Signed Continued Charles A. Myers, Professor of Industrial Relations and Director of Indus- Fred Slavick, Associate Professor, New York State School of Industrial and Herman M. Somers, Professor of Politics and Public Affairs, Princeton Sidney C. Sufrin, Professor of Economics, Syracuse University. John G. Turnbull, Professor of Economics and Associate Dean of the College of Liberal Arts, University of Minnesota. Lloyd Ulman, Professor of Economics and Director of Institute of Industrial Dale Yoder, Professor of Industrial Relations and Director of Division of STATEMENT OF THE GIRL SCOUTS OF THE UNITED STATES OF AMERICA, PRESENTED BY MRS. HOLTON R. PRICE, JR., PRESIDENT RECOMMENDATIONS Girl Scouts of the United States of America recognizes the social and economic objectives of H.R. 15119 in regard to extending unemployment insurance to employees of non-profit organizations. We appreciate the consideration given by the House Ways and Means Committee to the recommendations made by this and other non-profit organizations. Section 104 of H.R. 15119 will make it possible for an organization like ours to fulfill its responsibilties as an employer in respect to unemployment insurance but in a manner that would not draw unnecessarily upon the funds and resources which have been contributed to Girl Scouting to carry out its program. We hope that the Senate Finance Committee will retain Section 104 of the bill in its present form. We particularly recommend retention of the following provisions made available to nonprofit organizations by H.R. 15119: 1. That non-profit organizations be allowed the option of either reimburs ing the State for unemployment compensation attributable to service for them or paying the State unemployment insurance contributions. 2. That non-profit organizations not be required to pay the Federal portion of the unemployment tax. FACTS SUPPORTING RECOMMENDATIONS Our organization has three reasons for supporting optional statewide reimbursable financing rather than a payroll tax. We believe these same reasons justify exemption from the Federal portion of the unemployment tax: 1. Increased costs Our organization, like other non-profit organizations, cannot readily pass on tax burdens to either its members or the donors who contribute to its financial support. 1 Signatures received after statement was released to press on July 26, 1965. We estimate that for the calendar year 1967 a 3.3 percent payroll tax on a $3,900 base rate would cost the 499 local Girl Scout Councils $550,000; the National Organization would have to pay $116,500. The resulting added expense of $666,500 represents almost two percent of operating budgets. This high percentage is accounted for by the fact that in a service organization such as ours salaries are the major expense item on the budget. These payroll tax contributions would be significantly in excess of the claimant requirements for our employees and would add considerably to the difficulties of financing a nonprofit organization. 2. Few claimants Unemploment insurance payments on a tax basis would impose upon the Girl Scout National Organization and Girl Scout councils throughout the country, as well as many other organizations like them, an inequitable share of total insurance cost. According to 1961 Bureau of Employment Security figures, nonprofit organizations are responsible for only 1 percent of total unemployment. This is the lowest percentage of any covered or non-covered industry. The relationship of low turnover and low claimant benefits to tax payments by non-profit organizations is illustrated by experiences in Washington, D.C., Colorado, and Hawaii. According to recent Bureau of Employment Security figures, the contribution of non-profit organizations to insurance funds far exceeds the payments made to claimants. For example, in 1964, Washington, D.C. charged non-profit organizations $676,000 and paid claimants $268,000. Also in 1964, Colorado collected $461,000 from non-profit organizations and paid $181,000 to non-profit organization claimants. In 1960, payments by non-profit organizations to the insurance fund of Hawaii were $76,000, while claimants from these organizations were paid $53,000. 3. Nature of organization Girl Scout employees are providing service designed, like public service, to assist in promoting the general welfare. Their specific objective is to help prepare girls for their citizenship responsibilities. The United States Government has acknowledged, by its recent actions and public statements, that organizations such as ours are necessary partners if the total potential resources of the nation are to be brought to bear upon its social needs. It would seem, therefore, that Federal tax exemptions applicable for State and local governments could properly be extended to non-profit organizations, and that methods similar to Federal reimbursement of the states could be made available to them for their claimants. SUMMARY Our presentation to this Committee is based upon our desire to meet the proposed bill's objective of extending unemployment protection to more employees who need it but, at the same time, to insure as fully as possible that the maximum amount of contributed funds and resources can be directed to serving the youth of our nation. STATEMENT OF RUSSELL W. LAXSON, TREASURER FOR HONEYWELL INC., This statement by Honeywell Inc., Minneapolis, Minnesota, is submitted in support of H.R. 15119. SUMMARY Careful weighing of the provisions of H.R. 15119 leads us to the conclusion that it is the most reasonable proposal possible. H.R. 15119 provides for several necessary changes in the Federal unemployment compensation law which we support. It also contains a number of provisions about which we have some reservations. However, it is a carefully balanced proposal which, if enacted in its present form would make necessary improvements in the federal unemploy ment compensation law and would be in the public interest. We support: 1. The provision for federal court review of the decisions of the U.S. Secretary of Labor concerning question of state conformity to federal statutes. 2. The provisions for extended benefits during periods of higher than normal unemployment. 3. The exclusion of major federal standards which would prohibit the individual states from developing and adapting state laws suitable for their own needs and circumstances. 4. The exclusion of provisions which would jeopardize individual company experience rating. We would oppose: 1. Legislation which would establish federal benefit and eligibility standards and which would otherwise deny states discretion in adapting their state unemployment compensation laws to meet their own circumstances and needs. STATEMENT Honeywell is vitally interested in the unemployment compensation system, its financing, its benefits and its administration. We have some employees in every state and jurisdiction in the United States, and pay unemployment taxes in all of these jurisdictions. We believe that the unemployment compensation program serves a most useful function in our industrial society and that the program needs to be reviewed from time to time in order to assure that it meets the needs for which it was established. We believe that in most of the states, the laws are more than meeting the objectives of the unemployment compensation program as it was originally conceived. Benefits today are generally much more liberal in both absolute and relative terms than those provided by standards originally established. Our broad experience with unemployment compensation also indicates the clear need for states to retain discretion in establishing benefits, qualification and financing standards. The diversity of conditions between states, and even within states, clearly shows that federal standards will not be equitable or workable in terms of a sound system of unemployment compensation. IMPROVEMENTS PROPOSED IN BILL H.R. 15119 The provision for federal court review of state conformity decision of the U.S. Secretary of Labor has been urgently needed for many years. This will give states some avenue for appealing decisions striking down state provisions which the states have deemed necessary to sound fair and equitable administration of their unemployment benefit systems. The resolution of such conflicts between the states and the Secretary through the federal courts should increase respect for the unemployment benefit system and help increase public acceptance and respect for the system. Past experience during recessionary periods has shown the desirability of developing a permanent system of extended benefits for recessionary periods of high unemployment. The provisions establishing this system of extended benefits also appear to be flexible enough to allow some experimentation by states in seeking a system of extended benefits which is fair and equitable and will meet the needs of those persons to whom very long term unemployment is a problem. We believe that H.R. 15119 has sufficient merit that it ought to be enacted even though there are numerous provisions about which we feel some reservations. We recognize that H.R. 15119 is a finely balanced proposal arrived at after long and careful study by the House Ways and Means Committee, the Interstate Conference of Employment Security Administrators. In total H.R. 15119 will improve the unemployment benefit program. In its present for it balances the interests of all groups and is in the public interest. Amendments are likely to destroy the careful balancing of interests which has been achieved in H.R. 15119 and ought to be avoided. STATEMENT OF IRA H. NUNN, WASHINGTON COUNSEL, NATIONAL RESTAURANT ASSOCIATION Mr. Chairman and Members of the Committee: My name is Ira H. Nunn. I am the Washington Counsel of the National Restaurant Association. I appear today on behalf of the National Restaurant Association to present the objections of the food service industry to S. 1991 and to H.R. 15119. The National Restaurant Association is the trade association of the food service industry. With almost 12,000 direct members and through affiliation with 135 state and local restaurant associations, my association speaks for over 110,000 food service establishments in every state in the union. STATEMENT OF POSITION The food service industry is opposed to both S. 1991 and to H.R. 15119 and recommends against the enactment of either bill. A bill identical to S. 1991 was the subject of extensive analysis by those who earlier have appeared before this Committee and before the House Ways and Means Committee. Its ramifications both technical and practical have been made clear. The bill reflects the philosophy of the current Administration that only increased federal control and expanded welfare benefits at the national level can solve the Nation's problems. This legislative proposal was rejected by the House Ways and Means Committee. Further analysis is not needed for us to state categorically that we disagree with both the philosophy underlying the bill, S. 1991, and the approach to the problem of unemployment made by this bill. This bill is complex and offers several far reaching projects but its fundamental defect to us is that it does nothing to solve the problem of unemployment. It does not seek to relieve or reduce unemployment. It seeks only to soften the blow of unemployment. This is a laudable goal, but S. 1991 would achieve it at such a high price to employers as to militate against the creation of new jobs and this is the only real answer to the unemployment problem. Several points of objection have already been made with which we agree. I believe they are worthy of brief repetition. We do not support the use of "average weekly wage" as a criterion for measuring adequate benefits. Such an average is deceptive because it includes the weekly pay of executives who rarely are unemployed. Although all averages are somewhat deceptive, we believe a fairer measure would be average weekly wages of claimants. We believe that reducing the disqualification period and severaly limiting reasons for disqualification can only serve to encourage some workers to leave the work force for purposes of collecting unemployment benefits. We can see no reasonable justification for so rigidly restraining the states' ability to deal with qualification for benefits. We believe that providing unemployment compensation to trainees is wrong. Those preparing for work should be compensated-in cases where compensation is justified or desirable-out of funds set aside exactly and solely for that purpose. Such trainees are not of an unemployed group the Unemployment Compensation Act was designed to handle. 8. 1991 IS NOT NEEDED Many valid objections have been raised to the various provisions of S. 1991 as well as to its original House counterpart, H.R. 8282, but foremost and fundamentally S. 1991 is objectionable because it is not needed. The President has based his case on a claimed need. He said simply, "The system has not kept pace with the times. No major improvements have been made since its original enactment 30 years ago." The implication is that changes are needed because changes have not been made recently. To us, the case has not been made; the issue has not been proved. Certainly, there has been considerable evidence offered by those who claim there is no current need for this legislation. Witness the remarks of Father Joseph M. Becker, S.J., "The states have experienced reasonable success in conducting their own programs, while increasing the real protection afforded the unemployed by about 100 per cent. As compared with those who received benefits in 1938, the first year in which benefits were paid, the beneficiary in 1960 received his benefits sooner, for a longer time and could buy more real goods with what he received." S. 1991 VIOLATES THE PHILOSOPHY OF THE ORIGINAL ACT The purpose of the Unemployment Compensation Act of 1935 was to provide a base, a minimum standard beneath which the states could not go in establishing unemployment benefits, tax rates and qualifying conditions and retain 90 per cent of the federal tax to be assessed. The federal power to levy and collect taxes was used and it was used sparingly. This tax is a tax on employment levied only on employers. It is a cost of doing business but more accurately, a price to be paid in order to do business. S. 1991 would raise that tax to an intolerable level by raising the tax rate and drastically raising the taxable wage base. S. 1991 would no longer permit the federal act to serve as a base or guideline to the states. Its requirements are too stringent for this. It would impose federal requirements almost completely and would leave the states almost no latitude. The states could impose only more rigorous or more costly require ments than the already overly burdensome requirements of S. 1991. THE ERROR OF UPSETTING EXPERIENCE RATINGS Federal law now permits and the states have adopted a provision which taxes at a lower rate employers whose workers have not been subjected to high or normal unemployment. It is true that S. 1991 would not directly affect this "experience rating" practice but it is also true, in our opinion, that the failure to require the states to adopt an "experience ratings" requirement as is the case with S. 1991, will result in the abandonment of "experience ratings" by the states. The unions oppose "experience ratings" in our opinion because the desire to protect a good rating leads many employers to challenge claims for compensation. Employers who do not benefit by the reduced rate because of a poor rating show little zeal for preserving experience ratings. The likelihood then is that the states will be pressured to abandon experience ratings for a one-rate-for-all system of taxation or a tax rate established on an industry basis. The latter plan would be quite harmful to many restaurant operators. Ours is an industry with a considerable labor turnover. The liberalizing aspects of other provisions of S. 1991 would cause many restaurant employees who leave their employment to qualify for benefits. On this point, consider the experience of one major restaurant chain, one by the way whose experience rating is excellent in states where it operates. Of those who left work and filed claims, 86 per cent were not qualified for immediate benefits. 23 percent had been discharged for misconduct and 63 percent had quit voluntarily. Only 14 percent of its claims were justifiable. Thus, the nature of our industry, it being one with an especially high percentage of unskilled workers, is such that it might not qualify for a favorable unemployment tax rate if judged on an industry basis. Yet this would be unfair to many of our large chain operations, which through use of such fringe benefits as profit sharing and pension plans, have been able to develop a very stable work force. These chains stand to suffer most. They have the most employees and often the best experience ratings. Lumping them on either an industry or a statewide basis is unfair. The experience ratings system is a good one. It should be preserved and it can only be preserved by the federal statute. HIGH TAXES DISCOURAGE EMPLOYMENT S. 1991 provides a tax on employment. Whatever social need is filled thereby, the fact remains that this tax is going to be a high one. When coupled with the new high tax rates adopted to finance the Medicare law, we find that employers will be paying up to $537.90 per employee per year in payroll taxes. And this assumes no further increase in Social Security taxes. We are faced with a per employee charge of $10 per week, a charge from which the employer derives no benefit. This $10 per week charge can only be controlled by not hiring new workers. Instead, the employer who provides overtime pay to current employees is able to avoid these extra taxes. When the other benefits employees receive are taken into consideration, it becomes profitable to provide overtime. The answer is not to add to the penalty rate for overtime. The answer is not to add further to the cost of hiring employees. Such legislation as this and the proposal to extend and raise the minimum wage can only operate to accelerate |