UNEMPLOYMENT IN SOUTH CAROLINA An Overview of Issues and Recommendations
Division of Research South Carolina Department of Commerce
Rebecca M. Gunnlaugsson, Ph.D. Erica Morgan, Ph.D.
A NEW LOOK AT THE UNEMPLOYED IN SOUTH CAROLINA
January 2006 – October 2009
40%
38.3%
30%
23.5% 20%
10%
8.5% 6.2%
6.1% 4.5% 0% NA 1
2
3
4
5
6
7
8
9
10
11
Years of School Compiled from data provided by the SC Employment Security Commission on 11/6/2009.
12
13
14
15
5.6%
16
17
18
19
UI CLAIMANT CHARACTERISTICS
Educational Attainment
Retirement 0.04%
January 2006 – October 2009
Still Working Claim 3.0%
Uncollected 13.5%
Lack of Work 34.7%
Employer Filed* 17.6% Voluntary Quit 10.1%
*Reason for Separation is “Uncollected” for 94.6% of Employer Filed claims.
Misconduct 23.0%
UI CLAIMANT CHARACTERISTICS
Reason for Separation
January 2006 – October 2009
20,000 18,000 16,000 14,000 12,000 10,000 8,000 6,000 4,000 2,000 0
Misconduct
Lack of Work
Uncollected
Voluntary Quit
Employer-Filed
UI: SEASONAL TRENDS
Seasonal Trends
Between January 2006 and October 2009, 944,976 claims were filed by 651,128 individuals.
Of these individual claimants, 441,086 filed only once, while 210,042 filed two or more times.
January 2006 – October 2009
4 3 Claims, 5+ Claims, 2.2% Claims, 7.6% 0.3%
2 Claims, 22.2%
1 Claim, 67.7%
UI CLAIMANT CHARACTERISTICS
Repeat Claimants
FACTORS DRIVING UNEMPLOYMENT STATEWIDE
1. High number of seasonal jobs 2. Extensive use of employer-filed UI claims 3. Ineffective UI tax rate structure 4. Lack of targeted effective interventions
Economy-Driven Factors 1. Rapid labor force growth
2. Increasing use of temporary workers 3. Transition of manufacturing industry 4. Shift of occupational mix toward high-skilled workers
FACTORS DRIVING UNEMPLOYMENT
Policy-Based Factors
Claims by Industry, 2006 - 2008
Most states require seasonal employment be designated by: Industry Occupation Employer Worker Start/end dates of season
4,000
3,000
2,000
1,000
Administrative and Support Services Textile Mills
200809
200811
200805
200807
200801
200803
200709
200711
200707
200703
200705
200611
200701
200607
200609
200605
200601
200603
0
Food Services and Drinking Places Machinery Manufacturing
Tourism and Hospitality* industry: 4.2% of GDP
11.6% of Employment 12.1% of UI claims Source: BEA, BLS, and Commerce analysis of ESC UI claimant data (2006 – June 2009) *Note: Includes NAICS 71 and 72
15 states impose benefit restrictions to seasonal workers (AR, AZ, CO, DE, IN, ME, MA, MI, MS, NC, OH, PA, SD, WV, WI)
Wage credits earned during season available for UI benefits paid during season Wage credits earned outside season available at any time
POLICY-BASED FACTORS
1. Seasonal Employment
Employers file claims (113 vs. 114) Vestige of original textile industry 9 states still allow (AL, GA, IA, KY, MI, MS, NC, SC, TN)
17.6% of UI Claims Typically temporary (low seasonal volume or regular factory retooling) 30% have 2+ new claim years with same employer Predictable: 61% are 1 year apart Short duration Average 4.7 weeks vs. 21.0 weeks Officially unemployed by USDOL Monthly State Unemployment Weekly Initial Claims More likely to be repeat
80% 60%
77.2%
47.7%
40%
32.2% 18.6%
20%
20.1% 4.2%
0%
1
2 Claims Filed
Employer-Filed
3+ Claimant-Filed
Source: Commerce analysis of ESC UI claimant data, 2006 - 2008
POLICY-BASED FACTORS
2. Employer-Filed Claims
Part 1: Taxable Wage Base
SC is one of 4 states still using federal minimum Wage Base of $7,000 (AZ, CA, MS, SC)
US Taxable Wage Base Statistics Range: $7,000 to $38,800 Average: $15,245 Flexible WB indexed to average annual state wage in 16 states Greater tax burden for low-wage workers De facto lump sum tax per worker Tax paid for a $15,000/year employee identical to a $75,000/year employee
POLICY-BASED FACTORS
3. Ineffective UI Tax Structure
Part 2: Experience Ratings
State UI tax rates based on firms’ “experience” with unemployment Employers who utilize UI system more face higher UI tax rates UI Tax Schedule in South Carolina:
South Carolina UI Tax Schedule
Tax Rate
Annual Cost Per Employee
Highest
6.1%
$427
Lowest
1.24%
$86.80
New Employers
3.34%
$233.80
Average Effective
2.09%
$146.30
POLICY-BASED FACTORS
3. Ineffective UI Tax Structure
Part 2: Experience Ratings
Employer Distribution by UI Tax Rate, 2008 52.7%
50%
40%
30%
22.1%
20%
10%
3.0% 0.3%
0.4%
0% 6.10
5.79
5.44
0.4% 5.09
0.6% 4.74
0.7% 4.39
1.0%
4.04
3.69
UI Tax Rate *Source: USDOL
2.7%
1.5%
3.34
2.99
3.0%
2.64
4.0%
2.29
3.5%
1.94
4.1%
1.59
1.24
POLICY-BASED FACTORS
3. Ineffective UI Tax Structure
Part 2: Experience Ratings
Imperfect experience ratings: Do not effectively use the full range of tax rates available. 1. Floor and/or ceiling tax rates 2. Infrequent movement between rating categories Provide incentive for employers to layoff workers.
If minimum tax rate is too high…
Employers accumulate excess reserves Have incentive to draw down excess via layoffs 34 states set lowest tax rates below SC, many at 0% (GA, NC).*
*Source: USDOL 2008 “Significant Measures of State UI Tax Systems.”
If maximum tax rate is too low…
No additional cost is associated with extra layoffs 3% of firms account for 30% of benefits charged yet pay 8% of contributions.*
POLICY-BASED FACTORS
3. Ineffective UI Tax Structure
Part 2: Experience Ratings
$1,000
$951
$800
UI Cost per Employee
$750
$600
$459 $400
$427 $378
$200
$86.80 $0 -45%
-40%
-35%
-30%
-25%
-20%
-15%
-10%
-5%
0%
5%
10%
15%
UI Reserve Ratio Balance
South Carolina
Arizona
Missouri
Georgia
North Carolina
$14 $0
20%
25%
POLICY-BASED FACTORS
3. Ineffective UI Tax Structure
Part 2: Experience Ratings
$1,000
$800
UI Cost per Employee
$727 $600
$400
$427
$200
$86.80 $32.16 $0 -45%
-40%
-35%
-30%
-25%
-20%
-15%
-10%
-5%
0%
5%
10%
15%
20%
UI Reserve Ratio Balance
South Carolina
Reserve Ratio States
Source: USDOL *Represents the average of the 19 of 24 states who use the Reserve Ratio method and had annual average wages within +/- 18% of South Carolina.
25%
POLICY-BASED FACTORS
3. Ineffective UI Tax Structure
Part 1: Develop Data-Driven Targeted Programs
UI claimants are treated the same regardless of their characteristics One-size fits all approach Use data to identify specific needs and develop suitable training and interventions Geographic locations Educational, occupation, industry, skills history Long duration claimants Repeat claimants
Use data to measure performance Track individual progress Measure state performance Use feedback to improve programs
USDOL “encourages states to assess claimants through the use of statistical profiling models using claimants’ characteristics, as known from their initial UI claim.” –USDOL guidance for use of ARRA funds
POLICY-BASED FACTORS
4. Targeted Interventions
Part 2: Integrate Multiple Programs
Assistance programs for unemployed administered by different agencies: Unemployment Insurance (SCESC) Wagner-Peyser (SCESC) Workforce Investment Act (SCDOC) Adult Education (SCDOE) TANF (SCDSS) Mandate comprehensive, integrated effort among programs to assist those in need by sharing electronic records Streamline process Eliminate duplicative efforts Quick response Efficiently use state & federal resources Successful outcomes for individuals across all programs more easily tracked if information is shared among agencies Comprehensive follow-up of individual activities and needs across all programs Effective, regular, reliable performance metrics
POLICY-BASED FACTORS
4. Targeted Interventions
Labor force (2002 to Nov 2009) in SC Increased 247,268 people Expanded 12.8%, compared to 6.8% nationally (6th fastest)
3.5% 3.0%
3.0% 2.3%
2.5% 2.0%
2.1%
2.1%
1.9% 1.8%
1.5%
1.7%
1.0%
1.3% 0.9%
0.5% 0.0%
Population (2002 to 2009) in SC Increased 457,308 people Expanded 11.1%, versus 6.7% nationally (9th fastest)
0.8%
1.1% 0.5%
2002
0.1%
2003
2004
SC
2005
2006
0.4%
2007
2008
US
Source: Bureau of Labor Statistics Note: Rates represent annual growth, December over December.
2. Increasing Use of Temporary Workers 7.0%
125 119
120
6.4%
115 110
6.0%
5.7%
105 100
6.5%
5.5% 102
95
Percent of Total Employment
Employment (Thousands)
130
Temporary Workers (2002 to 2008) Comprises 119,292 people Expanded 19.6%, compared to 5.1% nationally Makes up 6.4% of the workforce, versus 5.7% nationally
5.0%
2001 2002 2003 2004 2005 2006 2007 2008 Employment
% of Total Employment
Source: Bureau of Labor Statistics Note: NAICS 561: Administrative Support (includes temporary staffing firms).
ECONOMY-DRIVEN FACTORS
1. Rapid Labor Force Growth
$28
314
Thousands
310
$27
290
$26 $25.2
270
$25
250 242
230
$24
$24.0
210
$23 2001
2002
2003
2004
2005
2006
Manufacturing Employment
2007
2008
Manufacturing Output
Sources: Bureau of Labor Statistics; Bureau of Economic Analysis
4. Occupational Mix Shift Toward High Skills 2.49 2.48
Skill Level*
2.47
2.46 2.45 2.44 2.43 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008
Source: SCDOC Labor Market Information *Note: Represents average skill levels for all jobs recorded in South Carolina on a scale of 1 to 5. 1 indicates little to no preparation required. 5 indicates extensive preparation (in terms of advanced degrees, experience, and specialized training) necessary.
Billions of USD
330
ECONOMY-DRIVEN FACTORS
3. Transition of the Manufacturing Industry
CONCLUSION
Moving Forward
To reduce unemployment and strengthen statewide economic growth, stakeholders need to work together,
share data, align programs, and
define a tax structure that encourages economic productivity and serves the unemployed.
