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
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
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
The Unemployment Insurance (UI) program helps counter economic
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
Eligibility and amount
It is noticeable that most of American workers are not qualified for
unemployment insurance, including temporary, part-time, and
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.