Millionaires collecting unemployment became a controversial issue when the Congressional Research Service revealed that thousands of wealthy Americans had received unemployment compensation during the economic downturn that began in 2007. At first glance, it may seem outrageous that the well-heeled are collecting unemployment benefits when so many Americans are down on their luck and the United States government and many states are also in the red. However, the issue is a bit more complicated than the splashy headline might imply.
How Unemployment Benefits Work
Although unemployment compensation varies somewhat from state to state, the basic premise is the same: unemployment is a system of insurance intended to provide a buffer for employees who are involuntarily displaced. The system is supported by contributions from employers, which are based on wages and salaries. In many states, these payments are referred to as insurance premiums.
Millionaires aren’t exempt from unemployment insurance premiums, so their employers are paying for unemployment compensation for them just as they are for their lower-level employees and employees without significant assets. Standards for collecting unemployment insurance relate to the payment of these premiums, the circumstances under which employment was terminated and the amount of income earned during a specified period prior to termination. Because unemployment is a system of insurance and not a need-based welfare program, overall financial circumstances do not play a role in determining eligibility.
The Objections to Unemployment Benefits for Millionaires
Until the most recent recession, the issue of millionaires receiving unemployment compensation received little attention. When more citizens of a given state are working and periods of unemployment are generally shorter, the system balances better. However, with large numbers of Americans out of work for an extended period the system slips out of balance. Employers are paying premiums based on fewer employees earning lower wages, while larger numbers of unemployed are collecting benefits for longer periods of time.
When federal legislation extended unemployment benefits, that meant kicking in federal dollars to subsidize the state systems; that decision was in itself controversial, but all the more so when it came to light that some of those tax dollars—or worse, dollars the United States government was borrowing from foreign countries—was going to pay unemployment compensation to people who were more financially secure than most working Americans.
Will Millionaires Continue to Collect Unemployment?
In 2011, legislation was introduced to disqualify the wealthy from receiving unemployment benefits. However, to date no such disqualification has occurred. The arguments against millionaires receiving unemployment make sense: state and federal governments are themselves in difficult financial circumstances, and the recipients of those benefits are apparently not. And, it’s difficult to imagine that the few hundred dollars per week at which benefits top out in most states will do much to ensure that those unemployed millionaires sustain their standard of living. Getting an accredited online business management degree should help judge money issues in the future.
On the other hand, premiums have been paid on their behalf. And, though the idea may evoke an emotional reaction in many Americans, the approximately $80 million that those millionaires received during the worst of the economic downturn is a small drop in the greater scheme of things: hundreds of billions of dollars were paid out in unemployment benefits during that period.