Posted on October 14, 2021
Small businesses are getting increasingly frustrated by their inability to find workers, and I’ve been hearing from a lot of them. Despite the many job openings, the state unemployment rate was still at 7.2% in August, which continued “Extended Benefits,” which add an additional 13 weeks of unemployment benefits under federal rules. Extended benefits are triggered in Connecticut when the state’s unemployment rate is at least 6.5% of the most recent three months and at least 10% higher than it was for the same three-month period over the past two calendar years. Unfortunately, under these rules, Connecticut is in a “what comes first the chicken or the egg” situation. If jobs continue to be unfilled the unemployment will remain high and benefits could be extended even further, making it more attractive for people to not seek work. While there are many reasons for the current elevated employment levels, including some parents staying home to care for children, there is plenty of anecdotal evidence that some prefer to just collect benefits by complying with the minimum necessary to qualify for continued benefits – for example, setting up interviews with prospective employers but never showing up. That way they meet the Dept. of Labor criteria for collecting unemployment by showing that they’re actively seeking a job (but really aren’t).
A secondary but equally important consequence of the extended benefits is stress on the state’s unemployment compensation trust fund. Employers fund this account through unemployment taxes, which are expected to be able to cover typical level unemployment compensation. Due to the high level of unemployment the trust fund has been insolvent for some time, causing the trust fund to borrow from the federal government – the trust fund is expected to have a deficit approaching $1 billion by year-end. Connecticut’s employers are responsible for covering that debt, including any interest charged if they need to borrow funds from the federal government. After the Great Recession of 2008, it took years for Connecticut’s employers to pay off a similar debt. This is money that employers could have used for pay raises or expansion.
While the State of Connecticut did apply some federal pandemic funding to the unemployment fund deficit during this budget cycle, it is imperative that funds be similarly used this year to keep our state’s economy moving. In addition, we need to institute reforms to our state’s unemployment procedures to make sure that unemployment compensation is provided only to those who are truly and actively seeking jobs, not just faking it to obtain benefits. The trajectory of our state’s economy over the next few years will depend on Connecticut taking the appropriate actions and lay the necessary groundwork for economic recovery and job growth.