Greetings from AUGUST 14 is the 20th anniversary of the Social Security Act, which Unemployment insurance makes a vital contribution to the well-being of workers and their families and to our national economic well-being. The story of Twenty Years of Unemployment Insurance, told in the following pages is, on the whole, a story of progress and of worthwhile accomplishments. It is a story of devoted effort on the part of thousands of men and women-Federal workers in Washington and the regions and State workers in the 51 central offices and the 1,700 local offices. It is the day-to-day work of each of you which combines to make the total story. You are to be congratulated on your achievements. Your individual activities, which sometimes seem routine, are the stones with which the structure is built. Without these daily activities, no matter how good the laws, the program will never reach its full potentialities in promoting the well-being of our workers and the well-being of our country. As President Eisenhower has stated to the Congress, "Unemployment insurance is a valuable first line of defense against economic recession." It is a Federal-State business that for the last 9 years has paid jobless workers an average of over $1 billion a year in unemployment insurance benefits. The program demonstrates that significant and lasting progress in social and economic legislation can be made by a sincere partnership of Federal and State governments. In 1954, the Federal provisions were improved so that the benefits of this program were extended to 4 million additional workers. I have written to the State governors, urging that they recommend increases in both benefits paid and the duration of benefit payments. The response from the State governors has been heartening. Significant action was taken to bring the program nearer the goals set forth by the President as is shown in detail in the pages following. The important thing is for us all to continue to work for a system that provides all the people of our country adequate unemployment insurance with dignity and dispatch. James P. Macap Secretary of Labor I. What is Unemployment Insurance? WH THAT is unemployment insurance? Why do we have it? Who benefits from it? We who work in the program take it for granted that everyone knows the answers to these questions. Not everyone does. Certainly not everyone did 20 years ago when the program was started. Briefly stated, unemployment insurance is an income maintenance program; it is insurance against a portion of wage loss when workers lose their jobs. Funds are built up by taxes on wages during periods of employment so that weekly benefits can be paid to workers during periods of unemployment. In the United States, the program, up to June 30, 1955, had collected $20 billion for the payment of benefits; had paid out over $14 billion; and, with over $2 billion of interest on the funds, started the new fiscal year with a balance of $8 billion available for benefits. Like any insurance, unemployment insurance provides for pooling resources to meet a widespread hazard. In the United States unemployment insurance spreads the cost of unemployment over all the geographical areas and industries within a State, some of which are more vulnerable than others to the hazard of unemployment. It spreads the cost over periods of time, in that taxes are collected in both good years and bad years and benefits are paid in varying amounts as needed, when economic conditions change from year to year. Social Insurance Unemployment is one of the most serious risks which wage earners in a dynamic industrial economy face the risk of losing their jobs and their income. It is also one of the greatest risks to a community and to the Nation-the risk of losing the buying power of large numbers of people. Individual initiative and private enterprise alone cannot cope with such a risk. For these reasons unemployment insurance is social insurance, fostered and administered by governments, rather than private insurance. Unemployment insurance is even more completely social insurance than such other wage-loss-compensation programs as old-age insurance, disability insurance, or workmen's compensation. Workers or employers can buy retirement insurance, health and accident insurance, or workmen's compensation insurance from private insurance carriers but no private insurance carrier sells unemployment insurance because of the unpredictable character of the risk of unemployment. Unemployment insurance is not a general program to take care of all the unemployed. Its benefits are paid only to workers who normally depend for their livelihood on their earnings in covered employment and only when they are involuntarily unemployed and are able and willing to work. These benefits are paid as a matter of right to claimants who qualify as insured workers by reason of their past employment in jobs subject to the law and by reason of the circumstances of their unemployment. Unemployment insurance has characteristics which distinguish it from other income maintenance programs, such as public assistance. There is no means test. Benefit amounts and duration are defined by law so that workers can know in advance what benefits they will be entitled to if they are unemployed and eligible under the terms of the law. The benefits are financed, not from general taxation but from contributions based on the workers' earnings; in most States all contribuions are paid by employers. Insured workers' unemployment insurance policies explain the benefit rights for which they may qualify, and their responsibilities in claiming benefits. Causes of Unemployment Unemployment is inevitable in a highly dynamic economy such as that of the United States. Some unemployment exists even in good times. The need for unemployment insurance is revealed by an analysis of the primary causes of unemployment. Changes in the seasons result in peaks and valleys of business activity and employment. Weather limits the season of operation in logging, out-of-door construction, fishing, shipping on the Great Lakes, various food-processing industries, and tourist and other businesses in resort areas. Weather and style factors limit the busy season in the fur and garment industries. All States experience some seasonal unemployment; in some parts of the country, seasonal industries represent a large proportion of industrial activity. Some workers in highly seasonal industries are employed too casually or too briefly to come within the protection of unemployment insurance and some unemployment insurance laws impose limitations on benefits payable to workers in such industries. Yet thousands of workers who depend for their year-round livelihood upon employment in industries which have sharp seasonal fluctuations are benefited by unemployment insurance payments. Inventories and model changes, business failures and mergers mean loss of work. Depletion of natural resources as in the coalfields and shifts in demand, as from coal to oil, throw individuals and communities out of work. Catastrophes such as fires and floods cause temporary shutdowns or layoffs. (See the Arkansas story, p. 3, for testimony concerning how unemployment insurance helped after one tornado.) Technological unemployment results from the development of new products, such as synthetic fabrics, or new methods of producing old products or of performing services, such as new printing devices or new business machines. Such technological changes may displace, either temporarily or permanently, workers whose products or skills become obsolete as a result of the new developments, while at the same time they open up new job opportunities in the exercise of new skills and in the manufacture of new products. Recent developments in electronics and in automation are accelerating this process of technological change and may result in temporarily increased technological unemployment. The last 20 years have seen much relocation unemployment. During the war years, the building of new aircraft and atomic energy plants and large-scale housing projects for their workers required an unprecedented moving of construction and production workers. In addition, there have been geographic shifts of industries for economic reasons. The relocation of a family's main breadwinner and the resultant move of his whole family often means dislocation of a secondary worker in the family-the wife or son or daughter. Unemployment insurance has helped to bridge the gap between jobs for many such workers. Some unemployment is due initially to workers' personal and individual reasons-for example, that of workers who left their jobs because of temporary illness or compelling problems of family care and who cannot get jobs when they are ready to go back to work. Unemployment insurance in the USA has not been tested in any major depression; it has not had to meet cyclical unemployment arising from the curtailment of business activity in the fluctuations of the business cycle. But the last 20 years have not been free from recessional unemployment, and unemployment insurance has helped both directly and indirectly. When average weekly unemployment almost doubled from 1953 to 1954, payments for unemployment insurance slowed down the drop in personal income. Benefit payments rose more than a billion dollars-from $962,000,000 in 1953 to $2,027,000,000 in 1954. The purchasing power growing out of these unemployment insurance payments helped to sustain the demand for goods, to prevent other unemployment, and thus to hasten the recovery from the recession. Functions of Unemployment Insurance In these various types of unemployment, unemployment insurance makes an important contribution to workers, to employers, and to the total economy. To insured workers who are employed, unemployment insurance lends a feeling of security; they know that should they lose their jobs through no fault of their own, they will not be totally without income. For insured workers who are unemployed, it means cash to ease the crisis of loss of their jobs. These payments help workers buy food, housing, and other essentials for themselves and their families. Since the program requires registration at the public employment offices, it helps workers find new jobs— and suitable jobs. Benefits between jobs help to conserve workers' skills. They reduce the pressure on jobless workers to take blind-alley jobs in which they would lose their skills and the status which goes with skills. At the same time unemployment insurance facilitates the free flow of workers between communities. When workers must leave a community because of industrial or community changes or for personal reasons, unemployment insurance helps sustain them until they How Unemployment Insurance Helped After an Arkansas Disaster Excerpts from news stories in the ARKANSAS GAZETTE, WARREN EAGLE-DEMOCRAT, and BENTON COURIER. THIS southern Arkansas town felt the full goodness of unemployment insurance at a time when the town's economic structure was threatened with the destruction of the main power plant of the Bradley Lumber Co. by violent winds January 3, 1949. Unemployment insurance payments to the lumber workers, thrown out of work through no fault of their own, saved the day for Warren. The city fathers were quick to admit that without the benefit payments, the city would have faced certain economic disaster. Nearly all of Bradley Lumber Co.'s workers were jobless because its main power plant had been destroyed. About 350 of them were recalled to remove wreckage and guard property. That left 650 employees idle. The Employment Security Division of the State Labor Department moved swiftly to meet this grave situation. It opened a temporary office here to make immediate unemployment insurance payments to those who had built up enough wage credits to become eligible. Between January 10 and May 23, when accumulated credits had been exhausted, the State agency paid $207,000 to 1,190 jobless residents. This money kept the company's experienced force intact, ready to resume work when jobs were reopened. Weekly checks bought the necessities of life and paid rent until wheels turned again at the plant. A local grocer said that most of his business during the critical period of reconstruction was by persons drawing unemployment insurance. "When the payments stopped, we grocers sure felt the sting. Unemployment insurance was a godsend to us all." "Inasmuch as unemployment insurance provides a feeling of security for workers, it helps business by keeping people in a confident mood for planning, buying and building," W. D. Roody, president of the local chamber of commerce stated. "It certainly kept up the morale of the town's workers, and in our particular case unemployment insurance proved that it is a defense against a cut in buying power and is the worker's first safeguard against insecurity when he loses his job through no fault of his own.” From an editorial in the BENTON COURIER This newspaper is beginning to see the benefits of the unemployment insurance, despite some abuse of the law. The reserve built up by this law, which requires employers to pay from 5 mills to 3 cents on every payroll dollar, is proof of extreme benefit in meeting grocery requirements for workers who have been laid off in the large industrial centers in recent weeks. This unemployment insurance was a tremendous help down at Warren following a tornado on January 3. Of this emergency period, R. W. Fullerton, president of Bradley, said: "Through the company's record of continuous operation, a large credit was built up by Bradley's contributions for the benefit of its employees. Because of this credit, approximately 600 of our employees who were not reemployed in the rehabilitation of our plant were enabled to draw unemployment insurance benefits." |