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Unemployment Insurance - Overview

Print of Bread Line -- No One Has Starved (1932), an etching by Reginald Marsh (1898-1954), showing Depression era men waiting in long line for food. Marsh lines these men up and uses the words of Herbert Hoover -- 'No one has starved' -- to underscore the way unemployment strips them of their humanity and individual tragedies. Unemployment Insurance (UI), sometimes called Unemployment Compensation (UC), pays benefits to qualified workers who are unemployed and looking for work. Unemployment payments (compensation) are intended to provide an unemployed worker time to find a new job equivalent to the one lost without major financial distress. By payments to laid-off workers, it ensures that at least a significant proportion of the necessities of life (food, shelter and clothing) can be obtained while a search for work takes place. Benefits are paid as a matter of right and are not based on need.

In the United States, the unemployment insurance program is based on a dual program of federal and state statutes. The Federal-State unemployment insurance system, initiated in the Social Security Act of 1935, offers the first economic line of defense against the effects of unemployment. Much of the federal program is implemented through the Federal Unemployment Tax Act. Each state administers a separate unemployment insurance program within minimum guidelines established by Federal statute. Who is eligible, the amount they receive, the period of time benefits are paid, ongoing eligibility, and disqualification procedures are determined by each state.

Conceptually, unemployment compensation is designed to provide benefits to most workers out of work due to no fault of their own for periods between jobs. Almost all wage and salary workers are now covered by the Federal-State system. State agencies take applications and administer payments. Except in a few States where there are small employee payments, the unemployment compensation system is financed by a payroll tax on employers. To support the system a combination of federal and state taxes are levied upon employers. The proceeds from the unemployment taxes are deposited in an Unemployment Trust Fund (the Fund). Each state has a separate account in the Fund to which deposits are made. The Federal Government provides funding for benefits for unemployed federal employees and ex-military personnel.

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Unemployment Insurance - Overview

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