Fritsch, Conrad F.

Ruesink, David C.

Texas A&amp;M Repository

3 1975L-1201WHAT IF UNEMPLOYMENT INSURANCE COVERAGE WEREEXTENDED TO AGRICULTURAL WORKERSDavid C. Ruesink and Conrad F. Fritsch*In recent years several bills to extend unemploy-ment insurance to agriculture have been consideredby Congress. Because Congress lacked knowledgeconcerning the impact of the program, it requestedthat a broad-based research effort be undertaken todetermine the costs and benefits of such legislation.Twelve land grant universities were involved in theresulting study. Results from the Texas portion areincluded in this report.At this time a specific proposal is being con-sidered by Congress to amend the Federal Unem-ployment Tax Act. It would remove the presentagricultural labor exclusion for employers hiringrelatively large numbers of workers. The proposedlegislation would cover workers employed by agri-cultural employers hiring four or more workers ineach of 20 weeks of a calendar year or having aquarterly payroll of at least 5,000.The Federal government established minimumrequirements for participation in the unemploy-ment insurance provisions of the Social SecurityAct of 1935, later the Federal Unemployment TaxAct (FUTA). Over 65 million jobs in the UnitedStates are covered by unemployment insurance.However, agricultural workers have been excludedsince the beginning.Unemployment insurance is a means of pro-viding a worker with income if he is temporarilyout of work through no fault of his own. Itdiffers from and is operated separately from Work-men's Compensation, Social Security or WelfarePrograms. Benefi ts are paid according to theamount of work and earnings of individuals beforebecoming involuntarily unemployed.When a worker receives benefits, all employersfor whom he worked during the base period are*Respectively, sociologist, Texas Agricultural Extension Service,The Texas A&M University System; and associate professor, De-partment of Agricultural Economics and Rural Sociology, TexasAgricultural Experiment Station, The Texas A&M UniversitySystem.10.20charged in proportion to the wages paid him bythese employers. Out-of-state employers are chargedin the same way as in-state employers. Benefitsare apportioned among the several employers, ifmore than one, according to the formula existingunder legislation of the respective state or states.!To qualify for benefits, the unemployed workerof a subject employer must establish that he isout of work because of some reason that is nothis fault. He then registers with the Texas Em-ployment Commission (TEC) in accordance withregulations prescribed by them to show that he iswilling to work, able to work and looking forwork. He must accept jobs within his skill andoccupational range when they become available.In Texas, he can also receive benefits if he is ina job training program approved by TEC.Implications for Texas Agricultural EmployersFive alternative proposals will be presented inthe tables to show the differences of the provisions.The alternatives relate to number of employeesan employer has for certain periods of time. Manypossible alternatives could be considered but thoseshown in the tables and reasons for selecting themincluded:1. One worker any time to show the effectif all employers are covered.2. One worker in 20 weeks or $1,500 highquarter which is the current coverage formost industries.lTo be eligible for benefits, a worker must have earned at least$500 in a base period consisting of the first four of the last fivequarters before filing the initial claim. These wages must beearned in at least two quarters and must equal one and one-halftimes the high quarter earnings. Weekly benefits are 1 /25 ofthe high quarter earnings with a maximum of $63 per week.Normally, benefit payments do not extend longer than 26 weeksand must not be more than 27 percent of the total wages earnedin the base period. Claims are charged against employersaccording to the proportion of earnings a claimant received fromthe employer during the base period.u y m J h E. Hut n, r Co3. Four workers in 20 weeks or $5,000 highquarter which is the proposed legislationnow being considered for agriculture.4. Four workers in 20 weeks which was pro-posed by the administration in 1970.5. Eight workers in 26 weeks which was pro-posed by the Senate Finance Commi ttee in1970.Based on research conducted by the TexasAgricultural Experiment Station and the TexasAgricultural Extension Service in cooperation withthe United States Department of Labor, the follow-ing tables show what would have been the caseusing 1969 as the coverage year. Comments willbe limited to the current proposed legislation oralternative 3.Thirteen percent of the employers and 59 per-cent of all agricultural jobs would be includedunder this provision,2 Table 1. This pattern ofa relatively small percentage of employers but arelatively large percentage of jobs generally issimilar throughout the United States. Roughly40 percent of the employers with gross sales of$40,000 or more would be included while onlyabout 3 percent of the employers with gross salesof less than $20,000 would be covered.The impact varies by type of farm. Relativelyfew cash grain, livestock, cotton, other field cropsor general farm enterprises would have been cov-ered under alternative 3, Table 2. Few farms ofthese types in Texas have enough workers a suffi-cien t length of time to be included in the proposedlegislation. Even though few employers are in-cluded in these types of operations, an analysis ofthe gross payroll distribution by type of farm showsthat these enterprises account for almost % of allfarm labor expenditures, Table 3. Employer cov-erage is dependent on the number of workers,weeks of employment and quarterly payroll ratherthan farm type.How Cost of Unemployment Insurance Is PaidThe unemployment insurance system is afederal-state program administered in Texas bythe TEC. It is financed by covered employercontributions to a state unemployment insurancetrust fund on behalf of workers. The Texas Unem-ployment Insurance Act requires participation byall employers subject to state legislation. Cur-rently, employers in covered industries having oneor more workers for at least a portion of each of2To put this in a different perspective, there were about 1.37,000farms in Texas in 1969. Of these, roughly 27,000 had annualpayrolls of $150 or more. Thus, 13 percent of the employerscomes to about 3,500 total employers that would be coveredunder alternative 3. This means that less than three percent ofall Texas farms would be included but about 60 percent of allfarm workers would be covered.20 weeks or who pay wages of at least $1,500 ina high quarter in a calendar year are called subjectemployers. The tax rate is based on the unemploy-ment benefits received by his employees during theprevious year. Employers with high claims chargedagainst their account pay a higher rate than thosewith few or no claims.In Texas the 1972 tax rate ranged from 0.6 to4.5 percent on the first $4,200 annual taxable wagesper worker. The maximum could increase if theoverall level of the state fund is low. Of this rate,0.5 percent is collected for program administrationcosts. Under current Texas law, the total addedcost would be a minimum of $6 per $1,000 payrolland the maximum would be $45 per $1,000 payrollup to $4,200 per employee.Employer Reaction to This Increased CostAn employer may react several possible ways.He may:I. Absorb this as an added cost for production.This, along with other expenses, would cause pro-duction costs to increase. A few marginal operatorsmay cut down on their size or quit altogether ratherthan adding another cost to their operation.2. Attempt to increase productivity of workers.One way to pay more money for the same workeris to obtain more work from him. Less employeeturnover, greater worker satisfaction, better em-ployee-employer relations and more efficient use oftime added to improved productivity.3. Reduce the amount of hired farm laborused. Changing to less labor intensive enterprises,using more family labor, increased mechanizationand laying off workers during slack time arepossibilities. Many farmers "make work" forseveral weeks to keep a good worker for the 12-month work period. Rather than continuing thispractice, employers could layoff their workersduring slack periods. There is a danger in thisbecause the worker may find a new job that is asattractive as his old job.4. Reduce the amount of seasonal labor used.Some seasonal workers are more likely to drawunemployment insurance benefits than regularworkers. This is especially true of migrant labor.By reducing this type of labor usage, the draw-downon the unemployment insurance account would beless.5. Increase the employment of workers notlikely to qualify for benefits. Certain types ofworkers do not qualify for benefits for some reasonwhich may include: (a) workers not working longenough to build up the $500 base during the four-quarter base period; (b) students working onlyduring the summer or after school; (c) housewivesworking temporarily.6. Increase the use of custom work. Opera-tions such as grove care, combining, cotton harvest-ing, spraying or dusting can be hired without thefarm operator having any labor involvement. Thisshifts the responsibility to the owner of the customservice.Implications for Hired Farm WorkersOne justification for having agricultural work-ers included for coverage by unemployment insur-ance is the concern for the economic and socialsituation of hired farm workers. The operationalimpact of unemployment insurance is to provide adeferred income to qualified workers who becomeunemployed involuntarily. The amount and dura-tion of benefits received depends upon their workforce participation in covered industries.Based on 1969 wage information, actual earn-ings of agricultural employees who worked at least50 weeks per year averaged $3,806. Workers em-ployed in Texas agriculture for 40 or more weekswith no out-of-state agricultural employment earnedan average of $3,355. Interstate agricultural work-ers with 40 or more weeks of employment earnedan average of $2,941. If unemployment insurancehad been in force and all work was for coveredemployers, workers with 40 or more weeks in Texasagriculture would have received an estimated $42.64per week for an average of 5.88 weeks or a totalof $251 in benefits. This would bring total incometo $3,606 or almost 95 percent of the average in-come received by full-time employees. The averagebenefits received by agricultural workers who dosome work in Texas as well as other states butwho work at least 40 weeks per year would havebeen $38.87 per week for 4.69 weeks. This totalof $182 each would result in a total annual incomeof $3,123 or roughly 82 percent of the full-timeworker.Unemployment insurance benefits are tied di-rectly to the worker's unemployment history duringthe previous year. Continuation of the right toreceive benefits, unlike welfare payments or foodstamp programs, are tied directly to employmentand earnings history. This provides a positivebuilt-in work incentive. .Coverage of the agricultural sector under provi-sions of the Federal Unemployment Tax Act wouldbring in one of the two major private sectors stillstill excluded from coverage. It would provideworkers with an income maintenance protectionthat is unavailable at present. From a strictlyeconomic viewpoint, a compelling case is made toextend coverage to workers on large farms wherethere is a more formalized employer-employee re-lationship similar to non-agricultural firms. Thissame situation is less clear for workers on smalleroperations where usually there is a more informalassociation with their employers. On the whole, ex-tension of coverage to agricultural workers wouldraise employer costs by a minimum of 1 cent perhour to a maximum of 8 cents per hour assumingan original wage of $1.75 per hour.Table 1. Distribution of subject Texas farm employers and gross payroll within each economic class under five selected coverageprovisions, 1969.Coverage provisions2 3 4 5One worker Four workersin 20 weeks in 20 weeks EightOne worker or $1,500 or $5,000 Four workers workersGross sales Totals anytime high quarter high quarter in 20 weeks in 26 weeks$40,000 or more Percent of workers(Economic Class 1)Employers 7,481 100 99 38 32 12Gross payroll $132,979,696 100 99 79 73 51$20,000-$39,999(Economic Class 2)Employers 6,465 100 93 8 5Gross payroll $ 34,594,864 100 98 28 16 2$10,000-$19,999(Economic Class 3)Employers 5,665b 100 91 1 1Gross payroll $ 18,319,568 100 99 9 8 2Under $10,000(Economic Class 4)Employers 7,482 b 100 84 2 2Gross payroll $ 17,467,920 100 96 19 15 2All ClassesEmployers 27,093 b 100 92 13 11 3Gross payroll $203,362,048 100 99 59 53 34aLess than 0.5 percent.bThis number is an underestimate since the population is based on employers filing Social Security Wage Statements. Excluded areemployers with payrolls less than $150 per year and non reporters. Most of these employers have annual sales less than $20,000.However, this exclusion has very little effect on total payroll.Table 2: Distribution of subject Texas employers by type of farm under five selected coverage provisions, 1969.Coverage provisions2 3 4 5One worker Four workersin 20 weeks in 20 weeksOne worker or $1,500 or $5,000 Four workers Eight workersType of farm anytime high quarter high quarter in 20 weeks in 26 weeksPercent of workersCash grain 100 93 13 11 2livestock farm & ranch 100 92 9 7 2Cotton 100 89 10 7 3Subtotal-three major products 100 92 11 8 2Other field crops 100 69 9 9 2Vegetables 100 100 54 40 28Fruit and nuts 100 100 43 43 11Poultry 100 100 40 40 22Dairy 100 100 42 41 13General 100 99 1 1 1Miscellaneous 100 100 28 18 12Subtotal-other products 100 91 29 26 11Tabfe 3: Distribution of gross payroll of subject Texas employers by type of farm under five selected coverage provisions, 1969.Coverage provisions2 3 4 5One worker Four workersin 20 weeks in 20 weeksOne worker or $1,500 or $5,000 Four workers Eight workersType of farm anytime high quarter high quarter in 20 weeks in 26 weeksPercent of workersCash grain 23 23 16 15 9Livestock farm & ranch 30 36 29 29 31Cotton 19 19 16 14 13Subtotal-three major products 72 72 61 58 53Other field crops 4 4 4 4 3Vegetables 5 5 8 9 12Fruit and nuts 3 3 5 6 5Poultry 3 3 4 4 5Dairy 7 7 11 12 13General 1 1Miscellaneous 5 5 7 7 9Subtotal-other products 28 28 39 42 47Total-all products 100 100 100 100 100aless than 0.5 percentExtension of Unemployment Insurance to TexasAgriculture: A technical report, Karen J. Nergartand Conrad F. Fritsch. Prepared at Texas A&MUniversity in conjunction with: Regional ResearchProject NE-58 of the Northeast Agricultural Experi-ment Stations. Submitted to the U.S. Departmentof Labor, January 10, 1973.The Economic Impact From the Extension of Un-employment Insurance to Texas Agriculture. Con-rad. F. Fritsch, Karen J. Nergart and David C.Ruesink. Bulletin B-1l46 published by the TexasAgricultural Experiment Station, The Texas A&MUniversity System.Educational programs conducted by the Texas Agricultural Extension Service serve people of all ages regardless of socio-economiclevels, race, color, sex, religion or national origin.Cooperative Extension Work in Agriculture and Home Economics, The Texas A&M University Syst<;m and the United StatesDepartment of Agriculture cooperating. Distributed in furtherance of the Acts of Congress of May 8, 1914, as amended, andJune 30, 1914.5M-8-75 AECO

What If Unemployment Insurance Coverage Were Extended to Agricultural Workers.

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What If Unemployment Insurance Coverage Were Extended to Agricultural Workers.

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What If Unemployment Insurance Coverage Were Extended to Agricultural Workers.

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