Unemployment Insurance: 6 Need-to-Know Insights
Policy + Politics

Unemployment Insurance: 6 Need-to-Know Insights

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President Obama and Senate Democrats are pressing for a three-month extension of the half year emergency unemployment benefits already granted for the 1.3 million Americans who were hoping for an extension when the program expired in late December.

The Senate will hold a crucial procedural vote on the bipartisan measure late Monday or Tuesday, sponsored by Sens. Jack Reed (D-RI) and Dean Heller (R-NV). On Tuesday, Obama will also hold a White House event to focus attention on people who have lost benefits and argue that failing to extend the benefits would harm the overall economy. Unless Congress acts, as many as 3.2 million people will lose their emergency benefits by June, as the funding is exhausted. 

Related: 3 Issues on the Agenda When Congress Meets

The costs of extending the emergency benefits for another three months this year would be $6.5 billion or $25 billion for the entire year, according to Sen. Reed.

House Speaker John Boehner (R-OH) and Sen. Rand Paul (R-KY), among other Republicans, have stipulated that any extension of unemployment benefits must be offset with spending cuts.

Federal and state unemployment compensation programs are highly complex programs that help millions of Americans during tough economic times. Some Americans who have been unemployed for more than six months are hit with major financial and personal hardship, including bankruptcy and the loss of their homes. And more than half have reported putting off medical care, while many say they are depressed or have lost self-respect.

Related: GOP Signals Deal on Jobless Benefits If Dems Play Ball

Here are six of the most important things you need to know about unemployment insurance, according to a recent analysis by the Center on Budget and Policy Priorities:

What is unemployment insurance (UI)? It’s a combined federal-state program created in 1935 to provide a form of social insurance to assist unemployed Americans and their families through financial crises while helping sustain consumer demand during economic downturns. States are responsible for running and funding the basic unemployment program, although the U.S. Department of Labor actually oversees the system. Most states provide a minimum of 26 weeks of benefits.

What are extended benefits? A permanent extended benefits program typically provides an additional 13 to 20 weeks of compensation to unemployed workers who have exhausted their regular benefits in states where the unemployment situation has worsened substantially. The total number of additional weeks of coverage is determined on a state-by-state basis, with more going to states with the most employed people, in contrast to the normal unemployment rate. 

When the economy collapsed in 2008, Congress gave the unemployed a longer lifeline. It increased jobless benefits to a maximum of 99 weeks, with the federal government picking up the additional tab. Before the program expired Dec. 28, the unemployed in Nevada and Rhode Island were receiving up to 73 weeks of benefits, while jobless people in 18 other states – including California, New York, New Jersey, Ohio and Pennsylvania – were receiving a maximum of 63 weeks. 

Who is eligible for unemployment insurance? To qualify, a person must have lost his job through no fault of his own, must be able to work and be available to work, and must be actively seeking another job. The regulations vary from state to state, and in some cases, states don’t cover part-time workers unless those workers are willing to take on full-time employment. States also have some latitude in determining the base period of employment used to determine eligibility.

Most states vary the number of weeks of benefits according to the amount of a worker’s past earnings, whether the worker had earnings in each of the four calendar quarters that make up the base period, and how evenly those earnings were distributed over the base period. In other words, someone can’t simply take a job for a few weeks, quit or get fired and expect to qualify for even the base amount of unemployment insurance.

How is unemployment insurance funded? The basic UI system is funded by taxes that employers pay on behalf of their employees. The federal government usually picks up the full tab for temporary emergency unemployment benefits. The federal government also levies a UI tax on employers, under the Federal Unemployment Tax Act (FUTA), to finance the administration of state UI programs.  

How much can you receive in unemployment insurance? In 2012 the average unemployment benefit was about $300 per week, ranging from as little as $235 a week in Mississippi to $979 for someone with dependents in Massachusetts. State laws typically aim to replace about half of a worker’s previous earnings up to a maximum benefit level.

How easy is it to qualify for unemployment insurance? Unemployment insurance is not designed to cover all unemployed workers. It does not cover people who leave a job voluntarily, people looking for their first job, and reentrants who previously left the labor force voluntarily. During the past quarter-century, fewer than half of unemployed workers actually received unemployment insurance, except during recessions. But it is easier than ever to apply for UI in most states, which offer electronic applications.

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