California:
"Reforming" Unemployment Insurance on the Backs of Laid off Workers

Mar 29, 2004

According to the Los Angeles Times, the California Chamber of Commerce, Governor Arnold Schwarzenegger and the state AFL-CIO are currently negotiating some form of "reform" of the state unemployment insurance system.

The supposed reason for proposing this reform is that the state unemployment trust fund is about to go broke because of the high level of unemployment. Of course, given that the economy periodically goes through recessions with periods of higher unemployment this certainly should not have come as a surprise.

In fact, the main reason for the problems of the trust fund is lack of funding. Throughout the 1990s, corporations were allowed to drastically reduce what they pay into the fund. Today, they pay less per worker than ever before. In 1993, for example, the rate was twice as high, and in 1973, it was three times as high as it is now.

So, are the politicians and the business people discussing reforms that will oblige the corporations to pay more to keep the fund afloat? Of course not. No, they want to postpone a measly $40 per week benefit increase that was scheduled for January 2005, as well as cut unemployment benefits that are paid to the lowest paid workers.

Unemployment benefits in California are scandalously low as it is, averaging less than $250 per week, in a big industrial state with a very high cost of living. The unemployment benefits are even low compared to other states, with the level of California’s benefits ranking 45th out of 50 states. Even Texas, famous for its lack of worker protections, pays higher unemployment benefits on average than California!

As every politician knows, keeping unemployment benefits low not only taxes the bosses less, it helps them force desperate laid off workers to accept poorly paid jobs, adding to the downward pressure on everyone’s wages and benefits.