How does unemployment work?

Unemployment has remained historically low in the United States, but with what economists are calling a "low-hire, low-fire" state, it means many people who are out of work are struggling to find new jobs. 

Here’s what to know about unemployment benefits: 

What is unemployment insurance? 

The backstory:

Created in 1935, unemployment insurance is a joint state-federal program that provides payments to eligible workers who "are unemployed through no fault of their own," according to the U.S. Department of Labor. 

Each state has its own unemployment insurance (UI) program, though all states adhere to a minimal set of guidelines under federal law. 

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Who is eligible for unemployment? 

Big picture view:

Unemployment insurance is available for employees who have been laid off and are seeking work, as long as they meet their respective states’ requirements for wages earned and/or the length of time worked. 

Who’s not eligible for unemployment? 

According to the Brookings Institution, unemployment insurance is not available for people who quit their jobs or for people looking for their first jobs. Self-employed workers, gig workers, undocumented workers and students aren’t typically eligible for UI benefits, either. 

What disqualifies you from unemployment? 

Dig deeper:

People can also be disqualified for unemployment if they were fired for misconduct, refuse suitable jobs when offered, fail to seek employment, or if they’re involved in a labor dispute. Again, it depends on each state’s respective laws. 

How long do unemployment benefits last? 

The duration of benefits varies by state, but most states offer up to 26 weeks of unemployment payments.  In Arkansas, Florida, Tennessee and North Carolina, benefits are only offered for up to 12 weeks, while Massachusetts offers up to 30 weeks. Extended benefits may be available in times of high unemployment.

How much will unemployment pay? 

By the numbers:

How much workers can receive will also depend on the state, but in most states, maximum benefits are 30-50% of a worker’s previous wages, according to Brookings. 

Unemployment laws by state

Local perspective:

Here’s a breakdown of the maximum weekly unemployment benefits and the duration of benefits in each state: 

Who pays for unemployment insurance?

The UI program is paid for by taxes on employers, including state taxes and the federal unemployment tax (6% of the first $7,000 of each employee’s wages), according to Brookings. Employers who pay state unemployment taxes on time get a maximum credit of 5.4%. The credit is less in states that are late in repaying unemployment insurance debt owed to the federal government.

Do you pay taxes on unemployment? 

Yes. Unemployment insurance payments must be reported on federal tax returns, unless the person receiving it chooses to have the tax withheld by the state’s unemployment agency. 

What if your unemployment claim is denied?

What you can do:

According to the Labor Department, each state has the ultimate authority in determining who receives unemployment benefits, but anyone who is denied has a right to appeal. Employers can also appeal if they don’t agree with the state’s ruling.