service station. We submit that the charge of failure leveled at the States is not well founded, that there is no need for the plan of additional Federal standards, and that the States are doing and will continue to do an adequate unemployment compensation job. We pledge you the interest and efforts of our association to continue helping improve State unemployment compensation laws.

In appearing before you today, I represent the committee on social security laws of the Midcontinent Oil & Gas Association.

The CHAIRMAN. Mr. Field, we thank you, sir, for your appearance before the committee and for bringing to us the views of your organization.

Are there any questions of Mr. Field?

Mr. ALGER. I have no questions, but I want to welcome a fellow Dallasite here. We are glad to have you here and I appreciate your

statement.

Mr. FIELD. Thank you, gentlemen.

The CHAIRMAN. Our next witness is Dr. Eveline M. Burns.

Dr. Burns, will you please identify yourself for this record by giving us your name, address, and the capacity in which you appear?

STATEMENT OF PROF. EVELINE M. BURNS, NEW YORK SCHOOL OF SOCIAL WORK, COLUMBIA UNIVERSITY, ON BEHALF OF THE NATIONAL CONSUMERS LEAGUE

Dr. BURNS. I was for many years a member of the graduate department of economics at Columbia University and am a past vice presiIdent of the American Economic Association. I have been closely associated with the development of our social security program since 1934, as a staff member of the Committee on Economic Security, as a consultant to the Social Security Administration, and in recent years also as a member of the Federal Advisory Council on Employment Security where I serve as chairman of its legislative committee. I am the author of several standard books in the field of social security, and am the immediate past president of the National Conference on Social Welfare.

I am testifying today on behalf of the National Consumer's League. I am a member of the league's national council. The league has the honor of being one of the earliest organizations to campaign for an adequate unemployment insurance program. The league is composed of citizens from all walks of life who believe that consumers have the responsibility and the power to eliminate depressing working and living conditions. The members of the league believe that the safety of the whole Nation is threatened when these conditions are permitted to exist for any group. Because of its concern with the health, safety, and economic well-being of the Nation as a whole, the league has fought during its 60-year history for the enactment of socially beneficial legislation that would raise working and living standards throughout the country.

In our testimony today we would like to address ourselves to three

matters:

The need for improvement in the State laws, the urgent need for Federal standards and, finally, the nature of some of the substantive provisions of the bill.

We have prepared some technical comments on certain provisions which we think might be strengthened so as more certainly to achieve the basic purposes of the bill and these we have transmitted to its introducers and to your office, Mr. Chairman, for consideration by your committee when it takes up detailed provisions.

I. THE NEED FOR IMPROVEMENTS IN UNEMPLOYMENT INSURANCE

The National Consumer's League strongly supports H.R. 3547, establishing Federal benefit standards in unemployment insurance and for a very simple reason: we see no other way, short of federalization of the entire program, by which the objectives of this program can be attained.

The purposes of unemployment insurance are twofold:

(1) To protect individuals and families from the deprivation that follows involuntary unemployment of wage-earners; and

(2) To contribute to the stability of the entire economy by replacing a sizable proportion of the loss of purchasing power that results from unemployment.

With your permission, Mr. Chairman, I would like to depart from my statement at this moment to take a shot at answering the question you raised as to whether it should be 50 percent of the wage as an objective or 50 percent of something based upon minimum needs and cost of living.

We would thoroughly agree with your view, as I understood it, that the objective was 50 percent of wages, and I think the emphasis on wages was for two reasons. First, to get away from any kind of relationship to need and the needs test, which inevitably you get into if you start saying, "Is this amount of money the cost of living? Is the amount of money sufficient to meet basic needs?" I think we were trying to get away from that to give people something as a right with some relationship to their wages. It makes a great deal of sense to say it should keep pace with wages, because as living standards have improved in this country workers naturally take on very many more commitments because of their higher wage earnings, therefore they need more money, money in absolute terms, than they needed 20 years ago when they had not committed themselves so much for house purchases, rent, and other things which are part of the American standard of living.

The second reason I think, sir, why it was that we emphasized wages was because of this second objective, unemployment insurance contributing to stability.

If it continues to the stability of production and of the general level of the economy, then we need to peg it to wages, because it is only in that way that we can be sure that when wages stop there is a sizable replacement of wages for economic stability.

If I may now go back to my statement, the Federal-State unemployment insurance system has not been in operation almost a quarter of a century, but despite much amendment to the State laws, almost nowhere does the system come near to attaining these objectives in any realistic sense.

(a) Coverage: As of the end of 1958, 15.3 million workers were denied the benefits of the system because they were either employed

by firms with less than four employees or by nonprofit corporations or State agencies and the like. Even were the bill to be enacted, several million workers would still lack protection.

While the terms and conditions of employment of workers in agriculture and domestic service may argue for some delay in covering them by unemployment insurance, no objection can be made against coverage of workers in small firms, nonprofit corporations, and State employees.

(b) Benefit amounts: As of the end of 1958, maximum benefit amounts were still so low, in spite of State action, that nationally about one-half of the claimants were receiving the legal maximum rate, and in three States 80 percent or more of all claimants were drawing benefits at the maximum rate. This situation has two results:

First, it makes a mockery of our stated policy of providing wagerelated benefits. With so large a number of beneficiaries drawing the maximum we are approaching a flat rate system. If this is what we want we could dispense with the costly and complicated system of keeping records of earnings. But we are sure that this is not what the Nation wants. It seeks a system where benefits reflect differentials in earnings and to assure this, the legal maxima must be increased to keep pace with rising wages.

Even more important is the second effect of the present low maximum in most States. They operate to prevent a large number of claimants from drawing benefits equal to even the modest 50 percent of wages which seems by general agreement to have been, and to be, the benefit objective.

At the end of 1958 there were only 6 States with 4 percent of the covered workers where the maximum weekly benefit was 50 percent or more of the average weekly wages of covered workers and in 13, accounting for 34 percent of covered workers the maximum was as low as 40 percent. In consequence, a sizable number of the beneficiaries were prevented from drawing benefits equal to half their previous earings, and for the country as a whole, benefits averaged, în 1958, only little more than a third of average weekly wages in covered employment.

It is difficult enough for a family to get by during unemployment when benefits are equal to half their previous wages, and in passing, I should like to say that that missing 50 percent of one's wages leaves plenty of room for the self-help that people lay so much stress upon. Yet we are not assuring even this much protection.

Studies of the experience of beneficiaries in recent periods in six States, have shown that in none was the average weekly benefit of the unemployed head of a four-member family sufficient to cover the family's weekly expenses for food, shelter, utilities, and medical care, let alone other expenses such as household operation or clothing, and in three of the areas the same was true of single claimants. And in five areas 75 percent of these claimants were entitled to the maximum weekly benefits under their State law.

(c) Benefit duration: To the unemployed worker the duration of his benefits is a important as their amount. Yet even during the prosperous years 1954-56 over a million workers exhausted benefits annually.

For the Nation this represented about a quarter of all beneficiaries, but in some States the proportions were much higher. In 1956 for example, when exhaustions nationally were lowest, in 17 States the proportion exhausting ranged from 30 to 41.3 percent.

Studies in 16 States showed that from 23 to 57 percent of the exhaustees remained unemployed 4 months after exhaustion of benefits. At that time the average duration for which they had drawn benefits. was slightly more than 20 weeks.

Even in such a State as New York, which provides 26 weeks uniform duration, and where consequently the exhaustion ration was far below the national average, 27 percent of the exhaustees were still out of work 4 months after benefits stopped. Despite this obvious failure of the system to provide for the needs of the unemployed in so-called normal times, the average potential duration of benefits in these years was not increased above 23 weeks for the Nation as a whole while in 18 States it remained below 20 weeks.

The more serious inadequacy of these short benefit durations is, of course, revealed in periods of recession. During the 12 months ending September 1958 the exhaustion ratio rose to 29 percent nationally and was above 40 percent in 7 States and above 25 percent in 38 States. Even the additional weeks of benefit made available through the temporary unemployment compensation program have not proved adequate.

Through October last year 400,000 beneficiaries had exhausted their TUC benefits which on the average had extended their benefit durations to about 32 weeks.

II. WHY FEDERAL STANDARDS ARE NECESSARY

Opponents of Federal unemployment insurance benefit standards use three types of argument, none of which, in the opinion of the National Consumer's League, has any validity.

In the first place Federal standards are objected to on principle. It is asserted that the operation of unemployment compensation laws is a matter solely for State policy and that the Federal Government has no right to interfere in such State-operated program.

To this we would most vigorously counter with the assertion that, on the contrary, the Federal Government has a vital interest in unemployment insurance policies. It has long since accepted a responsibility for the well-being of the unemployed, not only through the passage of titles III and IX of the Social Security Act in 1935 which brought into being the Federal-State employment security program with its accompanying Federal standards, but more recently by the enactment of the Temporary Unemployment Compensation Act of 1958. The people of this country look to the Federal Government to safeguard their welfare and the Federal Government cannot but be responsive to this demand.

Second, the Federal Government in 1935 ceded to the States access to a 2.7-percent payroll tax in the expectation that this richly yielding revenue source would be used to provide for the needs of the unemployed. If the States fail to use these funds for the purpose of setting up an adequate program and merely pass tax savings on to employers the Federal Government cannot remain unaffected or un

concerned. For people will no longer take uncompensated unemployment lying down.

In the last resort, if the State unemployment insurance systems do not meet the needs created by unemployment, the Federal Government will be forced by public pressure to take over the residual responsibility and the less adequate the State systems, the greater will be the burden on the Federal taxpayer. In giving up access to the 2.7 percent payroll tax to the States the Federal Government thus has the right to define the purposes for which the States are given this revenue source and the proposed Federal standards would accomplish this.

Third, we would argue that the Federal Government has been charged, under the Employment Act of 1946, with assuring high levels of employment. It is generally recognized that an adequate unemployment insurance system is a major stabilizing element through its contribution to the maintenance of purchasing power. Indeed it is often described in economic literature as a built-in stabilizer. But if the States fail to use the yield of the payroll tax to assure at least a minimally adequate system in terms of both benefit amounts and duration so that, as now the system replaces barely a quarter of the wage loss incurred by the unemployed, the system is not making its full contribution toward economic stability and the task of the Federal Government becomes that much harder. Here again the Federal Government cannot afford to be indifferent to what the States are doing.

In fact, we doubt whether anyone seriously opposes Federal standards on principle, but only those standards which appear to be against their own interests.

We note, for example, that some of those who are against Federal benefit and duration standards also oppose another of the provisions of H. R. 3547. This is section 4(b) which would make it possible for States to reduce tax rates across the board uniformly for all employers should they find that an adequate program could be financed by an average tax rate lower than 2.7 percent. Here is a provision that would actually remove a Federal control, for at present the only way a State can lower its average tax rate is by instituting some form of differential tax reductions through an experience rating system. Yet some of the very people who shout loudest about Federal restrictions on the right of the States to do as they please, are opposing an amendment that would actually extend State freedom. The reason is, of course, not far to seek; the present provisions act as a powerful pressure to maintain experience rating and some States, if given the freedom proposed in the bill, might decide to lower their average tax rates by an across-the-board reduction rather than by experience rating.

A second type of objection raised by opponents of Federal standards is that their enactment will unjustifiably interfere with the freedom of action of the States. But the minmium standards proposed in the bill will in no sense act as a straitjacket, for they are minimum standards only; there is nothing to stop a State which so desires from providing more generously for its unemployed. In each case the standards are written in a form that will avoid the necessity for continuous congressional revision; in particular, it is especially noteworthy that the provisions relating to the maximum benefit have been so defined as to avoid the use of dollar figures.