The year 1941 is a unique one in the history of United States economy. The country has entered upon a gigantic defense program utilizing Federal appropriations of $43,000,000,000. Some $58,000,000,000 more have been requested by the President after the United States actually entered World War II. Unemployment, which had been a paramount problem since 1929, has gradually decreased in urgency.
Feverish activity in the production of airplanes, guns, tanks, and other wartime material has been responsible for the addition of more than 2,500,000 wage earners to the payrolls of private manufacturing since June 1940. However, in September 1941 there were still some 4,500,000 unemployed. To be sure, the total labor force has grown by nearly 7,000,000 workers since 1929. It is evident that the defense program has not eliminated unemployment; in fact, it has precipitated a new type of unemployment due to official priorities. The purpose of priorities is to ration materials when demand exceeds supply. The most essential defense industry gets prior right to the material. The effect has been a decided shortage in materials and a laying off of workers. It is estimated that approximately 5,000,000 workers will be unemployed in 1942. This problem constitutes a challenge to our unemployment insurance system.
Suggestions for Insurance Laws.
In 1940 Mr. A. J. Altmeyer, Chairman of the Social Security Board, made six specific suggestions to states for their consideration with reference to unemployment insurance laws: (1) the waiting period should be reduced; (2) a higher minimum benefit should be provided; (3) the benefit rate should be increased; (4) the duration of benefits should be lengthened; (5) partial unemployment benefits should be paid; (6) the eligibility and disqualification provisions should be reexamined.
In 1941 all but five state legislatures met in session and some 850 bills dealing with unemployment insurance were introduced. Of the total bills introduced, 173 became part of the laws of the 43 states.
Faults of Present System.
The chief inadequacies of the unemployment insurance system may be summarized as follows: (1) Workers remain unemployed long after exhausting their benefits. The proportion of beneficiaries who exhausted their benefits while still unemployed ranged from 30.2 per cent in Maine to 78.7 per cent in Delaware. This survey covered 25 state jurisdictions. In 15 of these jurisdictions more than 50 per cent of the beneficiaries exhausted their benefits and remained unemployed. In 1940, 51,080,113 weeks of unemployment were compensated, 90.3 per cent of which were weeks of total unemployment. This corroborates the statement often made that unemployment insurance today does not provide protection for the full period of unemployment.
During 1941 six states changed their laws to provide flat benefit duration periods for the unemployed. Georgia and North Dakota provided flat benefit periods of sixteen weeks. Hawaii and Utah provided for a flat 20-week period. Ohio and West Virginia lengthened their period from fourteen to sixteen weeks. Maine and South Dakota reduced the number of benefit weeks for low wage groups. (2) The size of the benefit is extremely inadequate in many states making no provision for family maintenance. In 1940, $519,945,914 was distributed in benefits making an average of $100.15 per beneficiary as against $84.24 in 1939. General relief allowances during 1940 averaged $296 while WPA payments averaged $663 per person. California in 1940 paid the highest; an average of $174.12 per person. In fact this state paid 50 per cent more in benefits than either Pennsylvania or Illinois and 170 per cent more than Ohio. The lowest amount of benefit paid in 1940 was the average of North Carolina — $42.60.
The inadequacy of the benefit can be observed from the fact that 4.7 per cent of the total unemployment weeks were compensated by sums amounting to less than $5 a week: 10.6 per cent by less than $6; 28.8 per cent by less than $8; and 43.7 per cent by less than $10.
Changes in Benefit Rates and Waiting Periods.
The end of 1941 was marked by an increase in weekly benefit rates in Georgia, Hawaii, Minnesota. Nebraska. New Hampshire, North Dakota and Ohio. Increases in maximum benefits were also provided in seventeen states; an increase of $15 to $16 in Indiana, Minnesota, Ohio, Oklahoma — to $17 in Maryland and Wisconsin. Maximum benefits were raised from $15 to $18 in Georgia and Missouri — to $20 in Hawaii. Both Arizona and Vermont placed a $5 minimum and Georgia a $4 minimum. These minima are low enough, indeed, if unemployment insurance is accepted as a device for insuring against the hardships of unemployment!
The majority of the state legislatures were convinced that the waiting period required before benefits are paid was too long. Thirty states shortened this waiting period. In eighteen states the waiting period was reduced to one week in a benefit year. The states having the one week waiting period include Arizona. Arkansas, Kansas, North Dakota, Utah and West Virginia. In ten states the waiting period was reduced to two weeks in a year.
With the development of the defense economy and the consequent shortage of skilled labor there has been a tendency to stiffen the requirements for eligibility for benefits. A number of states have set up stricter provisions for disqualifying workers who leave their work voluntarily, are discharged for misconduct, or refuse suitable employment offered by the state employment exchange. Montana, Nevada, North Dakota, Ohio, Oklahoma, Oregon, Utah, Washington and Wyoming now deny benefits during unemployment caused by marriage.
Question of the Men in U.S. Service.
One of the most significant problems arising out of the war economy is the provision of the unemployment insurance applicable to men called into the army. Thirty-three states merely froze the benefit rights of the men who joined the army. Hawaii, Minnesota, North Carolina and Ohio will require no waiting period for benefits to discharged soldiers who were entitled to unemployment insurance. In Illinois exsoldiers who earned $225 before their service will be entitled to weekly benefits of $18 for 20 weeks. This is the maximum permissible under the law; Rhode Island will pay $16 weekly to draftees who had earned at least $100 in the year before their military service began and will not require any waiting period. It is obvious that in order to avoid the 'bonus marches' on Washington which followed the last war, the state systems will have to adopt a more realistic approach to the problems of the returned soldiers and their economic needs.
Canada has been aware of this problem and on Oct. 1, 1941 passed the Post-Discharge Re-Establishment Order which provides the men discharged from the army with protection under the existing unemployment system, and out of work benefits for those men not covered by unemployment insurance.
Congressional Action.
Two bills introduced in Congress in 1940 represented an attempt to eliminate the present patch-work quilt picture of state unemployment insurance standards: (S-3365) introduced by Senator James Murray embodied the need for Federal minimum benefit standards such as twenty weeks unemployment benefits for the year, one week waiting period, minimum weekly benefits and maximum qualifications; (S-3181) introduced by Senator Downey proposed the establishment of a Federal equalization fund in order that all states may be able to pay all the benefits required. Neither of these bills passed Congress and the need still remains. President Roosevelt in his Budget message of January 1942 recommended the extension of the coverage of the Social Security Act to include some 27,000,000 people in the United States not now covered by the Act. He further recommended the liberalization and expansion of unemployment insurance in a uniform national system, so that the problem caused by some state funds being on the verge of bankruptcy while others have a tremendous amount of unused money, shall not exist.
In January 1941 the total unemployment insurance revenue amounted to $1,750,000,000. Fifty-one states paid out 60.8 per cent of the contributions which they collected during the year. See also SOCIAL SECURITY.
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