Unemployment Insurance Celebrates 70 Years of Assistance

Created by the law that created the Social Security system, Unemployment Insurance is celebrating an anniversary. The Social Security Act of 1935 set up the federal-state partnership for the unemployment insurance (UI) program and Michigan was the first state to adopt their own UI law.

“Citizens really need this program. There are thousands and thousands of workers all across the nation that depend on this program,” said Ron Macksoud, a public information specialist of the Alabama Department of Industrial Relations speaking with the Auburn Plainsman. “You never know when you are going to be in the ranks of the unemployed,” he added.

A combination of federal and state statutes governs the UI program. The U.S. Department of Labor provides administrative funding for the program which is directly financed by our federal unemployment taxes (FUTA). The state UI programs provide unemployment benefits to those workers eligible to receive benefits which are funded by state unemployment taxes (SUTA) paid by employers.

“The intent, then as today, was to provide a temporary income for unemployed workers while they sought new employment. Unemployment benefits are “high velocity dollars” and are quickly cycled back into the economy as families use the money to purchase life’s necessities – food, clothing and shelter. In fact, unemployment benefits have a multiplier effect, generating about an estimated two and a half times as many dollars in the economy,” said David Plawecki, a deputy director in the Michigan Department of Labor & Economic Growth.

It initially took two years for the fund to build to a level to allow disbursements. 1938 was the first year of eligibility and paid out $8.1 million in total benefits. The average weekly check at the time was $7.75.

“The cost of living has changed, making the difference of payment of payment continue to evolve over the past 70 years. In 2004, total benefits paid exceeded $246 million, and the average weekly unemployment check was $176.64,” said Debbie Hebert, an employee of the Alabama Department of Industrial Relations speaking with the Auburn Plainsman.

In the wake of Hurricane Katrina, U.S. Secretary of Labor Elaine L. Chao has announced the release of $30.8 million in grants to expand the four hurricane affected states to enlarge their capacity to process claims and distribute UI payments faster to claimants.

“Recovery starts with getting some form of replacement income into workers’ pockets. This nearly $31 million in grants will help Alabama, Mississippi, Louisiana, and Texas expedite unemployment insurance payments for those left unemployed as a result of Hurricane Katrina,” said Secretary Chao.

The grants are being issued to help the hurricane-damaged states cover the cost of facilities and temporary staff, call centers to handle claims, and even mobile field centers. These grants will also help support new telephone and Internet options and expanded information technology capacity to manage the increased number of claims that are expected.

The Alabama Department of Industrial Relations will receive $1.5 million of the Department of Labor grants while the Mississippi Department of Employment Security will receive $15.7 million. The Louisiana Department of Labor (DOL) will receive $11 million and The Texas Workforce Commission will receive a $2.6 million grant to assist the Louisiana DOL in processing the claims of relocated Louisiana workers.

Ron Macksoud speaking with the Auburn Plainsman said, “It is tough to tell how things will change for the program due to this hurricane because it’s early on. We don’t have any numbers yet, it may be another week or so (before we know).”

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