INCREASE IN WAGE BASE SEC. 302. (a) Effective with respect to remuneration paid after December 31, 1968, section 3306(b) (1) of the Internal Revenue Code of 1954 is amended by striking out "$3,000" each place it appears and inserting in lieu thereof "$3,900". (b) Effective with respect to remuneration paid after December 31, 1971, section 3306 (b) (1) of such Code (as amended by subsection (a)) is amended by striking out "$3,900” each place it appears and inserting in lieu thereof "$4,200". Passed the House of Representatives June 22, 1966. Attest: RALPH R. ROBERTS, Clerk. The CHAIRMAN. I will ask that each Senator limit himself to 10 minutes on the first round of interrogating Secretary Wirtz, and thereafter, why we will let each Senator ask as many questions as he wants to when his next turn comes. The Honorable W. Willard Wirtz, Secretary of Labor, is our first witness. You are a very busy man these days, Mr. Secretary, and we know you have important responsibilities. We wish you very well, and we will try to expedite this hearing as far as your testimony is concerned to meet your schedule. You may proceed as you would prefer, Mr. Wirtz. I have a copy of your prepared statement. HON. W. WILLARD WIRTZ, SECRETARY OF LABOR; ACCOMPANIED BY STANLEY H. RUTTENBERG, ASSISTANT SECRETARY FOR MANPOWER; ROBERT C. GOODWIN, ADMINISTRATOR, BUREAU OF EMPLOYMENT SECURITY; WILLIAM U. NORWOOD, JR., DIRECTOR, UNEMPLOYMENT INSURANCE SERVICE, BUREAU OF EMPLOYMENT SECURITY; AND SAMUEL V. MERRICK, SPECIAL ASSISTANT TO THE SECRETARY FOR LEGISLATIVE AFFAIRS; THE DEPARTMENT OF LABOR Secretary WIRTZ. Thank you very much, Mr. Chairman and members of the committee. First, with respect to the importance of anything else, nothing else can compare with the importance of this particular piece of legislation as far as the interests of the Department are concerned. I have filed or have for the committee, Mr. Chairman, copies of the statement which have been prepared. If it meets your convenience, I should like very much to suggest that it be filed and made a part of the record and I will summarize it. The CHAIRMAN. Without objection we will do that. That is what the reorganization calls for, Mr. Secretary. It is perfectly all right with me and we will proceed on that basis. (The prepared statement, with attachment, follow :) PREPARED STATEMENT OF HON. W. WILLARD WIRTZ, SECRETARY OF LABOR Mr. Chairman and Members of the Committee, too many times, a Secretary of Labor has had to appear before this Committee to discuss unemployment insurance in a setting of widespread unemployment. Today's picture is of a generally prosperous economy. In June, total employment stood at 75.7 million, an increase of 2.0 million from a year earlier. On a seasonally-adjusted basis, the unemployment rate has been 4.0% or below since February, lower than during any period since early 1957. There are two proposals before this Committee for considertion today relating to this nation's unemployment insurance system-S. 1991, the Administration bill, and H.R. 15119, the House passed bill. As you know, H.R. 15119 was developed by the House Ways and Means Committee after lengthy public hearings and Committee consideration in executive sessions. We recognize that changes have taken place since May 1965 when S. 1991 was introduced. The economy has continued to improve. There has been a reduction in long-term unemployment of experienced workers, and there has been an opportunity to develop alternatives to meet the goals. With this in mind, I will review both H.R. 15119 and S. 1991 and suggest what we consider to be the best legislation in terms of program goals and needs. Even a 4% unemployment rate, in a country like ours, represents a lot of people. In June there were a million adult men and slightly less than a million adult women looking for jobs. It is for people like these, and for the families they support, that our unemployment insurance system is designed. Even at our low levels of insured unemployment-the lowest since World War II-there have been more than 3 million different people so far this year that have filed for unemployment insurance. Obscured by the national average, and concealed by the gross statistics, are the much larger numbers of people affected by the continuous movements taking place in the job market. In 1965, for example, there were, on the average, 76 million people in the labor force-72 million employed and 3.5 million unemployed. But during the year 90 million different individuals are estimated to have been in the work force at some time; 87 million different individuals are estimated to have held jobs; 14.1 million are estimated to have experienced some unemployment; 7.5 million filed claims for unemployment insurance; 6.1 million qualified for unemployment insurance benefits; 5.0 million were unemployed long enuogh to receive unemployment benefits; 1.1 million were unemployed long enough to draw all the benefits available to them, and 0.5 million exhausted 26 weeks or more. Figures for 1966 are of course not yet available, but they will show a similar pattern. Thus, the general level of unemployment must be distinguished from the displacement of particular workers at particular times and places. In 1965 the unemployment rate ranged From 2.3% to 7.8% by State; From 1.7% to 8.1% by major labor areas; From 0.4% to 8.4% by broad occupational groups; From 2.5% to 15.7% by age; and From 4.1% to 8.3% by race. History suggests "Constant displacement is the price of a dynamic economy. that it is a price worth paying. But the accompanying burdens and benefits should be distributed fairly." With this statement of the National Committee on Technology, Automation and Economic Progress, I am in complete accord. And I suggest that one of the most effective ways to assure the fair distribution of the burdens is through the strengthening of our present Federal-State unemployment insurance system. Unemployment insurance is an important aspect of manpower policy. In our present-day economy over 80% of the nation's total labor force make their living through working for others-in contrast to earlier periods in our history when the majority of people worked on the land, or were otherwise "working for themselves" in self-owned (or family-owned) professional, business, and service activities. Today wage earning is the center of economic life. Preparing for a job, getting, holding and separating from a job, having income between jobs and finding another to replace the lost one are crucial for large numbers of workers. Unemployment insurance is designed to make up the worker's wage loss in a way which helps him to meet his economic and social needs with dignity and without loss of self-respect. The payment is a predictable, objectively determined cash payment related to his customary earnings but unrelated to his wealth or his "need" and received as a matter of insured right deriving from his status both past and present-as an active member of the labor force. The value of our unemployment insurance system has been amply proven during its 30 years of existence. Its basic goals remain essentially unchanged. Its purpose is to provide― Partial replacement of wages lost by reason of lack of work; In a way that preserves dignity; But does not put a premium on idleness. The system is designed to protect, insofar as possible, all who work for wages; to assure most workers a stipulated fraction of their own usual wages for the period of their unemployment due to economic causes; but to provide no pay. ment for periods when individuals are not clearly in the labor force. By providing wage replacement for the individual unemployed worker it helps maintain purchasing power, prevents the dispersal of an employer's workers during periods of brief interruption of work. It helps to conserve workers' skills and preserve labor standards by making it unnecessary for the worker to accept, because of economic desperation, the first available job regardless of its suitability. The costs of the system, both State and Federal, amount to somewhat less than 11⁄2 cents per payroll dollar; the entire Federal and State cost for a system containing all the improvements included in the Administration's original recommendations would be less than 2 cents per payroll dollar. It is not my intention to urge the enactment of S. 1991 as a total substitute for H.R. 15119. H.R. 15119 recognizes some of the deficiencies in our present system, introduces some significant forward steps, and provides for improvements in the system which are in the right direction. But H.R. 15119 falls short of meeting the basic goals of the system in four important areas: It fails to provide the benefit requirements proposed by S. 1991; Its extended benefits program fails to provide needed protection for the long-term unemployed in periods other than State or national recessions; Its increases in the taxable wage base are inadequate; and Its coverage provisions warrant further consideration. In its coverage of employees of nonprofit and State hospitals and educational institutions, H.R. 15119 has broken new ground and introduced new concepts for which we owe a great deal to the House Ways and Means Committee. The House acted to extend coverage to an additional 3.5 million workers. These were distributed by categories as follows: Employers of 1 or more in 20 weeks or wages paid of $1500 or more in a calendar quarter Definition of agricultural labor (add some agricultural processing workers) State hospitals and colleges-- Total 1.2 .2 .2 1.4 .5 3.5 I recommend broader coverage than that provided in H.R. 15119 so far as the "size of firm" is concerned. The feasibility of the S. 1991 provision for covering employers of one or more at any time has been amply demonstrated by experience under OASDI and under unemployment compensation laws of States of varying sizes and industrial composition. The Interstate Conference of Employment Security Agencies recommended coverage of employers of one or more if the employer had at least a $300 payroll in a quarter. This payroll limit represents the highest quarterly limit used now by States which determine coverage solely by size of quarterly payroll. I recommend it for your consideration. I also recommend advancing the effective date of this coverage to January 1, 1968. The other coverage change that I would recommend is with respect to farm workers. While everyone generally agrees that farm workers have a real need for unemployment insurance protection, in the past it has been difficult to work out a proposal that was administratively feasible. We have continued to study this problem and we believe we have a proposal that would provide some meaningful protection to the farm worker, and would at the same time meet some of the objections of earlier proposals. Under this alternative, coverage would be extended to farmers who report at least 50 workers for OASDI purposes but only for those workers who had wages of at least $300 in a calendar quarter. H.R. 15119 also provides, as does the Administration bill, a program to protect the long-term unemployed. H.R. 15119, however, would provide extended unemployment compensation only during periods of high unemployment which would be triggered on a State or national basis. S. 1991 proposes to assure all workers with substantial employment protection against long-term unemployment whether or not it occurred during periods of high unemployment. A triggered program is inadequate. It does not, for example, meet the unemployment problems created by mass lay-offs, as in the case of the Studebaker plant shutdown, or the Republic Aviation plant shutdown in Long Island, or the Douglas Skybolt shutdown in Los Angeles, California. These layoffs, although significant, would not have affected the rate of unemployment in the whole State sufficiently to cause the trigger to operate. We believe the extended benefit program in S. 1991 has much to commend it. It is not the only way to deal with the problem, however, and I suggest that a combination program of Federal and State benefits be provided as follows: 1. As an inducement to States to provide regular benefits beyond 26 weeks for the long-term unemployed there would be Federal sharing on a 50-50 basis of any such State benefits between 27 and 39 weeks in a benefit year. The provision of such benefits would be optional with the State. 2. A fully Federally-financed program of triggered benefits equal to the lesser of 50% of regular State benefits or 13 times the regular weekly benefits amount. The triggers, both nationally and State, would be those in H.R. 15119. This combination approach should serve as an incentive to the States to provide protection beyond 26 weeks. The States have already expressed their concern in this area. Ten States now provide a duration of regular benefits for some claimants beyond 26 weeks. The provision for sharing the cost of benefits beyond 26 weeks would recognize the fact that the normal limit of exclusive State responsibility for unemployment is 26 weeks. The further provision for full Federal financing of extended benefits on a triggered basis would recognize that during periods of high unemployment, whether within the State or nationally, the causes are not confined to conditions inside the State and there is a national interest affecting the general economy which becomes an appropriate Federal responsibility. This proposal is described more fully in the attached statement. I urge that this Committee give the most serious consideration to retaining the benefit requirements proposed by the Administration's bill. These relate to the primary factors determining the adequacy of protection-the weekly benefit amount and the duration of benefits. In this day of a highly mobile work force and inter-related State economies, the wide variation and the general inadequacy in State law benefit provisions constitute the greatest single area of deficiency in the present system. S. 1991 requires a State to pay a worker at least 50% of his average weekly wage limited, however, by a maximum. The maximum would increase from 50% of the State-wide average weekly wage to 60% of such wage and finally to 66% %. This would meet one of the stated goals of the program, to provide the great majority of covered workers with a benefit of at least half their average weekly wage. Generally speaking, there is no disagreement with this stated goal, but the existing statutory maximum weekly benefit amount is so low in most States that the goal cannot be reached. In only one-third of the States can a worker earning the State average weekly wage receive a benefit of at least 50% of that wage. In another one-third of the States such workers receive a benefit of from 40 to 49%, and in the remaining third they receive less than 40%. States have been amending their laws to increase benefit amounts, but maximum weekly benefit amounts have not kept pace with the increasing level of wages. All to often, a worker earning only $80 a week receives less than onehalf of his weekly wage when unemployed. At the present time, there are only 19 States where the maximum is at least one-half of State-wide average wages. In the States in which the maximum is below 40% of State-wide average weekly wage, less than one-half of all claimants and less than one-third of the men-receive 50% of their own weekly wage. Even in the States in which the maximum is 50% of the State-wide average wage, about half the men are cut off by the maximum. The Interstate Conference of State Employment Security Agencies at its Phoenix meeting this spring took a position in favor of the weekly benefit amount requirement in S. 1991 except that it would provide a maximum of only 50% of State-wide weekly wages. While this recognition of the desirability of the Federal requirement is highly significant, we believe the 50% maximum is inadequate. As I have just pointed out, in those States in which the maximum is 50%, about half the men are prevented from getting 50% of their wage in benefits by the maximum. If the maximum were 66%%-about 15% of claimants would be cut off by the maximum and only about 25% of the men. Increasing the maximum in three stages is, we belive, a realistic way to meet the goal. S. 1991 also provides that eligible workers who meet the requirement of 20 weeks of base period employment (or its equivalent) must be entitled to receive at least 26 weeks of benefits if they remain unemployed that long. If the State permits workers to qualify for benefits with fewer than 20 weeks of work, the duration of benefits for such workers can be shorter. We believe that benefits should be payable for a sufficient length of time so that a high proportion of workers will be protected for the full duration of their unemployment during a year. The Administration's proposed standard should achieve this. Moreover, without a duration requirement, there are apt to be pressures within a State by those who wish to keep benefit costs down, to meet the weekly benefit amount requirement at the expense of reduced duration. Unlike H.R. 15119, S. 1991 provides that no more than 20 weeks in a one-year base period (or its equivalent) may be required of a worker to qualify for benefits, but does not require States to exclude from benefits workers who have less than 20 weeks of employment or its equivalent. It merely permits shorter benefit periods. While in general State qualifying requirements are no greater than that proposed by S. 1991, there has been a tendency over the years to balance increased benefits by raising minimum qualifying requirements. The requirement provided by S. 1991 may be expected to influence States with very low qualifying requirements to provide more adequate tests of labor force attachment, while at the same time protecting workers from unreasonably high requirements. Under S. 1991 employers in States which do not meet the benefit requirements I have discussed will not lose all tax credit. Instead, their credit will be limited to the actual average cost to the State of the benefits being provided under State law. A State could not get tax credit for its employers by providing inadequate benefits to its unemployed workers. Under existing law an employer gets the full 2.7% tax offset against the Federal unemployment tax regardless of the amount of State tax that he pays. Tax rates may be low in some States not only because of low unemployment, but also because under the State law benefits are low in amount, or short in duration, or because eligibility for benefits is restricted. Thus, the uniform Federal unemployment tax is in effect uniform no longer, and the Federal tax falls short of its original objective of enabling States to provide adequate benefits without fear that other States will attract industry by lower taxes resulting from inadequate benefits to workers. H.R. 15119 provides a disqualification standard which is aimed particularly at doing away with cancellation of wage credits or total reduction of benefit rights for any disqualification except misconduct connected with the work or fraud in connection with a claim. The provision also permits a reduction for receipt of earnings or disqualifying income, as, for example, pensions. We do not believe that this provision would adequately protect a worker from unreasonable disqualifications. We, therefore, suggest an alternative. Benefits shall not be denied because of a disqualifying act (other than for unemployment due to a labor dispute or fraud connected with a claim) for a maximum period of more than 13 weeks next succeeding the week in which the disqualifying act occurred. An employer's experience rating account should not be charged with any benefits paid for unemployemnt which follows a disqualifying act. Cancellation of benefits would be prohibited except for fraud in connection with a claim. With respect to unemployment due to a labor dispute, the provision would permit disqualification for the duration of the worker's unemployment due to that cause. It would leave to the States the reasons for which an individual may be disqualified and the range of the disqualifying period from 1 to 13 weeks. |