unemployment insurance, insurance against loss of wages during the time that an able-bodied worker is involuntarily unemployed. The goal of such insurance is to provide a minimal livelihood to unemployed workers until they are once again employed. Compulsory unemployment insurance makes such protection legally obligatory for certain classes of workers under prescribed conditions. Voluntary unemployment insurance is maintained by private organizations sanctioned, encouraged, or subsidized by the state. The first attempts to establish unemployment insurance plans began toward the end of the 19th cent. in Germany, Italy, and Switzerland (see social security). Most Western European states adopted such plans in the early part of the 20th cent.: France, 1905; Great Britain, 1911; the Netherlands, 1916; Italy, 1919; and Germany, 1927. In the United States an unemployment insurance program, along with other welfare programs, was introduced by the Social Security Act of 1935. That act, amended many times, provides for a sliding scale of payroll taxes on industry. For example, employers whose records show that their business experiences little unemployment receive lower rates. The Employment and Training Administration in the U.S. Dept. of Labor is responsible for administering the law. Over the years Congress has extended the program to many workers initially not covered. By 1994 more than 96% of all workers were covered by unemployment insurance. Each state has its own unemployment insurance law and operates its own program.
See D. Nelson, Unemployment Insurance: The American Experience, 1915–1935 (1969); W. Vroman, Unemployment Insurance Trust Fund Adequacy in the 1990s (1990).