Out of Work, Out of Luck

This Washington Post article on the increasing number of challenges to unemployment benefits is depressing. Because a company's insurance is based on the number of claims, they have an incentive to deny applications of unemployment benefits, which they do by claiming either that the worker was fired for cause or quit outright on her own.

Under state and federal laws, employees who are fired for misbehavior or quit voluntarily are ineligible for unemployment compensation. When jobless claims are blocked, employers save money because their unemployment insurance rates are based on the amount of the benefits their workers collect.

As unemployment rolls swell in the recession, many workers seem surprised to find their benefits challenged, their former bosses providing testimony against them. On one recent morning in what amounts to one of Maryland's unemployment courts, employees and employers squared off at conference tables to rehash reports of bad customer service, anger management and absenteeism.

"I couldn't believe it," said Kenneth M. Brown, who lost his job as a hotel electrician in October.

He began collecting benefits of $380 a week but then discovered that his former employer, the owners of the Gaylord National Resort and Convention Center, were appealing to block his unemployment benefits. The hotel alleged that he had been fired for being deceptive with a supervisor.

"A big corporation like that. . . . It was hard enough to be terminated," he said. "But for them to try to take away the unemployment benefits -- I just thought that was heartless."

After a Post reporter turned up at the hearing, the hotel's representative withdrew the appeal and declined to comment. A hotel spokesperson later said the company does not comment on legal matters. Brown will continue to collect benefits, which he, his wife and three young children rely on to make monthly mortgage payments on their Upper Marlboro home.

Unemployment compensation programs are administered by the states and funded by payroll taxes that employers pay. In 2007, employers put up about $31.5 billion in such taxes, and those taxes typically rise during and after recessions, as states seek to replenish the funds.

That seems like poor planning; shouldn't the taxes rise during periods of growth to get saved up for the next recession?

Comments

[ajay]

Yes, but most states have idiotic balanced-budget laws that prevent such forward planning. (Note to anyone who defends such laws: they are not the equivalent of "well, I can balance my checkbook, so the govmint ought to be able to do the same". They are the equivalent of demanding that someone who is paid monthly should balance his personal incomings and outgoings every week.)

[jobseeker]

States could opt to raise unemployment taxes in more that one way. They could increase the rates or the could increase the portion of wages subject to the tax. For example, in California the tax is based on a percentage only of the first $7,000 of an employee's annual wages.