Government Assistance....It Blows My Mind How Many People "Need" It

Poverty is a problem in many countries.  After the great depression of the 1930's, social safety nets were created to temporarily help people.  Although expensive, society is still better off with instead of without them.  Unemployment insurance benefits don't last long and pay a fraction of previous income.  Most unemployed people want a job.  Without welfare,  people suffer and economy decline from reduced consumption. 

If governments need to reduce spending, eligibility can be toughen so that most unemployed don't collect benefits.  Also benefits can be less generous.   When unemployment is low again, surplus UI premiums become general revenue that governments exploit.

Unemployment is an added expense the employer pays, not the employee. However there are 3 states that currently have a small imposed tax that is passed on tot he employee, but it does not cover the full Unemployment. Employers also pay the Federal Unemployment tax and not the employee.

So it is not insurance the employee pays in at all. In fact, this is one aspect that employee's fail to understand that a business is required to pay on your behalf just for employing an employee. Add that on top of the FICA and Medicare that has to be matched. Even though employee's have received a 2% reduction in the FICA withheld, the employer is still having to pay in 6.2%.

In California, just about every employer is maxed at 6.2% for Unemployment due to the Federal Government extending benefits to 2 years. When the Feds did that, our already broke state borrowed some 9 billion dollars from them to pay for the extended benefit. Since the state has not paid it back, which of course how were they when they were already broke, guess who has to pay it back? Yup, the employers. The last week in November last year, the Feds released an additional .3% tax on employers in California that was retoed back the entire year. All because the state can't pay them back. They shit on all the companies that bill clients by payroll. Any Employee Leasing or Staffing companies had no clue of this additioanl tax until 5 weeks before the end of the year. These businesses bill their customers with each payroll period. The word is that it will increse and additional .3% for 2012, but employers will not know until November. So while FUTA was reduced from .8% to .6% in the third quarter of last year, employers in California were hit with an additinal .3% that had to be paid into the Feds. This will now be .6% for 2012. Michigan has been at .9% and Indiana is at .6% with several others at .3%.

When people find a job, they should understand that an employer is not only paying your wage and maybe a portion of your health insrance, but also 6.2% for FICA, 1.45% for Medicare, the employer's Unemployment rate (6.2% for us in California) and .6% for FUTA, plus an additional .6% for 2012. that's 13.6% of your wages on top of what you are being paid. Now the UI and FUTA is on the first $7,000 (in California), but still. This doesn't include your Workers Comp rate.

 Let's use California as an example. Employee earns $7,000, here are the costs to the employer:

FICA (6.2%) - $434

Medicare (1.45%) - $101.50

State Unemployment (6.2%) - $434

Federal Unemployment (.6% + .6%) - $42 + $42 = $84

Total   -   $1053.50

So even though the employee only made $7000, the employer paid your net wages plus $1053.50. And this is just for taxes and not Workers Comp or Health Benefits if the employee had them.

Now look at Unemployment. The employer paid in $434 to the employer's trust fund. An employee files for Unemployment in California and they can receive 1/26 of the highest paid quarter of the base period. So say the $7000 was earned in one quarter. 1/26 of $7000 is $269.23. That is the weekly benefit amount the employee will receive on Unemployment. As long as the employee is allegedly looking for work this employee will earn a minimum of $269.23 from anywhere between 12-26 weeks. So minimum 12 x $269.23 = $3230.76 or 26 x $269.23 = $6999.98. Now this is a simplistic calculation, but you get the idea. So if the employer pays in only $434 and the employee can draw the minimum $3230.76 that leaves the employer's trust account in a deficit of $2796.76. this is how the employer's rate is then calculated and there is your 6.2%, which is the highest rate in California.

Four years ago our account had about a half million dollar surplus....at the closing of the fiscal year for the state late last year our account has nearly a half million dollar deficit due to the extension of UI benefits.....and we are not alone