Washington Lawmakers Should Preserve Unemployment Insurance Reforms

Editorial from Association of Washington Businesses

2/16/05

OLYMPIA---Unemployment insurance reforms passed by the Legislature in 2003 worked and should be retained. That's the conclusion of a Competitiveness Brief prepared by the Washington Research Council for the Washington Alliance for a Competitive Economy (WashACE). The brief, titled "Preserve UI Reform to Preserve Jobs," summarizes key components of Washington's unemployment insurance system before and after the 2003 reforms.

"The 2003 reforms restored balance to a system that imposed the highest employer unemployment insurance taxes in the nation and focused more on benefits than on enforcement," said Research Council President Dick Davis.

"The UI reforms were designed to encourage job creation in a state that had seen many of its leading industries - from manufacturing to technology - decimated by the changing economy and recession. Opponents claim the reforms went too far, when in fact they didn't go far enough," said Don Brunell, president of the Association of Washington Business (AWB). "Rather than being the most expensive state for unemployment, Washington is now among the most expensive. Going back to the old system is a job-killer."

The unemployment insurance reforms were the result of efforts to improve Washington's competitive position among other states and positively influence job creation. They were also a key part of the incentive package aimed at bringing assembly of the Boeing 787 (formerly the 7E7) to Washington.

Now that plans for assembling the 787 in Everett are in place, and the economy - though extremely fragile - is slowly recovering, WashACE is concerned that state lawmakers may want to undo the 2003 reforms.

"Lawmakers cannot retreat from the state's commitment to bring jobs back to Washington. Rolling back these reforms now - before they are even fully implemented - would put a chill on our fragile business climate and discourage job growth," said Washington Roundtable president Steve Mullin.

WashACE cautioned state and local elected officials to be mindful that, in today's fast-paced global economy, other states and countries are aggressively courting Washington companies and jobs. It's still possible that those 1,200 Boeing 787 assembly jobs, and others, could go elsewhere if Washington becomes unfriendly to business and piles on new taxes and fees.

For example, South Carolina recently announced $166 million in tax incentives to convince a Boeing sub-contractor to site its $560 million aircraft complex at the Charleston International Airport. In contrast, some Washington state lawmakers appear poised to increase employer and employee taxes and fees.

"Costs matter today," Brunell concluded. "This brief is a stark reminder that if our state keeps adding to the costs of producing goods and services, employers and the jobs they create will move to places where they can be competitive."

According to the WashACE 2005 Competitiveness Redbook, Washington's $695 per employee cost for unemployment insurance is the highest in the nation. (High-wage Alaska is second at $650, and South Carolina is 35th at $140.) The 2003 reforms, when fully implemented, will just begin to bring costs in line with those of other states.

WashACE, a partnership between the Association of Washington Business, the Washington Roundtable, and the Washington Research Council, is preparing a series of Competitiveness Briefs aimed at making Washington state more attractive for the private sector to invest and create jobs. This brief is the first in that series. To download a copy, go to www.awb.org; www.waroundtable.com., or www.researchcouncil.org.