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What is Unemployment Insurance?

Unemployment insurance, a fixture in the U.S. economy since the Great Depression, is a fundamental part of the nation's safety net for those who lose their jobs through no fault of their own. It provides a partial replacement of earnings for the unemployed. And it has a positive impact on the economy during recession. It puts money into the hands of people who will spend it and help speed the economic recovery.

The money granted in benefits circulates quickly through the economy. A Labor Department survey indicated that every dollar paid out in benefits helps expand the nation's output by $2.15 worth of goods and services.

Who Administers Unemployment Insurance?

Each of the 50 states administers its own version of the unemployment insurance program within the general rules of federal law. Eligibility and benefit amounts are determined by the states. It is financed by federal and state taxes on wages. The federal tax is levied on the first $7,000 earned each year by workers. Money from the federal government pays for the administrative costs of running the program, and for federal extensions of the benefits. The money collected by the states is used for the benefit checks given to workers.

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