Unemployment Insurance

Unemployment insurance was created by the Social Security Act of 1935 as a partnership: each state runs its own program and sets benefit levels and rules, within federal standards overseen by the Labor Department's Employment and Training Administration. Employers pay a federal tax and a state tax on the first part of each worker's wages, which fund benefits and administration. Workers generally qualify if they lost a job through no fault of their own, earned enough in the past year, and are able, available, and looking for work.

Benefits typically replace 40 to 50 percent of prior wages, up to a state maximum that ranges from a few hundred dollars a week in some states to more than 1,000 in others. Most states pay for up to 26 weeks, though several pay for 12 to 20 weeks when unemployment is low. A federal-state extended benefits program adds weeks in states with high unemployment, and Congress has added more in deep recessions.

During the pandemic in 2020, Congress added 600 dollars a week, then 300, extended benefits, and covered gig workers and the self-employed for the first time. Claims topped 6 million in a single week, overwhelmed state systems, and the Government Accountability Office estimated that 100 to 135 billion dollars was lost to fraud. Debates continue over modernizing state computer systems, how long benefits should last, whether low state taxes leave trust funds short in recessions, and whether benefits discourage work.