Policy Documents

Creating Jobs: Reforming Unemployment Insurance in Massachusetts

Steve Poftac –
February 10, 2011

 

As states and nations aggressively promote their business climates, the high cost of doing business in Massachusetts requires ongoing remediation for the Commonwealth to sustain its competitive advantage. While most employers are willing to absorb some higher costs in exchange for access to the Commonwealth’s skilled workforce, world-class universities, and innovative culture, they demand a stable, predictable and competitive business cost climate. Unfortunately, the Commonwealth’s Unemployment Insurance ("UI") tax system is the most costly system in the nation – and it is potentially costing Massachusetts thousands of jobs.

Massachusetts’ UI safety net is the most generous in the nation by several measures, including eligibility and benefit duration. Massachusetts is the only state that provides 30 weeks of benefits; 48 other states provide 26 weeks. Massachusetts also allows an individual who has been working for 15 weeks in only one quarter to be eligible for the same benefits as someone who has been in the workforce for 20 years.

These two features of the Massachusetts UI system have the paradoxical effect of creating an inhibitor to job creation -- an expensive ‘per job’ tax. In 2010, the ‘per job’ tax burden due to unemployment insurance costs was $638 in Massachusetts, twice the U.S. average.