We do. That is, your unemployment benefits are paid by you and your fellow citizens through a number of means, including the collection of federal and state taxes, as well as the levying of union dues and other professional fees. The exact source of funding depends on the kind of unemployment insurance benefits you are receiving.
Federal Unemployment Taxes
It doesn't show up on your pay stub, but chances are, your employer has been paying taxes into a federal employment trust fund for years. The Federal Unemployment Tax Act, or FUTA, levies a payroll tax of 6.2 percent on the first $7,000 of wages paid to each employee. This tax is set to fall to 6 percent after the first quarter of 2011. The federal government uses this fund to subsidize state unemployment benefits.
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State Unemployment Taxes
Each state runs its own unemployment insurance program, subject to minimum standards established at the federal level. To administer benefits, each state is free to levy its own system of taxes to cover the cost of unemployment benefits. Typically, the states levy taxes on businesses to cover unemployment claims. In most cases, your state unemployment insurance office will be the agency physically writing the check, possibly supplemented with funds from the federal unemployment trust fund.
Supplementary Unemployment Benefits
Some companies and unions maintain pools of money that unemployed members and workers can tap into during periods of unemployment. Income from these sources is called "supplemental unemployment benefits." The source of funds can be your employer, you and your fellow workers or union members, or a combination of both.
Private Unemployment Funds
Some individuals pool their money with others to create a private unemployment fund. These are not affiliated either with employers or with unions and are strictly voluntary mutual aid associations.