Unions Support Increasing Unemployment Benefits

Within days after Governor Engler announced that unemployment taxes for employers would be cut by 10 percent for 1998, organized labor joined several Democrats in sponsoring legislation to restore costly benefits that were frozen by the GOP controlled legislature in 1995.

The Governor's $50 million tax cut will save nearly $100 per full time employee to Michigan job providers. Unemployment tax costs will be calculated on 9 percent of the first $9,500 of employee wages rather than the current 1O percent. This will be the third unemployment tax cut since 1995.

Like the other cuts, this one was triggered by a surplus over the required $2.077 billion in the Unemployment Trust Fund.

While business groups strongly support tax reductions in the 100 percent employer-funded unemployment compensation system, the AFL-CIO has a different opinion. Tim Hughes, lobbyist for the AFL-CIO, calls for expansion of unemployment benefits rather than returning excess reserve funds to employers. According to Hughes, "If the money is in the fund, it should be used for what it was designed for."

The costly and expanded benefits in the union-backed proposal reverse many of the cost saving measures passed in 1995. Included are the following:

• Restoring the weekly benefit rate to 70 percent of
  after-tax earnings compared to the current 67
  percent level approved in 1995.
• Increase the maximum weekly benefit rate
  by more than $40 per week.
• Striking the section of the law that revokes benefits
  to unemployed workers who refuse work that pays
  80 percent of their former wage.
• Allowing "locked out" and seasonal employees to
  be eligible for benefits.

Many political observers say that this issue was the most powerful weapon used by the unions to help the Democratic party regained control of the House in 1996. Campaign literature targeted many GOP lawmakers in vulnerable districts with the message that they voted to take away benefits for the unemployed at the same time they voted for tax cuts for the "rich" (the elimination of the intangibles tax).

With the 1998 election less than 12 months away, it seems clear that organized labor wants to again use this issue to defeat pro-business lawmakers who vote to control our costly unemployment compensation system.