“No work, no wages, and no buying power is the most crucial [problem]. … When the family pocketbook is empty, the neighborhood stores are empty.”
These words were spoken by Frances Perkins in 1933, but they convey an economic principle that seems to be lost in today’s debate.
The economic well-being of the overall economy and jobs for individual workers are inextricably linked. Maine’s current unemployment rate of 7.6 percent means that 53,800 people are out of work. Nationally, 41 percent of all unemployed people have been out of work for six months or longer.
For those long-term unemployed, federal unemployment benefits have supplemented regular state unemployment benefits by providing additional weeks of coverage. Maine Department of Labor numbers suggest that between 5,000 and 6,000 of these Maine people will lose these federal unemployment benefits — unless Congress acts — when the extensions are slated to expire in December.
Appointed as the first woman Cabinet member by Franklin Roosevelt, Frances Perkins served as secretary of labor for 12 years. She was principally responsible for crafting the administration’s package of programs designed to both mitigate the suffering caused by the Great Depression and help prevent similar tragedies in the future.
Perkins knew that understanding the economy required more than analyzing charts; it required understanding people and work. Speaking in 1935, she said, “It has taken the rapid industrialization of the last few decades … to teach us that a man might become a victim of circumstances far beyond his control.”
Both Perkins and President Roosevelt recognized that the changing economy had forced millions of workers out of jobs — something neither they nor the displaced workers could have predicted or prepared for. But both also knew that responding to a crisis of such magnitude could not be remedied through individual action. A bold systemic response was required.
Knowing that the high levels of poverty, hunger and homelessness people were experiencing were caused by a lack of jobs, not the result of personal character flaws, the Roosevelt Administration created a system that would serve as a buffer against the harmful effects of unforeseen job loss. The result was a social insurance program commonly known as the Social Security Act, of which Unemployment Insurance, or UI, is one component. The UI program provides benefits for partial wage replacement when wage earners lose a job through no fault of their own, using a fund created with payroll taxes.
As we’ve learned since 1935, unemployment insurance is immediately spent by its recipients on necessities such as food and rent. These dollars serve as an economic stabilizer for the individual, their families and the community. A recent report commissioned by the U.S. Department of Labor during the Bush Administration found that there is $2 of economic activity for every $1 received in unemployment benefits — demonstrating that sustaining communities is a direct result of benefits made to individuals.
Today, workers once again are facing “circumstances far beyond their control.” The economy has undergone rapid change. During the Great Recession that began on Wall Street with the bank meltdowns, more than 8 million jobs have been lost. Workers have struggled to adapt.
In response to the crisis, Congress included additional funding for unemployment insurance as part of the “stimulus” package. Recent Census Bureau estimates are that unemployment insurance benefits kept 3.3 million people, including 1 million children, out of poverty in 2009 alone.
At the end of her tenure as secretary of labor, Perkins reflected, “These social and economic reforms [are] a turning point from a careless neglect of human values and toward an order of mutual and practical benevolence within a free and competitive industrial economy.”
Today, as tens of thousands of Maine people remain out of work, forthcoming policy actions will demonstrate if we still believe that we have a “mutual” stake in responding to the boom and bust cycles of the economy or if those unemployed workers — and the community businesses they support — are on their own.
Laura A. Fortman is the executive director of the Frances Perkins Center and former commissioner of the Maine Department of Labor. The center aims to fulfill the legacy of Frances Perkins, principal architect of the New Deal, by continuing her work for social and economic justice and preserving her family homestead in Newcastle. Fortman is a member of the Maine Regional Network, part of the Scholars Strategy Network, which brings together scholars across the country to address public challenges and their policy implications. Members’ columns appear in the BDN every other week.