Experience Rating System
Using the Reserve Ratio to measure fund health makes sense, but using the same metric to determine the employment health of a business, does not. No other country in the developed world uses the Experience Rating system. If there is a justifiable need to measure ‘employment risk’, there are other metrics that capture it more accurately.
These alternative options measure employment risk by using variables that the employer can control. They incentivize hiring and payroll increases while disincentivizing layoffs.28 If the political will is not there to remove the Experience Rating system then these alternatives created by Michael Miller and Robert Pavosevich are better than the Reserve Ratio method.