The employer paid for it all, but there is an insurance feature in a sense. However, in the bill that is now proposed, there is not that same element of right whatsoever. That is my point, that you are just going to impose Federal standards on States, all of whom have flexible economies that are different from the other States and areas, and therefore need a flexible formula; but now we are going to impose a rigid formula which will not emphasize the rightness at all. Mr. SELLS. They did incidentally in the creation of the law create a standard which was simply that the States that enacted unemployment compensation laws could keep 2.7 in the State and three-tenths of 1 percent in the Federal Government, so that principle was not completely new.

The think that bothers us is that we keep talking about these individuals who abuse the privileges and we do not talk about the abuse of the employers through the enactment of the kind of legislation that goes around and evades the true intent of the law, which is much more than simply helping tide an unemployed worker over. It is a matter of purchasing power. It is a matter of many things in our community other than just helping the unemployed worker, and we feel that the entire situation should be looked at and the fact that industry in America today and in Indiana, which we certainly get from the press and the politicians, are saying that if you raise unemployment compensation you will drive industry out or they will not come into Indiana, and this sort of thing.

But the fact of the matter is what they are doing is trading on the unemployed workers. They are denying to them the minimum standard of living that they need. Industry is being subsidized through the unemployed and the suffering of human beings, and they are not doing the kind of a job they ought to be doing for the community, and that job is to help maintain a standard of living consistent with good economic practice.

Mr. ALGER. I will not go into this further with you now because of the time, although I would like to. I have a couple of things I would like to call to your attention and ask your advice.

Do you believe in the experience ratings of the employers who have managed to provide more stable employment and therefore qualify for a lower tax rate?

Mr. SELLS. We believe in it, as I said, providing that it doesn't mean that they get this favorable experience rating through denying unemployed workers through the various devices they have in the State.

Mr. ALGER. It is based on the stability of their employment. That is one way.

Mr. SELLS. Not totally.

For example, they can appeal a decision when an unemployed worker is getting unemployment compensation and they have all kinds of loopholes that they can deny benefits.

Mr. ALGER. I am talking about degree then rather than kind. To the degree that the experience rating provides stability of employment, you would be for it?

Mr. SELLS. That is right.

Mr. ALGER. The Federal standards imposed through this bill will throw out the experience ratings entirely?

Mr. SELLS. Not necessarily.

As I understand it, the proposal before Congress is to set minimum standards beyond and above which they can go, and if they have the necessary funds in the unemployment insurance, then their experience rating would go in effect.

Here again it is a matter of degree; at what point does the experience rating go into effect?

Mr. ALGER. It is my understanding that experience ratings go out the window as we take on these Federal standards. If I am wrong, the record is open, and you may show experience ratings will remain if you are able to do so.

You mentioned consumers. To the degree that we are trying to help the unemployed through this experience rating, if we then do not in effect stimulate an employer to try to keep stability, by the very nature of it we are going to create more unemployment, it seems to me, and defeat the very purpose that you are attempting to correct.

In other words, there is an incentive for him to have a lower tax rate if he keeps people working on a stable basis. This makes for employment, not for unemployment.

You can answer that further if you care to for the record.

Secondly, now with this cost of increased charges, necessary in order to make a greater payout which will be charged now to the businessman, he must necessarily pass it on to the consumer at higher prices. Does this not cut down the buying power of the buying public and the purchasing power we are trying to protect?

Mr. SELLS. I don't quite follow that last because the unemployed worker will be increasing his buying power at the same time, and he is the one who will be spending the money, incidentally. He is the individual who cannot save or put it away for a rainy day or anything.

Mr. ALGER. That is fine, but if the formula is wrong, and I want to help people, of course, you may be helping a few at the expense of the entire labor market that will be hit the most when their dollar bill buys less. Do you follow me?

If the businessman cannot absorb the increase, what does he do. He passes it on to the consumer. You said so earlier, so obviously you

understand that.

If the businessman's cost is passed on to the consumer, then their buying power is depleted.

Mr. SELLS. You are saying that the unemployed is not a consumer and he isn't a consumer to the extent his benefits and the duration is increased.

Mr. ALGER. No; I am saying thateveryone else is a consumer.
Mr. SELLS. We are all consumers.

Mr. ALGER. That is correct.

If you impose a wrong formula here and cut down everyone's buying power, maybe you have done more harm than you have done good. At least it is an interesting point and if you care to add to that, I am sure the record will be left open by the chairman.

The CHAIRMAN. Mr. Machrowicz.

Mr. MACHROWICZ. Is it not true that rather than do what the gentleman from Texas has inferred, what this bill actually does in regard to experience rating is, permits uniform rate and individual rate deductions.

Mr. SELLS. That is my understanding of the bill.

Mr. MACHROWICZ. Yes.

Mr. ALGER. My understanding is directly opposed to the one stated by the gentleman from Michigan.

The CHAIRMAN. Let us try to reconcile our views when we get in executive session.

Mr. SELLS. We thank you, sir, for coming to the committee, and I want to congratulate you on your knowledge of this subject and the very fine presentation of your views. Thank you so very much. Mr. SELLS. Thank you very much.

(The following was received by the committee:)

In answer to the request from Congressman Alger, I should like to point out that the postexhaustion study conducted in Indiana showed that, 2 months after exhaustion of benefits, 31 percent were employed, 54 percent were unemployed, and 15 percent had withdrawn from the labor force. Four months after exhaustion, 43 percent were employed, 40 percent were still unemployed, and 17 percent had withdrawn from the labor force. Among the male exhaustees, 2 months after exhaustion, 37 percent were employed, 51 percent unemployed, and 12 percent withdrawn, compared with the experience of female exhaustees 25 percent of whom were employed, 57 percent still unemployed, and 18 percent withdrawn from the labor force. Four months after exhaustion, among the male exhaustees, 48 percent were employed, 38 percent still unemployed, and 14 percent withdrawn; compared with the females 36 percent of whom were employed, 42 percent still unemployed, and 22 percent withdrawn from the labor force.

It is difficult to point to the relative small percentage of those withdrawing to make out a case why there should be no extended benefits for the much larger proportion who are still in the labor market but without employment. I would like further to refer the Congressman to the summation of all these postexhaustion studies that appeared in the Monthly Labor Review, March 1959, volume 82, No. 3, page 267, where it reads, "The survey findings tend to refute the contention that most claimants either manage to find a job or withdraw from the labor market soon after receiving their last benefit." This same article will also provide the Congressman with other characteristics of the exhaustees as he requested.

DALLAS SELLS,

President, Indiana State AFL-CIO, Indianapolis, Ind.

The CHAIRMAN. It is quite evident that we cannot conclude in less than about an hour and 15 minutes, so it seems advisable that we adjourn until 2 o'clock without objection.

We will reconvene at 2 o'clock.

(Thereupon, at 12:40 p.m., the committee recessed, to reconvene at 2 p.m., same day.)

AFTERNOON SESSION

The committee reconvened at 2 p.m., upon the expiration of the

recess.

The CHAIRMAN. The committee will please come to order.
Our next witness is Mr. Robert A. Ewens.

We will be glad to hear from you at this time, Mr. Ewens.

STATEMENT OF ROBERT A. EWENS, EXECUTIVE VICE PRESIDENT, WISCONSIN MANUFACTURERS ASSOCIATION, MILWAUKEE, WIS.

Mr. EWENS. My name is Robert A. Ewens. I am executive vice president of the Wisconsin Manufacturers' Association, in which more than 1,200 manufacturing companies hold membership. More than 800 of these have less than 100 employees.

I am appearing here to voice on the behalf of these member companies, their opposition to the establishment of Federal unemployment compensation standards.

For 27 years, since Wisconsin enacted the first unemployment compensation law, my predecessor, and I, together with others, have represented Wisconsin industry on the statutory advisory committee to the Wisconsin Industrial Commission on Unemployment Compensation.

During that time, with but one exception, we have joined with representatives of unions in recommending to the Wisconsin Legislature each biennium an agreed bill establishing standards for unemployment compensation. We have done so without coercion.

We have made revisions in keeping with conditions which we, the members of the committee, are intimately aware of as residents of the State of Wisconsin; we have not been swayed by what was done in Illinois, in Minnesota, in Iowa, in Michigan. We recognized only a responsibility to our own citizens. We have done a good job by all standards, and are paying our own way.

Since 1933 our deliberations and the subsequent enactments of our recommendations by the Legislature of Wisconsin have seen the benefits increase from $15 a week to a new maximum of $45 under an agreed bill now before the legislature. This is equal to at least 50 percent of the average weekly gross paycheck in Wisconsin.

The purchasing value of this money is even greater when it is recognized such payments are not subject to Federal income taxes and, under another advisory committee proposal this year, they will no longer be subject to Wisconsin income tax either.

In addition, we permit an unemployed worker in Wisconsin to earn up to half of his weekly benefits without losing any of his unemployment compensation benefits.

I cite these improvements to emphasize that States, being aware of the peculiar needs of their citizens, are responsive to them.

We in Wisconsin have been able to afford increasing benefits because of special offsetting features, such as experience rating, honest and efficient administration which includes excellent probing, and prosecution of fraud, all of which reduce employer contributions in direct and continuing recognition of employment stabilization by employers.

This progress sensitive to our peculiar needs-is jeopardized by needless proposals to federalize unemployment compensation, a premise resisted by Congress and Presidents for two decades.

We don't, among other things, want to be penalized by being forced to contribute a share of the cost of Federal reinsurance grants to improvident States.

Last year a representative of the Wisconsin Manufacturers' Association told the Senate Finance Committee of our opposition to the subsequently enacted legislation to extend unemployment compensation with permissible reliance on Federal funds.

We in Wisconsin, incidentally, followed the extension last year although we did stand on some fiscal principles and used our own money for that purpose. The major premise of our opposition was, as Mr. Joseph Kenny, our spokesman, said to the Senate committee:

It seems logical to us in industry to fear that present consideration of extension of benefits may well represent an unwitting precedent that can lead to the

destruction of State systems of unemployment compensation and the abandonment of experience rating which has been such a powerful and constructive influence in stabilizing employment, and reducing potential unemployment, for more than a quarter of a century.

Congress has long held to the principle that such Federal control should be avoided at all costs.

I commend to your consideration the keynote sounded by the Committee on Economic Security, appointed by President Roosevelt, which said, after a long and serious study, in its report of some 20 years

ago:

All things considered, we deem it the safest and soundest policy to confine the role of the Federal Government with respect to this problem

unemployment—

leaving to them

the States

primary responsibility for administration.

In 1935 the Senate Committee on Finance, in reporting out the Federal unemployment compensation legislation, endorsed this view by saying:

As we deem it desirable to permit the States freedom of choice in this respect we also believe that the Federal law should provide for recognition of credits allowed by the States who have regularized their employment.

The term "regularized their employment" symbolizes the basic concept of unemployment compensation since its inception.

Among others, President Roosevelt also advanced this premise. In his message to Congress in January 1933 he said:

An unemployment compensation system should be constructed in such a way as to afford every practical aid and incentive toward the larger purpose of employment stabilization *** in order to encourage the stabilization of private employment, Federal legislation should not foreclose the States from establishing means for inducing industries to afford an even greater stabilization of employment.

While unemployment is regrettable, in seeking to cope with the problem we must not be blinded to the even greater responsibility of preserving the more than 60 million jobs now filled in America.

Appreciation of this responsibility has resulted in acceptance of the thesis that unemployment compensation is an insurance program. It is a fundamental and widespread conviction that unemployment compensation is an insurance program designed to cushion the shock of the jobless for short periods.

There has been a steadfast refusal by State legislatures to extend unemployment compensation as a long-term palliative for fear that the program evolve into something comparable to the much lamented and poverty producing British dole.

In that connection, let me quote the Milwaukee Journal. That outstanding newspaper has a long, liberal tradition and more frequently than not is numbered among the advocates of progressive legislation favoring the so-called underprivileged.

In reviewing the proposals to extend unemployment compensation that are now before you, the Milwaukee Journal said editorially on May 9 last year:

What is too often ignored is that unemployment compensation is an insurance program. "Premiums" are paid by the employers; benefits are collected by