Source: Niskanen Center
by Matt Darling
“The United States funds unemployment insurance (UI) in an unusual way. Most nations fund unemployment insurance through a flat payroll tax — similar to how the United States funds programs like Social Security and Medicare: Every person who works has some fixed percentage taken out of each paycheck1 (up to a certain amount) to fund the unemployment insurance program. The United States uses a different system called experience rating. Under experience rating, unemployment insurance is paid for by a tax on firms, and the level of that tax depends on each firm’s history (or ‘experience’) sending laid-off workers into the unemployment insurance system.” (04/23/24)