legislation that we have so recently had. It would assure those workers that their benefits would at least provide them with half of their average weekly wages up to a statewide maximum calculated at twothirds of the statewide average weekly wage. Thus the worker who had been earning $100 a week, when unemployed would be assured of a $50 benefit so long as that was no greater than two-thirds of the statewide average weekly wage. Incidentally, if that $50 was more than two-thirds of the statewide average weekly wage, he would get no more than two-thirds figure.

This bill would provide Federal assistance to States whose benefit payments, because of their own economic calamities, have put their funds in jeopardy. Thus, such States would be able to qualify for reinsurance grants upon appropriate certification by the Secretary of Labor that they had met the necessary conditions underlying the present law. These amounts of money, given to replenish and bolster the State unemployment insurance fund, would not have to be repaid. This would avoid the problems that now confront certain States that have been beset by unemployment over a period of years and are finding that they must at one and the same time raise their taxes to continue to pay benefits and raise them again to repay loans from the Federal Government.

(The prepared statement follows:)

Monsignor O'GRADY. Anyone who has had direct personal contact with the employment situation throughout the country during the past 2 years cannot fail to be impressed by its seriousness.

I am well aware that we have had many changes for better or worse in the various States, but on the whole we have had a continuing serious situation in most of the large centers throughout the country, and one of the saddest things about the situation is the fact that a large part of the leadership of the country does not seem to have recognized its seriousness.

I happen to have lived through the depression of the 1930's. I was in close touch with the situation throughout the country. I know that the leadership of the country on the whole was rather seriously concerned. Some of our ablest leaders, including the business leaders, gave a great deal of attention, during the early 1930's, to ways and means of developing a flexible public works program that would provide employment not only for hourly rate workers but, also, for professional people.

There was a great deal of interest in the creation of employment opportunities that would readily lift the load of unemployment.

In fact, that was the one measure that was constantly being applied to every sort of work program. There was the general feeling that we could not depend to any large degree on huge work programs that would take a long time to get underway.

With a change in Government in 1933 the Democratic leadership, in its anxiety to do something dramatic to relieve the load of unemployment, endeavored to set up a huge public works program but in less than a year it became evident that this sort of program could not pick up the load of unemployment in a reasonable period of time. Within a year it had created only 100,000 job opportunities.

The Democratic leaders were, therefore, compelled to return to the experience of 1930, 1931, and 1932. They set about creating a mass employment program that was designed to lift the load of unemployment and to create a variety of job opportunities that were necessary to meet the needs of the unemployed as a whole.

One of the things that impressed me about the unemployment situation in the early 1930's as I moved around the country, was the unrest that appeared in so many cities. Fortunately, the people who were charged with the administration of the public works program were aware of this; they were very conscious of the importance of providing employment opportunities: they knew the psy chology of the unemployed workers in many of our large industrial centers.

I believe that this is one factor in the unemployment situation of the thirties that has never been fully understood.

I do not want to be an alarmist but at the same time I believe that we ought to be conscious of the mentality that long-lasting mass unemployment can develop among the masses of the unemployed. I hope that the leaders of our country will become more conscious of and more sensitive to this situation before it is too late.

While other economic indicators are up, employment, particularly in manufacturing, has not been rising so rapidly, and unemployment remains heavy in manufacturing.

Many of our leaders keep pointing to the evidences of improvement in the economic situation throughout the country; they point to high levels of production, capital investment and sales, but the fact still stares us in the face that there are large levels of unemployment in virtually all our large industrial centers.

This is emphasized by the figures on unemployment benefit exhaustions. While it is contended that we are coming out of the woods, benefit exhaustions for the first two months of 1959 were 392,000. This is at a much higher rate than the 848,000 exhaustions of January-March 1958.

These and other figures show us that we are developing a large hard core of unemployed workers. We cannot permit this to continue without a serious effort to do something about it.

I have seen what stagnant pools of unemployment meant in the thirties and I have seen what work opportunities did to clear these pools. I have seen large numbers of what might have been regarded as long-term unemployed, lifted up again and returned to useful employment.

One of the questions about which there was serious concern in the 1930's was the demoralizig potentialities of mass relief for the unemployed. This explains the great interest generated in regard to constructive work programs in the 1930's. This should be of equally serious concern at the present time.

It is the only constructive means of dealing with those who have exhausted their benefits under unemployment compensation. While we hope to improve our system of unemployment compensation, no matter how much we may improve it we will need a constructive public works program in order to prevent the demoralization that will otherwise result from long-term unemployment.

The other measure we need to consider is basic improvement in unemployment insurance. The depression of the early thirties really sharpened the thinking of the people in regard to certain permanent changes that needed to be made in our industrial system. During this period the people began to recognize the importance of developing definite forms of protection against the hazards of the industrial system, especially unemployment and old age.

During this period also we learned more about what other countries had done through unemployment insurance.

The President's Committee on Economic Security, which was set up in 1934, gave special attention to a program of unemployment compensation.

The national character of the unemployment of the 1930's led some people to advocate a national system of unemployment compensation. The influence of the Wisconsin school helped to produce a Federal-State system instead. The Wisconsin influence, deriving from the fact that Wisconsin was the first State to adopt an unemployment insurance law, had other effects as well. Throughout the country many leaders were ready, on the model of workmen's compensation, to accept unemployment compensation as a form of protection against the hazard of unemployment, irrespective of employer or employee responsibility.

The Wisconsin school was effective, however, in injecting a concept of employer responsibility through provision for merit rating, a concept that has really hampered unemployment insurance in attaining its original objectives. Individual employer's tax rates were, in general, to go up if workers became unemployed and drew benefits.

If they did not become unemployed and draw benefits, taxes would be low. The Wisconsin leaders thus intended, by tax incentives, to give employers an economic interest in stabilizing employment.

In so doing, however, they gave employers a more immediate interest in denying benefits to the workers. That interest has promoted a series of disqualifications that have made it more and more difficult for the workers to secure benefits. More immediately it has induced employers to work against the improvement of benefits, in both duration and amount. The efforts of employers and their representatives are being directed toward the preventing of legislative improvements and also toward restrictions in regard to the administration of benefits.

The efforts of employers in the field of administration have been directed toward litigation in regard to claims for benefits made by the workers. In many instances this means considerable delay in the payment of meritorious claims to workers who are involuntarily unemployed.

In other cases, those employers may protest claims already paid to workers who, because they cannot afford the time to appear to defend themselves, default at appeals hearings and become chargeable with overpayments to the State.

Merit rating has produced sharp interstate variations in the average employerState unemployment tax rate. For example, based on taxable wages for the year ending June 30, 1958, average employer taxes for State unemployment insurance varied in 1958 among the States from a low of 0.4 percent to a high of 2.7 percent. This interstate tax variation, with the interstate competition it creates among industries on labor costs, creates pressure from employers to try to bring down their States unemployment taxes and along with them their State unemployment benefits, as close as possible to the lowest common denominator. It has been said that there is no need for Federal intervention to obtain improvements in unemployment benefit standards because the States themselves have systematically improved their laws as to unemployment benefit amounts and benefit duration.

There can be no question that the laws today provide for higher benefit amounts and longer duration than they did in 1937 and 1939, at the outset of the program.

The real question is twofold: Have these improvements attained a semblance of adequacy? Has the cost that the workers have had to pay been a reasonable one for the improvements they obtained? As to the first, it is sufficient to say that despite all the improvements the States themselves have made, they have not yet provided for maximums that represent two-thirds of the statewide average weekly wage nor for payments to the great majority of unemployed workers of benefits that equal half of their average weekly wage.

The CHAIRMAN. We appreciate your very fine statement. As I remember, you were on the original commission or committee that was appointed to consider the problems that existed at the time and to recommend to the Congress the establishment of some programs out of which grew most of what is in the Social Security Act? that not true?

Is

Monsignor O'GRADY. Yes, sir. I was associated and worked with the committee in 1934, and of course I had been all through that period. I had worked on a study of the old WPA for the House Appropriations Committee. I had been in 14 States. I had been pretty much all over the country. And I got a picture of the situation at that time. And that has been a part of my background, you see. I have been a student, and I had a chance of participating in these discussions through the years.

The CHAIRMAN. Was it the thinking of the group at that time that as a minimum there should be a replacement through unemployment compensation on at least half of the weekly wage lost by the worker? Monsignor O'GRADY. By the workers, yes; half of his wages, yes. That was considered desirable. That was thought throughout. We thought about this members, you see; there was always, of course, a debate about who was a member of the industrial army. And we had to keep them in proper condition, and you had to give him sufficient to take care of him during that period of unemployment.

We have not thought about it for a very long period, because, you see, the concept of work was in the air at that time too. We hadn't thought about this unemployment compensation taking care of longlasting unemployment. We had thought that it would be necessary. We didn't think about putting them on a dole, because there was some violent opposition to a dole. And I thought that there ought to be a work program to take care of-well, take all the people, now, four

hundred and some thousand that have exhausted their benefits in the first part of this year. They have no more benefits. We thought that they ought to have opportunities for employment.

The CHAIRMAN. During the period that these payments were to be made, was it the intention of your group and would you say that you understood it to be the intention of Congress in initiating the program that the benefits themselves be geared to reflect compensation for the loss of one-half of that wage?

Monsignor O'GRADY. Of his wages. The replacement of half of his wages. Of course, we didn't have a lot of this fine thinking. We did have the stabilizing thought in there that has been presented recently by many of the economists, including Arthur Byrnes and some other members of Harvard faculty whose names were mentioned here today. But they had that thought definitely. And the other one that I mentioned was that this was an insurance.

We had thought, you see-they pointed out the experience of workmen's compensation was very live in our memories at that time. Many of us who had lived for a long period had thought about the experience there. And we didn't want to bring in this concept of negligence, because we said that is going to involve us again in all sorts of legal entanglements. And we want a simple system. We don't want to become involved in all these legalisins, because we will never get through with them. The worker is not going to have the talent; he is not going to be able to hire this talent to defend himself if he is going to go into a court, you see, all the time; if he is going to be in law courts all the time, he is not going to be able to defend himself, you see. We looked at it in a very simple sort of fashion.

The CHAIRMAN. Mr. Mason.

Mr. MASON. In connection with his benefits being half his wages, at that time every penny he earned he took home with him. There was no Federal tax of 20 percent upon his wages then, because we had a thousand dollars for the single man and $2,500. And that was more than most of the fellows in the lower brackets earned. So, he took home all of his wages.

Today with the scale of wages and the tax that we levy, he only takes home, say 80 percent of his wages. Because he has to pay a 20percent tax; unless he has four or five children. So, if we give them today 50 percent of their take-home wages, then wouldn't that be about the same as the objective of it in the first place?

Monsignor O'GRADY. You mean a minimum?

Mr. MASON. Yes, the minimum then was half his wages. The minimum now if it is half of his take-home wages would be on a par, wouldn't it?

Monsignor O'GRADY. Well, I think it would be a little bit less. We have had quite a debate, you know, on OASI, as you know, as to whether or not in the last increases you made there is a question whether or not they are any better, for instance, than what you had first in 1939; when I set it up in 1939 there is a real question whether or not there has been any increase. We have had that long debate about OASI. To me it is a real question to see what the value of the dollar is. You not only have the taxes, Congressman, but you have the depreciation, the depreciation of the value of the dollar. Another way to put it is that you have higher prices-whichever side you want

to go on. I suppose it is in part one and in part the other, part the depreciation of the value of the dollar, and partly the higher prices. I still think that the half-you see, many of the States don't have that, not many, practically. Not many have that. And then if you are going to get the higher wage groups, give them a benefit that will amount to anything, that is the reason we think of this two-thirds, you know, for average, as a maximum.

I don't want to take your time unnecessarily. I think your time is of a great deal of value. I wish you well, and I hope you will have the courage to face the problems in here and give us a beginning at least in this. Maybe another year will tell; we can take a broader look at the disqualifications and the difficulties of administration. Because I feel that we haven't. And I have raised this question with the administration about whether they are up to date, about whether their knowledge is up to date about administration, whether they know what is happening in the States. And I am afraid—and this is no reflection on them-because States aren't too anxious-I know with my meanderings that they are not too much interested in my meanderings around these State offices. They would just as soon I keep out, you see. But just the ordinary reality of what is happening to the worker in the line is very difficult to make, now, because the States don't want people outside getting into their affairs. They say that is getting into their affairs. Maybe it is. I don't see it that way, because I, as a citizen, think I have a right to prowl around and get into the lines.

Of course, they don't leave me in the line very long before they catch up with me. They want to know what I am doing, and why I don't go up to the front office first and talk to them. Well, they tell me what they want me to know, but I want to find out for myself. The CHAIRMAN. We thank you very much for coming to the committee and discussing these matters with us.

That completes the calendar for these hearings. Without objection, the record of the hearings will remain open until the close of business Monday, April 20, for the inclusion of any additional statements or data or material which has been requested to be supplied for the record.

Mr. ALGER. Mr. Chairman, I request that a bulletin issued by the First National Bank in Dallas be included in the record for the information of the members.

[Economic Letter, 1st National Bank in Dallas, vol. 8, Apr. 15, 1959, No. 4]

THE UNEMPLOYMENT SITUATION

Last week (April 7) the Government released its official figures on unemployment for March. The release came earlier than usual at the request of AFLCIO top officials so that the data would be available for use at labor's mass meeting in Washington (held April 8) in protest of the unemployment situation. For several months now, labor leaders have charged that unemployment is critical, especially in view of the fact that the economy has been operating at such a high level.

According to the Government, there were 4,360,000 unemployed in March. This is about 6 percent of the civilian labor force. At the depths of the recent recession unemployment was 5,198,000 (March 1958), or about 7 percent (seasonally adjusted) of the civilian labor force. And before the recession set in, the unemployment figure was 2,508,000 (October 1957), only about 4.7 percent of civilian labor force.