The Unemployment Program – From the Great Depression to the Great Recession
Part 4 – Federal Supplemental Compensation Program
The Unemployment Insurance (UI) Program, created by the Social Security Act of 1935, continues to serve as the first line of defense against the effects of unemployment on the economy. During the Federal Fiscal Year of 1982, the UI Program paid more than $21 billion dollars in unemployment compensation benefits to approximately 11.4 million unemployed workers. This included regular UI payments, UCX payments (military service members), UCFE payments (federal employees) and TRA payments (trade readjustment allowances). During this same time period, 4.8 million employers paid $12.9 billion in state unemployment taxes.
I can’t help myself; I have to jump ahead in time to show a comparison: The Congressional Budget Office (CBO) recently reported that UI benefit payments of $43 billion were made in 2008 and grew to approximately $119 billion in 2009. The CBO projection for 2010 is that benefit payments will reach $133 billion. Furthermore, it projected that employer unemployment taxes would increase from $38 billion in FY 2009 to $75 billion by 2013 and would range between $78-$84 billion through 2020. This is a very large burden for employers to bear, over a very long period of time, and could even be compounded by future recessions.
Back on task, unemployment benefits were originally paid to unemployed workers for a maximum of 13 to 16 weeks. By 1982, the maximum number of weeks an individual could draw UI benefits had increased to 26 weeks. A few states may have even extended the number of weeks an individual could be paid regular benefits a little longer than 26 weeks. During that same timeframe, in periods of very high unemployment, individual states could trigger on an extended benefit period. These extended benefits of 13 additional weeks were paid for through a 50/50 split of the costs between the state and Federal Governments. Throughout time, recessionary economic periods have occurred that dramatically change the way UI benefits were paid.
During one of these periods of economic downturn, when all states are impacted by high and prolonged unemployment, Federal programs have been adopted by Congress and funded by the Federal Government. These Federal Supplemental Compensation (FSC) Programs, as they were known, occurred twice during the 1970’s and again in September of 1982. The FSC programs went into effect after all regular and extended benefits were exhausted by a claimant for benefits. This effectively extended the first line of defense against economic disaster for unemployed workers when the normal UI Program was not sufficient. We will discuss these periods of economic downturn further in later blogs as we move out of the 70’s and 80’s and into the 90’s through current times and the Great Recession. There have been 13 or 14 recessions over time.
As everyone certainly knows, employers fund the entire Federal/State UI Program through State and Federal payroll taxes. Part 5 of this blog will discuss the FUTA tax offset credit and what requirements a state must meet for employers to be able to claim the credit in their state.