Trust Fund. Massachusetts employers saw UI taxes jump 33 percent on January 1, which will drain an additional $500 million unless the Legislature freezes rates before billings go out for the first quarter.
AIM was pleased that Speaker DeLeo today committed to seeking a freeze.
AIM has a clear definition of substantive UI reform:
- Adjust the UI rate schedule to require negatively rated employers, those who habitually put employees into the UI system, to pay higher rates than more stable employers whose employees rarely use the UI system; and to require that new employers contribution rate be set at the so-called zero positive rate, more accurately reflecting the employers actual trust fund balance and avoiding "sticker shock" when receiving the actual bill after the first year of operation.
- Increase the work requirement for eligibility to collect UI benefits from 30 times the weekly benefit amount to forty and requiring wages to be paid in at least two quarters, bringing Massachusetts into line with the majority of other states; (estimated annual savings: $30 million.)
- Reduce the maximum duration of benefit weeks from 30 to 26 when the state's economy is performing well by adjusting the statutory trigger mechanism from 5.1 percent unemployment in each of the 10 local labor markets in the state to a straight 5.1 percent unemployment rate statewide over the preceding six months - producing savings in the UI Trust Fund of between $50 and $90 million per year. This provision would bring Massachusetts' benefits into line with all other states.
DeLeo also said the House would produce a Fiscal Year 2015 budget with no new taxes and fees.
“We’ve taken decisive action to make Massachusetts work, to signal to companies near and far that we are open for business, to strengthen our economy and support our citizens during the worst … downturn since the Great Depression,” he said.