A Distinctive System: Origins and Impact of U.S. Unemployment Compensation

53 Pages Posted: 7 Jul 2000 Last revised: 4 Oct 2010

See all articles by Katherine Baicker

Katherine Baicker

Harvard University - Department of Health Policy & Management; National Bureau of Economic Research (NBER)

Claudia Goldin

Harvard University - Department of Economics; National Bureau of Economic Research (NBER)

Lawrence F. Katz

Harvard University - Department of Economics; National Bureau of Economic Research (NBER)

Date Written: January 1997

Abstract

Unemployment compensation in the United States was signed into law in August 1935 as part of the omnibus Social Security Act. Drafted in a period of uncertainty and economic distress, the portions that dealt with unemployment insurance were crafted to achieve a multiplicity of goals, among them passage of the act and a guarantee of its constitutionality. Along with the federal-state structure went experience-rating and characteristics added by the states, such as the limitation on duration of benefits. The U.S. unemployment compensation system is distinctive among countries by virtue of its federal-state structure, experience-rating, and limitation on benefits. We contend that these features were products of the times, reflecting expediency more than efficiency, and thus that UI would have been different had it been passed in another decade. But how different is the UI system in the United States because of these features, and how have they affected the U.S. labor market? We present evidence showing that more seasonality in manufacturing employment in 1909-29 is related to higher UI benefits from 1947 to 1969, if a state's manufacturing employment share is below the national mean. Lobbying activities of seasonal industries appear important in the evolution of the parameters. We also present suggestive evidence on the relationship between declining seasonality and experience-rating.

Suggested Citation

Baicker, Katherine and Goldin, Claudia and Katz, Lawrence F., A Distinctive System: Origins and Impact of U.S. Unemployment Compensation (January 1997). NBER Working Paper No. w5889. Available at SSRN: https://ssrn.com/abstract=225671

Katherine Baicker

Harvard University - Department of Health Policy & Management ( email )

677 Huntington Avenue
Boston, MA 02115
United States

National Bureau of Economic Research (NBER)

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Claudia Goldin (Contact Author)

Harvard University - Department of Economics ( email )

Littauer Center
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617-495-3934 (Phone)

National Bureau of Economic Research (NBER) ( email )

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Lawrence F. Katz

Harvard University - Department of Economics ( email )

Littauer Center
Room 215
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United States
617-495-5148 (Phone)
617-868-2742 (Fax)

HOME PAGE: http://www.economics.harvard.edu/faculty/katz/katz

National Bureau of Economic Research (NBER) ( email )

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