The essence of this topic is to discuss the subject, unemployment insurance. However, it is important to understand what unemployment is all about before delving into the nitty –gritty of the topic.

Unemployment is a term which refers to a situation where a person with requisite qualification actively searches for employment but is unable to find. The term unemployment rate is usually used to measure unemployment. And it is calculated by dividing the number of unemployed people by the number of people in an employment.

Many governments of countries offer unemployment insurance to their unemployed individuals who meet requirements for eligibility. The high rate of unemployment promotes economic distress and in contrast, low rates of unemployment may lead to an overheated economy.

Therefore, unemployment is a key economic parameter because it shows the ability or inability of workers to obtain gainful work. And contribute to the productive output of such country’s economy. However, the definition of unemployment doesn’t include people who leave their employment as a result of disability, higher education and retirement.


The four types of unemployment are cyclical, frictional, institutional, and structural unemployment.

Cyclical unemployment: this is unemployment arising from changes in the business cycle, eg, recessions.

Frictional unemployment: this occurs when workers leave their jobs and take some time to find another one.

Institutional unemployment: this happens as a result of policies that change the attributes of the labor market, an example is minimum wage laws and unemployment insurance.

Structural unemployment: this is usually long term unemployment as a result of serious changes in the economy, eg, new technologies or changing business needs.

What Is Unemployment Insurance?

Unemployment insurance (UI), also called unemployment benefits, is a type of insurance policy which is usually state-provided that pays sums of money to individuals on a weekly basis when they lose their job. To be able to benefit, one must meet certain set eligibility criteria.

Many governments of the world offer unemployment insurance to certain unemployed individuals who meet eligibility requirements. However, those who either voluntarily quit or were fired for a just cause are usually not eligible for the unemployment insurance policy in many countries.

Just like the countries have different laws guiding unemployment insurance, so do they have agencies that administer its own unemployment insurance program. It is these agencies that sets out the eligibility criteria and decides who is qualified. The benefits are usually paid out by state governments from specific payroll taxes for that purpose.

Benefits of Employment Insurance

An unemployment insurance policy operates to provide temporary income and other benefits to people who lose their jobs as a result of no fault of theirs. In other words, they ready and available to work but cannot find a work. These circumstances of inability to work may arise as a result of lack of work or sacks whether seasonal or lay-offs without their own fault.

Also, unemployment insurance also makes provision for wider coverage for individuals with children and spouses if their total family income is less than $25,921 per annum in Canada.

Similarly, the insurance policy also provides income and insurance coverage to people who are temporarily out of work as a result of illness or sickness, injury etc. However, the maximum eligibility time for sickness is 15 weeks.

Disadvantages of Employment Insurance

There is a creation of negative economic incentive by the existence of unemployment insurance. This is by way of over dependence on employment insurance.


The term Unemployment insurance is a state-run program that provides citizens with periodic payments when they lose their jobs. And equally meet certain eligibility requirements.

In most of the countries where it is obtainable, the package does not last forever as they are by way of palliatives. The benefits are by way of unemployment compensation, and in the United States, it typically last up to 26 weeks, depending on the state.

Those who quit your job or dismissed for a justifiable reason, you will not qualify for the  insurance policy in US.

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