Part 1 – The Beginning

Between the years of 1916 and 1931 many states played with the idea of creating an unemployment compensation program for their citizens. None were successful, however, until Wisconsin passed the first unemployment law in 1932. At the time, the United States was deeply mired in the Great Depression and other states remained very hesitant to pass unemployment laws for fear of placing their employers at a competitive disadvantage with states that had no such laws. As a result, advocates for an unemployment program turned to the Federal Government for help.

In 1934, the Federal Government created the Committee on Economic Security. This committee was charged with the responsibility of studying the problems associated with the economic security of individual citizens and to make recommendations for both long and short term solutions. After researching old age insurance systems and unemployment programs throughout the world, they were able to present Congress with an outline of both the "Old Age and Survivors Insurance Program," considered the long term fix, and the "Unemployment Insurance Program," the short term fix.

This began a great debate regarding how the unemployment program would be organized. Some wanted complete state control. Others preferred complete Federal control. With complete state control, the same problem of interstate competition existed between states. In addition, some states would be unable to adequately fund an agency to administer the program as well as development of budget problems that could cause a raid on the unemployment fund established for paying benefits. To nationalize the program was considered equally as unacceptable because it would be inflexible to local economies, conditions of employment, rates of tax and benefit payments. For these reasons, a Federal-State unemployment insurance (UI) partnership was considered the best option for administering an unemployment program across all states.

President Franklin D. Roosevelt agreed, and on August 14, 1935, he signed the Social Security Act into law. This Act created the two social programs that exist today: Social Security and Unemployment Compensation. President Roosevelt described the Social Security Act with the following quote:

"This law represents a cornerstone in a structure which is being built but is by no means complete – a structure intended to lessen the force of possible future depressions, to act as a protection to future administrations of the government against the necessity of going deeply into debt to furnish relief to the needy – a law to flatten out the peaks and valleys of deflation and of inflation – in other words, a law that will take care of human needs and at the same time provide for the United States an economic structure of vastly greater soundness."

His words were proven true for 75 years, but change may now be needed.

Rett Hensley
TALX Strategic Consultant