Unemployment Insurance Taxes and Job Creation

One of the major claims made yesterday in the House Finance committee was that the bill to overhaul the state unemployment insurance system was necessary to help businesses create jobs.  Job creation is certainly important right now as the lack of jobs is what is driving high, long-term unemployment.  Unfortunately, cutting unemployment insurance taxes is not an effective way to create the jobs North Carolina needs.

Lower employer taxes have not led to employment growth in the state’s where they have been implemented. That is because unemployment taxes represent 0.1% of total business costs. But more than that, when employer’s aren’t contributing to an unemployment insurance system that provides adequate wage replacement, there is a negative impact on consumer demand — the primary driver of business hiring decisions.

If House Bill 4 moves forward, it will reduce the benefits paid out by half immediately and by 70% after achieving solvency as compared to current law.

The result will be an unemployment system unable to serve its stabilizing function.

 

One Comment

  1. Jeff S

    February 1, 2013 at 10:17 pm

    Cite your source; name names.