Economist: Consultant should set unemployment insurance rates

A South Carolina Department of Commerce Economist says the state needs to hire a consultant to review the tax structure used by the Employment Security Commission.
Economist Dr. Rebecca Gunnlaugsson(gun-LOG-son) says workers at three percent of South Carolina firms receive 30 percent of the state’s unemployment benefits and those firms pay in only eight percent of contributions to the government’s unemployment insurance pool. She says there’s a greater tax burden on employers of low-wage workers than businesses with better-paid employees. She says the current system provides incentives for companies to layoff workers.
Board of Economic Advisers Chairman John Rainey has been meeting with leaders of the Employment Security Commission, the Department of Commerce and others, to develop a plan for paying back the federal government for an Unemployment Insurance Fund deficit fast approaching $1 billion, and for rebuilding the state’s Unemployment Trust Fund. Thursday’s meeting may be the last meeting of Rainey’s work group. He says it’s now up to state lawmakers.
Governor Mark Sanford has called what he is calling an Unemployment Roundtable for Tuesday on similar issues, to which business leaders from all over the state are invited.
Rainey says state leaders need to know some things.  “Is the right amount of money being paid in?  Is it being paid in by the right people?  I don’t think we know that yet.”
Rainey says there are a number of experts who know a lot about unemployment insurance and business tax rates and they’re capable of being objective.
“We need an outside, independent expert,” he said.  “Unconnected–politically or economically with this state, and come in and give us an overview and tell us how we might remodel our system so that it’s more responsive, more cost-efficient.” 
Dr. Gunnlaugsson says South Carolina’s taxable wage base, the formula from which employers pay unemployment insurance, hasn’t changed since 1983.
“A number of states actually index their taxable wage base, to a wage inflation,”  said Gunnlaugsson. “What that allows is that the taxable wage base increases at the same rate that the weekly maximum benefits amount increases.  In the long run, you solve a lot of issues, that the benefits don’t increase at a greater rate than the unemployment insurance contributions.”
Gunnlaugsson says a lot of employers who are at the minimum unemployment insurance tax rate are paying more per employee than comparable other states, and those at the maximum tax rate are paying a lot less than businesses in comparable states.
Dr. Gunlaughsson says a consultant could also aid to technically unify, and pull together into a more effective business process, state agencies that help the state’s workers. She says the state’s One-stop Shop Job Centers are convenient but they’re missing something:  “Even though they’re all located under one roof they’re separate agencies, technologies and business processes.  And they don’t communicate with one another.  In some cases redundant services are provided.  One area may not know what services have been provided by other areas.” 
Concerning plans to pay back the government and possibly change the rules for unemployment insurance, the President of the State Chamber of Commerce Otis Rawl says anything done that will affect business and industrial prospects must be done carefully. Rawl says the Boeing company falling out of favor with the state of Washington is an example of what South Carolina does not want to have happen. Boeing is expected to choose a location for its new 787 jetliner facility by year’s end. Washington is home of the company’s commercial airplane division but is competing with South Carolina for the new project.