What might a system that benefits businesses look like? For starters, it could provide tax predictability. This would mean a uniform unemployment insurance tax at the federal level, with no variation between states and no evaluation of experience.
You could argue that if UI is a program for workers, then workers should pay taxes. But all businesses benefit from stable family incomes and consumer demand, especially during recessions.
Yet unemployment insurance could tap more sources of income. For example, in Alaska, New Jersey, and Pennsylvania, workers contribute to an employer-employee shared tax, similar to Social Security. More workers could be brought into the program by demanding contributions and giving permanent eligibility to independent contractors – again, like Social Security.
Beyond reducing the burden of unemployment insurance, reform can be designed to directly benefit businesses. There is also a pandemic plan for this: the Paycheck Protection Program. While mired in fraud and lacking many eligible people – no surprise for a program in times of crisis with a mandate to quickly spend hundreds of billions of dollars – it was a life raft for many companies and it is estimated to have saved millions of jobs. .
The principle of PPP – that directly reducing labor costs during a recession saves jobs and reduces unemployment – is backed by decades of evidence. A system using common tax contributions to provide temporary wage relief to companies in need could prevent layoffs and make companies beneficiaries of a program they have long funded.
Of course, some companies may prefer to lay off workers rather than cut their wages or accept government assistance. Yet there is an assumption that goes hand in hand with layoffs: that there is a pool of workers ready to hire when the economy recovers. In this recession, like the last, employers have struggled to find qualified workers quickly to fill positions.
Congress can continue to ignore UI and limp with each new crisis, applying costly short-term solutions each time. Or it can provide workers and businesses with the certainty of an effective and efficient program that will withstand the next crisis.
Kathryn Anne Edwards is a labor economist at the non-profit, non-partisan RAND Corporation and a professor at the Pardee RAND Graduate School. His research focuses on the interaction of public programs, labor supply and income.
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