related activities for the fiscal year 1949 reached $30,684,000,0** The CHAIRMAN. Dr. Eveline Burns? Dr. Burns, we may be 21 to hear you, but I wanted to make a little inquiry. Will you be seated? What is the length, approximately, of statement? Dr. BURNS. I cover, sir, quite a considerable number of point the program. We have made a rather careful analysis of the zer tion that is before you. The CHAIRMAN. I am afraid we will have to suspend at this pa because of the work on the Senate floor. You would have to over until Monday, because I do not believe we will be able to have & session tomorrow. Dr. BURNS. I would like to come down again, of course. I would be very glad to do so. The CHAIRMAN. We are very sorry to put you to that necess but I am sure that all of us must go to the floor of the Serat afternoon. So I suggest that you come back on Monday, and we will be a to hear you then. Dr. BURNS. Thank you. I prefer to do that. The CHAIRMAN. Mr. Argo, I will have to make the same state to you. STATEMENT OF R. K. ARGO, PERSONNEL DIRECTOR, AZAZI TŁ MILLS, INC., BIRMINGHAM, ALA. Mr. ARGO. Senator, it will be impossible for me to be here Xo but I would like to submit my statement for the record, if tar v suit you.. The CHAIRMAN. Yes. cover in your statement. record. And suppose you tell us what pom Mr. ARGO. Well, I cover several points, including disab age and the definition of "employee." The CHAIRMAN. You are not in the life-insurance fiel The CHAIRMAN. You may have a seat if you will, ther wish to make any oral statement in connection with y will be very glad to hear from you. Mr. ARGO. I would be glad for the statement to stand Mr. ARGO. Yes, sir. The CHAIRMAN. For the purpose of identifying yo The CHAIRMAN. And what are your mills? Tex, The CHAIRMAN. Cotton textile mills? Mr. ARGO. Yes. 60805-50-pt. 3- -9 The CHAIRMAN. Very well. We will be glad to have your statement, and we will put it into the record. We regret that we cannot hear you orally this morning. (The prepared statement of Mr. Argo follows:) STATEMENT OF R. K. ARGO TO THE SENATE FINANCE COMMITTEE ON THE SOCIAL SECURITY ACT (H. R. 6000) I am R. K. Argo, personnel director of Alabama Mills, Inc., Birmingham, Ala., chairman of the social-security committee of the Alabama State Chamber of Commerce, a member of the social-security committee of the Associated Industries of Alabama, and a member of the legislative committee of the Alabama Cotton Manufacturers Association. Today I am presenting the views of the above-mentioned associations. H. R. 6000-Extension of coverage.-Old-age and survivors' insurance coverage would be extended to add approximately 11,000,000 new persons to the 35,000,000 persons now covered during an average week. The groups add d to the system under the bill are as follows: Nonfarm self-employed with some exceptions; employees of State and local governments; domestic servants in a private home; employees of nonprofit institutions; agricultural processing workers; Federal employees not covered under any retirement system; Americans employed by an American aircraft outside the United States; employees and self-employed in the Virgin Islands (about 5,000) and, if requested by the legislature, in Puerto Rico; and salesmen. It seems to be the opinion of most business groups that universal coverage extending even beyond the groups proposed to be covered by H. R. C000 is fundamentally desirable. This position contemplates the establishment of old-age and survivors' insurance as a basic minimum floor of protection for all gainfully employed. It is our feeling that, unless universal coverage was recommended, there would be the danger of another wholesale and costly revision of the program at a later date in order to give other groups a new start. However, the basic reason for recommending universal coverage is that all gainfully employed people must be made to realize, through the taxing device, that social security is not a give-away program, and that everyone who works for a living and who expects to receive benefits from the Government must pay his share of the cost while gainfully employed. We strongly recommend that steps be taken to diminish or to terminate any Federal participation in State old-age pension programs now jointly financed by the State and Federal Governments in the field of public assistance. With universal coverage of OASI, the Federal Government should retire completely from public assistance. H. R. 6000 is dangerous in that it proposes more rather than less Federal money for public assistance. If this view prevails, the political manipulation by certain States which throws more and more of the burden onto the Federal Treasury and reduces the State's responsibilities for old-age pensions will be accelerated rather than diminished. H. R. 6000-Increase in Federal share of public assistance costs.-The bill would strengthen financing of public assistance in all States, and, particularly, would enable States with low-average payments to raise the level of payments to needy recipients under the State-Federal program. Federal funds would be made available to the States under the following matching formula: (a) For old-age assistance, aid to the blind, and aid to the totally and permanently disabled, Federal funds will equal four-fifths of the first $25 per recipient plus one-half of the next $10 plus one-third of the next $15 with a maximum of $50 on individual assistance payments. (b) For aid to dependent children, Federal funds will equal four-fifths of the first $15 per recipient (including one adult in each family) plus one-half of the next $6, plus one-third of the remainder, with maximums on individual assistance payments of $27 for the adult plus $27 for the first child plus $18 for each ad litional child in the family. We strongly urge opposition to further increases in Federal assistance grants to States as provided in H. R. 6000. The glaring examples of abuse and manipu lation by some States of the present matching formula are undesirable. As an example, the average paid to recipients during August 1949 for public assistance in the State of California was $70.70, as compared to the State of Georgia $20.73. This comparison shows the inconsistency of the program. Another illustration: The State of Louisiana recipients were paid during the month of August 1949 an average of $47.08, and for the fiscal year ended June 30, 1949, 810 out of each 1,000 persons 65 years of age and over were on the public-assistance roll. In comparison to this for the same period, in the State of New Jersey, 66 out of each 1,000 persons 65 years or older were on the public-assistance rolls and were paid $48.34. The present type of unequal matching induces States to increase the number of recipients rather than the average payment. The average payment per recipient can be reduced in the present law with financial advantage to the State. A glaring example of this is the State of Mississippi, which from September 1947 to September 1948 increased their recipients by 13,728 and reduced the average payment to recipients $1.85; but, due to the unequal matching, this State, by this increase in the rolls of recipients, realized many thousand dollars more from the Federal level than they had previously done. We recommend that we return to the original dollar-for-dollar matching for public assistance as the first step to eliminate the Federal Government's participation in this program. We firmly believe that this is a problem which should be handled at the local level without any Federal participation. H. R. 6000-Definition of "employee."-The new definition, which is effective with respect to services performed after 1949, has four parts. The first part provides (as does existing law) that an officer of a corporation is an employee of the corporation. The second provides that the usual commonlaw rules are to be used to determine whether an individual is an employee. Thus all persons who have been determined to be employees under existing law will continue to be considered employees. * The third part of the definition extends coverage to individuals who perform services, under prescribed circumstances, in seven occupational groups. The fourth test of employee status differentiates between individuals who are employees and those who are not employees on the basis of a factual considerations and not on the basis of technical legal considerations. Under this test, the status of an individual in the performance of service for any person for remuneration is determined from the combined effect of the following enumerated factors: (1) Control over the individual; (2) permanency of the relationship; (3) regularity and frequency of performance of the service; (4) integration of the individual's work in the business to which he renders service; (5) lack of skill required of the individual; (6) lack of investment by the individual in facilities for work; and (7) lack of opportunities of the individual for profit or loss. We believe that this test is so broad that any bureau or administrator in Washington would have the authority to rule in many cases independent contractors could be classified as employees. As an example, the paper industry in our State of Alabama contracts with small independent contractors for logs used in this particular industry. We believe, under this test, the administrator of this act could hold these small independent contractors and their employees to be employees of the contracting company. You can readily see the tax liability that could be imposed. * * ** We recommend that there be united opposition to the proposed revisions in the definition of "employee." This concurs in the House Ways and Means Committee minority report which said "Paragraph 4 of the definition of 'employee' gives to the Treasury Department virtually unlimited discretion, through authority to extend the definition of 'employee,' to determine where the impact of the social-security taxes will fall. As a result of this authority, large numbers of persons will have no way of knowing their social-security tax liability until the Treasury determines it for them." We therefore recommend that existing definitions of employee now contained in the law be retained; furthermore, with universal coverage, the need for revising the definition of "employee" is no longer of major importance. H. R. 6000-Permanent- and total-disability insuranceCoverage: All persons covered by the old-age and survivors insuranes program would have protection against the hazard of enforced retirement auc loss of earnings caused by permanent and total disability. Benefits: Permanently and totally disabled workers would have their fits and average wage computed on the same basis as for old-age benefitz no payment would be available for dependents of disabled workers. Eligibility for benefits: An individual would be insured for dis benefits if he had both (a) 6 quarters of coverage out of the period ending when his disability occurred, and (b) 20 quarters of coverage out of the 40-quarter period ending when his disability occurred. H. R. 6000 will put the Federal Government into the disability-insurance business. The experience of life-insurance companies on disability has been very disastrous. Many life-insurance companies, as is generally known, suffered very serious losses during the depression. Life-insurance companies, as you know, where they furnish disability insurance, make this available only to select groups at a high rate; but, under the proposed bill, all types of risks will be brought in and will constitute a much greater hazard than insurance companies have under their policies. The trouble with disability in a tax-supported system is that people will claim benefits as a matter of right because they have paid their taxes to cover the receipts of disability. In the first place, it would be impossible to police such a large-scale program because it is a known fact that disability is very hard to disprove. Rheumatism, low back pains, and other obscure things such as nervous disorders, feigned heart diseases, which keep people from working, are most difficult to handle. Another danger in this program is that one receiving benefits for disability will certainly want to remain on the rolls if jobs become scarce or the wage scale falls. You must remember that this is not benefits for 26 weeks or 1 year; it can mean benefits for life. The situation which we would probably face is that in the event of a depression, in a system of this kind, when the claimants have exhausted their unemployment-compensation benefits, they would then try to prove their inability to work and show that they are disabled and be put on the permanent benefit rolls. We would like to bring out one of the dangers, particularly in the textile industry, where many women are employed. Say we have a woman who has been working in our industry for 10 years. She is married and wants to go home. She does so, and after 6 months she claims that she is not able to work because she is disabled. You probably could not prove that she was not disabled, and she claims benefits, say, for rheumatism, nervous break-down, or some other obscure cause. You could see exactly what would be the outcome in a case of this kind. We believe that policing this would be impossible. Just remember that when you become 65 years of age that is a fact, but total disability would be mighty hard to disprove at any age. H. R. 6000, taxable wage base.-Under the proposed bill, the total annual earnings on which benefits would be computed and contributions paid is raised from $3,000 to $3,600. We strongly urge the $3,000 taxable wage base be maintained, inasmuch as the entire tax plan already established in OASI and State unemployment insurance is at $3,000. I quote from the minority report of the House Ways and Means Committee, which we believe is an excellent reason why the present wage base should be retained: "We definitely are of the opinion that the proposed increase in the wage-base limit from $3,000, as proposed in H. R. 6000, results in higher benefits to those better able to provide their own protection and does nothing to increase the benefits for those with average wages below $3,000 for whom the system should be primarily concerned. It increases the dollar cost of the system substantially, provides a windfall to persons near retirement who earn $3,600 or more, and unnecessarily complicates the keeping of wage records by employers who must continue to report unemployment taxes on a $3,000 wage base." We believe benefits should be increased by increasing the formula and not the taxable wage base. We feel that benefits as provided in H. R. 6000 go entirely too far. The CHAIRMAN. The committee will recess until Monday morning at 10 a. m. (Whereupon, at 12:35 p. m., the committee recessed to reconvene Monday, February 27, 1950, at 10 a. m.) SOCIAL SECURITY REVISION MONDAY, FEBRUARY 27, 1950 UNITED STATES SENATE, The committee met at 10 a. m., pursuant to recess, in room 312, Senate Office Building, Senator Walter F. George, chairman, presiding. Present: Senators George, Johnson of Colorado, Kerr, Millikin, Taft, Butler, and Brewster. Also present: Mrs. Elizabeth B. Springer, chief clerk, and F. F. Fauri, Legislative Reference Service, Library of Congress. The CHAIRMAN. The committee will come to order. Mr. Rieve? STATEMENT OF EMIL RIEVE, CHAIRMAN, CIO SOCIAL SECURITY COMMITTEE, AND GENERAL PRESIDENT, TEXTILE WORKERS UNION OF AMERICA, CIO Mr. RIEVE. Good morning, Senator. The CHAIRMAN. You are on first this morning. We hope other members of the committee may come in during your appearance, but it is rather difficult to secure full attendance at any time, especially this session. You are the chairman of the CIO Social Security Committee? The CHAIRMAN. And the general president of the Textile Workers Union of America? Mr. RIEVE. That is right, Senator. I am also vice president of the CIO. The CHAIRMAN. You were on the Senate Advisory Council last year. Mr. RIEVE. Yes; I was one of the two labor representatives on th committee. The CHAIRMAN. We will be very glad to hear you, sir, on H. R. 07 Mr. RIEVE. I appreciate this opportunity to discuss with your mittee the CIO position on improving our Federal socialprogram. I am appearing here today as chairman of the CIG mittee on social security, which has a number of proposals for ening the bill H. R. 6000 that you are now considering. This Congress is certainly going to pass some kind of socia legislation. I am optimistic, you see. The need has existe years, and the demand has become too widespread to be ig f 4 |