April 6, 1950
To the ,Congress of the United States:
One of the great advances in economic legislation made during the 1930's was to establish the Federal-State system of employment security. This system has two parts-first, a nation-wide employment service to help workers find jobs and employers find job-seekers, and, second, a nation-wide system of unemployment insurance to help tide workers over periods of unemployment.
Finding a job is of more importance to an unemployed worker, of course, than receiving unemployment insurance benefits. Consequently, great emphasis has always been placed on strengthening and improving the employment service.
We cannot, however, completely eliminate unemployment; even in times of high employment, there will be turnover of jobs and numerous shifts and changes in job opportunities. Consequently, we must have a strong and steadily improving system of unemployment insurance.
Under our Federal-State unemployment insurance system, benefits are paid, in accordance with State laws, to workers who, while able and seeking to work, are unemployed through no fault of their own. These benefits are paid from the proceeds of State payroll taxes, which are deposited in reserve accounts--one for each State--in the Unemployment Trust Fund in the United States Treasury.
In the past twelve years, unemployment insurance has proved its worth not only as an invaluable source of support to unemployed workers and their families, but also as a means of maintaining purchasing power of great value to the entire economy. In 1949, for example, 1.7 billion dollars in benefits were paid to more than seven million individuals, the largest amount for any year in the history of the system. This was a significant factor in preventing serious dislocations during last year's period of economic readjustment.
Our experience with unemployment insurance has revealed weaknesses as well as strengths in the existing system. While many improvements have been made in the State laws since the program began, the system is far from adequate today.
Over 15 million workers--about one-third of all employees--are not protected by unemployment insurance. In 1949, only about one-fifth of the purchasing power lost through unemployment was replaced by unemployment insurance benefits. In 1949, weekly benefits averaged only about $20--not enough to preserve a minimum standard of living. Nearly 2 million workers used up their benefits entirely--showing that benefits were not available for a long enough period. While the unemployment reserve funds of the States have so far proved to be adequate, a few States may soon face financial difficulties because of local concentration of unemployment.
On several occasions in recent years, I have recommended that the system be improved, to extend protection to many workers not now covered; to provide, in every State, benefits for 26 weeks ranging up to $30 a week for single persons, with additional benefits for dependents; and to increase the financial stability of the system.
Action on these proposals has become more urgent as unemployment has increased somewhat in spite of the continuing high levels of business activity. While unemployment dropped over half a million between February and March, on the average nearly 4 1/2 million persons were looking for work during the first three months of this year, as compared to 3 million in the same months of 1949, and nearly 2 1/2 million in 1948. Furthermore, the length of time it takes people to find jobs is becoming longer. One million people--about one out of every four unemployed--have been out of work for 15 weeks or more. A year ago, only 420,000 were without jobs that long, and in 1948, only 330,000.
This gradual growth in unemployment over the last two years is not because there are fewer jobs. Employment has remained at high levels, along with industrial production, consumer incomes, and other indicators of the health of our economy.
But there are more people looking for work. In recent years, up to one million more people have come into the labor market each year, looking for work, than have left the labor market. Part of the new group entering the labor market this year will be the largest number of college graduates in our history--some 500,000 young people, including about 250,000 veterans. In addition, of course, a large number of high school graduates will also be looking for jobs.
Furthermore, as new plants and equipment have been added and supplies of raw materials have become more ample, businessmen have been able to produce more with the same number of workers.
Thus, our labor force has increased, our productivity has increased, but the number of jobs has not kept pace. This emphasizes the importance of expanding our economy so that new jobs will be created to use skills and energies that are now being wasted. It also emphasizes the importance of making better provision for those who are temporarily out of work.
The Congress now is well along toward completing action on legislation to improve the old-age and survivors' insurance and public assistance programs. Like those programs, the unemployment insurance system needs to be improved in the light of experience. Accordingly, I recommend that the Congress turn its attention as soon as possible to strengthening our Federal-State unemployment insurance system.
First, I recommend that coverage be extended to about 6 million workers not now covered. The first major deficiency in the present Federal-State system of unemployment insurance is that it excludes large numbers of workers.
Coverage should be extended to employees of small firms--those employing one to seven workers. Workers in firms employing fewer than eight workers were originally left out of the Federal law because of expected administrative difficulties. In fact, however, such employees have been satisfactorily covered for years under the Federal old-age and survivors' insurance system, and 17 States have already extended their unemployment compensation systems to cover them, without encountering any serious administrative difficulties. Many other States are waiting for the Federal Government to act, and have provisions in their laws which would cover these employees automatically when the coverage of the Federal Act is extended. No reason exists for discriminating longer in the Federal law against such workers.
Coverage should also be extended to Federal Government civilian employees. Although the Federal Government took the leadership in establishing a system of unemployment insurance for workers in private industry, it has not assumed the same obligation toward its own employees. Yet the rate at which Federal workers--especially manual workers--are separated from their jobs is approximately as high as in private industry. Federal workers should no longer be denied the protection of unemployment insurance.
I also propose extensions of coverage to about 500,000 persons who are employed on a commission basis, and about 200,000 workers in occupations of an industrial nature connected with agriculture, all of whom are excluded at present. Moreover, the Federal unemployment insurance legislation should be extended to Puerto Rico, subject to its acceptance by the Territorial Legislature.
Second, I recommend the establishment of nation-wide minimum levels for amounts and duration of unemployment benefits, in order to correct the second major deficiency in the present unemployment insurance system--the inadequacy of benefits.
At present, while the Federal law includes a number of standards which the States are required to meet, it does not establish minimum levels for benefit amounts or duration. Maximum weekly benefits in the various States now range from $15 to $27 for single persons; benefits are somewhat larger for persons with dependents in the 11 States providing dependents' allowances. With these maximum levels, average weekly benefits for the Nation as a whole were just over $20 in 1949.
The variations among States create serious inequities. They mean that workers who lose their jobs in identical circumstances are treated very differently because of the accident of geographical location. They mean that businessmen in some States suffer a greater loss in markets when unemployment occurs than do those in other States.
Furthermore, while the States generally have increased benefits in recent years, so that the situation is not nearly so bad as in the case of old-age and survivors' benefits, in most States the increases in benefits have lagged considerably behind increases in wages and costs of living. Thus, unemployment benefits today replace a smaller proportion of a worker's regular wages than was the case when the system was started.
For these reasons, I believe that nationwide minimums should be established by law which will assure adequate benefits in all States. The standards proposed are these: benefits for single persons should approximate 50 percent of normal earnings, up to a maximum of at least $30 a week. Additional allowances should be granted for individuals with dependents. The proportion of previous earnings replaced would vary with the number of dependents, up to a maximum of 70 percent of wages, or $42, whichever is lower, for an individual with three or more dependents.
These standards are not high. If they had been in effect, the national average weekly benefits in 1949 would have been just over $24. But this would be a substantial improvement in an income level which, at best, is intended to provide only for subsistence expenses. Furthermore, uniform standards would reduce present inequities in benefit levels among different States. Some variation in benefit amounts would and should remain, reflecting the differences in wage levels and costs of living in different parts of the country.
At present, the maximum duration of benefits varies among the States from 12 to 26 weeks. Like the variation in size of benefits, this is inequitable, and in many States simply represents a lag in reaching what was considered from the beginning to be a desirable standard, but which was originally set low because of actuarial uncertainties. With this wide range, the average duration of benefits in 1949 was less than 13 weeks. Because of the short duration of benefits, nearly 2 million workers exhausted their rights to benefits before finding another job.
Benefits should be available for at least 26 weeks in a year to all workers who are out of work that long. Experience in the States which have increased the duration of benefits is that while average duration does not rise very much, because most workers find a new job before using up benefits, the number who use up their benefits entirely is markedly decreased. It is estimated that, under my proposal, the number of workers who exhausted their benefits in 1949 would have been only half as large as it was.
The combined effect of my recommendations for extended coverage, higher benefits, and longer duration, would have resulted in about $850 million more in benefits--and in consumer demand--in 1949. The cost of these improvements would be moderate. At the same time that weekly benefits are raised, the upper limit to the amount of wages taxed should be raised from $3,000 to $4,800 per worker, in line with the increases in wage levels. On this basis, the combined cost of all benefits for all States under these proposals would have been about 1.2 percent of taxable payrolls in 1948 and 2.5 percent in 1949--compared with actual costs (on the basis of the present $3,000 wage limit) of .9 percent of taxable payrolls in 1948 and 2.2 percent in 1949.
In most States, the rate of tax has been extremely low in recent years--many employers have had to pay no tax whatever. Some States have had to increase rates somewhat last year or this year, but in all but a few cases, taxes are still well below the rate of 2.7 percent contemplated when the system was started. Under my proposals, many States would not have to increase tax rates to cover all the increased costs, since they still have excess reserves. Most, if not all, States would find no trouble meeting the additional costs within the 2.7 percent tax rate.
Consequently, I believe that the standards I propose will achieve substantial improvement in the unemployment insurance system, benefiting both workers and businessmen, at very reasonable costs. As is the case at present with respect to coverage, the Federal law should not prevent the States from exceeding the minimum standards if they wish to do so.
Third, I recommend that adequate methods should be required to provide benefits for workers who move from one State to another.
Clearly a worker who is employed in two different States during a year is as entitled to unemployment insurance benefits when out of work as a worker who is employed in only one. The States have generally recognized this, and have attempted voluntarily to work out methods for paying benefits in such interstate cases. They have, however, been only partially successful. Interstate workers generally must wait much longer to receive benefits than intrastate workers. Furthermore, the benefits of many interstate workers are lower than if they had worked in only one State.
It is a difficult problem to develop adequate methods for paying benefits promptly and equitably to interstate workers in our Federal-State unemployment insurance system. Nevertheless, it is in the national interest to encourage the mobility of labor, since that is indispensable to economic expansion in a free society like ours. Consequently, I believe that the States should be required to adopt such methods as are necessary to provide fair and adequate protection for interstate workers.
Fourth, I recommend that both Federal and State laws concerning fraud and disqualifications should be revised and improved.
It was a weakness in the original Federal legislation that it did not clearly require the States to deal adequately with the question of fraud. Some States--without going to uneconomical extremes in inspection and policing-have instituted effective methods for preventing or detecting fraudulent claims. I believe, however, that the Federal law should be clarified so that all States can be required to have adequate means for dealing with those few individuals who attempt to obtain benefits through misrepresentation.
During the last few years, some States have considerably enlarged the number of reasons for disqualifying workers who seek unemployment benefits and have increased the severity of penalties for disqualification. These excessive disqualifications have operated to prevent persons who are genuinely out of work through no fault of their own from receiving benefits. These over-severe disqualification provisions, which penalize the innocent along with the guilty, should be corrected.
Fifth, I recommend, at this time, two improvements in the financing arrangements for unemployment insurance.
Since the beginning of the program, a small part of the unemployment tax has been collected by the Federal Government and included in general Federal revenues. The administrative costs of the program--both Federal and State--have been paid out of general Federal revenues, and have never been as large as the Federal unemployment tax collections. I propose that the Federal unemployment tax be paid into a special Federal unemployment account in the Unemployment Trust Fund (which now includes the separate State reserve accounts for the payment of benefits). This account would be used exclusively to pay the cost of State and Federal administration of the employment security program, and the cost of reinsurance grants, to be available to States who encounter temporarily severe financial difficulties.
Experience has demonstrated that the cost of unemployment insurance varies widely among the different States. This is mainly due to differences in each State's economic structure and in the incidence of unemployment in certain industries, which are beyond the control of the individual State. It has become evident that a few States, while able to finance an adequate system of unemployment insurance in normal periods, may not be able to maintain the solvency of their unemployment funds in a period of severe unemployment under the present financial provisions provided in the Federal legislation. So that these States will not be forced to increase their tax rates unduly during periods of declining employment and payrolls, the legislation should be amended to provide assistance to such States through reinsurance grants when their funds approach exhaustion. This will be a major step toward strengthening our Federal-State system of unemployment insurance, since it will, without detracting from the independence of State action, gain some of the advantages of pooled reserves.
A strengthened unemployment insurance system not only will furnish more adequate aid to those who become unemployed, but also will do more to maintain the high volume of consumer purchasing power so necessary to the welfare of the entire economy. Thus it is a strong element in our program to support growth and expansion in the economy.
Our essential economic problem is to put to sound, productive use our increasing technical knowledge and our growing labor force. To this end, we need imaginative and enterprising investment--in plant capacity, in new equipment, in basic resource development. To this end, we need vigorous competition and a growing number of new businesses. To this end, we need a stable agriculture, sensible wage-price-profit decisions, and mature labor-management relations. To this end, we need an expanding world economy, with a productive flow of international trade and investment.
Both private and public policies must be directed to these purposes, and I have recommended a series of measures to the Congress for Federal action. My present proposal to strengthen our unemployment insurance system is one of these measures.
I am particularly urging action at this session of Congress on unemployment insurance because State legislation must follow the Federal amendments. Action by the Congress this year would clear the way for State action in 1951, when practically all of the State legislatures will be meeting in regular session.
But the primary reason for Congressional action is the real need of those who are unemployed. The unemployment insurance system is a tried and proven means of assisting them. That system urgently needs strengthening. I therefore request favorable consideration of these recommendations at this session of Congress.
HARRY S. TRUMAN
NOTE: For the statement by the President upon signing the Social Security Act Amendments of 1950 on August 28, see Item 224.
The President's message was released at Key West, Fla.
To the ,Congress of the United States:
One of the great advances in economic legislation made during the 1930's was to establish the Federal-State system of employment security. This system has two parts-first, a nation-wide employment service to help workers find jobs and employers find job-seekers, and, second, a nation-wide system of unemployment insurance to help tide workers over periods of unemployment.
Finding a job is of more importance to an unemployed worker, of course, than receiving unemployment insurance benefits. Consequently, great emphasis has always been placed on strengthening and improving the employment service.
We cannot, however, completely eliminate unemployment; even in times of high employment, there will be turnover of jobs and numerous shifts and changes in job opportunities. Consequently, we must have a strong and steadily improving system of unemployment insurance.
Under our Federal-State unemployment insurance system, benefits are paid, in accordance with State laws, to workers who, while able and seeking to work, are unemployed through no fault of their own. These benefits are paid from the proceeds of State payroll taxes, which are deposited in reserve accounts--one for each State--in the Unemployment Trust Fund in the United States Treasury.
In the past twelve years, unemployment insurance has proved its worth not only as an invaluable source of support to unemployed workers and their families, but also as a means of maintaining purchasing power of great value to the entire economy. In 1949, for example, 1.7 billion dollars in benefits were paid to more than seven million individuals, the largest amount for any year in the history of the system. This was a significant factor in preventing serious dislocations during last year's period of economic readjustment.
Our experience with unemployment insurance has revealed weaknesses as well as strengths in the existing system. While many improvements have been made in the State laws since the program began, the system is far from adequate today.
Over 15 million workers--about one-third of all employees--are not protected by unemployment insurance. In 1949, only about one-fifth of the purchasing power lost through unemployment was replaced by unemployment insurance benefits. In 1949, weekly benefits averaged only about $20--not enough to preserve a minimum standard of living. Nearly 2 million workers used up their benefits entirely--showing that benefits were not available for a long enough period. While the unemployment reserve funds of the States have so far proved to be adequate, a few States may soon face financial difficulties because of local concentration of unemployment.
On several occasions in recent years, I have recommended that the system be improved, to extend protection to many workers not now covered; to provide, in every State, benefits for 26 weeks ranging up to $30 a week for single persons, with additional benefits for dependents; and to increase the financial stability of the system.
Action on these proposals has become more urgent as unemployment has increased somewhat in spite of the continuing high levels of business activity. While unemployment dropped over half a million between February and March, on the average nearly 4 1/2 million persons were looking for work during the first three months of this year, as compared to 3 million in the same months of 1949, and nearly 2 1/2 million in 1948. Furthermore, the length of time it takes people to find jobs is becoming longer. One million people--about one out of every four unemployed--have been out of work for 15 weeks or more. A year ago, only 420,000 were without jobs that long, and in 1948, only 330,000.
This gradual growth in unemployment over the last two years is not because there are fewer jobs. Employment has remained at high levels, along with industrial production, consumer incomes, and other indicators of the health of our economy.
But there are more people looking for work. In recent years, up to one million more people have come into the labor market each year, looking for work, than have left the labor market. Part of the new group entering the labor market this year will be the largest number of college graduates in our history--some 500,000 young people, including about 250,000 veterans. In addition, of course, a large number of high school graduates will also be looking for jobs.
Furthermore, as new plants and equipment have been added and supplies of raw materials have become more ample, businessmen have been able to produce more with the same number of workers.
Thus, our labor force has increased, our productivity has increased, but the number of jobs has not kept pace. This emphasizes the importance of expanding our economy so that new jobs will be created to use skills and energies that are now being wasted. It also emphasizes the importance of making better provision for those who are temporarily out of work.
The Congress now is well along toward completing action on legislation to improve the old-age and survivors' insurance and public assistance programs. Like those programs, the unemployment insurance system needs to be improved in the light of experience. Accordingly, I recommend that the Congress turn its attention as soon as possible to strengthening our Federal-State unemployment insurance system.
First, I recommend that coverage be extended to about 6 million workers not now covered. The first major deficiency in the present Federal-State system of unemployment insurance is that it excludes large numbers of workers.
Coverage should be extended to employees of small firms--those employing one to seven workers. Workers in firms employing fewer than eight workers were originally left out of the Federal law because of expected administrative difficulties. In fact, however, such employees have been satisfactorily covered for years under the Federal old-age and survivors' insurance system, and 17 States have already extended their unemployment compensation systems to cover them, without encountering any serious administrative difficulties. Many other States are waiting for the Federal Government to act, and have provisions in their laws which would cover these employees automatically when the coverage of the Federal Act is extended. No reason exists for discriminating longer in the Federal law against such workers.
Coverage should also be extended to Federal Government civilian employees. Although the Federal Government took the leadership in establishing a system of unemployment insurance for workers in private industry, it has not assumed the same obligation toward its own employees. Yet the rate at which Federal workers--especially manual workers--are separated from their jobs is approximately as high as in private industry. Federal workers should no longer be denied the protection of unemployment insurance.
I also propose extensions of coverage to about 500,000 persons who are employed on a commission basis, and about 200,000 workers in occupations of an industrial nature connected with agriculture, all of whom are excluded at present. Moreover, the Federal unemployment insurance legislation should be extended to Puerto Rico, subject to its acceptance by the Territorial Legislature.
Second, I recommend the establishment of nation-wide minimum levels for amounts and duration of unemployment benefits, in order to correct the second major deficiency in the present unemployment insurance system--the inadequacy of benefits.
At present, while the Federal law includes a number of standards which the States are required to meet, it does not establish minimum levels for benefit amounts or duration. Maximum weekly benefits in the various States now range from $15 to $27 for single persons; benefits are somewhat larger for persons with dependents in the 11 States providing dependents' allowances. With these maximum levels, average weekly benefits for the Nation as a whole were just over $20 in 1949.
The variations among States create serious inequities. They mean that workers who lose their jobs in identical circumstances are treated very differently because of the accident of geographical location. They mean that businessmen in some States suffer a greater loss in markets when unemployment occurs than do those in other States.
Furthermore, while the States generally have increased benefits in recent years, so that the situation is not nearly so bad as in the case of old-age and survivors' benefits, in most States the increases in benefits have lagged considerably behind increases in wages and costs of living. Thus, unemployment benefits today replace a smaller proportion of a worker's regular wages than was the case when the system was started.
For these reasons, I believe that nationwide minimums should be established by law which will assure adequate benefits in all States. The standards proposed are these: benefits for single persons should approximate 50 percent of normal earnings, up to a maximum of at least $30 a week. Additional allowances should be granted for individuals with dependents. The proportion of previous earnings replaced would vary with the number of dependents, up to a maximum of 70 percent of wages, or $42, whichever is lower, for an individual with three or more dependents.
These standards are not high. If they had been in effect, the national average weekly benefits in 1949 would have been just over $24. But this would be a substantial improvement in an income level which, at best, is intended to provide only for subsistence expenses. Furthermore, uniform standards would reduce present inequities in benefit levels among different States. Some variation in benefit amounts would and should remain, reflecting the differences in wage levels and costs of living in different parts of the country.
At present, the maximum duration of benefits varies among the States from 12 to 26 weeks. Like the variation in size of benefits, this is inequitable, and in many States simply represents a lag in reaching what was considered from the beginning to be a desirable standard, but which was originally set low because of actuarial uncertainties. With this wide range, the average duration of benefits in 1949 was less than 13 weeks. Because of the short duration of benefits, nearly 2 million workers exhausted their rights to benefits before finding another job.
Benefits should be available for at least 26 weeks in a year to all workers who are out of work that long. Experience in the States which have increased the duration of benefits is that while average duration does not rise very much, because most workers find a new job before using up benefits, the number who use up their benefits entirely is markedly decreased. It is estimated that, under my proposal, the number of workers who exhausted their benefits in 1949 would have been only half as large as it was.
The combined effect of my recommendations for extended coverage, higher benefits, and longer duration, would have resulted in about $850 million more in benefits--and in consumer demand--in 1949. The cost of these improvements would be moderate. At the same time that weekly benefits are raised, the upper limit to the amount of wages taxed should be raised from $3,000 to $4,800 per worker, in line with the increases in wage levels. On this basis, the combined cost of all benefits for all States under these proposals would have been about 1.2 percent of taxable payrolls in 1948 and 2.5 percent in 1949--compared with actual costs (on the basis of the present $3,000 wage limit) of .9 percent of taxable payrolls in 1948 and 2.2 percent in 1949.
In most States, the rate of tax has been extremely low in recent years--many employers have had to pay no tax whatever. Some States have had to increase rates somewhat last year or this year, but in all but a few cases, taxes are still well below the rate of 2.7 percent contemplated when the system was started. Under my proposals, many States would not have to increase tax rates to cover all the increased costs, since they still have excess reserves. Most, if not all, States would find no trouble meeting the additional costs within the 2.7 percent tax rate.
Consequently, I believe that the standards I propose will achieve substantial improvement in the unemployment insurance system, benefiting both workers and businessmen, at very reasonable costs. As is the case at present with respect to coverage, the Federal law should not prevent the States from exceeding the minimum standards if they wish to do so.
Third, I recommend that adequate methods should be required to provide benefits for workers who move from one State to another.
Clearly a worker who is employed in two different States during a year is as entitled to unemployment insurance benefits when out of work as a worker who is employed in only one. The States have generally recognized this, and have attempted voluntarily to work out methods for paying benefits in such interstate cases. They have, however, been only partially successful. Interstate workers generally must wait much longer to receive benefits than intrastate workers. Furthermore, the benefits of many interstate workers are lower than if they had worked in only one State.
It is a difficult problem to develop adequate methods for paying benefits promptly and equitably to interstate workers in our Federal-State unemployment insurance system. Nevertheless, it is in the national interest to encourage the mobility of labor, since that is indispensable to economic expansion in a free society like ours. Consequently, I believe that the States should be required to adopt such methods as are necessary to provide fair and adequate protection for interstate workers.
Fourth, I recommend that both Federal and State laws concerning fraud and disqualifications should be revised and improved.
It was a weakness in the original Federal legislation that it did not clearly require the States to deal adequately with the question of fraud. Some States--without going to uneconomical extremes in inspection and policing-have instituted effective methods for preventing or detecting fraudulent claims. I believe, however, that the Federal law should be clarified so that all States can be required to have adequate means for dealing with those few individuals who attempt to obtain benefits through misrepresentation.
During the last few years, some States have considerably enlarged the number of reasons for disqualifying workers who seek unemployment benefits and have increased the severity of penalties for disqualification. These excessive disqualifications have operated to prevent persons who are genuinely out of work through no fault of their own from receiving benefits. These over-severe disqualification provisions, which penalize the innocent along with the guilty, should be corrected.
Fifth, I recommend, at this time, two improvements in the financing arrangements for unemployment insurance.
Since the beginning of the program, a small part of the unemployment tax has been collected by the Federal Government and included in general Federal revenues. The administrative costs of the program--both Federal and State--have been paid out of general Federal revenues, and have never been as large as the Federal unemployment tax collections. I propose that the Federal unemployment tax be paid into a special Federal unemployment account in the Unemployment Trust Fund (which now includes the separate State reserve accounts for the payment of benefits). This account would be used exclusively to pay the cost of State and Federal administration of the employment security program, and the cost of reinsurance grants, to be available to States who encounter temporarily severe financial difficulties.
Experience has demonstrated that the cost of unemployment insurance varies widely among the different States. This is mainly due to differences in each State's economic structure and in the incidence of unemployment in certain industries, which are beyond the control of the individual State. It has become evident that a few States, while able to finance an adequate system of unemployment insurance in normal periods, may not be able to maintain the solvency of their unemployment funds in a period of severe unemployment under the present financial provisions provided in the Federal legislation. So that these States will not be forced to increase their tax rates unduly during periods of declining employment and payrolls, the legislation should be amended to provide assistance to such States through reinsurance grants when their funds approach exhaustion. This will be a major step toward strengthening our Federal-State system of unemployment insurance, since it will, without detracting from the independence of State action, gain some of the advantages of pooled reserves.
A strengthened unemployment insurance system not only will furnish more adequate aid to those who become unemployed, but also will do more to maintain the high volume of consumer purchasing power so necessary to the welfare of the entire economy. Thus it is a strong element in our program to support growth and expansion in the economy.
Our essential economic problem is to put to sound, productive use our increasing technical knowledge and our growing labor force. To this end, we need imaginative and enterprising investment--in plant capacity, in new equipment, in basic resource development. To this end, we need vigorous competition and a growing number of new businesses. To this end, we need a stable agriculture, sensible wage-price-profit decisions, and mature labor-management relations. To this end, we need an expanding world economy, with a productive flow of international trade and investment.
Both private and public policies must be directed to these purposes, and I have recommended a series of measures to the Congress for Federal action. My present proposal to strengthen our unemployment insurance system is one of these measures.
I am particularly urging action at this session of Congress on unemployment insurance because State legislation must follow the Federal amendments. Action by the Congress this year would clear the way for State action in 1951, when practically all of the State legislatures will be meeting in regular session.
But the primary reason for Congressional action is the real need of those who are unemployed. The unemployment insurance system is a tried and proven means of assisting them. That system urgently needs strengthening. I therefore request favorable consideration of these recommendations at this session of Congress.
HARRY S. TRUMAN
NOTE: For the statement by the President upon signing the Social Security Act Amendments of 1950 on August 28, see Item 224.
The President's message was released at Key West, Fla.