Idaho’s unemployment insurance (UI) program purpose is to replace a portion of an individual’s wages on a temporary basis when they lose a job due to no fault of their own. While the purpose is simple, it is a complicated machine subject to misconceptions.

This is the first installment in a series about Idaho’s unemployment insurance program and how it fits within the national system. The series will perhaps dispel some misunderstandings about the UI program as well.

Idaho’s UI program is one of 53 in the U.S. system that includes every state, Washington, D.C., Puerto Rico and the Virgin Islands (U.S. Department of Labor: Employment & Training Administration, 2021). All programs share certain characteristics that are foundational to their creation in 1935 (Price, 1985).

• Funds for benefits come from taxes on employers and are deposited in a trust fund and can only be withdrawn to pay for UI benefits to claimants.
• Employer UI tax is “experience rated,” which means it varies depending on the frequency workers for a specific employer claim benefits, with those claiming less frequently receiving a discounted tax rate and those more frequently taxed a bit higher.
• The federal government closely regulates and monitors how states manage their trust funds and the funds distributed from it (Price, 1985).
• Employers receive a discount on their Federal Unemployment Tax Act (FUTA) payments as long as they contribute payments to unemployment programs in their state. This is the incentive to states to establish their own state UI program (Price, 1985). Without it, a state’s employers are unable to receive these discounts (Idaho Department of Labor, 2021).

For the remaining components, Idaho and the other states and territories operate their own programs directly and at their discretion. State legislatures decide who is eligible and under what conditions, the waiting period to receive benefits, the benefit amounts and their minimum and maximum benefit levels, the duration of benefits, disqualifications and other administrative matters. However, while the Idaho legislature can change almost anything in UI law, modifying provisions on the tax side run the risk of interfering with FUTA credits to employers.

UI programs in the United States are almost a century old and have played a critical role in the economy through business cycle downturns, natural disasters and other disruptions to employment at various scales. The foundational elements installed at their beginning in the 1930s remain much the same and have withstood the test of time. Nevertheless, like any machine, it requires maintenance due anticipated and unanticipated frictions and malfunctions.

For the agencies charged with administering UI programs, this entails safeguarding public resources pooled into the UI trust funds and an obligation to be diligent in fulfilling state and federal statute as taxes are collected from covered employers and benefits distributed to eligible claimants. It also includes resolving public misconceptions about the impact of UI programs, or combating modern threats such as fraud which the efficiency provided by the internet has made more persistent.

Over the coming weeks, an explanation of these components of Idaho’s UI system and how it functions will help provide an overview of the system and resolve some misconceptions.

– Craig Shaul, research analyst supervisor, Idaho Department of Labor

References

• Idaho Department of Labor. (2021). Idaho Department of Labor. Retrieved from Idaho Unemployment Insurance Tax Information: labor.idaho.gov
• Price, D. N. (1985, October). Unemployment Insurance, Then and Now, 1935-85. Retrieved from Social Security Administration: www.ssa.gov
• US Department of Labor: Employment & Training Administration. (2021, October). Unemployment Insurance Fact Sheet. Retrieved from US Department of Labor: Employment & Training Administration: https://oui.doleta.gov/unemploy/docs/factsheet/UI_Program_FactSheet.pdf

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Part Two: Explaining Idaho’s UI Tax System – Claimants and Benefits

Part Three: Explainer on the Unemployment Insurance Trust Fund and Taxes

Part Four: Labor Department works hard to prevent fraud, protect trust fund

Part Five: Unemployment insurance helps the economy as well as individual workers