Jobless Compensation in Boom and Recession

Report Outline
Current Portents of Slowdown in Industry
Jobless Compensation in Years of Prosperity
Question of Adequacy of Present System
Proposals for Change in Unemployment System
Special Focus

How well the present federal-state system of unemployment compensation would weather a prolonged economic recession is a question now under close study by government economists and the staffs of various congressional committees. The subject will come up for debate early in the 1954 session of Congress when the Senate considers a bill passed by the House in July which would establish a federal loan fund to assist states which may encounter difficulties in meeting their obligations to the jobless.

Set up by the Social Security Act of 1935, the unemployment compensation system has now been in full operation for a period just short of 15 years. While the act imposed a federal payroll tax of one per cent in 1936, rising to three per cent in 1938, first payments to the jobless in all states were delayed until 1939. The system has been and remains financially strong, but most of the years since 1939 have been years of substantially full employment, and the system has yet to be tested in anything approaching a nation-wide unemployment emergency.

Past operations of the system are now under study by a task force of specialists set up by the Advisory Board on Economic Growth and Stability of the President's Council of Economic Advisers, The task force is seeking answers to these questions: How well has the system served over the years to regularize employment and to maintain consumer purchasing power in times of recession? Would it prove an effective economic prop in a period of general or prolonged depression? Findings of the task force will provide the basis for future White House decisions on whether changes are needed to make the system a more effective instrument for stabilizing the national economy.