What Is Unemployment Compensation?
Let me explain what unemployment compensation really is. It's money paid by the state to workers who've lost their jobs due to layoffs or retrenchment. This is designed to give you a source of income while you're jobless until you land another position. To qualify, you have to meet specific rules, like having worked a minimum period and actively searching for work.
You usually get this through an unemployment check or direct deposit, and it replaces part of your income for a set time or until you find a job, whichever happens first. People also call it unemployment benefits or unemployment insurance.
Key Takeaways
Here's what you need to grasp right away. Unemployment compensation goes to people who've recently lost their job without it being their fault, like from a layoff or business closure. These benefits often come as a percentage of your average pay from the last 52 weeks. Any pandemic-related extras ended on September 6, 2021. You get paid via check or direct deposit, and each state has its own rules and requirements for these benefits.
Understanding Unemployment Compensation
Many developed countries and some developing ones pay out unemployment compensation. In the US, it's handled jointly by the federal government and each state. Your benefits are based on a percentage of your average pay over the recent 52 weeks, and the exact calculation differs by state.
States generally pay these benefits, funded mostly by state and federal payroll taxes from employers. Most places offer 26 weeks, but it can range from 12 to 30 weeks, with extensions during high unemployment times.
Unemployment Compensation Requirements
As I mentioned, the federal government and states manage this together in the US. Requirements for how benefits are figured out vary by state. Take New York as an example: you need to have worked and earned wages in two calendar quarters, gotten at least $2,600 in one quarter, and your total wages must be 1.5 times your high quarter amount. The weekly minimum is $104, and the max is $504.
New York and other states dropped the seven-day waiting period for those out of work due to COVID-19 closures or quarantines.
COVID-19-Related Unemployment Programs
On March 27, 2020, President Trump signed the $2 trillion CARES Act, which boosted unemployment insurance temporarily through three programs: Pandemic Unemployment Assistance, Federal Pandemic Unemployment Compensation, and Pandemic Emergency Unemployment Compensation.
Summary of COVID-19 Programs
- Pandemic Unemployment Assistance (PUA) extended benefits to self-employed, freelancers, and independent contractors, and it ended on September 6, 2021.
- Federal Pandemic Unemployment Compensation (FPUC) gave an extra $600 a week until July 25, 2020, then $300 a week from January 2, 2021, to March 14, 2021, and ended on September 6, 2021.
- Pandemic Emergency Unemployment Compensation (PEUC) added 13 weeks after regular benefits ran out, plus another 11 for 24 total, and ended on September 6, 2021.
Continued COVID-19 Relief
President Biden signed the $1.9 trillion American Rescue Plan on March 11, 2021, extending benefits for pandemic job losses from March 14 to September 6, 2021. It bumped PUA from 50 to 79 weeks and PEUC from 24 to 53 weeks. All pandemic-related unemployment aid stopped on September 6, 2021.
History of Unemployment Compensation
The first system started in the UK with the 1911 National Insurance Act under H.H. Asquith's Liberal government. It aimed to counter the growing Labour Party influence among workers. This act created a contributory insurance for illness and unemployment, but only for wage earners—families and non-wage earners had to find other help. Communists criticized it for preventing revolution, while employers and Tories viewed it as a necessary evil.
The British setup used actuarial principles, funded by fixed contributions from workers, employers, and taxpayers. After one week unemployed, you could get seven shillings weekly for up to 15 weeks a year, but only in volatile industries like shipbuilding, with no dependent coverage. By 1913, it insured about 2.5 million people.
In the US, Wisconsin started it in 1932 to ease the Great Depression. President Roosevelt made it national in 1935 with the Social Security Act. At first, it exempted employers with fewer than eight workers, dropping to four in 1954 and one in 1970.
Special Considerations
In Canada, it's called Employment Insurance (EI), funded by employer and employee premiums. The first national system came in 1940 via the Unemployment Insurance Act, again due to the Great Depression. It got expanded in 1971 and replaced in 1996 by the Employment Insurance Act, shifting focus to promoting employment over just supporting unemployment.
Other articles for you
Gentrification transforms low-value neighborhoods into high-value ones, bringing improvements but often displacing original residents and raising social issues.
In-house financing allows retailers and firms to directly provide loans to customers for purchasing goods and services, bypassing traditional lenders.
A wealth tax is a levy on the net market value of an individual's assets, distinct from income or property taxes, implemented in some countries and proposed in the U.S
FactSet is a financial data and analysis provider for professionals in investment and banking sectors.
Delta is a key risk metric in options trading that estimates how much an option's price changes with a $1 shift in the underlying security's price.
The Upstream Capital Costs Index (UCCI) is a tool for tracking capital costs in oil and gas production projects, managed by S&P Global.
The information ratio measures a fund manager's ability to generate consistent excess returns over a benchmark relative to the volatility of those returns.
An economic growth rate measures the percentage change in a nation's production of goods and services over a specific period compared to a previous one.
Market segmentation divides a broad market into smaller groups based on shared characteristics to enable targeted marketing and product strategies.
Hard skills are quantifiable technical abilities essential for jobs, acquired through education and experience, and often contrasted with softer behavioral skills.