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.

1941: Unemployment Insurance

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.

1940: Unemployment Insurance

The Social Security Act.

With 1940 five years elapsed since the passage of the Social Security Act. Economic conditions during the period changed from a state of depression to the first stages of a huge defense-spending economy. Already the program of social legislation was meeting opposition, some of it the natural opposition to centralized or Federal control. The Social Security Act set up certain standards, such as (1) Federal custody of benefit funds, to safeguard their investment and (2) Federal grants to finance state administration and to provide Federal supervision of such administration; moreover (3) the Federal tax provided inducements to the states to pass state unemployment insurance laws. And from the Federal tax, reserves of almost $2,000,000,000 had accumulated.

Reactions to Accumulated Reserves.

These reserves were responsible for two distinct movements in 1940. Employer organizations, eager to secure lower taxes for their membership and fearful lest the large reserves result in an inflationary movement, urged the creation of a merit system. Under the merit system industries having the least employment would pay the smallest tax; and the system, its proponents felt, would create an inducement to employers to stabilize their industry and eliminate unemployment.

On the other hand, trade union leaders and social workers urged a liberalization of insurance by increasing the size of the benefit to the worker and by shortening the waiting period before receipt of the benefit check. A positive movement to increase Federal control of state unemployment insurance funds was, moreover, afoot. This would seem to be the only way to secure the liberalization of state benefit provisions.

Proposed Changes in the Act; Liberalization of State Laws.

During 1940 the McCormack bill (HR7762) and the Murray bill (S3365) introduced in Congress embodied certain changes in the Social Security Act. These included: (1) The establishment of Federal minimum benefit standards which all state laws must meet in order to secure the advantages of the tax offset; (2) Federal reinsurances, so that if state funds should be exhausted benefits could be paid from some kind of Federal pool; and (3) Federal interference with state experience rating by either increased regulation or complete prohibition.

The first proposal arises from the patchwork-quilt nature of state unemployment insurance laws. Many states have accumulated tremendous reserves while the actual benefits to the worker are small. It has been argued that the Social Security Board's experts were too conservative in their estimate of what benefits a 2.7 per cent pay roll tax would finance. Some states have already liberalized their laws. Of the few states having legislative sessions in 1940, several utilized their sessions for improvements in the unemployment insurance law. Rhode Island reduced the waiting period for the unemployed worker, Mississippi and Virginia increased unemployment benefit amounts and strengthened the eligibility provisions. New Jersey raised the maximum weekly benefit rates to $18 a week and lengthened the insurance period to eighteen weeks. It also protected the rights of those workers inducted into military service by making it possible for them to claim insurance on the base period prior to induction.

The chairman of the Social Security Board, Mr. Altmeyer, recommended in his report that waiting periods be reduced to one week; that maximum weekly benefits be raised to at least $20 a week; that the weekly rate be set at 66½ per cent of full-time earnings in states where the funds are sufficient; that every state provide for partial unemployment benefits; and that the duration of benefits be increased to a uniform period of at least sixteen weeks.

Disbursements in New York State.

In New York State, $18,770,000 more was paid out in unemployment insurance in 1940 than in 1939, an increase of 23.5 per cent over the 1939 figure. Why the state was obliged to pay out so much more when a larger percentage of workers were employed was explained in this wise by the director of the division of placement and unemployment insurance, Mr. Milton O. Loysen. The early stages of the defense program were characterized by a higher rate of labor turnover and much short-term unemployment. This tendency was accentuated by the 'jerkiness' in employment resulting from the inability of many defense plants to get materials and equipment on time. Furthermore, about 300,000 additional employees had been added to the insurance system in 1939. And, finally, as a result of legislative revisions in the benefit period, the average duration of payments to unemployed persons increased from 8.6 weeks in 1939 to more than 10 weeks in 1940.

The Merit-Rating Device.

Both the A. F. of L. and the C.I.O. joined in the fight against the merit-rating device. This device provides that the employer pay unemployment insurance tax in proportion to the stability of employment in his plant. Advocates of this provision declare that the firms which stabilize employment and provide steady work should be rewarded by paying lower taxes, while those industries which are highly seasonal should carry a larger share of the tax burden.

In New York State a merit-rating provision initiated at the request of the New York State Employers' Conference was introduced into the 1940 state legislature in the Young-Wadsworth bill. The A. F. of L. objected to the bill declaring it to be a device to reduce the income of the unemployment-compensation fund. It further declared the benefits paid under the New York unemployment insurance law inadequate, the waiting period too long, and the amount of the benefit check too small to afford the worker reasonable protection. It further stated that experience rating does not lessen unemployment.

An impartial study of the Wisconsin merit-rating system, made by Dr. Charles Myers, reveals that fewer than 11 per cent of the surveyed firms had by its use achieved any appreciable stabilization. Offsetting this slight gain in stabilization, Dr. Myers found 'the development of the tendency to avoid benefits by devices (particularly extreme spreading of work) which do not stabilize employment.'

Organized labor, however, failed to secure benefit liberalization in 1940 in many states because it was so busy fighting merit rating. New York makes no provision for partial unemployment and New Jersey still collects contributions from employees. Only six of the 53 American unemployment compensation laws force workers to contribute. These six states (New Jersey, Kentucky, Alabama, Louisiana, California, and Rhode Island) collect approximately $40,000,000 annually from the pay envelopes of workers. It is agreed as a matter of public policy that in unemployment insurance, like accident compensation, the cost should be paid by the industry and passed on to the consumer.

Amendments of 1939.

The 1939 amendments to the Social Security Act excluded from its provisions, in addition to agricultural labor, previously omitted, student part-time workers, golf caddies, newspaper-carriers under 18, nonprofit associations, as well as wage-earners receiving more than $3,000 annually. State unemployment insurance laws in Kentucky, Louisiana, Maine, Nebraska, Pennsylvania, Virginia, Illinois, New York and South Carolina were amended to conform with these revisions.

Miscellaneous.

With 1940 initiating the development of a tremendous defense program, labor was particularly concerned with retaining its legislative gains. The results of the health examinations of military recruits emphasized in a startling fashion the need for improved physical health. In New York State, the Goldberg bill introduced an amendment to the unemployment insurance law providing that a worker who is capable of employment when he registers as totally unemployed, but who subsequently becomes sick, shall not be prevented by such incapacity from continuing to receive temporary unemployment benefits. The bill was passed by the state legislature in 1940, but was vetoed by the governor. Congress, on the other hand, substantially liberalized the provisions of the Railroad Unemployment Insurance Act during the year.

A significant court interpretation was made with reference to unemployment insurance. 'An employee receiving unemployment benefits is not disqualified from receiving compensation for the same period under the workmen's compensation act,' was the decision of the Supreme Court of Michigan. The legislature, it was said, intended to create two independent organizations to administer two kinds of compensation, payable from different funds.

The fact that there were so few new developments in the field of unemployment insurance during the year was undoubtedly due to the marked decrease in unemployment. Large Government defense orders to the steel, aeroplane, and automobile industries were responsible for absorption of thousands of unemployed workers. The New York State report, however, reveals the fact that increased business activity does not necessarily mean the elimination of unemployment. See also LABOR LEGISLATION.

1939: Unemployment Insurance

During 1939 there was a marked increase in employment and payroll figures in the United States. Whether this favorable phenomenon arises out of a normal improvement in business and industrial activity or whether it is due to the stimulus of war contracts from England, France and Finland is still a moot question. Despite strikes in certain basic industries like the automobile industry, involving thousands of workers, there are evidences of increased production activity in steel, automobile, aviation, mechanical parts and kindred fields, and also statistics indicating increased employment. In fact, for the first time since 1929 there have been requests from industry for more skilled workers, indicating a shortage of such workers in specific fields. The policy of the Government to reduce relief appropriations and curtail the budget of the WPA and the PWA has been based upon this absorption of skilled and unskilled workers by industry. It has been estimated, however, that there were still some 9,000,000 workers unemployed in December 1939, (See also PUBLIC FINANCE; UNITED STATES: Relief and Security.)

Amendments to the Social Security Act.

There were no radical changes in the unemployment insurance section of the Social Security Act during 1939. Among the most important amendments are those limiting taxable wages to the first $3,000 earned in a year and requiring merit systems for selecting state unemployment insurance employees after July 1, 1941. Other amendments to the Social Security Act were those which represented sweeping changes in the Old Age Insurance system. These involved extending annuities to aged wives and widows of the insured, as well as to younger widows with children. The date of payment of such annuities was moved from 1942 to 1940, and the amount of payment was also considerably liberalized. New groups of workers included under this amendment and applicable also to the recipients of unemployment insurance were employees of banks, savings and loan associations and other institutions not wholly owned by the government.

Changes in State Laws.

Coverage.

The Federal law still provides for a uniform tax payable by employers regardless of whether the individual state has an unemployment insurance law. Similarly, the present provisions as to credits, where reductions in rates are permissible under state laws, are continued without radical change. The bulk of the changes effected during the year involved coverage, exemptions, tax base, definition of 'wages,' and credits. California has outstripped the other states in the union in an amendment effective Dec. 1, 1939. This amendment raised the weekly unemployment insurance to a minimum of $10.00 and a maximum of $18.00 weekly. The duration of benefits in the year will now range to as high as 26 weeks, depending on the total wages earned in the previous year. A minimum of $300 annually must be earned in order to establish eligibility.

The state of Massachusetts abolished the clause providing for compulsory workers' contribution to the unemployment insurance fund. It did, however, adopt a merit rating system which reduced the employers' tax rate from 2.7 per cent to as low as .5 per cent. Without a doubt the strongest and most prosperous industries benefit from such a merit clause. A new benefit table was set up, to become effective April 1, 1940, providing benefit rates from a $6.00 minimum to a $15.00 weekly maximum.

In North Carolina, too, the merit rating device was adopted. Banking and insurance companies fought the extension of the law to include these industries. The Federal Court held that the statute was unconstitutional as far as banks were concerned, because the Act provided for the payment of contributions during the year in which the law was enacted, which in effect made the collection of contributions retroactive.

Of the 47 states in which legislatures met this year, 44 had passed amendments to their unemployment insurance laws by Aug. 9, 1939. The most common change was that of a broader inclusion of employers on the basis of their pay rolls. About  of the states excluded employees of benevolent societies and civic groups. Minnesota excluded workers employed by small employers in towns under 10,000 population. Oregon broadened the definition of agricultural laborers excluded from the benefits of the act, while Idaho passed an amendment extending benefits to domestic workers, as well as workers in private non-profit making, scientific, literary and certain charitable organizations.

Benefit Provisions.

In an effort to simplify unemployment insurance administration, twenty-nine states shortened the base period of calculation to one year instead of the previous cumbersome device of calculating on eight out of nine calendar quarters. Half of the states which amended benefit provisions set a minimum of $5.00 weekly or more. There are still a number of states which pay a minimum weekly as low as $1.50. This of course shows quite markedly the fact that unemployment insurance has had little correlation with standards of living or the need of the workers.

Two states adopted a formula during the last year whereby the lower-paid workers receive benefits for a longer period of duration in proportion to wages earned, than do workers with higher wages. However, in at least sixteen states the unemployment insurance laws affect the lower-paid workers adversely because they are required to have a longer period before they are eligible for insurance than higher-paid workers. During this year, an increase in wage requirements was made in fifteen states by providing a higher multiple of the weekly benefit amount than formerly existed. Half of this group require thirty times the weekly benefit amount before the worker is eligible for insurance.

Consonant with the attempt to simplify the Unemployment Insurance Acts, twenty states now provide that the waiting period before insurance is paid shall be only two weeks of whole or partial unemployment within a year.

Judicial Decisions.

Judicial decisions have also added considerably to the body of legislative changes effected during the year. The State Unemployment Insurance Act of Arkansas was attacked by employers who felt that since their tax, based on payroll, is the sole contribution to the fund, it constituted an unnecessary burdening of a specific class. The attack was made that the unemployment insurance law was class legislation. The state Supreme Court, however, held the act was constitutional since it was obviously enacted to alleviate economic insecurity, a problem which is accepted as a serious menace to the health and welfare of the people.

In a recent case involving the unemployment insurance law of Wisconsin, the Supreme Court of the state held that an employee, deprived of work because the employer had discontinued the manufacture of certain goods, was entitled to compensation. When the trade union involved in the industry demanded that the wages of workers in a particular trade be increased the employer discontinued manufacturing the line of goods, and the workers were released from employment. The Supreme Court held that the amount of unemployment compensation granted by the State Industrial Commission was legal, since the employer's action resulted in involuntary unemployment for the worker.

Wage Loan Plans.

More recently the General Motors Corporation established an employee loan plan for about 150,000 of its workers. This plan is to provide loans to its workers during periods of enforced idleness of a seasonal and general business nature. Whenever a worker's weekly income falls below a certain proportion of a full week's pay, the corporation offers to loan him the difference, with interest. The loan is cancelled in the event of the worker's death. On the other hand should the worker's weekly income exceed above 60 per cent of the standard agreed upon, one half of the amount by which such earnings exceed 60 per cent is to be deducted from his wages to repay the loan. This wage loan plan, supplementary to the state unemployment insurance, is ostensibly an attempt to standardize the worker's purchasing power.

Strikes and Dismissal Compensation.

During the recent Chrysler automobile strike (November 1939) the State Industrial Commission of Michigan refused to permit the payment of unemployment insurance to the striking employees. The case is being made a test case on eligibility to unemployment insurance in the event of strikes.

Recent studies of dismissal compensation plans of private firms have revealed the following points: several companies have protected the waiting period at the end of which larger dismissal payments can be claimed. A large number of firms have reduced their scales of dismissal compensation for certain groups of employees, but have planned to assist by wage loans those workers who are not covered by the Social Security Act, workers who have a long period of service to their credit, and workers whose previous salaries made unemployment insurance payments decidedly inadequate. The study seems to indicate that the continuation of dismissal payments by employers is a form of supplementary insurance benefit.

Stabilization and Liberalization of Benefits.

Although unemployment insurance laws are still in a rudimentary stage, it is evident that a number of problems of insecurity which it was hoped the law would correct have not been so corrected. Benefits in most states are far from adequate for the retention of a purchasing power and the maintenance of an American standard of living. There is, as a result of the Federal-state system, a patchwork quilt of state laws with varying amounts of benefits, duration of benefits, as well as conditions prescribed for benefits. The administration of most state laws is accompanied by extremely involved systems of computation and red tape.

There is need for greater liberalization of benefits and for more adequate benefits particularly for the lowest wage group, which is usually also the one most subject to unemployment. The tremendous reserves accumulated by the unemployment insurance systems amounted to over $1,300,000, with collections during the first half of 1939 approximately twice the amounts paid out. Such accumulation of reserve funds withdrawn from circulation have been construed as reducing purchasing power, thus actually intensifying the depression and increasing unemployment. It is further recognized that merit rating, the device of reducing the tax rate for those industries able to stabilize their unemployment or to considerably reduce it, is futile. Studies made of the Wisconsin Unemployment Reserve System seem to indicate pretty clearly that stabilization of industry or reduction of employment does not come about because of the promise of a lowered tax rate. What stabilization does take place may be attributed to other more tangible factors, such as reduced unit costs of production, technological improvements, etc. And yet merit rating has given undue advantage to large corporations, public utilities, and monopoly industries. These industries are engaged in a nation-wide attempt to lower their unemployment insurance tax by introducing this technique in the unemployment insurance laws.

Evasion of Unemployment Insurance.

Some of the new problems of unemployment in states having the merit rating are the increase of work-spreading or part-time work for which there is no insurance. Hiring for a probationary service period constitutes another way of avoiding insurance compensation. Unskilled workers are hired on a temporary basis, never become eligible for benefits because they are discharged at the end of four weeks. During peak seasons temporary help, students or 'self-employed' persons working on a commission basis, are engaged and form another device for lowering the unemployment rate. In addition to these techniques, the experiences of each state unemployment insurance office having the rating system are filled with individual devices for lowering the insurance rate and 'beating the law.'

The last two years have been accompanied by extraordinary technological development which has also in part been responsible for increasing the unemployment lists. Despite the demands of war industries for skilled and semi-skilled workers, despite unemployment insurance, WPA and PWA, unemployment is still our major social and economic problem in the year 1939. See also SOCIAL SERVICE, PUBLIC.