Senator TALMADGE. Thank you, Mr. Mackey.

Any questions, Senator Williams?

Senator WILLIAMS. No questions.

Senator TALMADGE. Is Mr. Charles H. Taylor of the Virginia Manufacturers Association present?

He has sent a letter to the chairman of the committee, enclosing a copy of his prepared statement. In his absence at this point I will insert his letter, together with his testimony, in the record.

Without objection.

(The documents referred to follow :)

VIRGINIA MANUFACTURERS ASSOCIATION,

Richmond, Va., July 15, 1966.

Senator RUSSELL B. LONG,

Chairman, Senate Finance Committee,
Washington, D.C.

DEAR SENATOR LONG: To save your Committee time, we are asking that you receive our statement in support of H.R. 15119 for inclusion in the record. Sincerely,

CHARLES H. TAYLOR.

STATEMENT OF THE VIRGINIA MANUFACTURERS ASSOCIATION BEFORE THE SENATE FINANCE COMMITTEE ON H.R. 15119, UNEMPLOYMENT INSURANCE AMENDMENTS OF 1966, JULY 18, 1966

Mr. Chairman and Members of the Senate Finance Committee, the Virginia Manufacturers Association presents this statement in support of H.R. 15119, which has been carefully put together by the House Ways and Means Committee and overwhelmingly adopted by the House of Representatives. This measure is the product of long months of exhaustive study by the House and Ways Means Committee, and a wide and complete variety of testimony from the parties of interest, including state administrators, the Department of Labor, employee groups, and employer groups. We strongly urge that this measure be reported without amendment.

H.R. 15119 adequately provides for all of the demonstrated basic improvement needs of our state-federal unemployment compensation insurance program. The record clearly shows that continuing improvements have been made by the states to meet the changing economic conditions and that employers have given their support to accomplish this. We would expect to continue to do this.

H.R. 15119 preserves state responsibility and management of this program. It is to the credit of the states that they have conclusively demonstrated their ability to manage their programs responsibly and effectively for the nearly 30 years of their existence.

We are unalterably opposed to S. 1991, the companion measure to H.R. 8282 which was thoroughly evaluated and rejected by the House Ways and Means Committee. The main thrust of this measure is a federal minimum benefit payment standard which, in application to the various state systems, would not accomplish the results represented. When this feature was thoroughly exposed on the House side, it was found that it would require federal standards for all basic features of the program to accomplish a workable federal minimum benefit payment standard. This would mean complete federalization of our state programs. Some of the main backers of this legislation have made it clear that this is precisely the objective.

We hope that it will be your judgment to report H.R. 15119 without amendment.

CHARLES H. TAYLOR, Executive Vice President.

Senator TALMADGE. The committee will stand in recess at this point. until 9 a.m. tomorrow morning.

(Whereupon, at 11:05 a.m., the committee adjourned to reconvene at 9 a.m., Tuesday, July 19, 1966.)

UNEMPLOYMENT INSURANCE AMENDMENTS OF 1966

TUESDAY, JULY 19, 1966

U.S. SENATE,

COMMITTEE ON FINANCE,
Washington, D.C.

The committee met, pursuant to recess, at 9 a.m., room 2221, New Senate Office Building, Senator Herman E. Talmadge presiding. Present: Senators Gore, Talmadge, Hartke, Williams, and Morton. Also present: Senator Moss of Utah.

Also present: Tom Vail, chief counsel to the committee.
Senator TALMADGE. The committee will come to order.

We have seven witnesses this morning representing the retailer interest, manufacturer interest, labor interest, farmer interest, and business interest in general.

Our first witness is Mr. Frank Malone, president, Southern Bell Telephone & Telegraph Co., of Atlanta, Ga. Mr. Malone will represent the Bell System.

Incidentally, he is a constituent and an old friend of mine.

Will you come forward, Mr. Malone, and proceed in your own manner?

STATEMENT OF FRANK MALONE, PRESIDENT, SOUTHERN BELL TELEPHONE & TELEGRAPH CO., FOR BELL SYSTEM TELEPHONE OPERATING COMPANIES

Mr. MALONE. Thank you, Mr. Chairman.

In the interest of conserving this committee's time, I have only a very brief statement, and the appendix attached to it, will be filed but not read.

Senator TALMADGE. Without objection, the appendix will be inserted in the record, together with the statement.

Mr. MALONE. Thank you, sir.

My name is Frank Malone. I am president of the Southern Bell Telephone & Telegraph Co. I have had 38 years' experience in the telephone business in various capacities, and I am familiar with its employment problems and practices.

I appear today on behalf of the Bell System telephone operating companies, which provide telephone service to about 45 million customers and provide employment for more than 600,000 people. In 1965 these companies paid $322 million in Federal and State payroll taxes for unemployment compensation.

Our reason for appearing today is to indicate our support of H.R. 15119 which, if enacted, will be the most important change in Federal

unemployment compensation legislation since the original legislation in 1935.

H.R. 15119 makes provision for the extension of benefits during a period of recession, either State or national, when it is reasonable to presume that most of the individuals who remain unemployed are in that status because of a scarcity of jobs. It protects the credits of individuals who leave employment to change jobs where the new job proves to be of short duration. It encourages training during a period of unemployment. In addition, by raising the taxable wage base, it will help the Federal programs to remain fiscally sound. H.R. 15119 appears to us to incorporate reasonable and sound improvements in the present law and will accomplish a desirable updating of the original act.

The enactment of H.R. 15119 will result in an increase in Federal taxes to the Bell System telephone operating companies by 1972 of more than $7 million annually. While we would naturally prefer that there be no increase in costs, we do not object to bearing our fair share of the burden of benefits to those persons involuntarily unemployed.

We also support H.R. 15119 because it preserves two very important principles which are now in the Federal law relating to unemployment compensation.

(1) The Federal requirement for States to have experience rating provisions if employers are to obtain additional credit against the Federal tax, and

(2) The right of the States to prescribe disqualifications. Experience rating provides employers with an important incentive, through a reduction of the taxes they must pay, to avoid as far as possible the creation of unemployment. In other words, by maintaining a stable work force and keeping layoffs to a minimum, an employer can reduce his unemployment tax costs. Furthermore, it gives an employer an incentive to assist in evaluating claims for unemployment compensation, since it is the practice in most States to notify an employer when a former employee applies for benefits. If the employer believes a claim is unwarranted, he is given an opportunity to present his reasons therefor.

Without experience rating, many employers would have no incentive to minimize unemployment or to make any effort to prevent unjustified claims.

The States should continue to be permitted to use their own judg ment in the disqualification of applicants for unemployment compen sation. Included among present disqualifications are those which apply to an individual who quits his job voluntarily, or who refuses a suitable job, or who is unable to work due to pregnancy or maternity, or who receives retirement benefits under a private pension plan or under social security, or who is discharged for misconduct. The experience of the States has demonstrated that this type of disqualification is necessary in order to reserve unemployment benefits for those for whom they are really intended.

There is attached to my statement an appendix which sets forth in more detail our reasons for urging that these important principles in the present law be preserved.

As mentioned earlier, H.R. 15119 makes material improvements in the present law while preserving these two basic principles. We therefore urge its enactment.

Thank you, Mr. Chairman.

(The prepared statement of Mr. Malone, with appendix, follow :)

STATEMENT OF FRANK MALONE, PRESIDENT OF SOUTHERN BELL TELEPHONE AND TELEGRAPH COMPANY FOR BELL SYSTEM TELEPHONE OPERATING COMPANIES

Mr. Chairman and Members of the Committee:

My name is Frank Malone. I am President of the Southern Bell Telephone and Telegraph Company. I have had 38 years' experience in the telephone business in various capacities and I am familiar with its employment problems and practices.

I appear today on behalf of the Bell System telephone operating companies, which provide telephone service to about 45,000,000 customers and provide employment for more than 600,000 people. In 1965 these companies paid $322 million in Federal and State payroll taxes for Unemployment Compensation.

Our reason for appearing today is to indicate our support of H.R. 15119 which, if enacted, will be the most important change in Federal Unemployment Compensation legislation since the original legislation in 1935.

H.R. 15119 makes provision for the extension of benefits during a period of recession, either state or national, when it is reasonable to presume that most of the individuals who remain unemployed are in that status because of a scarcity of jobs. It protects the credits of individuals who leave employment to change jobs where the new job proves to be of short duration. It encourages training during a period of unemployment. In addition, by raising the taxable wage base, it will help the Federal programs to remain fiscally sound. H.R. 15119 appears to us to incorporate reasonable and sound improvements in the present law and will accomplish a desirable updating of the original Act.

The enactment of H.R. 15119 will result in an increase in Federal taxes to the Bell System telephone operating companies by 1972 of more than $7 million annually. While we would naturally prefer that there be no increase in costs, we do not object to bearing our fair share of the burden of benefits to those persons involuntarily unemployed.

We also support H.R. 15119 because it preserves two very important principles which are now in the Federal Law relating to Unemployment Com pensation:

(1) The Federal requirement for States to have experience rating provisions if employers are to obtain additional credit against the Federal tax. and

Fur

(2) The right of the States to prescribe disqualifications. Experience rating provides employers with an important incentive, through a reduction of the taxes they must pay, to avoid as far as possible the creation of unemployment. In other words, by maintaining a stable work force and keeping layoffs to a minimum, an employer can reduce his unemployment tax costs. thermore, it gives an employer an incentive to assist in evaluating claims for unemployment compensation, since it is the practice in most states to notify an employer when a former employee applies for benefits. If the employer believes a claim is unwarranted, he is given an opportunity to present his reasons therefor. Without experience rating, many employers would have no incentive to minimize unemployment or to make any effort to prevent unjustified claims.

The States should continue to be permitted to use their own judgment in the disqualification of applicants for unemployment compensation. Included among present disqualifications are those which apply to an individual who quits his job voluntarily, or who refuses a suitable job, or who is unable to work due to pregnancy or maternity, or who receives retirement benefits under a private pension plan or under Social Security, or who is discharged for misconduct. The experience of the States has demonstrated that this type of disqualification is necessary in order to reserve unemployment benefits for those for whom they are really intended.

There is attached to my statement an appendix which sets forth in more detail our reasons for urging that these important principles in the present law be preserved.