But's Its My Hard Work Paying Your Unemployment

I found this story, from a Marketplace segment via Carpe Diem, especially irritating.  Our company has to pay for a lot of unemployment fraud, so seeing such fraud in action really annoys the hell out of me.

Quick background:  Employers pay unemployment taxes generally as a percentage of wages.  These taxes are based on a direct relationship with past claims from ex-employees.  The more of my ex-employees who make claims, the more premiums I pay.

Since I only have jobs for 6 months a year (it is a seasonable business), employees have the opportunity to file for unemployment the other 6 months.   BUT, the rule is generally that you have to be looking for work.

Unfortunately, I have numerous employees who work for me over the summer and take the winter off, but tell the unemployment office they are looking for work so they can collect unemployment anyway.  I have had employees call me from Mexico telling me about the great winter vacation they are having on the exact same day I see their names on the roles of those collecting unemployment (and thereby supposedly "looking for work").

In California, where such behavior is rampant (and where the state unemployment agency has established penalties for employers who even think about asking the state to investigate one of his ex-employees for fraud) I pay over 7% of wages in unemployment taxes, vs. less than 1% in states without such fraudulent behavior.

So, with this background, I am thrilled this guy is showing the initiative to find work but am frustrated he is still fraudulently taking my money:

Michael: I'm getting $272 a week [in unemployment benefits]. Which is just, bare bones. It's so bad that at one time I was going to the food bank. And, you know when you're really hungry and when you're facing eviction, you've got to do something.

Marketplace: So he started looking for work on the side. He found it pretty quickly.

Michael: So right now I have Craigslist open. And what I've done is I've opened three different tabs: I've opened free stuff, all gigs and all jobs.

Marketplace: He's found all sorts of work this way: software testing, landscaping, bouncing and lots of focus groups. All have paid cash. He says some weeks he's earned three times as much as his benefits check. Like everyone on unemployment, he's meant to report any earnings to his unemployment insurance office. Then they adjust his benefits down. So how does Michael answer the question, have you earned any money this week?

Michael: I opt to say, you know, no. I opt to say no, I have not. Because this is my own hard work, this is my own ingenuity, this is my own genius, and I am still looking for work every day.

You are absolutely right Michael, yours the same argument all productive folks make in the face of government expropriation.  In fact, I couldn't have said it better - "this is my own hard work, this is my own ingenuity, this is my own genius."  Brilliant.  But recognize that the unemployment money you are taking fraudulently was paid for with my hard work, my ingenuity, and my own genius.

  • http://evilredscandi.blogspot.com Evil Red Scandi

    Get it straight - it's not unemployment, it's funemployment.

  • Spartan79

    So I have only one question for you. Why do you still do business in California? I also run a business, albeit probably one much smaller than yours. However, despite the diminutive size of my business (in terms of employee size), I do business in and. over a period of two to three years, travel to every state in the U.S. --- save one. My office manager, who has to file all the paperwork, get all the permits, deal with the CA treasury department and the other various other California local and county government agencies, etc. etc. etc., finally convinced me that the f*****g you get isn't worth the f*****g you take. I don't miss working in California one bit, and truly hope that one day it slides off into the pacific. Or maybe we could give it back to Mexico. The U.S. would be better off without it.

  • Dr. T

    I was on unemployment for a few months after the laboratory I helped to establish was bought by Quest Diagnostics. I reported severance pay that dropped my benefits to zero that week. I reported consulting income that dropped my benefits to zero for a few weeks. I reported when I got a full-time job in another state. Why did I do this? First, I'm an honest person. Second, because it shocked the hell out of the county unemployment workers!

    Unemployment insurance is another idiocy of the nanny state. It exists because too many adults behave irresponsibly and spend every dollar they have. I couldn't believe how many of my employees (mostly medical technologists earning over $40,000) live from paycheck to paycheck. Twice I remember employees being frantic because payment for their overtime hours got deferred until the next paycheck (two weeks away). They had already spent (via credit cards) their overtime pay and the bills were due soon. When people like this lose their jobs, they don't have enough savings for two weeks, much less the recommended six months. Such people lobbied for and got government-run unemployment benefits. They'd have been better off with employer-run savings accounts, because more than half the unemployment dollars go to bureaucracy and fraud.

  • http://www.buffalog.blogspot.com Craig

    Ah, but Michael has been told his entire life that, just like Social Security and Medicare, he has paid into UI his entire working life. It isn't surprising he feels entitled to get it back despite some niggly regulations.

  • ArtD0dger

    Well, I think there's an argument that you're not the only one Michael is taking unemployment money from. Since you know that you will be forced to pay this excess amount, your demand/wages for seasonal workers will be reduced to a lower equilibrium, and your prices to a higher one. This harms you, your remaining customers, and those unseen potential customers that now forego your business. And of course, it harms the general taxpayer unless you are covering the full unemployment amount. But it most especially harms any seasonal workers who do NOT draw unemployment since they will bear the full wage reduction.

    Either way, perverse outcomes all around.

  • http://herdgadfly.blogspot.com/ gadfly

    Unemployment compensation law even permits employees to collect UC from an employer while still employed. It is called underemployment. A seasonal business such as cannery may require employees all year but pay substantial overtime in September and October. When wages decline with reduced hours in the next quarter, the parade to the UC office can begin.

    The most amazing thing to me is the benefits enjoyed by the UAW whose laid-off employees draw labor contract funds from the union (paid by the automakers) and also are permitted to collect UC from the states.

  • Michael

    Dr.T

    I was out of work and did some cash work. What it did was make me go back and look at my pay stubs. Someone earning between $10 and $15 per hour in Cincinnati is getting hit with a 39% payroll tax and a property tax around 10%. Government loves to lament that the American people are working paycheck to paycheck, but this is where government wants the American people. I would be in a much better position if 49% of my income wasn't taken and in exchange I get weekly trash pick up.

    I empathize with Coyote's situation particularly because since his is a seasonal business. But I empathize with the full time employee too since he isn't paid his full worth because of the unemployment insurance system.

    I'd like to see the system go private where a person can either build savings and/or buy an unemployment insurance policy. But it's never going to happen. The unemployment insurance system creates lots of union government jobs and those jobs will always take precedent over the welfare and well being of employees and employers in the private sector.

  • Mark

    In Iowa this is not considered fraud. If you freelance while looking for work, the income you made self employed is not counted against your benefits.

  • Max

    Well, you get it wrong, it wasn't his fault. I mean the state offers him this option without much of a downside. It is the fault of voters and politicians and thus yours (if you vote) as well. It is the unaccountability of the democratic state that ultimately has forced him to lie and will do so. ISn't the welfare state a fine thing, a thing that turns men on men without easily pin-pointing a beginning nor an end?

    We Europeans have made a perpetuum mobile out of it and are now trapped. The only way this is going to end in Europe, is when another war destroys the democracies of now. Though when that will happen, I don't know (I hope it is not in my time).

  • http://tjic.com TJIC

    I had one employee take a week of vacation, come back to work, realize that noone else had done his job in his absence (and, thus, work had piled up...a LOT), and flip out because he felt overwhelmed.

    This happened at 8am.

    I arrived at work at 8:30, my first goal of the day being to talk to him and come up with a strategy to get the backlog dealt with.

    ...but at 8:04 the employee sent me a really nasty email, saying that the employee manual did not require any advance notice on quitting, so he was quitting effective immediately.

    He was out of the building before I arrived.

    I emailed and called, leaving messages asking him to comeback so we could talk about it.

    No response.

    A week later I got his application for unemployment.

    FUCK THAT!

    I worked hard to make sure that he was denied, and that his appeal was denied, and that his second appeal was denied.

    Having his "I quit" email on hand helped!

  • http://milliondollarway.blogspot.com Bruce Oksol

    This is one of the reasons that the current unemployment rate of 9 - 15% across the country is not resulting in much civil disobedience, or pictures of long lines of homeless people. Folks are supplementing their unemployment with free-lancing jobs that are not being reported. There are some fascinating things going on right now.

    I do wonder how small businesses stay in business in California. I know I can't afford to live there.

  • Michael

    Bruce makes a good point. Would we rather have this "Michael" earn some money from odd jobs and not report it to the government or have him burning cars at night and taking his former boss hostage by day.

    I can understand Warren's frustration with California's laws and regulations, but it is a sovereign state. If it wants to run a work 6 months, get unemployment 6 months cycle and tax business 7%, then it is free to do so. The fortunate thing about America is that no one is required to do business with California.

  • Gordon

    To TJIC
    Good for you.

  • Allen

    How much lower might the unemployment rate be if there wasn't unemployment insurance?

  • Dr. T

    Michael:

    Fraud is fraud. You can give all the justifications and rationalizations you want, but you still defrauded the unemployment system. You are no different than welfare cheats, Medicaid and Social Security scammers, federal workers who misuse government credit cards, and income tax cheats. People like you cause high taxes because you support the nanny state and the entitlement state, but then you use the excuse of high taxes to justify your own fraudulent actions. But, the rampant fraud increases costs, resulting in even higher taxes. Hence, I have no pity, only disgust and anger.

  • Michael

    Dr. T

    I'm not the Michael in Coyote's story. I'd like to see the end of Medicaid, SS and a federal government that operates with in the confines of the constitution as originally written.

    However, we live in a time where government waste, fraud and corruption is standard practice. I will say that if faced with the choice of paying my mortgage or paying for a self serving government bureaucracy, I'm paying my mortgage.

  • http://www.localetrends.com/ Pete

    California Unemployment Situation in Heat Map form:
    here is a map of California Unemployment in August 2009 (BLS data)
    http://www.localetrends.com/st/ca_california_unemployment.php?MAP_TYPE=curr_ue

    versus California Unemployment Levels 1 year ago
    http://www.localetrends.com/st/ca_california_unemployment.php?MAP_TYPE=m12_ue

  • Jim Collins

    Nothing against you Coyote, but untill a few years ago I would have agreed with you entirely. A few years ago I worked for a company that I thought was pretty good, until I get called into a meeting at 4:00 PM one day and am out the door with my belongings by 4:30 PM. Nine people were let go that day. Do you think that there was a coincidence that all nine of us would have been fully vested in the pension plan the next day? That four of us were owed a cost savings bonus of almost $100,000 between us? If I hadn't gotten a good job offer almost immediately, I would have been one of the people taking that paid vacation. It would have been partial compensation for the $80,000+ that I got screwed out of.

  • Peter

    We had an employee that was hiding out during his work day to run his own landscaping business from his cell phone. He was fired for that reason. He applied for unemployment and it was granted. The states reason was that we did not have a specific written policy against working other jobs while on our job. They wouldn't listen to the fact that this presumes the fact that he already has another job and therefore shouldn't get the unemployment. It just goes to show that it is virtually impossible to "fire" an employee in MA and that the unemployment system is nothing more that a business paid government subsidy for the lazy and deceitful.

  • Methinks

    Coyote,

    I understand your frustration. However, your grasp of economics is to good to think that the cost of unemployment insurance is borne by any party other than labour. Unemployment insurance is factored into every one of your hiring and firing decisions and how much you are willing to pay your employees.

    There is no free lunch and it's pretty damn hard to make others pay for your lunch. Labour enjoys the benefits of unemployment and pays for them dearly. The only problem is that the benefits and costs are improperly distributed.

  • Michael

    I agree that the cost ends up hitting the workers. I wouldn't think that Coyote thinks he is paying out of pocket the matching SS and Medicare taxes.

    Unemployment is now just a 6 month perk of getting canned. I remember in Ohio about 17 years ago, when you got let go, you went down to the unemployment office, took a 4 hour class, met with a counselor and got an employment workbook. You then met monthly with the counselor who would copy your employment workbook to verify your employment activity.

    Now everything is done online with a few yes or no questions. Nothing is verified.

    The whole system sucks, but government gets to make the rules.

  • Max

    @Jim Collins:

    Well, that is one reason why pension plans shouldn't be made by a third party, but by you. However, even if you were fired for the reason you stated, this is not a healthy policy for any company. The signaling for other employees is too harsh.

    Though I can think that such stupid companies still exist and more so in today's business climate. On the other side, I wonder why they could fire you like that after such a long time? Didn't you have some kind of provisions against it in your contract (like 3 month notice or some such)? And where there no signals in your company that showed up that maybe this company has a bad attitude on labour policies?

  • the other coyote

    Did anyone see the headline a week or two ago that the feds were going to extend unemployment benefits in states with high unemployment, but not in states with low unemployment? Once again, states that do things right get to subsidize states that do things wrong. I feel like all we do here in Texas is work our asses off to support a bunch of worthless surfers.

    But I do feel terribly, horribly sorry for the ag sector in California. Since when does a little bait fish take precedence over feeding humans? I'm reading my daughter a series of books about Rose Wilder, the daughter of Laura Ingalls Wilder, which are set in 1894. How much the world, and attitudes toward the world and man's role in it, have changed just since my grandmother was born (my grandmother was born in 1897 and died in 1993. She was such an interesting link to the way the world should be).

  • Jim Collins

    Max,
    I wasn't fired, I was laid off with no chance of recall. If they would have fired me I had legal recourse, but, since I was laid off there was nothing I could do. To fire me they would have had to show that I violated company rules or policy. The ink was barely dry on my last evaluation form which contained all "above expectation" ratings.

  • john

    Unemployment is a joke.

    As an employer in PA - I used to try and fight bad unemployment claims.

    I caught a truck driver stealing from me and fired him for cause. He filed for unemployment. Of course I didn't win that.

    I had an employee quit on an a Friday. No advanced notice - nothing. In a season when I really needed him. He found a "better job". He slept in and was late for the first 2 days of the job and was fired. Filed for unemployment against me. Of course I didn't win that.

    Now PA has a law that you need an attorney to fight any unemployment claims. You can't do it yourself (even though you never won it atleast made them get off their dead a** and show up for the hearing). Its not not worth the hassle and expense. Just another tax.

    What I have found is that the more "benefits" the governemt gives out the stronger their constituencey. They don't give a fig about 10 small business men when they can give out free money to 1,000 potential voters.

    What a joke

  • Methinks

    How long do unemployment transfer payments usually last?

  • http://www.workbabble.com workplace bosses human resources

    There are lot of people who are unemployed looking for jobs. The government should take steps.