FACT CHECK: Massachusetts’ Unemployment Insurance Reform is Necessary

July 17, 2025

A recent Boston Business Journal editorial accurately highlighted the urgent need to fix Massachusetts’ broken Unemployment Insurance (UI) system. But for many residents, it’s not always clear what the UI system is—or why it matters so much.

What Is Unemployment Insurance—and Why Should You Care?

Put simply: When someone loses their job, unemployment insurance is what helps keep them afloat while they look for work. Think of it like a safety net that’s supposed to be there when you need it most.

Employers pay a special tax into a state-run Trust Fund, which is supposed to cover these benefits when workers become unemployed. It’s designed to be self-sustaining—employer contributions should roughly match what gets paid out to unemployed workers.

But in Massachusetts, that system is broken. Due to poor design (such as lax eligibility requirements and overly generous benefits), the fund is almost empty and taxes on employers are sky-high. This affects everyone: workers who might need benefits, employers who pay the taxes, and the overall health of our state’s economy.

As the state’s UI Trust Fund slides toward insolvency, it’s important Massachusetts residents understand the facts behind this crisis. Let’s dive into why the proposed solutions matter for our economic future.

FACT: Massachusetts’ UI System is Headed Toward Collapse

Massachusetts unemployment has risen for five consecutive months, hitting 4.8 percent in May with 190,000 residents unemployed. That’s higher than the national unemployment rate—a reversal from recent years when Massachusetts outperformed the country.

Meanwhile, the state’s UI Trust Fund continues to decline. Here’s where it gets complicated: Massachusetts currently owes $2.1 billion to the federal government. This debt occurred because during the pandemic, the state used federal relief funds meant for other purposes to pay state unemployment benefits. Now, the federal government wants that money back.

What does this mean for Massachusetts residents? Either employers will face massive tax increases to pay this debt (which means less money for hiring and wage growth), or there won’t be enough funds to pay workers’ benefits. Without reform, it’s a lose-lose situation.

FACT: Massachusetts’ System Costs Much More Than Other States

Massachusetts has an incredibly generous unemployment insurance payment rate. The editorial rightfully points out that residents receive up to $1,051 per week in Massachusetts compared to $427 in New Hampshire and $721 in Connecticut.

But, generosity without sustainability is a recipe for disaster. Massachusetts is now the only state in the nation offering up to 30 weeks of UI benefits, a duration triggered by rising unemployment in the state, due to a 2003 provision in state law.

Additionally, between July 2021 and June 2024, Massachusetts had an improper UI payment rate of 22.9 percent, making it 10th worst in the nation. That’s $1.18 billion in taxpayer money wasted on errors—money that could have funded real benefits or prevented tax increases.

These inefficiencies feed into a larger structural problem: a mismatch between employer contributions and benefit payouts. The result is a system that teeters on the edge of insolvency, even during economic booms.

FACT: Massachusetts Already Burdens Businesses with High UI Taxes

The Tax Foundation currently ranks Massachusetts in 47th place for unemployment insurance tax rates, meaning only three states impose higher UI tax burdens on employers.

These taxes aren’t just numbers on paper. They’re driving real consequences. High UI costs, layered on top of other expensive business conditions, are pushing employers to look elsewhere. Between Q3 2022 and Q3 2023, more businesses closed than opened in Massachusetts, with net losses topping 2,000 establishments.

In a state already losing population and facing rising unemployment, a UI tax structure that pushes employers out the door is a recipe for stagnation. Reform isn’t optional. It’s urgent.

FACT: Businesses are Not to Blame

The BBJ editorial board is correct. Businesses did not cause the $2.1 billion UI debt, and the public doesn’t believe they should be punished for it. MOA polling shows that 71 percent of Massachusetts voters oppose making employers pay for the state’s UI blunder. This isn’t just a business complaint; it’s a broad-based demand for fairness.

This sentiment reflects a larger frustration with the state’s policy approach. Massachusetts businesses are already facing sky-high energy costs, unaffordable housing that makes worker retention difficult, and the looming impact of population loss. Add a structurally broken UI system on top of that, and you get a policy environment that repels—not retains—growth.

FACT: The Bay State Has the Resources to Fix This

The editorial makes clear that the current UI system in Massachusetts must be fixed.

The good news? Massachusetts has options. The state’s Rainy Day Fund, officially known as the Stabilization Fund, is a multi-billion-dollar reserve meant to help during times of economic trouble. At over $8.1 billion, it’s one of the largest in the country.

Many other states have used reforms or general funds to pay down UI debt. For example, North Carolina paid off their significant UI debt in 2015 through significant reforms to their system, and New York was able to pay off more than triple Massachusetts UI debt, almost $7 billion, using their rainy day fund.

The Bottom Line: Reform is Urgent

The longer Massachusetts delays UI reform, the more damage will be done—to workers, to employers, and to the state’s economic future.

Fixing the UI system doesn’t mean abandoning workers. It means creating a sustainable, effective program that balances support for the unemployed with a healthy business environment that can generate the jobs they need.

Let’s build a system that works for everyone.