UNEMPLOYMENT IN SOUTH CAROLINA
An Overview of Issues and Recommendations
Division of Research
South Carolina Department of Commerce
Rebecca M. Gunnlaugsson, Ph.D.
Erica Morgan, Ph.D.
A NEW LOOK AT THE UNEMPLOYED IN SOUTH CAROLINA
January 2006 – October 2009
40%
38.3%
30%
23.5%
20%
10%
8.5%
6.2%
6.1%
4.5%
0%
NA 1
2
3
4
5
6
7
8
9
10
11
Years of School
Compiled from data provided by the SC Employment Security Commission on 11/6/2009.
12
13
14
15
5.6%
16
17
18
19
UI CLAIMANT CHARACTERISTICS
Educational Attainment
Retirement
0.04%
January 2006 – October 2009
Still Working
Claim
3.0%
Uncollected
13.5%
Lack of Work
34.7%
Employer Filed*
17.6%
Voluntary Quit
10.1%
*Reason for Separation is “Uncollected” for 94.6% of Employer Filed claims.
Misconduct
23.0%
UI CLAIMANT CHARACTERISTICS
Reason for Separation
January 2006 – October 2009
20,000
18,000
16,000
14,000
12,000
10,000
8,000
6,000
4,000
2,000
0
Misconduct
Lack of Work
Uncollected
Voluntary Quit
Employer-Filed
UI: SEASONAL TRENDS
Seasonal Trends
Between January 2006 and
October 2009,
944,976 claims were filed by
651,128 individuals.
Of these individual claimants,
441,086 filed only once,
while
210,042 filed two or more
times.
January 2006 – October 2009
4
3
Claims,
5+
Claims,
2.2% Claims,
7.6%
0.3%
2
Claims,
22.2%
1
Claim,
67.7%
UI CLAIMANT CHARACTERISTICS
Repeat Claimants
FACTORS DRIVING UNEMPLOYMENT STATEWIDE
1. High number of seasonal jobs
2. Extensive use of employer-filed UI claims
3. Ineffective UI tax rate structure
4. Lack of targeted effective interventions
Economy-Driven Factors
1. Rapid labor force growth
2. Increasing use of temporary workers
3. Transition of manufacturing industry
4. Shift of occupational mix toward high-skilled workers
FACTORS DRIVING UNEMPLOYMENT
Policy-Based Factors
Claims by Industry, 2006 - 2008
Most states require seasonal
employment be designated by:
Industry
Occupation
Employer
Worker
Start/end dates of season
4,000
3,000
2,000
1,000
Administrative and Support Services
Textile Mills
200809
200811
200805
200807
200801
200803
200709
200711
200707
200703
200705
200611
200701
200607
200609
200605
200601
200603
0
Food Services and Drinking Places
Machinery Manufacturing
Tourism and Hospitality* industry:
4.2% of GDP
11.6% of Employment
12.1% of UI claims
Source: BEA, BLS, and Commerce analysis of ESC UI claimant data (2006 – June 2009)
*Note: Includes NAICS 71 and 72
15 states impose benefit restrictions
to seasonal workers (AR, AZ, CO, DE,
IN, ME, MA, MI, MS, NC, OH, PA, SD, WV,
WI)
Wage credits earned during
season available for UI benefits
paid during season
Wage credits earned outside
season available at any time
POLICY-BASED FACTORS
1. Seasonal Employment
Employers file claims (113 vs. 114)
Vestige of original textile industry
9 states still allow
(AL, GA, IA, KY, MI, MS, NC, SC, TN)
17.6% of UI Claims
Typically temporary (low seasonal
volume or regular factory retooling)
30% have 2+ new claim years with
same employer
Predictable: 61% are 1 year apart
Short duration
Average 4.7 weeks vs. 21.0 weeks
Officially unemployed by USDOL
Monthly State Unemployment
Weekly Initial Claims
More likely to be repeat
80%
60%
77.2%
47.7%
40%
32.2%
18.6%
20%
20.1%
4.2%
0%
1
2
Claims Filed
Employer-Filed
3+
Claimant-Filed
Source: Commerce analysis of ESC UI claimant data, 2006 - 2008
POLICY-BASED FACTORS
2. Employer-Filed Claims
Part 1: Taxable Wage Base
SC is one of 4 states still using federal minimum Wage Base of $7,000
(AZ, CA, MS, SC)
US Taxable Wage Base Statistics
Range: $7,000 to $38,800
Average: $15,245
Flexible WB indexed to average annual state wage in 16 states
Greater tax burden for low-wage workers
De facto lump sum tax per worker
Tax paid for a $15,000/year employee identical to a $75,000/year
employee
POLICY-BASED FACTORS
3. Ineffective UI Tax Structure
Part 2: Experience Ratings
State UI tax rates based on firms’ “experience” with unemployment
Employers who utilize UI system more face higher UI tax rates
UI Tax Schedule in South Carolina:
South Carolina UI Tax
Schedule
Tax Rate
Annual Cost Per
Employee
Highest
6.1%
$427
Lowest
1.24%
$86.80
New Employers
3.34%
$233.80
Average Effective
2.09%
$146.30
POLICY-BASED FACTORS
3. Ineffective UI Tax Structure
Part 2: Experience Ratings
Employer Distribution by UI Tax Rate, 2008
52.7%
50%
40%
30%
22.1%
20%
10%
3.0%
0.3%
0.4%
0%
6.10
5.79
5.44
0.4%
5.09
0.6%
4.74
0.7%
4.39
1.0%
4.04
3.69
UI Tax Rate
*Source: USDOL
2.7%
1.5%
3.34
2.99
3.0%
2.64
4.0%
2.29
3.5%
1.94
4.1%
1.59
1.24
POLICY-BASED FACTORS
3. Ineffective UI Tax Structure
Part 2: Experience Ratings
Imperfect experience ratings:
Do not effectively use the full range of tax rates available.
1. Floor and/or ceiling tax rates
2. Infrequent movement between rating categories
Provide incentive for employers to layoff workers.
If minimum tax rate is too high…
Employers accumulate excess
reserves
Have incentive to draw down excess
via layoffs
34 states set lowest tax rates
below SC, many at 0% (GA, NC).*
*Source: USDOL 2008 “Significant Measures of State UI Tax Systems.”
If maximum tax rate is too low…
No additional cost is associated with
extra layoffs
3% of firms account for 30% of
benefits charged yet pay 8% of
contributions.*
POLICY-BASED FACTORS
3. Ineffective UI Tax Structure
Part 2: Experience Ratings
$1,000
$951
$800
UI Cost per Employee
$750
$600
$459
$400
$427
$378
$200
$86.80
$0
-45%
-40%
-35%
-30%
-25%
-20%
-15%
-10%
-5%
0%
5%
10%
15%
UI Reserve Ratio Balance
South Carolina
Arizona
Missouri
Georgia
North Carolina
$14
$0
20%
25%
POLICY-BASED FACTORS
3. Ineffective UI Tax Structure
Part 2: Experience Ratings
$1,000
$800
UI Cost per Employee
$727
$600
$400
$427
$200
$86.80
$32.16
$0
-45%
-40%
-35%
-30%
-25%
-20%
-15%
-10%
-5%
0%
5%
10%
15%
20%
UI Reserve Ratio Balance
South Carolina
Reserve Ratio States
Source: USDOL
*Represents the average of the 19 of 24 states who use the Reserve Ratio method and had annual average wages within +/- 18% of South Carolina.
25%
POLICY-BASED FACTORS
3. Ineffective UI Tax Structure
Part 1: Develop Data-Driven Targeted Programs
UI claimants are treated the same
regardless of their characteristics
One-size fits all approach
Use data to identify specific needs and
develop suitable training and
interventions
Geographic locations
Educational, occupation, industry,
skills history
Long duration claimants
Repeat claimants
Use data to measure performance
Track individual progress
Measure state performance
Use feedback to improve programs
USDOL “encourages states
to assess claimants through
the use of statistical profiling
models using claimants’
characteristics, as known
from their initial UI claim.”
–USDOL guidance for use of
ARRA funds
POLICY-BASED FACTORS
4. Targeted Interventions
Part 2: Integrate Multiple Programs
Assistance programs for unemployed administered by different agencies:
Unemployment Insurance (SCESC)
Wagner-Peyser (SCESC)
Workforce Investment Act (SCDOC)
Adult Education (SCDOE)
TANF (SCDSS)
Mandate comprehensive, integrated effort among programs to assist those in need by
sharing electronic records
Streamline process
Eliminate duplicative efforts
Quick response
Efficiently use state & federal resources
Successful outcomes for individuals across all programs more easily tracked if information
is shared among agencies
Comprehensive follow-up of individual activities and needs across all programs
Effective, regular, reliable performance metrics
POLICY-BASED FACTORS
4. Targeted Interventions
Labor force (2002 to Nov 2009) in SC
Increased 247,268 people
Expanded 12.8%, compared to
6.8% nationally (6th fastest)
3.5%
3.0%
3.0%
2.3%
2.5%
2.0%
2.1%
2.1%
1.9%
1.8%
1.5%
1.7%
1.0%
1.3%
0.9%
0.5%
0.0%
Population (2002 to 2009) in SC
Increased 457,308 people
Expanded 11.1%, versus 6.7%
nationally (9th fastest)
0.8%
1.1%
0.5%
2002
0.1%
2003
2004
SC
2005
2006
0.4%
2007
2008
US
Source: Bureau of Labor Statistics
Note: Rates represent annual growth, December over December.
2. Increasing Use of Temporary Workers
7.0%
125
119
120
6.4%
115
110
6.0%
5.7%
105
100
6.5%
5.5%
102
95
Percent of Total Employment
Employment (Thousands)
130
Temporary Workers (2002 to 2008)
Comprises 119,292 people
Expanded 19.6%, compared to
5.1% nationally
Makes up 6.4% of the workforce,
versus 5.7% nationally
5.0%
2001 2002 2003 2004 2005 2006 2007 2008
Employment
% of Total Employment
Source: Bureau of Labor Statistics
Note: NAICS 561: Administrative Support (includes temporary staffing firms).
ECONOMY-DRIVEN FACTORS
1. Rapid Labor Force Growth
$28
314
Thousands
310
$27
290
$26
$25.2
270
$25
250
242
230
$24
$24.0
210
$23
2001
2002
2003
2004
2005
2006
Manufacturing Employment
2007
2008
Manufacturing Output
Sources: Bureau of Labor Statistics; Bureau of Economic Analysis
4. Occupational Mix Shift Toward High Skills
2.49
2.48
Skill Level*
2.47
2.46
2.45
2.44
2.43
1999 2000 2001 2002 2003 2004 2005 2006 2007 2008
Source: SCDOC Labor Market Information
*Note: Represents average skill levels for all jobs recorded in South Carolina on a scale of 1 to 5. 1 indicates little to no preparation required.
5 indicates extensive preparation (in terms of advanced degrees, experience, and specialized training) necessary.
Billions of USD
330
ECONOMY-DRIVEN FACTORS
3. Transition of the Manufacturing Industry
CONCLUSION
Moving Forward
To reduce unemployment and strengthen statewide
economic growth, stakeholders need to
work together,
share data,
align programs, and
define a tax structure
that encourages economic productivity
and serves the unemployed.