I saw an article on Yahoo! Finance yesterday about rising unemployment taxes for employers:
Companies have yet another reason not to boost hiring: rising unemployment taxes.
Employers around the nation are getting socked with higher state unemployment tax bills as states are forced to shell out more than $1 billion in interest payments this month. More than 30 states have had to borrow billions from a federal fund to cover unemployment benefits for their jobless residents in recent years.
And this is only the first of two tax spikes employers are contending with, on both the state and federal level. Come January, companies in 24 states could have to shell out between $21 and $63 more per employee in federal unemployment taxes.
There are plenty of details at the link as far as how and why the pricing varies at different states and levels of government, but the gist of it is that as unemployment remains high, governments are running out of money to pay the unemployed and are looking at ways to increase that revenue stream. Of course, since that revenue stream comes from businesses, raising those taxes pushes incentives for hiring in the exact opposite direction of what the government wants.
I grew up in a stable, relatively sheltered environment, and I did not even know such things as unemployment insurance existed for a very long time. As I read articles during the giant crashes that started this whole mess, I began to see references to such things. I still remember exactly where I was in the library of Lindenwood University when I looked up unemployment benefits on Wikipedia on my iPod Touch and how shocked I was to learn that we actually paid people who weren’t working, and not only that, but the money for it came from people who were working! That such an absolute thievery was constantly happening in a supposedly capitalist society had previously been completely beyond my imagination!
But, what can I say, I was a naive academic conservative (I suppose I should add “privileged,” “white,” and “male” in there too). As the economic downturn lingered, and as I began to realize the real-world frictions that made “just get a job” conservatism not so simple for many, I began to be less astonished. And as I left college and home for the real world with more costs and bills, I began to appreciate the security of something like unemployment benefits. I had to wrestle with such philosophical questions as whether or not I would take unemployment benefits if I lost my job, and what my answer meant for my philosophy.
Just a couple weeks ago I read about John Douglas Marshall opening his last unemployment check. Who am I to tell him that he didn’t look hard enough for a job, or that he needs to rethink the kinds of jobs he is looking for? And thus I find myself in a contradictory no man’s land, vociferously opposing extensions of benefits on principles of costs and incentives, yet unwilling to arrogantly condemn millions of benefactors for being personally responsible for their position. I wrote two months ago about the struggles of the long-term unemployed, and I still feel pretty similar. Surely a motivated unworker can be pro-active and do something, but is “a stint at McDonald’s after your office job really going to look better than just leaving a two-year hole? Maybe not.”
The difference now is that the continued cost of paying the unemployed is starting to take its toll on budgets. As the wiki article explains, unemployment benefits are supposed to be a stabilizer – a larger amount of businesses paying the tax in good times makes up for a larger amount of payments going out in bad times. But in a prolonged period of unemployment, the bad times just have a very bad unstabilizing feedback effect – the workers have to pay more to the unworkers, which makes it more likely that there will be even less workers, which makes them need to pay even more to the unworkers, and so on.
You can argue back and forth all day about principles of whether the government has a right to charge unemployment taxes or whether the government has a responsibility to provide unemployment benefits. But no matter how compassionate you are, some things just aren’t sustainable on a practical level, and I’m afraid unemployment benefits are edging closer to that point.