Financing an Effective Unemployment Insurance System:
Protecting Working Families, Our Communities & Minnesota's Economy.
(April 2003)
by Rick McHugh and Andrew Stettner, National Employment Law Project and
Carrie Thomas, JOBS NOW Coalition

To view the full .pdf version of the report, click here.

Unemployment insurance is designed to pay adequate weekly benefits so that jobless workers and their families can maintain essential family spending.  In the face of ongoing job loss and dislocation, Minnesota's UI program also automatically boosts the state's economy by maintaining consumer spending during a recession.

This briefing paper by the Minnesota JOBS NOW Coalition and the National Employment Law Project (NELP) analyzes the recent economic impacts of UI benefits in Minnesota; it also examines the current financing structure and makes recommendations for its improvement.  The programs continued positive economic impact on Minnesotas working families and economy will depend on maintaining a strong foundation through a sound UI financing structure.

The paper's key findings include:

• Over the 2001 and 2002 calendar years, $1.7 billion went into the Minnesota economy through UI benefits.  Even after employer taxes are taken into account, the net benefit was over $1 billion.
  
• Minnesota's average UI tax rate is one of the lowest in the region.  Minnesota compares favorably to other midwestern states in terms of the percent of unemployed persons that get benefits and the rate of wage replacement.
  
• Factors that contributed to the trust fund's insolvency included low tax rates paid by employers in the 1990s, which was due to a combination of low unemployment and an out-of-date financing structure.  Because of low tax rates, Minnesota failed to take advantage of the strong economy of the late 1990's to build a reserve for the current downturn.