Federal partnership in the form which time and experience have proved so satisfactory.

Gentlemen, the death knell of S. 1991 would be a victory for responsibility and commonsense and an infusion of new life into concepts of fiscal sanity and a stable economy. These concepts the States are now fulfilling and the results are no doubt reflected in our opulent economy and in the unemployment rate which has ebbed almost to the point of full employment.

H.R. 15119, now before you, does not pander to housewives who might consider taking part-time work if conditions exactly suited them; or to students who might work a few hours a week if they liked the location, hours, and pay; or retirees and pensioners who do not want to jeopardize their retirement pay, or others not involuntarily idle and seeking regular work at prevailing wages. H.R. 15119 retains essential elements of a sound State-Federal job insurance program for unemployed persons genuinely in the labor market.

May I urge upon the Committee on Finance its careful consideration of the principles which through experience of many years we have found essential to the continued vitality and usefulness of the employment security programs.

The CHAIRMAN. Thank you so much, Mr. Williamson.

What is your reaction to the original unemployment insurance program when it was initiated in 1939?

Mr. WILLIAMSON. Well, I have given my life to it, and I am sold on it as long as it does not dampen the incentive to work and provide people with a livelihood. I think it has done more to cure and prevent mental and physical illness than the whole College of Physicians, Mr. Chairman.

The CHAIRMAN. My reaction to it, of course, when that was passed-I was a student politician on the Louisiana State University campus and did not have anything to do with this program-but my reaction to it was that Congress could have passed a Federal program if it wanted to, particularly insofar as it applied to interstate commerce. Instead the Congress chose to levy a tax and then turned the program over to the States and gave the States a tax credit of 90 percent of the Federal tax if they wanted to get into it and provide a program.

Now, it is clear that as of that time the Federal Government achieved what it was hoping to do in having a partnership, as you have described it, where the States set the standards but in most instances the Federal Government had some idea of what it would hope to see achieved in the States. In most instances the States did pattern their laws pretty much after the Wisconsin experience. The Wisconsin administrator helped to draft that State's law.

It occurs to me that when we provide a credit against a Federal tax, we do it because we want somebody to do something.

For example, we provided one recently so that if you build a new plant you get a tax credit. We have done that in some other cases, too, where we wanted somebody to do something.

If we found, however, that this tax credit was not being used the way it was supposed to be used, that the purpose of our law was being frustrated by means of a tax credit rather than implemented, it would seem to this Senator that we would have a right to take another look at the extent to which we wanted to let this tax credit apply.

The reason I raise that question is that I notice in one State of the Union this tax credit of 2.7, which is a State portion, is so used that it works out to a zero tax on 40 percent of all employment in that State, of all covered employment.

Now, in Georgia you do not have a zero tax.

Mr. WILLIAMSON. No, sir.

The CHAIRMAN. It goes down to 0.25.

Mr. WILLIAMSON. Öne-fourth of 1 percent, and we think that is about low enough.

We have a good fund, but we do not believe in a zero tax personally because we want to retain the employer's interest. If he gets lulled into a sense of false security and does not have to pay and does not have to notify us of the quits or the discharges for cause and refusals to work, I think the program would break its own back, and I think it is necessary to have a tax on all employers covered in order to retain their interest. When you tickle his pocketbook, you have got his interest.

The CHAIRMAN. My thought is that the experience rating is a good thing. I think it is a very good thing because it tends to keep employers on their toes, to make them report that a man was not fired, that he quit, or that he was fired for cause and that he should have been fired, and I think there ought to be a difference.

It seems to me as though to eliminate completely the incentive of the employer to try to keep that tax low, you are going to do a great damage to this program.

Mr. WILLIAMSON. If you take the disqualifications away as provided in S. 1991, you would lose interest, too.

The CHAIRMAN. My thought is that a State could be justified in going to a zero tax, but only when the fund is built up to the extent that you can afford to go to a zero tax for everybody. It seems to me as though it could be regarded as being parallel to a situation where you take insurance, and if over a period of time you incur no damages, and if the insurance company makes the money, you can have a refund or reduction in rate, but you would still pay something for the insurance protection that you are getting.

Frankly, the thought has occurred to me with reference to the competition among States it might be well that we have some basis for Some minimal amount that would not be forgiven.

Now, I would have no quarrel with your figure of 0.25. But it does seem to this Senator there ought to be some point at which they do not forgive it at all and unless they are going to forgive it for all employers, and I just wanted to get your reaction to it.

Mr. WILLIAMSON. The feeling of the legal people on our council, and they are on our council, is that we should retain a tax on all employers. That is their consensus.

The CHAIRMAN. It worked out well for Louisiana, and I would not want to change it unless there was a good reason why it should be changed, but on bidding on a $50-million shipbuilding contract, we won the contract by $100,000. That is one-fifth of 1 percent, and as between two contractors, both of whom have the best possible experience rating, it would seem to me that somewhere along the line there should be some limit to the extent to which one State would be discriminated against in favor of another even by State law because a person should pay something for his insurance, I should think.

65-992-66-35

Now, when this program went into effect we had a level of benefits that worked out to 65 percent of the average weekly wage. As of now, the benefits are 45 percent of the average weekly wage.

Do you have any idea as to how we could get the level of benefits up without infringing the States' rights to fix those benefits, to say what they would be and how they would be arrived at?

Mr. WILLIAMSON. There are only a few States where probably the money they get now won't pay as much as it did back there. You will remember the income tax, the withholding tax, has increased a great bit since then, and the people have moved to the country and a lot of expenses-the take-home money is just as high now, say, in every State as it was back there then, Senator.

The CHAIRMAN. Well, I would concede that it might very well be when you look at what you can buy with the money that the fellow could buy just as much food and as much red beans and rice to hold hide and hair together until he found some other job as he could before. But with everybody living better in the country, and the average wage being greater, and we hope, if we should decide, we would hope, the benefits would be related to the fact that people are living better and doing better nowadays rather than what they could buy 30 years ago. I wonder if you could offer us any suggestion or if you would have any objection if we could work out something that would nudge the States forward on the general level of benefits without in any way infringing upon their right to say what those benefits were going to be.

Mr. WILLIAMSON. If you get your benefits too close to the total wage you are going to do away with the incentive to work and you are going to have a lot of bums and loafers sucking at the public tit, and you remember the disrepute that the program was in back there when you paid them nearly as much to carry home money as they would carry if they were working, and through experience we found that you have to have an incentive margin in there.

Now, we pay about two-thirds of our workers in Georgia about 52 percent. Every body that does not get the maximum gets about 32 percent of their wages in job insurance. We think that is high enough. We are paying $43 now and it goes up to $45 next year, and I did not have a squawk out of the legislature nor the advisory council when they advised me to do it.

The CHAIRMAN. Senator Talmadge.

Senator TALMADGE. Mr. Williamson, what is the total amount of money in the composite trust fund at the present time?

Mr. WILLIAMSON. Senator, it is approximately $8.5 billion, and then in addition to that I believe we have about $270 million in the Georgia loan fund, and there is a little due back from those States that borrowed for the TEC. So between $812 billion and $9 billion. I would say offhand.

Senator TALMADGE. And Georgia's share is how much?

Mr. WILLIAMSON. Right now it is $211 million and at the end of this month it will go up close to $220 million.

Senator TALMADGE. Under the present labor market conditions are Georgia workers having any difficulty in getting jobs?

Mr. WILLIAMSON. Most of them are not. We have the least unemployment we have had since World War II, and we are paying out

less benefits, but we are having trouble filling job orders. Several contractors have called me and told me they had to go out of business because they could not get workers.

I called the labor and domestic office there in Atlanta and asked them about it and they said, "Mr. Williamson, I am sorry, we will load up the truck and it will get off at the first red light.' But we are

having trouble filling orders.

A lot of people who are unemployed now are not willing to take the job at the prevailing wage for the skills they have, and we have trained approximately 5,000; we have a good many more in training, and about 70 percent of those will get jobs.

Senator TALMADGE. That is the unskilled that you are training? Mr. WILLIAMSON. Sir?

Senator TALMADGE. The shortage is for skilled workers, I take it? Mr. WILLIAMSON. Semiskilled, automobile mechanics, carpenters, and body and fender, business machine operators, and things like that. Senator TALMADGE. On completion of the training program are your unskilled workers having any success in finding jobs?

Mr. WILLIAMSON. We find, I guess, about 70 percent of them find jobs after the vocational education department of the State educates them, finishes the course.

Senator TALMADGE. In the computation of weekly insurance amounts, would it be realistic to use a formula which would set a State maximum as a percentage of the statewide average weekly wage?

Mr. WILLIAMSON. No, sir; I do not think so, because you figure a whole lot of big executives who make $175,000 a year, and when you average Mr. Ford and Mr. Rockefeller, their salaries, with mine, I do not think it makes much sense.

We made a study of that in Georgia recently and the average of the insured wages was $20 less per week than the average statewide wage, Senator.

Senator TALMADGE. From your experience with the administration of temporary extended benefit provisions, do you believe a considerable number of workers will decline employment after exhausting payments under a permanent 26 weeks extended program?

Mr. WILLIAMSON. We entered into the 1961 TEC, and over 50 percent of the workers exhausted that, and still we had the problem of no jobs. I do not subscribe to a long duration because a person hesitates to go into training or to get some physical defect or some handicap corrected until the end of that period, and then in the meantime he is getting in the habit of not working, and I doubt the wisdom of extending benefits too far.

Senator TALMADGE. Are most job insurance payments equal to about half the individual's average weekly wage?

Mr. WILLIAMSON. In Georgia everybody gets 52 percent and a fraction of their wages except the ones who get the maximum, $43. There are about two-thirds of our workers in our State who get over 50 percent. But I would not say that you ought to impose it on other States just because we have it

When you change one of these factors, Governor, you have to change them all. They are just interrelated, and it is hard to realize and I have to be sold by my chief of research every once in a while when I will reach in and want to do something, and he will tell me how it is

tied into duration, is qualification and these other things, so that when you change one standard or one thing in the law you have to look at them all or you get yourself all tangled up in something.

Senator TALMADGE. Are you satisfied with the provisions for judicial review in H.R. 15119?

Mr. WILLIAMSON. I think it is better than nothing. But I always like to play my cards above the table. I would rather have a de novo review, and not one of these automatic affirmances of the rulings of the Secretary of Labor. I would rather have political review than an automatic acceptance of the findings of the Secretary of Labor.

I have been engaged in a lot of these conformity hearings. I helped represent New Hampshire and South Dakota. New Hampshire did the heinous crime of sending a check to a lawyer, a benefit check to a lawyer, who had carried a case, a benefit case, to the Supreme Court and won it. They said that was not paying benefits to the claimant when due.

Since then the Congress has changed the law and requires the Federal Government to recognize an attorney as an attorney and deal with him.

Senator TALMADGE. Thank you, Mr. Williamson.

Thank you, Mr. Chairman.

The CHAIRMAN. Thank you very much.

Mr. WILLIAMSON. I enjoyed being with you, Mr. Chairman.

The CHAIRMAN. The next witness is Mr. Colin L. Smith, Employers Unemployment Compensation Council of Michigan.

Mr. Smith has notified us that he is hospitalized today and will not be able to be here, and he has submitted his statement which we will have printed in the record in support of his position. (The statement referred to follows:)

STATEMENT OF COLIN L. SMITH, EXECUTIVE DIRECTOR, EMPLOYERS' UNEMPLOYMENT COMPENSATION COUNCIL OF MICHIGAN, IN SUPPORT OF H.R. 15119 AND IN OPPOSITION TO S. 1991

I. Representation

SUMMARY

This statement is made on behalf of Michigan organizations representing approximately 91,500 employers in the State.

II. Position on S. 1991

We are strongly opposed to Senate Bill 1991, the companion bill to H.R. 8282. for reasons stated in our testimony to the House Ways and Means Committee which is attached to this statement.

III. Position on H.R. 15119

H.R. 15119 represents a reasonable compromise worked out by the Ways and Means Committee between the conflicting view points of interested parties. As such, we support it and urge its approval by the Senate without change.

Since H.R. 15119 is a compromise, we are supporting it notwithstanding that it infringes to a minor degree on certain principles to which we subscribe. We intend to continue to support those principles in evaluating any future proposed legislation modifying the federal unemployment compensation provisions. Those principles are covered in the following statement.

STATEMENT OF COLIN L. SMITH, EXECUTIVE DIRECTOR, EMPLOYERS' UNEMPLOYMENT COMPENSATION COUNCIL OF MICHIGAN, IN SUPPORT OF H.R. 15119 AND IN OPPOSITION TO S. 1991

1. REPRESENTATION

My name is Colin L. Smith. I am Executive Director of the Employers' Unemployment Compensation Council, a non-profit Michigan corporation, whose pur