PHOENIX-In a report released today by the Goldwater Institute, economist William B. Conerly argues that reforming Arizona's unemployment insurance (UI) system would benefit workers, families, and employers, and help the state save money. "This is a win-win situation for Arizonans," said Dr. Conerly. "With a few changes to the system, we can get Arizonans back to work."
In Getting Back to Work: Reforming Unemployment Insurance to Increase Employment, Conerly suggests that Arizona restructure its UI administrative policies to promote work. In other states, administrators have encouraged rapid reemployment and saved money in benefits payments by having more face-to-face contact with recipients and by setting up job-search seminars. Conerly also urges Arizona's congressional delegation to support federal reforms, such as President Bush's New Balance proposal, that would eliminate the federal UI tax and give states more authority over their use of administrative funds. In 2000, Arizona businesses paid $127 million in federal UI taxes for the administration of UI benefits, but got back only $51 million.
At the same time, Conerly cautions Arizona against increasing its maximum UI benefit. "The burden of unemployment insurance taxes is ultimately borne by workers," Conerly writes. "Taking more money from hard-working Arizonans is not the appropriate response to a system that fails to promote employment." According to a U.S. Department of Labor audit, in 2002, $60 million, or 17 percent of Arizona's UI payments, were overpayments. Average benefit levels in Arizona are below the national average, reflecting the state's wage levels and its relatively low maximum UI benefit, but the benefit computation is actually in the middle of the national distribution, making Arizona benefits typical for lower income families.
Conerly also argues that, short of eliminating the federal UI tax, Congress should allow states to receive waivers for experiments in alternative systems. Conerly points to Chile, which has created a system of individual unemployment insurance accounts. "For the American unemployed worker, going back to work means giving up a free benefit," Conerly writes. "For the Chilean unemployed worker, going back to work means more money saved for future bouts of unemployment, or more money rolled into a retirement account." The report is available online here.
Author Contact: William B. Conerly, Ph.D., Economist, Conerly Consulting, LLC, (503) 598-2096 Goldwater Contact: Satya Thallam, Fiscal Policy Analyst, Goldwater Institute, (602) 462-5000 x 228 Press Contact: Tom Jenney, Director of Communications, Goldwater Institute, (602) 712-1257