The Federalism Of Unemployment Insurance

Submitted By scarlettmeadow
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The Federalism of Unemployment Insurance
Federalism has become increasingly more noticeable in America over the past few decades. States are increasingly trying to hold on to their powers and the Federal Government seems to be increasingly ready to take over local issues. One of the issues that has seen growing tension between Federal, State and Local Government is Unemployment Insurance. In a time when the economy is on the downslope and people are having more and more difficulty keeping jobs that are able to support their families, the issue of Unemployment Insurance is becoming highly important. In light of recent economic issues, policy changes regarding Unemployment Insurance have become increasingly necessary. But, is it the problem of the State, Local or Federal Government to fix?
What it is
Locally defined, “Unemployment Insurance is a joint state-federal program that provides cash benefits to eligible workers,” (Career One Stop, 2012). Unemployment insurance was set up in 1936 and has not been changed much since then. Each state is entitled to create its own system for Unemployment, such as eligibility, but every state must follow the guidelines that have been enacted by the Federal Government. It is a system that is perplexed with both State and Federal funds as well. In order to fund Unemployment Insurance, both the State and Federal Government impose a tax on employers for providing these benefits. The State, in turn, pays benefits to workers who are unemployed. When long-term benefits are required, the Federal Government steps in and adds some funding assistance.
Policy Change Enacted The American Jobs Act was proposed in 2011 and this act included many reforms to the unemployment issue. One of these policy changes included in this Federal Act concerns the maximum time that a person can receive benefits for their Unemployment Insurance. As previously mentioned, States have had individual policies concerning this issue. Recently, the Federal Government has imposed an increase on this mandate. According to the Federal Government, this reform policy “will provide important support for those who are suffering due to economic conditions, help them return to work sooner, and increase economic growth and job creation,” ( , 2011)
Constitutional Federalism Issue Raised
Constitutional Framework is in place to ensure that acts of Federalism do not get in the way of States being able to do what is best for their people. Changes in the Federal Government can result in “stepping on the toes” of the states which, in turn, will cause many issues to be raised. Paying these benefits to people who have lost their jobs, takes a large amount of funds. Increasing availability and time allotted for people to draw this insurance is an issue that will in effect, stump many states. State and Local Government is primarily responsible for these funds. The Federal Government does set aside a portion to aid the states, but it is no longer enough. The longer that people are allowed to draw these benefits, the more the state will need to come up with, to pay out.
Unfortunately, these costs are often passed on to businesses in the form of taxes. In turn, these businesses threaten to leave the state in question because they cannot afford the higher taxes. An age-old Federal penalty is all that holds this system together. This penalty enacts a large Federal tax on businesses which are in states who cannot meet the standards in these policies. Of course, local officials do not want to face the blowback they would receive from causing that penalty. However, the states must continue to follow these federal standards despite federalism-related pressure to reduce taxes and cut benefits.
The Pros and Cons Effected The effectiveness of this policy is up for debate. Effectiveness would constitute that this policy would work to help an issue. One concern regarding the effectiveness of this increase