How Unemployment Insurance Can Backfire

Throughout the coronavirus mess, I've read, over and over, "I paid into unemployment insurance for my entire career, it is about time I collected" or words to that effect.

The purpose of this brief essay is not to discourage applying for and collecting unemployment during this crisis. That is why it exists: when someone, through not fault of their own, loses their job.

However, there are three points I do wish to make:
  • Employees do not pay into the unemployment fund. In Kansas (where I live) and in every other state about which I am aware, it is illegal (criminal offense) to make an enterprises' employees pay into unemployment. 
  • The amount the employer pays is determined by three things; the number of people who have collected unemployment from that specific enterprise in recent years, how hazardous the work is (its "rating") and how many businesses have laid off employees across the state in recent years. 
  • Unemployment insurance is a very significant cost of doing business that has to be paid even if the business is losing money.
With regard to the last point, the United States' #1 producer of medical masks, while it has geared up production, is not going 24/7 because of being badly burned by the cost of unemployment insurance the last time we had an epidemic in the USA. The story is fascinating (and, a quick read), here. It is well worth the brief time it will take to read. 

And, after reading the story of the mask producer but before the predictable rants about the evils of free enterprise begin, please keep in mind that most hospitals are non-profits. 


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