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The nation's first unemployment compensation law

Written by Joseph A. Ranney, Attorney at Law
Phone: (608) 283-5612

In 1931 Wisconsin became the first state in the nation to create an unemployment compensation system. Unemployment compensation is really an offshoot of the reforms made by Governor Robert LaFollette and his Progressive supporters between 1900 and 1915. "Fighting Bob's" son, Philip LaFollette, was governor in 1931, and unemployment compensation is probably the greatest achievement of Wisconsin's second generation of Progressives.

The Wisconsin State Federation of Labor (WSFL) began the campaign for unemployment compensation in 1910, but support grew slowly. About 1920 Professor John Commons of the University of Wisconsin, one of the great architects of many of the early Progressive reform laws, became interested in the issue. Commons prepared a draft plan, modeled on the British system. He and the WSFL lobbied hard for his plan throughout the 1920s, but with little success.

Why didn't Commons' plan pass quickly? There were several reasons. Throughout the 19th century, most Americans believed that unemployment was a matter of individual bad luck or character defects. This belief was deeply ingrained in American culture. Only gradually did Americans realize that in fact unemployment was an unavoidable feature of the modern industrial economy.

Commons persevered. His plan gradually gained support as legislators became familiar with it. The beginning of the Great Depression in 1929 also made Wisconsinites acutely aware of the need for some sort of security system to cushion the effects of unemployment on both society and the individual.

In the 1930 election Philip LaFollette replaced a conservative as governor and one of Commons' former students, Harold Groves, was elected to the Legislature. Groves' political skills nicely complemented Commons' intellectual skills. Commons had proposed that all employers contribute to a common fund, but many employers argued this would help employers with high worker turnover at the expense of more stable employers. Groves met this objection by creating separate reserve "accounts" for each employer. Farmers, who were a potent source of opposition to the plan, were exempted from it.

Finally, in response to employers' arguments that the new law would impose another big government program on Wisconsinites, Groves threw down the gauntlet by proposing that if Wisconsin employers set up private funds that covered at least 175,000 workers within two years the new law would not go into effect.

With these modifications, the Legislature enacted the plan into law in 1932. Employers were never able to meet Groves' challenge by setting up private plans. The new system worked so well that they soon dropped their opposition.

The new law was soon praised as a model for other states and was copied by many of them. Unemployment compensation was the Progressives' last great social program, and it remains one of the finest contributions Wisconsin has made to the nation.

Note: The views expressed in this article are the author's alone. Distributed as a public service by the Wisconsin Supreme Court in honor of the state's sesquicentennial.

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