Tag Archives: New Deal

Working at Reducing Unemployment

From 1948 until 2012, the average unemployment rate in the United States was 5.8% The highest unemployment rate was 10.8% in November 1982. The lowest unemployment rate was 2.5% in May 1952.

So how is the unemployment rate determined? The obvious simple answer, and the widely accepted answer, is that it is “the measure of the number of people actively looking for a job as a percentage of the labor force.” We need to keep that definition in mind, as it will appear later in this article.

Currently, for December of 2012, the unemployment rate in the US has been calculated at 7.8%. At the beginning of the year, the average unemployment rate in the US was 8.5%. As an aside, the state with the lowest unemployment rate in 2012 was North Dakota at 3.2%.  That is relatively easy to understand.  Small state – newfound oil.  But the two states in a tie for the highest unemployment rate in 2012 were….. Nevada (understandable) and………….Rhode Island! I have not a clue as to why Rhode Island has a high unemployment rate of 10.2%.  Who would have guessed?

In the United States, unemployment benefits are usually called unemployment compensation. Benefits are generally paid by state governments, funded in large part by the federal government to workers who have become unemployed through no fault of their own. This compensation is classified as a type of social welfare benefit. According to the IRS Code, these types of benefits are to be included in a taxpayer’s gross income.

The idea of unemployment insurance in the US began in Wisconsin in 1932. Through the Social Security Act of 1935, the federal government effectively encouraged the individual states to adopt unemployment plans. To facilitate the program, Congress passed the Federal Unemployment Tax Act (FUTA) which authorizes the IRS to collect an annual federal employer tax used to fund state workforce agencies.

Here is a thumbnail sketch of how the federal-state unemployment benefit works. The jobless generally receive up to 26 weeks of state benefits and then shift to federal emergency unemployment compensation, which is broken into four tiers and lasts up to 47 weeks. There is a separate federal extended benefits program, which provides up to 20 weeks, but only New Yorkers are eligible for it at this time. (Really?  How did New York vote in the last presidential election?)

The federal government has spent far more on unemployment insurance in recent years that it had in previous economic downturns because of the unprecendented response to the Great Recession (Not to be confused with the Great Depression). Federal benefits were extended to a record 99 weeks in November 2009. That safety net was extended multiple times until late 2012, when Congress extended the deadline to file, but shortened the duration for which the jobless can receive checks.

How much does all of this cost us? Over the last five years, state and federal unemployment insurance programs have cost roughly $520 billion, according to a Congressional Budget Office report released in late November of last year. That is over a half a trillion dollars!  When it comes to our government, trillions are “in” and billions are “passe.”  That money is spent over and above the monies collected from the working labor force through the collection of unemployment taxes.

This is not the first time this has happened. The “Greatest Generation” also lived through the “Great Depression.”  Common sense tells me that the federal goverment had better programs in the 1930s than it has today.

The Great Depression was a worldwide horrific event. A combination of unemployment, inflation, political instability and climatic conditions all converged at one time and lasted approximately 12 years in the US.  Oddly enough, World War II was primarily responsible for breaking the stranglehold of the Great Depression.  I am by no means advocating WW III to turn our current misfortunes around.

Here is what our government did in response to getting people working during the Great Depression:

Civilian Conservation Corps

The CCC was a public work relief program that operated from 1933 to 1943 in the US for unemployed, unmarried men from relief families. These men were ages 18-25. As a part of the New Deal initiated by President Franklin D. Roosevelt, it provided unskilled manual labor jobs related to the conservation and development of natural resources in rural lands owned by federal, state, and local governments. Maximum enrollment at any one time was 300,000.  In nine years, 2.5 million young men participated in the CCC, which provided them with shelter, clothing, and food, together with a small monthly wage of $30 a month, $25 of which had to be sent to their families. The principal benefits of an individual’s enrollment in the CCC included improved physical condition, heightened morale, and increased employability. During the program’s tenure, volunteers planted nearly 3 billion trees to help reforest America, constructed more than 800 parks nationwide, upgraded most state parks, updated forest firefighting methods, and built a network of service buildings and public roadways in remote areas.

Some of the notable alumnae of the CCC program were:

Hyman G. Rickover, 4-star Admiral, former Corps Area Commander
Raymond Burr, actor (noted mostly for Perry Mason)
Archie Moore, the Light Heavyweight Boxing Champion of the World
Robert Mitchum, actor
Chuck Yeager, test pilot (first human to break the sound barrier)
Walter Matthau, actor
Stan Musial, baseball player

Now aren’t you glad you read my blog?

Civil Works Administration

This program was also a part of the New Deal, and was created in November 1933 to rapidly create manual labor jobs for millions of unemployed workers. The jobs were merely temporary for the duration of the hard winter. The CWA created construction jobs, mainly improving or constructing buildings and bridges. It ended on March 31, 1934, after spending $200 million a month and giving jobs to 4 million people. The CWA’s workers laid 12 million feet of sewer pipe and built or improved 255,000 miles of roads, 40,000 schools, 3,700 playgrounds, and nearly 1,000 airports (not to mention building 250,000 outhouses still badly needed in rural America).

Works Progress Administration

The WPA was another larger New Deal program that began in April 1935.  It employed millions of unemployed people to carry out public works projects, including the construction of public buildings and roads. Almost every community in the US had a new park, bridge, or school constructed by the agency. The WPA’s initial appropriation was $4.9 billion, which was about 6.7% of the 1935 GDP. In total, the program cost $13.4 billion.  From 1935 until 1943, the WPA provided almost eight million jobs. The goal of the program was not for full employment, but to provide a paid job for the breadwinner suffering from long-term unemployment.  In my home town of Soft Rock, two parks and our high school athletic field were all constructed by workers of the WPA. That was pretty big for a town that had a population of less than 700 at the time.

Do not get the impression that these programs did not have their detractors. These programs were under fire and under scrutiny, because opposing politicians thought the projects selected were rewards for some while attempting to buy political support from others. But the end result was that many people, sorely in need of a job, received a job. And the upside as compared to today? The communities, states and the federal government all received something in return for the employment dollars spent on the programs. Now common sense tells me that they had better programs in the 1930s, than we do today. What did the taxpayers receive in return for the half trillion dollars spent on unemployment in the last 5 years. The answer? Butkas. Nada. Zero. Nothing.

So now we get to that sticky point where I comment, “Should we continue with unemployment benefits for up to 99 weeks and continue to expect nothing in return?”  Why can’t we have programs like they did in the 30s? Have we become such a nation that manual labor is considered beneath our dignity?

Our country has become a fairly well-educated country. The following statistics are for the educational attainment in the United States for persons aged 25 and over:

High school graduate 87.58%
Some college 56.86%
Associate/and or Bachelor’s degree 39.89%
Bachelor’s degree 30.44%
Master’s degree 7.95%
Doctorate or professional degree 3.00%

It makes complete sense to me, that our highly educated and, hopefully, evolved elected officials could institute a more modernized version of the 1930s programs.  They can surely make better use of the vast amount of college-educated, experienced, highly qualified people who are currently collecting unemployment compensation.  What a waste of talent!   Many of those 1930s programs were headed by reserve component officers or military men. That would not fly today, but someone, somewhere should have the organizational skills to put these people to productive use in exchange for an unemployment check.

How about this?  We give everyone the 26 weeks unemployment compension and if they cannot find a job, then we give them a job and their pay is the unemployment. Of course, you would want these people to have opportunities to continue to apply for other work. What if we stick them with companies that can use their skills at the government’s expense? They would get 12 weeks with each company, and then move to another. They could possibly be hired by a company once they have shown their capabilities. That would be a win for the government, and a win for the hiring company.

I am a firm believer that everyone is not cut out for college. I also believe that we are missing the boat by not providing technical/vocational training to our high school students. Even though our schools are tailoring their curriculum toward college prep, only 40% of the people have a Bachelor’s or higher degree. We must prepare our students for other vocations.

The government could assist in lowering unemployment by repealing Obamacare. Why?  Because when the act was passed, companies began downsizing to allow for the anticipated 20-25% increase in their total payroll costs.  After all, as mentioned in a previous post, companies are not in business to lose money.  But they did reduce their work forces in anticipation of the implementation of Obamacare, thus fueling the fire of an already bad economic situation.

So now for my more studious readers, I am going to pose this question. If we could magically lower the unemployment rate to zero, would all capable Americans be employed?  The answer?  Not even close! The definition for the unemployment rate in the second paragraph says it is determined by “people actively looking for a job.” We have just under 5% of our country on welfare. They are not looking for a job. So if you were to add that 5% to the 7.8%, the true number of capable people not working is over 12%.  If you think unemployment is expensive, wait until my next blog about welfare.