Staffing Agencies and the cost of Unemployment Insurance

The Staffing View

On business, the workplace and employee relations

_February, 2010

 

Employers Face Rising Unemployment Insurance Taxes

The Great Recession may technically be over, but it was sharp and deep and the recovery in jobs growth has been painfully slow In December the nation’s unemployment rate was near 10 percent and even higher in several states Particularly troubling is how long it is taking many people to get back work Forty percent of all unemployed in December had been out of work for six months or longer, the highest rate since 1948 according to the federal Bureau of Labor Statistics

As the recession has continued individual unemployment insurance trust funds in the 50 states have been drained, triggering tax increases on employers who pay into the fund and forcing many state governments to borrow from the federal government According to Propublicaorg, a New York-based nonprofit journalism website, 25 states have run out of funds and been forced to borrow from the federal government, raise taxes or cut benefits

Included among those states who have borrowed from the federal government were Georgia ($139 million), New York ($24 billion), North Carolina ($17 billion), Rhode Island ($146 million), and Virginia ($172 million) Additionally, Propublica also found that employers in many of those states are facing an increase in what they pay into the fund in 2010 Using data provided by state workforce development offices and the federal Labor Department, the site reports that Georgia, Maine, New Hampshire, New York, Rhode Island and Virginia all face tax increases ranging from $28 per worker in New York, to $140 per worker in Maine

We mention those states because they are in our service area But of course the problem is in every state In Kansas, for example, the average unemployment tax rate assessed on employers will be doubled this year to 437 percent from 202 percent The increased tax, which is paid on the first $8,000 of an employee’s wages, is expected to generate $407 million in 2010 compared to the $198 million raised in 2009 Yet even with the tax hike the revenue raised will likely fall short of the more than $700 million that officials predict will be needed to pay claims

There is not a worse time for companies to pay higher taxes than when their revenues are down It makes it more difficult to maintain their staff, purchase new equipment or make other investments that could help grow their businesses Yet with the slow growth in the economy and the large numbers of long-term unemployed workers, the unemployment insurance tax funds will continue to be strained

Contracting with an employee staffing firm is one way for employers to manage this cost When you partner with Micro Tech Staffing Group those temporary employees remain on our payroll We assume the UI tax burden for the personnel we provide

 

The Massachusetts Economy and Scott Brown’s Election

We don’t analyze elections results for a living, but as a staffing firm whose mission is to recruit qualified temporary and permanent employees for our employer clients, we do follow the economy closely In particular, we’re very familiar with economic conditions in Massachusetts, where Republican Scott Brown was the surprise winner in the race to fill the US Senate seat formerly held by Sen Edward Kennedy

Political pundits have attributed Brown’s historic win to the voters’ desire to stop the health care reform proposal moving through Congress, a complacent state Democratic party and poor campaigning by his opponent

But they also say voters want Washington to focus more on the economy and in Massachusetts the economy did not help the Democrats While the US seasonally adjusted unemployment rate doubled from 5 percent to 10 percent from December of 2007 to December of 2009, Massachusetts’ rate rose from 45 percent to 94 percent in the same period That’s below the national average in both cases

But December was not a good month in the Bay State In October and November the jobless rate had actually slipped down to 89 percent and 87 percent respectively By the end of December, however, about 21,100 more residents were listed as unemployed compared to November, according to the state Office of Labor and Workforce Development By the end of 2009, there were 104,300 fewer residents holding a job and 103,500 more listed as unemployed and actively seeking work, than there were at the end of 2008

In other words, in the month preceding the state’s special election on Jan 19, there was a surge in people losing their jobs, growing more frustrated with their plight and ready to vote for a change Precisely the wrong time for the incumbent party

Of course Massachusetts is actually doing better than many other states, such as Rhode Island or Michigan And there have even been worse recessions to hit the region in the not too distant past In the early 1990s, the Massachusetts economy suffered a triple hit when the high tech sector around the Route 128 beltway lost its preeminent place to Silicon Valley; cuts in the nation’s defense budget meant the loss of thousands of jobs; and an overheated housing market finally cooled off

A rebound came when many of those laid off technology employees from mainframe computer makers such as Prime, Data General and Digital Equipment turned into entrepreneurs and started companies At the same time, the state’s financial services sector, including the mutual fund industry and the venture capital sector, enjoyed a surge in business that lasted for a decade until the early 2000s

This time, economists are looking for the education, health care and information technology sectors to be the lead jobs generators Economist Alan-Clayton Matthews of Northeastern University doesn’t expect employment levels to reach their pre-recession levels until 2013

By then Massachusetts will have held another election for the US Senate and voters will have had another opportunity to register their opinion on how the state’s economy is performing

 

A Staffing Industry Concern: Immigration Reform

Will the Obama Administration take up immigration reform this year? It’s an important issue for those of us in the staffing industry, whether as an employer or an employee The problem of illegal aliens and undocumented workers is a problem for companies that play by the rules against firms that cut their labor costs by ignoring the law

President Obama mentioned immigration reform briefly in his State of the Union message last month and his campaign pledge to revise immigration laws was a reason why many Hispanic voters supported him in the 2008 election But Americans are turning tougher on immigration A Gallup poll last year found that 50 percent of Americans surveyed believed immigration should be decreased -- up from 39 percent the previous year -- while 32 percent said immigration levels should stay the same and just 14 percent said they should be increased

No doubt the economic recession had a large influence on the results, considering that unemployment was high when the poll was taken last July Seven months later jobs remain scarce and the feeling of many out of work is that they’re competing for a paycheck with people who are in the country illegally

At Micro Tech Staffing Group we adhere to the federal Form I-9 employment verification process when considering new workers I-9 calls for employers to review documents presented by new employees to prove their identity and work eligibility But not all staffing firms comply and many neglect to be as vigilant 

That’s a competitive problem for us But it’s also a legal issue for companies that contract for temporary help In some cases law suits have been filed by full-time employees of those companies contending that they deliberately used undocumented workers thereby restraining their wages

Today, there are more than 24 million foreign-born workers in the United States, according to the federal Census Bureau, the largest total in history They represent about 16 percent of the total labor force, down from about 20 percent in 1900, but up sharply from the 52 percent in 1970, a time when federal immigration policies were being revised and a new wave of immigration was beginning

In 2006 the Bush Administration proposed a “guest worker” program, which offered legal status, as temporary workers, to the millions of undocumented men and women now employed in the US Sen John McCain also made immigration reform one of his priorities then and sponsored legislation to document illegal aliens Neither proposal was enacted With economic issues said to be returning to the president’s front burner in 2010, developments in immigration reform will be worth following

 

Black History Month

February is Black History Month Scholastic Magazine has taken the time to select history’s top African-American Inventors They include:

Elijah McCoy (1843-1929) In 1872 he invented a self-regulating lubricator to protect steam cylinders and pistons in steam engines The device became so successful that within 10 years buyers of steam engines would typically ask if their lubrication system was “the real McCoy”

Lewis Latimer (1848–1928) Inventor of the carbon filament in electric light bulbs

Jan Ernst Matzeliger (1852–1887) Inventor of a shoemaking machine that revolutionized the shoemaking industry by increasing speed by 900 percent

George Washington Carver (1864-1943) Best known for developing crop-rotation methods for conserving nutrients in soil and discovering hundreds of new uses for crops such as the peanut

Garrett Morgan (1877–1963) In 1916 invented the first gas mask, used by firefighters who previously were overcome by smoke inhalation Also invented the first traffic signal

Dr Patricia E Bath (1949–) In 1981 invented the Laserphaco Probe, a surgical tool that uses a laser to vaporize cataracts and that has helped many blind people to see

 

 

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