State governments are borrowing heavily from the federal government to keep paying unemployment-insurance benefits and, even with the weak job market, most states are raising payroll taxes to pay off the loans.
Thirty one states, their unemployment-insurance funds empty, have borrowed nearly $41 billion from the federal government. California alone has borrowed nearly $8.8 billion as of mid-November, according to the Labor Department.
This article is interesting because it opens our eyes to the fact that simply just jump starting the economy is not enough to bring down unemployment.
ReplyDeleteWe are experiencing a slow recovery and many think we will see a drown in unemployment rates because of this--unfortunately there is another barrier stopping firms from hiring:
"As states try to replenish the funds and begin to repay the loans, employers are facing increases in both state and federal payroll taxes, a potential barrier to new hiring."
So in order to continue much needed unemployment benefits, states have to borrow money--in order to pay this money back states have to increase payroll taxes thus lowing firms incentive to hire.
The question is: do the benefits the unemployed get overcome the absence of their job they are NOT getting because firms are not hiring because of the payroll tax increase to pay for their initial unemployment benefits?
No.
I find this to be very interseting becaue I find myself asking the question, "Why is the State Government" doing so much for the unemployed? In other words, I think that the government is not motivationg unemployed persons to go find new work with all of these new unemplyment benefits- as we discussed last Friday in class.
ReplyDeleteI agree Austin. Extending the unemployment insurance is not motivating people to find a job. Instead, I think it's more of a hindrance. The unemployment safety net allows the unemployed to wait for the perfect job rather than take one that helps them get by until the market improves. This is too hard on the state budgets. There are jobs available it's just that we need to either start investing in retraining programs or start improving the job matching process. Maybe a national government program for job postings with incentives to employers. I just think there is a better way to spend our money that will help improve the unemployment rate.
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