Unemployment Compensation

November 25, 1940

Report Outline
Efforts to Amend Compensation Laws in 1941
Operation of Unemployment Insurance Program
Proposals for Revision of Insurance System
Controversy Over Principle of Merit-Rating

Efforts to Amend Compensation Laws in 1941

Rapid Growth of State Unemployment Reserve Funds

Since January 1, 1936, when the federal-state unemployment compensation system went into effect, about $3,035,000,000 has been collected by the states and territories in unemployment compensation payroll taxes. Of this amount, $1,252,000,000, or 41 per cent of total collections, has been paid out in benefits to unemployed workers, and $1,738,000,000 has been deposited in reserve funds to meet future contingencies. (The remaining $45,000,000 has been transferred to the national unemployment reserve fund established for railroad workers in 1938.) In a number of states, less than 20 per cent of collections has been paid out in benefits and more than 80 per cent has gone into reserve. With employment and payrolls rising steadily under the stimulus of the national defense program, it is estimated that total reserves will have increased to about $2,250,000,000 by July 1, 1941.

The rapid growth of reserve funds is certain to cause strong pressure upon Congress and the state legislatures next year for revision of present unemployment insurance laws. Reserves piling up in many of the states are much larger than are needed to maintain state programs on a sound financial basis. In about a dozen states, reserves already accumulated are believed to be large enough—with no additional tax collections—to pay unemployment benefits at current rates for from 5 to 15 years. Most employer groups hold that excessive reserves show the need of reduced payroll tax rates. Organized labor opposes tax reductions and calls for liberalization of unemployment benefits.

Proposals for Tax Cuts and Benefit Liberalization

A. J. Altmeyer, chairman of the Social Security Board, has repeatedly expressed his belief that present payroll tax rates should be retained and unemployment benefits liberalized. Liberalization of benefits through enactment of minimum federal benefit standards is proposed by both the American Federation of Labor and the Congress of Industrial Organizations, and bills to carry out this purpose have been introduced in both houses of Congress.

ISSUE TRACKER for Related Reports
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Apr. 10, 2009  Business Bankruptcy
Mar. 13, 2009  Vanishing Jobs
Apr. 25, 2003  Unemployment Benefits
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Sep. 09, 1988  Help Wanted: Why Jobs Are Hard to Fill
Mar. 18, 1983  The Youth Unemployment Puzzle
Dec. 24, 1982  Federal Jobs Programs
May 28, 1982  America's Employment Outlook
Jun. 27, 1980  Unemployment Compensation
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Jul. 11, 1975  Underemployment in America
Dec. 16, 1970  Unemployment in Recessions
Mar. 05, 1965  Unemployment Benefits in Times of Prosperity
Apr. 03, 1964  Overtime Pay Rates and Unemployment
Feb. 01, 1961  Unemployment and New Jobs
Jan. 07, 1959  Lag in Employment
Apr. 16, 1958  Emergency Jobless Aid
May 16, 1956  Lay-Off Pay Plans
Nov. 12, 1953  Jobless Compensation in Boom and Recession
Feb. 25, 1949  Defenses Against Unemployment
Jul. 30, 1945  Full Employment
Nov. 25, 1940  Unemployment Compensation
Jul. 10, 1939  Problem of the Migrant Unemployed
May 19, 1936  Unemployment and Recovery
Sep. 02, 1931  Public Employment Exchanges
Aug. 19, 1929  The Stabilization of Employment
Feb. 21, 1928  The Employment Situation in the United States
Jan. 23, 1926  Unemployment Insurance in the United States
Unemployment and Employment Programs