The Spark

“The emancipation of the working class will only be achieved by the working class itself.” — Karl Marx

State Unemployment Funds Running Out Just When Needed

Feb 23, 2009

Unemployment compensation funds in seven states are already running a deficit. This includes Michigan, Ohio, California and New York. Funds in 11 other states are expected to be exhausted by the end of this year.

Of course, there are more people applying for unemployment benefits now. But the basic cause of the problem is the systematic cuts in state unemployment taxes paid by employers during the past years of relatively “good times” when funds should have been built up to prepare for the bad times.

In Michigan, for example, the state with the biggest deficit in its fund, unemployment taxes on businesses were cut three times in 12 years. Because of cuts like this all across the country, the average state unemployment fund had only about half the reserves on hand at the start of the current economic decline that it had at the start of the last recession in 2001.

These meager reserves aren’t running out because benefits are so generous. The average unemployment check covers about one-third what people were paid before they were laid off.

And eligibility rules have been rigged so that many minimum-wage workers don’t qualify, even though they worked full time for years – their earnings were too low! Other workers, employed for over a year at somewhat higher wages, may not have worked long enough to qualify because of the way states fix the qualifying period. Altogether, more than two-thirds of all unemployed workers don’t qualify for any benefits.

This government, which has handed over 50 billion dollars to Citigroup and 45 billion dollars to Bank of America – can’t find the money to cover all the unemployed.

Shows whose side the government is on.