Unfortunately, it has saddled us with a system that prevents workers from customizing income-security plans for their needs. It is a system rife with inequitable cross-subsidies between workers, and it is inimical to the nation's economic health. Of all the federal mandates that Congress could repeal, this one should be near the top of the list. The Social Security Act compels the states to establish unemployment insurance systems. They are given considerable latitude in setting tax rates, benefit levels, eligibility criteria, and so on, but all must follow the same basic design.
Employers pay a payroll tax, a certain percentage of each employee's taxable wage base.
Even in highly experience-rated systems, however, benefits paid seldom match exactly with employer taxes. Workers who become unemployed may qualify to receive benefits. To qualify, a worker must have earned at least a certain threshold amount, a means of limiting the system to those workers who have a fairly regular attachment to the labor force. An eligible claimant receives, usually after an administrative delay of several weeks, a check that usually replaces about half of his pre-tax earnings while employed, up to a given maximum. The unemployed worker must certify each week to the administering agency that he is able to and actively seeking work.