Two in three Americans will experience at least one year of unemployment for themselves or their household head during their working years. As any of the tens of millions of Americans who lost their jobs during the Great Recession will tell you, unemployment can be excruciating for families — devastating finances, reducing subsequent earnings, and inflicting severe psychological and emotional damage on workers and their children. Unemployment also has enormous costs for our entire economy, depressing GDP growth and eroding the skills of our workforce.
Unemployment insurance (UI) was created eight decades ago to mitigate the risks and hardships of job loss. UI is earned insurance: firms contribute to the system on behalf of their workers through a modest payroll tax. If workers are laid off through no fault of their own, UI benefits temporarily replace a fraction of workers’ wages while they seek new job opportunities. UI is also a state-federal partnership: states are responsible for paying benefits, while the federal government is responsible for funding administrative costs and reemployment services.
The above excerpt was originally published in Real Clear Policy.
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