Experience-Rating Operations in 1941

D U R I N G 1941, experience-rating provisions were operative under 17 of the 38 State unemployment compensation laws which provide for modification of employers' contribution rates on the basis of their experience with the risk of unemployment. Modified rates had been in effect in only 4 of these States in the preceding year; during 1942, experience rating will be in operation in 34 States. Probably the most important result of experience rating in 1941 was the substantial decline in collections. It is estimated that employer collections based on 1941 wages were reduced by $58.1 million, or 23 percent of the amount which would have been obtained under a uniform 2.7-percent contribution rate; for the country as a whole, the loss approximated 6 percent. In the 17 States where experience-rating provisions were operative, the State-wide average contribution rate varied from 1.3 to 2.6 percent. Reduced rates were assigned to 55 percent of all employers eligible for rate modification, and contribution rates above 2.7 percent,1 to 13 percent. In 1939 these 17 States reported average monthly employment of 5.5 million, 26 percent of the total for the United States. The experience-rating provisions in effect produced very different results in terms of the distribution of reduced and increased rates among employers. Even among States with the same type of experience-rating plan, variations of more than 500 percent in the proportion of employers with reduced rates are accounted for, in part, by differences in the date when an employer had to begin paying contributions in order to qualify for a rate reduction in 1941. Differences in rate schedules among these States accounted for variations of as much as 1.5 percent in the contribution rates assigned to employers with identical benefit experience. Since the statistics on which this analysis is based do not indicate the employment practices of individual employers, the data do not reveal