Business

Decline in Unemployment Leads to Decreased Contribution Rates

December 15, 2014, 10:50 AM HST
* Updated December 15, 10:52 AM
Listen to this Article
2 minutes
Loading Audio...
A
A
A

Unemployment insurance contribution rates for 2015 will be reduced by 22 percent on average, according to an announcement by the Hawai’i State Department of Labor and Industrial Relations Monday.

The result of the reduction means employers will be paying $50 million less in taxes in 2015, which is about $100 less per employee on average.

Since December 2010, the unemployment rate in the state has dropped from 6.8 percent to 4.1 percent. The drop in unemployment helped to replenish the Unemployment Compensation Trust Fund.

In October, Hawai’i was ranked as having the sixth lowest unemployment rate in the United States and the civilian labor force reached a record of 667,750 people.

“This is welcome news to many small businesses throughout the state who can now consider investing the savings in their businesses and personnel,” said Governor David Ige. “The Trust Fund is designed to replenish its balance when times are better so the taxes on employers do not rise when the economy falters and when employers can least afford higher taxes.”

ARTICLE CONTINUES BELOW AD

In 2010, the Unemployment Compensation Trust Fund went bankrupt and the state was forced to borrow $183 million to pay out benefits. Since then, the fund balance has grown to nearly $400 million.

ARTICLE CONTINUES BELOW AD

Maintaining the Unemployment Compensation Trust Fund to an adequate reserve level, where the balance necessary is available to out a year of benefits, is the goal of the unemployment insurance financial structure.

Currently, the reserve is at 0.99 of the adequate level, which is about 12 months of benefits.

“Unemployment benefits play a major role in stabilizing the economy during recessions by maintaining the purchasing power of those without income from employment, and DLIR’s duty is to protect employers against the double ‘whammy’ of diminishing profits and rising unemployment taxes during recessionary times,” said DLIR Director Dwight Takamine. “Unemployment benefits also provide the ability for a worker unemployed through no fault of their own to put food on the table and shelter over their family while they search for another job.”

Comments

This comments section is a public community forum for the purpose of free expression. Although Big Island Now encourages respectful communication only, some content may be considered offensive. Please view at your own discretion. View Comments

Newsletters

Get a quick summary of what’s happening on the Big Island with our daily & weekly email of news highlights.