Unemployment Insurance: An Old Lesson for the New Federalism?

Although the unemployment insurance (UI) system in the United States evolved through the prompting of the federal government, the UI system functions as a collage of 53 individual state programs. The UI system is nearly 50 years old, yet its design might be viewed as a model for the Reagan administration’s “New Federalism.” As state-managed, state-financed insurance programs, the UI system embodies state autonomy in operating what essentially is federally established policy. However, a policy conceived at the federal level is not always cordially received at the state level, particularly if states are expected to shoulder part of the policy’s financial burden. In the UI system the financing effort of the state programs has not been uniform, and the federal government has permitted, and even encouraged, some state UI programs to spend beyond their resources.