Yesterday, Jennifer Granholm, governor of Michigan, reported that in December, a record NEW 200,000 people applied for unemployment benefits in this economically depressed state.
It may seem a ridiculous question to ask, but what exactly qualifies one to be "unemployed" and thus eligible for those benefits? It would seem simple--you lose a job and income, so you need help for a period of time until you can find a new one.
I recently closed my business of almost thirteen years. But because I was self-employed I can't collect any benefits at all.
People who aren't self-employed and receive a paycheck from an employer have part of that salary taken out for the "unemployment pool."
On the surface, I guess it only seems fair. But given the economic circumstances we're facing, it's ridiculous.
As a self-employed person, I actually created jobs, mostly indirectly through order of product from other businesses. So, guess what? It's the ripple effect. They are closing, too.
" Small business" is another misnomer. Because I'm a business of one, myself, and because I live simply with no major collateral or large debt, it's impossible for me to get a business loan. Had I been able, I'd still be in business. And I didn't need much.
"Small business" means anything up to several million dollars. I'm sorry, but that's not a small business. That's a corporation.
President Obama has signalled that he wants to pump money into the SBA, Small Business Association, to jumpstart small businesses and make it easier to get loans. I'm all for that. But before he does, let's give true, small, entrepreneurial businesses like mine a chance for the application.
And let's change "unemployed" to mean just that. No hoops to jump through. Since the self-employed can't get benefits, I have to wonder what the real unemployment statistics are for the state of Michigan.
"Self-employed" shouldn't have to mean a "pre-existing condition."
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in fact, impossible. you should have gone into politics, i believe they have excellent benefits. have you considered emigration?
Why is America making it so hard to be your own boss?
And it's worse even than just that. If I recall right, if you try to take money out of your 401K, it doesn't count as a hardship withdrawal if you're not actually on unemployment (there are a few other exceptions, but simply "not making money" is not one of them). That means that if the government is already giving you money, they will also give you a tax break by waiving the penalty on early withdrawal from your 401K (10% if I remember right), but if you're not asking for money from the government, they'll charge you a penalty for using your own money. (Since when isn't lessening your retirement fund and lengthening the time to retirement penalty enough? I don't think anyone who invented that sinister 10% early withdrawal penalty ever really thought through who that will affect, but it's really devastatingly horrible to watch how little money comes out after all that.)
As well in other countries, besides in u.s. self employed people are in a different position than the workers of another employer. In my country small scale business people, besides having the exactly similar problem as you have got, have also got the benefit to pay much lower taxes than workers of an employer.
I think that all people should be put in the same position concerning work, taxes and unemployment problems. I think that the only way to do it is to introduce some kind of socialism. So that all the employers are state employers. Big international private companies, especially those, which are producing weapons should be banned.
I’ll just try to stick to your topic of unemployment. There are some idiotic wickets you must pass through to be unemployed. One is that you must prove you’re actively looking for work whether there is any work or not. Another is that if you were previously making $100K per year in a professional capacity and you take a job as a clerk in a retail store at minimum wage—well, hey! Congratulations! You’re employed! If your job was sent overseas or taken over by a foreigner on an H1B visa making a third of what you had been paid (or less) too bad for you. The story will be that there aren’t any Americans qualified for your old job. You can retrain at government expense to do other jobs that don’t exist any more either or that put you at a poverty wage with no prospect of advancement. As far as the U.S. Labor Department is concerned you’re not unemployed regardless of whether you can keep up the mortgage payment, the health care insurance, and stay warm and eat or not.
The reason for all of these idiotic rules is that the U. S. Labor Department is, like the U. S. Chamber of Commerce, an agency whose job is to paint a rosy picture for policy makers to hide behind.
And yes, unemployment statistics are a notoriously inaccurate measure of how many people are actually out of work. But, like Amazon sales rank is for book authors, it's the best real time measure we have of what is actually happening in the marketplace, even if it undercounts wildly.
One is that it requires you to list yourself as unemployed. My problem was that I was aggressively trying to find new work, I just wasn't making money. If you're ready to give up on having any contracts, being unemployed may seem ok. But it feels wrong—if you lay yourself off, who's going to rehire you? (There is an answer to this, it just has a weird feel.) But once unemployed, that really requires you to go on interviews and try to get a day job. (Of course, the government may want you to do this. But that's what I meant in my previous comment where I said the government has a preference for what kind of job it wants you to have.)
But also, forming an S-Corp costs usually $500-$1000 to form and probably costs an annual fee to maintain. A lot of people aren't up to that extra expense, which is effectively an unemployment tax if what you're saying is they should form the corporation just so they can draw unemployment sometimes. (An S-Corp gets a number of tax advantages that make this worthwhile for some people, but again one has to wonder why those tax advantages should go only to a corporation and not to a person. They should really fix the need to elect a vehicle like this just for such reasons. The purpose of a corporation is really to be a legally separate entity for the purpose of liability, ownership, etc. That's the right reason to get a corporation. Getting one because it will mean that things you do will be accounted for differently seems a bit dubious from a design point of view, though I totally agree with you that the laws seem to require you to consider options like this.)
Here's a suggestion.
Why not open up contributions to Unemployment Insurance to all? Give self-employed people the option of making regular contributions just as they would through an employer. It's not unlike paying for medical benefits privately if you are self-employed.
It'll take discipline for a self-employed person, but it's no different than medical insurance or knowing you have to set aside money for taxes, etc.
This is the only way I can see to make an equitable system for all.
During the non recession years, I got allot of smugness about us "suckers working for the man" from my self employed freinds. Not so much anymore. Your crying about not getting money from a program you did not pay into. Where I come from, that's considered whining that your not allowed to steal.
For the purpose of collecting benefits, it helps to have had an employer who paid taxes to support the system.
As a general rule, self employed persons do not pay taxes to support the system, therefore they are not entitled to benefits.
Question:
Would those of you who are not happy with the present arrangement be willing to pay taxes to support the system?
-You don't count because you were an employer.
-I don't count because technically I was a contractor (wasn't self employed, my workplace paid the taxes adn I was taxed yearly).
-People that are unemployed too long apparently stop counting as unemployed (assumingthey don't starve to death).
The numbers floating around are really far to low to accurately portray the true number of unemployed people. I suspect if all the people that "don't count" are added in... the number may easily be double what is passed around as a bad bad number to have unemployed.
Great post.
I thought about attempting some cogent comments regarding closely held corporations and decided not to due their inherent complexity. Your post very nicely explains one of a number of complex reasons why state sponsored employment insurance doesn't work well with very small incorporated firms. There are also others.
I would agree that the poster from the midwest has made an excellent observation, however that does not mean that I support the idea of broadly applying employment insurance to the self employed sector (incorporated or not). I highly doubt it could be made to work, partly for the reasons you have articulated.
Finally - this post and all comments should be sent to Obama via change.gov, as well as to your congressional rep.
Thanks for the post. "My experience is, it's a waste of time getting into the unemployment benefits process given the puny income from benefits - less than a quarter of the original take home pay."
But I have to tell you, when you actually wake up in the morning wondering how much longer you'll have money for food, "puny" is huge. My landlords have been quite forgiving of rent and their example needs to be followed by others if we are to make it through this as a nation.
It would be great if we all sent this to change.gov and some other sites too, like democraticunderground.com and dailykos.com. It's important not to give up just because Obama's been elected!
We should talk!