UNEMPLOYMENT COMPENSATION

Unemployment compensation helps alleviate the potential economic hardships of the involuntarily unemployed while these individuals work towards transitioning back into employment. The system should provide economic security while incentivizing claimants to re-enter the workforce as quickly as possible.

Pennsylvania’s unemployment compensation system is almost entirely funded by employers, who pay among the highest UC taxes in the country. Pennsylvania employers paid roughly the 6th highest average UC tax rate from 2016 to 2020 according to data from the U.S. Department of Labor, whose rankings account for differences in the amount of wages subject to tax, known as a state’s taxable wage base. And according to the Tax Foundation’s 2021 State Business Tax Climate Index, Pennsylvania’s UC taxes ranked in the top 10 worst states for employers, taking into account maximum and minimum rates, additional costs and complexity; a poor performance, though improved after ranking worst in the country in four of the previous seven years.

Excessive UC costs and an unsustainable system can undermine job creation and destabilize an important safety net program. The PA Chamber opposes any broad-based UC tax increases and supports changes in the law that promote fairness, help control costs and promote solvency of the UC trust fund.

Specifically, the PA Chamber supports:

• A system limited to temporary unemployment benefits only for those who were clearly attached to the workforce, lost their job through no fault of their own and are actively seeking new employment;
• A tax rating system that fairly determines employer tax rates by considering an employer’s past experience;
• Strict enforcement of the work-search requirement and efforts to provide resources and guidance to claimants;
• Benefits that are based on prior wages earned in covered employment;
• UC Trust Fund finance policies that are reactive to fund balance levels in order to be solvent and avoid the need to borrow from the federal government;
• Policies that mitigate employer cost increases in the event federal borrowing for UC is necessary, including reasonable and predictable payment schedules;
• Legislative and administrative efforts to combat fraud and abuse of the UC system and hold perpetrators accountable; and
• Efforts to improve system functionality and avoid any excessive or unnecessary administrative burdens on employers, claimants and program personnel.

UC played a critical role in the legislative response to the COVID-19 pandemic as policymakers sought to drive support to individuals through an existing system with established infrastructure. While adjustments were necessary to allow for flexibility, the PA Chamber urges lawmakers to exercise caution should similar circumstances arise again and ensure that any adjustments to UC are temporary and key principles of the program still adhered to. Additionally, given unprecedented business shutdown orders and record number of claims, the PA Chamber supports utilizing federal stimulus funding to pay down UC debt incurred as a result of the pandemic. Other states opted for this approach, which was specifically authorized by the federal government, in order to avoid or reduce significant employer tax increases.

Revised by the Policy Subcommittee. Approved by the Board of Directors on October 5, 2021