Friday, August 1, 2014
Inquirer Daily News

Who should pay for unemployment benefits?

So, who should pay for unemployment benefits? Should employers pay the brunt, as they do now? What about workers? After all, it's an insurance policy for them. How about the unemployed themselves? Maybe if they got a little less, or if fewer of them qualified for benefits, Pennsylvania's fund wouldn't be bleeding red.

Who should pay for unemployment benefits?

So, who should pay for unemployment benefits? Should employers pay the brunt, as they do now? What about workers? After all, it's an insurance policy for them. How about the unemployed themselves? Maybe  if they got a little less, or if fewer of them qualified for benefits, Pennsylvania's fund wouldn't be bleeding red.

Pennsylvania legislators are chewing over this problem now in Harrisburg and you can read my story about it in the Philadelphia Inquirer.

Now a little weed-whacking: Employers in Pennsylvania underwrite 93 percent of Pennsylvania's Unemployment Compensation Trust Fund.  Ordinarily, it would be 100 percent, but in tough times, there's a provision that kicks in some cash from employees' pay checks. Average annual contribution from employees is $37.

In Pennsylvania, employers are taxed on the first $8,000 of each employee's wages -- a wage level that has not been changed since the mid-1980s. Pennsylvania is one of only seven states that tax on that low a wage base. Some states have the wage base indexed to an annual measure. That's the case in New Jersey where the wage base is $29,600.

Advocates for the unemployed say that the reasons Pennsylvania's fund is in such sorry shape, paying out more than it takes in, is because employers haven't been paying their fair share. If Pennsylvania's wage base had kept up with inflation, they say, the taxable wage base would be in the $18,000 to $20,000 range per year. 

But it's not that simple: It takes two factors to tango -- I mean, two factors to tax. There's the wage base and there's the rate. It's a multiplication problem and the result is the average contribution per covered employee. 

Julia Hearthway, the state's labor secretary, argues that the Pennsylvania's rate is higher than most. When employers multiply the rate times the base, they get an average contribution per employee that puts Pennsylvania on the high side. The average contribution per employee is $589. In Jersey, it's $710. Michigan's is $742. There are a few states in the $600s and $500s, but the vast majority are in the $250 to $450 range.

Business advocates say that higher taxes will discourage hiring -- and employers do face a hefty IOU from Uncle Sam for federal borrowing to keep the fund whole. Certainly people who are unemployed can't manage without benefits. I'd like to know how much each extra dollar from currently employed people would yield. Doubling the annual tax would nearly close the current gap in the funding and still not be more than $1.50 per week.  Is that too much? That's for others to answer. 

Jane M. Von Bergen Inquirer Staff Writer
About this blog

Jobbing covers the workplace – employment, unemployment, management, unions, legal issues, labor economics, benefits, work-life balance, workforce development, trends and profiles.

Jane M. Von Bergen writes about workplace issues for the Inquirer.

Married to a photographer she met at her college newspaper, Von Bergen has been a reporter since fourth grade, covering education, government, retailing, courts, marketing and business. “I love the specific detail that tells the story,” she says.

Reach Jane M. at jvonbergen@phillynews.com.

Jane M. Von Bergen Inquirer Staff Writer
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