Lessons from the US Federal State Unemployment Insurance System for a European Unemployment Benefits System

The federal state system of unemployment insurance (UI) in the USA was established by the Social Security Act of 1935 during the Great Depression. Under the programme, states provide temporary partial wage replacement to involuntarily unemployed workers with significant labour force attachment. The federal government induced states to establish adequate UI programmes through: 1. a uniform federal tax imposed on employer payrolls, with a 90 percent credit granted to employers in states operating approved UI programmes, and 2. grants to states to administer their programmes. This paper reviews state practices concerning employer coverage, applicant eligibility, benefit generosity, and benefit financing, with the aim of revealing lessons for a possible European unemployment benefit system (EUBS).