Letter to the President of the Senate and to the Speaker of the House on the Need for Strengthening the Unemployment Insurance System

Dear Mr._________:

I am transmitting herewith a bill designed to carry out a recommendation made in my Economic Report to the Congress for long-overdue permanent improvements in our Federal-State system of unemployment insurance. The bill would extend coverage of the system to over 3,000,000 more workers, increase the size and duration of the benefits, improve the financing of the system, and make certain technical changes.

I cannot emphasize too strongly the need and importance of strengthening our unemployment insurance system. These improvements will not only ease the burdens of involuntary unemployment, but will add to our built-in defenses against recession.

The deficiencies of the present system of restricted benefits and' coverage have been amply demonstrated in recent years. Twice, in 1958 and again in 1961, Congress found it necessary to enact temporary stop-gap legislation to provide extended unemployment compensation benefits for the long-term unemployed. More and more workers have remained unemployed for long periods of time in the last few years. The percentage of the insured unemployed who were unemployed more than 26 weeks increased from 15 percent in 1956 to 29 percent in 1961, and remained at 21 percent in 1962.

The proposed bill would provide Federal extended benefits for those workers who have long work histories but who have exhausted their State benefits and remained unemployed for more than 26 weeks. The first 26 weeks of unemployment benefits would be left to the States. The Federal Government would assume responsibility for a maximum of 26 additional weeks for those with a much longer, firmer attachment to the labor force than is required under any State law. The maximum of 26 additional weeks of benefits is based on the fact that under the 1961 temporary extended benefit program nearly two-thirds exhausted the 13 additional weeks of benefits provided.

To qualify for extended benefits a worker would have to be employed in at least 78 of the 156 weeks preceding his unemployment, as well as in 26 of the last 52 weeks. In order to qualify for the maximum duration of 26 additional weeks of benefits, a worker must have 104 weeks of employment in the 3 year qualifying period.

Long periods of unemployment in the group of workers with firm attachment to the labor force involve a difficult period of personal adjustment to a changed situation. Unemployment insurance by itself is not a cure for such unemployment; nor is it the only measure necessary to deal with the problem. The Manpower Development and Training Act, the Public Works Acceleration Act, the 1962 Public Assistance amendments, the strengthening of the employment service, particularly the services to those over 45 and to those under 21, are all invaluable tools we have already acquired for this purpose. Other measures we have proposed include the Youth Employment Act, the Senior Citizens Community Planning and Services Act, and the National Education Improvement Act now pending before Congress.

Unemployment insurance is, however, an invaluable additional tool because of its automatic response to economic conditions provides the worker with income and the community with purchasing power while other more individualized programs are getting under way for those for whom they are suitable.

Another major provision of the bill encourages the States to raise their basic benefit payments. Under present-day conditions weekly benefits are often too low in relation to lost wages to enable the worker to meet his basic and nondefferable expenses. Thus the bill establishes an initial Federal goal of individual weekly benefits of 50 percent of individual weekly wages, up to a State maximum of 50 percent of Statewide average weekly wages. This goal increases to 66 2/3 percent by 1970.

The financing of the system would also be strengthened by the bill. A system of equalization grants to States is provided in order to spread the burden of excessively high unemployment compensation costs; and the amount of wages subject to taxation would be increased to $5,200 in calendar year 1966. The new benefits will be financed by a 0.3 percent increase in the net Federal tax.

I am attaching an explanatory statement which describes these Administration proposals in detail. I urge that early consideration be given to this legislation. It will provide a much needed addition to the series of tools with which we can meet the unemployment problems of this country.

Sincerely,

JOHN F. KENNEDY