Jobless overload woes seen
An overload on the state's Unemployment Insurance Agency over the last few weeks has had state employees scrambling to keep the system functioning, while some Michigan employers are bracing for an increase this year in their unemployment insurance tax.
The November unemployment rate was 7.4 percent in Kent County, according to the Michigan Department of Energy, Labor and Economic Growth. That compares to 6.7 percent in Kalamazoo County, 7.7 percent in Ottawa County, 8.3 percent in Allegan County, and 10 percent in Muskegon County.
Overall, the state of Michigan recorded an unemployment rate of 9.1 percent in November.
From October to November, jobless rate increases in the 16 Michigan regions ranged from .2 to 1.9 percentage points, with a median increase of .4 percent. The state’s three northernmost labor market regions posted sizeable seasonal increases of over a full percentage point, while the next largest rate increases were in the Detroit-Warren-Livonia and the Flint metropolitan statistical areas, both with increases of .7 percent.
From November 2007 to November 2008, seasonally unadjusted payroll jobs fell statewide by 114,000, or 2.7 percent, according to DELEG. All of the 12 major metropolitan areas in the state recorded payroll job declines, the most significant being in Southeast Michigan.
“This was not a typical November for jobs in Michigan’s various regional labor markets," said Rick Waclawek, director of the Bureau of Labor Market Information & Strategic Initiatives. "Merchants hired fewer retail workers for the holiday season than usual, while a number of other industry sectors reported larger than expected seasonal job cuts.” He added that statewide manufacturing employment was comparatively steady in November, although down slightly from the prior month.
There were numerous year-end news reports about long lines at the Michigan UIA Problem Resolution Centers, with many recently laid-off individuals reporting that they were unable to file for unemployment benefits either online or by phone.
Last week, a spokesperson for the UIA said the problem was "largely the phone lines," and those lines were still "jammed up … because of the heavy call volumes."
Norm Isotalo also said that the UIA had added an additional server for its online filing system, which "seems to be running pretty well now." He confirmed, however, that there was a slowdown in early January, due to the heavy volume of newly unemployed trying to file claims.
The UIA is adding 90 "limited term" employees in February to deal with the crush, according to Susan Corbin, deputy director of DELEG.
When asked Jan. 9 by the Business Journal why the UIA was not prepared for the new claims filed recently, Corbin said Michigan is "very fortunate that our system is still operational. I think there are four or five other states around the country whose systems have crashed this week, and our system is still working."
She noted that, in Michigan, "You don't go to your local unemployment office to file your claim." For several years, the Michigan UIA system has required people to file unemployment claims by phone or computer, and starting in October, it has been emphasizing that people should file online. She said in January 2008, 30 percent of people filed online; in December, that number had increased to 50 percent.
"The only reason somebody should be going to (one of the seven Problem Resolution Centers) is if they have a problem: They tried to file online or tried to call one of our call centers and that's not working for them. That's what those offices are set up for. They were not set up for people to come and file their claims."
Isotalo said there are usually about 240 people answering the lines for filing claims at any given time from 8 a.m.-4:30 p.m., Monday through Friday. The UIA has three call centers around the state.
Richard Hooker, a partner in Varnum law firm's Novi office, is an expert on unemployment law in Michigan. He said the UIA faces two major problems here.
"First of all, we have horribly high unemployment rates," he said. "The other one is merciless pressure to reduce the size of state government. We've got an (unemployment insurance) agency that's understaffed.
"There aren't enough of them and likely are not going to be enough, because of the pressure to keep state government" at minimal size, he said.
According to Isotalo, more than 400,000 people in Michigan are claiming either state or federal unemployment benefits. The federal unemployment programs are the emergency extensions enacted by Congress in July and again in late November. The federal government funds the extensions, not the state governments.
Isotalo said Michigan had more than 200,000 "contributing" employers in 2008 covered by the state unemployment insurance. Nonprofit and government employment is covered by a different unemployment system. In 2007, there were an estimated 224,000 contributing employers.
In 2007, the UIA paid out $1.85 billion in unemployment benefits; in 2008, that figure was $2.19 billion — not including the month of December, he said.
Michigan unemployment tax is a complicated formula with many variables, but in general, according to Isotalo, Michigan employers pay an average of about $441 a year per employee in unemployment insurance tax. The tax rate ranges from .6 percent to 10.3 percent of the first $9,000 paid to each employee each year; the average is about 4.9 percent.
The rate varies because Michigan is an "experience" state, which means that over the years, the more laid-off individuals an employer has drawing unemployment benefits, the higher the tax rate for that company.
"So employers using the system are the ones taxed more heavily," said Isotalo.
Some employers have a negative account balance at the UIA, which means their laid-off employees are drawing more from the state unemployment insurance fund than the employer has paid in.
States borrow money from the federal government to maintain their unemployment insurance funds. In Michigan, the law requires a "solvency tax" on the "negative balance" employers when the balance in the state trust fund on June 30 is less than the total amount owed to the federal government.
This year, for the first time in several years, those "negative balance" employers in Michigan — estimated at about 20 percent of the contributing employers — will be assessed an additional solvency tax of up to $67.50 per employee. If they were already at the top of the percentage scale (10.3 percent, or $927), they would now be paying about $995 per year per employee in unemployment tax.