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A brief history of unemployment insurance

Jeremy Sprinkle
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Essay by Nancy MacLean of Duke University

Recently, the Raleigh News & Observer published an excellent essay on unemployment benefits written by Arts and Sciences History Professor, Nancy MacLean, of Duke University.

In her essay, Nancy says the existence of unemployment insurance is rooted in the aftermath of the Civil War and the devastating boom-and-bust cycles of capitalism during the Gilded Age and leading up to the Great Depression. U.I.'s importance as a way to sustain businesses and workers during economic downturns is a lesson learned repeatedly during economic downturns since then.

MACLEAN: "Our forebears discovered that unemployment insurance holds up consumer demand, hence businesses, in a faltering economy. The system is particularly vital to sustaining the small businesses that serve consumers and are pivotal to the larger economy’s health.

It’s worked for almost 80 years. In the current recession, Census Bureau data reveal that unemployment benefits kept 3.3 million Americans out of poverty in 2009—and countless small businesses afloat. With economic recovery underway but still precarious, now is not the time to ignore the hard-earned wisdom of history.

If the North Carolina Chamber of Commerce has its way, as our out-of-control state legislature would have it, we are doomed to repeat history:

Yet lately some business groups and conservative elected officials have proposed changes in our system of unemployment compensation that would undercut its effectiveness. The N.C. Chamber of Commerce, for example, has called for cutting maximum weekly payments by one-quarter and the duration of benefits by more than one-fifth, while failing to ensure the future solvency of the system with adequate employer tax levels. A few legislators are even seeking an end to the federal-state system we’ve had since the 1930s: they would shift responsibility to those least able to bear it, the unemployed themselves.

To know why these ideas are bad and would produce unnecessary harm, it helps to know where the current system came from. Most directly, it came from the Social Security Act of 1935, which provided for unemployment insurance along with old age pensions and other measures to stabilize the economy and improve the well-being of citizens.  But behind passage of the SSA were three generations of learning.

It took decades and much suffering before the modern unemployment insurance system was adopted as part of the Social Security Act of 1935, along with other important reforms to keep Wall Street greed in check. Since then, corporate groups like the Chamber of Commerce and conservative ideologues have worked to undo the progress that was made 80 years ago. Nancy asks readers if we should now be listening to their advice on how to "fix" what's not broken:

We’re in the fix we are now, many leading scholars agree, because of the loss of other smart New Deal era policies that corporate lobbyists persuaded Washington to drop: namely, regulations such as Glass-Steagall that held risky behavior on Wall Street in check.  Do we really want to listen, again, to corporate lobbyists who seek to shift reasonable burdens from themselves onto citizens at large, particularly those already struggling to regain their footing in a slippery economy?

Click here to read Nancy MacLean's excellent essay, "Unemployment compensation: A win-win for business and families", then share it within your networks. Let's protect  and strengthen North Carolina's vital unemployment insurance system and take history off of "repeat".