pensated because it is not "attributable to the employer." Other members of the Council feel that the decision whether unemployment resulting from such causes should be compensated should be left entirely to the States. RECOMMENDATION ON PLANS SUPPLEMENTARY TO UNEMPLOYMENT INSURANCE 16. Study of Supplementary Plans The Congress should direct the Federal Security Agency to study in detail the comparative merits in times of severe unemployment of (a) unemployment assistance, (b) extended unemploymentinsurance benefits, (c) work relief, (d) other income-maintenance devices for the unemployed, including public works. This study should be conducted in consultation with the Social Security Administration's Advisory Council on Employment Security, the Council of Economic Advisers, and the State employment security agencies, and should make specific proposals for Federal measures to provide economic security for workers who do not have private or public employment during a depression and who are not adequately protected by unemployment insurance The Council recognizes that the burden of unemployment in a severe depression cannot be met in any one way. Neither unemploy ment insurance nor any other single method will be sufficient to do the whole job. A complete system of social security would provide for various types of plans to supplement unemployment insurance in times of large-scale unemployment. The Council intended to make recommendations concerning the merits and shortcomings of the various possible plans and, in submitting recommendations on public assistance, said: "In its report to be submitted on unemployment insurance, the Council plans to consider the problem of the responsibility of the Federal Government for the income maintenance of workers in time of business depres sion." 22 We regret that we have been unable to make the thorough study of alternative lines of action on which to base a policy decision in this area. We believe, however, that it is important that the Federal Security Agency study alternative methods of providing income security for workers who do not have private or public employment during a depression and who are not adequately protected by unemployment insurance and that preliminary plans be completed for putting the best methods into effect. We therefore recommend that the Congress direct the Federal Security Agency to make such a study in consultation with its Advisory Council on Employment Security, the Council of Economic Advisers, and the State employment security agencies. The State-Federal system of unemployment insurance should pay benefits of sufficient duration to permit most covered workers in normal times to find suitable employment before their benefit rights are exhausted. Furthermore, the Council has recommended that the State-Federal public assistance program be strengthened to meet more adequately the needs of unemployed workers ineligible for in 22 See p. 103. surance benefits or with inadequate insurance rights.23 These dual provisions for the unemployed through the State-Federal programs would suffice, the Council believes, unless the country is again plunged into a period of severe and prolonged economic distress. In that event, additional Federal action would clearly be needed for the relief of the unemployed. A depression has an uneven impact upon different cities and regions and many States and localities are not capable of meeting the great increase in expenditures called for by mass unemployment. In such a period only the Federal Government has sufficient credit and sufficiently broad eventual tax resources to meet the full need. The Council does not anticipate a return to the economic stagnation of the 1930's, but believes that it is prudent to prepare for a heavy volume of unemployment even while steps are being taken to prevent its recurrence. The Council cites without specific recommendation various types of possible Federal action. We wish to emphasize that whatever methods are used the integrity of the insurance system should be maintained and separate financing should be provided for the supplementary plans. (a) Unemployment assistance.-A special program of unemployment assistance might be used for persons who do not come under the unemployment insurance program either because of its failure to cover all types of work or because many members of the covered labor force are unable to meet the eligibility requirements in times of depression. Depressions greatly increase the number of persons who seek work for the first time to supplement the family income, and the number of formerly self-employed persons looking for jobs also rises. Moreover, as the depression deepens, the number of wage earners who lack recent earnings in covered employment increases, hence the insurance system bears a smaller and smaller proportion of the load of unemployment. A State-Federal unemployment assistance plan might be established with the same scale of Federal contributions as those recommended in the Council's report on public assistance for old-age assistance, aid to the blind, and aid to dependent children (three-fourths of the first $20 plus one-half up to $50 for the first two in a family plus $15 for each additional person). If the depression were prolonged, some States might be unable to meet their share of unemployment assistance payments without additional Federal help. The Federal Government, as in the 1930's, might take over almost all costs, or it might lend the States their share. (b) Extended unemployment benefits. Another possibility would be to permit extension of unemployment benefits at the same rate and to the same persons for an additional 13 or 26 weeks. If extended benefits are granted, the beneficiary might be required to take a training course or move to an area offering better employment opportunities. A needs test, however, would not be applied. A separate plan for financing extended benefits should be provided either on a joint State-Federal basis or by the Federal Government alone. Otherwise, extended unemployment benefits would undermine the unemployment insurance system. (c) Work-relief program. In the 1930's Congress spent billions of dollars on a series of work-relief projects. Debates over the advan"Recommendation 2 in pt. III, p. 108, provides for Federal grants for "general assist ance.' tages and disadvantages of work versus cash relief are still raging long after the demise of NYA, CCC, and WPA. Advocates of work relief may admit the folly of some projects, but they point to thousands of successful ones which have added significant value to the American economy. They also argue that many relief workers received training on the job and that work habits were maintained better than if cash relief had been the only method used. The advocates of cash relief cite its great simplicity and economy, and argue that most of the best work-relief projects competed with private industry or regular Government work and that work relief in many cases fostered bad work habits rather than maintained good ones. (d) Other income-maintenance devices for the unemployed, including public works.-Quite apart from unemployment insurance, unemployment assistance, extended unemployment insurance, and work relief, the Federal Government might, in times of serious depression, increase its spending on essential public works. Such action would stimulate employment primarily in the construction industries, secondarily in industries supplying the construction industry, and indirectly in the industries whose products are consumed by workers employed on the projects and in the supplying industries. On the basis of past experience, however, it is clear that public works alone are insufficient for a large number of the needy unemployed. Although in other recessions large numbers of construction workers have been unemployed, the secondary and subsequent effects of increased public works were not enough to give employment to many other groups who needed jobs. Although the Council recognizes the advantages of planning public works in good times and expanding them in periods of slack employment, it considers public works as an incomplete solution of the problem of widespread depression unemployment among persons ineligible for unemployment insurance benefits. Various combinations of the methods discussed above might be used. Other plans have also been suggested such as self-help groups, sharethe-work plans, and guaranteed employment. Throughout the country, both in business and labor groups, there is a widespread conviction that serious cyclical recessions can and should be minimized. Many general proposals have been made to promote full employment, and Congress has established a Council of Economic Advisers to deal specifically with this problem. If these attempts are successful, supplementary plans will not be needed, but as a safeguard against hasty and ill-conceived schemes, it will be well to have a sound plan ready if, despite all efforts, the country is again faced with the problem of large-scale unemployment. 24 TEMPORARY DISABILITY INSURANCE The Council in its second report to the Senate Committee on Finance presented recommendations for a program that would afford protection to workers against the loss of wages due to permanent and total disability. Under these recommendations, benefits would be provided only to workers who have been disabled for a period of at least 6 months when it appears likely that the disablements will be of long-continued and indefinite duration. Because time was lacking for a comprehensive study of the various methods that have been proposed to afford protection to workers who are unemployed because of temporary disability, the Council refrains from making any recommendations covering this area. The Council, however, recognizes that the loss of income from temporary disability is a major economic hazard to which all wage earners are exposed. In lieu of recommendations, a summary statement on the need for providing protection against wage loss due to temporary disability, the scope of existing programs, and some of the methods that have been suggested by various groups to afford workers such protection is presented below. On the average day, illness prevents about 2 to 21⁄2 million persons recently in the labor force from working or seeking work. In a year wages amounting to 5 to 6 billion dollars are lost because of disabilities lasting up to 6 months. The economic hardship caused by disability may be an even more serious hazard to workers than is wage loss, because illness entails medical expenses as well as the loss of income. Unlike the situation in other major industrialized countries, however, compulsory protection against wage loss due to temporary incapacity in this country is largely confined to work-connected accidents and diseases in industry and commerce which are covered by workmen's compensation programs. Only three States (Rhode Island, California, and New Jersey) have provided for the payment of benefits for temporary disability to workers covered by their unemploymentinsurance laws. In addition, the railroad unemployment-insurance law has been extended to provide cash sickness benefits to workers covered by that law. In recent years, voluntary health and welfare plans provided under collective-bargaining agreements have expanded materially. While such plans may provide excellent protection against the loss of income from temporary illness or other disablements for the groups economically powerful enough to obtain such protection, large groups of workers continue to remain unprotected under voluntary health and welfare plans. A study made in New York State indicated that only about 30 percent of the workers now covered by unemployment insurance have some protection against wage loss due to disability under group health and accident policies or formally established employer plans. For the country as a whole, an estimated 20,000,000 workers 24 See pp. 69-93. who are covered by State unemployment-compensation programs have no protection under formally established voluntary sickness-benefit plans. The extension of such protection to all employees in industry and commerce is unlikely because individual premium rates under commercial group insurance policies make coverage expensive for industries in which a relatively high incidence of disability may be expected. For instance, when women and nonwhite employees constitute 51 to 60 percent of the total number of eligible employees, rates for manual workers are 62.5 percent higher than the minimum-and increase proportionately to 112 percent higher when all eligible employees are women or nonwhite. Furthermore, group contracts are not suitable for small establishments; the smaller the number of employees, the greater the probabilities that the distribution by age and sex, as well as health of employees, will differ from the norms for establishments with a large number of employees. It is not uncommon for underwriters of group health and accident insurance to refuse to insure groups of less than 50 employees, while State insurance laws frequently prohibit issuance of group policies to groups of less than 25. Moreover, under any voluntary plan of affording protection to workers against the loss of wages, the employers who pay the lowest wages and whose employees consequently are in greatest need of protection would be the least likely to participate in such a plan. The New Jersey State Commission on Postwar Economic Welfare, after considering the need for temporary disability insurance and the possibilities for coverage under voluntary plans, came to the following conclusion: Popular opinion also overwhelmingly favors the extension of some form of social security legislation to protect against the hazards of illness. Particularly in the lower income levels, where the frequency of nonoccupational illness seems to be greatest, people suffer most severely from the economic effects of wage loss. Since it is an accepted public policy to protect the individual against wage loss caused by involuntary unemployment, it seems desirable to fill the gap in this protection by meeting the hazards of inability to work caused by sickness. The public interest in social and economic security and stability is as much served in the one case as in the other. While the progress made in supplying protection against wage loss caused by illness through voluntary programs adopted by employers has been great, the need for the extension of such protection is so great as to warrant the establishment of some form of uniform minimum standard coverage. Given sufficient time, the voluntary program might very well be extended greatly, but there would always remain a significant number of people for whom either no provision has been made or for whom inadequate provision has been made. The establishment of a minimum standard and its enforcement is essentially a function which must be performed by government, in whatever manner benefits may be provided. It remains to determine the best method by which such minimum benefits may be provided and financed.25 The four existing laws providing insurance against temporary disability-the Rhode Island, California, and New Jersey State laws, and the Federal law for railroad workers-are very closely allied with the respective unemployment insurance laws in both substantive provisions and administrative arrangements. The same groups of workers are covered, the same type of formula determines the benefits pay; able, the same measure of attachment to the labor force is used, and except in the New Jersey plan for disability during employment, the same "base periods" and "benefit years" are used for temporary dis 28 Fourth Report of New Jersey State Commission on Postwar Economic Welfare, pp. 9-10. |