August 1997

Unemployment Insurance

The unemployment insurance system involves a complex network of coordinated state and federal programs. The Federal Unemployment Tax Act (FUTA), implemented as part of the Social Security Act of 1935, imposed a uniform federal tax on the payrolls of industrial and commercial employers who employed eight or more employees for at least 20 weeks per year. Employers that paid a tax to a state-level unemployment insurance program could offset up to 90 percent of the state tax against the federal tax.

The Employment Security Amendments of 1970 and the Unemployment Compensation Amendments of 1976, both federal laws, broadened this coverage to include all private employers in industry and commerce who employ one or more individuals for at least 20 weeks during the current year or who pay $1,500 or more in wages and salaries during any calendar year. Agricultural and domestic employees face slightly modified eligibility standards. Eligibility for benefits is determined by an unemployed worker's previous attachment to the labor force as evidenced by a specified amount of work or earnings in covered employment and by the unemployed worker's ability and willingness to work.

The unemployment rate in the United States for the first quarter 1997 was 5.3 percent. By May 1997, the national unemployment rate moved down slightly, to 4.8 percent.

The unemployment rate varies by state. The states with the highest unemployment rate in May 1997 were: Alaska, 6.9 percent; District of Columbia, 6.8 percent; and California, Louisiana, New Mexico, and New York, 6.3 percent. States with the lowest unemployment rate were: Nebraska, 2.3 percent; South Dakota, 2.6 percent; New Hampshire, 2.8 percent; and Iowa and Utah, 3.0 percent.

Compared with other industrialized countries, only Japan has a lower unemployment rate than the United States. As of first quarter 1997, the unemployment rate in the United States was 5.3 percent, compared with 3.3 percent in Japan. Unemployment rates in other industrialized countries were: Canada, 9.6 percent; Australia, 8.7 percent; France, 12.8 percent; Germany, 7.8 percent; Italy, 12.3 percent; Sweden, 10.6 percent; and the United Kingdom, 7.5 percent.

In 1995, 92,322,409 workers were covered by the unemployment insurance system in the United States. Also in that year 8,035,229 workers received their first benefit payment, and 2,661,773 workers exhausted their benefit allowance.

Thirty-four percent of first time claimants exhausted their benefit allowance in 1995. States with the highest percentage of claimants exhausting their benefit allowance were: the District of Columbia, 51.7 percent; New Jersey, 46.6 percent; and Texas, 44.9 percent. The states with the lowest percentage of claimants exhausting their benefit allowance were: South Dakota, 11.0 percent; New Hampshire, 15.1 percent; and North Carolina, 15.7 percent.

The national average duration, in weeks, of an individual receiving unemployment benefits was 14.7. The states with the longest average duration were: the District of Columbia, 19.8 weeks; Carolina, 8.4 weeks; Alabama, 9.2 weeks; and Georgia, 9.4 weeks.

The average weekly benefit in the United States was $187.29 in 1995. The states with the highest average weekly benefit were: Hawaii, $270.03; New Jersey, $252.63; and Massachusetts, $244.40. The states with the lowest average weekly benefit were: Louisiana, $121.38; Mississippi, $134.06; and Alabama, $138.51.

For more information, contact Ken McDonnell, (202) 775-6342, or see EBRI's Web site at
Source: EBRI Databook on Employee Benefits, fourth edition, 1997.