18 MiMfg Magazine September 2020
How Manufacturing is Tackling
Unemployment Issues in Michigan
By David Q. Worthams • MMA
State employment levels continue to improve as the
Michigan Department of Technology, Management &
Budget reported 269,000 additional jobs across June
and July while the current 8.7 percent unemployment
rate is both better than the national average and
much improved from April’s post-pandemic rate of
22.7 percent. Despite this, employers will likely feel
the long-term effects of COVID-19 through its impact
on unemployment benefits and related programs.
Lack of Trust in the Unemployment
Insurance Trust Fund
As a funding source entirely sustained through
the state and federal unemployment taxes paid by
Michigan employers, manufacturers keep a close eye
on the health of the Unemployment Insurance Trust
Fund (UITF). Funds in the UITF are used to pay
unemployment benefits. After MMA led an effort
to pay down long-term debt in the fund, at the
beginning of 2020, Michigan’s UITF was third
strongest in the nation with more than $4.66 billion
in reserve. COVID-19 and its resulting economic
crisis changed everything.
As employers were forced to suspend operations
and make difficult workforce decisions, the UITF
balance has declined rapidly. The Michigan Department
of Labor and Economic Opportunity (LEO)
announced projections in June that put the Fund
below $2.5 billion, triggering an increase in the
taxable wage limit for 2021 and eliminating nearly
$57 million in annual unemployment tax savings.
A provision in the Michigan Employment Security
Act intended to ensure solvency of the Fund requires
the taxable wage base to increase from $9,000 per
employee to $9,500 when the balance of the Fund
falls below $2.5 billion.
MMA Driving Solutions to
Prevent Tax Increases
To prevent an increase in employer taxes paid
into the unemployment system, MMA is pushing
three potential solutions:
1. MMA supported efforts by the Michigan
Legislature to appropriate funds to bolster the
balance of the UITF. In an early version of a
supplemental appropriations bill passed earlier
this year, Senate Bill 690 (Senator Jim Stamas,
R-Midland), $500 million was set aside to be
transferred to the UITF if it fell below the
threshold. Unfortunately, sizable budget deficits
created by COVID-19 forced the elimination
of this provision before final passage.
2. Understanding that employers should not be
held responsible for the cost of unexpected
unemployment due to COVID-19, Congress
and the Trump Administration are considering
enacting another COVID-19 protection
program that provides funds to states to fill
UITF gaps. There is bipartisan recognition
that the economic damage we face today is not
the result of normal market functions nor the
actions of specific employers. MMA and a
coalition of business groups sent a letter calling
on Congress to continue provisions within the
Coronavirus Aid, Relief, and Economic Security
(CARES) Act that would provide 100 percent
federal reimbursement for extended benefits.
3. On a parallel track, MMA is pushing a policy
debate in Lansing about postponing the trigger
date for making a determination of the taxable
wage base. As the pressure on the fund is caused
by the COVID-19 pandemic, a tax increase on
employers will not solve the problem and may
increase financial stress on manufacturers facing
cashflow challenges. Changing the trigger to
January or June of 2021 could prevent employer
tax increases while maintaining adequate
UITF reserves.
Get Involved!
Stay up-to-date on unemployment regulations
and help drive the Association’s HR policy
priorities by joining the MMA Human Resource
Policy Committee. Learn more at mimfg.org.