1942: Unemployment Insurance

War and Post-War Period.

1942 ushered in with an inclusive report prepared by thirty outstanding experts in the field of social security entitled Social Security in War Time and After. This was an evaluation particularly of the state of unemployment insurance in the United States. The report recommended a specific program of action for the war period as well as the post-war period: (1) The revision of the present unemployment insurance program to increase its coverage and to provide 'socially adequate' benefits to maintain a worker and his family for at least six months. Individual benefits should be weighted in favor of lower incomes. (2) Adequate minima and additional allowances for dependents should be established. (3) The period of benefit duration should be made uniform for all workers in all states. (4) Uniformity and social adequacy should be assured by means of Federal standards. (5) After six months of regular unemployment insurance benefits, the committee proposed the establishment of a system of public works planned in advance and geared to serve the 'double purpose of stimulating the expansion of private industry and providing employment for those not absorbed in private industry.'

Improvement of National Standards.

This program to improve the unemployment insurance standards in the United States was endorsed by various other groups cognizant of the existing patchwork quilt arrangement in the field. The House Defense Immigration Committee, also known as the Tolan Committee, recommended on Dec. 19, 1941, that larger payments be made and that a benefit period of 26 weeks be established in all states.

This plea for national standards and more adequate insurance funds set the tone for the year 1942. Early in the year the President of the United States asked the governors of the states and territories to transfer their employment service agencies to the Federal government, in order that they may more effectively function as a national industrial recruiting agency. 'The President considered it essential to convert state agencies into a uniformly and of necessity nationally operated employment service in order that there be complete responsiveness to the demands of national defense.'

This move was responsible for an outburst of criticism from state authorities and brought into sharp relief the battle over federalization of the unemployment insurance systems. The centralization of employment agencies was indeed a necessity for the effective service of a manpower commission. Since most employment agencies functioned in conjunction with the administration of the unemployment insurance system, the first step toward centralization of unemployment insurance systems seems to have been effected.

Unemployment Benefits.

It was estimated at the beginning of 1942 that 17,000,000 men would be employed in the war time production of tanks, airplanes, etc.; that 7,000,000 persons were to be transferred from civilian industries into war production industries, as well as the absorption of some 2,000,000 persons who had not sought jobs up to that time. In spite of this estimated need for manpower at the beginning of the year, by Jan. 31, 1942, some 200,000 workers were out of work in the automobile industry followed by a period of complete cessation of work in the industry. Unemployment compensation payments rose sharply in December 1941 reversing the six months previous trend. The unemployment benefits of $41,100,000 in January 1942 practically doubled the amount paid in December and exceeded the previous January by 5 per cent. During the six months ending June 30, 1942, more than $220,000,000 was paid out in unemployment benefits. Approximately 2,000,000 persons received at least one benefit payment during the period — a weekly average of over 710,000 persons. Compensation was paid for more than 18,000,000 weeks.

This situation was undoubtedly due to the unemployment arising out of lay-offs caused by priority shortages as well as the conversion of peace time industries to war-time production. The war time program helped wipe out much of the seasonal unemployment but this was negated by the other types of unemployment. In fact one fourth of the unemployment was concentrated in Indiana, Michigan and Ohio — where so many war production industries are concentrated.

Amount of Reserves.

At the end of 1941 the State Insurance Funds had a balance of more than $2,524,000 or 50 per cent more than the total expended in benefits since the system has been in effect. In 1941 the total disbursements in benefits by 51 jurisdictions amounted to $345,707,730. Despite the general rise in wages and the increase in employment, the average amount paid to an unemployed worker was $107.74. This contrasts unfavorably with the general relief grants which averaged $278, while the WPA payments averaged $698 in 1941. The average weekly benefit for total unemployment rose from $10.57 in 1940 to $11.06 in 1941. This undoubtedly is the reason for the belief that the unemployment benefit is inadequate.

Changes in State Legislation.

The New York State Legislature amended its unemployment insurance law to provide an increase in the maximum rate from $15 to $18 and an extension of time from 13 to 20 weeks. It also provided benefits for the partially unemployed and cut the waiting period from three weeks to two weeks.

Pennsylvania also increased its benefit to a range from $8 to $18 from the previous standard of $7.50 to $15. The benefit period was lengthened to 16 weeks.

The United States Supreme Court dismissed the appeal of a Mississippi employer from the State Supreme Court in a case involving the 'common control' provision of the state unemployment compensation law. This law provides that when an employer controls another business unit either directly or indirectly, their combined employment record shall be considered for purposes of coverage. The employer in this instance challenged the validity of this provision. The decision of the Supreme Court in upholding this provision is of widespread significance since 25 states embody similar common control provisions.

By the end of 1942 the director of the Social Security Board, the leadership of both the A. F. of L. and the C.I.O. were agreed upon the desirability of extending the Social Security program even further. To some extent this may have been influenced by the Beveridge report issued by Sir William Beveridge at the request of the British government, providing an extensive program for social security affecting everyone. However, Mr. Altmeyer of the Social Security Board had already prepared a program stressing the desirability of expanding the program in order to meet two major economic problems created by the war: (1) the necessity to control inflation, (2) the necessity to obtain revenue through taxation or borrowing or both. The enlarged excess of Social Security contributions over disbursements would reduce current purchasing power and would serve as a potent force in the fight against inflation.

Furthermore the investment of excess Social Security funds in Government obligations would make corresponding sums available to the Treasury. The report further recommended new types of protection: (1) Benefits for the permanently disabled workers and dependents irrespective of the worker's age; (2) benefits for workers temporarily disabled through illness or injury and for dependents payable for a limited number of months; (3) extension of social security to occupations now excluded from the act: agricultural labor, domestic service, employees of non-profit organizations, government service, maritime employees and self-employed; (4) an increase in benefits to make them more adequate for workers' needs.

The significance of such a series of recommendations is evident in considering a post-war program. The recommendations became the basis for President Roosevelt's Social Security program for the year 1943.