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Archived: Speaker Offers Hope for Unemployment Insurance Reform

Posted on October 29, 2013

Massachusetts House Speaker Robert DeLeo provided a dose of hope to employers today by confirming that lawmakers may attempt to reform the commonwealth’s antiquated and expensive unemployment insurance system.

DeLeoState House News Service reported that DeLeo is looking to link structural changes to the UI system with an anticipated effort to increase the state minimum wage or other issues.

“In addition to the minimum wage, I think maybe we have to change some of the burdens that businesses presently face in Massachusetts,” DeLeo told the News Service.

Associated Industries of Massachusetts 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 five 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 UI costs, driven by high wages, lenient qualification requirements and an overly generous benefit structure, are the highest in the country. AIM’s Unemployment Insurance reform proposal, contained in House Bill 1732 and reflected in other bills, seeks to introduce more than $100 million in one-time and recurring cost savings into the system by the following reforms:

  1. Adjusting 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.
  2. Increasing 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.)
  3. Reducing 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.

AIM is less enthusiastic about linking UI reform to an increase in the $8-per-hour minimum wage or to measures compelling employers to provide paid sick time. Both proposals would dampen the already anemic job growth in the commonwealth and should, in any case, be debated on their own merits as a matter of good government.

The minimum wage increase and paid sick time could both appear on the 2014 state ballot. Activists collecting signatures propose to ask voters to raise the minimum wage to $10.50

“The chair’s been talking to a lot of different parties to come up with a comprehensive package that deals with the minimum wage on one side and the UI on the other so we have an employer-dash-employee piece of legislation that can be beneficial to both. Whether right now we’re going to be there or not, I don’t know,” DeLeo told State House News.

Asked about a perceived lack of appetite among members to take votes on two issues that could be seen as unfriendly to business, DeLeo said, “That could be right, but I wouldn’t want to rule it out just yet.”

Many small business owners cannot afford to pay higher wages and continue to hire new employees. While Massachusetts’ minimum wage remains 75 cents higher than the national $7.25 base rate, other states are moving toward higher wages.