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How does unemployment work?

  • How does unemployment work?

    The American workforce has been devastated by the coronavirus pandemic. Between social distancing measures, mandatory closures of businesses, and reduced customer capacity, the preventive measures to reduce the spread of the virus have slashed revenue at many companies—forcing them to furlough or lay off huge swaths of their employees.

    More than 45 million Americans, mostly service workers, people in arts and entertainment, small-business owners, construction workers, salespeople, and transportation professionals, lost their jobs between March and mid-June. Bloomberg Markets has predicted that another 6 million white-collar jobs may be on the chopping block in a second round of cuts.

    Paychecks are drying up, but bills won’t stop coming. So how can people stay afloat while they search for their next career opportunity? The answer for many has been unemployment insurance. The 85-year-old federal-state program temporarily provides a portion of wages to workers who have lost their jobs through no fault of their own, as long as they are available and looking for work.

    While unemployment benefits vary significantly from state to state, they typically replace about half of workers’ average weekly earnings for up to 26 weeks.

    That might be enough to help people scrape by until they get a new job offer in normal times, but the uncertainty of the pandemic has made things much harder. In response, the federal government passed the Coronavirus Aid, Relief, and Economic Security (CARES) Act in late March.

    The $2 trillion relief package helps states extend unemployment benefits to workers who don’t usually qualify—like freelancers, ride-share drivers, and the self-employed—and enhances compensation by up to $600 per week. It’s a lifeline to many workers who’ve been suffering during the COVID-19 crisis.

    Getting the money is a tricky process under normal circumstances, and now that states have been scrambling to offer the new federal benefits and serve a huge influx of recently unemployed people, everyone will need to be persistent to get the benefits to which they’re entitled.

    To help laid-off workers navigate the unemployment system, The Simple Dollar looked at information from a variety of official sources, including federal and state labor departments; the Consumer Financial Protection Bureau; unemployment fact sheets; as well as third-party resources, like CNBC, Nolo, TurboTax, and Bench.

    Click through to learn more about how unemployment works and what you may need to do to get benefits if you lose your job.


  • Eligibility depends on how job is lost

    Guidelines for unemployment insurance vary by state, but eligibility usually requires that you “are unemployed through no fault of your own,” according to the U.S. Department of Labor. This typically means you were laid off or furloughed from your last job. You may have trouble qualifying for unemployment benefits if you voluntarily quit your last job or you were fired for certain reasons, like violating safety rules or failing a drug test, according to Lisa Guerin of Nolo.

  • Meeting work and earning requirements

    To qualify for unemployment insurance in most states, individuals will need to meet certain criteria during their “base period”—typically the most recent four of the previous five calendar quarters before filing a claim for benefits, according to the U.S. Department of Labor. Representatives at the state agencies that handle unemployment will determine if a person earned enough money and worked enough calendar quarters to receive unemployment insurance.

  • Appeal denied benefits

    State unemployment insurance programs have many reasons they may disqualify applicants from receiving benefits, such as if they decide a person hasn’t been actively seeking work, didn’t have a “good cause” for leaving a job, or lied to receive benefits. Those who are denied benefits have the right to submit an appeal to the state’s decision within a certain period of time.

  • Don’t delay application for unemployment insurance

    The U.S. Department of Labor recommends that workers apply for unemployment benefits as soon as possible after their jobs end. It may take two or three weeks after submitting an application before benefits are received.

  • Most states allow phone or online claim

    Most, if not all states allow applicants to submit an unemployment claim by phone or online, according to the U.S. Department of Labor. In-person applications, while usually available, may be suspended in some states due to the pandemic. Check the U.S. Department of Labor’s list of unemployment insurance offices in every state for local contact info.


  • Self-employed workers and independent contractors may qualify

    The federal CARES Act allows states to offer unemployment insurance benefits to people who don’t usually qualify, such as self-employed workers, independent contractors, and gig workers. Availability of these extended benefits varies by state, so check with your state’s program for details.

  • Read the unemployment handbook

    States typically send people who submit unemployment insurance claims a detailed handbook, either in the mail or online. It includes information on certifying for benefits, rights and responsibilities while receiving compensation, how to stay eligible for the program, and ways benefits may be lost.


  • Provide complete and correct information

    The unemployment insurance application typically asks for a variety of information related to previous employment, including the address of the last workplace and the dates worked there. Submitting an incomplete or inaccurate application might lead to delays in a claim, so be as accurate as possible.

  • Weekly benefits vary from $213 to $555 across the country

    The average weekly amount for unemployment benefits in the United States is $378, according to 2019 data from the U.S. Department of Labor analyzed by Greg Iacurci of CNBC. The actual amount paid on each claim varies significantly from state to state. Mississippi, for example, pays a weekly average of $213, while Massachusetts pays $555 each week. How much an individual gets from unemployment insurance will depend on the wages earned in the base period and the state that’s providing the benefits.

  • Duration of benefits differs state to state

    How long individuals can receive unemployment benefits depends on where they live. Most states will pay unemployment claims for up to 26 weeks, but some, like Florida and North Carolina, put a 12-week ceiling on benefits, according to Greg Iacurci of CNBC.

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