Unemployment Insurance

The U.S. Department of Labor maintains a fund called the Federal Unemployment Account, which provides money for states to ensure that they can maintain unemployment insurance when demand is highest. According to the National Conference of State Legislatures, 30 states currently borrow from this account. California alone has borrowed $8.8 billion so far. Beginning in 2011, the states will have to make $1.4 billion in interest payments on unemployment insurance loans from the federal government. To help pay back the loans, many states have increased unemployment insurance taxes. States should consider reforms that will make the unemployment insurance system more sound and solvent.  For example, the Cascade Policy Institute in Oregon  proposed creating an Individual Asset Account to improve the unemployment safety net and help build up personal assets for difficult times. Read below for more detailed information and solutions.

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      State Unemployment Rates for August 2011

      Unemployment rates in the states were little changed in August 2011, according to figures released by the Bureau of Labor Statistics on September 16, 2011. 


      The Costs and Consequences of Unemployment Insurance in the States

      Mercatus | by Eileen Norcross and Emily Washington | February 28, 2011

      The duration and depth of the current recession reveals the risks associated with the federal-state unemployment insurance programs. Unemployment insurance programs in the states have been approaching insolvency for more than a decade, putting pressure on states to raise payroll taxes, cut benefits, or seek federal loans.


      State Unemployment Trust Fund Balances

      NCSL | February 28, 2011

      State governments levy payroll taxes on employers to pay for unemployment insurance benefits. These taxes, calculated on state financing formulas and an employer's history of claims, are deposited into the Federal Unemployment Trust Fund.


      An Unemployment Insurance Balancing Act

      Stateline | by Christine Vestal | February 26, 2011

      Unemployment insurance is helping millions of Americans stay afloat while they search for jobs, but gaps in the safety net are leaving out many who need it most.


      As Unemployment Insurance Debts Mount, Interest Payments Loom

      Stateline | by Pamela Prah | February 26, 2011

      For more than two years, stubbornly high unemployment has been taking a toll on the nation's workforce, but for states, the mounting costs of paying benefits to millions of people who can't find work are only beginning to become clear.


      Unemployment Insurance Taxes: Options for Program Design and Insolvent Trust Funds

      The Taxpayer Foundation | by Joseph Henchman | November 21, 2011

      Unemployment Insurance reforms should be considered, including eliminating the "firewall" between administrative costs and benefits, reducing cross-subsidies to high-layoff employers, and relying more on face-to-face training and advising. More significant reforms that could be considered include adopting elements of state workers' compensation programs and experimenting with individual accounts.

    • SOLUTIONS: Delaware

      Personal Unemployment Accounts

      The Caesar Rodney Institute | by David Stevenson | February 28, 2011

      Less than half of Delawareans receive unemployment insurance benefits when they lose their job. The claims process is time consuming and demeaning for many. Errors in payment and outright fraud waste millions. There is a better way. Personal Unemployment Accounts (UA), run like a 401K or IRA, can provide an attractive alternative.


      Turning Unemployment Insurance into an Asset

      Cascade Policy Institute | February 26, 2011

      Unemployment Insurance (UI) and personal assets are safety nets; one is built by government and the other by the individual. Both protections are lacking: UI benefits are faulty - they increase temporary lay-offs, and delay re-employment for that minority share of workers who receive benefits, and individuals are not saving enough to help themselves in difficult times.


      Legislative Guide to Unemployment Insurance Reform in the States

      Both Federal and State Governments are responsible for UI. Federal law imposes an unemployment tax on employers, but provides that they may receive credit against most of the tax
      if their State has an approved UI program. This tax offset approach provided the original incentive for all States to enact UI laws.


      The Individual Asset Account: Turning Unemployment Insurance into an Asset

      Cascade Policy Institute | February 8, 2011

      Cascade seeks to initiate a pilot program that would allow employers and workers in Oregon to opt-out of the mandatory UI system and participate in an alternative arrangement of Individual Asset Accounts (IAAs).