So, when the Ways and Means Committee turned down federal standards, it removed the heart of the plan to modernize jobless pay. Organized labor is now looking to the Senate to restore this "heart" if unemployment compensation reforms are to have any real meaning.

Federal standards, as proposed, would cover these areas:

Increased Benefits-Higher weekly amounts would be required of the states. Maximums must be raised in steps until they reach two-thirds of each state's average weekly wage. Benefit floor will be half of each unemployed worker's weekly wage loss subject to the new maximums.

Extended Duration-Long-term adjustment benefits would go to those who use up all their state allowance. Payments would continue at the state's weekly amount for six more months, if needed, so long as the unemployed worker maintains his eligibility. Benefits are also payable during an approved training period.

Disqualification Penalties-States would be allowed to withhold benefits up to six weeks-the average duration of a spell of involuntary unemployment-in cases where the worker quits voluntarily, was discharged for misconduct or refused suitable work. Local employment offices could withhold longer, however, if there was evidence of continued violations.

To most people this would seem to be reasonable and enlightened legislation in line with other socially progressive legislation passed in recent years.

Opponents, however, charge that the bill is "a shocking grab for federal power" and "nothing less than total revolution in our system for giving benefits to the unemployed:" This is the contention of the ultra conservative Reader's Digest magazine.

Rep. Charles Vanik (D-Ohio) has answered this charge fully. He says: "There is no 'grab' for federal power, and H.R. 8282 is not a revolutionary federalization of the unemployment compensation system. The system was created not by the states but by the taxing power of the Congress when it passed the Social Security Act of 1935 ...

"There have always been certain standards in the federal statute that state laws must meet, for employers in that state to receive almost 90 percent credit against the federal tax. H.R. 8282 would now provide some additional standards that state laws must meet in the future for full credit to be allowed

"The bill imposes no penalties-it just contains provisions for tax credit. And as several independent scholars have pointed out, the federal government must be able to use some incentive to encourage the states to make needed adjustments within a reasonable length of time. And it should be noted that the new federal 'standards' allow, as of now, great initiative and variation to be made by the states."

Opponents of federal standards also claim that employers would be saddled with an estimated increase of 60 percent or more in payroll taxes.

Vanik, however, points out that in 1965 the total cost of jobless pay was about $2.2 billion. Proposed improvements would have added less than another half a billion dollars.

If the proposed federal standards were written into the law it would make considerable difference in the benefits received by jobless workers. Here are some examples of the maximum weekly benefits in some states: Alabama-from $32 to $58; California-from $55 to $80; Colorado-from $50 to $68; District of Columbia-from $53 to $70; Illinois-from $38 to $76; Indiana— from $40 to $73; Michigan-from $33 to $83; Minnesota-from $38 to $67; Missouri-from $40 to $69; New Jersey-from $50 to $75; New York-from $50 to $76; Ohio-from $42 to $75; Oregon-from $44 to $69; Pennsylvania-from $45 to $67 and Wisconsin-from $55 to $70.

The difference between the present maximums and proposed maximums is, unquestionably, the difference between not being able to provide for your family and being able to provide; to live in poverty and not live in poverty when you are out of work. A myth has been built up that hundreds of thousands of workers are receiving unemployment compensation illegally, getting something for nothing rather than working for it. Proposed legislation would in no way limit a state's ability to detect, prosecute and obtain criminal convictions for fraud. The important thing is that in the America of today, adequate jobless insurance is imperative. And if we are going to get it, the Senate of the U.S. now holds the key.

STATEMENT OF J. BILL BECKER, PRESIDENT, ARKANSAS STATE AFL-CIO

My name is J. Bill Becker, and I am President of the Arkansas State AFLCIO. On behalf of my organization and the working people of Arkansas I want to thank the Committee for considering our views in the interests of necessary and meaningful improvements in our unemployment insurance system. We support the general broad goals of S. 1991, but I will confine my statement to certain features with which we have had experience in Arkansas.

BENEFITS

The benefit provisions of the Act which would require that the state maxinnuum be increased to 66% percent would greatly improve the present law, although we are disappointed that you would wait until 1971 to accomplish what needs to be done now. The maximum unemployment benefits are now limited to onehalf of the state average weekly wage for insured employment for the previous year. With an average wage of $76, our maximum is now $38 weekly and will be adjusted each year. This provision was adopted in the Arkansas Legislative Session of 1963. It was the first time our maximum benefits had reached 50 percent since 1950. In 1939, a unemployed worker received a benefit of half his weekly wage, up to a maximum of $15.00. The average weekly wage in Arkansas was then $16.00. Therefore, virtually all workers were able to receive benefits of half their weekly wage as our law originally intended. In 1964, however, there were over 29 percent of our claimants who drew the maximum rate; most did not get 50 percent of their wage loss; this is better than in some states, but it does not yet provide the great majority with 50 percent of their wage loss. It is discrimination. Justice and equity demand equal treatment for all workers. There is no valid economic reason why employees whose earnings are over $76 a week, with the possible exception of the highest paid, should get less than 50 percent of their wage loss restored when unemployment strikes.

Because of their higher wage, these workers have attained a higher standard of living and greater financial obligations. Although Arkansas average hourly earnings are 75 cents per hour below the United States average, thousands in our labor force make fairly decent wages. As a mater of fact, two industries, paper and allied products and chemicals and allied products, have earnings higher than the United States average.1

We still have a lot of catching up to do. The average weekly benefit amount for total unemployment in 1964 was only $26.49. Of 44,594 persons receiving one or more payments in 1964, 11,461 claimants exhausted their benefits. The average duration of benefits was 11.6 weeks. A standard calling for 26 weeks of benefits, if a worker has 20 weeks of employment in his base year, would certainly help stabilize the Arkansas economy and provide needed subsistence for many families.

FINANCING

At the same time that Arkansas workers benefited from the 1963 legislation, the stabilization rates were revised downward so that, in effect, 85 percent of the employers in the state received a tax break. These were employers who had a good experience rating. The old law in Arkansas provided that when the unemployment Fund level reached two times the previous year's benefit payment, all rates below 2 percent would rise to 2 percent until the Fund was stabilized. In addition, a "floor" was set in the event the Fund continued to fallif the Fund equalled the previous year's benefit payments, an emergency feature provided that all rates would automatically go to 2.7 percent. Administration officials estimated that the 2 percent trigger point would be reached by 1964 unless the rate schedule was changed. There was an imminent 2 percent tax rate minimum facing the employers. The law changed the rate schedule so that when the trigger points were reached, the tax rate would go up by only twotenths of a percent. We estimate that in 1963 one utility alone saved some $80,000 in unemployment insurance taxes. The emergency trigger point, or "floor", was removed entirely and it is quite possible, under the present Arkansas law, that if the Fund keeps falling it could conceivably, in a period of high unemployment, go down to zero.

1 Average Hourly Earnings in Arkansas, Publication H-10a. Industrial Research and Extension Center, College of Business Administration, University of Arkansas, May 1965, Table 2.

While most employers received what amounted to a tax break, 15 percent of all employers with negative balances were assigned a penalty rate of 4 percent. Whereas the negative balance employer formerly had a tax rate of 2.7 percent of payrolls-regardless of how much they were overdrawn-the new statute increased their maximum rate to 3 percent on April 1, 1963; to 3.3 percent on January 1, 1964; to 3.6 percent on January 1, 1965; and will go to 4 percent on January 1, 1966. It hardly seems fair that these employers-the least able to pay-who have poor experience ratings, largely as a result of the economic nature of their business, should be punished.

Experience rating has resulted in the underfinancing of our program. Since 1938, employers have been taxed an ever smaller proportion of their payrolls. A contributing factor, of course, has been our low tax base of $3,000. The 1964 year-end balance (of our Trust Fund) was at the lowest level since the end of 1944. In the last 11 years, since 1953, the Fund balance has dropped $17,213,885. In each of these years, benefit payments have exceeded employer contributions-the excess totaling $25,591,792 during the 11 year period. In spite of the advances in experience rates in the past two years, Arkansas still has a low average rate in comparison with most other states. The 1964 average tax rate was 1.49. Twenty-six percent of our employers had a rate of 0.3 percent; twentyfour percent of our employers had a rate ranging from 0.5 percent to 1.1 percent. See Exhibit 1. These experience rating provisions have resulted in savings to employers of almost $150 million since the provisions first became effective in 1942.*

Unemployment insurance is not, as many employers believe, a system for keeping their taxes and costs down. It is designed to keep purchasing power up. We have high hope that Congress will help us solve this very serious problem of underfinancing that plagues our state program. We are fearful today that an effort might be made to freeze our present 50 percent escalator clause at its present maximum of $38 a week unless our Fund is properly financed. We do not believe that we can maintain an adequate level of benefits unless Congress sets a floor under benefits and at the same time substantially increases the tax base.

1965 ARKANSAS LEGISLATIVE EXPERIENCE

The close relationship between the employer's financial interest in his tax rate reflects directly on eligibility and disqualifications. At the very first opportunity, the employer groups moved to protect their low tax rate at the expense of the unemployed. The 1965 Session of the Arkansas Legislature passed amendments to the Employment Security Law that would have meant "total disqualification" for voluntary quits, simple discharge and refusal of suitable work. For example, a discharged worker would need to requalify by having earnings equal to six times his weekly benefit amount. The penalty was eight weeks. In my opinion, this feature would have given an incentive to employers to fire people rather than lay them off so that the more severe penalty would be assessed. The bill (H.B. 340) placed unfair disqualifications on pregnancy, women who follow their husbands to other places of employment, and workers who quit employment to attend school or become self-employed. It also would have disqualified many seasonal workers in construction, needle trades, lumber, food processing, and other industries that have irregular employment. Originally, Arkansas law provided that you needed earnings in one quarter of your base period; then it was altered, so that you needed some earnings in at least two quarters; now it was proposed that you must have earnings equal to six times your weekly benefit amount in the last two quarters of your base period. Please see Exhibits 2 and 3.

The motivation behind the passage of this drastic law was that our Trust Fund needed stabilization. This motive cannot be denied. In an exchange on the floor of the House of Representatives during a debate on the measure, a Representative from Garland County asked the author of the bill, "Isn't it true that this would build up the Fund at the expense of the workers?" The reply was a candid "Yes."

In addition, it was argued in the Legislature and before the Committee handling the bill, that Arkansas needed to keep its tax rate low so that industry

2 Arkansas Employment Security Division 28th Annual Report. 1964, Page 34.

3 Memorandum to All Arkansas Employers from Arkansas Employment Security Division, February 10, 1965. Arkansas Employment Security Division 28th Annual Report, 1964, Page 36.