Unemployment insurance kept the state’s economy from collapsing during a time of ballooning unemployment. But that’s just one reason for keeping this program solvent. It’s also good for local businesses.
Unemployment insurance (UI) replaces a percentage of a worker’s lost wages when they become unemployed due to a layoff. It helps them pay the rent and utility bills, and put food on the table until they land another job. Landing that next job becomes more difficult as the unemployment rate rises because there are more workers competing for every available job. So, typically, the higher the unemployment rate, the longer it takes to find a job.
The current recession has caused high unemployment rates. In New Mexico, more than 54,000 jobs were lost between February 2008 and February 2011. Some 7,000 of those jobs were lost just over the last year (February 2010 to February 2011), so the long painful ride isn’t over yet.
When people lose their jobs, they stop spending money. That’s bad for business. Everyone from retailers to child care providers to local eateries see a decline in business. That, in turn, can lead businesses to laying off their own employees. You can see how this can easily become a downward spiral. Programs like UI help counteract an economic downturn. UI keeps a bad thing from getting much, much worse.
New Mexico UI payments are made from the state’s Unemployment Insurance Trust Fund. The balance in the state’s UI Trust fund was more than $550 million before the current recession began. Now, the state’s UI Trust Fund is in danger of being depleted. If the UI Trust Fund were depleted, the state would have to increase UI rates drastically and borrow from the US Department of Labor. Interest paid to the DOL and the jump in payment levels would make that an expensive proposition for New Mexico’s employers. HB 59, introduced by Rep. Mimi Stewart and supported by the business community and lawmakers from both sides of the aisle, would take steps to keep that from happening. Even the governor’s staff was involved in crafting this compromise legislation.
HB 59 would maintain the current policy of a balanced unemployment insurance law, meaning that the measures taken to maintain the solvency of the UI Trust Fund would be shared between employers and the unemployed. Both sides would give up something. Employers would see their UI rates rise. The unemployed would lose some benefits, such as extra assistance for those with dependents. This would be making the best of a bad situation. The governor should not veto HB 59 because she made a campaign promise not to raise “taxes.” These are insurance rates, not taxes, and they will be lower if she signs the bill than if she vetoes it.
Gerry Bradley is NMVC’s Research Director