Since the early 1900's, unemployment insurance in one form or another has been accepted and practiced in both Europe and the United States. Not until the disastrous depression of the 1930's, however, was there widespread recognition in this country of the need for federal legislation to cushion the shock of crippling economic slumps.
In 1935, the U.S. Congress passed the unemployment insurance provisions of the Social Security Act. This established a federal-state system of paying monetary benefits to eligible unemployed persons. Vermont's Unemployment Compensation Law was enacted in 1936 and was fully operative by 1938.
Over the years there have been substantial changes in the program, but the principle of unemployment insurance has been proven to be sound. Several recessions have been weathered; and even the recent rapidity of technological, economic, and political shifts in the United States and the world have not invalidated the essential premises of the system.
Among those major premises are:
1. That the primary objective of the unemployment insurance is to alleviate the hardship of lost wages for workers who become involuntarily unemployed, and who are able and willing to accept suitable jobs when available;
2. That eligible claimants receive unemployment insurance payments not as charity, but as a matter of right – and no means or “needs” test is involved;
3. That payments to the unemployed, though only a partial replacement of the wage loss, permit continuation of the unemployed workers non-deferrable purchases. This helps those from whom they buy, and often prevents secondary unemployment which would result if the total amount of wages lost through unemployment was completely withdrawn from circulation;
4. That unemployment is a normal accompaniment of production, and unemployment insurance is a production cost, which should be borne by management as are other cost. For that reason, taxes collected solely from employers are used to build up state reserve funds, from which unemployment benefits are paid, and;
That, form the standpoint of employers, unemployment insurance for short spells of unemployment tends to hold together a labor force that can be called upon when business improves.