Unequal Pay for Equal Unemployment
Indiana lawmakers are going to have their hands full this upcoming session fixing the state’s unemployment insurance trust fund. The fund is $2 billion in the hole so it will likely require an increase in the premiums employers pay as well a reduction in the amount paid out in benefits. Indiana already has one of the highest reimbursement rates in the country for the unemployed, as well as some of the lowest premiums on a per capita basis. It’s pretty much common sense that a system like this can’t survive.
However, raising premiums and cutting benefits will only get lawmakers there part of the way. Indiana is also going to have to make some serious structural changes to the way it shells out money for people out of work.
For example, let’s say we have two workers who both make $30,000 a year and they lose their jobs. Worker A was in construction and only worked about nine months out of the year, while Worker B was in retail and they worked the full 12 months. Under Indiana’s current system, your unemployment reimbursement is based on your highest quarter (3 months) of earnings for the year. And the more you make, the higher your reimbursement. Since Worker A only worked 39 weeks out of the year their quarterly salary is higher than the person in retail, so they get reimbursed at a higher rate.
According to the Indiana Department of Workforce Development, Worker A would be reimbursed up to 68% of his salary at $390 a week, while worker B would only be reimbursed 55% of his salary to the tune of $320 a week. So you have one person who only works part of the year getting more money than someone who works year round. Lawmakers are going to have to change that formula so a worker’s pay is “equalized” over the entire year. It’s more fair to all the workers and it doesn’t bankrupt the state.
Lawmakers hope to have the unemployment trust fund solvent by 2020. Higher premiums, adjusted benefits and getting more people to work will be part of that equation, however until Indiana gets everyone on the same footing, all this is going to do is repeat itself down the road and we’ll be right back where we started.
