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TABLE 1.—Maximum weekly benefit amount and ratio to average weekly wages of
covered workers, 1939 and 1953
1 Figures in parentheses represent maximum, including dependents' allowances, except in Colorado where the maximum is higher for claimants meeting certain requirements. The District of Columbia maximum is the same with or without dependents. Figure not shown for Massachusetts since it would necessarily be based on an assumed maximum number of dependents.
2 Rates based on average weekly wages of covered workers for 1952 since 1953 data not yet available. figures in parentheses based on maximums, including dependents' allowances.
Table 2.—Proportion of weeks compensated and claimants eligible for the maximum
weekly benefit amount, 1 calendar years 1939 and 1952; and 12-month period ending Sept. 30, 1953
6.8 2 84.5 32.4
6.2 2 26.0 25.7 17.9 13. 7 14.7 13. 5
5.0 10.8 2 29.0 2 47.8 31.1 15.4 28. 3
8.4 2 12.6
6.1 15.4 20.6 2 53.1 22.7
4. 2 14.8 28.4 12.1 55. 8 10.4 21.6 23.6 33.4
2. 2 17.4 18.6 27.2 40.2 30.7 2 16.8
6.0 18.4 2 25. 3 13. 5
8.9 35. 8
9.4 16.7 2 52.9
51.2 84.6 71.0 35. 9 62.6 72.6 54. 5 52.9 64.2 45.8 50.2 39.7 68.5 71.5 64.0 64. 7 53. 3 26.0 52.9
7.8 47.6 80.7 77.7 18.5 25.9 47.1 74.1 65.1 66.6 31.6 67.1 57.7 51.9
3.8 71.6 59.5 69.8 53. 9 50. 3 76.8 70.2 76.0 36.7 61.9 67.7 47.4 50.5 40.9 43. 2 49.8 79.1
55.4 72.0 78.3 43. 2 72.5 73.8 60.8 56.4 59. 2 51.8 41.7 45.8 71.9 76.3 67.4 67.0 61.5 34. 5 64.8 14.8 45. 6 78.6 85.4 26.6 16.5 53.4 77.8 67.6 68.4 31. 2 72. 2 60.0 48.3
7.4 72.6 68.6 65.9 61. 2 52.9 76.6 75.8 74.3 37.4 66.8 72.5 44.7 48.7 53.2 41.9
1 Excludes dependents' allowances.
2 Data for 1939 represent payments at “$15 or more.” Percentages shown for the 9 States in the maximums of $16 or $18, therefore, are overstated.
3 Excludes Wisconsin; comparable data not available.
EXCERPTS FROM THE ECONOMIC REPORT OF THE PRESIDENT
AMOUNTS OF BENEFITS
A second inadequacy is the size of benefits. Originally, upon the recommendation of the President's Committee on Economic Security in 1935, the States set benefits generally at 50 percent of weekly wages. However, they also fixed dollar maximums which have since significantly curtailed the benefits. The effective ratio of average weekly unemployment benefits to average weekly wages of covered workers was 43 percent in 1938. Since then, with dollar maximums failing to keep pace with rising wage levels, the effective ratio has fallen to 33 percent. At present, these maximums are typically between $20 and $30 weekly. It is suggested that the States raise these dollar maximums so that the payments to the great majority of the beneficiaries may equal at least half their regular earnings.
DURATION OF BENEFITS
A third deficiency is the duration of benefits. Only 2 dozen States provide for 26 weeks, and only 4 of these pay benefits for that length of time to all persons who meet minimum requirements for any benefits. During the 1949 recession, almost 2 million persons exhausted their rights, most of them in less than 4 months. Yet a conspicuous feature of unemployment is that, as it increases in amount, it also increases in duration for the individual. For example, in Aj ril 1940, when unemployment was large, three-fifths of those seeking employment had been out of work 6 months or longer, compared with an average duration in 1953 of less than 2 months. It is urged, therefore, that all of the States raise the potential duration of unemployment benefits to 26 weeks, and that they make the benefits available to all persons who had had a specified amount of covered employment or earnings. A 6-month period would not prevent exhaustion of benefits in a severe slump, but in a minor downturn it should be adequate for a great majority of the claimants.
EXCERPTS FROM THE STATEMENT OF THE JOINT COMMITTEE ON THE ECONOMIC
Unemployment compensation has long been regarded not only as support to those temporarily displaced by the shifting operations of a dynamic economic system, but as a program beneficial to the entire economy because of its “built in” stabilizing features. Whether or not one believes that the recently rising trend in unemployment will soon right itself or that it threatens to become worse in the months ahead, it is highly desirable that the Federal Government, in cooperation wih the States, do everything possible (1) to relieve individual distress from unemployment, and (2) to minimize the loss in consumer demand with its cumulatively bad effects upon the rest of the economy. The committee wishes to underscore the statement contained in the President's message that "unemployment insurance is a valuable first line of defense against economic recession.”
The present economic outlook thus presents precisely the situation under which the provision of an adequate unemployment insurance program is most imperative. Under the circumstances there can be little disagreement with the objectives of the President's program. Broader coverage and strengthening the State systems will help maintain consumer demand and aid in forestalling or countering rising unemployment. We commend the President's suggestion that the States should raise the potential duration of benefits and their dollar maximums on weekly benefits so that payments to the great majority of beneficiaries may be restored to a larger percentage relative to their regular earnings.
LETTER FROM SECRETARY OF LABOR JAMES P. MITCHELL
COPY OF LETTER ADDRESSED TO ALL STATE GOVERNORS FROM SECRETARY MITCHELL
DATED FEBRUARY 16, 1954 I am writing you at the suggestion of President Eisenhower regarding improvement in and expansion of the unemployment insurance program. Since this is a jointly operated Federal-State program, we want to work with you so that we can fulfill our respective responsibilities.
There are several areas in which we believe the unemployment-insurance program needs to be strengthened in order to realize its full potentialities in providing protection against unemployment. These are the extension of the system to additional workers, improvement in benefits, protection of State funds against insolvency, and more adequate financing of administration.
The President has recommended action to Congress to improve the program in some areas and is suggesting action to the States in several other areas. Specifically, the President has recommended to the Congress changes in the Federal Unemployment Tax Act which should result in the States' extending protection to some 4 million additional workers. These include, primarily, employees in firms with one or more workers at any time. In addition, the President has recommended unemployment insurance protection for the 272 million civilian employees of the Federal Government. I hope that you will call the attention of your legislature to the desirability of similar action to extend the protection afforded by your own program to State and local government employees.
The President is also recommending to the Congress amendment of the Federal law so that the States can give new and newly covered employers the advantage of experience rating after 1 or more years of coverage under the program, instead of after the 3 or more years now required. In addition, he is making certain proposals to the Congress which will safeguard State unemployment funds against insolvency and will permit more adequate financing of employment security administration.
The President has also directed attention to the fact that the present statutory benefit maximums under State laws have resulted in too high a proportion of claimants getting less than 50 percent of their weekly wages. Only by raising these maximums in line with the rise in wages and living standards can the program serve its purpose of providing sufficient purchasing power to aid in assuring an adequate benefit to the worker for loss of earnings and to effectively help in curbing economic decline. His report describes, as a desirable goal of the program, that maximum weekly benefits be raised “* * * so that the payments to the great majority of the beneficiaries may equal at least half their regular earnings."
In his Economic Report the President has also called attention to the importance of assuring longer periods of unemployment insurance protection. This is needed, since when unemployment increases in volume, it also increases in duration for the individual. The President has urged that all States provide 26 weeks of benefits uniformly to all eligible claimants, in order to assure that even in a minor business downturn most workers would remain protected by the program until they could find other jobs.
At its most recent meeting in January the Federal Advisory Council on Employment Security took action supporting the President's recommendations on improving weekly benefits. The Council recommended that in each State, the maximum weekly benefit amount should be equal to at least 60 to 67 percent of the State's average weekly wage.
Recognizing that these are matters for State rather than Federal action, I suggest that you evaluate the protection afforded by the provisions of your State law as compared with the goals mentioned above. At the same time, of course, you will wish to make sure that qualifying requirements are such as to assure that only workers in fact attached to the labor force are entitled to benefits.
The strength of this program is of great interest and concern to the Federal as well as to the State governments. It is one of the more important measuresalong with credit and debt management, tax and lending measures, foreign trade, farm and public works plans--which the President referred to in discussing the Nation's economic growth and stability. Unlike some of those mentioned, this program is one where vigorous and farseeing State action can do much, directly and immediately, to promote the Nation's economic health. I should like to lend my efforts to help achieve close collaboration between the Federal Government and the States in this cooperative effort.
The Bureau of Employment Security of the Department is furnishing materials to the head of your employment security agency which should be useful in evaluating the adequacy of the benefits provided under your unemployment insurance law. I shall also be pleased to keep you informed from time to time on the progress of those measures which the President is proposing for congressional action and other developments pertaining to the employment security program. Yours very truly,
JAMES P. MITCHELL,
Secretary of Labor.
SUMMARY TABLES ON MAXIMUM WEEKLY BENEFIT AND DURATION PROVISIONS
When benefits were first payable under the State unemployment-insurance laws, all States but 3 provided a maximum weekly benefit amount of $15. In Illinois and Michigan the maximum was $16; in Wyoming the maximum was $18.
By the end of 1939, 3 additional States (Alaska, Rhode Island, and Utah) had increased the maximum to $16 while California, Idaho, and Louisiana raised it to $18. The bulk of covered workers (77 percent) were employed in the 42 States with a $15 maximum.
As illustrated in table 1, maximum weekly benefit amounts had been increased above the original limits in most States by the close of World War II. By December 1945, only 10 States had retained their original $15 maximums while 19 States, with 45 percent of the Nation's covered workers, provided for $20 maximums; 31 percent of covered workers were employed in States with maximums ranging from $21 to $25.
As of the most recent date (December 1953), 42 States with almost 90 percent of the covered employment have basic maximums of $25 or more; in 17 of these the maximum is $30 or more.
Table 2 shows the maximum amounts provided as of the close of 1939 and 1953, the average weekly wages of covered workers for calendar years 1939 and 1952, and the respective ratios. These data indicate that since weekly wages have increased at a greater rate than did the maximums the respective ratios have declined in each of the States. In 29 States, for example, the present ratio of the maximum benefit to average weekly wages is 40-49 percent, and in only 3 States is the ratio as great as 50 percent; in 1939 all but 2 States had ratios of 50 percent
1 Excludes dependents' allowances.
In using these data, it should be noted that the average weekly wage data pertain to the wages of all covered workers, including those whose earnings are insufficient to entitle them to the maximum weekly benefit. If data were available, the comparison would be made on the basis of average weekly earnings for those claimants eligible for the maximum The resulting percentages might be somewhat lower.
If the States were grouped by their 1953 maximum weekly benefit amounts, it is noted that the ratio to weekly wages declines as the maximum declines:
Increases in the maximum weekly benefit amount provided under State unemployment insurance laws have been accompanied by a rising proportion of payments at the maximum amount. In 1939, for example, roughly one-fourth of all payments for total unemployment were issued at the maximum; during 1952 the percentage averaged 55 (table 3) and ranged from about 4 percent in North Carolina to 85 percent in Alaska. These proportions are somewhat higher if we examine data on the number of claimants at the maximum because the data on number of weeks compensated are weighted downward by the duration of payments made at the lower weekly amounts. Thus, during the most recent period available, 58.8 percent of claimants were eligible for maximum weekly benefits.
These percentages are arrayed by size in table 4. Here it is noted that in 16 States, including a number of highly industrial areas, the ratios exceed 70 percent, while in 13 others they range from 60 to 69 percent.
Table 5 contains figures on the hypothetical maximum weekly benefit amount at given percentages of average weekly wages. Thus, if the maximum were established at, for example, 60 percent of average weekly wages in covered em