Unemployment data can be misleading and deceptive, certainly when presented in absolute quantitative totals. Only by careful analysis of those out of work can we determine the severity of unemployment. In the first place, we must understand clearly the official definition of "unemployment." Roughly, any person ready, willing, and able to work, and seeking work but unable to find it, is counted as unemployed. By definition, then, anyone in the civilian labor force who does not have a job is unemployed. If you subtract employment from the total civilian labor force, you get the number of "unemployed." But that figure does not tell you (1) how long the unemployed have been idle; (2) what their skills are; (3) how much their earnings were when employed; (4) whether they are fully dependent upon work; (5) whether they are in the labor market temporarily; (6) how many of them are in families which have one or more other members at work. Answers to these and other questions are very important in determining severity of unemployment.

We know that there is a hard core of unemployment always with us, even in boom times-people who are moving from one job to another or who are casually employed (going in and out of the labor market). Their unemployment is not very serious because the same individuals do not stay out of work long; that is, those who make up this figure are constantly changing. (NOTE-They are not "unemployables," because unemployables by definition are not counted in the labor force.)

Also, we have each year some 900,000 new people entering the labor market because they have reached working age. All do not find jobs immediately upon entering the labor market. Those who do not are counted as unemployed.

Another interesting aspect of unemployment is that the figure tends to become progressively larger when recession sets in, thus making it seem worse than it is. For example, a recession might cause the number counted as unemployed to reach, say, 7 million, from a prerecession level of about 3,500,000. This does not mean that we must now find jobs for 3,500,000 workers in order to get the economy back to its former employment level. What commonly happens is that the loss of one job may cause an increase of more than one in unemployment. For example, Mr. Doe is the only one in his family in the labor force. He has a good job from whose earnings he supports his family consisting of his wife, age 43, who keeps house; a son, age 17, who is in high school; and a daughter, 19, in a nearby junior college. Doe's earnings are not lush, but the family is thrifty and they manage to make out, but barely do and can save nothing. Doe loses his job. The only income now is from social security. Doe gets counted as unemployed because he registers for work. But Mrs. Doe might also enter the labor market and one or both of the children might quit school and try to find employment. Here, then, is an extreme case of one person (Mr. Doe) becoming unemployed, but his loss of job causing possibly a total of four to get counted as "unemployed."

By the same token when economic activity picks up one good job might reduce unemployment by two or more. In Doe's case, let's say, his old job back might at least send the son and daughter back to school or put Mrs. Doe back in the kitchen at home.

So, without further elaboration, we can say that unemployment figures are tricky and must be analyzed with care before they are meaningful.

Labor union officials currently reason that, although the economy had recovered fully from the recent recession by the end of 1958, and has continued to climb since, employment has not recovered as it should. In other words, recovery did not generate enough jobs. And if the above figures are correct, this is certainly true. But why?

One apparently abiding characteristic of a free enterprise economy is that the economy abhors disequilibrium or an unbalanced condition of any kind-and when not restricted, the economy will generate forces which tend to correct the disequilibrium.

For example, a traditional, fundamental function of the enterpriser in managing or coordinating his business is to husband or allocate his resources in a manner that will produce the greatest output for the least input. And the common standard of guidance is the cost of each agent of production in relation to the value of what the agent will contribute to production. Thus, when labor costs become relatively high in comparison with machine costs, the enterpriser will use more of the cheaper agent, and less of the more expensive one. In so doing he is behaving in a manner similar to that of the housewife who buys less beef and more poultry when the price of beef is out of line with the price of

poultry. The analogy is not perfect because the enterpriser usually cannot act as quickly as the housewife.

A good case in point is what has happened in the automobile industry, according to reliable reports. Just since 1955 there has been a decline of about 276,500, or 30 percent, in the number of workers in the industry. Michigan has caught the major impact of this decline. The chief cause has been automation (the purchase and installation of automatic machinery) which the industry finds cheaper in relation to output than labor.

It is possible that the industry was reaching the point of pricing itself out of the market, and, from increasing competition with foreign cars produced under much lower cost conditions, had to turn to automation. Other industries-steel, electrical rubber, chemical-where unions are strong, have likewise introduced considerable automation, displacing labor.

Now it is likely that automation was bound to come in time, but very probably not so quickly had the cost differential been less marked.

An unfortunate consequence is that another unbalanced condition may derive from the correction of the cost differential; but it will be in the market place, not on the production line: Unemployment reduces income or buying power, thus lowering market demand. Products are sold to people. Unemployed people cannot buy unless they can draw upon savings or be supported by relatives, friends, or the Government. For a while, they might obtain credit, but it is not likely.

In time, displaced workers might find employment elsewhere, but too often the new jobs involve lesser skills at lower pay; or to say the least, they are often not in the same job category or in the same industry as those in which the workers were formerly employed. Also finding employment may mean moving to another geographical location with all the friction that such a move ordinarily entails.

The old classical answer was that "in the long run" more employment than unemployment is created by technological advance, but an equally old reply is that "People do not live in the long run; they live in the short run." And that is true. It is no consolation to workers displaced by automation in a given industry to know that the making of the automated machinery creates new jobs if the displaced workers themselves are not able to take those jobs, or that “eventually" there will be more jobs, when the displaced have to live from day to day and cannot wait.

Efforts by unions to reduce unemployment by forcing a shorter workweek or by some kind of "work spreading" are generally slow to get results. Bargaining successfully for higher wages for those workers who remain employed is not the answer either, because it does not relieve unemployment in the short

run.

Again the old classical economists would have a theoretical answer running something like this: Automation will reduce costs, thus bring lower prices of goods on the market and in turn result in buyers having more left to spend on other things whose increased sales will require more production and, hence, open up more jobs. If this process worked it would be "in the long run"--not immediate. And there is some doubt about whether it would work at all or not, what with inflation and strong union demand that industry share with workers the benefits of more efficient output. Furthermore, the theory assumes conditions of free competition which do not exist.

So anyway you look at technological unemployment there is no simple solution to the problems it creates. Since the big two-labor and management-seemingly cannot work hand and hand to find a solution themselves which will be in the public interest, obviously Government will be drawn into the situation, either (a) to spend sufficiently to create jobs or (b) to dole out more benefits to the unemployed. What is ironical about this is that industry in the final analysis will pay most of the bill anyway. But in the process just a little more freedom

is lost to public authority.

BUYING GOLD

For some time now there has been a growing fear that more inflation is inevitable in the United States. Loss of more than $2 billion in our gold supply in recent months is being interpreted as proof that foreign financiers have lost confidence in the future of the dollar; that they expect Uncle Sam to devaluate by raising the price of gold to $50, or possibly $70 per ounce (now $35); and, therefore, they are drawing gold out now so as to be ready when the price is raised.

This all sounds fantastic but, fantastic or not, it is being talked about, and some people believe it firmly enough to act accordingly. Gold is being bought abroad by American citizens who are convinced that by so doing they have a certain hedge against inflation.

Although we have no idea of the total volume of gold speculation, we have reason to believe that it is becoming quite large.

Advertisements are appearing in the Wall Street Journal and other financial media offering to assist speculators in buying Canadian gold bars on as low as 3 percent margin. We have investigated and found that, for example, $1 million worth of gold can be bought for $30,000 in cash and a promissory note (secured by the gold) for the $970,000 balance. Interest on the note is 54 percent, and you pay one-fourth of 1 percent to cover storage or safekeeping charges. Annual cost, therefore, on the above speculation would be $58,200, assuming no change in interest rate or in storage fee. If you are in the 50 percent income tax bracket, the net cost would be $29,100 a year. (NOTE.-No recommendation intended. This is only a report of facts.)

Suppose that the price of gold was raised to $70 per ounce 5 years from now. If you bought at $35, you would make $1 million less $145,500 carrying costs, or $854,500, which supposedly would be subject to 25 percent capital gains tax, and possibly a Canadian tax.

It looks good on the surface, but here are only some of many risks: (1) The price of gold might not be raised at all; (2) if it is, the raise might not come for many years; (3) when it does, it might be only a small raise, say to $40; (4) you might have to pay taxes on your gain that do not now exist (a windfall tax, for example), or the capital gains advantage you are now expecting may be removed later; (5) or your own income circumstances might change and put you in a lower than 50 percent bracket.

In other words, it is no foregone cinch, but some folks are doing it, nevertheless. ARTHUR A. SMITH.

(The following resolution of the General Assembly of North Carolina was transmitted to the committee for inclusion in the record by letters from the Honorable A. Paul Kitchin, Member of Congress; the Honorable Thad Eure, secretary of state of North Carolina; and the Honorable Henry E. Kendall, chairman, Employment Security Commission of North Carolina :)

[S.R. No. 200]

JOINT RESOLUTION of the General Assembly of North Carolina concerning certain legislation now pending in the Congress of the United States relating to the establishment of certain minimum Federal benefit standards

Whereas there is now pending in the Congress of the United States, unemployment insurance legislation which legislation is for the purpose of establishing certain minimum Federal benefit standards and would in so doing remove from the States many of the powers now vested therein, which legislation is coercive upon the legislatures of the various States in that if they fail to comply with the proposed standards, drastic penalties would be imposed upon the taxpayers in such States; and

Whereas the Legislature of the State of North Carolina in past sessions has exercised its responsibility in this field, having adopted in 1951, uniform duration of benefits for 26 weeks and has further improved the program at each session and is now, in the current session, giving favorable consideration to a provision for extension of benefits by eight additional weeks under certain conditions and other improvements; and

Whereas the people of North Carolina are firmly dedicated to the proposition that matters relating to the amount and duration of unemployment insurance payments should be left to the discretion of the various State governments due to the widely varying economic and other conditions that exist among the States: Now, therefore, be it

Resolved by the senate, the house of representatives concurring:

SECTION 1. That the General Assembly of North Carolina hereby opposes legislation which would establish Federal minimum benefit standards and which would compel the States to take similar action, thus depriving the Legislature of North Carolina of its rightful authority in such matters.

SEO. 2. That a copy of this resolution be sent to each Member of the congressional delegation from North Carolina.

SEC. 3. That this resolution shall be in full force and effect from and after its ratification.

In the general assembly read three times and ratified, this the April, 1959.

(The following material was filed with the committee:)

Hon. WILBUR D. MILLS,

STATE OF FLORIDA, OFFICE OF THE GOVERNOR,

Chairman, Ways and Means Committee,

House Office Building,

Washington, D.C.

day of

Tallahassee, April 10, 1959.

DEAR MR. MILLS: I am enclosing copy of statement issued by the Governors attending the conference with President Eisenhower on the question of Federal law setting minimum standards for unemployment compensation insurance benefits.

As is set forth in the statement, the views expressed are of the individual Governors signing and does not purport to be official action of the National Governors' Conference.

With kind regards, I am
Sincerely,

LEROY COLLINS, Governor.
MARCH 23, 1959.

(Following their meeting with the President, the Governors met and unanimously adopted the following statement:)

The executive committee of the Governors' conference appreciate the President's invitation to meet with him to discuss the subject of unemployment compensation. In this matter, the executive committee is not authorized to speak for members of the conference not present. This expression therefore is a consensus of the views of the individual participating Governors.

We believe that the States should exercise their responsibility in this field consistent with their respective needs without imposition of Federal standards, governing eligibility, duration, or the amount of benefits.

We favor adequate Federal advances to meet emergencies where the problems of unemployment are beyond the ability of the affected State governments. The discretion now vested in the States to set eligibility, weekly benefit amounts, and duration of benefits is fundamentally sound and should be preserved. This is demonstrated by marked improvements in State laws in recent years.

Unemployment insurance deals primarily with short-term unemployment and its purpose is to tide workers over between jobs. Rapid acceleration of technological improvements and resultant increase in productivity plus the normal increase in the size of our labor force require the expansion of private enterprise and long-range State and Federal planning of public works and resources development.

Gov. LeRoy Collins, Florida, Chairman; Gov. William G. Stratton,
Illinois; Gov. James F. Coleman, Mississippi; Gov. William F.
Quinn, Hawaii; Gov. Cecil H. Underwood, West Virginia; Gov.
John E. Davis, North Dakota; Gov. George D. Clyde, Utah; Gov
Steve McNichols, Colorado.

(Gov. Robert B. Meyner, New Jersey, was not present.)

ATLANTA, GA., April 15, 1959.

Hon. WILBUR D. MILLS,

Chairman, Committee on Ways and Means,
House of Representatives, Washington, D.C.:

I am seriously opposed to the provisions of H.R. 3547, which would force State unemployment compensation laws to conform to arbitrary miscellaneous Federal standards, and I am equally opposed to the implications of the Federal control over State functions which this bill invoices. I am firmly convinced that the individual States are fully qualified to deal with the unemployment

compensation programs, and that they better than the Federal Government are equipped to determine, and to fill the needs in their respective areas. The Georgia unemployment compensation program has been well administered, well financed and well managed, and I respectfully urge that Congress not attempt to federalize this program by establishing Federal standards and restrictions to deal with economic conditions that vary so widely among the several States. S. ERNEST VANDIVER, Governor, Georgia.

RALEIGH, N.C., April 10, 1959.

Hon. WILBUR D. MILLS,

Chairman, Committee on Ways and Means,
House of Representatives, Washington, D.C.:

In view of the current interest in the hearings now being conducted by your committee, I would like to state North Carolina's position with reference to Federal standards embodied in H.R. 3547. The general assembly of North Carolina has today passed a joint resolution which states in part "that the General Assembly of North Carolina hereby opposes legislation which would establish Federal minimum benefits standards and which would compel the States to take similar action, thus depriving the legislature of North Carolina of its rightful authority in such matters."

I have consistently opposed this type of unwise legislation and wish to express my opposition to H.R. 3547. In my biennial message to the general assembly, I said, in part, "I do not think that the employment security program should be administered from Washington. I do believe that the States should always have a sound and adequate program of unemployment insurance benefits. In my opinion, the States should take the lead in this matter and should do whatever is necessary to cope adequately with periods of prolonged unemployment such as that experienced during 1958."

Hon. WILBUR MILLS,

LUTHER H. HODGES, Governor of North Carolina.

COLUMBUS, OHIO, March 26, 1959.

Chairman, House Ways and Means Committee,
U.S. House of Representatives, Washington, D.C.:

We are firmly of the opinion that minimum standards governing benefit provision of the State unemployment compensation should be adopted by the Congress. For almost 5 years now, the President of the United States has urged the States to amend their laws so that the majority of workers can receive one-half of their normal weekly earnings when unemployed, yet very few States have complied. Benefits fail to meet reasonable standards of adequacy in a majority of States. This, in turn, creates a competitive imbalance which has a depressing effect on each individual State which seeks to meet reasonable standards.

We feel that this continues to defeat the intent and purpose of the unemployment compensation system and that the only remedy will be through congressional action. We urge this at the earliest possible moment.

MICHAEL V. DI SALLE,
Governor of Ohio.

STATE OF RHODE ISLAND AND PROVIDENCE PLANTATIONS,

Hon. AIME J. FORAND,
House of Representatives,
Washington, D.C.

EXECUTIVE CHAMBER, Providence, April 22, 1959.

DEAR CONGRESSMAN FORAND: The purpose of this letter to you, as a ranking member of the House Ways and Means Committee, is to communicate to you my endorsement of the objectives embodied in proposals which, through Federal standards, would bring about a degree of uniformity and liberality in the unemployment compensation programs of the States.

I am hopeful that, drawing upon your own intimate knowledge of the economic picture in Rhode Island, you will also have an opportunity to discuss my position in this matter with your colleagues on the committee.