1938: Unemployment In The United States

The Problem of Unemployment.

Unemployment with its consequent problems of insecurity has been the chief industrial hazard facing from 10,000,000 to 17,000,000 wage earners in the United States since the depression of 1929. The social and psychological burdens of insecurity are borne by even a larger number of people, because unemployed wage earners have dependent families whose welfare is intimately related to the earning capacity of these wage-earners. Although we have no accurate measure of unemployment, conservative as well as radical estimates indicate that at no time since 1929 have we had fewer than 9,000,000 or 10,000,000 unemployed. Even in 1937, when there seemed to be a marked increase in profits, productivity, and employment, there was but a small decrease in unemployment figures. It would seem from the picture of the last decade that unemployment is no longer a temporary phenomenon of modern industrial society. Whether prosperity returns or not, unemployment is a continuing hazard and must be controlled by a permanent program.

The psychology with which the public and the Government faced this hazard of industry is one characterized by temporary reform. Government programs of 'Share the work' or 'Buy an apple,' which characterized the early days of 1930 and 1931, were followed by the NRA program of 1933 to 1935. Temporary Federal and state relief to the unemployed, a shorter work week to spread work, creation of public works projects — these were but a few of the devices created to provide purchasing power for those unfortunates who had lost their jobs.

There are many attributable causes of unemployment; seasonal changes, technological innovation, the periodic recurrences of prosperity and depression, and consolidations of industries, or the demise of an industry. Whatever the causes may be, the fact remains that at any one time the standing army of unemployed in 1938 was larger than in 1928. There seem to be no new industries on the horizon which are likely to take up this army of unemployed, except the possibility of war industries. Unemployment appears to be a permanent phenomenon of modern industry.

The year 1938 was marked by increased average productivity per worker. This was due to the rapid introduction of machinery during the last five years. Technological changes have leveled the skill requirements of industry; mechanical inventions have substituted a small number of semi-skilled for a larger number of unskilled workers or artisans. During 1936 and 1937 more than 1,500 electric conveyors were sold to coal mines, as compared with the total of 849 in use in 1935. The number of wage-earners displaced from the coal mines as a result of these technical innovations are in the thousands. Other industries have shown a marked increase in productivity accompanied by a decrease in man power. This fact is particularly true of the telephone industry, the railroad industry, and certain manufacturing industries like food, textiles, and tobacco.

Governmental Measures.

The year 1938 has also been marked by a great deal of political agitation against the huge sums expended by the Government in its relief program. This agitation emanated from those interests like tax-payers and corporations who, having accepted unemployment as a temporary phenomenon, rebel against the New Deal program and its inevitable increase in taxes.

President Roosevelt sponsored a program for meeting unemployment through the establishment of the Works Progress Administration, the Public Works Administration, the Civilian Conservation Corps, and a number of other emergency measures. The most fundamental solution to unemployment is to be found in the Federal Social Security Act of 1935. For the first time since the depression of 1929, the Government through this act saw unemployment as a permanent hazard of industry, and set up an insurance system which was to provide purchasing power during periods of unemployment on a basis other than that solely of relief.

Provisions of the Social Security Act.

The Federal Social Security Act levied a payroll tax of 1 per cent in 1936, 2 per cent in 1937, and 3 per cent in 1938 and thereafter, on employers of eight or more persons. Certain employments are exempt from this tax, such as agricultural labor, domestic service, shipping on the navigable waters of the United States, and Civil Service employees. The tax is levied only upon wages payable for services, and is collected by the Bureau of Internal Revenue of the Treasury Department. The states must pass unemployment insurance laws in cooperation with the Federal Act. In order to obtain the approval of the Social Security Board, the state unemployment compensation law must include provisions which guarantee that:

(1) All benefits shall be paid through public employment funds or such other agencies as the Board may approve.

(2) No benefits shall be paid for unemployment occurring within two years after the first day with respect to which contributions are first required.

(3) All contributions to the state fund shall be immediately transferred to the unemployment trust fund of the United States.

(4) Money withdrawn from the unemployment trust fund shall be used only for payment of benefits.

(5) Benefits shall not be denied any person for refusing to accept any work vacant due to a trade dispute; or if the wages, hours, or other conditions are substantially below the standard prevailing for similar work in the locality.

Unemployment Insurance.

In 1938, thirty-one states paid unemployment insurance benefits. In two remaining states benefits will be payable in January 1939. After July of that year (1939) all the states in the United States will have reached the stage of full operation on their unemployment insurance acts. By November 1938, 3,500,000 unemployed workers in twenty-nine states had received benefits amounting to about $368,000,000. These checks averaged about $11 a week for men and women who were unemployed, and an average payment of about $5 a week for those who were partially unemployed. Within the last year also, plans for the interchange of unemployment insurance benefits have been effected between all but eight states and territories, so that unemployed workers living in New York State may claim and draw unemployment insurance benefits for which they were eligible when they previously lived and worked in some other state. (See also SOCIAL SECURITY.)

Railroad Unemployment Insurance Law.

In 1938 the only substantial amendments to the Social Security Act occurred in the Railroad Unemployment Insurance Law, which becomes effective July 1, 1939. This law amends the Social Security Act to require state unemployment insurance agencies, as a prerequisite to receiving grants from the Federal Government, to make their record available to the Railroad Retirement Board and to cooperate with other Federal agencies administering the unemployment insurance law. The amendment provides for a Railroad Unemployment Insurance account to be set up under the Social Security unemployment insurance division. It further provides for the eventual transfer to the Railroad account of the balance of the amount collected by the state agency from railroad employees.

State Amendments on Unemployment Insurance Laws.

Many of the states having unemployment insurance laws have passed amendments providing for changes in the administration and procedure of these acts. Such changes vary widely from state to state. Undoubtedly, one of the most complex problems mitigating against the successful operation of unemployment insurance laws lies in the fact that the practice of different states varies widely in the matter of the amounts of benefits paid, the methods of computing benefits, the length of time which the unemployed worker must wait until he can apply for benefits, and the varying costs of administration. Practically every state fund is engaged in the task of developing elaborate machinery to compute the benefits to which a worker is entitled, based on a percentage of payments which have been made into the fund over a period of time. Few employers or workers can compute these benefits because of the complexity of the laws. Furthermore, most of the state laws were passed during a period of widespread unemployment. The unemployment insurance offices were swamped with applications for benefits as soon as they opened for business. Since the state agencies were compelled to adopt administrative procedures, and to select and train personnel, they were hardly ready or equipped to meet the onrush of applications. One of the chief criticisms leveled against the administration of the unemployment insurance laws emanates from the chaotic conditions prevailing in administrative offices.

Problems of Administering the Social Security Act.

Some of the salient features of the Social Security Act include: standards as to which workers shall be covered by the act, who shall contribute to the unemployment insurance fund, what type of fund shall be established, what kind of unemployment shall be compensated, the length of the waiting period, upon what shall eligibility for benefits depend, how large shall the benefits be, and how shall the law be administered. As has been indicated earlier, the standards of the different states vary on these topics. Whereas the Federal Social Security Act levies a tax on employers of eight or more employees, at least ten states tax employers of a smaller number of workers, and eleven states tax all employers regardless of the number of employees in their establishments.

Employees of religious, charitable, and educational institutions have been excluded by the Federal Social Security Act and therefore are not included in the insurance privileges of the state laws. The Advisory Council of the Social Security Board in its report made public on Dec. 19, 1938, urged that these groups be afforded the same privileges as other workers and be included under the jurisdiction of the Social Security Act. They further advised that farm employees and domestic workers also be included 'if administratively possible by Jan. 1, 1940.' There are approximately 2,500,000 paid farm workers who would be eligible.

In the matter of who shall contribute to the fund, there are several points of view. There are advocates of joint employer-employee contribution to the insurance fund, advocates of contributions from employers alone, and advocates of contributions from the state government. Seven states require contributions from both employers and workers for 1938 and thereafter. The District of Columbia provides for a government contribution to the unemployment fund. Most of the forty-four states provide for a pooling of social security funds, including some provision for merit rating and the scaling of contributions to the unemployment risk of the plant or industry. That is, the industry having the least unemployment in the course of a year is privileged to receive a lower insurance tax. This principle has been attacked as being an ineffective device to stabilize employment, difficult to administer, and tending to weaken the unemployment insurance system. The American Federation of Labor through its president, William Green, has urged state federations of labor to lead a campaign for the elimination of the rating system in those states where the practice exists.

All states except seven make some provision for part-time unemployment. The Social Security Act covers workers who during some twenty different weeks in the year were employed. This tends to exclude certain seasonal workers. Twenty-two states give the Unemployment Insurance Commission the power to determine benefit rates and eligibility standards for workers employed in seasonal industries.

Another perplexing problem is the length of the waiting period. The theory involved in answering this question is that the period preceding the receipt of insurance should be long enough to determine the validity of unemployment, but not so long that the worker may starve before he receives the necessary purchasing power. Several of the state laws require a waiting period of three weeks. The actual practice, however, because of the cumbersomeness of administrative machinery, results in waiting periods which are much longer than the stipulated legal period. In New York State no less than 68 per cent of the claims authorized for payment in November 1938 were overdue, almost one-fifth of them for more than nine weeks. At the end of November, a total of 56,170 complaints, protests, and tracers were still to be investigated and adjusted. No less than 371,380 total complaints, protests, and tracers had been filed in the first eleven months during which the system was in operation.

Although the majority of the recommendations offered by the advisory council in its report have to do with the problems of old age pensions and annuities, there were also suggestions made for the simplification of procedure in unemployment insurance administration. The Council urged the development of methods for calculating and paying benefits which will be understood by both workers and employers, and which will thereby expedite the payment of benefits.

Criticisms of Unemployment Insurance Procedure.

A criticism which has been frequently made this year of the present procedure in unemployment insurance states that the workers who need purchasing power the most are those who are most subject to unemployment. They are the workers who also receive the lowest wages and therefore receive the lowest unemployment benefit, if they receive it at all. These critics urge that different schedules of benefits be drawn up, graded as to the worker's age and work classification, and that this be substituted for the present complex system of computation. In terms of need there is no doubt that the poorly paid, unskilled transient worker, having but a series of temporary jobs and no savings, is but inadequately helped by the present unemployment insurance system. He must turn to temporary relief agencies. However, for most workers the unemployment insurance system has provided a bulwark against the hardships of unemployment. See also LABOR LEGISLATION.