Titles III and IX of the Social Security Act of 1935 dealt with unemployment insurance by giving the states the option to provide unemployment insurance to their residents funded through both federal and state unemployment taxes.
Unemployment insurance was enacted to provide a base of support for workers who lose their job due to no fault of their own. The idea was for pay-roll taxes enacted during times of high employment , which was based off of many people’s experiencing during the Great Depression.
Unemployment Insurance was enacted by:1
- Title IX of the Social Security Act levied a pay-roll tax of 1 percent in 1936, 2 percent in 1937, and 3 percent in 1938, on employers of eight or more persons exempting some employers who served certain services such as non-profits or agricultural businesses.
- The tax levied equally upon employers throughout the country was to ensure all states acted to as employers of the state were subjected to the law whether or not the state acted.
- If a State passes an unemployment compensation law that is approved by the Social Security Board, the employers of the State only have to pay 10 percent of the tax into the Federal Treasury, while the rest remains in the State fund for the payment of benefits to their states unemployed.
To be approved by the Social Security Board, the State unemployment compensation law had to include provisions that:1
- All benefits shall be paid through public employment offices or other agencies approved by the Social Security Board.
- No benefits shall be paid for unemployment occurring within 2 years after the first day with respect to which contributions are first required.
- Money withdrawn from the unemployment trust fund can only be used for the payment of benefits.
- Benefits shall not be denied to otherwise eligible individual who refused to work due to a union dispute or where the job had sub-par working conditions.
Currently, the average program in most states provides up to 26 weeks of benefits to unemployed workers, on average refunding 50% of their wages from when they were employed. The federal government only provides funding for administrative costs, with states providing the funding for worker benefits. There are minimal federal requirements so states are generally able to set their own eligibility criteria and benefit levels.2
For the full text of the bill, see here.
Endnotes
1. https://socialwelfare.library.vcu.edu/social-security/social-security-unemployment-insurance/
2. https://www.cbpp.org/research/introduction-to-unemployment-insurance