We want the program to be strong and virile in our State, and see it administered properly. Mr. MASON. Mr. Herndon, I gathered from your testimony that the State of Illinois has quite well taken care of their unemployment compensation problems and that if other States would do as well, perhaps they would not get into difficulties such as they have gotten into. That last, of course, is an inference from the testimony on the basis of what Illinois has done, and I do know that the Illinois legislature and the Illinois Governor have taken very excellent care of their unemployment compensation and they do not want any interference from the Federal Government in establishing standards or anything else. That is right, is it not? Mr. HERNDON. Yes, sir; that is my impression. Mr. MASON. Then on this qualifying basis for unemployment, qualifying as a part of the work force, each State sets up its own standards of qualification, do they not? Mr. HERNDON. That is right. Mr. MASON. And there is no need for the Federal Government to set up even standards of qualification by which they can become a member of the work force and entitled to draw unemployment compensation. That has always been left to the States. It should be left to the States and the various States have various standards for qualification, not many of them alike to others. That is true, is it not? Mr. HERNDON. Yes, sir. The CHAIRMAN. Are there any further questions of Mr. Herndon? Mr. ALGER. Mr. Chairman. The CHAIRMAN. Mr. Alger will inquire. Mr. ALGER. Mr. Herndon, I do not think I share the shock that has been expressed by the gentleman from Michigan at your testimony. Mr. Loesch said yesterday that of those exhaustees last year who took the full benefit they could have, 14 percent of the men and 22 percent of the women, after taking all of the compensation, then volutarily withdrew from the labor market because they did not need work. It points out that very possibly you are not only accurate; you just are the first to have the courage to point out something we are always fearful of in government because of political pressure, that we call somebody a goldbrick. All I have done is to point out that there are some goldbricks in this business who are trying to make hay out of the unemployment compensation. I for one want to recognize that that is what they are without skirting the issue and try to solve the problem the right way. I think that is where our great problem is here. What you said was that, and I am quoting you, "a premium on idleness is what you are doing when you set up unemployment compensation like this with Federal standards." I was impressed in listening to these hearings with these statements and I want to relate them to you to see what you think about them. These Federal standards would throw out the experience ratings which now in Illinois, I might point out, and other States, permit a manufacturer to actually be taxed less when having stable employment. The very incentive to keep people working, which is what we want, to keep men in jobs-it is not unemployment compensation we are solely concerned with. We are interested in keeping men work ing. The experience rating of employees, which gives the employer a lesser tax if he keeps his people working, is the very thing we throw out by this bill. Is that not self-defeating? Mr. HERNDON. We think it is and we encourage our industry through bulletins from our national association, from speeches that the officers make, to work hard toward achieving a merit rating. And if we throw out those standards, we are defeating the very purpose, as you have just said, of the original bill. Mr. ALGER. There might be more unemployment then? Mr. HERNDON. We think it encourages it. It encourages malingerers and others, and I don't mean that everybody who applies for unemployment compensation is a malingerer, but I think the new statute would encourage it, sir. Mr. ALGER. Would you say it is also possible that the increased cost on business might easily result, through this increased cost, in firings or greater unemployment as the business has to absorb or pass on this expense; it might actually result in hurting the labor market again on this basis? Mr. HERNDON. In our industry it would result in a greater drive toward mechanization and a lessening of the work force, and I think the purpose of our testimony today, Congressman, was to try and point out that this Federal enactment would destroy the security that the people now have, rather than enhance it. It would strike at the very foundation of the strength of the State laws, which now adequately protect, at least in our State of Illinois, we believe, and be a detriment to the worker in the long run rather than an advantage to the labor force. Mr. ALGER. Federal standards might thus be self-defeating in their purpose? Mr. HERNDON. We believe absolutely that they might. Mr. ALGER. Let me ask you something else. If the cost of the additional tax is one of the business costs the businessman must absorb or pass on, would it be expected that he pass this on, and that would necessarily result in higher prices, and this would very easily lessen consumer buying power; is that not possible? Mr. HERNDON. Absolutely, sir. Mr. ALGER. And here we are trying to solve the problem of limited purchasing power by putting into the hands of these people who are unemployed more buying money, but if we do this with the wrong formula it might be self-defeating, might it not? But if, in order to help a few, we impose higher prices on a great mass of the buyers, we have cut buying power more than we have helped, have we not? Mr. HERNDON. We believe that is very true. In our industry we are very fearful. We believe frankly and candidly that hotel rates are very high and we are pricing ourselves out of business, and we are encouraging competition in other forms of housing that are harmful to us. Any further increased costs are dangerous, particularly to our industry. Mr. ALGER. Then you pointed out also, as I recall, on page 2 another problem: That the nature of the take-home pay, you might call it, the pay anyway of the workers under this new Federal standard might easily be as much or close to as much as if they were working. So there is a subsidy for idleness, as you said earlier. Mr. HERNDON. We believe that, and we believe our industry is particularly vulnerable to that specific thing. Mr. ALGER. I found your statement very interesting and I want to ask one last question. Do you believe that the experience in Illinois is duplicated throughout the country, that the States can solve the problem and are solving it, or do you believe that any States are not meeting it, so far as you know through your association? Mr. HERNDON. I hate to make a blanket statement without study, Congressman. I believe, and the impression I get from our membership-and I go to many of the State association meetings-that it is being handled adequately by the individual States and the problem is not acute. Mr. ALGER. Then if you believe the State can do it, it does not make you heartless if you do not want Federal standards, does it? Mr. HERNDON. We believe to the contrary. We believe that we are saving the real fundamental purpose of this enactment by opposing federalization of it. We believe that in the long run we are saving and developing it, rather, and we don't believe we are heartless. We think we are on the side of the man who needs it. Mr. ALGER. Therefore, the present law will create more employment than Federal standards? Mr. HERNDON. That is our sincere and honest belief. Mr. ALGER. Thank you. Thank you, Mr. Chairman. The CHAIRMAN. Again we thank you, Mr. Herndon, for coming to the committee. Mr. HERNDON. Thank you. (The following letters were received by the committee:) Mr. WILBUR D. MILLS, NEW YORK HOTEL TRADES COUNCIL, Chairman, House Ways and Means Committee, DEAR MR. MILLS: On behalf of 35,000 workers in New York City hotels we write you in support of H.R. 3547-the Karsten-Machrowicz unemployment compensation Federal standards bill. Widespread unemployment is a serious problem. Four million seven-hundred thousand are unemployed, and that figure is rising. The problem is heightened by the inadequacy of the various State unemployment insurance laws. Many workers are unable to find employment by the time their benefit period is over. More than 2,500,000 unemployed have used up their benefits under State laws, and such exhaustions continue at the rate of 250,000 a month. Various studies, including those of the Federal Advisory Council on Economic Security, of the Rockefeller brothers fund and of Dr. Arthur Burns, former Chairman of the Council of Economic Advisers to President Eisenhower, have shown the need for the Federal Government to set standards below which no State can go. The proposed bill would establish these minimum standards by providing payment of weekly benefits of not less than 50 percent of the eligible unemployed person's weekly wages, so long as this does not represent more than two-thirds of the weekly average wage in the State where the claimant was employed. It would also establish a uniform benefit period of 39 weeks. The passage of such a bill would put an end to the argument which has been advanced by the various States as an excuse for inability to raise standardsthat business in the particular State would suffer in relation to the State which does not set the same standards. We would appreciate your filing this letter as part of the record of your hearings to commence on April 7. Very truly yours, JAY RUBIN, President. MICHIGAN HOTEL ASSOCIATION, Detroit, Mich., April 11, 1959. Congressman THADDEUS M. MACHROWICZ, The Ways and Means Committee, House of Representatives, Washington, D.C. DEAR TED: I understand that you had considerable discussion with Vernon Herndon of the Palmer House, when he appeared before your committee on April 9, regarding Federal unemployment compensation matters. I just wanted to assure you that what he said is as true in Michigan hotels, as it is in Chicago or any other area. You'd be surprised, Ted, at the amount of absenteeism and the indifference of many of our employees, even during a period such as this, right here in Detroit. Out through the State, in the seasonal hotels, I understand many of the "natives" work for the 2- or 3-month season just so they can get on the unemployment rolls for several weeks. These are in most cases housewives who are not heads of families. I believe a Federal unemployment compensation law would not help the deserving, as you men are trying to do, but would tend to encourage deliberately planned idleness, over longer periods of time. With kind regards, Sincerely, JERRY MOORE, President. MICHIGAN HOTEL ASSOCIATION, Congressman THADDEUS M. MACHBOWICZ, House of Representatives, Washington, D.C. DEAR CONGRESSMAN MACHROWICZ: We would like to direct our comments to those bills which establish Federal standards for unemployment compensation for not less than 39 weeks duration on benefits up to one-half of the weekly wage. Our experience in staffing our hotel with maids, dishwashers, kitchen workers, and other types of unskilled help give us, we believe, the experience upon which we base our objection to bill H.R. 3547 and other similar type proposals. We could point up many instances of where unskilled employees work only long enough at a job in order to qualify for unemployment compensation and then find ways and means to keep themselves eligible for this compensation, while turning down job offerings which come to them. Here in Detroit, where there is a high level of unemployment at the moment, we do have continual trouble in recruiting satisfactory employees and we experience a very heavy abstenteeism and a heavy turnover. I am writing this letter to tell you that hotels do have a difficult recruiting job in this area for unskilled workers, even though we do have chronic unemployment, this, in spite of the fact that here at the Sheraton-Cadillac, we maintain extensive on-the-job training programs and other devices calculated to help upgrade deserving employees. The enactment of legislation which is now before your committee would prolong the present period of compensation by 50 percent or more in some States and it seems incredible that your committee would give serious thought to a program which would establish entitlement benefits which far exceed the base year wage earnings of an employee. Such a workmen's claim clearly places a premium on idleness. This certainly was not the basic concept upon which the original Federal unemployment compensation statute was passed. We respectfully suggest that your committee consider delaying the revolutionary steps proposed for the bill H.R. 3547. Sincerely yours, MARK SCHMIDT, General Manager, Sheraton-Cadillac Hotel. Hon. THADDEUS M. MACHROWICZ, House of Representatives, Washington, D.C. MICHIGAN HOTEL ASSOCIATION, MY DEAR CONGRESSMAN MACHROWICZ: I have been told of a statement which Mr. Vernon Herndon presented to the House Ways and Means Committee last Thursday and I should like to add some comments to those made by Mr. Herndon. In making known his opposition to H.R. 3547, Mr. Herndon, I am informed, pointed out in some instances workers have deliberately made themselves unacceptable for work in order that they might continue to be eligible for unemployment benefits. Not only do I believe this to be true with certain classes of workers, as observed in our own operation, but by continuing to make unemployment benefits more attractive incentive is stifled. Despite a high level of unemployment in Detroit, it has become increasingly difficult to secure qualified workers despite the fact that our industry must, of necessity, employ a large percentage of low-paid unskilled workers who require comparatively little skill and whom we are willing to train through various programs. Occupancy in hotels in Detroit has continued to decline for the past several years, but at the Statler Hilton we have made an effort to maintain stability of employment in spite of declining business. That we have done so is borne out by the fact that for a number of years we have qualified for the lowest experience rating for unemployment insurance. For previous years our rating provided for a contribution rate of one-half of 1 percent. Although our experience still continued to be favorable, our contribution rate increased to 1 percent in 1958 and to 1.2 percent in 1959, which reflected an unfavorable balance in the State fund over which we have no control despite an excellent experionce rating. Further increased benefits, such as have been suggested, can inevitably only result in increased taxation to employers which, I am sure you will agree, is already extremely burdensome. I, therefore, respectfully ask that you do not give favorable consideration to passage of H.R. 3547 or similar bills which will tend to create an abuse of unemployment benefits. Very truly yours, ERNEST G. STECK, DETROIT HOTEL ASSOCIATION, April 14, 1959. Hon. THADDEUS MACHROWICZ, DEAR TED: As president of the Detroit Hotel Association I read, with more than usual interest, the speech that Vernon Herndon made before the House Ways and Means Committee regarding the proposal to increase unemployment compensation. I was very impressed with what he had to say because it "smacked home." We have always found certain job classifications in hotels difficult to fill with steady employees because positions such as potwashers, dishwashers, and many others of a janitorial nature, which are essential to hotel operation, do not appeal to men with high ambition, and we have had to take what unskilled workers we could get. Therefore, we have always had a large turnover of employees in these categories, regardless of the prevailing economic conditions. My experience with these people has convinced me long ago that many would just as soon collect unemployment compensation as work. I am fearful that by increasing unemployment benefits, we could make unemployment too attractive, and this could lead to dangerous complications. I know you will give this your serious consideration. Sincerely yours, The CHAIRMAN. Our next witness is Mr. Dallas W. Sells. |