Theodore Roosevelt once said, “Far and away the best prize that life offers is the chance to work hard at work worth doing.”
My time serving on the Twin Falls City Council and Idaho Legislature has provided me experience with both high unemployment conditions and workforce shortages. Theses economic conditions are part of the economic cycle of contraction and growth. During periods of high unemployment, we often find that available employment opportunities do not match the experience and training of those looking for work. During low unemployment periods, like we are experiencing today, there is a deficit of candidates prepared for the advanced workplace technologies and/or education needed to fill available positions across a broad range of industries.
In the “great recession,” Idaho unemployment rates rose sharply from approximately 3 percent in 2008 until the rate peaked at about 9.7 percent in 2009, after which we saw a slow and steady decline. In September of this year, the state unemployment rate reached a low of 2.8 percent.
The unemployment rate only tells part of the employment story. If you lose a job in an industry that is in decline, you may end up accepting work at lower wages or fewer hours. This is often called underemployment. While the current risk and demand for unemployment benefits is low, many Idahoans are underemployed and need training to gain access to opportunities available in a technology driven economy.
High unemployment and extended benefit periods during the recession eroded the Unemployment Insurance Trust Funds to a point in 2009 that Idaho needed to borrow from the federal government to cover claims. This also required a substantial increase in the Employer Unemployment Insurance rates. (All the borrowed funds have since been repaid and Trust Funds have been replenished to adequately cover another recession.)
It is time that we provide relief to Idaho employers by substantially reducing the fund multiplier that drives the unemployment insurance rate. The rate formula currently uses a fund multiplier of 1.5, an increase from a low of 0.8 over the past seven years. A 1.5 multiplier is sufficient to cover 18 months of average unemployment benefits in a major recession. During the last legislative session, Gov. Otter proposed a reduction of the multiplier to 1.3, adequate to cover 15 months of benefits. This would maintain the fund at a historically appropriate rate while lowering employer costs by an estimated $118.6 million over the next three years.
Unfortunately, this included lowering the annual funds available in the Idaho Workforce Development Training Fund by $3.6 million ($1.2 million annually). This important fund supports training and retraining of employees for the ever-changing workforce needs. UI Trust Funds are needed to provide unemployment benefits during periods of high unemployment. However, those trust funds cannot be used for workforce retraining.
We need to lower the Unemployment Insurance rate without damaging the training fund. Decreasing the rate to save employers $115 million will still assure enough resources to cover unemployment benefits of another “great recession.” However, we should continue to provide adequate support for workforce training throughout the economic cycle of a dynamic economy.
The annual state budget spends over $1.5 billion educating citizens from kindergarten to career. Workforce training is a good fit with our education mission. We can, and should, adopt a new rate formula to reduce employer costs while also protecting workforce training funds. The funds are needed to speed the transition for someone underemployed or receiving unemployment benefits to that prize of “work worth doing.”