Md.'s jobless benefits rated among worst

Wage replacement ratio is 43rd lowest in U.S.

Business leaders dispute study

Average payout of $241.57 ranks 25th among states

February 23, 2003|By William Patalon III | William Patalon III,SUN STAFF

Maryland may be one of the wealthiest states in the nation, but its unemployment benefits rank near the bottom, and should be upgraded immediately, concludes a new study by the Maryland Budget and Tax Policy Institute.

Some business leaders and state officials, however, said the study is seriously flawed, and that Maryland actually offers one of the best jobless-benefits packages in the nation.

But that's not what the new study found, said Patrick Lester, the author of the study, which is entitled: "Maryland Unemployment Insurance: Underfunded and Out of Date."

"Maryland is generally perceived as a high-tax, high-spending state that supports government social programs in spades," said Lester, a policy analyst with the institute, which has offices in Silver Spring and Baltimore.

"But it's not true. When it comes to unemployment insurance - who gets it and how much they get - we're well behind the rest of the country."

While 43 percent of the nation's unemployed receive benefits, the study said that only 34 percent of Maryland's unemployed receive them.

And for those who receive benefits, the average weekly payout of $241.57 per week in Maryland replaces only 33.9 percent of the average weekly wage. That ratio ranks Maryland 43rd out of 50 states.

The $241.57 average weekly payout ranks Maryland 25th out of 50 states, and places it below the national average of $257.90.

That average weekly payout "is as if someone is working for minimum wage," Lester said.

Arizona is at the bottom, with an average unemployment payment of $205 per week, while Washington state is at the top, with an average payout of $496 per week, Lester said his research found.

According to the 2000 Census, Maryland's median household income of $52,868 ranked it third, behind New Jersey and Connecticut. More recent estimates place that income at $53,530 - second behind Alaska's $57,363, according to economy.com analyst Scott Hoyt.

Such high-income levels warrant a major boost in Maryland's unemployment benefits, which rank among the nation's worst, the nonpartisan tax policy institute said in its study, which was partially financed by the liberal Open Society Institute-Baltimore.

While Maryland's average is $241.57, its maximum weekly payout was boosted to $310 last year, an increase of $30, or 11 percent, said Thomas Wendel, executive director of the Maryland Office of Unemployment Insurance.

"Overall, we feel we're in the top five or 10 in terms of overall benefits," Wendel said.

Created by Congress during the Great Depression, unemployment insurance is administered individually by the states, which have substantial latitude in designing their benefits packages.

And while some states finance benefits via a mixture of payroll taxes on employers and employees, in Maryland, employees do not contribute to the state unemployment trust fund.

The study said there are other problems with Maryland's unemployment-insurance benefits.

For instance, while the state provides additional benefits to unemployed workers with children, that benefit is capped at $8 per child per week. Those receiving the $310 maximum do not get that extra money.

And though 24 states provide at least partial benefits to part-time workers who lose their jobs, Maryland does not, Lester said.

The study concluded that the state's unemployment system is underfinanced, that benefits are too low and that too many of the state's jobless are unfairly barred from receiving the weekly unemployment payments.

All of these problems can be fixed without worsening Maryland's already-critical state budget woes, the study said. Among its recommendations:

Raise the minimum and maximum weekly payouts, and then index them - either to inflation, or to average wage levels around the state - so that they increase automatically, and aren't reliant on the political uncertainty of legislative intervention.

Increase the allowance for dependents from $8 to $25 per child per week, for up to five children, and separate that payment from the maximum benefit level.

Make part-time workers eligible for payments.

Make unemployment payments available to workers for longer than the current maximum of 26 weeks.

Improve the health of the unemployment benefits trust fund, without forcing the state to kick in money, in two ways: first, by boosting the payroll tax rate levied on employers, and second, by increasing the wage base those taxes are levied against - currently the first $8,500 a worker earns - to as much as $87,000.

State business leaders and lawmakers contend that such a piecemeal approach will bring trouble, saddling companies with higher payroll taxes at the state economy's nadir, perhaps heightening job losses.

In a roundabout way, that would hit the state, too, they said, since lower profits and higher unemployment would gnaw into tax revenue.

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