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Unemployment benefits are paid through the unemployment insurance system run by the state. Unemployment insurance operates like any other form of insurance--life insurance, car insurance, etc. A large number of people pay into the system, and then a much smaller number actually withdraw money through claims.

Every employer is REQUIRED to carry unemployment insurance on behalf of each of their employees. This is paid in the form of a payroll tax. With employers paying into the UE system on behalf of millions of employees every year, those premiums fund the actual unemployment claims made by a much smaller percentage of the labor market.

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