Unemployment insurance is based on having those who are employed pay benefits for those who become unemployed. That’s crazy. That’s not insurance! And it doesn’t help much. Take a person in Illinois making $84,000.00 per year. This fake insurance would pay them $534 per week for 26 weeks. That’s the annualized equivalent of $27,768, or roughly 1/3 of what they were making when they were employed.
Now, let’s suppose that this individual had been employed at this level or higher for 20 years. Their employer would have contributed $7,626 in taxes over that timeframe. And you would have contributed to taxes too… but that is harder to find and figure out what part of your tax is going there. So, if you paid anything more than $6258 in any type of unemployment tax, you will be getting much less than you paid for, and the help isn’t really enough to get you through a tough time, based on your 20 plus year standard of living.
What would be better you ask? How about real insurance? Seriously. If you drive a car, and have lots of accidents you’re going to pay much more in insurance premiums. But if you are a safe driver, you should have lower premiums. Apply that same concept to unemployment insurance. Your premium should go down the longer you are employed. And you can choose how much you pay for what level of coverage.
The market would determine risk, and set premiums. The market would monitor for and prosecute fraudulent claims. And the cost to government and employers would go away. Having that cost to employers go away makes it easier for companies to employ workers, and that helps to eliminate or at least reduce the risk of the insurance.
So, unemployment “insurance” is actually counter productive in my view because it makes employers hesitate to hire workers, because if they then let them go, they will be faced with higher unemployment taxes.
Surely we can figure out a better way to help those who wish to work transition from one job to another, without taxes! Private true unemployment insurance for the benefit of the employee, and under their complete control would make that a reality.