‘Where Does the Unemployment Money Come From?’

Unemployment money or more accurately unemployment benefits/unemployment payment/unemployment insurance/unemployment compensation is routinely scheduled payments given to unemployed people by authorized bodies such as governments.  If you’ve ever wondered where does the unemployment money come from, then this is the article for you.

In the United States of America, unemployment money comes from several places. It comes from a compulsory insurance system that is financed through a partnership between the federal and state governments. The Federal Unemployment Tax Act (FUTA) tax which demands that 6 percent of the first $7,000 of protected workers’ earnings is one of the sources of unemployment benefits. It is also financed by the federal fund, unemployment insurance taxes that differ from state to state, and general payroll taxes.

The first instance of unemployment money can be traced to the National Insurance Act of 1911 in the United Kingdom. It was introduced by H. H. Asquith of the Liberal party government. They introduced it to counter the rapidly growing popularity of the Labour Party among the United Kingdom’s working-class population. When it was first introduced, the opportunity was only available to people who were already earning wages during illness and unemployment. Those who did not already earn wages did not qualify for unemployment benefits. In the UK, the idea of unemployment benefits had mixed reactions. Communists argued that it would divide and prevent the working class from starting revolutions while others agreed that although it had many disadvantages, it was necessary. The unemployment benefits scheme was first funded through the collection of a fixed amount from taxpayers, employers, and their workers. When it was first introduced, the benefits were restricted to more dangerous industries such as shipbuilding. If a worker was unemployed for more than one week, the worker could apply to receive 7 shillings a week for up to fifteen weeks uninterrupted.

In the United States, unemployment benefits are available in all 50 states, the District of Columbia, the United States Virgin Islands, and Puerto Rico. The eligibility requirements and payments vary from state to state. However, eligible workers can get as much as $783 in Massachusetts per week and as low as $235 in Mississippi. To be eligible for unemployment money, you have to meet the requirements of your state. As earlier stated, they vary; however, there are general rules set in place. They are:

  1. If you quit your job voluntarily you may not be eligible for unemployment benefits.
  1. If you were fired from your job due to misconduct, then you may not be eligible for unemployment benefits. Misconduct in this case applies to actions happening inside and outside your place of work.
  1. To be eligible for unemployment benefits you must be temporarily unemployed and your unemployment must not be as a result of your actions.

In the US, there is no waiting period. Some countries have a waiting period of up to seven days; however, the United States doesn’t have one. The rates of participation are very different in states; however, estimates have shown that less than 30% of Americans who are unemployed (who are also still searching for work) receive unemployment benefits. In the 72 countries that offer unemployment money, there is something called a PBD. PBD means potential benefit duration, and it is the maximum amount of time eligible people can consistently receive unemployment benefits. In the United States, the PBD is six months.

We hope this article has answered your question on where the unemployment money comes from and more.

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