the economic significance of unemployment compensation, 1948-1959

The Economic Significance of Unemployment Compensation, 1948-1959Author(s): Richard A. LesterSource: The Review of Economics and Statistics, Vol. 42, No. 4 (Nov., 1960), pp. 349-372Published by: The MIT PressStable URL: http://www.jstor.org/stable/1925687 .

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The Review of Economics and Statistics VOLUME XLII NOVEMBER I960 NUMBER 4

THE ECONOMIC SIGNIFICANCE OF UNEMPLOYMENT COMPENSATION, 1948-1959 *

Richard A. Lester

T HIS paper attempts to measure the earnings loss from unemployment and to esti-

mate the extent to which that loss has been compensated by unemployment insurance from I948 through I959. Those dozen years include the first three postwar recessions and the intro- duction of some new federal-state programs of unemployment compensation.

Despite two decades of experience and the payment of over $2 5 billion of benefits, the economic importance of unemployment compensation has not been extensively analyzed.' Indeed, widely varying notions prevail as to the proportion of earnings lost from joblessness that were replaced by unemployment compensation. Yet an assessment of the economic impact of the program and its contribution to consumer spending depends in considerable measure on that replacement ratio.

On the basis of statistics for I948-59, we shall seek to answer the following questions: What have been the dollar amounts of wage loss for the country, month by month, as the result of unemployment? To what extent was that national wage loss met by unemployment compensation, month by month, during the I2-year period? What has been the trend in wage loss

compensation during that period? How did the ratio of wage loss replacement by unemployment compensation vary during each of the three postwar recessions and recoveries? How did the rate of compensation for noncyclical types of unemployment compare with the compensation rate for recession-generated unemployment in each of the three postwar slumps? And how did the rate of compensation for recession unemployment differ as between states during each of the three recessions?

An attempt to find statistical answers to these questions necessitated the development of new statistical series. In some cases, absence of adequate data has required some arbitrary assumptions and rather ingenious devices to fill the gaps.

The conclusions of the study are summarized at the end of the paper. Explanations of the calculation, meaning, and limitations of the statistics appear, for the most part, in the Ap- pendix. The first part of the study involves an estimate of the wage loss from all unemployment, including that portion which is not covered by the unemployment insurance program. The second part, dealing with compensation for recession wage loss, focuses on covered employment only, but the wage-loss estimate does allow for normal growth and the wage loss resulting from reduction in work hours with declining employment.

Measurement of Workers' Loss Differences in methods of calculating wage

loss largely explain the marked variations in estimates of the proportion of earnings losses met by unemployment benefits. For example, some wage-loss estimates are calculated in terms of the drop in aggregate earnings during

* This paper was prepared during the tenure of a Ford Foundation fellowship. The conclusions are those of the author and are not necessarily supported by the Ford Foundation. The paper has benefited from comments and suggestions by Ida C. Merriam, William G. Bowen, William Papier, Alfred Skolnik, Thomas Karter, and Louis Levine.

'The most elaborate analyses that have come to the attention of the author are: Ida C. Merriam, "Social Secur- ity Programs and Economic Security," in Policies to Com- bat Depression, A Conference of the Universities-National Bureau Committee for Economic Research (Princeton, I956), 205-35; and Marvin K. Bloom, "Measuring the Effect of Unemployment Benefits on the Economy," re- printed from the annual meeting of the American Statistical Association in I954 by the Research Council for Economic Security (Chicago, 1955).

[349]



350 THE REVIEW OF ECONOMICS AND STATISTICS

an economic slump. By failing to allow for the normal rate of increase in the labor force and in wage scales, these estimates understate the loss. Some estimates are based on the assumptions that the average wage of the unemployed when working was the same as for those who continued in employment and that all unemployed workers normally work and seek full- time jobs. Actually, the lower-paid, lower- seniority workers are more likely to be unemployed, and some wish only part-time employment. Thus, those two assumptions would tend to overstate the wage loss.

Gross vs. net pay. There is a significant difference of opinion about whether the wage loss from unemployment should be measured in gross pay or in some calculation of net compensation. This problem arises partly because wages are subject to income and social security taxes while public unemployment benefits are not taxable. Therefore, take-home pay is well below gross pay. On the other hand, disem- ployed workers may lose much more than their gross pay. These losses over and above gross pay include all kinds of fringe benefits (e.g., employer contributions to social security and company benefit plans, vacation and paid-holi- day rights, paid sick leave, and bonus stock- purchase and profit-sharing rights).

In a year like I958, the income-tax saving of the unemployed might average around 9 or io per cent of gross income.2 It is questionable whether the employee's social security contribution which his employer deducts should be considered a saving since his benefit rights (survivors', disability, and old-age annuity) may be reduced more than the monetary equivalent of the employee tax.

A basis for estimating the implicit losses of unemployed workers in addition to their gross wage exists in the data for supplemental com-

pensation and fringe benefits. According to U.S. Department of Commerce estimates, sup- plements to wages and salaries ranged from 4.3 per cent of total wages and salaries in I948 to 7.3 per cent in I958.3 United States Chamber of Commerce studies of fringe benefits show that they rose in total from I5.4 per cent of gross earnings in I947 to 2I.8 per cent in I957.4 The I,020 companies in the latter year's survey had average hourly earnings of $2.I7, with fringe benefits averaging an additional 47.4 cents per hour in cost.

The difference between those two sets of figures is largely explained by two factors: (i)

the Chamber's figures are heavily weighted by large firms and (2) the Department of Com- merce figures include chiefly legally-required payments and expenditures for private pension and welfare plans. Therefore, they omit certain fringe benefits, accounting for somewhat more than one-third of the Chamber's total, which could be lost by disemployment. Those omitted items are principally paid vacations; paid holidays; paid sick leave; special bonuses; profit-sharing, savings, and stock-purchase plans; free meals; and educational subsidies. Adding to the Department of Commerce's figures for these items (on the basis of the propor- tions in the Chamber's studies) would raise the estimates for the whole economy to around 6 per cent of wages and salaries in I948, and io per cent in I958.

Most employee benefit rights or protections are reduced or terminated following a brief period of unemployment. If a worker's employment ceases, usually he accumulates no fringe-benefit rights during his period of unemployment. A worker on lay-off from a company may, however, have such rights continued during a brief period. In most cases, sickness and accident insurance and hospitalization and surgical coverage are suspended within a month after lay-off; group life insurance protection usually extends for a month to three months

2 The individual percentages would, of course, vary with the worker's income level, number of dependents, and other deductions. Assuming average full-time earnings of $3 ,8oo per year (See Table i, column 5) as total income and three personal deductions per income recipient, the federal income tax would amount to $324, or about 8.5 per cent. However, the savings on marginal declines would be greater and in some cases might reach i8 per cent for earnings decreases down to $2,000, below which (in this case) any tax savings would cease altogether.

The employee tax for Old-Age, Survivors' and Disability Insurance in i958 was 2.5 per cent.

'U.S. National Income and Output, U.S. Department of Commerce (Washington, 1959), 201-202; and Survey of Current Business, xxxix (July 1959), 12.

'The Hidden Payroll, Non-Wage Labor Costs of Doing Business, U.S. Chamber of Commerce (1949), 7; and Fringe Benefits I957, U.S. Chamber of Commerce (1958), 9 and 28.



ECONOMIC SIGNIFICANCE OF UNEMPLOYMENT COMPENSATION 35I

after lay-off.5 Other benefits, such as paid vacations and pensions, would generally be affected by the length of the lay-off. Others still would cease with lay-off. That would be true of such items as paid holidays, free meals, and paid sick leave.

Despite differences in company policy and in individual records, an estimate of perhaps 8 per cent of gross pay for the loss of fringe- benefit rights and protections is reasonable for I958, and 4 to 5 per cent for I948.6 Those rough estimates take account of the fact that the percentage is higher for coverage under unemployment compensation than for the economy as a whole, because of the size of firms and industries included under unemployment compensation.

Assuming that these estimates of tax gains and fringe-benefit losses from unemployment are approximately correct, the aggregate gains and losses have tended largely to offset each other. Undoubtedly, the total tax saving ex- ceeded the fringe-benefit loss in I948, but by I959 they were probably nearly balancing one another. Therefore such gains and losses will be largely disregarded in the over-all national and state calculations in this paper. 6a

Mloreover, comparisons of compensation in terms of gross wage loss have the advantage of being simple to understand, relatively easy to calculate, and fairly comparable with similar calculations for other social insurance programs. In addition, gross earnings are a more appropriate measure of the wage (and output) loss suffered by the whole economy.

Loss of gross earnings. To measure the rate of compensation in terms of gross earnings

monthly or quarterly over a number of years, it is necessary to determine (a) the actual earnings loss that was due to joblessness and (b) the total unemployment compensation paid during the same time intervals. Although the definition of unemployment raises some complex problems, as a practical matter we must rely on the official figures.7

In order to arrive at an estimate of earnings loss, it is necessary to reduce the unemployment figures to full-time equivalents. That step is required partly because full-time earnings figures are to be used to convert unemployment data to dollar-loss estimates. Also it provides a common basis for adding total and partial unemployment. Of course, the process involves certain assumptions concerning the number of hours for which the various categories of unemployed are available for work.

Estimates of the earnings loss from unemployment, on a monthly basis from I948 through I959, are presented in Appendix Table i. The elements used to derive the estimates of loss from total unemployment and from total and partial unemployment combined are explained in detail also in the Appendix.

Level of Compensation

The calculated percentages of wage loss replaced by unemployment compensation are depicted in Chart i. They are also given in col-

' For a summary and for representative provisions of agreements, see Collective Bargaining Negotiations and Con- tracts, Vol. 2, Bureau of National Affairs (Washington, T959), section on Employee Benefits, pp. 44:50I to 507.

6 Obviously these loss estimates are quite crude, and de- tailed study might reveal them too high, too low, or vari- able in significant degree over the business cycle. Much more refined estimates are, therefore, highly desirable.

" Support for the position that the tax gains of beneficiaries are largely offset by losses of fringe benefits is to be found in the majority statement of the Ohio Advisory Council, which concluded: "On balance, the average benefit recipient probably loses about as much as he gains from tax [withholding] savings. Since this is the case, the 'take- home' pay issue can be largely ignored." Legislative Recom- mendations of the Ohio State Advisory Council on Unem- ployment Compensation, Part IV (Columbus, March Ii, I959), 5.

'The unemployed count of the Census undoubtedly has been subject to certain shortcomings which tend to underestimate unemployment in a recession. For example, people who believed that no work was available and on that assumption were not looking for work may in part be counted as "not in the labor force." Also it is not clear to what extent the unemployed count includes jobless persons not looking for work because they are waiting to hear from a job they had previously applied for. Undoubtedly, these are among the factors that explain the slow-down in labor- force expansion in recession periods and the acceleration in labor-force growth during good times. These differences are evident in the discrepancies between the actual size of the labor force and the "expected" size in various years since I950. (See Testimony of Ewan Clague, January 1959 Eco- nomic Report of the President, Hearings before the Joint Committee of Congress of the United States, 86th Cong., ist Sess., January 27-February Io, I959, 94 and I2I, Chart I .)

For a discussion of the adequacy and limitations of the Census measurement of unemployment see Gertrude Ban- croft, "Current Unemployment Statistics of the Census Bu- reau and Some Alternatives," in The Measurement and Behavior of Unemployment, A Conference of the Universi- ties-National Bureau Committee for Economic Research (Princeton, I957), 63-99.




umn 2 of Appendix Table 3. The line labelled "regular programs in per cent of wage loss (total)" represents the percentage of wage loss from total unemployment that was compensated by the regular state and railroad benefit programs.

In Chart i, the line showing the percentage of wage loss met by those two regular programs appears to have a horizontal trend for this I2-year period. The average of the monthly figures is about 2 I per cent. The benefit figures include payments for both total and partial unemployment, with benefits for partial unemployment normally constituting about 5 per cent of total benefit payments. Consequently, benefits for total unemployment alone would average about 2 0 per cent of the wage loss from total unemployment.

If allowance is made for partial unemployment, the rate of compensation for wage loss under the regular programs drops to an average

of about i 5 per cent. As the bottom line in Chart i indicates, a horizontal trend at the I5 per cent level seems to be appropriate for the compensation rate when partial unemployment is included in the denominator.

The average level of compensation under regular programs was less in I958 than in I 949. However the compensation rate did not decline as low as it did in the recovery years of I950 and I955, even though insured unemployment in percentage of total unemployment (the top line in Chart i) did decline as much in I959 as in the other two recovery years. Actually, the compensation rate for I959

averages about the same as that for I950 and two per cent above that for I955. Therefore, a possibility exists that the level of compensation in I959 was slightly higher than the pattern for the preceding decade.

A horizontal trend for the I2-year period is somewhat surprising. In view of the increase

PER CENr CHART I PER CENT

80 ~~~~~~~~~~~~~~~~~~~~~~~~~~~~80

70( 70 INSUREb UNEMPLOYMKANTAN PER.GENT

7 oF T TAL UNEMPLOYMENT

60 SO

50 30

40i 40

III ~~~~~~~~~~~~~~~~~~~~~~~~ALL 'PUBLIC PROGRAM ANlt PER

I , 2 I . CENT OF WAGE LosS (TOTAL) AREGULAR RAMS IN RE C C ENT 30 It- ti OF WAGELoss (To-'AL) 3 ~~~~~~~~~~~~~~

A~~~~~~~~~~~~~~~~~~~~~~~~~~ AAAA A

25 25

20

,948 A

20

20 '0

I ~ ~ ~ ~ ~ ~ ~ ~ ~~~~~~~ AR G LRSO ISII~R C N O A.

A A~~~~~~~~~~~~~~~~os(OALADPRIL 5 ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~5

0 1948 1949 1950 1951~~ A92 15 94 15 95 97 15 99



ECONOMIC SIGNIFICANCE OF UNEMPLOYMENT COMPENSATION 353

in the coverage of state laws and the expan- sions in benefit duration, a rising trend might have been expected. Between I948 and I958, average monthly employment in covered industry rose from 76 to 8i per cent of the total of full- and part-time employees in all private industries; the increase was especially large in I956 when coverage of the Federal Unemploy- ment Tax Act was expanded from employers of 8 to employers of 4 or more. The potential duration of claimants establishing benefit rights rose from an average of 2I.1 weeks in I948 to 23.6 weeks in I959. Apparently such improvements in coverage and benefit duration were, at least in part, offset by a lag in the level of benefit ceilings compared with the advance in wage levels.8

Eligible jobless workers who fail to file for benefits or who delay in filing are a factor in keeping the compensation percentage low. No estimate is available to show the significance of the non-filers. Studies of delayed filing of initial claims in five states during I956 revealed that I 9 to 43 per cent of all filing claimants had waited at least 8 days after separation from their jobs before they filed for benefits.9 About a third of those delayed filers waited for more than 6 weeks of joblessness before they came in to claim benefits. The delayed filing data for New Hampshire (the state that had the lowest percentage of delayed filers) were converted into total weeks of uncompensated unemployment, and it was found that the total amounted to 3.5 per cent of the aggregate weeks of compensated claims during the eight months covered by the survey in that state. That percentage would presumably be about twice as large for the three states with 38 to 43 per cent of all claimants in the delayed filer category. For industrial states the percentage would probably be near the New Hampshire figure because the data show that factory work-

ers are much more likely to file during the first week of joblessness (most states require an uncompensated waiting week before benefits commence) than are workers in construction, retail trade, and other non-manufacturing lines.10 In all five states, "expecting to be re- called to former job" and "lack of knowledge of the unemployment insurance program" were important reasons for delayed filing.

It is evident from the curves in Chart i that the aggregate rate of compensation for wage loss is greatly influenced by the percentage of total joblessness represented by insured unemployment. The level of compensation declines as non-insured unemployment increases. Un- compensated unemployment rises relatively in the main because covered workers exhaust their benefit rights as their joblessness becomes extended and also because new entrants into the labor market add to the non-insured totals.

The compensation ratios depicted in Chart i are, of course, kept down not only by non- filers, delayed filers, exhaustees, and new entrants into the labor force, but also by uncompensated waiting weeks and by disqualifications from benefits and determinations of ineligibility for benefits. Some state data are available, on an individual basis, relating actual benefits to the claimant's normal pay just before he became jobless. Individual computations for Arizona in I956 and Missouri for I958 show individual compensation ratios averaging 4I and 42 per cent respectively."1 The difference between those averages of individual ratios for the period when the person is drawing benefits and the over-all aggregate ratios (these appear in

'The average weekly benefit amount for total unemployment, which was 34.1 per cent of average weekly wages in covered employment in 1948 (and 36.o per cent in 1949) had dropped to a low of 32.1 per cent in 1955 and was only 33.5 per cent in I957.

'See Preliminary Analysis of Delayed Filing of Initial Claims, Office of Program Review and Analysis, Bureau of Employment Security, U.S. Department of Labor, August 28, 1957, Tables i and 3 and comment on page 4. The five states were: Arizona, New Hampshire, New Mexico, Okla- homa, and South Carolina.

10Ibid., 5. " The Arizona study was based on individual computa-

tions for 20,692 eligible claimants during the I2 months ended June 30, I956, and related the individual's weekly benefit to his average weekly earnings in the high quarter of his base year. The average was calculated from the mid- points of the classes in the table showing "Proportion of Wage Loss Compensated." See A Preliminary Report to the Arizona State Advisory Council, Phoenix, August 30, I956 (mimeo.).

The study of 8,i6i claimants in St. Louis, Missouri, in a week in April 1958 is a calculated average using the mid- points of the classes in a distribution showing benefits in per cent of gross average weekly wage received in the period of employment immediately preceding the beneficiary's last spell of unemployment. See Survey of Unemployment Com- pensation Beneficiaries in St. Louis City and St. Louis County, Missouri, April I958, Missouri Division of Employ- ment Security (St. Louis, June 1959), 46, Table I.




Appendix Table 3) should be clearly borne in mind.

Cyclical Variation in Compensation Rate The cyclical pattern of the lines in Chart i

is pronounced, especially if the influence of the Korean War in I952 is eliminated. The rate of compensation rises in the early months of a recession. This occurred from the last quarter of I948 to mid-I949, from the last quarter of I953 to mid-I9s4, from the last quarter of I957 to April I958. The highest rate of compensation is reached usually at about the bottom of the industrial downswing. Thereafter the percentage of compensation declines during the next year or year and a half, depending on how sharp and short the recession. The compensation rate was low in the last half of 9o50, I955,

and I959.

This pattern means that unemployment compensation reaches its maximum effectiveness during the first half year after the recession commences. Thereafter benefit exhaustions reduce the rate of compensation. The pattern was somewhat conmpressed and modified in the I958-59 recession. The business slump was particularly sharp, so that the peak of the compensation rate was reached in half a year after the recession started. Thereafter the rate of compensation under the regular programs tended to decline for a year and a half. How- ever the decline was delayed and was less dis- tinct if the compensation figures include the temporary extended benefits programs (the curve for "all public programs" in Chart i).

Adding them made the peak compensation month September rather than April, and a significant decline in the compensation rate did not occur until after April I959. Also that rate in I959 did not drop to quite so low a level, even under the regular programs, as it did in the second full year of the previous two postwar recessions.

The compensation rate also is subject to some seasonal influences. Generally it tends to be high in the first part of the year, coming to a peak in March or April. Usually it is lower in the autumn, often reaching a low point in October or November. However, there are ex- ceptions, when cyclical factors outweigh seasonal ones. Variations in the ratio of insured to

total unemployment (the top curve in Chart i) generally seem to explain changes in the curves showing rates of compensation.

Extent of Compensation for Recession Wage Loss

Another measure of the effectiveness of unemployment compensation is the percentage compensation for the wage losses attributable to economic slump. Investigation of that subject involves an analysis of the three postwar recession periods. The relevant question is, How much of the earnings loss caused by the recession was met by the additional benefit payments resulting from recession unemployment?

A number of attempts have been made to answer that question. Generally they have involved measuring (on a monthly or quarterly basis) the net drop in private payrolls from the pre-recession peak, then calculating the net increase in benefit payments after that peak, and finally dividing the benefit increase by the payroll decrease to arrive at a rate of compensation or wage-loss replacement.12

Attempts to derive a percentage of wage-loss compensated by means of simple calculations of net change from a pre-recession peak suffer from three defects: (i) they make no allowance for the normal year-to-year increases in wage scales, (2) they make no allowance for the growth trend in the total labor force, and (3) they make no allowance for seasonal factors.13 The importance of the first two factors in-

12 See, for example, Miriam I. Civic, "Jobless Pay Offsets to Wage Declines," Conference Board Business Record, xv (March I95.8), 96 ff.; Paul G. Craig, "Unemployment Com- pensation as an Offset to Wage Loss," Bulletin of Business Research, The Ohio State University, xxxviii (May I958),

I and 8; Ida C. Merriam, op. cit., 2I3-I7; and George F. Rohrlich, "Measuring the Impact of U. I. Benefit Payments in a Recession," The Labor Market and Employment Secur- ity (July I958), 5-IO.

13 In the articles cited in the preceding footnote, the calculations of Civic and Craig are subject to all three of these shortcomings. Merriam uses seasonally adjusted wage and salary data, measures benefit payment change from the corresponding month or quarter in the preceding year, and recognizes that measurement from a pre-recession peak neg- lects the fact that payrolls would have continued to increase in the absence of recession. Rohrlich seeks to elim- inate the seasonal factor by using the corresponding months in the previous year for both benefits and wage and salary disbursements, and assumes a three per cent growth rate for the labor force. However, he makes no allowance for the normal increase in wage scales.




creases with the length of time. The consequence is that each succeeding month's figures erroneously tend to show a greater proportion of wage loss being replaced by compensation, and the percentage of compensation is particularly high in the recovery phase of the cycle, especially as total wages and salaries approach the pre-recession level.

In order to avoid those three defects, a different method was used to calculate the recession-caused loss of earnings, and all computations rest on the corresponding quarter in the pre-recession base year. The computations are confined to the coverage of state unemployment insurance laws. The basic assumption is that, in absence of the recession, total wages would have conformed to a straight line drawn between (a) such wages in the four quarters just before the recession and (b) total wages for the first four quarters after the recession when unemployment had fallen to the percentage that obtained during the pre-recession period. The amount by which wages in the recession fell short of that straight-line calculation, on a quarterly basis, was taken to represent the recession wage loss. The compensation paid out for that recession loss was measured by the amount of benefit payments over and above the sum paid out in the corresponding quarter of the I2-month period just before the recession. The details of the calculation of the ratios of compensation are explained for each of the postwar recessions in the Appendix. Since data were not available for a subsequent recovery period in the case of the I958-59 recession, the rate of increase for the I954-55 recession was used.

Obviously this method of determining the compensation rate takes into account both total and partial unemployment. The benefit statistics include partial benefits, and the decline in total wages results from reductions in employment stemming from both total unemployment and shorter hours.

Implications of the results. The percentages in Table i show, in general, that the highest rate of compensation for wage loss occurred during the first three quarters after the business downturn commenced. There are some excep- tions. Generally, they are in the states where an eight per cent yearly growth factor some-

what understates the actual growth rate Ohio, Michigan, Virginia, South Carolina, Ken- tucky, Colorado, and Oregon.

The variation in average percentage compensation among the selected states in Table i

ranges from Oregon and Rhode Island on the high side to Wisconsin and Missouri with averages about half those of the high states. The i 6 states in this table and the next two tables were selected to provide representation for various sections of the country and different types of industry.

The figures for the United States as a whole in Table i are somewhat lower than over-all state and rail benefits in percentage of earnings loss from total and partial unemployment (shown in column 3 of Appendix Table 3). The average for the scattered months in Appendix Table 3 is I9.2 per cent in I949 and I5.4 per cent for the first three quarters of I950; this compares with 9.4 per cent in Table i. How- ever, most of that difference undoubtedly arises from disparities in the methods used in calculating wage loss. Elements are included in the recession wage-loss estimates that are not a part of the estimates of over-all wage loss.

Two main factors help to explain why the United States figures in Table i (and also Tables 2 and 3) tend to be lower than those in Appendix Table 3. One is that any reduction in work hours (including elimination of over- time as well as shorter work weeks) is counted in the wage-loss calculations in Tables I, 2,

and 3. The second is that the wage-loss figures used in calculating those three tables assume a straight-line projection of labor force growth, whereas during a recession the actual growth tends to fall below "expected" or "projected" growth. Thus, the estimates of over-all wage loss exclude both declines in earnings from shortened hours to the point where persons are classified as part-time workers and net with- drawals from the labor market with declining job opportunities. As a consequence, they defi- nitely understate the actual wage loss from declining employment in a recession.

Compared with Table i, the percentages in Table 2 are generally somewhat larger. They are higher for twelve states and lower for four states.

Variations in the rate of growth in wages in




covered employment are one factor affecting the figures in Table 2. Between I953 and I955, Rhode Island and South Carolina ex- perienced practically no increase in that wage total, and Pennsylvania had an increase of less than two per cent. Consequently, the wage loss figures were unduly large and the compensation percentages correspondingly small. On the other hand, in Arizona, Colorado, and Cali- fornia covered payrolls rose at an annual rate of 8 to io per cent between I953 and I955,

which explains the absence of any wage loss figure for two quarters and a high figure for Arizona in the first quarter of I955.

The compensation rate for each state can, of course, be calculated on the basis of its own increase in wages in covered employment.

That has been done for the I954-55 recession period. No recalculation was necessary for seven states (Massachusetts, New York, Vir- ginia, Ohio, Michigan, Wisconsin, and Oregon) because their covered payroll increased at a yearly rate of from 4.5 to 5.2 per cent between the last quarter of I952 (or the third quarter of I953) and the corresponding quarter of I955. For the other states, recalculation on an individual basis raised the compensation percentages for Rhode Island, New Jersey, Penn- sylvania, South Carolina, Kentucky, and Mis- souri, and lowered them for Arizona, Colorado, and California.14 Such a recalculation indicates that Virginia, South Carolina, Wisconsin, Ari- zona, Colorado, California, and Oregon had low compensation ratios, and that the compen-

TABLE I. COMPENSATION RATES FOR WAGE LOSS IN I949-50 RECESSION

(In per cents)

U.S. Mass. R.I. N.Y. N.J. Pa. Va. S.C. Ky.

I949- II1.4 I0.3 I4.5 I5.0 Ii.6 8.2 (27.3) I2.1 I3.7

I949-II Ii.8 I7.5 125.I 14.0 IO.I I0.4 *Ii.8 io.6 I6.5

I949-III io.6 I9.5 I8.4 I6.5 9.8 io.6 I0.7 II.0 8.I

I949-IV 9.6 I0.2 9.2 I12.7 6.4 8.9 8.5 (32.2) IO.I

I950-I I0.4 8.o 6.o I2.2 8.2 8.8 7.5 II.5 I0.3

I950-II 8.o 9.5 8.6 7.7 4.8 5.9 I0.2 I0.5 i8.6

I950-III 3.8 4.2 n.b. 5.0 .9 4.2 7.5 9.I 9.0

Quarterly average 9.4 11 .3 I3.6 II.9 7.4 8.i 8.o io.8 I2.3

Ohio Mich. Mo. Wisc. Ariz. Colo. Cal. Ore.

I949-I 5.3 7.6 5.2 7.0 II.I 6.7 2,I.I I4.7

I949-II 7.0 9.9 7.5 6.9 5J1 5.9 i16.9 I3.3

I949-III 7-0 II.4 I0.0 6.4 7.3 6-5 9.9 7.8

I949-IV 8.5 7.7 7.0 8.I 7.6 7.I II.9 I8.i

I950-I II.2 8.6 8.5 8.2 7-0 II.7 I3.8 21I.2

I950-II I0.I 9.9 4-I 4.7 3.7 9-4 5.I I3.5

I950-III 5.7 p.l. 2.5 I.5 4-I 9.3 n.b. I0.2

Quarterly average 7.8 9.2 6.4 6.i 6.6 8.i I3.I I4.I

n.b. means a negative benefit (quarter's benefits under base quarter). p.l. means a positive figure for wage loss (calculated wages for quarter under actual wages for that quarter). a The Virginia figure for the first quarter of I949 is in parentheses because a low calculated wage loss makes it especially large. The same i2

true of the South Carolina figure for the fourth quarter of I949. Neither figure was used in calculating the quarterly average. SOURCES: The Labor Market and Employment Security, Employment and Wages of Workers Covered by State Unemployment Insurance Laws

(U.S. Department of Labor); and reports from some individual states.

"The recalculated ratios for the nine states were: R.I. N.J. Pa. S.C. Ky. Mo. Ariz. Colo. Cal.

I954-I 28.3% 26.9% 20.6% 9.8% I4.5% i8.8% 5.4% 8.5% 4.8%

I954-II 2I.9 27.3 I5.5 6.2 i6.8 20.3 5.3 7.7 7.3 1 954-III I 9-3 '2 2 .6 I 9.4 6.3 I 6.4 I I .9 3 .8 2 .3 4.8

1954-IV 6.4 2'2.8 23.4 6.i I3.0 I7.4 3.9 2.8 5JI

'1955-I 8.3 28.6 i8.i 4.7 II.4 I3.3 3.6 5.0 4.4

I955-Il 8.7 27.6 22.0 .7 I2.6 I6.2 I.7 3.0 I.I

Quarterly average I5.5 26.0 I9.8 5.6 I4J1 I6.3 4.0 4-9 4.6

For this recalculation, the following percentages were used for the yearly increase in covered payrolls: Rhode Island 0.4, New Jersey 3.6, Penn- sylvania I.5, South Carolina o, Kentucky 3.5, Missouri 3.8, Arizona zo, Colorado 8, California 8.5.




sation rates of New York, New Jersey, and Pennsylvania were relatively high for unemployment caused by the I954-55 recession.

The United States average of II.5 per cent in Table 2 is below the average of I4.7 per cent for the over-all figures (column 3 of Appendix Table 3) during the same period. However, as already explained, the wage-loss figures applied in Appendix Table 3 are not strictly comparable with those used in Tables I, 2, and 3 . Thus, it may be that in I954-55 the percentage compensation for recession unemployment was as high as it was for non-recession unemployment during that period.

Table 3 is incomplete because at the time of writing quarterly statistics of total wages in covered employment were not generally available after I958. Considerable variation exists among the figures in Table 3. Total wages in Arizona and Oregon were increasing at a con- siderably greater rate than 5 per cent per year

during I957-59. In Wisconsin and Ohio the normal state program (and thus the benefit figures used in the calculations) included a 50 per cent temporary extension of benefit duration beginning June 2I and July I 3 respectively. The figure of I 5. I per cent for the United States average in Table 3 compares with an average of 23.3 per cent for the figures in column 3 of Appendix Table 3 for the same period of time.

The figures of the United States in Tables i,

2, and 3 seem to indicate that the rate of compensation for recession unemployment increased somewhat with each postwar recession. How- ever, only five calendar quarters are available for the I958-59 recession, and the projection of a five per cent annual increase in wages may not prove valid for that period. On a five quarter basis, the compensation rate for the United States was io.8 per cent for the I949-5o recession, I2.2 per cent for the I954-5 5 recession, and i 5.I for the 1958-59 recession (excluding temporary extended benefits). However, the Korean War had an effect on the 1950 compensation rates, because it helped to raise the total wages in covered employment to a figure of eight per cent a year.'6 If allowance is made

TABLE 2. COMPENSATION RATES FOR WAGE LOSS IN I954-55 RECESSION

(In per cents)

U.S. Mass. R.I. N.Y. N.J. Pa. Va. S.C. Ky.

I954-I I3.5 I3.7 I7.2 I8.8 I9.8 13.0 III.0 6.4 I2.6 I954-1I I3.8 I3.3 I4.9 2I.2 20.8 I5.5 8.5 4-3 I4.8 I954-Ill II.4 12.3 ii.8 20.8 17.4 I2.8 MI.1 4.0 I4.5 I954-IV I2.0 I0.5 2.6 25.7 I4AI 9.1 6.8 3.0 9.8 I955-I MI.1 9.3 2.8 I2.8 I7.2 9.2 8.o 2.2 9.7 I955-1I 8.2 5.7 2.9 II.5 I2.5 7-3 4-5 .3 9.5 Quarterly

average II.5 io.8 8.7 I8.5 I7.0 II.2 8.2 3-4 II.S


I954-I I2.4 II.5 I3.3 I3.0 io.8 I3.I 9.3 I2.6 I954-1I II.9 I3.5 I5.4 I0.5 II.4 I12.4 I5.0 5.2 I954-Ill 9.4 io.6 9.7 4.6 12.3 3.7 I0.3 3.0 I954-IV II.4 I9.4 III 7.3 p.l. 9.I p.l. 6.5 I955-I 8.9 9.7 9.0 7.0 (30.6) n I7.6 p.l. n.b. I955-Il 5.I (I4.8) 7.5 3-I p.1. 4.9 I.0 2.I

Quarterly average 9.9 I2.9 II.0 7.6 II.5 MI.I 8.9 5.9

n.b. means a negative benefit. p.l. means a positive figure for wage loss. a Parentheses mean that a low calculated wage loss makes the percentage figure especially large. SOURCES: same as Table i.

'Comparison of the estimates may be helpful for judging the extent to which the total wage-loss figures represent an underestimate. For the I954-55 recession (calendar I954

and the first half of I955), the estimated total wage loss is $23,000 million. The estimated recession loss is $I3,300,

leaving a residual of $9,700 million for the non-recession wage loss from unemployment. The corresponding figures for the I957-58 recession (last quarter of I957 and calendar I958) are: total of $24,200 million, recession loss of $I3,400 million, and non-recession of $io,8oo million.

"The eight per cent rate of yearly increase was based on the rise from four quarters in I 947-48 with an average




for the effects of the forced draft of the Korean War on the economy and we therefore use a seven per cent growth factor for covered wages, the five quarter average for the I949-50 recession is I2.3 per cent compared with I 2.2

per cent for the I954-55 recession. Judging from Chart i, any tendency for the

rate of compensation for recession unemployment to rise from I948 through I959 is not evident in the figures for compensation of all types of unemployment, at least prior to I959. In the absence of figures for I960, it is not possible to determine whether, both for recession unemployment and nonrecession unemployment, the rate of compensation reached a slightly higher level commencing with I959. And if that is the case, the higher level could be only temporary unless the benefit improvements enacted by the state legislatures early in I959 are followed by later benefit improvements in line with rising wage levels.

The proposition that non-recession unemployment has been compensated at about as high a rate as recession-caused unemployment can be tested by applying the method used for calculating recession losses to wage-loss figures

available in Appendix Table I .17 The results are indicated in Table 4. The first column of the table presents the quarterly ratio wherever one or more figures are available in column 3 of Appendix Table 3 (state and rail benefits as a per cent of calculated earnings loss from total and partial unemployed by Census reports). Where a figure is not available from that source, the line is left blank in column i of Table 4. Column 2 presents the recession- caused wage loss calculated from the adjusted Census figures for total and partial unemployment on a full-time basis. Column 3 con-

TABLE 3. - COMPENSATION RATES FOR WAGE LOSS IN I958-59 RECESSION

(In per cents)

U.S.b Mass. R.I. N.Y. N.J. Pa. Va. S.C. Ky.

I957-IV I4.3 I3.7 9.8 (23.9) I8.8 I3.4 p.l. 3.6 II.0 I958-I I5.9 I8.4 I2.2 I5.9 I5.9 I4.5 i8.8 6.7 i6.i I958-11 i8.i I9.2 i6.o 27.4 I6.5 I7.4 I3.4 8.7 I8.2 I958-III I4.3 I7.9 7.6 2I.2 II.7 I4.6 8.i 8.9 I2.8 I958-IV I2.9 I3.3 7.6 26.7 I4.6 II.7 (2 75) c 2.9 7.8

Quarterly average I5.I i6.5 Io.6 22.8 I5.5 I4.3 I3.4 6.2 I3.2


I957-IV 7.8 4.6 5-7 7.4 p.l. p.l. (35.7) c I7.8 I958-I II.9 I2.2 I2.8 I2.0 3.2 5.8 II.0 I4.0

I958-II I3.7 I8.9 I9.7 35.6a p.l. 29.I 25.2 (48.6) I958-III I4.0 9.6 I5-3 (757)a C p.l. I3.2 3I.4 p.l. I958-IV 9.2 3.4 Io.6 (36.4)ac p.l. p.l. p.l. p.l.

Quarterly average II.3 9.7 I2.8 I8.3 I6.o 22.5 I5.9

p.l. means a postitive figure for loss. a Includes extended benefits under the state's program. For other states the TUC benefits are excluded. b Excludes amounts paid under all temporary extended benefits programs. , Parentheses around figures mean that a low calculated wage loss makes the percentage figure especially large. Those figures were not used

in calculating the quarterly averages. SOURCES: same as Table i.

of 3.74 per cent of the work force unemployed compared with an average of 2.73 per cent for the corresponding quarters in I952-53.

17 That was done by putting the wage-loss figures in column 7 of Appendix Table i on a quarterly basis and using the same four pre-recession quarters as a base as were adopted for the calculations of recession wage loss in arriv- ing at the percentages in Tables I, 2, and 3. For the recessions of I949-50 and I954-55, many months were missing in column 7 of Appendix Table i. Where that was the case, it was necessary to combine the figures in column 6 into quarterly totals and to multiply each total by the ratio derived from dividing the column 6 figure by the column 7 figure for any month in the quarter for which both figures were available. Where no month in the quarter was represented in column 7, the average ratio for the other quarters having an available figure was used (I.35 for the missing quarter in I948, I.45 for the three missing quarters in I953-54, and I.25 for the first quarter of I949 because that was about the ratio for that quarter in the preceding and succeeding years).

For column 2, the same additional benefit figures were used as those applied in calculating the figures in column 3, which were taken from Tables i, 2, and 3.




sists of the United States figures in Tables i,

2, and 3, which are based on changes in total wages in covered employment.

Comparison of columns i and 2 in Table 4 leads to two conclusions. First, the compensation rate was, on the average, no better for recession unemployment than for total (recession and non-recession) unemployment."8 Second, the compensation rate was generally higher for recession unemployment than for total unemployment during the first quarter of a recession period but lower during the last two quarters of such periods.19 This appears to have been due largely to exhaustion of benefit

rights. Also in the recession downswing, low benefit ceilings are an important factor depressing compensation rates. Neither of those two factors (exhaustion of rights and low benefit ceilings) is so influential in depressing the compensation rates for seasonal and frictional unemployment, which generally are more likely to involve low-paid employment, a shorter duration of joblessness, and withdrawal from the labor market after disemployment.

Comparison of columns 2 and 3 shows that the column 2 method for determining wage loss tends to understate it (or, less valid, the column 3 method tends to overstate wage loss). How- ever, the difference averaged only two per cent in the I954-55 period and 2.5 per cent in the I957-58 period.

In sum, the comparisons in Table 4 seem to indicate, for the postwar period, that (i) recession-caused unemployment was no better compensated than non-recession unemployment over a whole recession, and (2) the method used to calculate compensation rates for recession wage loss does not greatly understate them compared with the more complex method of working from Census unemployment data, and, in addition, it permits the calculation of state ratios.

Further refinement of this technique for deriving state ratios of compensation should help to make it a useful tool for comparing state compensation levels and for measuring benefit adequacy. Also, it can aid in determining the countercyclical effects of unemployment compensation in different areas.

Conclusions The main results of this statistical study can

be summarized as follows: i. Benefits for total joblessness under the

regular state and railroad programs of unemployment compensation seem to compensate, on the average, for no more than 20 per cent of the wage loss from total unemployment. If the wage loss from partial unemployment is included, the compensation rate (including partial benefits) averages only about I5 per cent.

2. All public programs, including the extra- ordinary ones, compensated for no more than

TABLE 4. -PER CENT COMPENSATION FOR WAGE Loss IN POSTWAR RECESSIONS, BY DIFFERENCES IN COVER- AGE AND METHODS OF CALCULATION

(In per cents)

For all For recession unemployment total and partial Relative drop

unemployed, Additional in covered (Census Data) a unemployed b wagesc

I949-I .... 27.59 I I .40 I949-Il I8.05 20.68 II.75 I949-III 20.08 I3.27 io.6o I949-IV 19.33 ...d 9.60 I950-I 15.80 2 I.68 10.35 I950-II I7.08 i6.oo 7.98 I950-I1l 13.36 7.82 3.82

Quarterly average I 7.58 I 7.84 9-36

I954-I I7.87 I4.6I 13.52 I954-Il I6.26 I5.96 I3.78 I954-III I4.57 I3.I4 II.39 I954-IV I3.42 I3.76 I2.04 I955-I 14.23 I3.99 IO.I2

I955-Il I3.77 9.79 8.23

Quarterly average I5.02 I3.54 II.5I

I957-IV 14.48 24.o8 I4.29 I958-I I8.I7 I4.39 I5.93 I95-8-II 20.25 22.55 i8.o6 I958-III I6.17 14.22 I4.33 I958-IV I5.I0 I2.44 12.85

Quarterly average I6.83 I7.54 I5.09

a Figures from column 3 of Appendix Table 3. b Calculations for recession-caused changes are based on figures in

column 7 of Appendix Table i. e Figures taken from Tables I, 2, and 3. d Unavailable because a wage-loss calculation was not made for the

4th quarter of I947 (part of the base period).

18 In the three postwar recessions, benefit payments aris- ing from the recession itself were slightly more than half of all the benefits paid out during the peak year of the recession,

"9The first quarters of the I954-55 recession period are an exception to this generalization.




23 per cent of the wage loss from total unemployment, and about i 8 per cent of the wage loss from total and partial unemployment combined, during the period from I948 through I959-

3. Over that twelve-year period, there is no evident tendency for the rate of compensation for total unemployment or that for total and partial unemployment to rise or fall under the regular programs. A horizontal trend appears to be the most appropriate for those two series of compensation rates. At least prior to I959,

expansion in coverage and benefit duration seem to have been largely offset by lags in weekly benefit maximums.

4. The aggregate compensation rates are heavily influenced by the percentage of insured unemployed among the total jobless. As Chart i shows, at times and especially in the second year of a recession, a fairly high percentage of the unemployed are not subject to unemployment compensation.

5. Recession-caused unemployment, by and large, appears to have been compensated at a rate no higher than the average compensation rate for all types of unemployment - seasonal, frictional, and technological, as well as recession. Yet, from a business-cycle viewpoint, a good case can be made for compensating recession unemployment at a higher rate than non- recession unemployment.

6. For wage losses from recession unemployment, some states evidently have compensation rates averaging twice as high as those of other states.

7. The techniques applied in this paper provide some basis for forming judgments about the relative adequacy of benefit payments under unemployment compensation.

APPENDIX

This Appendix explains the methods used in deriving three types of data: (i) wage loss from joblessness, (2) benefits as a percentage of total wage loss from unemployment, and (3) benefits as a percentage of wage loss from recession unemployment.

Wage Loss from Unemployment The first problem was to derive a monthly series

showing the wage loss due to total and partial un-

employment. The methods by which such a series of estimates was developed can be explained under four headings.

A. Full-time equivalents for unemployment. This subsection explains the first three columns in Ap- pendix Table i. The first column provides a calculation of the full-time equivalent of the total unemployment figures of the U.S. Census. Of the completely jobless, not all were available for full- time employment; some of the wholly unemployed were members of the part-time labor force. Indeed, a fairly high percentage of the females and of the males I 4 to I7 years of age and over age 65 presumably were available only for part-time employment. The distribution by age and sex of the unemployed workers who were part-time was determined by the percentage of all persons at work who were part-time by age group and sex in the first three years (I956, I957, and I958) for which com- plete monthly figures are available. From those three-year averages a single conversion table was developed.20

Having arrived at the proportion of workers among the unemployed who normally would work part-time, a figure for average hours worked by part-time employees is necessary in order to convert their hours lost into full-time equivalents. On the basis of the distributions for hours worked by part-time workers in non-agricultural industries in I956, I957, and I958,21 it was determined that a figure of 20 hours, or half-time, should be used to change the estimates for part-time workers totally unemployed into full-time equivalents.

The second column in Appendix Table i is com- posed of the first column (full-time equivalent of the totally unemployed) plus the full-time equiva-

a For simplicity of calculation the following table of percentage working part-time, which approximates the three- year averages, was applied to the unemployed on the assumption that they sought part-time work in those percentages:

Age group Male Female

I4-I7 78% 78% I8-24 I9 I9

25-54 8.5 25 55-64 I2 28

65 and over 28 44 Aside from a drop in the percentage in the summer

months for the I4 to 24 age group and a high figure for November for all age groups except I4 to i7, there is little seasonal variation in the monthly percentages. In applying a single table, of course, such seasonal variation is not taken into account. The monthly percentages were calculated from the data in the Annual Report of the Labor Force (I956, 42, 1957, 50, and 1958, 57).

2'The distributions are presented in Annual Report on the Labor Force I956, Table 22, 42; Annual Report on the Labor Force I957, Table 22, 50; and Annual Report on the Labor Force I958, Table 28, 57.




APPENDix TABLE I. - EARNINGS LOSS FROM UNEMPLOYMENT, I948-59

Earnings loss,

Calculated Earnings total- full-time loss, temporary

Total plus Earnings annual total & plus Total temporary Partial adjustment earnings temporary partially

unemploymenta unemploymenta unemploymenta factor of unem- unemployed unemployed (millions) (millions) (millions) (per cent) ployed a (millions) (millions)

(I (2) (3) (4) (5) (6) (7)

I948:

January I,777.2 2,040.7 84.29 $2,272-45 $386.4

February 2,225.0 2,403-7 82.70 2,244.06 449.5

March 2,o66.3 2,666.2 574.8 8I.97 2,238.60 422.8 $530.0

April I,870.5 2,o84.6 84.6 I 2,325.5 I 404.0

May I,528.i I,759.9 82.3I 2,276.69 333.9

June I,584.9 i,868.o 72.I6 2,008-57 3I2.7

July I,7IO.I I,955-I 75.86 2,I24.84 346.2

August i,633.0 I,9i6.4 8I.I7 2,276.82 363.6

September I,6I9.4 I,776.0 639.2 82.96 2,330.35 344-9 469.o

October I,4I3.5 I,522.0 80.57 2,266-43 287.5

November I,576.9 I,778-4 8I.5I 2,296.I4 340.3

December I,699.8 I,938.I 84.98 2,397.29 387.2

I949:

January 2,305-5 2,624.8 87.I6 2,462.27 538.6

February 2,794.8 3,027.3 87.28 2,469.I5 622.9

March 2,753-3 2,952-4 88.42 2,504-94 6i6.3

April 2,625.7 2,859.9 87.Io 2,47I.03 588.9

May 2,800.3 3,035-3 I,54.8 84.4I 2,398.09 6o6.6 837-4

June 3,032.7 3,282.3 79.65 2,266.04 6Ig.8

TJ uy 35l@&io .1 ;5 X 7 29 *D ? I 1.23 2,314.24 7 I 7.4

August 3,I24.6 3,409.2 I,200.9 8I.69 2,338.05 664.2 898.2

September 2,9I2.6 3,I74.2 83.42 2,398-49 634.4

October 3,110.3 3,32 5.J 88.42 2,553.83 707.6

November 2,950.4 3,I34.7 III05.4 85.46 2,479.54 647.7 876.I December 3,025.3 3,224.7 87.80 2,558.84 687.6

11950: January 3,882.5 4,072.3 87.12 2,550-44 865.5 February 4,o89.7 4,2I5.4 979.0 86.9I 2,555.68 897-7 I,I06.3

March 3,6i6.9 3,809.0 87.o6 2,571-49 8I6.2

April 3,o67 .9 3,235.5 89-40 2,652.23 715.1 Maay 2,618.5 2,831.8 1,012.9 85.82 2,557.26 603-5 8I9.3

June 2,656.7 2,933.8 76.60 2,292.56 56o-5

July 2,574-0 2,788.7 8I.62 2,453-50 570.2

August 2,o69.7 2,2II.3 I,I07.8 82.40 2,494.20 459.6 689.9

September I,972.0 2,I38.8 8o.i6 2,442.88 435-4

October I1640-7 I,756.6 81.19 2,49I.II 364.7 November I,907.I 2,028.0 849-3 79.82 2,465.64 4I6.7 59I.2

December I,874.6 2,050.4 82.79 2,574-56 439.9

I95I:

January 2,208.9 2,367.8 83.04 2,599-57 5I2.9

February 2,I36.I 2,282.5 9264 8I.24 2,560.o8 486.9 684.6

March I,878-4 2,057.8 79.94 2,535.70 434.8

April I,549.2 I,740.2 78.04 2,49I.62 36I.3

May I,39I.8 I,495-4 844.6 78.96 2,537.38 3I6.2

June I,522.5 I,750-I 72-73 2,352-27 343-I

July I,500.0 I,742.5 76.94 2,504.40 363.7

August I,305.3 I,5i8.7 83.o8 2,7I7-34 343.9

September I,420.3 I,685.6 78.I4 2,568.07 360.7

October 1,441.7 1,59I.6 77.23 2,550.33 338.3

November I,590-9 I,76i.5 77-35 2,566-47 376.7

December I,368.4 I,495-9 8I.78 2,726-34 340.0

I952:

January 1,740.3 1,930.0 85.05 2,848.75 458.2

February I,754.9 I,983.7 83.84 2,82I.43 466.4

March I,5i8.5 I,7I5.5 85.8I 2,90I.24 414.8

I Full-time equivalent.




APPENDIX TABLE i (continued) Earnings

loss, Calculated Earnings total- full-time loss, temporary


unemploymenta unemploymenta unemploymenta factor of unem- unemployed unemployed (millions) (millions) (millions) (per cent) ployed a (millions) (millions)

(I) (2) (3) (4) (5) (6) (7)

April I,349-4 I,565.3 82.5I $2,802.66 $365.6 May I,278.6 I,468.5 809.3 79-34 2,707-48 33I.3 $5I3-9 June I,342.9 I,594.2 76.07 2,607.87 346.5 July I,48i.i I,68I.o 79.35 2,732.8i 382.8

August I,293-9 I,592.5 80.42 2,782.27 369.2

September I,i88.6 I,466.5 76-43 2,656.20 324.6

October I,048.8 I,228.5 75-55 2,637-45 270.0

November i,i6o.8 I,323.0 657-I 79.6I 2,79I.66 307.8 460.6 December I1246-4 I,380.6 82.5I 2,906.28 334-4

I953:

January I,60I.3 I,833-I 90.I6 3,i89.86 487-3 February I,528.3 I,697.6 84.90 3,OI 7.07 42-6.8 March I,424.0 I,573.8 82.50 2,944-7I 386.2

April I,349.3 I,523.3 87.42 3,I34-OI 397.8 May I,090.0 I,3IO.4 89.5I 3,222.96 35I.9 June I,192.8 I,399-I 651.4 80.47 2,9IO.07 339-3 497-3 July I,229.I I,405.4 8I.oi 2,942.28 344.6 August i,oI6.6 I1264.2 8I.29 2,957-53 3II.6

September I,II4.6 I,378.8 82.90 3,02I.29 347-I

October I,070.7 I,302.8 83.82 3,o60.o6 332.2

November I,430-5 I,72 I.8 84.03 3,072.98 440.9

December i,856.o 2,I47-I 967-7 88.I6 3,229.52 577.8 838.3

I954:

January 2,674.0 3,II3.I 92.56 3,396-49 88I.I February 3,I79.8 3,460.4 88.68 3,259.66 940.0

March 3,245.6 3,53 I .6 I,295.3 88.3I 3,25 I .57 956.9 I,307.9 April 3,0I3.9 3,365-4 89.I6 3,288.44 922.2

May 2,859.6 3,I92.6 I,2I8.2 88.3I 3,262.6i 868.o June 2,733.2 3,I05.8 84.33 3,I2o.84 8Io.3

July 2,749.1 3,i08.7 84.46 3,I30-93 836.3 August 2,730-0 2,977-3 I,432.I 86.76 3,228.4I 804.6 I1i9i.6

September 2,662.7 2,975-4 86.82 3,242.87 82I.6 October 2,448-3 2,646.5 88.38 3,3I3-59 699.8 November 2,5IO.0 2,729.6 I,212.I 84.32 3,I73.24 749-9 I,o83.0 December 2,448.7 2,622.2 87.28 3,296.92 733-3

I955:

January 2,936.o 3,243.0 88.5I 3,355.86 906.9 February 2,990.6 3,i67.4 I,045-3 9I.06 3,465.36 9I4.7 I12i6.5 March 2,792.5 2,924-4 9I.88 3,509.50 855.3 April 2,606.I 2,804.I 9I.I9 3,496.oo 8I6.9 May 2,II9.2 2,308.i 943.6 84.5I 3,25I.80 625.5 88I.2 June 2,078.6 2,342-4 I,092.3 76-50 2,954-36 576.7 845.6 July I,924-5 2,i66.0 I,205.7 75-78 2,937.23 530.2 825.3

August I1789.5 2,o87.9 I,259-4 77.8I 3,028.23 526.9 844.7 September I,807.8 I,986.i 896.7 76.20 2,977.64 492.8 7I5.3

October 1,788.7 I,944.8 868.i 77-I7 3,027-76 490.7 709.7

November I,990-3 2II52.2 969.6 79.6I 3,I36.i0 562.5 8I5.9 December I,998.4 2,i86.0 987.2 82.59 3,266.57 595-I 863.8

I956: January 2,495.7 2,674.8 I,024.0 86.26 3,425.38 736.5 I,055.8 February 2,503.9 2,694.6 987.2 88.I9 3,5I5.99 789.5 I,078.8 March 2,455.6 2,707.6 942.6 87.5I 3,502.73 790.3 I,o65.5 April 2II78.2 2,340.6 i,oi8.6 82.68 3,322-50 648.I 930.I May 2,I08.8 2,34I.8 I,004.5 79.87 3,222.22 628.8 898.5 June 2,112.2 2,455.9 I,3I2.3 74.84 3,03I.I4 620.3 951.8

July 2,223.0 2,459-3 I,30I.4 76.83 3,I23.9I 640.2 979.0 August I,8I4.9 2,o89.5 I,265.2 79.84 3,257-74 567.3 9IO.7

a Full-time equivalent.




lent of persons with a job but not at work. Under the Census concepts applicable before I957, the figures for "unemployed persons" did not include persons on "temporary unemployment," i.e., who were not at work because they were on lay-off with definite instructions to return to work within 30 days of lay-off, or who had new jobs to which they were scheduled to report within 3o days. The Census figures were adjusted to full-time equivalents on the assumption that part-time workers

constituted the same percentage among these "temporary unemployed" as among the "total unemployed." 22

In column 3 the Census figures for persons who for economic reasons worked part-time have been adjusted to put the time not worked by such partly

APPENDIX TABLE I (continued) Earnings

loss, Calculated Earnings total- full-time loss, temporary


unemploymenta unemploymenta unemployment a factor of unem- unemployed unemployed (millions) (millions) (millions) (per cent) ployeda (millions) (millions)

( 1 ) ( 2) (3) (4) (5) (6) (7)

September i,678.9 I,928.4 983.5 80.63 $3,30I.52 $530.6 $8oI.I October I,682.1 I,874.2 920.5 79.75 3,276-93 5II.8 763.2 November 2,047.2 2,200.9 I,OIO.3 79.II 3,26i.97 598.3 872.9 December 2,104.6 2,315.2 I,046.4 84.25 3,485.98 672.6 976-5

I957: January 2,787.2 I,093.7 86.36 3,585.67 833.0 II59.6 February 2,702.4 II,90.7 86.I4 3,588.88 808.2 I1I64.3 March 2,44I-5 I,083.3 84.52 3,533.49 7I8.9 I,037-9 April 2,284.0 I,06I.3 85.32 3,579-I7 68I.2 997.8 May 2,246-3 i,o6o.o 78-55 3,3o6-43 6I8.9 9II.0 June 2,5I2.I I,349-0 74.2I 3,I34.38 656.2 I,008.5 July 2,3I9.9 I,353.8 77-54 3,286.I5 635.3 i,oo6.o August 2,I4I.8 I406.4 79.I3 3,360.79 599.8 993.7 September 2,I58.0 994.2 82.37 3,505.95 630.5 92I.0

October 2,130.6 I,039.1 83.93 3,580.03 635.6 945.6 November 2,68i.5 I1I34-7 83.03 3,549.26 793-I III28.7 December 2,899.2 I,204.3 88.77 3,802.76 9I8.7 I,300.4

I958: January 3,962.7 I,474-9 90.25 3,874-43 I,279.4 I,755.6 February 4,544-2 I,457.1 90.69 3,90I.64 I,477-5i I,95I.2

March 4,587.9 i,6i8.4 9I.63 3,950.48 I,5IO.4 2,043.2 April 4,444.7 I,6I6.2 89.34 3,859-93 I,429.7 I,949-6 May 4,I70.6 I,567.1 87.28 3,778.94 I,3I3.4 o806.9 June 4,348.0 I,768.5 82.65 3,586.05 1,299-3 I,827.8 July 4,300.I I,649.I 83.60 3,634-93 I,302.5 I,802.1 August 4,025.9 I,742.0 86.26 3,767-55 I,264.0 i,85o.9 September 3,526.8 I,302.0 84.49 3,706.86 I,089-4 I,49I.6 October 3,242-5 I,2I6.I 83.6I 3,684.69 995.6 I,369.0 November 3,282.7 I,232.9 84.33 3,733.OI 1,02I.I I,404.7 December 3,54I-5 I,3IO.3 87.95 3,9I0.56 I,54-I I,58I.I

I959: January 4,I34.5 I,228.0 88.95 3,972.5I 1,368.7 I,775.2 February 4,i69.7 I,092.6 90.07 4,040.24 I,403.9 I,77I.7 March 3,777.5 I,225.2 87.28 3,932.27 I1237.8 I,639.3 April 3,049.3 198.6 83.36 3,772.04 958.5 I,335-3 May 2,792.5 1,049.I 8I.3I 3,695.27 859.9 IJ,83.0 June 3,003.5 I,4I8.5 75.29 3,436-49 86o.I I1269.2 July 2,929.2 I,487.5 77-59 3,556.73 868.2 I,309.I August 2,859.5 1,399.5 8I.38 3,746-47 880.3 I,3I7.2 September 2,739-I I,09I.7 83.65 3,867.42 882.8 I5234.6 October 2,766.2 I5,I5.2 8I.o8 3,764-54 867.8 I,2I7.6 November 3,I32-5 I,202.5 85.26 3,953.92 I,032.I I,428.4 December 3,454.5 I5,56.4 83.82 3,924-74 I5,29.8 i,508.0

a Full-time equivalent.

22 These monthly percentages were between 82 and 89 per cent, during the 9-year period, except for the months of June and July when they ranged from 73 to 83 per cent and one March, two Augusts, and one December, when they were about 8o per cent.




unemployed on a full-time basis. The raw data were the sum of two Census categories: (i) regular full-time workers working reduced work weeks because of economic reasons (slack work, job turn- over, material shortages, and repair to plant or equipment), and (2) regular part-time workers who prefer and could accept full-time employment.23 Prior to I955 the Census did not publish figures for average hours worked by involuntary or "economic" part-time workers. Beginning with May I955, when regular monthly data were available, such figures for average hours are given for non- agricultural industries. It has been necessary, therefore, to assume that the average ratios for I955

to I959 applied to the pre-May I955 figures.24 On the assumption of a normal 40-hour week, the total involuntary loss of hours can then be calculated and converted to a full-time equivalent.25

Others have made estimates of the total time lost from unemployment using methods differing somewhat from the procedure applied here.26 Those estimates generally seem to be somewhat larger than the full-time equivalents presented here.27 Ap-

parently that is mainly due to the allowance made in the figures in Appendix Table i for the fraction of the unemployed in the part-time labor force.

B. Comparison of wages of unemployed and employed. One of the most difficult relationships to estimate is that between the normal pay of the totally unemployed or of "economic" part-time workers and that of workers who continue to be employed. Presumably that percentage ratio varies from boom to recession and from one recession to another, depending in part on the extent to which high-wage workers in construction and in heavy industry (steel, autos, machinery, etc.) are laid off and the distribution of the employment cuts between high-wage and low-wage occupations within industries.

Unfortunately the state programs of unemployment compensation have compiled and calculated few continuing figures on the average normal pay of beneficiaries compared with average weekly wages (or even high-quarter wages 28) in covered employment. So far as the author has been able to discover, Pennsylvania is the only state that has such figures for a number of years and these are not on a monthly basis. The Pennsylvania percentages are presented in the first two columns of Appendix Table 2 .29

APPENDIX TABLE 2. -BENEFICIARIES' EARNINGS IN

PER CENT OF AVERAGE EARNINGS FOR ALL COVERED

EMPLOYMENT, PENNSYLVANIA, I950-59 a

Pennsylvania U.S.A.

Compared with Compared with Calculated high quarter high quarter adjustment

Period for of current of previous factor in App. sample year year Table I

Calendar I950 80.5 83.1 83-4

Calendar I95I 82.0 87.7 79.0

Calendar I952 84.8 92.0 80.5

Calendar I953 84.7 87.7 84.7

I954-I 88.8 89.2 86.o

I954-IV 84.3 84.7 86.6

Calendar I955 79.6 82.9 82.7

I956-I 79.0 83.9 87-3 I956-II 73.6 78.I 79.I

I958-II 84.6 88.o 86.4

I959-II 74.6 78.o 80.0

a Data supplied by Division of Research and Statistics of the Pennsylvania Bureau of Employment Security. The calculations were made by the author. The original data represent in each case a four per cent sample.

23 Prior to I955, the figures for non-agricultural industries and agriculture are combined; thereafter they are given separately.

' In the 44 months from May I955 through December I958, the adjusted figure averaged 47 per cent of the original total (monthly variation 42.I to 5I.5), so that figure of 47 per cent was used to reduce the figures for part-time workers to full-time equivalents for the data prior to May '955.

'For example, in May I955 a total of 934 usual full- time workers worked an average of 24.4 hours, so 934 multiplied by I5.6 gives I4,570.4 divided by 40 or 364.3 as a full-time equivalent. In the same way, 876 usual part- time workers able and desiring to work full-time averaged i8.8 hours, so 876 multiplied by 2I.2 gives i8,57I.2 divided by 40 or 464.3 as a full-time equivalent. Since no figures are available for the average hours worked by "economic" part-time workers in agriculture, a 20-hour assumption has been used, reducing 230 to II5. The total of 364.3 and 464.3 and II5.0 is 943.6. For the first four months of I959 when hours figures are not available, the hours figures for the corresponding months in I958 with one minor adjustment were used. The unadjusted figure for June I953 is taken from Gertrude Bancroft, op. cit., Table A-iO, ii6.

'See, for example, Thomas K. Hitch, "Meaning and Measurement of 'Full' or 'Maximum' Employment," this REVIEW, XXXIII (February I95I), I-I I; and Gertrude Ban- croft, op. cit., esp. 93-97. See also Albert Rees's paper in Measurement and Behavior of Unemployment, op. cit., 25- 26 and 57-59.

7 Compared with Bancroft's estimates for the I7 sep- arate months for which part-time employment figures are available in the years I949 through I954, the totals from combining columns 2 and 3 in Appendix Table I are from 83 to 89 per cent as large (see Bancroft, op. cit., Table A-I2, II9). Hitch presents an estimate only for November I949 (op. cit., Table 2, 7). The combined total for that month in Appendix Table I is 96 per cent of the Hitch figure. For this comparative purpose, both the Bancroft

and Hitch figures were reduced to a weekly basis on the assumption of a 40-hour week.

' This term refers to the earnings in that quarter of a calendar year in which the earnings were higher than in any of the other three calendar quarters.

' The third column is not derived from the first two. It is included in Appendix Table 2 for purposes of comparison with the ratios derived by the means explained in the next subsection.




The proper period for comparison in Appendix Table 2 is that for the high quarter of the previous year (really the first 4 of the previous 5 quarters), for that is the base period for the earnings of the beneficiaries. However, these percentages are relatively too high because the high-quarter wage for the individual is being compared with the highest quarter total for all in covered employment (not a total of each individual's highest quarter). Also it is impossible to determine how much the factor of unemployment has reduced the figures for high- quarter earnings of the beneficiaries compared with all covered employees. These two considerations may tend to offset each other. Of necessity they have been largely ignored in the calculations.

Occasional data on the previous earnings of beneficiaries are available for other states. Some of them are on an annual basis, which means that they are reduced by periods of unemployment during the year. That factor tends to understate the relative position of beneficiaries in terms of normal earnings.

In the State of Washington a ten per cent sample of claimants for the period July 1955 through June 1956 showed that their base-year (1954) earnings averaged $2,972,30 which was 73.2 per cent of the 1954 average annual earnings in covered employment in that state. A study of beneficiaries in Oregon in March 1958 showed that their base-year (1956) earnings averaged $3,284 statewide and $3,248 in the Portland Metropolitan Area, which were 75.3 and 72.5 per cent of the average earnings of covered workers in 1956 in the respective areas.31

A Massachusetts sample of 7,325 workers drawing benefits in 1958 (equal to 8 per cent of the average weekly insured unemployment for that year) revealed that their average high-quarter earnings were $907.68, which was 85.3 per cent of the average earnings in covered employment for the highest quarter in 1957.32 That is fairly close to the Pennsylvania figure for beneficiaries in the second quarter of 1958 in Appendix Table 2. The annual earnings of the sample beneficiaries in Massachusetts averaged $2,715.12 in the base

year,33 which is 66.7 and 64.8 per cent respectively of the average annual earnings in covered employment for the years I957 and I958.

From benefit adequacy studies, figures for two other states are available for comparisons of the earnings of claimants and of non-beneficiaries on a weekly basis. One of the studies deals with a sample of about 6 per cent of the claimants in the Albany-Schenectady-Troy area of New York during the last week of April I957; the other examines a I0 per cent sample of claimants in Anderson, Greenville, and Spartanburg Counties of South Carolina, who filed compensable claims during a week in March I957.34 In the New York study the average weekly earnings of 27I beneficiaries for a full week's work immediately prior to disemployment was $68.20, which represented 77.0 per cent of the average weekly earnings of all covered employees in the Albany industrial area in I956.35

In the South Carolina study, the average weekly earnings of 259 beneficiaries amounted to $51.10 for the employment period just preceding their disemployment, which was 87.3 per cent of average weekly earnings in covered employment in the survey area during the base year (April 1956- March I957) .

These data for other states at various dates seem to indicate that the Pennsylvania ratios may be fairly representative of the country as a whole. That is more evident if one allows for the downward bias in the comparisons on a yearly basis, because of the greater incidence of unemployment among beneficiaries during the whole base-year period.

The next assumption is that the base-year earn-

? Characteristics of Unemployment Compensation Claim- ants, Washington State, Benefit Year July 1955-June 1956, Employment Security Department, State of Washington, February I958, I2.

81Family and Personal Characteristics of Portland Area Beneficiaries, Oregon State Unemployment Compensation Commission, April I959, I5.

' Data on the sample and special tabulations supplied by Mary E. Wilcox, Department of Research and Statistics, Massachusetts Division of Employment Security, Decem- ber 22, 1959.

3 In Massachusetts the base period is the I2 months preceding the week in which a valid claim is first filled.

3'The samples are not presumed to be exactly representative of all claimants. They included only those who were unemployed 5 or more weeks and were either single or members of specified-sized families. Single claimants constituted 24 per cent of the New York sample and under I9 per cent of the South Carolina sample.

3 Benefits, Incomes and Expenditures of Unemployed Workers: Experience of a Group of Unemployment Insur- ance Beneficiaries in Albany-Schenectady-Troy, Spring 1957, New York State Department of Labor, September I958. The earnings averages on page 24 were weighted by the respective numbers in the sample (page 7) to obtain a single weighted average of weekly earnings of beneficiaries to compare with average weekly earnings of $88.59 for covered employment in the Albany area.

3"Virlyn A. Boyd, Survey of Unemployment Compensa- tion Beneficiaries in Anderson, Greenville, and Spartanburg Counties, South Carolina, 1957, South Carolina Employ- ment Security Commission, August I958. Average weekly earnings of beneficiaries were calculated from Table 23, 45; average weekly earnings of $58.52 for the survey year were calculated from Table B-6, ii8.




ings ratios in covered employment (which represents about two-thirds of all civilian employment and four-fifths of all civilian wages and salaries) apply in the rest of the economy.37 If so, the Pennsylvania ratios can be considered as somewhat representative of the country as a whole. That would involve also the acceptance of the high- quarter basis of comparison. A calendar-quarter basis tends to understate the full-time earnings of beneficiaries more than those of non-beneficiaries, because the former generally have a higher incidence of unemployment or partial unemployment. However, as already explained, that bias may be counterbalanced by the downward bias involved in using for comparison the average earnings of covered workers in a single high quarter, usually the last quarter in a calendar year. That presumably is not the high quarter for all the workers in covered employment.

C. Earnings adjustment factor. One further step is necessary in order to arrive at the monthly "Earnings Adjustment Factor" in column 4 of Appendix Table i. It is to develop an appropriate monthly series for deriving full-time earnings figures for the unemployed from full-time earnings data for all employed workers. The series developed for that objective has been derived from (i) the monthly percentages that jobless males from 25 to 54 years old constitute of the total unemployed and (2) an adjustment factor based on the state ratios, principally those of Pennsylvania in Appen- dix Table 2.

The prime (25-54) male percentage varies with the business cycle. Men from ages 25 to 54 are mostly primary wage earners (the relatively high- wage breadwinners), whereas females and the younger and older males are, as a group, mostly secondary and part-time workers (see the table in footnote 20). Census Bureau data for 1948 through I959 show that the percentage of men in the 25- 54 age group among the total unemployed usually declines as the over-all unemployment drops, whereas the percentage of women increases. In times of recession and expanding unemployment, the reverse is true -the proportion of prime male workers among the unemployed rises.

That this ratio of prime males among the unemployed is a fairly good indicator of changes in the average level of normal earnings of the unemployed is revealed by industry data for jobless beneficiaries in Pennsylvania. Monthly totals were

compiled of the weeks of unemployment in five high-wage industries (construction, transportation equipment, primary metals, fabricated metals, and machinery except electrical) in Pennsylvania during the decade from 1949 through mid-I958.38 This high-wage-industry total was then divided by the total number of weekly benefit payments for total unemployment in Pennsylvania to provide a series of percentages. Comparison of the two series (prime males in per cent of all unemployed in the U.S. and compensated unemployment in five high- wage industries in per cent of all compensated weeks of total unemployment in Pennsylvania) correspond remarkably well for most of the ten- year period, and especially in 1949, 1952, and 1954 to mid-I958.39 Divergencies in 1950, 195I, and 1953 are entirely due to sharp drops in the Penn- sylvania construction figures, which for September of those three years were only one-fifth of the year's peak month.40

However, the prime (25-54) male unemployed constitute, on the average, only about one-third of all the unemployed. Consequently, it is necessary to raise the prime male percentages by a con- stant in order to bring them to a level indicated by the range of the various state ratios. The ratios of beneficiaries to non-beneficiaries' earnings in Pennsylvania (Appendix Table 2) and other states show that about 50 percentage points would need to be added to the percentages for male (25-54)

jobless in the unemployment total in order to bring those percentages up to the proper level. The results of adding 50 percentage points to each of the male (25-54) jobless percentages are shown in column 4 of Appendix Table i. The resulting figures are grouped and presented in the third column of Appendix Table 2 for comparative purposes. As the figures in Appendix Table 2 show, the adjustment factor percentages thus derived are not very different from an average of the Pennsylvania ratios in the first two columns. However, the adjustment factor percentages seem more nearly correct because they correlate better (inversely)

" Possibly the ratios result in some overstatement of the wage loss of the non-insured unemployed. The uncov- ered portion of the economy includes a relatively large percentage of low-paid employment, such as farm and domes- tic service, as well as unpaid family workers.

'Data supplied by the Pennsylvania agency. 3 Due to changes in the industrial coding system in

Pennsylvania, it is impossible to assign benefit costs to certain industries after June 1958.

40 For Ohio the same sort of figures (compensated unemployment in the five high-wage industries in per cent of all compensated total unemployment) correspond fairly closely with the percentage of males 25-54 among the unemployed in the years I948, I950, and I95I, but are con- siderably higher thereafter. However, if the Ohio figures are lowered by I5 points (e.g. 50 to 35 per cent) for the years I954-58 the correspondence for Ohio is as good as that for Pennsylvania in the years I954, I955, I956, and I957.




with national indexes of employment, production, and gross national product.

D. Calculated full-time earnings. In order to arrive at a series for normal full-time wages of the jobless, it is necessary to apply the percentages in column 4 of Appendix Table i to figures for the full-time earnings of the employed. To derive column 5, the earnings adjustment factor in column 4 was applied to the Department of Commerce's annual statistics for wage and salary disbursements per full-time employee in all private industry.4' The official yearly figure was used for July of each year, and one-twelfth of the increase from year to year was used as the increment to calculate figures for the intervening months.42

The objective of the rather extensive calculations discussed above was to arrive at series representing earnings loss from total unemployment and from total and partial unemployment combined, on a monthly basis. Such series are presented in columns 6 and 7 of Appendix Table i. Column 6 results from multiplying column 2 by one-twelfth of the figures in column 5; column 7 is column 3 times one-twelfth of column 5. Division by I2 is necessary in order to convert the annual totals into monthly figures.

Benefits as a Per Cent of Wage Loss Calculation of the percentage of wage loss re-

placement involves (i) the compilation of monthly

figures for the total of all unemployment benefits under the different programs and (2) division of the benefits' total by the wage loss figures in Appendix Table i.

Since no series of combined benefit payments on a monthly basis is available, it was necessary to compile the figures. They are presented in columns i and 4 of Appendix Table 3, representing the total unemployment benefits paid out under all public programs. That combined figure was used in calculating the percentages in columns 6 and 7 of the table.

Column I is the sum of (i) the net amount of benefits paid under state unemployment insurance programs (which excludes temporarily extended benefits paid by 22 states in I958 and I959) 43

and (2) the net amount of unemployment benefits paid under the Railroad Unemployment Insurance Act. Column 2 in Appendix Table 3 is column i

divided by the calculated earnings loss from total and temporary unemployment (column 6 of Ap- pendix Table I). And column 3 in Appendix Table 3 is column i divided by the calculated earnings loss from total, temporary, and partial unemployment (column 7 in Appendix Table i).

In addition to the regular state and railroad programs of unemployment benefits, there have been a number of other federal and temporary programs. Those other programs during the period I948-59 were as follows: Servicemen's Readjust- ment Benefits (1948-52), Reconversion Unemploy- ment Benefits for Seamen (I948-52), benefits under the Unemployment Compensation for Veterans program including amounts paid to veterans by the Railroad Retirement Board (I952-59), benefits under the program of Unemployment Compensa- tion for Federal Employees (I955-59), benefits under the Ex-Servicemen's Unemployment Com- pensation Act (1958-59), and benefits under all Temporary Unemployment Compensation programs (State UI, UCFE, UCV, and UCX).44 The total of all those federal and temporary benefits programs is given in column 4 of Appendix Table 3.

As already indicated, the percentages in columns 6 and 7 were derived from a figure for all public benefits (columns I and 4 combined) divided by the wage loss figures in Appendix Table i (columns 6 and 7). Chart I presented in graph form the percentages in columns 2, 3, and 6 of Appendix Table 3-

41The figure of total wage and salary disbursements in all private industries was divided by the corresponding figure for "number of full-time equivalent employees" to get the annual averages. The data were obtained from U.S. Income and Output, Department of Commerce, I959, Tables VI-2 and VI-I3, 20I and 2II; and Survey of Cur- rent Business, xxxIx (July I959), 32 and 36 and XL (Feb- ruary I960), I0.

42 illustrate in detail the procedure used, the Com- merce Department's figures for wage and salary disbursements per full-time employee in all private industries are $2,591 for I947 and $2,80I for I948, or a difference of $2I0. Using the I948 figure as the one for July of that year, then the June figure would be $2,80I minus $I7.50 (one-twelfth of $2I0), or $2,783.50, and so on, deducting $I7.50 each month back to January I948. The Depart- ment's I949 figure is $2,849, which is $48 above the I948 figure. Therefore the August I948 figure is calculated by adding $4 (one-twelfth of $48) to the July figure $2,80I. The resulting figures for June, July, and August ($2,783.50, $2,80I, and $2,805) were then multiplied by the corresponding "earnings adjustment factor" in column 4 (72.i6, 75.86, and 8I.I7 per cent) to obtain $2,oo8.57, $2,I24.84, and $2,276.82 in column 5.

Obviously, this is an arbitrary method for distributing the annual increase in earnings by months. Wage increases are most likely to occur in the Spring, and the last calendar quarter is generally the one with highest earnings. How- ever, allowance for such seasonal variations might not make enough difference to justify the attempt to derive and apply a seasonal factor.

43The 22 states include the six states that temporarily paid extended benefits under their own state laws as part of their regular programs.

"Including temporarily extended benefits under the regular programs of Colorado, Connecticut, Illinois, Ohio, Wisconsin, and New York.




APPENDIX TABLE 3.- BENEFITS AS COMPENSATION FOR LOST EARNINGS

State-rail State-rail benefits benefits as Total public benefits

as per cent per cent of Benefits as per cent of earnings of earnings earnings under Private loss from

State and loss from loss from federal supplemental railroad total- total-temp. programs unemployment Total-temp. benefits temporary plus partial and TUC benefits Total-temp. plus partial

(thousands) unemployment unemployment (thousands) (thousands) unemployment unemployment

(I (2) (3) (4) (5) (6) (7)

I948:

January $ 62,268 i6.ii% $ 54,650 30.039 February 62,754 I3.96 55,5II 26.3I

March 78,4i8 I8.55 I4.80% 65,726 34.I0 27.20%

April 77,680 I9.23 57,256 33.40

May 68,6i8 20.55 43,822 33.68 June 73,7I8 23.58 40,790 36.62 July 67,656 I9.54 40,52I 3I.25

August 65,950 I8.I4 40,I73 29.I9

September 63,49I I8.4I I3.54 35,495 28.70 2I.I0

October 54,554 I8.98 23,860 27.28

November 62,508 I8.37 23,632 25.3I

December 80,920 20.90 3I,858 29.I3

I949: January I07,603 I9.98 43,II0 27.98

February I20,0I0 I9.27 5I,230 27.49

March I60,670 26.07 66,648 36.88

April I44,987 24.62 56,033 34.I3

May I51,II2 24.9I i8.05 5i,643 33-43 24.2I

June I59,986 25.8I 52,277 34.25

July I52,256 2I.22 54,6I7 28.84

August I80,374 27.I5 20.08 29,054 3I.53 23.32

September I62,844 25.67 9,643 27.I9

October I49,986 2I.20 5,960 22.04

November I69,387 26.I5 I9.33 5,680 27.03 I9.98

December I80,373 26.23 5,773 27.07

I950:

January I99,I5I 23.0I 6,020 23.7I

February I74,783 I9.47 I5.8o 5,293 20.06 I6.28

March 200,9I0 24.6I 5,987 25.35

April I43,247 20.03 4,o66 20.60

May I39,936 23.I9 I7.08 3,423 23.76 I7.50

June I22,039 2I.77 2,733 22.26

July I0I,830 I7.86 2,380 I8.28

August 92,I99 20.06 I3.36 2,I34 20.52 I3.67

September 65,594 i5.06 I1,2I0 I5.34

October 60,635 I6.63 693 I6.82

November 62,734 I5.05 io.6i 528 I5.i8 I0.70

December 69,86I I5.88 496 I5.99

I95I:

January 93,65I I8.26 577 I8.37

February 73,309 I5.05 I0.7I 408 I5.I4 I0.77

March 73,537 I6.9I 332 I6.99

April 63,004 I7.44 2II I7.50

May 7I,499 22.6I I4.45 I56 22.66 I4.48

June 69,627 20.30 io6 20.33

July 64,677 I7.79 II4 I7.82

August 76,8oi 22.33 98 22.36

September 62,388 I7.29 68 I7.3I

October 69,742 20.62 55 20.63

November 70,2I8 I8.64 52 I8.65

December 72,275 2I.27 6o 2I.28

I952:

January II9,026 25.98 84 26.00

February I05,9I3 22.7I 66 22.72

March I04,995 25.3I 56 25.33




APPENDIX TABLE 3 (continued)




(thousands) unemployment unemployment (thousands) (thousands) unemployment unemployment (I) (2) (3) (4) (5) (6) (7)

April $95,387 26.09% $ 44 26.I0% May 88,048 26.57 I7-I3% 33 26.58 I7.I4%

June 85,I93 24-59 29 24.60

July 96,632 25.24 27 25.25

August IOI82 27.40 I4 274I

September 65,o68 20.04 9 20-05

October 56,758 2I.02 86 2I.05

November 49,858 I6.20 IO.82 978 I6.52 II.04

December 7I,969 2I.52 2,II4 22.I6

I953:

January I00,739 20.67 3,24I 2I.34

February 9I,I76 2I.36 3,645 22.22

March 98,628 25.54 4,458 26.69

April 86,772 2I.8I 3,860 22.78

May 74,79I 2I.25 3,II9 22.I4

June 73,I73 2I.57 I4.72 3,I04 22.48 I5.34

July 7I,III 20.64 3,284 2I.59

August 66,494 2I.34 3,255 22.39

September 67,598 I9.47 3,027 20.34

October 69,372 20.88 2,584 2i.66

November 8I,438 I8.47 3,o64 I9.I6

December I 27,6 I3 22.08 I 5.22 5,049 22.96 I 5.83

I954:

January i64,847 I8.7I 6,559 I9.45

February i88,740 20.08 8,030 20-93

March 233,675 24-42 I7.87 IO,927 25.56 I8.70

April 2I5,455 23.36 io,i88 24.47

May I95,026 22-47 I6.26 8,985 23-50 I7.0I

June 200,0i8 24.68 9,545 25.86

July I78,5II 2I.34 9,936 22.53

August I73,633 2I.58 I4.57 I0,i85 22.85 I5.43

September i67,242 20.36 9,432 2 I .50

October I49,6i8 2I.38 7,336 22.43

November I45,279 I9.37 I3.42 7,432 20.36 I4.I0

December i68,9i I 23.03 9,244 24.29

I955: January IgO,60I 2I.02 I0,524 22.I8

February I73,I40 I8.93 I4.23 I2,408 20.29 I5.25

March IgO,8I3 22.3I I5,064 24.07

April I44,483 I7.69 II,8o6 I9.I3

May I2I,324 I9.40 I3.77 9,920 20.98 I4.89

June i08,986 I8.9O I2.89 9,680 20.58 I4.03

July 93,666 I7.67 II.35 8,9I7 I9.35 I2.43

August 93,983 I7.84 II.I3 IO,I4I I9.76 I2.33

September 84,055 I7.06 II.75 8,578 i8.8o I2.95

October 69,758 I4.22 9.83 6,005 I5.44 IO.67

November 75,827 I3.48 9.29 6,082 I4.56 IO.04

December 96,9I5 I6.29 II.22 7,495 I7.55 I2.09

I956:

January I40,642 I8.42 I3.32 9,53I I9.67 I4.22

February I47,388 I8.67 I3.66 IO,070 19.94 I4.60

March I56,gI5 i9.85 I4.73 i0,8I7 2I.22 I5.74

April I34,952 20.82 I4.51 8,593 22.I5 I5.43

May I27,252 20.24 I4.I6 7,4I7 2I.42 I4.99

June ii6,554 I8.79 I2.25 6,733 I99 I9.87 I2.95

July II3,234 I7.69 ii.56 6,855 427 I8.76 I2.27




Private supplemental unemployment benefits. Total figures for private supplemental unemployment benefits payments on a monthly basis are not available. Column 5 of Appendix Table 3 gives the combined figures for such payments under plans which cover most of the members of the United Steelworkers of America, the United Rubber Work- ers, and the United Automobile Workers.45

Although the totals in column 5 are incomplete,

APPENDIX TABLE 3 (continued)




(thousands) unemployment unemployment (thousands) (thousands) unemployment unemployment

(I (2) (3) (4) (5) (6) (7)

August $I2I,263 2I.38 % I3-3I% $ 7,767 $ 273 22.75% I4.I7%

September 96,522 I8.I9 I2.05 6,I48 I1539 I9.35 I2.82

October 93,48I I8.27 I2.25 4,987 I,4I7 I9.24 I2.90

November 94,953 I5.87 io.88 4,93I 382 I6.70 II.44

December I08,0I2 I6.o6 Ii.o6 5,654 38 I6.90 II.64

I957: January I83,808 22.07 I5.85 7,I23 36 22.93 I6.46

February I68,854 20.89 I4.50 8,02I 42 2I.88 I5.I9

March I74,608 24.29 I4.02 8,639 I27 25.49 I7.66

April I58,085 23.2I I3.20 7,6I3 32I 24.32 I6.6I

May I49,296 24.I2 I6.39 6,622 372 25.I9 I7.II

June I25,509 I9.I3 I2.44 5,890 5i8 20.03 I3.03

July I32,843 20.9I I3.20 6,567 673 2I.94 I3.86

August I25,I97 20.87 I2.60 6,927 6I5 22.03 I3.30

September II6,250 I8.44 I2.62 6,I97 I,070 I9.42 I3.30

October I34,77I 2I.20 I4.25 5,796 2,543 22.II I4.86

November I40,669 I7.74 I2.46 6,272 2,229 I8.53 I3.02

December 2I7,520 23.68 I6.73 9,07I 2,750 24.66 I7.42

I958:

January 326,248 25.50 I8.58 I2,579 5,0I8 26.48 I9.30

February 330,663 22.38 I6.95 I3,43I 6,968 23.29 I7.63

March 387,9I8 25.68 I8.99 I5,573 I0,744 26.7I I9.75

April 4I9,602 29.35 2I.52 i6,I65 I2,072 30.48 23.35

May 379,I87 28.87 20.99 I4,378 I4,II6 29.97 2I.78

June 333,839 25.69 I8.24 I3,83I II,322 26.76 I9.02

July 3I2,955 24.o6 I7.37 6I,336 8,574 28.74 20.77

August 270,755 2I.42 I4.95 93,27I 9,6I9 28.80 20.I0

September 24I,467 22.I6 I6.I9 I00,097 8,767 3I.35 22.90

October 225,703 22.67 I6.49 79,64I 4,9I8 30.67 22.30

November I82,6I7 I7.88 I3.00 58,208 3,82I 23.58 I7.I4

December 250,I77 2I.68 I5.82 69,74I 4,524 27.72 20.23

I959: January 293,655 2I.47 I6.54 67,382 6,7I5 26.38 20.34

February 26I,488 I8.63 I4.75 58,5I4 4,368 22.79 I8.05

March 263,76I 2I.3I I6.09 59,097 2,5I5 26.o8 I9.69

April 220,I69 22.97 I6.49 48,260 I,579 28.00 20.I0

May I69,892 I9.76 I4.36 29,360 2,800 23.I7 I6.84

June I63,299 I8.99 I2.87 20,507 I,904 2I.37 I4.48

July I6I,753 I8.53 I2.29 I3,693 805 20.10 I3.33

August I60,967 I8.29 I2.22 I0,983 2,6II I9.53 I3.05

September i64,833 I8.67 I3.35 9,766 3,335 I9.78 I4.I4

October I62,668 I8.75 I3.36 8,86i I,38I I9.77 I4.09

November I89,368 I8.35 I3.26 I0,537 7,94I I9.37 I4.00

December 237,752 2I.04 I5.77 I3,580 6,567 22.24 I6.67

45The full titles of the last two unions are: The United

Rubber, Cork, Linoleum and Plastic Workers of America, and the United Automobile, Aircraft and Agricultural Im- plement Workers of America.

The data were supplied to the author by those three unions. For steel they cover the i8 major steel companies with over half a million steelworkers; benefits commenced in September I957 and the figures include amounts in escrow for benefits payable in Ohio and Indiana. For rubber they include all plans and lump-sum payments in Ohio




they probably include almost nine-tenths of all supplemental unemployment benefits payments made during those years.46 Although the supplemental Ibenefits were of great importance to the individuals who received them and represented a significant addition to the rate of unemployment compensation in those three industries, they were of minor significance in terms of the total unemployment benefits for the country as a whole. At their peak in I958, such payments represented less than 5 per cent of the total public jobless benefits for that month. They were not included in the percentage calculations given in columns 6 and 7.

Benefits as Per Cent of Recession Wage Loss The method used to determine what percentage

of recession wage loss was actually compensated by unemployment benefits in each of the three postwar recessions is as follows. First, the recession of 1949-50 was examined to find a period of four con- secutive calendar quarters after recovery set in that had about the same percentage unemployment as the four quarters immediately preceding the recession. Thus, the last quarter of I947 and the first three quarters of I948 were selected as the base-year period, and the last quarter of I950 and the first three quarters of I95I chosen as the comparable recovery period.47 Then the average annual percentage increase in the wages of workers covered by state unemployment insurance laws between the corresponding quarters was calculated and was found to be about eight per cent.48

The wages of covered workers in each of the four base quarters were increased by eight per cent a year in order to provide a calculated quarterly series for the intervening quarters between the I947-48 and the I950-5I periods. They constituted a no-recession series for total wages in covered employment. From that series the actual total wages in covered employment were subtracted to supply quarterly figures of calculated wage loss due to the recession.

For the I954-55 recession the same procedure was followed. The four-quarter base period con- sisted of the last quarter of I952 and the first three quarters of I953. However, there was no post- recession period of four quarters during which the unemployment rate returned to the average of the base year. The closest approach to the base-year average of 2.7 per cent unemployed is that of 3.8 per cent for each of the last two quarters of I955.

Total wages in covered employment in the third quarter of I955 were 9.27 per cent above the third quarter of 1953; in the fourth quarter of 1955 they were 9.27 per cent above the fourth quarter of I954 and I4.I3 per cent above the fourth quarter of I952. Although the annual average of those three figures works out to 4.64 per cent, it was decided to use a 5 per cent yearly increase to calculate the no-recession series, in view of the higher unemployment rates in I955 than in I953. The calculated totals for the last two quarters of I955

at a 5 per cent rate are Ioo.8 per cent of the actual totals.

For the I958-59 recession, data for a comparable subsequent recovery period were not available. Return to pre-recession unemployment rates had not been achieved at the time this paper was written, and, even if that had occurred, current statistics for wages in covered employment would have been missing because such figures are available only about a year later.49 In view of the similarity of the 1958-59 period to that of I954-

55 in terms of average increases in wage scales as well as in projected growth of the labor force (both in percentage terms), a 5 per cent annual increase was also applied to the four base quarters prior to the I958-59 recession (the fourth quarter of I956 and the first three quarters of I957) in order to obtain a no-recession series from which to determine the recession-caused wage loss.50

at the time those payments were made; benefits began in July I957. For autos the figures include only the Big Three automobile companies; benefits began in June I956. The total amounts paid out through I959 were as follows: steel (approximately $68 million), rubber (approximately $3.8 million), autos (approximately $78 million). In steel no figures are included from July through December I959 because the steel strike from July I5 through November 6, I959 practically eliminated such payments (which were down to $296,074 for June I959), and reports of payments for that period were not available when this paper was written.

46The Research Department of the AFL-CIO estimated that, under all supplemental unemployment benefits plans, the payments during the worst six months of 1958 were running at a monthly rate of $io million to $I2 million. See "Supplemental Unemployment Benefits," Collective Bargaining Report, iII (December 1958), 76.

"The comparative figures of per cent of civilian labor force who were unemployed in the United States was an average of 3.65 for I947-48 and of 3.40 for I950-51.

' The average yearly increase by quarters was 7.4, 8.o, 8.6, and 7.4.

Quarterly wages of workers covered by state unemployment insurance laws are published quarterly in Em- ployment and Wages, a special statistical supplement to Labor Market and Employment Security, issued by the U.S. Department of Labor.

49The delay is mainly because statistics for total wages in covered employment in the states rest on quarterly tax returns of employers.

'Undoubtedly the true no-recession increase in wages would have a steeper slope than that resulting when wage progress is interrupted by recurrent recessions, during which wage losses arise that probably cannot be completely made up in the subsequent recovery.




To determine the additional benefit payments due to the recession, the same base-year period of four pre-recession quarters was used. The additional benefits were calculated by subtracting the total benefits in the base-year quarter from the benefits paid in the corresponding quarter of each subsequent year. The result is a quarterly series of total benefits in excess of those paid in the matching quarter of the base year.

The benefit statistics used are those for state programs only. They present no problem except for the I958-59 recession when the six states had their own programs of temporary unemployment compensation. It has been necessary to make certain that in all state comparisons the extended

benefits program is excluded or, where included, is specifically mentioned.

To derive the state figures in Table i, the same procedure and percentages were applied to the state data as those previously used for the nation- wide calculations. In other words, for each state the total wages in covered employment for each quarter of the base period were increased by eight per cent a year (for the I949-50 recession period) and by five per cent a year (for the I954-55 and I958-59 recession periods) to calculate the wage loss caused by the recession. The rate of compensation for recession-caused joblessness was determined by dividing the increase in benefits by the calculated wage loss for that quarter.



the economic significance of unemployment compensation, 1948-1959

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