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Changes in Unemployment Insurance in Maryland

Maryland is contemplating a substantial increase in the premiums that employers pay for unemployment insurance, due to the sharp increase in claims during this difficult economy.

A discussion of the basics of unemployment insurance payments might help those who are not familiar with the program.  There are two unemployment insurance taxes that Maryland employers pay for their workers: taxes paid to the Unemployment Insurance Division of Maryland’s Dept. of Labor, Licensing and Regulation and a smaller federal tax payable to the U.S. Treasury on IRS form 940.  The taxable “wage base” in MD for any tax year is a maximum of $8,500.00.  Employers pay a tax on each worker quarterly based on the wages earned, up to the maximum annual base.  The federal system is similar except the wage base is $7,000.00 and the federal rate is .8%, yielding a maximum liability of $56.00 per year per worker.

Under Maryland law, the rates charged to all employers must rise if it appears that the Fund holding the insurance benefits will or may exhaust.  Due to a lower wage base (fewer workers) and an increase in validated claims, the Fund has fallen under a risk of depletion.  According to published reports, Governor O’Malley is proposing rather sharp increases in the minimum and maximum rates, per published reports, but he is trying to find ways to mitigate the impact of these increases.

One of the challenges is that the workers most vulnerable in a bad economy are the ones whose employers will bear the worst burdens of the unemployment crisis itself.  I do not know whether I accept the propounded idea that the increase in unemployment premiums will in fact cause or exacerbate unemployment itself.  But seasonal, low-wage workers may only work part-year, and for multiple employers (i.e. falling within a new wage base each time.)  Low-wage, part-time workers spend more of their working time within the wage base, unlike a white-collar professional earning e.g. $5K/month, and are likely to be working in jobs and for employers with high turnover and therefore high rates of validated claims.  Construction workers are a good example: when the weather gets cold, contractors let many workers go.  When construction is down generally, workers get laid off, and file benefits, increasing the costs of hiring workers and lowering the profitability of each new worker to be hired, etc.  Even if unemployment premiums don’t meaningfully induce or extend unemployment itself, they definitely don’t help.

While this Law Office is by policy and philosophy pro-union, pro-labor and pro-worker, I have often wondered why employers do not more often notify employees more formally of the costs of their own hire.  While I can understand why employers might want to keep those costs secret as a matter of competitive intelligence, employees ought to know that their employers are in fact paying a surcharge of $X per year for worker’s comp, for unemployment insurance, for FICA matching.  I am surprised that conservative political activists have not demanded the economy-wide disclosure of some or all of these costs to employees for rhetorical purposes, either worker-by-worker or en masse.  I suspect that many employees don’t conceive that the employers actually have to write checks for these legally required benefits.  The general acknowledgement of these costs by workers, or at least the formal notification of these costs to workers, might go a long way to soothing relations between labor and management in some cases.