Rethinking Unemployment Insurance Taxes and Benefits

Unemployment Insurance (UI) serves a core purpose that is intuitive for both economists and noneconomists: it provides insurance against the risk of job loss. Because employment is the only or primary source of income for most families, job loss often delivers a financial blow that would be crippling absent any insurance. Moreover, the need to fund UI has important consequences for employers in the form of experience-rated taxes. In this brief, we outline principles for the optimal design of both the worker- and employer-facing aspects of UI, grounding these principles in the relevant literature.