labor lawAdivision of labor law center

A number of areas in the U.S., including Puerto Rico, recently received federal employment grants to aid struggling economies. Many unemployed workers have long had a fantasy of free money for job training. Now, it’s coming true for unemployed workers in the Eastern and Central areas of Puerto Rico, as well as some parts of Utah, Texas and other states.

A Puerto Rico unemployment grant under the federal WIRED program was recent announced to aid the Eastern and Central areas. The grant is an attempt by the U.S. Labor Department’s Employment and Training Administration to help struggling regional economies. The grant includes an initial gift of $500,000 for training in the region.

After a regional training plan is completed, the region will be given an additional $4.5 million grant to use in any worker-training program they like. Part of the WIRED effort, the recent program includes a Puerto Rico unemployment grant of up to $5 million to train workers in the Eastern and Central area of Puerto Rico.

“Investing in area workforces through this collaborative approach will boost entire regions’ economic vitality,” U. S. Secretary of Labor Elaine Chao said when announcing a recent Puerto Rico unemployment grant. WIRED is a program conducted by the U.S. Department of Labor to improve the economy in troubled regions by training workers. Technically, the program’s name is the Workforce Innovation in Regional Economic Development initiative, although it is usually referred to by the initials WIRED.

The Eastern and Central regions of Puerto Rico were chosen as two of several areas to receive second round WIRED grants. Under this federal program, the Eastern and Central area will use the Puerto Rico unemployment grant to improve the area economy by training unemployed workers for better jobs. In total, this second round of WIRED grants will exceed $65 million. The first group of WIRED grants awarded $195 million to 13 regions. WIRED has proven highly successful in recent years in improving an area’s unemployment. The grants are awarded based on a competition involving the state governors.

According to Puerto Rico Unemployment Insurance Posters, the District of Columbia, Puerto Rico, and the Virgin Islands are considered “states” for UI claims filing purposes. The Unemployment Trust Fund in the Federal unified budget contains a separate account for each of the States, the District of Columbia, the Virgin Islands, and Puerto Rico. These 53 jurisdictions deposit their respective unemployment taxes in their accounts and withdraw funds to cover the costs of regular State benefits and half of the extended benefits program. Three additional Federal accounts are for administration, extended benefits, and loans to States; they are funded by the Federal unemployment tax.

Effective January 1985, all employers covered by the Federal Unemployment Tax Act are charged 6.2% of the first $7,000 annually for each worker’s covered wages. However, employers do not actually pay the full amount because they credit toward their Federal tax the payroll tax contributions that they paid into a State unemployment insurance program. Their credit may also include any savings on the State tax achieved under an approved experience rating plan.

Effective January 1985, the total credit may not exceed 5.4% of taxable wages. The remaining 0.8%, including a 0.2% temporary surcharge, is collected by the Federal Government. The permanent 0.6% portion is used for the expenses of administering the unemployment insurance program for the 50% share of the costs of extended benefits, and for loans to States. Any excess is distributed among the States in proportion to their taxable payrolls.

All States finance unemployment benefits through employer contributions. There is no Federal tax on employees, and only three States collect employee contributions. Puerto Rico Unemployment Insurance posters let employees know that they will not have to pay any contributions to the UI fund. The actual tax paid depends on the employer’s record of employment stability, measured generally by benefit costs attributable to former employees. All jurisdictions use this system, called experience rating. Employers with favorable benefit cost experience are assigned lower rates than those with less favorable experience.