How Washington’s unemployment insurance program keeps our economy on track

February 17, 2011 | Economic Opportunity Institute

By David Groves | Washington State Labor Council

Imagine a company that does business in every county in Washington state, pumping billions in payroll dollars into our economy. Better still, this company is counter-cyclical, ramping up hiring and payroll when the state economy is struggling.

The rest of the business community and public officials all benefit thanks to increased consumer spending and tax revenues to fund improved public services. So Washington would all go to extraordinary lengths to keep this company healthy and strong, right?

That “company” exists. It’s Washington’s unemployment insurance system, and in 2010 it pumped more than $4.3 billion into our state economy. But some political and business leaders tend to ignore its benefits — and the many businesses and jobs it has preserved — and focus on decrying its costs.

Washington has the healthiest U.I. system in the nation. After a two-year recession and persistent 9%-plus unemployment that continues to this day, it is sufficiently funded that our state is in a position to approve a major cut in U.I. tax rates, that will save employers hundreds of millions of dollars a year.

In contrast, as of this writing 30 states have U.I. systems that are insolvent. Idaho, for example, has borrowed more than $200 million and is about to extend its tax on employers, already at its maximum, through at least 2016 to cover a bond sale to repay the loan. The U.S. government just started imposing a 4.1% interest charge on arrears, which total more than $42.5 billion for all the delinquent states.

So, which state has a better business climate on this issue? One with responsible tax rates that can pump billions into the state economy and avoid raising taxes when the state economy is struggling? Or one with artificially low taxes that not only pays lower benefits — providing less of an economic safety net for businesses — but also requires a major tax increase amid a recession?

Read more from Unemployment Insurance: Saving families, businesses »

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