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Unemployment Insurance Overview

History and Purpose

The Unemployment Insurance system is a federal-state program enacted in 1935 as part of the Social Security Act (SSA). UI was created in response to a series of economic downturns around the turn of the 20^th century, including the Great Depression. The UI and other new social insurance programs such as workers’ compensation were established in recognition of the fact that families had become increasingly vulnerable to poverty should their main wage-earner lose his job or ability to work.  Susceptibility to poverty due to job loss is still a very valid concern today. 

UI’s additional goals include providing a countercyclical infusion of consumer spending during economic recessions, strengthening the attachment between employers and their skilled workers during temporary layoffs, and maintaining labor standards during economic crises.

State Responsibility

The Federal-State Unemployment Insurance Program provides unemployment benefits to eligible workers who are unemployed through no fault of their own.  Each state administers its own Unemployment Insurance (“UI”) program.  While the federal statute sets broad parameters for state UI programs, states define most of the details of program design, including eligibility criteria, benefit levels, and benefit duration. The definition of “no fault” is also determined under State law.  Most programs are funded exclusively through a tax on employers, although three states also require an employee contribution.  

Eligibility

Most states require UI recipients to have earned a certain amount or to have worked for a certain time period.  The majority of states require recipients to have worked the first four out of the last five completed calendar quarters prior to the time a claim is filed.  If a claimant was terminated for some reason other than a lack of work, the state agency responsible for administering UI will determine whether the individual is eligible or not under state law. 

To continue receiving UI benefits, the recipient must file periodic (weekly or biweekly) claims to establish that he remains eligible.  The recipient may also be directed to report to the local Unemployment Insurance Claims Office or One-Stop/Employment Service Office for an in-person interview.  UI may be terminated if the recipient fails to report as directed.  Recipients may also be required to register with the State Employment Service.

An applicant whose claim is denied or disqualified has the right to file an appeal. 

Benefits

Benefits are based on a percentage of an individual’s earnings over a recent 52-week period, up to a maximum amount determined by each state.  Most states will pay benefits for a maximum period of 26 weeks.  The benefit period may be extended under certain circumstances, such as an unusually harsh economic climate.  UI benefits are subject to federal income tax. 

Sources

U.S. Department of Labor, State Unemployment Insurance Benefits.  Available on-line at http://workfocesecurity.doleta.gov/unemploy/uifactsheet.asp. 

Vicky Lovell & Cynthia Negrey, Promoting Women's Workforce Security: Findings from IWPR Research on Unemployment Insurance and Job Training. Available on-line at http://wdr.doleta.gov/conference/pdf/lovell.pdf.