Unemployment Benefits in Times of Prosperity

Report Outline
Modernization of Unemployment Insurance
Evolution of Benefit System for Jobless
Points of Debate in Recasting the System

Modernization of Unemployment Insurance

Proposals for Revision of Federal-State System

Efforts by the Johnson administration to bring about the first major reform in the American unemployment insurance system in ten years have the support of organized labor but appear destined to meet resistance from the business community. Two important questions are at issue: (1) Whether unemployment compensation, now a composite of variegated and semi-autonomous state programs, should be converted into something more nearly resembling a national insurance system, and (2) whether the system's taxes and benefits should be raised to afford a thicker cushion against a worker's loss of income during periods of unemployment, especially unemployment that extends over a long period of time.

In each of the three years of his administration, 1961–63, President Kennedy asked Congress without avail to strengthen federal control over the unemployment compensation system, to raise payroll taxes, and to increase unemployment benefits. President Johnson said on Jan. 8, 1964, in his first State of the Union address, that in carrying out the war on poverty it would be necessary to “modernize our unemployment insurance.” The need to widen the coverage and increase the benefits was stressed by the President again in a report on manpower problems transmitted to Congress on March 9, 1964.

Little more on the subject was heard from the Chief Executive until he sent his annual budget to Congress last Jan. 25. In the message accompanying the budget, the President called once more for reform of the unemployment compensation system. It was noted in the budget itself that “No federal legislation to improve this insurance system has been enacted in the last 10 years and, in many states, the coverage and duration of benefits are inadequate.” It was pointed out that only 60 per cent of the labor force was covered by the system and that benefit payments amounted to only one-fourth of wages lost by covered workers during periods of unemployment. “Proposed legislation,” the budget analysis stated, “will include improvements to (1) extend coverage of the system, (2) establish federal standards relating to duration and level of benefits, (3) strengthen financing, and (4) establish a new, separate federal system of extended benefits for workers who have been in the labor force for a long time.”