It is the ultimate no-win situation, a Catch-22.
Washington employers struggling to survive our “Great Recession” are being forced to lay off employees. Those workers are receiving unemployment benefits, which deplete the state’s unemployment trust fund. To replenish the fund, the state is increasing unemployment insurance taxes on employers. Higher taxes make it harder for those employers to create jobs. Unlike the workers compensation plan, employers pay for the entire unemployment insurance program because there is no employee contribution.
The amount employers pay into the unemployment insurance trust fund is based on their layoff history and the amount in the trust itself. This includes all types of employers: hospitals, state and local governments, nonprofits groups and private-sector businesses. When a recession forces layoffs and the trust to diminish, an employer’s UI taxes rise. In addition, nearly all employers pay into a pool to cover benefit spikes during times of high unemployment. It is a Catch-22.
Rising unemployment in Washington is draining our UI trust fund. In 2009, the fund paid out $4 billion in benefits, more than three times the amount paid in 2008.
As a consequence, UI taxes are dramatically increasing this year. Some examples from a recent survey of AWB members: