more than 20 weeks of prior employment for a worker to receive 26 weeks of benefits. Under S. 1991, every state would be required to pay 26 weeks of benefits for no more than 20 weeks of prior employment.

S. 1991 would establish a permanent program of Federal benefits-termed Federal Unemployment Adjustment Benefits-for another six months (26 weeks) for those who exhaust their 26 weeks of state benefits and who had so-called "substantial" prior employment. This period of "substantial employment" means no more than 78 weeks of work in the preceding three years. At the same time, however, that some people with only this limited amount of work are drawing a full year of benefits, others with even more total employment, but differently distributed, will be ineligible. There will most certainly arise a cry for removal of this discrimination among claimants-leading to an extension of eligibility for a full year of the Federal benefits to practically everyone with a limited record of employment in the three prior years.

The unfortunate part of the whole Unemployment Compensation system is that it is in no way dependent on whether a company makes a profit. This type of tax puts a substantial additional burden on a property operating in the red. It is also a deterrent to the investment of new capital. We believe that if improvements in this system take place, the first and most important improvement is that the employee who stands to benefit should pay at least a portion of the cost.

For the reasons stated above, the American Hotel & Motel Association is unalterably opposed to S. 1991 and urges its rejection by the Committee.

H.R. 15119

H.R. 15119—the House-passed bill-represents a major departure from the proposed changes to the Unemployment Insurance system, as originally considered in the 89th Congress by the House of Representatives (H.R. 8282 and its Senate counterpart, S. 1991). In many respects H.R. 15119 is preferable legislation if indeed this Congress is to alter the present Unemployment Insurance system.

H.R. 15119 is a vast improvement over S. 1991 in that it (1) eliminates the proposed Federal extended benefits (Federal Unemployment Adjustment Benefits) and proposes, in lieu thereof, reasonable “recession benefit" provisions; (2) eliminates the proposed Federal standards for state unemployment insurance eligibility, benefit duration, and the amount of weekly benefits; (3) eliminates the proposed disqualification standards that would have required every state to pay benefits to everyone who: quit voluntarly without good cause, or was fired for willful misconduct, or refused to take suitable work while drawing benefits; (4) eliminates the proposed altering of the "experience-rating" concept; (5) eliminates the proposed Federal matching grants, i.e., subsidy, for excess" benefit costs; (6) substantially reduces the proposed increase in the tarable wage base; and, (7) provides for Federal court review of adverse unemployment insurance decisions by the U.S. Secretary of Labor.

In the final analysis H.R. 15119 is a marked improvement over S. 1991 in that it rejects, in both principle and substance, the far-reaching and potentially damaging provisions of S. 1991.

Although H.R. 15119 is to be preferred over S. 1991, the American Hotel & Motel Association cannot support the former in toto.

H.R. 15119 proposes to increase both the Federal Unemployment Insurance tax rate from 0.4% to 0.6% and the taxable wage base to $4200. As a result, some 45 states will most likely raise their wage base accordingly with employers in those states having their state (UC) tax liabiilty computed on this stated above in our discussion of S. 1991, this immediate increase in costhigher base. In consequence, many an employer will have larger taxes. And as stated above in our discussion of S. 1991, this immediate increase is costsmall percentage-wise but large dollar-wise-will place a severe burden upon our industry which is already faced with almost insurmountable problems.

In summary, we believe that the present Federal-State Unemployment Insurance System has operated with a great deal of success during difficult periods of our economic history. We are convinced that the system can continue to meet the needs of the economy if there is a degree of restrain on the part of the Federal authorities. This restraint can be best exercised if the unemployment insurance system remains in the hands of the several state administrators with changes therein to be accomplished on a state-by-state basis as the need arises.

STATEMENT OF DR. THOMAS K. HITCH, CHAIRMAN, HAWAII UNEMPLOYMENT COMPENSATION STUDY COMMITTEE

I am Dr. Thomas K. Hitch. I am Vice President and Director of Economic Research for the First National Bank of Hawaii, but I am appearing here in my capacity as Chairman of the Hawaii Unemployment Compensation Study Committee which was organized in 1955 and has studied this field intensively ever since. I am speaking for the following organizations which have representatives on this committee:

Chamber of Commerce of Honolulu

General Contractors Association of Hawaii

Hawaii Employers Council

Hawaii State Chamber of Commerce

Hawaiian Electric Company, Inc.

Hawaiian Sugar Planters' Association

Hawaiian Telephone Company

Honolulu Gas Company

Pineapple Growers Association of Hawaii

In addition, the Chinese Chamber of Commerce of Hawaii and the Honolulu Japanese Chamber of Commerce have asked me to inform you that they concur with the views I will express.

The organizations and companies I represent encompass practically the entirety of all business, industry, and agriculture in the State of Hawaii.

I might add that for most of my professional life I have considered myself as being primarily a labor economist, and that I served in that capacity on the staff of the President's Council of Economic Advisers in the Truman administration. I am currently a member of the tripartite advisory committee to the Hawaii State Department of Labor and Industrial Relations.

RE H.R. 15119

I strongly support the passage by the Senate of H.R. 15119 in precisely the form in which it passed the House of Representatives by an overwhelming vote. H.R. 15119 is a compromise bill that was written after the most penetrating hearings on the subject of unemployment insurance that the Congress has held since the passage of the original act in the mid-1930's. It makes a large number of improvements in the unemployment insurance program which were needed to meet conditions existing today, while at the same time maintaining the fundamentally sound federal-state partnership in the program. It also puts this partnership on a more equitable footing by providing for judicial review of conformity decisions by the Secretary of Labor.

RE S. 1991

I strongly oppose the enactment of S. 1991 for reasons which are detailed in the remainder of this statement. I should preface these remarks by saying that the bulk of my remaining testimony will be confined to the subject of agricultural coverage since (1) Hawaii is the only state that covers agriculture and therefore its experience with this subject is unique, and (2) I participated closely in the drafting of the original bill to cover agriculture back in 1957 and I have followed developments in this field very closely ever since.

I. Agricultural coverage

A. Agriculture in Hawaii.-First, a few facts about Hawaii's agriculture. Agriculture has, historically, been the foundation of the Hawaiian economy and is still the biggest activity in the private sector. The two biggest agricultural industries are sugar, where our 1,100,000 tons per year represents 18.5 per cent of U.S. production and 12.2 per cent of U.S. consumption, and pineapple where our 18,000,000 cases of solid fruit and 12,000,000 cases of juice represents 50 per cent and 75 per cent respectively of world production. Other agricultural products are beef, milk, poultry, eggs, coffee, macadamia nuts, papaya, and a broad range of truck crops. Most of these latter activities are excluded from coverage because of their small size (we cover only employers with 20 or more employees), so I will confine my remarks to our experience with sugar and pineapple coverage.

B. The lesson from sugar coverage.-The lesson from sugar coverage is instructive in that sugar in Hawaii differs markedly from practically all temperate

zone Mainland agriculture, and therefore the fact that its employees have been covered by the employment security law at very little cost to the companies and at no cost to the reserve fund should not lead you to think that the same results would be obtained if coverage were extended to Mainland agriculture. The reason for this is, of course, that sugar in Hawaii is not seasonal. Sugar in Hawaii is generally two years from planting to harvest and generally some six years from planting to replanting; the harvesting season is generally some nine months in duration; the growing of cane and the milling of cane is an integrated activity under one management and with one work force; and during the few months of the year that cane is not being harvested and milled, there is plenty of work to be done (planting, care of crops, mill overhaul and repair, etc.) to keep the work force employed. Consequently, about the only unemployment compensation beneficiaries originating in the sugar industry are retirees, dischargees, voluntary quits, and an occasional layoff from a reduction in work force brought about by some labor-saving development.

O. The lesson from pineapple coverage. Pineapple is much more like Mainland agriculture in that it is somewhat seasonal in its growing habits. I say “somewhat seasonal" because it is far less seasonal than most Mainland agriculture that I am familiar with. After all, Hawaii's climate is summer the year round, and pineapple (like sugar) is about two years from planting to harvest and from four to five years from planting to replanting. It is not like growing corn in my home state of Missouri where the fields are prepared and planted in the spring, the crop is taken off in the late summer, and the farm is battened down against the winter from November to March.

Nevertheless the pineapple that ripens in the summer when the sun is a bit warmer is better pineapple than the fall, winter, or spring crops, and hence the companies tend to peak their harvesting season in the June to September period. About two-thirds of the total crop is picked and canned in these months, with about one-third being harvested during the rest of the year. However, very little planting takes place during the summer harvesting season, so that the planting season (which varies between fall, winter, and spring by the different companies' varying cultural practices) tends to balance out to some extent this seasonality. Since all that the canneries do is to can the harvested pineapple, seasonality is somewhat greater there than on the plantations.

Hawaii's pineapple plantations have a regular full-time, year-round work force of about 2,000 which is augmented during the summer harvesting season by some 4,000 seasonal employees and which is augmented during the planting season by about 1,000 seasonal employees. The canneries have a regular yearround work force of something in excess of 1,000 people, with an additional 10,000 or more seasonals being hired during the summer harvesting season, of whom some 2,500 will work intermittently during the rest of the year when the canneries are operating on their reduced, off-season schedules. Practically all these cannery seasonal employees are women: most males in the group are high school or college students working during their vacation.

Since pineapple is about the only major activity in Hawaii with a seasonal pattern, it provides temporary jobs that otherwise would not be available to housewives, casual workers, and to summer vacation students.

With this background out of the way, let me now make a few points.

You can see that there are three rather distinct classes of workers in pineapple-the true seasonal worker who works only in the summer season and who rarely has any significant work experience outside of the season, the casual or intermittent worker who not only works during the harvesting and canning season in the summer but works intermittently and sporadically on the plantation or in the cannery during the period of reduced activity that we call the off-season, and finally the regular full-time, year-round work force. The pattern of employment for each is quite stable, season after season and year after year. If these seasonal and casual workers wanted full-time employment, they would have little difficulty in getting it in Hawaii where the rate of unemployment has never been as high as 5 per cent in the last decade and has frequently been at and even below 3 percent.

If our employment security law presumed that these seasonal and casual workers were in fact unemployed actively seeking work when they are not working in the fields or in the canneries, the cost of the program would be astronomical. The law therefore provides that seasonal workers in a seasonal industry (and both are specifically defined) are entitled to full benefits but these benefits are allocated between the seasonal period and the off-season

period in accordance with the worker's seasonal and nonseasonal work pattern in his base period. Thus, if a seasonal worker in pineapple worked only during the season (with no off-season earnings), he could only draw benefits during the next season. If, on the other hand, he had worked 15 weeks during the pineapple season and then had other work for 15 weeks during the off-season, half his total benefit entitlement could be drawn during the next season and half during the next off-season.

I mentioned earlier that without such a seasonality provision the cost of covering a seasonal agricultural industry like pineapple would be astronomical. We have a pretty good measure of what such costs would be as a result of studies conducted both by the industry and by the State Department of Labor and Industrial Relations two years ago. These two studies resulted in the same disturbing conclusion: that the elimination of the seasonality provision could cause benefits paid to pineapple workers alone (4 per cent of our civilian work force) to rise to such an extent that the cost of our entire unemployment insurance program would be increased by 45 per cent.

This causes us to be very seriously concerned with S. 1991 which, according to information I have from the Bureau of Employment Security, would result (inadvertently, I hope) in our seasonality provision being out of conformity. This result stems from the requirement (which I think is most inappropriate in any case) that any person who meets the maximum qualifying requirement (20 weeks of work or base-period earnings of five times the state weekly average wage) must be assured entitlement to 26 weeks of benefits. Also, it is likely that the proposed requirement that disqualifications be limited to a six-week postponement period (which again I think is most inappropriate) would result in seasonality provisions being out of conformity.

My conclusion is a very simple one: If the Federal Congress forces the repeal of Hawaii's seasonality provision, the increase in benefit payouts in Hawaii will be tremendous, and these payouts will be made to seasonal and casual workers who are not really unemployed when they are not working. Temperate zone Mainland agriculture is even more seasonal than is Hawaii's pineapple agriculture. I believe that any extension of coverage to agriculture should clearly and explicitly make it certain that each state has the right to enact seasonally provisions in keeping with the seasonal characteristics of its own agriculture and the processing of its agricultural products. Unless some realistic provision is made for recognizing the seasonal characteristics of agricultural activities which are governed by the seasons in widely varying areas, the costs of unemployment insurance would skyrocket without any relationship to the facts of real unemployment.

D. A final comment.-To round out my description of Hawaii's experience with agricultural coverage, I should mention that in our law we have recognized the need for keeping these costs as low as possible while still providing benefits identical to those provided under industrial coverage. We consequently permitted stable agricultural employers to provide benefits (through BES administration) on a pay-as-you-go basis-a reimbursable plan much like that which applies to federal, state, and local governments. This results in very sizable cost savings to the sugar and pineapple companies since they do not have to build up large reserves in the fund with respect to their agricultural payrolls. Six years' experience with this arrangement has shown that it works very satisfactorily from the viewpoint of the employer, the employee, and the government.

II. Need for modernization of qualifying standards and disqualification provisions

There is a pressing need that has been largely overlooked in these hearings for modernizing many of the unemployment compensation laws of the country. This need stems from changes that have taken place in the last quarter of a century in the labor force, in labor force attitudes, and in the unemployment compensation system itself.

The labor force is a much more fluid body than it was thirty years ago, with an immense increase in secondary workers, particularly women, who are from time to time in the labor force and from time to time out of the labor force. For example, 83.2 million people in the U.S. worked at one time or another in 1963, but according to the U.S. Department of Labor, only 57 million of these were full-time workers and the remaining 26.2 million were part-time workers or people who worked only intermittently. Of the 32.2 million women who were in the labor force at one time or another in 1963, almost half were part-time, intermittent, or temporary workers. This means that at any one time there are

an immense number of people with some recent work experience who are no longer in the labor force, but who can qualify for benefits if qualifying standards are set very low. S. 1991 says that no state can set a base period monetary qualifying standard higher than five times the average weekly wage in covered employment, which for Hawaii would be $472.85. Both of my teen-age daughters made more money than that last summer in vacation jobs. The average worker in Hawaii will, by definition, make that much in five weeks. To limit qualifying wage requirements to this amount automatically opens the unemployment compensation door to very large numbers of secondary workers who from time to time enter and then withdraw from the labor force.

Changes in labor force attitudes over the years make this situation much worse than it would otherwise be. Our thousands of housewives and students who work in our pineapple canneries every summer during the season never used to think of themselves as unemployed when the season was over, but now they have no compunction whatsoever in drawing whatever unemployment compensation benefits their brief and temporary work experience entitles them to. Equally, when casual workers work a short work week during the off-season, they expect a supplemental unemployment compensation check-which is always handled by mail to avoid the inconvenience of appearing in person at the Labor Department Building. After all, the benefit is a right if you meet the qualifying and other requirements.

I might add that in Hawaii-as perhaps in other resort areas of the countrywe see this in extremes. We have nearly half a million visitors from the Mainland every year, and a great many of these visitors are entitled to benefits if the State Employment Service cannot locate suitable work for them. Under S. 1991 even the refusal of suitable work could carry only a six-week postponement of benefits.

Changes, primarily in coverage, in the unemployment insurance system itself have an important bearing on qualifying standards. In the beginning, coverage was severely restricted to the industrial core of the labor force-employers with eight or more employees, no public employment, no agricultural employment, etc. On the theory that many claimants would have much more total work experience than covered work experience, qualifying standards (which relate only to covered work experience) were purposely set very low. At this time when coverage is approaching totality, this reason for low qualifying standards has ceased to exist.

I therefore strongly oppose the limitations on qualifying standards contained in S. 1991. For similar reasons, I strongly oppose the limitations on disqualifications contained in S. 1991.

III. Need for modernization of benefit provisions

Whatever the need for modernization of the benefit provisions in the employment security laws around the country is (and certainly the need does not exist in Hawaii where we have one of the most liberal sets of benefit provisions in the country), I must strongly object to the proposal that the Federal government mandate the states to increase benefits. Everyone knows that state unemployment compensation legislation is a give-and-take proposition involving labor and business and that given a fair balance of political influence, labor has to permit the plugging of some loopholes in order to get improvements in benefits and vice versa. For the Congress to mandate a vast range of improvements in benefits and place a tight lid on matters like disqualifications (as S. 1991 would do) would guarantee that the situation that exists today in so many states whereby many persons with very little attachment to the labor force can draw benefits would get dramatically worse and would, I believe, lead to the eventual discrediting of the entire unemployment insurance system-which none of the people I speak for want to see come about.

IV. Federal unemployment adjustment benefits

I do not agree with the proposal for FUAB. As a temporary measure in times of high unemployment, there may well be some justification for such a program. But with unemployment of the regular work force at fairly minimal levels (not much over 3 per cent of the total work force in Hawaii now) exhaustees are largely people who need training or retraining or change of work attitude, or people who no longer have any attachment to the labor force (retirees. secondary workers who, having worked for a while, have quit for an indefinite period). The former need training, retraining, or a change of attitude rather than another twenty-six weeks of benefits, and the latter never should have been drawing benefits in the first place.