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03-02-2004

Page history last edited by PBworks 17 years, 5 months ago

March 2, 2004

ROMNEY WORKS TO PREVENT OUTSOURCING OF JOBS

Says Unemployment Insurance Reform Necessary To Preserve, Protect Jobs

 

Governor Mitt Romney today called on members of the Legislature’s Joint Committee on Commerce and Labor to help him stem the outsourcing of jobs from Massachusetts to other states and nations.

 

“In Massachusetts, we are losing jobs to other countries and other states,” Romney said. “Manufacturing jobs have fled from Massachusetts for decades. But, the new wave of outsourcing is particularly alarming because it involves the very jobs that replaced those jobs that were lost.”

 

He added, “Now, we are seeing the loss of highly skilled manufacturing positions we believed were secure. We are seeing outsourcing in clerical, financial services, accounting, engineering, software and other areas. The promise that education is a sure road to job security is very much in question.”

 

Romney said bringing unemployment insurance costs more in line with other states will stem the tide of outsourcing and help preserve and protect jobs in Massachusetts.

 

“I am fighting to bring new jobs to Massachusetts and to keep the ones we have here,” Romney said. “If the Legislature fails to reform our unemployment insurance system, if it fails to bring it into line with all the other states in America, you will not see jobs come here, you will see them leave here.”

 

Romney’s proposal to reform the unemployment insurance system will immediately reduce the cost on businesses by lowering the “wage base” from $14,000 to $12,800. It will also eliminate the mandatory surcharge on businesses, which could place an unlimited and unpredictable assessment on each and every job in the Commonwealth if the unemployment insurance fund is going insolvent.

 

The plan will provide approximately $120 million in immediate cost savings to employers, resulting in an incentive for job retention and creation.

 

In addition, Romney’s bill proposes benefit reforms that will bring Massachusetts in line with other states, including:

 

  • Providing up to 26 weeks of unemployment benefits, which is the same level offered by every other state in the nation, instead of the current 30 weeks;
  • Offering benefits to individuals who have worked for at least 20 weeks, instead of the current 15 weeks; and
  • Redefining the “average weekly wage” to a more reasonable standard by basing it on four quarters of earnings with the three highest quarters being double weighted.

 

Under these measures, Romney said Massachusetts will still provide the most generous unemployment insurance benefits in the nation.

 

“We need to get the balance right,” said Romney. “We have an opportunity to work together to reform the system so that Massachusetts continues to provide the best benefit package in the country, but at the same time lessens the cost of retaining and creating jobs in the state.”

 

 

###

Governor Mitt Romney

Testimony

 

before the

 

Joint Committee on Commerce and Labor

Unemployment Insurance Reform

 

March 2, 2004

 

 

 

Good Morning Chairman Hart, Chairman Rodrigues, and members of the Committee.

 

Thank you for the opportunity to testify today on the importance of Unemployment Insurance Reform to retaining and creating jobs in the Commonwealth.

 

Today, I am speaking in favor of the reforms contained in my bill H4446 entitled "An Act Further Creating And Protecting Jobs, Easing The Unemployment Insurance Burden On Employers And Preserving The Solvency Of The Trust Fund."

 

That’s a mouthful. Let me tell you what this bill is all about. This is a bill to stem the tide of outsourcing from Massachusetts. We are losing jobs to other countries and other states. Of course, manufacturing jobs have fled from Massachusetts for decades. But the new wave of outsourcing is particularly alarming because it involves the very jobs that replaced those jobs that were lost. Now we are seeing the loss of highly skilled manufacturing positions we believed were secure. We are seeing outsourcing in clerical, financial, accounting, engineering, software, and other jobs. The promise that education is a sure road to job security is very much in question.

 

Why do these jobs leave. We all know the answer; it’s very simple. It is because the cost of labor, even skilled and educated labor, is much lower in these countries. And today, with the low cost of telecommunications and Internet connection, there is little cost penalty to having such work done across the world. So if the cost of a worker is lower somewhere else, the job will be taken there.

 

The Massachusetts unemployment insurance tax hike of over 80 percent is sending jobs away from Massachusetts. It is costing us jobs. As it is fully comprehended and implemented by our employers, it will cost us more jobs.

 

I am fighting to bring new jobs to Massachusetts and to keep the ones we have. If the Legislature fails to reform our unemployment insurance program, if it fails to bring it into line with all the other states in America, you will not see jobs come here, you will see them leave here.

 

I know that many employers and many jobs won’t be affected, at least for a long time. You see, many businesses can’t outsource: their jobs must be performed locally. Construction jobs, hospitality jobs, education jobs, municipal jobs, health care jobs. All of these must remain in the local community; they are not subject to outsourcing. So you won’t be hearing from them. Their representatives will be perfectly happy if you raise unemployment insurance because it won’t cost them jobs. At least not in the short run.

 

But that’s not true for software engineers, financial service workers, specialty manufacturing jobs, telecommunications equipment jobs, biotech jobs, and so forth. These are the jobs that are leaving and if we don’t reform unemployment insurance now, they will keep leaving.

 

The unemployment insurance legislation passed by the General Court last year was a good first step. I congratulate the Legislature for its important action. It is now time to take the next critical step. The competition for job creation is growing more intense between states and nations. Employers are looking for less expensive alternatives to creating jobs in Massachusetts. We simply cannot expect new jobs to come to Massachusetts if we have the highest cost in the nation.

 

It is very easy for employers to measure the cost of unemployment insurance, and compare it state-to-state. Prior to the current law taking effect, Massachusetts had the ninth highest UI cost, as a cost per employee, in the country. With the passage of this law, though, Massachusetts now has the highest UI costs in America. This is a distinction we do not want and we cannot afford.

 

Since January when employers received notification of the new 2004 rates, we have received over 4,200 calls and letters from employers. Many of whom are concerned that the most recent rate increase, coupled with the increase in the taxable wage base, will make it difficult to maintain their current staffing levels or move forward with plans to hire new employees.

 

Let me provide you with a few quotes, from the letters we have received:

 

Mark Canepa, Executive Vice President for Sun Microsystems, stated that: “Regulatory and tax policies influence decisions at global companies like Sun, which can choose to grow and create jobs in a number of locations. Skyrocketing, unpredictable unemployment insurance rates will be taken into account when Sun decides where to hire new engineers or invest in existing operations.”

 

Patrick Griffin, Senior Vice President of East Coast Benefit Plans, Inc. in Dedham, wrote to us: “If this tax remains as is, many employers will be forced to reduce the number of employees in order to absorb such a dramatic increase. This certainly is not good for the economy and will surely dampen the economic recovery”

 

Robert Devereux, President/Owner, of a utility pipeline contracting company in Boston, said the following: “This increase…will hurt my business and could potentially increase unemployment because it may be necessary to make up the UI increase by reducing our workforce.”

 

I have an enormous concern for people who are out of work. It is something I think about every week, every day. I also think about the people who will create that next job.

 

We need to get the balance right – we have an opportunity to work together to reform the system so that Massachusetts continues to provide a generous benefit package, but at the same time lessens the cost of retaining and creating jobs in the state.

 

My bill will provide needed reform to our unemployment insurance system. We calculate that it will create at least 2,500 jobs. Last year, we all took pride in the passage of the economic stimulus and jobs bill. It provided approximately $100 million for job growth, to be invested over several years. But it is dwarfed by the $700 million per year hike in payroll taxes that was put in place at the same time. We may think the voters can be fooled, but the people who are out of work are not.

 

I acknowledge that UI premiums needed to increase, but meaningful benefit reforms can reduce the amount of the increase, and thus encourage job retention and creation.

 

Massachusetts has a long progressive history of providing worker benefits, one of which is extending payments to those who have lost their jobs. In fact, Massachusetts today offers the most generous average total payments to laid-off workers of any state.

 

However, the public needs to know that even with the reforms we are proposing, Massachusetts will still be the most generous in the nation.

 

Here are the facts. With these reforms, Massachusetts’ average total benefit will be:

 

* 25 percent higher than New York (MA is $1,248 higher)

* 30 percent higher than Connecticut (MA is $1,427 higher)

* 49 percent higher than Michigan (MA is $2,064 higher) and

* 50 percent higher than California (MA is $2,098 higher)

 

Some people say, “shouldn’t our benefits be higher, because we are a high cost of living state?” Well, we are not higher cost than New York or Connecticut or California. Yet they all have significantly lower UI costs and lower average benefits than we do.

 

The benefit reforms that we are proposing would put our Commonwealth in line with other states when it comes to determining benefits. The reforms we seek will:

 

 

1. Provide benefits for up to 26 weeks, the same level provided by every other state in the Union.

2. Offer benefits to people who have worked for a minimum of 20 weeks or more, instead of the current level of 15 weeks. A majority of states require 20 weeks or more to be eligible in their systems. Only 2 states require less than 15 weeks.

3. Base benefits on four quarters of earnings, instead of just the current two. As some people work on a seasonal basis, we also propose double weighting the three highest quarters of earnings, so those individuals will not see a disproportionate change.

 

We cannot afford to be branded as the highest cost of employment state. It takes years to erase that stigma. We have made good progress to overcome the title of “Taxachusetts.” The current UI law is a great leap backwards in that progress.

 

But what’s even more of a concern is the very real hidden damage that results from being the most expensive state for UI. That damage is the call we never get, from the large, multi-state corporation who doesn’t even consider Massachusetts because they think we will be too expensive. It is the small, main streets business that now decides to not hire that incremental employee. It is the Massachusetts manufacturer who now decides they are better off outsourcing their whole operation to North Carolina, Mexico or China.

 

This reform package will send the message to employers that they can afford to maintain jobs here, and equally important, create jobs here without paying a penalty.

 

Only by enacting these reforms can we reduce the cost to employers, and thus encourage job retention and creation. Our bill will also:

 

* Reduce the payments required by employers, by reducing the “wage base” to $12,800.

* Eliminate the mandatory but unpredictable “surcharge”, which could place an unlimited surcharge on each and every job in the Commonwealth.

 

Like the benefit reforms, a $12,800 wage base brings MA in line with the other 49 states where the current average wage base is $12,832.

 

There is one provision of the current law, which was not highlighted during the recent debate. That is the requirement that Massachusetts assess a surcharge on every job if the fund appears to be headed for a deficit, requiring interest borrowing from the federal government. This surcharge will be on top of the already high rates imposed by the law. This unpredictability will limit employers’ ability to budget and controls costs, and thereby discourage both the retention and creation of jobs.

 

Because the bills for this year’s unemployment insurance contributions have not yet been sent to employers, we still have a brief window of opportunity to enact these reforms and provide needed incentives for job creation.

 

Time is of the essence and therefore I urge you to act quickly. It is against federal regulations to provide refunds to employers once they have paid their UI bills, so this is our last opportunity to reform the UI system and spur the creation of new jobs for our unemployed citizens!

 

Over the last two years, I have spoken with many people who are out of work, as I know each of you has. And we’ve all heard the same thing: they want a job. We know it is generous to pay more in unemployment benefits, but if it costs our state tens of thousands of jobs, are we really doing the right thing for our citizens? More jobs is all of our first priority. Let’s do what it takes to prove it.

 

Thank you and I will be happy to answer any questions you may have.

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