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benefit rates. Use of a weekly basis avoids the more detailed record keeping and reporting and calculations which would be involved if a daily time unit were used.
An employee's weekly benefit rate is typically determined under American unemployment-compensation laws as a percentage of his full-time weekly wage. Under nearly all laws, benefits are figured at 50 percent of the employee's full-time weekly wage, usually with a minimum of $5 and a maximum of $15 per week. Except in the District of Columbia, where benefits also vary with the number of a worker's dependents, an employee's benefit rights are thus closely related to his past earnings on a full-time basis.
Although the use of a full-time standard in figuring weekly benefit rates does involve some difficulties, nevertheless it seems preferable to the alternative "averaging" methods sometimes proposed. (There is considerable experience available under accident-compensation laws to demonstrate how unfair to employees an averaging basis of computation can be.)
It must be recognized, however, that American laws attempt a more difficult task than has been faced in other countries, namely, the determination of each employee's benefit rate on the basis of his own past full-time earnings. Such a determination is necessarily more difficult and more expensive to make, and harder to understand, than the flat benefit rates and fixed allowances for dependents which apply under European unemployment-insurance systems. The present American basis helps to differentiate unemployment compensation from "relief”, and has much to commend it. But further study might well be given to simplifying the determination of weekly benefit rates, consistently with use of individual employee earnings on a full-time basis.
Partial Unemployment Benefits Most of the existing State laws define a worker as partially unemployed whenever he earns in wages less than his weekly benefit rate. These laws typically pay to a worker who is partially unemployed benefits equaling or exceeding the difference between his wages and his weekly benefit rate. In several States an additional $1 or $2 is paid in benefits, thereby further recognizing the principle that a man should receive, when doing some work, at least as much as he would receive if totally unemployed and drawing full benefits for total unemployment.
A few of the State laws do not yet include any provision for defining or compensating partial unemployment. They will doubtless give further consideration to this matter in the near future, since an unemployment-compensation law is hardly adequate unless it provides for some lower limit, beneath which the worker's wage income will be supplemented by benefit payments.
Duration of Benefits
Benefits are payable to eligible employees as a matter of right, based on (and in proportion to) their past work in employments covered by the State law. The "ratio” provision most commonly used in existing laws is that 1 week of benefits may be paid for each 4 weeks of employment occurring within the past 2 years.
. Despite the desirable limiting effect on benefit rights of such ratio provisions, nearly all American laws have found it necessary to place a further maximum limit on the benefits an employee may draw within any period of 52 consecutive weeks. The most commonly used maximum duration is 15 or 16 weeks within any year.
A number of State laws provide, however, that additional benefits may be paid to workers who become unemployed after working steadily for some years. Such additional benefits are typically based on such employment, say, during the past 5 years, as has not already been charged off by previous benefit payments. A ratio of 1 to 20 is used in several State laws, to limit the additional benefits thus payable.
The Public Employment Service and Unemployment Compensation That unemployment-compensation laws cannot be successfully administered without an adequate system of public employment offices has already been stressed earlier in this report. Certain further comments may be relevant at this time.
Under the Federal Wagner-Peyser Act of 1933, the United States Employment Service (which is a division of the Department of Labor) is able to provide Federal aid-on a basis of matching State money dollar for dollar-for those State employment services which affiliate with the Federal service and meet certain Federal requirements.
As of September 11, 1936, there were 36 States affiliated with the United States Employment Service under the Wagner-Peyser Act. In addition, Alabama was in process of affiliation. Arkansas, Georgia, Kentucky, Utah, and Washington had accepted the Wagner-Peyser Act but had taken no further action. Six States had not yet accepted the Federal act, namely, Delaware, Kansas, Maine, Michigan, Mississippi, and Montana.
It seems clearly desirable to maintain the present Wagner-Peyser set-up, under which the United States Employment Service assists and correlates the various State employment services. The 50 percent Federal aid available under the present set-up has helped firmly to establish a merit basis for personnel throughout the public employment service. State matching of such Federal aid should continue, at least to the present extent, because it assures local interest in good administration, and because it reflects the fact that State employment offices serve the entire community as well as participating in the administration of State unemployment-compensation laws. We therefore favor continuance of the present Wagner-Peyser set-up, but urge close cooperation between the United States Employment Service and the Social Security Board.
Title III of the Social Security Act makes available through the Board additional money to finance the expansion of State employment services, insofar as such expansion is necessary in connection with State unemployment-compensation laws. In making grants under title III for the expansion of State employment services, we believe that the Board might well adopt as a sound and practical principle the requirement that States shall have fully matched the Federal funds available under the Wagner-Peyser Act as a condition for receiving additional Federal aid for their employment offices under title III of the Social Security Act.
The existence of national reemployment offices in every State should provide a helpful basis for building a system of State offices adequate to meet the problems of unemployment compensation. It would seem desirable, however, to begin the expansion of State employment services a full year prior to the commencement of unemploymentbenefit payments.
Since the employment service must be closely correlated in every State with the administration of unemployment compensation, it is important that the administrative set-up in every State be worked out accordingly. A single State agency might well be in charge of both the employment service and the administration of unemployment compensation. Care should be taken, however, so that the employment service will not be completely swamped with unemployment-benefit problems, but will rather continue to fulfill its primary function of finding suitable jobs for unemployed workers.
It is doubtful whether there is any single type of State administrative organization which is suitable to conditions in all the several States. Some States have set up their unemployment-compensation administration within the State labor department. Others have created a new unemployment-compensation commission. In some cases the new commission serves full time, while in other cases the members serve on a per diem basis, with day to day administration entrusted to a full-time director. Varying answers have also been given to date to the problem of correlating the State's employment service with its unemployment-compensation administration. Most of the States have not yet faced the problem of a State appeal board, to pass on disputed unemployment-benefit cases prior to their possible appeal to the courts.
The administrative problems involved in unemployment-compensation laws are in many respects more difficult than any yet faced in the field of American labor legislation. Although it is clear that a single State agency should collect contributions as well as handling unemployment benefits, the collection of contributions is the lesser part of the total task. Each State should recognize that it needs outstanding administrators to put its unemployment-compensation program into operation to the satisfaction of all concerned.
This report has already stressed the importance of a nonpartisan merit basis for the selection of the entire administrative personnel, upon whom the efficiency and economy of State administration will depend.
As more fully set forth in the report of the civil-service committee of the I. A. G. L. O., there are encouraging signs of progress in the direction of civil service in many of our States.
Although we recognize that the adoption of a civil-service system by a given State does not immediately mean its 100 percent application or operation, nevertheless we believe that a start along these lines should be made in every State as early as possible, especially in connection with the administration of unemployment-compensation laws.
The long-run effectiveness of a civil-service system will depend in every State on the degree to which citizens generally are aware of its importance. In the field of labor legislation, more specifically, both employers and workers have a vital interest in good administration, and therefore in the merit principle.
Advisory Committees A number of the States have set up, in connection with their unemployment-compensation administrations, an advisory committee consisting of representatives chosen by organized employers and of representatives chosen by organized employees. The members of the advisory committee typically serve without pay, other than reimbursement for necessary expenses, and are of great value to the administrative agency in advising on major policies and in securing public understanding of the law.
The advisory-committee device has worked especially well during the past 4 years in Wisconsin, and also more recently in New York and other States. An advisory committee which represents the leading employer and labor organizations of the State can be of special value in securing the passage of clarifying legislative amendments worked out by the advisory committee itself as acceptable to both employers and labor. More generally, an advisory committee may help to bring about in the community that informed consent to unemployment compensation which is essential to the effective operation of any law in a democracy.
There has not yet been any final decision on the constitutionality of the unemployment-compensation provisions (titles III and IX) of the Federal Social Security Act, or on the constitutionality of State unemployment-compensation laws.
A test of the Federal tax provisions is now pending in New Jersey, but can hardly result in a final decision until the spring of 1937. It is to be hoped that a favorable outcome will make possible continuing Federal encouragement of State laws in this field.
New York deserves credit for the most important court decision handed down to date on the constitutionality of State unemploymentcompensation laws. The New York Court of Appeals, which is the highest court of that State, upheld the New York unemploymentcompensation law in a sweeping five to two decision delivered in April 1936. This decision has been appealed to the United States Supreme Court, and is scheduled for argument in October. It is to be hoped that a favorable decision in this important New York case will clear the way for sustaining the unemployment-compensation laws of all other States, in some of which court tests have recently been started.
Conclusion Substantial progress in the enactment of State unemploymentcompensation laws has been made during the last few years, thanks in large measure to the encouragement afforded by the Federal Social Security Act. Additional State laws will doubtless be enacted during the coming months. There is reasonable prospect that the coverage of State laws will become Nation-wide during the coming year.
The present American program for unemployment compensation is a cooperative Federal-State program, in which the initiative and the primary responsibility rests with the States. Despite the various important problems of Federal-State relationships which need to be worked out on a cooperative basis, the Social Security Board has been able to offer valuable assistance and guidance to the States in developing their unemployment-compensation systems. The periodic interstate conferences attended by Social Security Board staff members and by State representatives offer real promise of working out solutions of the many important problems of administration which are still ahead.
Unemployment compensation is now recognized in every part of this country as a vital phase of any long-run program for increased economic security. In view of its wide popular support, we believe that unemployment compensation has already become an American institution, and has come to stay.