We have been in a down economy for a few years in Missouri. Most of the downsides of a recession or an economic slump are obvious, but there are some consequences we fail to comprehend.
Part of the money that pays federal unemployment benefits comes from business owners. Along with state unemployment systems, theFederal Unemployment Tax Act (FUTA) provides for payments of unemployment compensation to workers who have lost their jobs. Most employers pay both a federal and a state unemployment tax.
Currently, those who are out-of-work can be on unemployment for 90 weeks. Unfortunately, this system has provided the opportunity for some Missourians to choose not to work, making it hard for Missouri businesses to find good employees.
I was recently told a story of how FUTA is hurting small business owners right here in rural Missouri in another way.
Late last year, a local small building materials dealer was billed for anadditional $1,564.57 in FUTA taxes. This was an increase to most business owners in Missouri to be able to afford growing unemployment costs. If all goes well, this business has a profit margin of 2 percent of sales. It would take $75,000 more in sales to cover these additional costs. That is roughly the total sales budget of one of the owner’s stores in January.
On top of this, the business owner told me he tried to hire additional people last summer. Sadly, he was told by most people that they would rather stay on unemployment than to take a minimum wage job for a few months. He also mentioned that Missouri’s regulations are now so burdensome that his family often considers laying off all 100 employees and finding a new line of work. If an employee is fired for making a costly mistake or not showing up to work, the business is most often penalized by paying for that former employee’s unemployment.
We had several debates about unemployment benefits last year in the Missouri Senate. The bottom line is, unemployment is only meant to be replacement income for a short amount of time. When I hear that there are folks who would rather take government handouts than work, I believe we need immediate reforms. For all politicians that talk about “jobs” and support increased regulations that only make it harder for businesses to employee people — please take note: businesses pay our bills.
Unemployment is hard on everybody involved. Obviously, it is worst for those who cannot find work, but these lengthy terms for benefits also take money away from business owners. The smaller the business, the worse the effect is. This is why a lot of us are working as hard as we can to cut the ties of regulation and help as many business owners as possible to hire as many people as they need. These are tough times, but we are all in this together. And, together, we will find the solutions.