Mr. WILLIAMSON. I might say Mr. Newell Brown, the Under Secretary, in a speech a couple of weeks ago, did refer to nonprofit hospitals as part of the total figure, the 1.3 he was speaking of. The CHAIRMAN. I know he included it, but we did not get that breakdown, as I recall. Thank you again, Dr. Groner and Mr. Williamson, for coming to the committee. We appreciate having you. (The following letters were received by the committee:) Hon. WILBUR D. MILLS, AMERICAN NURSES' ASSOCIATION, INC., Chairman, Committee on Ways and Means, New York, N.Y., April 17, 1959. DEAR MR. MILLS: The American Nurses' Association, national membership association of registered professional nurses, has taken a position in support of the principle of compulsory unemployment insurance coverage for all nurses. The State nurses associations are being encouraged in their efforts to support State legislation to provide compulsory coverage for all nurses within the States. Therefore, the American Nurses' Association wishes to record its wholehearted support of the proposal currently before your committee to include nonprofit organizations under the Federal Unemployment Tax Act. Extension of coverage to nonprofit organizations will add 1.3 million workers to those now protected against loss of income and purchasing power resulting from involuntary unemployment. Nearly a million of these workers, including almost 200,000 professional registered nurses, are employed by nonprofit hospitals and community health agencies. We firmly believe that the philosophy and purposes of the Federal Unemployment Tax Act are particularly applicable to nonprofit hospitals. It is well known that salaries in the hospital field are low compared to the areas of employment now covered. It logically follows that hospital employees are in greater than ordinary need for protection, since these workers are less able to make financial provision against involuntary unemployment. We refer you to the Bureau of Labor Statistics report on "Salaries and Supplementary Benefits in Private Hospitals, 1956-57," which is attached. Many independent observers interpret this, and similar exemptions, as almost fostering by Government an attitude that hospital management has less responsibility, generally, as an employer than do covered employers. The consequence of the attitude-forming exemptions, we feel strongly, is reflected in the dislocations in hospital employer-employee relations now so prominently featured in the news, and which threatens the interests of employers, employees, and the public. Establishment of an institution for the purpose of doing mercy does not exempt them from the obligation also to do justice. The American Nurses' Association believes that the act promotes stabilization of employment, a goal to be encouraged in nonprofit hospitals. Our most recent figures show that in 1954, turnover as measured by the ratio of terminations to average employment was 42.2 percent in full-time professional nursing positions in non-Federal general hospitals. Employees of State, county, and municipal hospitals, not now covered by unemployment insurance, are protected in employment security by merit plans, tenure, and appeal from arbitrary discharge. For employees of nonprofit hospitals, in most cases, no such safeguards exist. Therefore, the comparison of the two types of institutions cannot be compared in discussing the extension of unemployment insurance to include nonprofit institutions. We note in this respect, however, that there is growing sentiment to include public employees under the act. We believe that hospitals cannot be encouraged in archaic, social philosophies and business methods wherein labor costs have a lesser priority than other costs of operation. The application of measures designed to stabilize employment will act to further reduce the minimal costs involved in unemployment insurance for employees of nonprofit hospitals. We request that this letter be placed in the record of the hearings just completed on proposals for amending the Federal unemployment insurance tax. Yours truly, Mrs. JUDITH G. WHITAKER, R.N., Hon. WILBUR MILLS, HOUSE OF REPRESENTATIVES, Washington, D.C., April 13, 1959. Chairman, House Committee on Ways and Means, DEAR MR. CHAIRMAN: Enclosed is a copy of a letter from one of my good constituents. I would certainly appreciate your making this letter part of the record in the current hearings being held on this subject. In addition, would you send me a copy of the hearings when available which I might forward to my constituent. Sincerely yours, ROBERT H. MICHEL, Member of Congress. I am writing to you in regard to an amendment to the unemployment compensation insurance law soon to be considered by the House Ways and Means Committee, which would eliminate the exemption from provisions of the act that apply to nonprofit organizations, including hospitals. The amendment, as you know, would require a 3-percent tax on the first $3,000 a year of wages for all hospital employees. This amendment would cause substantial hardship on the hospital economy and increase hospital costs unnecessarily. The reasons that I am opposed to the amendment are as follows: 1. The hospital employee does not need such protection, for as in industry, hospitals do not have substantial layoffs. The people hospitals discharge are discharged for a reason, and consequently, would not be covered by unemployment compensation. 2. Such an amendment would increase, substantially, hospital costs without giving any real fringe benefits to our employees. Therefore, I am opposed to this amendment because of the above two reasons. I trust that you will give consideration to the above reasoning when you consider this amendment. Very sincerely, Rev. JOHN WEISHAR, Director, Catholic Hospital Office, Diocese of Peoria. Mr. KENNETH WILLIAMSON, MINNESOTA HOSPITAL ASSOCIATION, INC., DEAR MR. WILLIAMSON: Recently our State legislature had a bill before the house and senate committees which would have put nonprofit hospitals under unemployment compensation. Because we knew that such a bill would cost hospital patients money, we felt we should investigate the need for such legislation. Therefore, we sent out a questionnaire to our hospitals asking the following questions: 1. Total payroll for the year 1958. 2. Total number of full-time (full-time equivalent employees). 3. How many employees were laid off for lack of work in the year 1958? 4. Will you contact your representatives and senators? Ninety-two hospitals answered this questionnaire. The payroll of these 92 hospitals was $52,500,000 and the questionnaire covered 16,000 employees. This questionnaire indicated that 86 hospitals had not laid off a single employee for lack of work. Three State hospitals laid off 13 employees, but on further questioning regarding the reason, they stated these employees were canceled out of employment for inability to meet work standards and not for lack of work. Three nonprofit hospitals laid off six employees, but again when questioned admitted that lack of work was not the reason for discharge, but actually these employees had been laid off because they were substandard people and that during the same period, the hospitals had been employing other personnel. Therefore, our questionnaire indicated that the hospitals in Minnesota had never laid off employees for lack of work and comments from many of them were that most hospitals were short of personnel. In Minnesota, it was estimated that if hospitals were put under unemployment insurance, it would cost patients in these hospitals approximately $5 million in the next 2 years to pay the unemployment insurance premiums. We submitted this report and the questionnaires to our State legislature and the bills were defeated. We sincerely believe that the labor picture is similar throughout the United States and the people working in hospitals are almost never laid off because of lack of work. We respectfully submit this information and ask that you oppose any effort to put nonprofit hospitals under unemployment compensation. Sincerely, GLEN TAYLOR. The CHAIRMAN. Our next and final witness for today is Mr. Frank M. Cruger. Mr. Cruger, will you identify your self for the record, sir, by giving your name and address and the capacity in which you appear? STATEMENT OF FRANK M. CRUGER, VICE PRESIDENT, NATIONAL SMALL BUSINESSMEN'S ASSOCIATION Mr. CRUGER. Mr. Chairman, my name is Frank M. Cruger. I am a partner in the Indiana Manufacturers Supply Co. of Indianapolis, Ind. I am appearing today on behalf of the National Small Businessmen's Association, and I am vice president of that association. We appreciate the opportunity to appear before this distinguished committee and to present our views on the proposals before your committee relating to unemployment compensation. Mr. Chairman, we are convinced that further federalization of unemployment compensation is very much against the national interest. And there is no question that the impact on small business would be another serious burden. The primary and impelling reason for opposing another extension of the Federal program is that this whole area would become more susceptible to the political pressures of those organized groups which apparently are intent on socializing the country. When Congress passed the basic unemployment compensation law in 1935 the fundamental purpose was to give temporary and limited assistance to those who were involuntarily out of work for a brief period of time. But these programs were accepted for what they are, State or local problems, and Congress has hitherto deemed it advisable to leave control, operation, and administration of the unemployment compensation programs to the States and their political subdivisions. It was regarded that each State, as a responsible body politic, was able to adjust its own program to fit its changing economic conditions. The States could also base any new legislation on past experience and could experiment with the various kinds of improvements consistent with the financial soundness of the program. Over the years all States have progressively improved not only the amounts but also benefit duration. Many States have established study commissions for the purpose of improving both the duration and extension of benefits. The bill before this committee would substitute the judgment of the Congress for the judgment of each State legislature in the determination of policy in this area. These proposals would also tend to ignore the validity of experience ratings. We believe that these ratings have provided an incentive to stabilize employment during the past 15 years or so. At four different times in the past 16 years congressional committees have given careful study to proposals to extend benefit duration and amounts. Each time the Congress rejected the idea of interfering with State programs, in the belief that unemployment compensation should remain a State responsibility. We believe that most State legislatures in the past two decades have done a good job of adjusting State programs to fit the changing conditions while maintaining the soundness of their program. The Federal Unemployment Tax Act, which became effective at the start of 1936, covered employers who had 8 or more employees in each of any 20 weeks of a tax year. The purpose of this legislation was to induce the States to enact their own unemployment compensation laws. There were several unsuccessful attempts during the Roosevelt and Truman administrations to extend coverage of FUTA to the smallest employers as proposed by bills now before this committee. In 1954 a Department of Labor proposal to extend coverage to employers having one or more employees was considered by the Congress. The Labor Department spokesman alleged that the problem of administration was the sole reason for limiting coverage in the original act to employers having eight or more employees. Since some 29 States had extended coverage to employers having less than eight employees, the Department argued that the extension of coverage to one or more employees was feasible and that there was no longer any sound reason why FUTA should not be likewise extended. This was to induce all States to so revise their unemployment compensation laws in order to assure equality of treatment of all employees. Though administrative considerations did have some bearing on the fixing of original coverage at eight or more employees, they were by no means the sole and controlling consideration. Title III of the Social Security Act and the accompanying FUTA were designed to establish a general Federal framework within which State laws, adapted to the particular needs and circumstances of each State, might be fitted. This was fully recognized in the report of your committee accompanying H.R. 9709 (1954), which did extend coverage of FUTA to employers having four or more employees. Historically, unemployment insurance has been primarily a State program. H.R. 9709 continues this basic pattern. While the problem of unemployment must always be one of national concern, geographic variations both in economic conditions and in employment practices make it essential that actual implementation of an unemployment-insurance system be carried out by State action. This report by your committee also took exception to the Labor Department's proposition that since it was demonstrably possible to extend coverage to one or more, there was no longer reason for any numerical restrictions on coverage of the Federal tax. Quoting again from the committee report: Your committee is satisfied that administrative difficulty is no longer a substantial obstacle to extending coverage to small firms. On the other hand, your committee believes that the further coverage is extended into this area, the further the Federal Government is moving into an area where differences in State and local conditions become a significant factor. There is a twilight zone where needed flexibility can only be maintained through State action. It may be appropriate that unemployment protection be extended into this fringe area, but your committee believes that such extension should be left to State determination in the light of local variations in employment patterns. Your committee does not believe that this problem exists to any appreciable extent with respect to the extension of coverage to employers of four or more. The above passage makes clear the intent to retain a so-called fringe area of coverage in which the States might act in their discretion. Furthermore, the States have acted in this area. There are 19 States which now provide coverage of the smallest employers, that is with one or more workers, and four others which cover employers with two or three workers. The recent addition of New York to this group has increased coverage of small firms by 25 percent so that on a nationwide basis over 50 percent of covered workers are in States which cover employers smaller than those covered by FUTA. Within a few months following enactment of H.Ř. 9709 in 1954 the Department of Labor ignored the clear pronouncement of your committee that it was desirable to maintain a coverage area in which States might act in their own discretion. The Department asked its Federal Advisory Council whether it should renew the attempt to extend coverage to the smallest employing units. A majority of the council recommended that the Department should pursue its original objective. Apart from the desirability of maintaining some State discretion in the field of coverage, there are weighty considerations why the Federal Government should not extend coverage of the Federal act to the smallest employing units. The factor of cost is a matter of considerable importance although the Labor Department apparently considered the matter of cost as being inconsequential, since they stated: If unemployment insurance is really a good thing for two-thirds of the workers of this country, is it not just that much better a thing for as many more as you can possibly cover administratively? But for those who might want to consider costs the following is pertinent. At the time of congressional consideration of H.R. 9709 in 1954 there were 587,000 employers under FUTA. The Department of Labor's proposal to extend coverage to the smallest employing units would have extended FUTA coverage to 2.3 million employers. In 1954 there were 1.5 million employers covered under State unemployment compensation laws. This number was 900,000 greater than the number covered under FUTA because 29 States had extended coverage to less than the 8 or more limit in FUTA. The extension of coverage then proposed would have added 1.4 million employers to State unemployment compensation tax rolls, thus doubling the number of covered employers. This extension of coverage to the smallest employing units would have brought 3.4 million employees under State unemployment compensation laws. Thus 2.3 million of the smallest employers-four times the number of employers already under FUTA-would have been added to the Federal tax roll in order to induce the States to extend their laws to cover 3.4 million employees. The Department of Labor, in its argument for extension of coverage of State laws by Federal action, has at no time brought out the impact in terms of the number of additional employers of the extension of coverage of FUTA. |