Unemployment Insurance

Unemployment insurance compensates workers who have lost jobs and their income. Unemployment insurance covers almost all workers except some domestic and some agricultural workers. People lose their jobs for many reasons. The business cycle of economic expansion and contraction causes some workers to be unemployed, often for prolonged periods. Importing manufactured items previously made domestically causes unemployment, while producing goods domestically for export creates jobs. The ebb and flow of employment opportunities resulting from importing and exporting goods explains some unemployment. Automating manufacturing processes implies machines replacing working people. New inventions can cause unemployment in an industry whose products become obsolete. Seasonal workers are often unemployed for some portion of a year. These causes of unemployment mostly are beyond individual control.

Some people are unemployed because of their own ineptitude or dishonesty or because they are looking for a new job the individual may exercise more control over these causes. Other people are underemployed that is, they are working at positions in which their talents, training, and previous experience are not being used fully. The unemployment insurance mechanism is designed to meet some, but not all, of these cases.

The problem of widespread unemployment is a political problem as well as an economic one. A difficult dilemma faces politicians trying to solve the unemployment problem by governmental action. On the one hand, if the government stimulates the economy by spending more money than it collects in taxes, the likely result is inflation. On the other hand, if the government restrains its spending, the likely result is continued unemployment. Unemployment insurance is one of several tools the government has for dealing with the unemployment dilemma.