History of Unemployment Insurance

Researcher & Writer
February 05, 2016

The passing of the Social Security Act in 1935 marks the beginning of unemployment insurance program on a country-wide scale. Provisions within the act were created to formalize services that would be needed in time of economic need.

Purpose

Unemployment insurance was created to limit hardship created when someone loses his/her job. This, in turn, stabilizes the economy. Unemployment insurance provides weekly benefit checks to individuals who have lost their job through no fault of their own.

The program is federally-funded and administered by the states. Both branches of government work in partnership to deliver services. Unemployment insurance is funded by taxes paid by employers. Only three states, Arkansas, New Jersey and Pennsylvania, collect employee taxes, and only in certain circumstances.

Timeline

1932: During the Great Depression, Wisconsin becomes the first U.S. state to bring unemployment insurance into law. Though it had been used on a voluntary basis in some states, this was the first time unemployment insurance has been formalized. California, Massachusetts, New Hampshire, New York, Utah and Washington quickly follow suit.

1935: President Franklin Delano Roosevelt signs the Social Security Act, which contains plans for unemployment insurance, into law. The act contains language encouraging states to form their own unemployment insurance laws.

1936: Neils B. Ruud of Madison, Wisconsin receives the first unemployment benefit check. It was written for $15.

1937: All states and the District of Columbia have by now enacted unemployment insurance laws.

1945: 26 states have by now imposed stricter eligibility requirements, limiting payments for individuals who’d quit their job or been fired. Today, all states use these eligibility criteria.

1952: 12 states now require recipients to actively seek work in order to receive benefits. Today, all states have this requirement.

Ongoing changes

Originally, individuals could claim benefits for a maximum of 16 weeks. Today, most states allow 26 weeks of payments.

In 1935, coverage only needed to be carried by employers with 8 or more employees. In 1954, it dropped to 4. By 1970, and still so today, employers with even one employee are required to carry coverage.

By the mid-1990’s technology began to radically change the claims process. There was a huge shift away from in-person claims and toward phone and Internet. Today, at least 85% of claims are made remotely.

During times of economic stress, such as the Great Recession, special programs have been established to extend benefits and cater to an increased need for unemployment insurance benefits.

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