OPINION: Higher unemployment benefits would boost local economy
Denis Hughes is president of the New York State AFL-CIO.
Earlier this year, President Barack Obama paved the way for states across the country to extend unemployment insurance benefits, a move intended to jump-start the economy and spur states into further action. Unfortunately, little has been done in New York.
New York's unemployment insurance benefit remains the lowest in the region. In fact, our benefit ranks second to last in the country in terms of wage replacement.
Aside from the recent $25 boost from the federal government, New York's maximum weekly unemployment benefit, now $430, hasn't changed in 10 years. Other Northeastern states that offer significantly higher benefits have indexed them to rise with inflation.
What's more, the low unemployment premium paid by employers has left the state's Unemployment Trust Fund insolvent. New York has to borrow an average $90 million per week to pay out our subpar benefits.
Why? New York applies the payroll tax only to the first $8,500 in annual wages paid to each employee - a limit that also hasn't changed in a decade. Many other states tax a much higher portion of wages. In New Jersey, the taxable wage base is $27,000; in Connecticut, it's $15,000.
Nine states had to borrow to pay unemployment benefits during and after the recession in the early 1990s, and only one, Texas, borrowed more than New York. Texas and four of the others eventually made legislative changes to avoid another bout with insolvency. New York has not.
New York needs to gradually increase what employers pay, indexing over time so that they can budget their costs while saving New York and its taxpayers millions of dollars.
Especially on Labor Day, it's important to remember that our unemployment system was created to help struggling working people make ends meet when the economy cannot produce jobs. As a result, the system has a profound impact on the state's economy as a whole, in good times and bad.
Every dollar in unemployment benefits generates a $1.64 increase in economic activity. People who are unemployed spend their benefits almost immediately, to purchase groceries, buy household necessities and pay rent. Their unemployment dollars are quickly dispersed back into the local economy, helping to sustain businesses and increasing the tax coffers of local governments throughout our state. Those tax dollars go to support police, fire fighters, sanitation pickup, hospital care and education.
That's why immediate action is necessary. We're not just talking about assisting those who are unemployed, but our business community and all of New York's taxpayers, too.
