Program Basics

The unemployment insurance act was established to help mitigate the negative effects of unemployment in the United States. Unemployment has a ripple effect, causing the economy to suffer as a whole when workers lose their buying power.

Unemployment insurance (UI) replaces part of a claimant’s income when he or she is laid off or terminated, which allows the worker to afford basic necessities while conducting a job search.

Since the unemployment act was passed, it has undergone many revisions and changes in order to better suit the needs of employers as well as workers. Some changes take place in reaction to the current unemployment rate, while other revisions occur in response to national trends, such as workers losing their jobs due to an increase in foreign imports, for example. Below, learn more about unemployment benefit history and discover how the unemployment rate by year can have an effect on the act.

The History of Unemployment Compensation

The Social Security Act, also known as the UI act, was signed into law in 1935, but the idea of creating an insurance program for unemployed workers was popular long before that. Before the act became a federal law, several states including Wisconsin and Massachusetts attempted to create local laws that would help unemployed workers. However, there was some concern that employers would be at a disadvantage if they were required to pay into an unemployment tax fund. As a result, most states were hesitant to create a mandatory UI insurance law out of fear that it would drive workers to other states instead.

Related Article: History of Unemployment Benefits

Proponents of the unemployment insurance act were able to create a committee that would consider the idea of passing a federal unemployment law. In 1934, a senator and state representative jointly introduced a bill to the committee, which was well received among experts, employers and labor officials. However, the committee believed that more research was needed and there were several questions that needed to be answered. For example, should the federal government run the unemployment program, or would it be best to let states create their own laws under the program? In the end, it was decided that the program would run effectively, if the federal government and the states formed a cooperative partnership to administer the program.

Changes to Unemployment Insurance Laws

The unemployment benefit act, has changed many times throughout its history. For example, claimants can usually only receive benefits for 26 weeks (or less in some states). However, unemployment benefits may be extended under special circumstances. The first time claimants were eligible for extended benefits was in 1958 under the Temporary Unemployment Compensation Act, which allowed states to provide up to 13 additional weeks of benefits. Temporary extensions have been granted a total of eight times so far when the Department of Labor anticipates that the unemployment rate will rise or when the economy is in a depression or recession.

Many other amendments have been made to the act as well. For example, the Disaster Relief Act allows states to provide extended benefits to workers who lose their jobs as a result of natural disasters. Furthermore, the Workforce Innovation and Opportunity Act was created to help unemployed workers receive training for jobs and understand how to apply for workforce development programs. Unemployment insurance laws have also been enacted in response to changes in the workforce, such as employees losing their jobs or having their hours cut due to increased imports from other countries.

The laws for UI benefits have also changed in relation to how many weeks a claimant can receive benefits. Prior to 2011, all states provided up to 26 weeks of benefits for qualified workers. However, several states have since changed their policies. Some have decreased the amount of weeks that a beneficiary can receive unemployment benefit payments, while others, including Montana and Massachusetts, have increased the amount of time. Arkansas, Florida, Georgia, Idaho, Kansas, Michigan, Missouri, North Carolina and South Carolina have all limited the number of weeks claimants can receive benefits, with maximum periods ranging from 12 to 21 weeks.

Important Unemployment Statistics

Looking at unemployment rate history can provide valuable insight into the job market in the U.S. The current unemployment rate is 3.7 percent as of September 2018, which is one of the lowest rates since 1969 when the rate reached 3.4 percent. Whenever the rate of unemployment decreases, the number of people filing claims to receive unemployment payments tends to decrease as well. This is apparent even when comparing the current unemployment rates to figures from 2017.

In general, the U.S. has been experiencing steady job growth as it recovers from the recession of 2008. While the unemployment rates vary from one state to the next, the general trend shows that the rate is steadily dropping. For example, the unemployment rate was 9.6 percent in 2010, compared to the current rate of 3.7 percent. Some states have seen better job growth than others, with North Dakota, Hawaii, Iowa, Nebraska and Minnesota all showing rates at or below 2.8 percent as of September 2018. When looking at the unemployment rate by state, other states are experiencing a slower rate of job growth. Alaska, the District of Columbia, West Virginia and Louisiana, for example, all have an unemployment rate at or above 5 percent as of September 2018.

Looking at trends in UI insurance claimants as well as the industries they come from can also provide valuable insight. For example, workers in the administrative support, waste management and remedial services industry make up more than 12 percent of all unemployment claims, while health care and social assistance workers account for nearly 10 percent of claims. Looking at industries alone does not provide a complete picture of the current unemployment landscape, though. These industries employ a large number of workers in the first place, and as a result, will naturally have more workers who are eligible to make claims.

Overall, there were well over 1.6 million claimants currently receiving UI benefits as of 2018, which is significantly lower than figures from last year. In fact, there have been nearly 14 percent fewer claims in 2018 compared to the same time last year. Certain states have seen even better improvements, with Wyoming, Kansas and Mississippi all having at least 30 percent fewer claims in 2018 compared to 2017.

Related Article: Continued Eligibility Requirements for Unemployment Benefits

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