Extended benefits under this provision would be payable without additional qualification requirements so long as the eligible workers otherwise exhaust their state rights in a particular benefit year.

What is actually needed is a combination of the provisions now contained in S. 1991, with modifications suggested above, and those contained in Title Two of H.R. 15119 to provide a more comprehensive system of protection against wage loss caused by unemployment of longer duration and should be adopted by the Committee.

HIGHER TAX BASE

The proposals contained in S. 1991 regarding the increase in the tax base for the purpose of unemployment insurance financing are eminently sound. When the federal unemployment contributions were first considered by the Congress, it was planned to tax the entire covered payroll. However, contributions for Old Age and Survivors' Insurance were limited to the first $3,000 earnings of covered workers, a level which at that time encompassed the overwhelming proportion of covered workers' earnings. Accordingly, the same standard was applied to unemployment insurance. Thereafter, wages have advanced materially and, correspondingly, the base for Old Age and Survivors' Insurance has been periodically increased and is now set at $6,600. However, the taxable base for unemployment compensation remained at $3,000. The retention of an outdated tax base creates numerous anomalies in the tax structure. Employers in the lower-wage industries, for example, are taxed on a greater proportion of their payrolls than those in the higher-wage industries. Since wages tend to be lower in smaller firms, small business is forced to pay unemployment insurance taxes on a greater fraction of its payrolls than its bigger competitors. As a result, unemployment insurance taxes weigh more heavily on the smaller firm than on big business and further hamper the efforts of the smaller firm to compete.

The unrealistic tax base also distorts state experience rating systems which seek to relate tax rates to the degree of employment stability. Even though

they aim at lower tax rates for employers with good experience, the reverse effect may result. If, for example, an unstable higher-wage employer is assessed a 3 percent tax rate it may only cost him 1.2 percent of this total payroll if his taxable payroll accounts for 40 percent of his total wage bill. A stable, lowerwage employer, on the other hand, who is assessed at the rate of 2 percent may pay 1.6 percent of his total wage bill if his taxable payroll equals 80 percent of the total payroll. This illustrates that an unrealistic tax wage base may permit unstable employers to enjoy lower unemployment insurance costs per dollar of payroll than that paid by the more stable employers. It is obvious that a low tax base defeats the very purpose that experience rating hopes to attain.

There is no doubt that the same revenue can be raised irrespective of the portion of the total payroll that is taxed. Theoretically, this can be done merely by taxing a small fraction of the payroll at very high rates to produce the needed revenue. In practice, the reluctance to do this, aside from the side effects touched upon earlier, has led to inadequate financing of state unemployment insurance systems, and in turn retarded the enactment of needed improvements in benefit levels and duration.

In

From the point of view of equity, adequate financing, and administrative efficiency and simplicity, the tax base for unemployment compensation purposes should be aligned with the tax base used for other social security programs. unemployment insurance such a tax base may have to be attained, as a matter of practical consideration, over several years. This is what S. 1991 seeks to accomplish-an ultimate establishment of a uniform tax base for all social insurance purposes. This is a reasonable approach.

OUT-OF-STATE CLAIMS

We support the provision of S. 1991 which disallows the right of a state to deny or reduce benefits because a claimant filed an out-of-state claim for benefits. We must preserve the fredom of an individual to move from one area to another. The mere fact of such mobility, so long as the individual remains in the labor force, should not affect his right to the same benefits that he would have obtained were his residence in a particular state to continue. The bill, however, fails to deal with an important facet of the problem brought about by mobility of our population. A person's work activity during a base period may take place in more than one state. Were all such work performed in a

single jurisdiction, that person would have qualified for benefits on becoming unemployed; inasmuch as his earnings were derived in more than one state, he may not have sufficient credits to qualify in either of them. Thus there is a decided need to remedy this defect and to provide, by federal rule, that employment experience in several states be combined for the purpose of determining eligibility for and amount of benefits.

IN CONCLUSION

Except for specific modifications suggested above, we are in substantial agreement with the unemployment insurance amendments set forth in S. 1991. We are also in basic agreement with the position presented to your Committee by President George Meany on behalf of the AFL-CIO.

We strongly urge your Committee, and through you the Senate of the United States, to modernize the unemployment insurance law. Such action is needed to extend protection to millions of workers not now covered, to establish federal standards for unemployment benefits, to institute a program for the long-term unemployed, and to provide improvements in unemployment insurance financing. These measures are long overdue.

STATEMENT OF KARL F. FELLER, INTERNATIONAL PRESIDENT, INTERNATIONAL UNION OF UNITED BREWERY, FLOUR, CEREAL, SOFT DRINK AND DISTILLERY WORKERS OF AMERICA, AFL-CIO-STATEMENT CONCERNING UNEMPLOYMENT COMPENSATION REFORM

The Brewery Workers International Union submits this statement concerning unemployment compensation reform for your kind consideration. We strongly support unemployment compensation reform along the lines of the McCarthy Bill, S. 1991.

Many of our rank and file members have spoken to the undersigned personally and to our field representatives about the extreme difficulty of supporting a family on present unemployment benefit levels during periods of seasonal layoff. When a plant is shut down, or when machines replace men, long-term unemployment and serious hardship are often the result.

The present hodgepodge of unemployment compensation systems in effect today are doing less to relieve this hardship than ever before. When unemployment compensation came into effect in the 1930's, wage earners received greater relative benefits than they do today. In every state, the maximum weekly benefit is smaller, relative to wages, than it was in 1939.

It is clear that the states have failed to meet the responsibility of providing an adequate income ffoor for a wage earner who is unemployed for causes beyond his control. Today, states compete for industry by reducing the cost. and consequently the benefits, of unemployment compensation programs. Wage earning families subsidize this destructive competition. Only a Federal law which makes unemployment compensation benefits uniform and adequate can prevent the continuing erosion of state unemployment compensation programs. Unemployment is a national problem; it requires a National answer.

The McCarthy Bill goes much further than the Bill enacted by the House. H.R. 15119, toward a national solution. Keeping in mind that the two most important factors in any unemployment compensation program are adequacy and uniformity of benefits, let us briefly compare the primary provisions of the McCarthy Bill and the House Bill.

M'CARTHY BILL

WEEKLY BENEFITS

Maximum benefits are gradually raised to % of a state's average weekly wage, with minimum benefits equal to 1⁄2 the worker's weekly wage.

HOUSE BILL

No provision is made for improvement of present state benefits, under which most workers qualify for less than 14 and some for as little as 14 or 1% of their weekly wage loss.

26 additional weeks of benefits are provided for unemployed workers who have exhausted regular benefits and who have been unemployed at least 6 months. Payment is made by the Federal Government, and extended benefits are payable regardless of economic conditions.

HOUSE BILL

Extended unemployment compensation is available to individuals who have exhausted all rights to regular compensation under state law for a period not to exceed 26 weeks. Benefits are payable only during periods of high unemployment. The Federal Government pays to each state an amount equal to 1⁄2 the extended compensation benefits. FINANCING

Neither Bill eliminates the experience rating which is undermining the financial base of the unemployment compensation system as the result of state competition for industry.

The House Bill is seriously inadequate. Although it contains many needed improvements, it does not eliminate the basic faults of the present unemployment compensation systems: inadequate coverage, inadequate benefits, and lack of national uniformity.

We respectfully urge your serious consideration of the McCarthy Bill. We suggest that enactment of a Bill along the lines of the McCarthy Bill would benefit industry, as well as wage earners, by stabilizing the purchasing power of wage earning families.

Respectfully submitted.

KARL F. FELLER, International President.

BIRMINGHAM, ALA., July 25, 1966.

Senator RUSSELL B. LONG,

Chairman, Committee of Finance,
U.S. Senate,

Washington, D.C.:

Birmingham Labor Council AFL-CIO urge you and committee to support uniform Federal standards for amount of week benefits and for minimum of 26 weeks of extended benefits in Federal unemployment (copy sent Senators Sparkman and Hill).

DONALD B. STAFFORD,

President, Birmingham Labor Council, AFL-CIO.

STATEMENT PRESENTED TO THE SENATE FINANCE COMMITTEE ON BEHALF OF THE RHODE ISLAND AFL-CIO BY THOMAS F. POLICASTRO, PRESIDENT

The Rhode Island AFL-CIO urges the Senate Finance Committee to recommend passage by the Senate of unemployment compensation legislation along the lines proposed in Senator McCarthy's Bill, S. 1991.

The Rhode Island AFL-CIO believes that modernization of the federal standards for unemployment compensation are long overdue.

The unemployment compensation legislation recently passed by the House of Representatives falls far short of meeting the needs of the unemployed. It would be a disservice to the workers of this country if the House Bill was enacted into law.

This nation has had thirty years experience with the operation of our employment security system. Very few changes have been made over the years that would keep federal standards up to date. Usually, Congress is called upon to take action when it is of an emergency nature. On these occasions, Congress has responded. During the Depressions of 1958 and 1961, Congress met the needs by enacting emergency temporary unemployment compensation programs. However, these actions were under pressure and were for short term situations. There is no emergency pressure on Congress at this time. Our nation is enjoying unprecedented prosperity. Therefore, the Senate Finance Committee had a golden opportunity to build in better federal standards that will protect the program in the years ahead. Now is the proper time to update our antiquated federal standards for unemployed compensation. Over the thirty year life of our Social Security System, employment security has been the ugly duckling of the Social Security family.

On two occasions, its constitutionality has been challenged. It has been under continuous attack by the National Association of Manufacturers, and other employer groups; the Interstate Conference of Employment Security Agencies; The Tax Foundation; Reader's Digest and other publications.

Unfortunately, these are the elements in our country who refuse to accept the fact that all segments of the Social Security family have become an integral part of the American economic and social system. They are built in fixtures of our economy and are firmly rooted in our society.

However, the opponents of a sound employment security system continue their devious methods in trying to destroy or severely cripple an essential program. The attacks upon the employment security system have been numerous. They have also been inaccurate and uninformed. These unrelentless attacks have been designed to confuse the public and the legislators. To a great degree, they have been successful.

The opponents of employment security have directed their attacks towards financing. They attempt to starve the program through under-financing. They seek unrealistic disqualification provisions. They would prefer to have the unemployed on the relief rolls rather than pay unemployment benefits. They have used the merit rating provisions as bait to pirate industry from one community to another.

Thirty years ago, when federal standards were first promulgated, there was some reason for setting them at such a low level. The economic nature of our states varied greatly. Since that time, our nation's economy has undergone considerable change. No longer do we have the wide economic difference between so called agriculture and industrial states. Just about all the states of our nation have become more uniformly industrial. We feel that the federal standards for unemployment security should be updated correspondingly.

Rhode Island is a geographically small state. Our working citizens are regularly confronted with confusing experiences with employment security laws This is brought about because thousands of our people live in Rhode Island and work in nearby Connecticut or Massachusetts.

The basic standards of the laws in the three states vary to a high degree. Therefore, if federal standards were modernized, many of these confusing experiences would disappear.

One of the areas where federal standards should be updated, is in the matter of disqualifications. More realistic federal standards should be established and duration of penalties be made uniform.

Another role for federal standards is the matter of processing of interstate claims. Many of our unemployed have been forced to undergo unnecessary hardships because some states are dilatory about procesing interstate claims.

The Senate Finance Committee should look into the matter of adequacy of benefits. Experience has shown that benefits have lagged seriously behind. The proportion of benefits to wages has gone down. An unemployed worker can no longer provide the necessities of life from his unemployment benefits. As a matter of fact, unemployment benefits in most instances, are below the poverty level set by federal government agencies. Therefore, adequacy of benefits should be raised and where possible, tied to a percentage of his average weekly wage. In Rhode Island we have worked hard to keep our employment security law parallel with the times. However, we feel that our unemployed and our employers have been placed at a disadvantage because other states and the federal government have not kept their standards in conformity with the times. We feel that some state administrators and state legislatures are unconcerned about the original concept and intent of the law.

In addition to urging the Finance Committee to recommend to the Senate legislation along the lines of $1991, we feel that the Committee should consider other features that would give a higher degree of protection to the person so unfortunate as to become unemployed through no fault of his own. Therefore, we further recommend that federal standards be extended to provide unemployment benefits to those who are unemployed because of sickness. Four states already are experiencing such a desirable feature and Congress should encourage it in the other 46 states.

Also, as to adequacy of benefits, we feel that Congress should take steps in providing increased benefits for the family breadwinner. Congress should require that benefits also be provided for dependents.

In addition, we believe that the limitation placed on the taxable wages should be removed. One of the gimmicks used by the opponents of employment security, is to starve the program. This is done by establishing a low tax ceiling and a merit rating system that gives preferential treatment of favored employers.

We greatly appreciate this opportunity to lend our support to the passage of legislation along the lines of Senator McCarthy's Bill, S1991.

We feel very strongly that Congress must enact uniform federal standards for the amount of weekly benefits for the unemployed.

Also, Congress should enact provisions that a minimum of 26 weeks of extended federal unemployment compensation benefits be provided.

In addition, we request that the House Bill amending the federal standards for Unemployment Compensation, not be enacted.

DEAR MR. CHAIRMAN: May I take this opportunity to express the views of the Building and Construction Trades Department concerning legislation to improve our Federal-State Unemployment Insurance system which is pending before your Committee. The Department is composed of eighteen National and International Unions, representing approximately four million building tradesmen throughout the country.

We in the Building and Construction Trades Department feel that the Federal-State Unemployment Insurance system must be brought up to date and that this is a matter highly deserving of the close, careful and immediate attention of the Congress. This attention must turn itself to a farsighted and longreaching solution to the existing problems.

Due to seasonal employment and the unique nature of our industry, the building trades have the highest rate of unemployment of any industry throughout the country. We are deeply concerned that adequate legislation be enacted in order to meet the needs of the present unemployment situation.

As we see it, the main problems are: (1) the inadequacy of benefits presently being paid and their lack of uniformity among the states; (2) the vast gap between the number of people drawing unemployment insurance benefits and the total number of people who are actually unemployed. A little over 800,000 persons draw benefits every week, while over 3 million are currently unemployed.