New Deal Bonus: Unemployment Compensation.

February 12, 2009 at 9:07 pm | Posted in Department of Labor, Historical, Labor | Leave a comment
Tags: Dorothea Lange, Economy, Franklin Roosevelt, John Steinbeck, New Deal, Peter Orszag, Photographs, unemployment insurance

Unemployment benefits aid begins. Line of men inside a division office of the State Employment Service office at San Francisco, California, waiting to register for benefits on one of the first days the office was open. They will receive from six to fifteen dollars per week for up to sixteen weeks. Coincidental with the announcement that the federal unemployment census showed close to ten million persons out of work, twenty-two states begin paying unemployment compensation. January 1938. (Photo: Dorothea Lange)

Here’s something else terrible (if you’re a Republican) that Franklin Roosevelt’s first administration did:

The Social Security Act of 1935 (Public Law 74-271) created the Federal-State Unemployment Compensation (UC) Program.

The program has two main objectives: (1) to provide temporary and partial wage replacement to involuntarily unemployed workers who were recently employed; and (2) to help stabilize the economy during recessions.

The U.S. Department of Labor oversees the system, but each State administers its own program.

There was continued bickering about the unemployment law creating a federal mandate to be administered by state governments, and in May 1943 Arthur J. Altmeyer, then chairman of the Social Security Board, wrote an article titled “The Advantages of Unemployment Insurance As Part of a Unified National Social Insurance Program” in which he stated:

The interview for unemployment compensation, San Francisco, California, January 1938. (Photo: Dorothea Lange)

Certainly no one would question that unemployment is at least as great a national problem as old age. So far as invading a field which historically has belonged to the States, the facts are that before the Social Security Act was under consideration, only one State had enacted an unemployment compensation law and it is doubtful whether that law would have remained on the statute books were it not for the fact that the present Federal Social Security Act creates an irresistible inducement for the States to enact unemployment compensation legislation. As a matter of fact, it was contended by opponents of unemployment compensation in 1935 that this Federal inducement constituted coercion and invasion of States’ rights. Certainly those who so contended cannot now logically argue that relieving the States of an obligation allegedly forced upon them in 1935 is an invasion of States’ rights. However, such discussions get us nowhere in deciding the basic question of what kind of an unemployment compensation system is best from the standpoint of simplicity, adequacy and financial soundness.

In November 2001 the Center on Budget & Policy Priorities (CBPP) published an article by Peter Orszag, now Obama’s Director of the Office of Management & Budget, wherein he argued that “unemployment insurance is a particularly effective stimulus”:

Bindle stiff, used to be logger. Side of Pastime Cafe. Idle three weeks before the opening of the Klamath Basin potato harvest. California, Siskiyou County, Tulelake. August 1939. (Photo: Dorothea Lange)

Those who oppose such temporary expansions in unemployment benefits often argue that the changes would merely reduce the incentives for workers to find jobs. In addition to ignoring the impact of the additional spending created by the expansion in benefits, this concern seems to be less relevant in a deteriorating job market. As the economy slows, longer spells of unemployment are more likely to reflect scarce job opportunities, rather than lack of effort in finding a new job. How many people would be willing to remain unemployed in the middle of a recession in exchange for an extra $25 or so per week?

The Bureau of Labor & Statistics has an article about events leading up to the establishment of the Federal-State Unemployment Compensation Program.

Migrant agricultural worker's family. Seven hungry children. Mother aged thirty-two. Father is a native Californian. Destitute in pea picker's camp, Nipomo, California, because of the failure of the early pea crop. These people had just sold their tent in order to buy food. Of the twenty-five hundred people in this camp most of them were destitute. February or March 1936. (Photo: Dorothea Lange)

UPDATE via Crooks & Liars:

(WaPo) It’s hard enough to lose a job. But for a growing proportion of U.S. workers, the troubles really set in when they apply for unemployment benefits.

More than a quarter of people applying for such claims have their rights to the benefit challenged as employers increasingly act to block payouts to former workers.

The proportion of claims disputed by former employers and state agencies has reached record levels in recent years, according to the Labor Department numbers tallied by the Urban Institute.