Our endorsement of H.R. 15119 is conditional upon its adoption in its present form. Should the Senate amend it, to restore any of the undesirable features of previous bills, we will oppose the amendments.

We particularly would oppose any of the following provisions:

1. Any Federal benefit period to be available in periods of strong economic activity as well as in recessions.

2. Any weakening or eroding of experience rating.

3. Any attempt to dictate to the States the amount or duration of unemployment benefits.

4. Standards for the eligibility or conditions for disqualification of claimants other than those already incorporated in H.R. 15119.

In general we approve H.R. 15119, although we would qualify our approval in some respects.

We approve the proposal to extend the duration of benefits in recessionary periods. We do not specifically endorse the triggers set in H.R. 15119, particularly the trigger for extension in individual States. It would have been a much better proposal if each State were permitted to adopt its own definition of recession. Pennsylvania and other States have already adopted programs of extended duration, and the different approaches made to the problem would have provided valuable experience in discovering the most helpful definition.

In any case, a trigger for benefit extension based on the relationship of insured unemployment at a given time to the level of unemployment in previous years is too variable to be satisfactory. We find that if this law had been in effect in Pennsylvania during recent years, in some calendar quarters we would have had an extension of benefits with an unemployment rate of 3.4%; in other quarters a rate of nearly 9% would have been insufficient to trigger an extension. The proposed increase in Federal unemployment tax is acceptable to the extent that it is necessary for administrative purposes and to fund the Federal share of extended benefits. We believe, however, that a Federal tax base of $3600 would have been preferable to the $3900 and $4200 specified in the bill. An increase in the Federal tax base automatically increases the tax base for the State systems, and a sharp increase in the base for State taxes causes a dislocation in the impact on the individual employers.

We regret that the House has found it necessary to impose restrictions on the State laws, by prohibiting the so-called 'double dip', by ensuring that claimants in approved training courses are not thereby disqualified, by forbidding the States to cancel wage credits for voluntary quits, and by forbidding discrimination against out-of-State claimants. The last two restrictions do not apply to Pennsylvania, and the first two are already a part of our law, but we would prefer to see the States given maximum latitude to establish their own system.

With these qualifications, we endorse H.R. 15119, and recommend the Senate Finance Committee report it favorably.

CARL F. SCHATZ, Chairman, Social Legislation Committee.

STATEMENT OF JOHN C. HAZEN, VICE PRESIDENT, GOVERNMENT, NATIONAL RETAIL MERCHANTS ASSOCIATION

INTRODUCTION

The National Retail Merchants Association is a voluntary non-profit organization serving, in a research capacity, retail, department, and women's specialty stores. Its membership embraces more than 13,000 individual retail stores located in every state in the union and in 46 countries abroad. Members of the Association, hereafter referred to as NRMA, employ approximately 1 million persons, and do a combined annual sales volume of $21 billion. The Association, therefore, has a very substantial and direct interest in any proposed amendments to the present Unemployment Insurance Program as conducted by the various states throughout the country.

The NRMA for many years has supported, through the action of its Board of Directors and at annual meetings of its membership, the principle of unemployment insurance as a means of security for the wage earner who, through no fault of his own, is unable to find work. The Association has consistently

contended that since employment varies substantially state by state, that the most effective administration of a sound Unemployment Compensation Program is best accomplished through the state system rather than by Federalization.

CURRENT LEGISLATION

Your Committee has before it for consideration S. 1991 which sets forth the Administration's proposals as introduced in May, 1965. It also has before it H.R. 15119 as developed by the House Ways and Means Committee, and as approved by an overwhelming majority in the House of Representatives.

Our basic position is that no Federal amendment to existing Unemployment Compensation Insurance is needed at this time. The record demonstrates that the various states have made substantial and meaningful progress in liberalizing their respective Unemployment Compensation benefits. We believe that the states can be relied upon to continue to efficiently liberalize the Administration of their respective programs as dictated by economic conditions.

We believe it to be true that the retail trade has paid considerably more money into unemployment compensation programs than the benefits which have been paid out to its employees who suffered a loss of employment through no fault of their own. Retailing, by the nature of the unpredictable fluctuating customer traffic, and the need of providing maximum shopping hours, must rely heavily on part-time or short-hour employees such as house wives and students who are not truly in the full-time labor market and who, for the most part, are secondary wage earners and not the sole head of a household. These employees generally are not eligible for unemployment benefits, and gain nothing from the unemployment tax paid by their employers. This places an added burden on the retail employer as compared to employers in other industries who operate basically with a regular full-time employee staff.

However, if in the wisdom of Congress, and now particularly the Senate, legislation is deemed necessary at this time, we believe the Senate should support the adoption of H.R. 15119 without amendment.

The House Ways and Means Committee had before it, the Administration's bill H.R. 8282-a companion bill to the Senate S. 1991. NRMA vigorously opposed H.R. 8282 on behalf of its members. It filed a detailed statement with the House Ways and Means Committee dated August 25, 1965. A copy of this statement is enclosed. Rather than repeating here the arguments it contains, we respectfully request each member of the Senate Finance Committee to study this statement carefully. This House bill, had it been enacted, would have substantially Federalized our state systems of Unemployment Compensation as would Senate bill S. 1991, now before your Committee.

The House Ways and Means Committee, guided by its Chairman, Wilbur D. Mills of Arkansas, held extensive hearings on H.R. 8282, and spent a considerable amount of time in executive sessions before reporting out its own Committee bill, H.R. 15119 (and an identical bill H.R. 15120 by the ranking minority leader of the Ways and Means Committee, John W. Byrnes of Wisconsin). It represents a reasonable and workmanlike compromise to the Administration's proposals and to the views expressed by the AFL-CIO. The House bill, as passed, reflects the best thinking and judgment of a majority of the state Unemployment Compensation Supervisors, who must cope with their respective states' unemployment problems.

We believe that on balance the provisions in the House bill pertaining to the increase in the tax rate, the extension of coverage, the increase in the base rate for tax purposes and the eligibility for benefits, while imposing an additional burden on the retail industry, are workable, even though costly to our members. We do not believe the views expressed to your Committee by Mr. W. Willard Wirtz, Secretary of Labor, on July 13, are in the best interest of the States' Insurance Program, or that his recommendations for more Federal controls are needed or warranted.

In conclusion, and to repeat, if Congress believes amended Unemployment Compensation legislation is needed, the House bill H.R. 15119 is a workable compromise to the Administration's proposal and warrants the Senate acceptance without any change whatsoever. Certainly the House Ways and Means Committee is a most competent body, it has given intensive consideration to this very important problem and the acceptability of its recommendations is certainly demonstrated by the overwhelming majority vote it received in the House of Representatives.

STATEMENT OF THE NATIONAL RETAIL MERCHANTS ASSOCIATION ON H.R. 8282 AND RELATED LEGISLATION TO AMEND THE FEDERAL UNEMPLOYMENT TAX ACT BEFORE THE HOUSE WAYS AND MEANS COMMITTEE AUGUST 25, 1965

INTRODUCTION

The National Retail Merchants Association is a non-profit membership corporation with a membership of over 13,750 stores located in every state in the Union and in forty-six countries abroad. Members of the National Retail Merchants Association provide employment for approximately 1,000,000 persons and do an annual volume of business of about $21 billion. Because of the large number of wage-earners employed in the retail industry, our interest in proposed revisions of the unemployment insurance statutes is manifest; indeed, as our statement hereafter will reveal, the impact on retailing will be of extremely serious proportions.

GENERAL STATEMENT OF PRINCIPLES

In keeping with the Ways and Means Committee's expressed desire to avoid repetition of testimony, the National Retail Merchants Association's statement will focus attention on the effect that H.R. 8282 will have on department, chain and specialty stores who comprise the membership of our Association. For the record, NRMA states its fundamental policy with respect to H.R. 8282 and unemployment compensation generally, as approved by the Board of Directors and at Annual Meetings of the membership.

1. NRMA supports the principle of unemployment insurance as a means of security for the wage-earner who, through no fault of his own, is unable to find work.

2. In the establishment of the Unemployment Compensation Act in 1935. Congress recognized that unemployment conditions and needs varied greatly in the various states. For this reason, Congress rejected a single Federal system of unemployment insurance and determined that the interest of the unemployed and the nation could best be served by administering the unemploy ment compensation program through the several states. The state system of unemployment insurance has, in practice, worked successfully and the individual states have given recognition to individual needs of its citizens through sharply increased benefits over the years, by periodic increases in maximum entitlements as well as through the liberalization of requirements necessary to qualify for benefits. Accordingly, we see no need for and oppose that portion of H.R. 8282 that would impose so-called "Federal benefit standards" and. for all practical purposes, Federalize the state unemployment systems of the states.

3. The Unemployment Compensation Act since its inception has embodied the principle of "merit rating" whereby the financial burden of unemployment insurance was apportioned among employers on the basis of their employee turnover. This principle encouraged employers to maintain a stable work force in the interests of our nation's workingman and the welfare of the country as a whole. The abandonment of the "merit rating" principle, in fact, by H.R 8282, if not in express language, will remove any incentive that exists for employers to stablize employment and convert the benefits program into a form of dole system.

PRINCIPLE OBJECTIONS TO H.R. 8282

We oppose the enactment of H.R. 8282 for the following reasons, among others: 1. It will have a serious impact on retailers' profits; and if they are to survive the heavy increased cost, it must be passed on to the consumers in the form of higher prices.

2. It will have a serious impact on retailers' ability to recruit and retain employees needed.

3. It will encourage employees, particularly "secondary wage-earners" to withdraw from the labor market to receive benefits.

4. The disqualification standards proposed are unrealistic and would inflate unemployment claims.

5. It would be unduly burdensome on the smaller retailer.

6. It would, for all practical purposes, eliminate "experience rating".

THE IMPACT THAT H.R. 8282 WILL HAVE ON DEPARTMENT, CHAIN AND SPECIALTY STORES

1. Impact on consumers and retailers generally

Retailing is primarily a service industry. According to authoritative figures published by the Controllers' Congress, NRMA, covering results of department stores in 1963 (the last year in which final figures are available), wages made up about 60% of the total operating costs of department stores. It is estimated that about 60% of department store payrolls are presently subject to tax for unemployment insurance tax purposes. The increase of the wage tax base from $3,000 to $5.600 from 1967 thru 1970 and $6,600 thereafter as contemplated by H.R. 8282 (and possibly immediately to $6,600 as proposed by Secretary Wirtz in testimony before the Committee) will raise the tax base to a minimum of 90% of department store industry payroll and possibly higher, both as to Federal as well as the state unemployment compensation taxes. Moreover, it is likely that the smaller retailer, usually a single proprietor, will have his entire payroll subject to both the Federal and state unemployment compensation tax. The increase in the wage base subject to unemployment insurance tax, coupled with the increase in the tax rate itself, will approximately double the Federal unemployment tax payable by department stores. State unemployment taxes, with the ultimate elimination of the merit rating credit, could increase even more.

To understand and underscore the impact of H.R. 8282, NRMA has made estimates of the additional cost to our members and related this additional cost to the department store profit figures as a whole. These estimates indicate that department store profits will be reduced by a minimum of 15% on an industrywide basis after taxes with the likelihood that smaller store owners' profits will be reduced as much as 25%. This does not reflect the effect H.R. 8282 would have on the cost of the goods and services that retailers themselves purchase from others. Moreover, this does not include the effect that increased unemployment taxes would have on the retailer's inventory which represents about 60% of total expenditures by retailers. By adding together the direct impact on operating costs with the additional costs of goods and services purchased, the profit impact could be reduced by another 15% or 30% in total. These figures have profound significance to the American public and the Congress because the meager net profit return presently “enjoyed” by retailers will leave them little or no alternative but to pass the additional costs on to consumers in the form of higher prices.

Set out below are the net profits earned by department and specialty stores during 1963. together with the direct, correlative effect that H.R. 8282 would have on such earnings:

Net profit of department and specialty stores (after Federal income taxes), 1963 fiscal year

1 Reflects 15-percent reduction or estimated reduction based on additional unemployment compensation taxes contemplated by H.R. 8282. It does not reflect additional cost of goods and services that may similarly be affected by H.R. 8282.

Source: Operating Results of Department and Specialty Stores in 1963, published by the Controllers' Congress, National Retail Merchants Association.

It will be observed that the general pattern is that the smaller retailer earns far less after-tax dollars than does his larger store competitor. Indeed, profit figures for stores with less than $1 million volume, if available, would undoubtedly show a net profit percentage far less than 1.35% earned by department stores in the $1 to $5 million volume category. For many, if not most of these retailers, the added tax costs could well represent the difference be

tween staying afloat or going out of business. For those retailers who are able to survive, the only alternative may be to increase prices to consumers. For retailers to absorb such costs, in the light of the slim profit margins indicated previously, seems highly improbable. Therefore, if Congress sees fit to enact H.R. 8282 in its present form, it must be prepared to accept the consequences of a strong impetus to the inflationary spiral and the already high cost of living. 2. Impact on recruitment of employees

An additional problem presented by the enactment of H.R. 8282 relates to employee recruitment. The retail industry is a stable industry in terms of employee work force. Most retailers maintain a regular, permanent staff of employees who can count on continuing, steady work the year-round. However. retailing is seasonal in the sense that a higher level of business is transacted during the Christmas season, at Easter time, around Mother's and Father's Days and at special sales events. Moreover, retail stores, to meet the shopping needs of their customers, typically stay open several nights each week. In addi tion, the typical retailer's day is characterized by a fluctuating flow of customers. At certain hours of the day the store is extremely busy while at other hours the store is relatively quiet. All these factors have made it necessary and economical for retailers to supplement their full-time work force by the use of part-time employees who work a regular schedule but less hours than the full-time employee. These persons are permanently employed, but work a limited number of hours per day. For example, an employee may work four hours per day for five days a week from eleven o'clock in the morning until 3 P.M. to cover the heavy customer traffic during the middle of the day or she may work three evenings each week during those days that the store is open evenings. In addition, a substantial number of individuals are employed at periodic intervals to meet special departmental needs.

It is estimated that the typical department store employs approximately 60% of its total employee work force either at periodic intervals or less than a regular work week. It is also estimated that of the total employee work force (full-time employees and part-timers) approximately 70% can be classified as "secondary wage-earners", that is, employees who are married women with husbands regularly employed or children living at home. The fact that the retail industry employs a large percentage of part-timers and "secondary wageearners" accounts in large measure for the relatively high turnover of this class of employees. These types of claimants do not have the same incentive to continue or find employment as primary wage earners. Unemployed "secondary wage-earners", with short base period employment and with benefits below the maximum, receive benefits for a longer period of time and a higher proportion exhaust benefits than workers with long-base period employment and higher benefit rates.

3. Problems of the secondary wage earner

A large number of personnel who leave retailing, of course, do so of their own accord or retire from the labor market so that unemployment benefits are not involved in these cases. However, the turnover factor makes the retail industry vulnerable to claims for unemployment insurance on the part of former employees, usually "secondary wage-earners", who no longer wish to work. have no desire to become re-employed and who seek to take undue advantage of unemployment compensation. H.R. 8282 provides that eligible employees who meet the proposed requirement of 20 weeks of prior employment (or its equivalent) must have a potential duration of 26 weeks. In about half the states who do not now meet this proposed standard, we predict that if H.R. 8282 is enacted that part time and extra employees would find work for at least 20 weeks in order to obtain 26 weeks of unemployment benefits. In those states that meet the proposed requirement, a large number only work the minimum period of 20 weeks or its equivalent in order that they may obtain the maximum duration of benefits.

There can be no doubt that with the additional enticement of higher state benefits, plus the cake frosting of 26 additional weeks of Federal benefits under H.R. 8282, will make it extremely difficult, if not impossible, for the retail industry to recruit competent part-time employees that will be necessary to conduct a retail business efficiently in the interests of its customers.

The following example drawn from an actual case history, based on the 1961-62 experience under the Temporary Emergency Unemployment Compensa