In a perverse twist of the pandemic economy, Washington is boosting the weekly benefit for some jobless workers by nearly 50% starting next month — the largest increase on record, the Employment Security Department announced Tuesday.
And employers might not need to endure another tax increase to pay for it.
The benefit increase stems from a state policy that ties jobless benefits to the state’s average wage, which thanks to a grim statistical quirk increased during the pandemic even as tens of thousands of workers lost their jobs.
As a result, the minimum weekly unemployment benefit will increase by $94, to $295, for workers who file their first jobless claim on or after July 4. (Workers already receiving benefits will continue to receive benefits at the current level.) That’s the biggest increase since the ESD began tracking such data, during the Great Recession, said Paul Turek, ESD’s state economist.
The maximum weekly benefit for new claims also will increase — by $85, to $929.
Coupled with the $300 federal pandemic benefit, the state’s total weekly benefits will range from $595 to $1,229. That federal benefit ends in September.
Around 17% of workers filing claims receive the minimum weekly benefit and roughly the same percentage get the maximum benefit amount, ESD officials said.
The benefit increase will likely add to criticism that high jobless benefits are fueling a labor shortage by encouraging unemployed workers to stay home instead of seeking work. But the higher benefits coincide with a resumption of the requirement, suspended since last year, that workers search for jobs while collecting benefits.
The sharp increases reflect the pandemic’s disproportionately heavy effect on lower-wage workers, as well as lawmakers’ earlier efforts to soften that blow.
Washington sets jobless benefits as a percentage of the state’s average annual wage from the preceding year — and in 2020, that average wage jumped by a record amount.
The reason: Because pandemic-related layoffs fell most heavily on workers in lower-wage sectors such as food service and hospitality (and relatively lightly among higher-wage, office jobs) the average weekly wage in 2020 leapt by 10.1%, to $1,475, or $76,741 annually, compared to 2019, ESD reported Tuesday.
That’s the biggest increase on record, according to the agency. “But of course it’s been distorted by the layoffs due to the pandemic,” Turek said. (The state’s average wage figure includes only jobs covered by state unemployment insurance.)
Indeed, because Washington shed so many jobs last year — just over 164,000 — the total wages received by workers increased less in 2020 than in previous years — just 4.7%, compared 8.7% in 2019 and 8% in 2018, Turek said.
Another key factor in the benefit increase: Earlier this year, state lawmakers raised the percentage used to calculate the minimum weekly benefit, from 15% of a worker’s average earnings to 20%, for claims filed after June 30. The higher rate kicks in during the first full week of July, which starts July 4.
Between the higher percentage and the pandemic-fueled spike in average wages, Washingtonians filing their first jobless claims July 4 can expect a minimum weekly benefit that is 46.8% more than what is currently offered. (The exception: a new state law prohibits claimants from getting more in unemployment benefits than they were getting in wages.)
State officials aren’t sure what the benefit increase means for the state’s finances — or the prospects for employers, who pay for most jobless benefits via taxes — in part because it’s not clear how many Washingtonians will file for benefits after July 4.
If the state economy continues to improve and fewer workers file claims, the benefit increase “shouldn’t matter much” to the state finances, Turek said.
“But obviously, if for some reason the economy were to stumble and a lot more people have to go on [unemployment], it could become a major issue,” Turek added.
New, or initial, claims for unemployment are averaging around 12,000 a week. That’s far less than during the opening months of the pandemic last spring, but still roughly twice the levels seen right before the pandemic and roughly on par with levels in the Great Recession.
Earlier this year, employers were looking at more than $1.5 billion in potential tax increases to replenish the state’s unemployment trust fund after hundreds of thousands of laid off workers filed claims. Lawmakers lessened that impact substantially through a series of tax deferrals and other measures.
But new tax increases aren’t expected because the state’s finances didn’t suffer as much as predicted during the pandemic, said state Sen. Karen Keiser, chair of the Senate Labor, Commerce & Tribal Affairs Committee.
The unemployment trust fund, which initially was projected to have a $200 million deficit by the end 2021, already has a total of $1.9 billion “and it’s growing now … because the high-wage earners and their employers are paying into the trust fund,” Keiser said. “So I think there’s no likelihood that there would be an additional [tax] premium.”
However, under state law, as the average wage increases, so too does the share of employees’ wages that are subject to unemployment taxes. As a result of the average wage increase, employers will be taxed on first $62,500 of each employee’s wages, starting in 2022, compared to $56,500 in 2021.
Labor advocates lauded the benefit increase as a rare bit of good news for lower-wage workers — even if it reflects the fact that so many of them lost their jobs.
“Lower-wage workers were more likely to lose work during the pandemic, richer workers more likely to have maintained employment, and so the minimum benefit based on the average wage jumped,” said Sage Wilson, spokesperson for the union-affiliated advocacy group Working Washington.
This is “perhaps the only time income inequality has benefited people at the bottom of the income distribution,” he added.