In the spirit of Enlightenment salons from centuries past, we present the latest installment of BwogSalon. Below, check out an excerpt from Evan Madeo’s article from the latest issue of Publius: The Undergraduate Journal of Politics at Columbia University. Madeo examines the history of unemployment benefits, finding that they were only intended to supplement the once-generous benefits that private corporations provided to their workers. He concludes that they are simply inadequate in an American economy that is permanently shedding industrial jobs and forcing corporations to cut pensions, wages, and health insurance. The government, he argues, needs to do more for the American worker. But don’t just take our word for it; read the introduction! You’ll make your fave French intellectual and your passionately political Papa proud.
Given the likelihood of continued jobless recoveries as the new post-recession trend, continuing the policy of federal dollars to state Unemployment Insurance (UI) programs will not efficaciously combat the consequences of job destruction in the American economy without packaging UI with other federal programs to ensure a path back toward job growth. The U.S. government should re-evaluate unemployment and jobs policies. While it is true that more workers are covered now more than ever, the purpose of UI, to combat layoffs both temporary and permanent, has been confused with the benefits aspect of the program, which do not offer meaningful protection to insured workers. Indeed, the meaning of layoffs has changed over time as we enter into a diversified global economy; layoffs tend to be permanent rather than seasonal. Further, benefits themselves vary state by state, decreasing the relevance of the aid to the unemployed. If an unemployed worker lives in a state with high levels of minorities or a state with higher than average per capita income, the said worker is likely to receive lower weekly benefits, for fewer weeks. In this paper, I argue that if we as a society value supporting those who have lost their jobs due to no fault of their own, we must do more beyond UI to provide a suitable transition as well as the availability of jobs, which itself is what most unemployed workers want. In this examination, I will first provide a brief background on the American welfare state. I will then examine the latitude provided to the states in providing Unemployment Insurance, the varying degrees of support for workers, and possible reasons for the divide in states’ policies. Finally, I will examine a jobless recovery, and demonstrate a need for a higher level of support for those who are unable to financially support themselves through prolonged periods of joblessness.
The welfare state in America was never intended to serve as the only source of social insurance in the industrial economy. While the U.S. is not alone in utilizing the private sector for social insurance, its dependency on the private sector to provide what many in other industrialized nations have come to regard as public responsibilities is unique in the sense that publicly provided benefits in the U.S. were not designed to be solely relied upon for security. Unionization provided workers with a living wage, job security, employer provided private health insurance, and a pension. In the U.S., publicly provided social insurance was meant to augment private benefits as well as fill in the gaps of coverage with Unemployment Insurance, Old Age Insurance, and Aid to Dependant Children. These programs were intended to cover all Americans (Skocpol 164), and in order to pass the Social Security Act, political concessions to the Southern Democrats had to be made. However, the vast majority of the working (white) industrial middle-class was covered by these basic public social insurance policies, insulating them from the volatilities of the capitalist system, which is prone to periods of expansion and contraction.
The New Deal occurred in a time of national and international crisis; the political capital afforded to lawmakers in America for change during such times is typically high. However, what occurred during the New Deal was not so much a departure from previous social welfare policies as much as it was a moment of continuity. The solidification of a social welfare policy rooted in and in deference to the Federalist and capitalist system reflected our unchanging core American values. It was also a reflection of the powerful forces arrayed at the time. A major impetus for UI in the SSA came from competition and the political pressure on President Roosevelt. There were two other plans for unemployment on the radar: the Lundeen Plan and the Long Plan. Both leaned far to the left. It was to FDR’s political benefit to pass a modest unemployment program to prevent the growing popularity in the other plans from gaining too much ground. A second force behind the outcome of UI was the intention of the Southern Congressional Democrats to maintain the racist policies and low-cost labor the agricultural economy depended upon. Any measure that was to become legislation had to get through the iron held by the vested interest of Southern Committee Chairs to only allow legislation that did not interfere with Southern social policy. Thus, UI benefits were limited to certain professions, excluding agricultural and domestic workers. Further, UI benefits were tied to work; the unemployed could only receive relief if they were laid off, due to no fault of their own.
Unemployment Insurance was originally designed to cover working class individuals for temporary terms of unemployment. The UI portion of the Social Security Act legislation assured that coverage for unemployment would not be universal. Based on a model from Wisconsin, UI was essentially a federal mandate to prevent employers from laying off their employees through the use of a punitive tax system for businesses. The emphasis was not on the livability of the replacement wages from UI, rather, it was on preventing layoffs. The fundamental aspects of the UI system have not changed since its inception. It is a state run program, allotting a limited amount of funds to laid-off workers for a limited amount of time.
What is argued here is that this is inadequate in today’s economy. Two fundamental changes have taken place in the economy of the U.S. since the passage of the Social Security Act. The first change is clear – the service sector share of the GDP has increased over time, at the cost of manufacturing jobs. Second, while there is a certain amount of disagreement among economists, available data does indicate that the U.S. is continuing on a trend of “jobless recoveries” from recessions. The implications of these changes are of considerable consequence. In short, if a job loss is not temporary, meaning that the firm is not planning to rehire the same workers it laid off, UI does little more than place a light bandage on a deep gushing wound; the replacement of a portion of wages is a necessary, yet provisional measure. If jobless recoveries are to become the status quo, the value of UI has virtually eroded and serves merely to delay the inevitable complete loss of income for a significant portion of the population, even while the economy grows and evidently becomes more productive, with fewer employees. Given the likelihood of continued jobless recoveries as the new post-recession trend, continuing the policy of federal dollars to state Unemployment Insurance programs will not efficaciously combat the consequences of job destruction in the American economy without packaging UI with other federal programs to ensure a path back toward job growth. The U.S. government should re-evaluate unemployment and jobs policies. If we as a society value supporting those who have lost their jobs due to no fault of their own, we must do more beyond UI to provide a suitable transition as well as the availability of jobs, which itself is what most unemployed workers want.
In this paper, I will begin with an analysis of how the real benefits of UI have changed over time. I will show that while more workers are covered under UI now than ever before, the policies of incentives and disincentives designed to prevent layoffs are not effective policy tools. I will then provide detailed information on how benefits can vary by state, and what key state data might help to explain such variances. I will follow this with current and historical economic indicators, in an effort to better define what a jobless recovery is, and what the implications of a jobless recovery from a recession will mean in the future. Finally, I will give a brief historical account of Presidential attempts to provide jobs to the unemployed from Lyndon B. Johnson to the present.