Unemployment Insurance: A 79-Year Old Promise to American Workers That Needs Renewing

“What was the New Deal?...It was, I think, basically an attitude…that found voice in expressions like 'the people are what matter to government,' and 'a government should aim to give all the people under its jurisdiction the best possible life.'” —Frances Perkins, Labor Secretary and architect of the Social Security Act of 1935

The Unemployment Insurance (UI) program was signed into law by President Franklin D. Roosevelt on Aug. 14, 1935, in the midst of the economy’s most severe contraction. At its lowest point, a quarter of the workforce was jobless, and in some areas, two-thirds of the unemployed had not worked for a year or more.  

Beginning in 1929, the Great Depression ambushed the American people. In the weeks before the stock market crash, 429,000 Americans were unemployed. Three months after the crash, 4 million were out of work; by the following year, 8 million were jobless. Those lucky enough to keep their jobs saw their wages shrink by 60 percent.

Families were torn apart by poverty and stress: divorce rates soared, marriage rates plummeted, and many men and boys left their homes to look for work.

Joblessness also destroyed public health. Malnutrition among school children was reported. Cases of tuberculosis doubled, and the U.S. Public Health Service reported that families of the unemployed suffered 66 percent more illnesses than families that had work. Two years into the Depression, hospitals in New York City reported 100 cases of starvation. Suicides rose by 40 percent.

The Creation of a National Social Insurance Program: A Long Time Coming

The Crash of 1929 was not the first severe economic downturn, nor was it the first time citizens demanded their government provide relief. Economic panics broke out in 1837 and 1857, and severe depressions occurred in 1873 and 1884; all led to large public protests in the nation’s urban areas, protests that were often broken up by the police.

Before the New Deal, there was no national social safety net for the unemployed.


Before the New Deal, there was no national social safety net in America or a national system of relief. The poor relied on churches and private charities for help and on a county-based system of poorhouses or poor farms, where the destitute worked for food. In some places, the poor were put up for bid, the authorities accepting the lowest bid from whoever promised to provide care for the elderly, indigents, and orphans. But these small-scale “solutions” were inappropriate for a growing urban population.

By the second half of the 19th century, the economy was rapidly industrializing, and migration from farm to city changed the conditions of work, the risks faced by workers, and the public discourse around employment. Political leaders and social reformers began to talk about the need for public programs to help those who lost their jobs in the “busts” that regularly followed boom times.

The earliest unemployment insurance programs were established by trade associations; association members paid into a private fund that would help support them when they were out of work. But it was not until the first decades of the 20th century that reformers envisioned an insurance against unemployment program that would involve the government. 

In the wake of a severe recession in 1920-22, Connecticut, Minnesota, Pennsylvania, and Wisconsin introduced bills to require an employer to create a reserve fund from which to pay the workers that the individual employer laid off or fired. Massachusetts and New York introduced bills for a general unemployment fund paid for by workers, employers, and the state.  None of these bills passed. 

After the crash of 1929, when the number of unemployed reached numbers never seen before, mayors in several cities tried to create work programs for the unemployed but didn’t have the revenue to pay them. City governments were having a hard time paying their employees, teachers, and policemen and took on debt to do so. But as the urban unemployed became increasingly desperate and evictions and hunger grew, social protests and organized resistance to evictions spread. Thousands protested in Cleveland, Philadelphia, Chicago, Los Angeles, and New York demanding public action.

In 1931, two years into the Depression, 52 bills were introduced in state legislatures proposing some kind of assistance to the unemployed. Wisconsin was the first state to pass a mandatory unemployment assistance program, to be paid for by employers, in 1932.

Unfortunately, three years of depression meant individual employers, state governments, and city governments did not have the funds to deal with the growing number and anger of the unemployed. By 1933, almost 1,000 cities had defaulted on their debt, and both state and city governments were begging for federal assistance. National action was clearly needed.

The Federal Government Steps In

Relief came in the form of the Federal Emergency Relief Act, shepherded through Congress by a Republican senator from Wisconsin and two Democratic senators from Colorado and New York. The bill, signed in May 1932, provided $500 million in immediate grants to 45 states to cover their relief efforts. By the time the program ended four years later, the federal government had spent $3 billion on relief for 20 million unemployed Americans. Payments were very modest, just $15.15 per month per family in May 1933, when the average monthly salary was about $110. This was a critical emergency measure, but the nation needed an ongoing program to deal with continuing mass unemployment.

The New Deal’s Unemployment Insurance Program:  A Shared Responsibility between States and the Federal Government

“Of course, unemployment insurance alone will not make unnecessary all relief for all people out of a major economic depression, but it is my confident belief that such funds will, by maintaining the purchasing power of those temporarily out of work, act as a stabilizing device in our economic structure and as a method of retarding the rapid downward spiral curve and the onset of severe economic crises.” —Franklin Roosevelt on signing the Social Security Act

When the Social Security Act establishing Unemployment Insurance was signed into law, 12 million Americans were unemployed and an estimated 6 million had been out of work for more than a year.  The program was a compromise that left many important design decisions to state legislators.

Under the law, employers with more than eight employees paid a percentage of their total payroll into the federal Unemployment Trust Fund.  A small portion of the money is set aside to pay for administrative costs (staff and costs involved in processing claims). The state draws down the funds that its employers have deposited to pay out unemployment benefits. States can also borrow from the federal government if their funds run out.

When the Social Security Act establishing Unemployment Insurance was signed into law, 12 million Americans were unemployed and an estimated six million had been out of work for more than a year.


While an important step forward, initially benefits were only available for 13 weeks (later extended to 26). And important classes of workers were excluded from the bill to satisfy Southern legislators – agricultural and domestic workers, disproportionately black, and federal workers could not participate.  Benefits were only available to workers who had established a steady work history at a certain wage. In practice, this meant the program mainly served male industrial and commercial workers in the 1930s. In 1939, amendments were made to deliberately exclude more categories of workers: food packagers, nonprofit employees, and students. But since that time, federal reforms of the law have generally expanded the scope of workers eligible for unemployment benefits.

Under the Unemployment Insurance system, states set “work history” requirements that determine eligibility and the benefits levels that unemployed people receive; as a result, access to benefits and benefit amounts vary dramatically across the country. Even today, the percentage of unemployed who actually receive benefits in a state varies from 10 percent to 60 percent, according to the National Employment Law Project. The maximum weekly benefit a worker can receive varies from $235 a week in Mississippi to $674 a week in Massachusetts. Low-wage workers often fail to qualify because they don’t have consistent work histories at high enough wages.

In 1958, the federal government created an extended benefit program that provided an additional 13 weeks of unemployment benefits to individuals who had exhausted state benefits. Eventually, this program expanded to an additional 26 weeks of Emergency Unemployment Compensation, paid mostly by the federal government through special appropriations.

In the wake of the Great Recession, the Obama administration made $7 billion of the Recovery Act available to states to modernize their unemployment insurance programs, encouraging them to expand unemployment coverage to more low-wage workers, women, and part-time workers. This expansion provided critical help to many families as the number of unemployed was rising to almost 15 million in 2010. But the “recovery” from this deep recession has been slow to reach many communities and families around America, and spells of unemployment have been much longer than in other recessions, as the graph below from the Economic Policy Institute shows.  The federal government did enact and fund a federal extension of 26 weeks for those who exhausted their 26 weeks of state benefits in 2009.  But Republicans in Congress stopped funding for the program in December 2013.

Extending federal unemployment benefits to Americans in need has not been a partisan issue since the program was established almost 80 years ago. It shouldn’t be now.


Extending federal unemployment benefits to Americans in need has not been a partisan issue since the program was established almost 80 years ago. It shouldn’t be now. Federal extended benefits need an automatic trigger that doesn't expire – based on state rates of unemployment and long-term unemployment. Preventing individual economic hardship should not be optional.

As Franklin Roosevelt noted, unemployment insurance helps stabilize the economy – by providing cash to unemployed people to pay for food and goods in their local communities. In fact, the failure to renew the Emergency Unemployment Compensation (EUC) program could cost the nation 240,000 jobs by the end of 2014.

But the most important goal of our unemployment insurance program must be alleviating the devastating impacts of job loss on families and individuals. This is a central risk of living in a complex industrial society, and only government can organize an appropriate response. Almost 80 years ago, government promised to help people beaten down by market forces beyond their control to survive, with enough sustenance to get back on their feet and try again. It’s a promise we need to renew.

Katherine McFate contributed to this post.

back to Blog

euc! euc! euc!NOW!!! no euc! no peace!! we want euc!!! can't you see! we want a shopping spree!! and we want it for free!!! with no fee! then we will be full of glee! so me and lee can flee a bee and say gee, he almost stung me on my knee! and made me pee can't you see the wee on the tee? hee hee hee!!!!!
AMEN! Thank you Jessica, Katherine, and The Center For Effective Government for a great article for/about the unemployed!
Thanking you for keeping this issue in the spotlight!
You are the one who keeps coming back and showing us your poor exercises in self control. If you possessed a smidgen of self control, you wouldn't even be here spouting your toxic and inane bull crap.
America's social safety net is failing workers in the 'gig economy' Article from The Week, by SARAH JAFFE AUGUST 12, 2014 The advantages borne of technology and the necessity borne of recession have brought a number of changes to our economy, and there's been no shortage of attempts to apply a name to the results. It's been called the sharing economy, the gig economy, the instant gratification economy — but whatever handle you apply, what we're talking about is a system that (often digitally) connects people who need cash to other people who need something, be it an apartment for the weekend, a ride to the store, their oven cleaned, or their groceries picked up. What gets lost in many of these attempts at cute nomenclature, however, is that this new and growing part of the economy is succeeding because, as Kevin Roose points out in New York, so many people are struggling. Those hustling to scrape together a living in the gig economy are hardly alone. The long-term unemployment crisis in the United States often seems to have slipped off the general public's radar. But while policymakers like Paul Ryan debut shiny new initiatives to end poverty by pushing the poor to make better plans and set goals (and punishing them if they don't), millions remain involuntarily out of work or only partially employed, and there continue to be more than two people looking for work for each job opening. As labor economist Heidi Shierholz pointed out in June, "Long-term unemployment is elevated in every age, gender, and racial and ethnic group, and it's elevated in every major occupation, in every major industry, and at all levels of educational attainment." Meanwhile, unemployment benefits not only haven't kept up, they've been cut back. The sequester forced cuts in federally supported benefits, Congress allowed the federal Emergency Unemployment Compensation Program to expire entirely in December 2013, and some states have taken it upon themselves to slice benefits still more under the mistaken assumption that if people can't put food on the table, they'll find ways to get themselves jobs. Instead, sociologist Peter Frase points out, when unemployment benefits run out and workers are no longer in a system that requires them to look for work, they may end up dropping out of the labor force entirely rather than finding a job. The Economic Policy Institute estimates that this July there were 5,860,000 of these "missing" workers and that the unemployment rate if they were included would be 9.6 percent. Let's not forget that in the U.S., unemployment benefits don't come close to replacing the wages lost when you lose a full-time job. In New York, where I live, the maximum you can take home each week is $405, while the average price of a one-bedroom apartment in my home borough of Brooklyn is over $2,500. That means that even with the maximum unemployment benefit, the average Brooklyn renter would be $880 short of the rent check at month's end, to say nothing of being able to eat or keep the power on. Brooklyn may be a bad example for the rest of the country, but New York is also one of the more generous states when it comes to unemployment — Arizona pays out $240 a week maximum, and the average one-bedroom apartment rent is over $1,000. High unemployment also helps keep wages low, and so more people are making ends meet by cobbling together a string of gigs, perhaps using the fancy new tools of the "sharing economy" to find temporary work on the web. According to the Freelancers Union (which admittedly has a horse in that particular race) one in three workers takes part in the freelance or gig economy to some degree. In 2006, the Government Accountability Office reported that about 42.6 million Americans were so-called "contingent" workers, or about 31 percent of the workforce. Since then, there's been no reliable government survey, but a report from Intuit suggests that 40 percent of the workforce will be freelance or gig workers by 2020. As Saket Soni, the executive director of the National Guestworker Alliance and the New Orleans Workers' Center for Racial Justice, tells me, "We're seeing the promise of long-term employment fade away. It's being replaced by long periods of unemployment that are interrupted by intermittent periods of work, whether that's going to Home Depot to be a day laborer in construction or logging in to TaskRabbit to become a day laborer on an electronic platform rather than a physical day-labor corner." Yet if you do any of that work while collecting unemployment, you're required to report it, and it gets taken out of your benefit check. How on earth do you pay the rent? There's been a lot of attention paid in the last few years to the "precariat," the growing group of workers whose existence is defined by their lack of economic security, their moving from job to job, freelance gig to freelance gig. For many of those workers, the idea of collecting unemployment benefits at all is a distant dream. Our unemployment system was constructed back in the 1930s on the premise of a stable, long-term position, not an economy full of "fractional employees," part-timers, and freelancers. This means that this crucial part of our social safety net is full of holes large enough for all types of workers to slip through. Low-wage workers often have to have two jobs to be able to afford rent or to feed the kids; if one of those jobs disappears, the bills don't get paid but because you're still working, no unemployment for you. Are you a driver for Uber and your rating goes down, so you lose your gig? No unemployment for you, you're an "independent contractor." As Soni says, the unemployment system is, for a growing number of workers, an anachronism. "Workers are experiencing periods of unemployment that are getting longer and longer, relying on intermittent employment, stringing jobs together to make a living. We need a completely overhauled social safety net." The Affordable Care Act was constructed in part to provide access to health insurance for people who don't get health insurance through their job, an acknowledgement that this and other benefits are less and less ubiquitous in today's economy. While a full universal single-payer healthcare system would do even more, the ACA has still done part of its job, and allowed some workers more freedom to choose to work less, or to retire early. Despite Republican claims to the contrary, this is a good thing if it frees up jobs for those who need and want them and allows people more power to choose how they will spend their time. It's time to begin reimagining other parts of the social safety net, building on the momentum created by movements for better access to health care, paid sick leave, and a higher minimum wage. "Fundamental to it would be this idea that as periods of unemployment get longer, the state really has to come in and support workers' transition from one job to another, so they are able to sustain a family during that transition," Soni says, "and make sure that transition involves periods of training to add value to a set of skills that workers have, so that the move workers make can be up a career ladder rather than constantly moving horizontally from one low-paid job to another." Soni calls attention to the system in Denmark, which replaces 90 percent of a worker's lost wages (up to 2000 euros a month) for a period of years, not weeks. Peter Frase at Jacobin explains it as "a system that protects workers rather than jobs, by providing a robust system of unemployment benefits and training programs to ease the burden of joblessness and the transition between jobs." In systems like this one, the cost of losing a job is much less devastating, and workers can take the time to find another job that they are well suited for. As Shierholz notes, this should be a crucial point of any unemployment system, which actually has benefits for the boss as well as the worker — if you're forced to take the first available position regardless of whether it's convenient for you or suited to your skills, you're likely to quit as soon as you find a better option. There has been growing interest in the idea of a universal basic income as a the solution to the problems of precarious work and an outdated social safety net. A basic income would allow people the freedom to leave a job they don't like and make getting fired less devastating; it would allow us to choose work to which we are suited and allow people to exit the workforce entirely if they want to, making room for more people to move into their jobs. Wages might have to rise if employers have to entice workers into their shops, but I see that only as a net positive. The important point is that, as Soni says, "It is possible through social policy to build the right social safety net under today's workers." At a moment where even conservatives like Ryan feel the need to address poverty and inequality, it's time to call for a safety net that actually supports us all.
republicans end up with 53 seats in the senate after elections, that will end the euc issue
Awesome article, TNT