OP-ED Governor’s unemployment reforms pose road to recovery

Special to the Seattle Times

IT’S basic economics that when the cost of a good or service increases, demand inevitably decreases. In Washington, the combination of an increase in the highest minimum wage in the nation with substantial increases in both unemployment insurance and workers’ compensation taxes is a lethal cocktail for employers and jobs even under the best conditions.

Under current conditions, it is a disaster.

Gov. Chris Gregoire has identified this as a major roadblock to our state’s economic recovery. She recently introduced legislation to correct the unemployment insurance tax structure without reducing benefits to our unemployed.

How can that be? When the tax and benefit structure in the system was renegotiated in 2005 and 2006, changes were made to the tax calculations to cover the increase in benefits. The fact is, the new system collected too much from employers and the fund balance soared up to levels well beyond what was needed. The changes made in the calculations resulted in employers paying nearly $2 billion more than was needed for a normal fund balance..

Call it luck or divine intervention, but when the economic downturn hit in 2008, we had a large surplus of money in the unemployment-insurance account. Washington’s fund remains solvent despite the worst unemployment in decades and some of the most generous benefits in the country. That cannot be said of other states.

It is important to remember employers pay 100 percent of the unemployment-insurance benefits, so unless benefits are reduced, there can be no real tax reduction. The governor is trying to correct the withholding side of the structure to better match benefits and taxes. This would result in a reduction of the cost of labor without reducing benefits.

It would be a significant win-win — something we have not seen between labor and business in years. Unfortunately, but not surprisingly, labor union leadership is unhappy with this idea. They insist on additional benefits, increasing the cost of the system as well as the cost of labor.

Since this would no longer be a win-win, employers want no part of this option. Who can blame them? They overpaid into the fund while lucrative benefits were available to unemployed workers during the darkest hour. It was employers who paid for an additional $25 per week during the 2010 session. The federal government has stepped up to the plate with extensions of up to 99 weeks. This has come at great cost to the federal fund, which is also paid by employers.

The fact is, these overpayments have already cost our state many jobs. It is ironic that many of the workers who testified on the governor’s bills said they would rather have a job than an additional handout, yet they oppose the No. 1 job-creating bill in the governor’s package.

If labor demands more unemployment by increasing the cost of labor then they will get what they want: fewer jobs and better benefits for those without work. That is not a solution to this issue. We can only hope the governor’s proposal prevails.

Cary Condotta, R-East Wenatchee, is the ranking Republican on House Labor and Workforce Development Committee.


Washington State House Republican Communications