Out of Work, Out of Luck?



Should seasonal workers get unemployment benefits? That’s one of the questions that Sunday’s editorial tackles.

Stephen Greene has been shopping around the same anecdote to listeners across the state for the past few weeks. It involves the state’s unemployment tax, a family-owned restaurant on the Strand and a bill that unexpectedly grew by $75,000.

Greene, the president of the Myrtle Beach Hospitality Association, is working hard to raise awareness about the sudden and mostly unexpected impact of last year’s reform of the inept and indebted Employment Security Commission.

The reform, which dissolved the ESC and created the new Department of Employment and Workforce, followed the digging of a $900 million financial pit by the overseers of the state’s unemployment trust fund. In order to pay back that money to the federal government, the legislature opted to raise rates on employers, deciding fairly that it made sense to raise rates the most on those employers whose workers claimed more in unemployment benefits. That method has meant a tougher road for businesses in our area than many had expected.

We’ve long known that the Grand Strand is a seasonal economy. When tourists pour into town in the summer, more workers are needed to staff the restaurants, hotels and water parks that they come to enjoy. A look at the past few years shows that starting in January, the number of those on unemployment in Horry County consistently drops, until there are 2,000-3,000 fewer people on the rolls in May. When the summer ends, those numbers steadily climb again as our seasonal businesses lay off employees. This regular and steady use of unemployment by seasonal employees means that many businesses that lay off workers every year are finding their unemployment tax bill has skyrocketed, with the first payment due by April 30.

“I’d estimate over 85 percent of our businesses are being detrimentally impacted by this,” Greene said. He warned that “there might be a lot of businesses going under and a lot more people unemployed because those businesses won’t be able to make it through.”

Republican Sen. Ray Cleary of Murrells Inlet, who has been involved in the discussions and plans from the beginning, said that the legislature’s first goal last year was to reform the unemployment system and pay back the federal money. As for the impact on seasonal businesses, Cleary said that lawmakers listened to a lot of testimony last year and talked to a number of experts, but “I don’t think it hit home until now.”

So what can be done or should be done to help local businesses? One solution, proposed in the state House, involves extending the time the state takes to pay back the federal loan, to temper the increase in businesses’ bills. This idea seems the easiest, but as is often true, the easiest solution is not necessarily the best.

While it would help businesses somewhat, extending the payback period from five years to eight years would cost the state an extra $76 million in interest payments. Gov. Nikki Haley has said she won’t support any change that will cost the state more. And Greene was similarly unimpressed, saying “delaying payments is a short-term Band-Aid on a gunshot wound.”

The solution Haley proposes, at least when it comes to seasonal businesses, would be to tear up unemployment checks for any seasonal workers. She was crystal clear on the topic during her town hall meeting in March: “Seasonal employees should not be getting unemployment benefits.”

This option is more intriguing. If workers were not eligible for benefits, the businesses that employed those workers would not be penalized on their tax bills for having so many former workers claiming unemployment benefits. It could certainly help lower businesses’ bills, but it forces us to ponder a tough question. Should seasonal workers get unemployment? There are strong arguments on either side, and frankly, we’re not prepared to answer it at this point.

Greene says that without offering any unemployment benefits, it would be harder to attract workers. Hospitality businesses would start relying more on H-2B and other temporary visa workers who stay for the summer and then leave. Current workers took their jobs with businesses that have already been paying into the unemployment trust fund. Denying them access to the benefits of that fund seems unfair. As we pointed out, there are also potentially thousands of seasonal workers who rely on unemployment checks during the winter each year. Those getting the checks are most likely to spend them immediately at local businesses. It’s unclear what impact taking that money out of circulation altogether would have on our winter economy.

On the other hand, unemployment benefits were set up to provide a last-ditch safety net for those who had lost their jobs and could not find another one, not necessarily to provide a seasonal cushion for those employed only part of the year.

Cleary has offered one possible compromise. His amendment to a Senate bill in committee would create a new category specifically for seasonal businesses, similar to the system already set up in North Carolina. In effect, any worker employed by a seasonal business would be eligible for unemployment during the business’s season, but not beyond.

“If the job is a June to September job,” Cleary explained, “if they get fired or terminated in July they can get benefits until September, but no longer.”

Cleary’s proposal would certainly be a benefit to business owners. What’s not so clear is how it would affect those on the Strand who rely on seasonal work. At a glance, we fear it would create a more transient population than we already have, with more workers flooding into the area with the summer’s jobs and then leaving for greener pastures when the work dries up. That sort of instability would not benefit any community. On the other hand, it’s hard to support a hospitality business model that relies on paying unemployment benefits year after year. If there’s a Solomon around, it’s time for him to step up.

 

 

The reform, which dissolved the ESC and created the new Department of Employment and Workforce, followed the digging of a $900 million financial pit by the overseers of the state’s unemployment trust fund. In order to pay back that money to the federal government, the legislature opted to raise rates on employers, deciding fairly that it made sense to raise rates the most on those employers whose workers claimed more in unemployment benefits. That method has meant a tougher road for businesses in our area than many had expected.

We’ve long known that the Grand Strand is a seasonal economy. When tourists pour into town in the summer, more workers are needed to staff the restaurants, hotels and water parks that they come to enjoy. A look at the past few years shows that starting in January, the number of those on unemployment in Horry County consistently drops, until there are 2,000-3,000 fewer people on the rolls in May. When the summer ends, those numbers steadily climb again as our seasonal businesses lay off employees. This regular and steady use of unemployment by seasonal employees means that many businesses that lay off workers every year are finding their unemployment tax bill has skyrocketed, with the first payment due by April 30.

“I’d estimate over 85 percent of our businesses are being detrimentally impacted by this,” Greene said. He warned that “there might be a lot of businesses going under and a lot more people unemployed because those businesses won’t be able to make it through.”

Republican Sen. Ray Cleary of Murrells Inlet, who has been involved in the discussions and plans from the beginning, said that the legislature’s first goal last year was to reform the unemployment system and pay back the federal money. As for the impact on seasonal businesses, Cleary said that lawmakers listened to a lot of testimony last year and talked to a number of experts, but “I don’t think it hit home until now.”

So what can be done or should be done to help local businesses? One solution, proposed in the state House, involves extending the time the state takes to pay back the federal loan, to temper the increase in businesses’ bills. This idea seems the easiest, but as is often true, the easiest solution is not necessarily the best.

While it would help businesses somewhat, extending the payback period from five years to eight years would cost the state an extra $76 million in interest payments. Gov. Nikki Haley has said she won’t support any change that will cost the state more. And Greene was similarly unimpressed, saying “delaying payments is a short-term Band-Aid on a gunshot wound.”

The solution Haley proposes, at least when it comes to seasonal businesses, would be to tear up unemployment checks for any seasonal workers. She was crystal clear on the topic during her town hall meeting in March: “Seasonal employees should not be getting unemployment benefits.”

This option is more intriguing. If workers were not eligible for benefits, the businesses that employed those workers would not be penalized on their tax bills for having so many former workers claiming unemployment benefits. It could certainly help lower businesses’ bills, but it forces us to ponder a tough question. Should seasonal workers get unemployment? There are strong arguments on either side, and frankly, we’re not prepared to answer it at this point.

Greene says that without offering any unemployment benefits, it would be harder to attract workers. Hospitality businesses would start relying more on H-2B and other temporary visa workers who stay for the summer and then leave. Current workers took their jobs with businesses that have already been paying into the unemployment trust fund. Denying them access to the benefits of that fund seems unfair. As we pointed out, there are also potentially thousands of seasonal workers who rely on unemployment checks during the winter each year. Those getting the checks are most likely to spend them immediately at local businesses. It’s unclear what impact taking that money out of circulation altogether would have on our winter economy.

On the other hand, unemployment benefits were set up to provide a last-ditch safety net for those who had lost their jobs and could not find another one, not necessarily to provide a seasonal cushion for those employed only part of the year.

Cleary has offered one possible compromise. His amendment to a Senate bill in committee would create a new category specifically for seasonal businesses, similar to the system already set up in North Carolina. In effect, any worker employed by a seasonal business would be eligible for unemployment during the business’s season, but not beyond.

“If the job is a June to September job,” Cleary explained, “if they get fired or terminated in July they can get benefits until September, but no longer.”

Cleary’s proposal would certainly be a benefit to business owners. What’s not so clear is how it would affect those on the Strand who rely on seasonal work. At a glance, we fear it would create a more transient population than we already have, with more workers flooding into the area with the summer’s jobs and then leaving for greener pastures when the work dries up. That sort of instability would not benefit any community. On the other hand, it’s hard to support a hospitality business model that relies on paying unemployment benefits year after year. If there’s a Solomon around, it’s time for him to step up.