Unemployment Insurance (UI)

By Chandrashekar (Chandra) Tamirisa, (On Twitter) @c_tamirisa

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Payroll taxation toward unemployment insurance (UI) and State-level UI implementation practices.

How it is now

In 47 of the 50 United States (meaning, except Alaska, New Jersey and Pennsylvania), employers pay taxes on wages to fund the state’s unemployment insurance program. During periods of unusually high unemployment, as it is now, unemployment benefits are extended with federal help and sometimes voluntarily by the states themselves.

Even though employers pay taxes on their employee wages, these taxes are passed on by the employers to the employees through wage reduction (lower wages, lower UI taxes, meaning, UI employer taxes can depress wages) and into the prices the employers’ charge for their goods and services.

Relevance to the people

During periods of economic decline, the states cannot collect UI taxes because of layoffs and lower levels of employment. If the states do not have the discipline of lock-boxing UI taxes collected during the upturns of the business cycle, they will not be able to pay UI benefits in a prompt and professional manner during the downturns of that same cycle, when unemployment levels rise. The people have no incentive to save for the times when they are unemployed and factor those savings into their wage demands.

What the Congress and the Executive Should Do? 

1. Existing UI programs in states must be streamlined to automate entry and exit from the program through employers. The workers should not have to file for UI benefits separately.

2. To reform UI, unemployment insurance must be federalized through federal payroll taxation of employees toward their individual UI accounts which can only be tapped into during periods of unemployment, high or low, voluntary or involuntary.

3. UI must pay at least the minimum wage for the state of residence of citizens.

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One thought on “Unemployment Insurance (UI)

  1. A seminal example of why state UI programs are not coherent is my current condition of unemployment in the State of Maryland:

    1. I was laid off from my most recent place of employment because I was happy with my W2 job and was a superior performer. I had asked my W2 employer to convert my employment at a minimum, at the same wage but half the work hours to a contractual position at my minimum hourly rate of $125/hour for the degree of complexity of work to give me the flexibility to obtain other consulting work. They could not because they could not carry high-wage superior W2 performers such as myself given the deteriorating economic situation. So, they hired cheaper, ad hoc labor of variable quality.

    2. I have to file a WebCert every week to qualify for UI payments and report job contacts and suggested to avail myself of training opportunities however well-qualified I am because of masters degrees in 3 disciplines: engineering, political science and applied economics, most likely because of widespread and prolonged government harassment, motivated by bureaucratic dysfunction and political partisanship in Washington, of an upstanding and politically unaffiliated US Citizen. I filed SF-95 personal injury claims against the government. My employer of Asian Indian origin may have wanted ownership of my Internal Memo to the Federal Reserve from 2003 which was leaked by the Fed because the small Federal contractor was being held up by the government as a model minority 8(a) woman-owned Asian-Indian business within the Federal government by guinea-pigging me to integrate other Asian-Indian Americans better into the United States. I am being harassed because my cooperation toward their advancement has become an abusive entitlement for the government and for the Asian-Indian (American) community in particular. The United States Senate is currently resolving the case with the Federal Reserve.

    3. The WebCert asks a question if I am working, whether paid or not, during the week. It fails my understanding why anyone filing a UI WebCert would want to volunteer for no pay. I cannot say “Yes” because under penalty of perjury, I have to at least declare an income of $0.01. I am working as a self-employed person investing my time in myself at a zero self-paid wage, income and revenue, incurring an imputed revenue and income loss of self-consulting fees, while also looking for W2 employment as required by law that does not conflict with my consulting practice.

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