The Reluctant Social Insurance: Federalism and Unemployment Insurance, 1935-2024

• In Event: Administrative Burdens and Effectiveness of the Social Safety Net

Abstract

Unemployment insurance is a particularly telling program for our understanding of social policy and federalism.  As in other forms of social insurance, eligibility is “earned” through employment and benefits are calibrated to the recipient’s wage record.  Unemployed workers have a vested right to benefits irrespective of need.  Yet, unlike other forms of social insurance, workers do not make direct contributions, the receipt of benefits is conditional and temporary, recipients must satisfy “nonmonetary” criteria concerning both the circumstances of job loss and availability for re-employment, and both benefits and the terms of receipt are left largely to state discretion. The result is an unemployment insurance system effectively suspended between the national, inclusionary, and egalitarian logic of social insurance, and the parochial, discretionary, and inequitable logic of “welfare.”  

This paper creates novel measures of the generosity (the adequacy of benefits) and inclusion (the share of those in need receiving assistance) of unemployment insurance from the origin of the program in 1935 through 2024. Using these measures, we first document patterns of cross-state and regional variation in generosity and inclusion, and changes over time in this variation. For the post 1994-era we use the State Safety Net Policy (SSNP) data set (a unique data set assembled from state and federal administrative records and original population estimates. For the pre-1994 era, we collected average weekly benefits, average weekly covered wages, average duration of receipt, first payments, and compensation for all unemployment—available from the Department of Labor back to 1970, and on comparable data from the ”Employment Security” and “Current Operating Statistics” reports in the monthly Social Security Bulletin, or the latter’s Annual Statistical Supplement back to 1938.  To measure the inclusiveness, we create population denominators of total unemployment from the Current Population Survey (1976+) and the decennial census (pre-1976). 

In addition to the generosity and inclusion measures, we create measures of state discretion in the unemployment insurance program by drawing on administrative records, archival and contemporary program data, and the relevant provisions of state laws.  This allows us to capture key elements of policy choice and policy variation—including occupational coverage, monetary eligibility, nonmonetary eligibility, methods for computing benefits, and the statutory parameters for the duration of receipt. This qualitative research in archival and policy allows us to measure the causal policy mechanisms driving both changes over time and differences across states that are not reducible to differences in state economies or labor markets. 

Our preliminary findings suggest that while state variation in UI policies—including occupational coverage, monetary eligibility, nonmonetary eligibility, methods for computing benefits, and the statutory parameters for the duration of receipt—narrow over this long span, state variation in program inclusion and generosity remain stubborn or actually widen.  This curious disjuncture underscores the importance of discretionary administration (especially in the determination of nonmonetary eligibility) and administrative burdens in driving variation across states and regions.  .  And it underscores the underlying problem that state discretion can yield social policies that are fundamentally inconsistent with the needs and aspirations of citizens.

Authors

• Colin Huntly Gordon, University of Iowa
  Presenting Author

• Sarah Bruch, University of Delaware
  Non-Presenting Co-Author