Reforming Ohio’s Unemployment Insurance System
Wednesday, November 26th, 2008 By Marc KilmerThe Heartland Institute sent out an e-mail today on reforming Ohio’s unemployment system. I thought I’d post its fine recommendations here for those who are not on Heartland’s e-mail list:
During a time of economic uncertainty, the prospect of unemployment is on the minds of many workers.
Ohio’s unemployment fund is nearing insolvency due to the growing number of unemployed citizens entering the system. With its unemployment rate reaching 7.2 percent and pay-outs of around $35 million a week depleting the unemployment fund to a projected $28 million by the end of the year, Ohio’s unemployment insurance program is in dire need of reform.
Ohio’s unemployment fund has been greatly strained by the current economic crisis. According to state officials, the state’s minimum safe balance for the unemployment fund is $2.5 billion; the fund is currently operating with a balance of $325 million. In September, there were more than 29,000 new jobless claims. Officials anticipate that number to continue to grow in the upcoming months.
Gov. Ted Strickland is currently seeking aid from the federal government and Labor Department to pull the unemployment fund back into solvency. But tax increases and federal bailouts do little to address the systemic deficiencies in the unemployment system; they merely allow the existing problems to survive and continue to grow. Real reform–reform that fundamentally re-examines the state’s role in providing unemployment benefits–must get underway.
Ohio legislators should keep in mind these three points regarding the needed modernization of their failing unemployment insurance fund:
Resist the urge to raise unemployment taxes
While state officials believe the tax base for unemployment taxes has expanded and could withstand an increase, raising taxes does not guarantee the program will improve. Raising the unemployment tax would do little to improve the system, but such a move may drive businesses out of the state.Move away from a state-based system and towards privatization
Privatization through individual unemployment accounts (IUA) shifts control of and responsibility for unemployment coverage from the employer and the state government to the employer and the employee. This allows for greater individual choice and flexibility at less cost to the state’s taxpayers.Do not penalize part-time and temporary workers
Ohio is the only state in the nation where a minimum-wage worker employed 30 hours a week does not qualify for unemployment insurance. These workers frequently receive no unemployment benefits despite their tax contribution to the system, and workers who never need to use the unemployment safety net pay into a system for benefits they will never receive. A private IUA follows a worker and guarantees the benefits are not lost.
Tags: unemployment insurance
