Experience Rating in Wisconsin, 1940

A T T H E BEGINNING O F 1940, the t h i r d year for which employers obtained modified contr ibut ion rates under the experience-rating provisions of the Wisconsin unemployment compensation act, approximately 4,900 or 60.5 percent of the 8,100 experience-rating accounts eligible for rate m o d i fications obtained rates of less t h a n the standard 2.7 percent, while 600 accounts, representing 7.5 percent of the t o t a l , received rates higher than 2.7 percent. The remaining t h i r d received the s tandard rate. There were 3,600 addit ional employers in Wisconsin who were not eligible for rate var ia tions, p r i m a r i l y because of the brief period dur ing which they had been subject to the law, and who therefore paid contr ibut ions dur ing 1940 at the 2.7-percent rate . I t has been estimated t h a t the revenue obtained from the contr ibutions for 1940 of the former group of 8,121 employers would be about 20 percent less than in 1939, or 40 percent less than the amount which would have been obtained under a un i f o rm 2.7-percent rate . Somewhat more than half of the aggregate 1940 pay ro l l of these employers was subject to contributions a t the rate of 1 percent. I t has also been estimated t h a t the average contr ibut ion rate for 1940 of these 8,121 employers would be about 1.0 percent, 1 in contrast to the average rate of 2.0 percent in 1939, and t h a t the average contr ibut ion rate for a l l subject employers i n the State would be approximately 1.7 percent for 1940. I t may be noted, i n this connection, t h a t the balance in the State fund at the close of 1939 was in excess of $50 m i l l i o n . Collections and interest during 1939 exceeded $15 m i l l i o n , while benefit payments were s l ightly greater than $3.5 m i l l i o n . D a t a now available do not indicate conclusively that a direct relationship exists between size of pay ro l l and contr ibut ion rates, for, while a greater proport ion of the employers w i t h larger pay rolls obtained rate reductions than employers w i t h smaller annual pay rolls, the average annual pay ro l l of those accounts w i t h the lowest rates was lower t h a n the pay r o l l of accounts w i t h highest contr ibut ion rates. As pointed out below, the experience of large and small employers is comparable only for employers w i t h the same period of coverage under the law, for most small employers have had a shorter period of experience under i t t h a n is the case for larger employers. However, industries characterized by l i t t l e fluctuat i on i n levels of product ion and operations—such as banks, ut i l i t i es , and trade groups—contain the largest proport ion of employers obtaining rate reductions. I n industries most subject to seasonal influences, such as construction, a large proport i on of employers were assigned rates i n excess of 2.7 percent. These data, however, do no t indicate the extent to which reduced rates under the experience-rating provisions reflect employer efforts to stabilize employment. I t should be noted, i n this connection, t h a t the amount of benefits charged to employers' accounts not only reflects the r isk of unemployment to which employers i n given industries were exposed b u t , i n addit ion , the benefit structure of the unemployment compensation law.