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New Weldon Cooper Center Report Examines Unemployment Insurance
Tougher To Be Unemployed In Virginia Than Elsewhere

January 29, 2004 -- It’s tough to be unemployed, but it’s tougher in Virginia than in many other states, according to a recently released policy study by the University of Virginia’s Weldon Cooper Center for Public Service.

In 2002, only 35 percent of unemployed people in Virginia received benefits, compared with the national average of 44 percent, said John L. Knapp, director of business and economics research at the Cooper Center and co-author of the study, “Virginia’s Unemployment Insurance Program.”

“There are many reasons for the difference, but they include Virginia’s tougher qualifying requirements and a stronger job market,” he said.

Knapp co-authored the research report, based on an analysis of several studies on the topic, with Megan Coltson Moyer, a former research assistant at the Cooper Center. Their study appears in the current issue of The Virginia News Letter, published by the Cooper Center.

Knapp noted that cracks in Virginia’s unemployment insurance system became apparent in recent years as the state economy suffered through a recession and a recovery bringing few new jobs.

Moyer and Knapp examined research about Virginia’s unemployment insurance system, focusing on a study conducted by Wayne Vroman, a nationally known expert on unemployment insurance systems who was commissioned by the Virginia General Assembly in 2001 to study the state’s system.

Vroman completed his report, “An Analysis of the Virginia Unemployment Compensation System,” in 2002. The next year, the General Assembly adopted some of Vroman’s suggestions, addressing in particular the weekly benefit.

The legislators did not act on Vroman’s recommendation for indexing the maximum weekly benefit to changes in the state’s average wage, although he admitted that when need is high and trust fund balances are low — as they are now — Virginia employers would face an added tax burden.

The nation’s unemployment insurance program began in 1935, during the Great Depression. The goal of the state-federal joint venture was to partially replace lost wages and aid in reemployment by creating a nationwide public job placement system. In Virginia, the program is managed by the Virginia Employment Commission.

Unemployed workers in Virginia qualify for benefits if they earned at least $2,500 in four out of five of their most recent months of employment. The requirements recently were changed, so that if a claimant does not qualify using this base period, he may attempt to qualify using the most recent four quarters of employment. Currently, the minimum weekly benefit is $50 and the maximum is $316. Beginning in July, the maximum will rise to $326. Benefits may be paid up to 26 weeks.

Unemployment benefits are paid out of the state’s unemployment insurance trust fund, which is funded by a tax on employers. A dip in the solvency of the trust fund results in a surtax on employers.

Virginia’s trust fund solvency is higher than the national average, and its employers pay lower taxes than in most other states. In 2002, when the national average employer tax was 0.5 percent of total wages of covered employees, Virginia’s average tax rate was 0.2 percent. Only Georgia had a lower rate and only Arizona, New Hampshire and South Dakota matched Virginia’s rate.

Beyond fine-tuning Virginia’s unemployment insurance system, the challenge is to maintain an adequate trust fund balance in the face of what has been, until recently, a weak economy. VEC analysts expect the trust fund to run low next year, with recovery expected by 2006.

Contact: Charlotte Crystal, (434) 924-6858

FOR ADDITIONAL INFORMATION: Contact the Office of University Relations at (434) 924-7116. Television reporters should contact the TV News Office at (434) 924-7550.

SOURCE: U.Va. News Services


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