The Ugly Truth
Let’s put the myth to rest…you do not pay anything into unemployment insurance in California. Your employer is the only one taxed for unemployment insurance.
Now wait a minute, before you all go whipping out your pay stubs and point to the ‘CA SUI/SDI Tax’ line…let me explain, because I did the same thing…
The deduction on my paycheck for “CA State Unemployment Insurance (SUI) / State Disability Insurance (SDI)” comes out to exactly 1.1% of my federal taxable wages as stated on my last pay stub. That’s important because on the California Employment Development Department’s website (EDD), the official government website for California payroll tax information, the state disability insurance deduction is 1.1% of an employee’s federal taxable wages. So the amount I see being deducted from the ‘CA SUI/SDI Tax’ line on my pay stub is only for disability insurance, nothing for unemployment insurance.
Additionally, on the California EDD website, it clearly states that, “UI is paid by the employer” and “SDI is a deduction from employees’ wages.” Doing the math on my own paycheck confirms this.
Now on to the next topic…
The Ugly Abuse
Unfortunately, I know a lot of people who’ve been laid off. It’s a bad time economically and there is no way to know if I will be joining their ranks. I’ve learned enough so far in life to never say never. What bothers me more, is abuse of the unemployment insurance program. If someone is on UI, there are only two things they should be doing, either looking for a job or going to school full-time. Now according to the EDD, going to school while taking UI payments is fraud (because you’re not “available” to take a part-time or full-time job if you’re in school), but I don’t see it that way. The way I see it, if you go to school, then you are improving your skills which makes you more valuable and more likely to be hired. The more likely you are to be hired, the less time you will spend on UI and the less likely you will be to get laid off again in the future.
So what’s the big deal? The big deal is, that’s not what most people do with their paid holiday, they ride it out until the last check comes in without making any productive use of their time. There are only a handful of times in your life, if any, after you’re 18 years old when you don’t have to work because someone else (like your parents) is footing your expenses. The least you could do is be intelligent about it and use the time wisely.
Based on the The Ugly Truth, we know that any individual abusing the system didn’t pay anything into it, so they are “not getting their money back” which is often their claim. Second, that maximum amount that your employer pays into the system, per employee, for the entire year, is only $434. So as soon as someone collecting unemployment takes their first month’s worth of UI payments, and let’s assume the maximum payment of $1,800 a month…they have already “gotten back” four years worth of their employer’s contributions.
If someone takes 11 months worth of the maximum payments, they’ve used their entire working lifetime of employer contributions.
So how long can we be abused? Pretty damn long actually.
A regular UI claim is 26 weeks. The first federal extension adds an additional 20 weeks. The second federal extension adds 13 more weeks. On March 27, 2009 Governor Shwarzenegger extended those benefits another 20 weeks. That’s a total of 79 weeks. And according to the California EDD website, legislation is pending that may add additional weeks of coverage beyond all of that. So assuming the California legislature doesn’t add even more weeks of coverage (which they are likely to do), it’s possible for someone to abuse the system for 1.5 years. A 1.5 year vacation! And you’ve got to be kidding yourself to think that the idea of taking almost 2 years off of work isn’t so enticing to people that they aren’t abusing the shit out of this program. I guarantee that abuse is widespread.
So everyone abusing the UI system gets a free ride for shy of two years. And let’s be honest, we know the market for jobs is bad but most people on UI aren’t really looking. And that $434 employers pay per person per year…that’s not going to cover everybody, which means once again, working class tax payers are on the hook for bailing out anyone milking the free ride of unemployment benefits.
The last problem with welfare programs such as UI is the mentality it indoctrinates into those who choose to abuse it, that they can get something for nothing. The people abusing this welfare system don’t understand that their vacation is being subsidized by everyone who is still working, it is not free. I do not know how they reconcile this ethical dilemma in their mind, but it is the growth of a welfare dependent class in society that supports further socialization of the government until eventually, everyone is looking for something for nothing from the government. And like Margaret Thatcher so eloquently said, “The problem with socialism is that eventually you run out of other people’s money.”
The hard workers in this country, those who still retain a shred of work ethic, will one day give up and join the ranks of the welfare state once they are overwhelmed by the demands (taxes) they are burdened with to support the more ethically challenged. Who will pay for the lazy and corrupt who abuse our welfare systems once the workers throw in the towel and concede defeat?
I never understood that in CA you could not go to school while on unemployment. It’s outdated. College classes are now available evenings, weekends, and online, meaning you can pretty much attend college WHENEVER you want and it would NOT interfere with finding or holding a job.
Fortunately, in my state the UCI does not ask about school, only if you were able and available for work. I am going to school full time, (15 units) but they are all online or night classes so YES, I am available to work.
I lived in CA for many years and their unemployment comp sucks! It is very outdated. Last I remember, you still had to mail in the forms every two weeks.
I know the deal–any system meant to help those who really need it can be abused. I’ve been getting UI for nearly a year. Still, I don’t feel one bit bad about it! When I worked, I worked hard. Being single, I was also taxed at the maximum percentile of my pay (28%) and got NO tax deductions. I pay county and school taxes at the full rate, even though I don’t have any kids or use any of the school facilities. No, I don’t feel one bit bad about taking my share of UI. I think I’ve earned it.
CA doesn’t explicitly state, from what I read, that you can not go to school. Like you mentioned in your state, CA is only interested in whether or not you are “able and available for work” which implies that you can not attend school and be “able and available for work” at the same time. From my own experience, back in the days when I thought that government was a noble and intellectual institution, I was very honest when I was applying for unemployment during the 2001 recession and told the UI interviewer that I would like to go back to school and finish my degree…I only needed three more classes and that I could do it over the summer in three months. They told me that going to school would be cause for the denial of UI payments. That was one of those epiphany moments that started me down the long road of questioning how the government does business, because that just didn’t make any sense to me.
And yes, you still have to mail in the forms. The President is on Twitter but we still have to snail mail the UI form every two weeks.
In Alabama where I currently live and work, I see the abuse of the UI claims and benefits a lot, because I’ve worked on and off for the past two years thru temp agencies. Many people workling these types of industrial temp jobs abuse the system by working just enuf for a few months so they can qualify for UI benefits, then when that temp job ends they will refuse to go back to work and instead will just stay home and draw unemployment for as long as possible. And just recently, over the 2009-10 holidays my work petered out and after weeks of trying to avoid it, I too filed for unemployment, and drew a total of four weeks unemployment before getting back on full time at a local plant where I’d worked as a temp two years earlier. But now I’m expected to work for a dollar and a half less than what I was paid two years ago for the exact same job and work. In Fact, after paying for additional gas, mileage on my vehicle, lunches etc, I am actually making about $35 per week less than what I could have drawn if I’d just layed out on unemployment benefits like all the other dead beats. I see so many people doing this in this state. Am I a fool, or is my sense of ethics just outmoded. Am I doing myself an injustice, or what?
Wow, great explanation! I was looking into this because I have a friend here in NYC that has been on benefits for 54 plus weeks and hasn’t looked for a job once, instead she lives for free at her parents house and goes out all the time and shopping with the check. I don’t know how she ‘gets away with it’ but it seems to be clear. Her justification is that she paid into the program so now she is ‘getting what she deserves’.
Jennifer,
Your friend suffers from a common misconception.
I did a quick check on the New York State Department of Labor website and as I expected it states the following, “In New York State, the money for unemployment insurance benefits comes from taxes paid by employers. No deductions are ever made from a worker’s paycheck for unemployment insurance.”
So your friend is simply ‘getting what she deserves’ from you and not from her employer. As a result of this mentality that she and millions like her have, more of your NY state income taxes will be diverted away from infrastructure improvements you could have enjoyed such as better roads, improved public services, etc… to fill the wide open hole in the unemployment insurance fund.
And what will the state’s response to this diversion of funds be as public services and infrastructure decline? Raise your taxes.
In addition, employers will inevitably have to allocate more of their profits to the unemployment insurance program which the state will mandate to help fill the hole, which means less money for raises, benefits and new hires – also affecting you directly.
I found a good example of this inevitability in a 2009 article in the Queens Gazette written by New York Senator George Onorato who stated that the the New York State Unemployment Fund, “is bankrupt,” due in large part to, “the state’s failure, for more than a decade, to increase the required level of contributions made to the Fund.”
Now you know what that will translate into for you.
Ironically, the loss of infrastructure improvements, the decline in public services and higher costs to employers in New York will also negatively affect your friend.
Unfortunately, most people fail to make this connection.
Hi you make some good points. However you are wrong. The employee ends up paying for a payroll tax like the EI through reduced wages. Let me explain it to you. If a partificular employer calculates he is able to spend $50 per hour on a worker, then it does not matter if the entire 50 is paid in a wage or $45 is and $5 to some government program. So you see, the EMPLOYEE pays EVERYTHING via reduced wages received. If an employer has to give up $5 per hour to the government for example, he will pay the employee $45. Total labor cost is still $50.
I completely agree with you except for one thing, most Americans don’t even consider that, so I was addressing their common misconception rather than the additional truth of what you stated. To me that is like “second tier” thinking. I have never heard someone complain to me, or read people complaining on the internet, about how they hate that their employer pays UI and that they wish it had gone to them instead. Most people never actualize that thought. What I do hear, are people saying something like, “I am just getting the money back I paid into unemployment.” And what they mean by that is not what you are saying, as true as that is, but rather the misconception that money has been taken directly out of their paycheck just like Social Security or Medicare taxes and put into this “account” that they are somehow now simply drawing off of. So yes, good comment and very true and very relevant.