Thursday, March 28, 2024
Hawai'i Free Press

Current Articles | Archives

Friday, December 11, 2020
A new way to address unemployment
By Keli'i Akina PhD @ 8:39 PM :: 2504 Views :: Small Business, COVID-19

A new way to address unemployment

by Keli'i Akina, PhD, President, Grassroot Institute

Hawaii’s unemployment insurance system has become a ticking time bomb that threatens Hawaii’s fiscal future. 

In the short run, it might still be possible to avert disaster through creative budgeting involving reduced government spending in other areas. In the long run, the problem is bound to return because of how the state's unemployment insurance system is structured, and only fundamental reforms will be able to fix it.

What kinds of fundamental reforms? 

Well, to learn more about that, I spoke this week with international economist Veronique de Rugy, a senior research fellow at the Mercatus Institute at George Washington University and nationally syndicated columnist, who has studied unemployment insurance systems worldwide. 

De Rugy also studies the U.S. economy, the federal budget, taxation, tax competition and financial privacy, and has testified numerous times in front of Congress on the effects of fiscal stimulus, debt and deficits, and regulation on the U.S. economy.

Educated in France, de Rugy joined me for the latest episode of my “Hawaii Together” program on the ThinkTech Hawaii network, during which I told her about how Hawaii’s unemployment insurance tax on businesses is scheduled to triple in 2021. 

That increase is required, I said, because when the state’s insurance fund goes down, the rates go up. And right now, the fund is totally depleted because of the state’s historically high unemployment caused by the COVID-19 lockdowns. 

I explained that this is an unfortunate way to fund the program, because at the very time when employers are struggling to survive, a tax increase would make it difficult for them to afford new hires. In fact, they might even have to let go some of their existing employees. In both cases, this would hurt the very individuals the insurance program is intended to help. 

Nevertheless, unless something can be done to prevent it, Hawaii by law must follow its usual procedure of raising taxes to deal with the depletion of its unemployment fund. This, unfortunately, will never put us in a position to better handle future emergencies. 

For a new approach, de Rugy urged that we think big. In fact, what she would prefer, she said, is to “dismantle the whole system … and move to … a system of private accounts.”

Yes, it’s a revolutionary suggestion, but not an untried one. As de Rugy explained, Chile and Austria are among countries that have overhauled their unemployment systems in favor of private savings accounts owned by the employees.

Under the new system, both the employers and employees contribute to the accounts through a tax. The accounts are portable and belong to the employees throughout their careers. If the employees decide to look for another job, they do not have to wait to be fired or meet the unemployment qualifications that we are accustomed to in the U.S. before drawing on their accounts.

Once they start drawing on the funds, there is no incentive to deplete the accounts because it's their money. Thus they typically will not dally on unemployment before looking for another job; they look for new jobs in earnest. Meanwhile, there are fewer limits on how the funds can be used, and it can even accumulate and be used for retirement.

De Rugy acknowledged it would be politically difficult to accomplish such a dramatic overhaul of Hawaii’s unemployment system "just like that." There are many questions, and they all deserve attention. But a fresh look at the issue could be just the thing to help jump-start Hawaii’s economy. 

State policymakers need to look for ways to remove the barriers and disincentives to work, not create them. Hawaii could go from a place where the government makes it difficult to do business to a place where the government itself is entrepreneurial and willing to try new things. 

As de Rugy said, “This is the beauty of the American system. … Hawaii could become the leader in employment.”

E hana kākou! (Let's work together!)

Keli'i Akina, Ph.D.
President / CEO

Links

TEXT "follow HawaiiFreePress" to 40404

Register to Vote

2aHawaii

808 Silent Majority

Aloha Pregnancy Care Center

AntiPlanner

Antonio Gramsci Reading List

A Place for Women in Waipio

Ballotpedia Hawaii

Broken Trust

Build More Hawaiian Homes Working Group

Christian Homeschoolers of Hawaii

Cliff Slater's Second Opinion

DVids Hawaii

FIRE

Fix Oahu!

Frontline: The Fixers

Genetic Literacy Project

Grassroot Institute

Habele.org

Hawaii Aquarium Fish Report

Hawaii Aviation Preservation Society

Hawaii Catholic TV

Hawaii Christian Coalition

Hawaii Cigar Association

Hawaii ConCon Info

Hawaii Debt Clock

Hawaii Defense Foundation

Hawaii Family Forum

Hawaii Farmers and Ranchers United

Hawaii Farmer's Daughter

Hawaii Federalist Society

Hawaii Federation of Republican Women

Hawaii History Blog

Hawaii Homeschool Association

Hawaii Jihadi Trial

Hawaii Legal News

Hawaii Legal Short-Term Rental Alliance

Hawaii Matters

Hawaii's Partnership for Appropriate & Compassionate Care

Hawaii Public Charter School Network

Hawaii Rifle Association

Hawaii Shippers Council

Hawaii Smokers Alliance

Hawaii State Data Lab

Hawaii Together

HIEC.Coop

HiFiCo

Hiram Fong Papers

Homeschool Legal Defense Hawaii

Honolulu Moms for Liberty

Honolulu Navy League

Honolulu Traffic

House Minority Blog

Imua TMT

Inouye-Kwock, NYT 1992

Inside the Nature Conservancy

Inverse Condemnation

Investigative Project on Terrorism

July 4 in Hawaii

Kakaako Cares

Keep Hawaii's Heroes

Land and Power in Hawaii

Legislative Committee Analysis Tool

Lessons in Firearm Education

Lingle Years

Managed Care Matters -- Hawaii

Malama Pregnancy Center of Maui

MentalIllnessPolicy.org

Military Home Educators' Network Oahu

Missile Defense Advocacy

MIS Veterans Hawaii

NAMI Hawaii

Natatorium.org

National Christian Foundation Hawaii

National Parents Org Hawaii

NFIB Hawaii News

No GMO Means No Aloha

Not Dead Yet, Hawaii

NRA-ILA Hawaii

Oahu Alternative Transport

Obookiah

OHA Lies

Opt Out Today

OurFutureHawaii.com

Patients Rights Council Hawaii

PEACE Hawaii

People vs Machine

Practical Policy Institute of Hawaii

Pritchett Cartoons

Pro-GMO Hawaii

P.U.E.O.

RailRipoff.com

Rental by Owner Awareness Assn

ReRoute the Rail

Research Institute for Hawaii USA

Rick Hamada Show

RJ Rummel

Robotics Organizing Committee

School Choice in Hawaii

SenatorFong.com

Sink the Jones Act

Statehood for Guam

Talking Tax

Tax Foundation of Hawaii

The Real Hanabusa

Time Out Honolulu

Trustee Akina KWO Columns

UCC Truths

US Tax Foundation Hawaii Info

VAREP Honolulu

Waagey.org

West Maui Taxpayers Association

What Natalie Thinks

Whole Life Hawaii

Yes2TMT