More News on the Unemployment Compensation Problem

Another new worry for the new year: increased unemployment compensation taxes for Florida employers. As I’ve blogged about previously, employers could see their taxes for this fund increase to as much as 11 times what they have been paying.

A more recent article notes the likely outcome for small businesses under this increase, predicted by an executive at a staffing firm:

The first things likely to go will be vacation time and sick leave, McLeod said. After those savings are exhausted, more layoffs may be the only option for some companies. “This increased tax is going to cost jobs, running unemployment up even higher,” McLeod said. “And 2011 will be worse on employers if something doesn’t change dramatically.”

Moral of the story: Watch out for those pesky unintended consequences of government intervention. Since unemployment is high, more funds are needed to pay for unemployment benefits. Those increased funds take money away from businesses that may have used the money to hire new employees. The result: increased unemployment and/or decreased benefits.

These unintended consequences can lead to a vicious cycle, all thanks in part to those in government who believe it is their job to fix all of our problems. In reality, their “solutions” to our problems often create new ones or at least make the current problems worse.

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