Why is unemployment compensation provided?

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pohnpei397 eNotes educator| Certified Educator

Unemployment compensation is provided for two main reasons.  One reason is to help the individual who is unemployed while the other is to help the society and economy as a whole.

On the one hand, unemployment compensation is meant to help the individual who loses their job.  In general, the rules for unemployment compensation are written so that only individuals who are unemployed for reasons outside their control can get compensation.  These people are deemed to be worthy of help because they have done nothing wrong and are unemployed even so.

On the other hand, unemployment compensation is meant to help the economy and the society as a whole.  Unemployment compensation is what is known as an “automatic stabilizer.”  This is something that helps to stabilize the economy automatically when times start to go bad.  When people start to lose their jobs, unemployment compensation puts money in their pockets and allows them to keep spending to some degree.  This prevents the economy from crashing too dramatically.  When the economy is helped in this way, society benefits as well.  There are fewer of the problems that would be associated with mass unemployment and economic desperation.

Thus, unemployment compensation is provided both as a way to be fair and compassionate to those who are unemployed through no fault of their own and as a way to help the economy and the society as a whole.