Unemployment Insurance

The unemployment insurance (UI) program is a joint federal and state program that was established in 1935 to provide an essential safety net for workers who become involuntarily unemployed. Federal law and regulations provide broad guidelines and some minimum standards that the states must meet. Beyond that, the states are free to set the important parameters of their UI programs—eligibility requirements, benefit levels, and financing. As a result, the unemployment insurance programs vary across all 50 states and the District of Columbia. The unemployment insurance program is financed through state and federal payroll taxes paid by employers.

In 2003, about 40% of unemployed workers received unemployment insurance benefits. In 2003, the average weekly benefit check was $262, which replaced, on average, 47% of a worker's previous salary. Workers received that benefit for an average of 16.4 weeks in 2003. Because states determine who is eligible for benefits, the weekly benefit amounts, and the duration of the benefits, the generosity of the UI program varies significantly by state.

Since the UI program was established, there have been a number of important changes in the labor market, including the rise in part-time and temporary work, the increased role of women in the workforce, and the rise of dual-income families and the difficulties they face balancing work and family obligations. Unfortunately, the unemployment insurance program has not kept pace with these changes, and presents particular difficulties for these groups of workers, as well as low-wage workers. Providing the assistance necessary to help these families requires the following state-based reforms:

• States should consider a worker's most recent earnings when determining eligibility for benefits.
• States should extend eligibility to workers seeking part-time jobs.
• States should base their eligibility requirements on hours worked, not wages, to alleviate the inherent discrimination against low-wage workers.
• States should pay more generous benefits to keep workers and their families out of poverty.