Unemployment Compensation

Unemployment compensation is the money granted to unemployed workers in the United States, which is classified as a type of social welfare benefit. These types of benefits will be included in a taxpayer's gross income, according to the Internal Revenue Code.

Through federal and state employer payroll taxes, there is a federal-state joint financial program called unemployment insurance. In general, employers should pay unemployment taxes in both state and federal level.

There are times when the federal government will lend money to the states for unemployment insurance. This is when the unemployment rate is high, therefore the states are running short of funds. If a states cuts taxes increasing benefits, then the need for loans will be exacerbated. There will an interest accompanied by all the loans made.

The politics surrounding unemployment insurance are very complex due to its nature that it is a joint program of state and federal run by the states.

Unemployment Rates
Unemployment Qualifications

Economic function

The Unemployment Insurance (UI) program helps counter economic fluctuations.

It is normal that the Unemployment Insurance (UI) program will help counter economic fluctuations. When the economy is growing, UI program revenue will rise because tax will be increased, while UI program spending will fall as there are fewer workers who are unemployed. This effect of collecting more taxes than spending will dampen demand in the economy. Also this will create a surplus of funds for the UI program to spend when it comes to a recession.

During recession more workers lose their jobs and claim Unemployment Compensation benefits. Therefore UI tax revenue will fall and spending will rise. The increased amount of UI payments to those unemployed workers will put additional funds into the economy, thus dampening the effect of earnings losses eventually.
 

Eligibility and amount

It is noticeable that most of American workers are not qualified for unemployment insurance, including temporary, part-time, and self-employed workers.

In general, the workers should be unemployed through no fault of their own, such as lay-offs. Reported covered quarterly earnings and the number of quarters worked are used to calculate and determine the length and the value of unemployment benefits.