promise between those two. It represented an indigenous American product quite different from any of its European prototypes.

But it has been what I call an uneasy compromise. Those of you who have been on this committee for many years will recall the almost continuous series of attempts that have been made to change the competitive emphasis the program now has.

There was the McCormack bill of 1940, which proposed Federal standards very similar to the present bill. There was the 1942 war displacement bill, the 1944 and 1945 war reconversion bills, the 1952 Moody-Dingell bill, and now the 1959 Karsten-Machrowicz bill. It has indeed been an uneasy compromise.

I think it is important to note that these proposals for change have come during abnormal situations-either at our entrance into war, or our progress out of war, or during a period of heavy unemployment. That fact is important.

In my second paragraph of the précis, I say that a more durable compromise can be achieved by establishing two different programs of unemployment benefits, a basic program designed for periods of normal unemployment and emphasizing the competitive approach, and a supplementary program designed for abnormal periods and making greater use of the welfare program.

The definition of abnormal unemployment is not easy. The term is both imprecise and variable. It is generally understood today to refer to a prolonged unemployment rate higher than about 6 percent. Such a rate causes acute uneasiness in our society and leads to a demand that something be done about it by someone. The term, though, is very changeable.

The variability of the term is illustrated by the six States which have already set up supplementary programs designed to operate in abnormal situations. Their definition of "abnormal unemployment," the trigger point, varies from 9 percent, I think, in North Carolina, to 4.375 percent in Illinois. You should not de deceived by the apparent exactness of that last figure; it merely represents the result of collective bargaining.

It should be noted, and it is very important, that an unemployment rate may have a geographical reference as wide as the entire country or as limited as a single locality. This observation is very important for dealing with the problem of depressed areas, which are islands of abnormality in seas of normality.

This general distinction between normal and abnormal unemployment is the crucial distinction. Public opinion has always been aware of this distinction, if anything too much aware of it. In periods of normal unemployment the public tends to be critical of the unemployment compensation program. You hear complaints on all sides that "jobs are going begging" while "great numbers" of people are drawing benefits. As soon, however, as unemployment mounts to a level that is considered to be abnormal, unemployment compensation is taken to the public's heart and its praises are heard everywhere, in the columns of the Wall Street Journal no less than in the AFL-CIO News. Since unemployment compensation is a public program this tendency of public opinion to shift with the winds cannot be safely ignored.

I grant that to some extent this shift in public opinion between boom and bust times is partly a reflection of public ignorance, but it

is not merely that. It is also a reflection of the different significance that unemployment benefits have in two objectively different situations.

For some of the differences in these two situations let me read you a paragraph from my prepared statement. It is on page 2, the first paragraph:

Unemployment benefits have one role to play in recession periods-when the need for purchasing power is urgent, when the quit rate is low, when the unemployed are eager to take whatever jobs are available, and when a larger proportion of their numbers consist of the core of the labor force. They have a somewhat different role to play in normal periods-when inflation rather than more purchasing power is the Nation's concern, when the quit rate is elimbing, when the unemployed are harder to satisfy with job offers, and when a larger proportion of their number consists of those on the fringe of the labor force. The welfare emphasis is more appropriate for the first kind of situation, the competitive emphasis more appropriate for the second.

While we are on this page, let me read the paragraph at the bottom of that page under the heading "Characteristics of regular system": The regular system of unemployment benefits has four characteristics which reflect the influence of the competitive, or Wisconsin, approach and fit it to operate well in normal situations. Two characteristics relate to the tax side

of the program and two to the benefit side.

(1) Each State is responsible for meeting the cost of its own unemployment benefits and must build its own unemployment reserves.

(2) Within the State each employer is taxed in proportion to the amount of unemployment connected with his own business; this is the tax system called experience rating.

(3) Benefits are available only to workers with a record of substantial work in a recent period.

(4) The duration of benefits is typically limited to about 26 weeks in a given benefit year.

The first two characteristics integrate the program of unemployment benefits with competitive economics and make the payment of benefits a "cost of doing business"-to use the phrase of John R. Commons, an early pioneer in this field.

The other two characteristics make the first two possible. That is, the limitations on benefits make possible or at least facilitate the allocation of financial responsibility to the individual State and to the individual employer within each State.

In normal times these four characteristics make good sense but in abnormal times they make less sense.

Let me read to you in that connection, from page 4 of my prepared statement, the section beginning "Abnormal Unemployment":

In situations of abnormal unemployment, however, these same characteristics of the regular program make less sense. Situations of abnormal unemployment require that benefits be made available on easier qualifying conditions and be paid for longer periods. For how much longer should benefits be paid? There is no definite answer, but certainly for a substantially longer period than that provided by the regular program. Even the 39 weeks provided by the combined regular and TUC programs this year were insufficient for a large number of the unemployed.

Now, an extension of benefits sufficient to meet the needs of all abnormal situations, even a deep depression, would make it very difficult, perhaps impossible, to retain the two main characteristics of the regular program, namely State responsibility and experience rating. A few States and many individual employers would find the burden of adequate benefits too great in abnormal periods. In such periods, the burden ought to be shared more widely; the competitive emphasis ought to yield somewhat to the welfare emphasis.

Then the conclusion on page 5:

Since the regular program is inadequate for abnormal periods and since the protection of unemployment benefits is most needed in abnormal periods, the conclusion seems inescapable that the regular program must be changed (its provisions must be liberalized and its competitive emphasis modified) or it must be supplemented. Sound political wisdom, it seems to me, suggests that the regular program should not be changed, but rather that it should be retained and supplemented by some auxiliary program.

I am inclined to think that the only way we can retain the advantages of the regular program while providing adequate protection against abnormal unemployment is to set up two programs. Let the regular program remain geared to the competitive needs of the normal situation, and let an auxiliary program be established which will automatically go into operation during abnormal situations.

Such an auxiliary program could take many forms. The simplest would be the permanent extension of the existing temporary unemployment compensation program, along with some kind of "trigger" arrangement to actuate the program automatically when unemployment passed a predetermined crisis point. Experience under TUC has been reassuring in that no serious claimant abuse has developed. The characteristics of TUC claimants, in point of age, sex, industry, and occupation, have been about the same as those of the claimants under the regular program.

We do not have really adequate data on that point.

Not all the States which have had the TUC program have kept adequate statistics; but the data which we have, and they are considerable, bear out this conclusion. Personally, I am satisfied with the statistics we have on it. Congress could safely make this temporary experiment in extended benefits a permanent part of our system of unemployment benefits.

Extension of the TUC program would be the simplest action for Congress to take, but it might not be adequate. If such an auxiliary program were left optional with the States, as TUC was, its adequacy would be determined by the extent to which the States elected to participate, either by accepting the proffered Federal aid or by setting up similar programs of their own. Currently, a number of State legislatures, as different in their industrial complexion as Missouri and New York, are considering the establishment of some auxiliary program of their own, and at least six have already acted. The paper you had reads "four," but since I wrote this two others have set up such programs. If Congress could know what the States will eventually do, its own course of action would be clearer.

An alternative line of congressional action would be to set up an auxiliary program in which there would be some pressure on the States for adoption. The pressure might be exerted through the familiar grant-in-aid technique. The Federal Government might offer to share a part, perhaps a third, of the cost of such an auxiliary program in any State that chose to establish one.

The remaining two-thirds of the cost could be met by each State in any way it chose. It need not finance the auxiliary program in the same way as the regular program. Indeed, I think a State would be wise to keep the financing of the auxiliary program entirely separate from the regular program. A State might, for example, raise the funds for the auxiliary program by a uniform payroll tax (no experience rating, therefore) imposed equally on employers and employ

But however the auxiliary program is financed-whether with or without Federal grants and employee taxes-its reserves should be kept separate from the reserves of the regular program in order to

make unmistakably clear that the two programs have different functions and operate on different principles.

The amounts involved in such an auxiliary program and I come here to the part that obviously would be of particular interest to a Committee on Ways and Means-would be small compared to the cost of the regular program. Benefits would be paid only to the exhaustees of the regular program-a relatively small number-and in most cases for a fewer number of weeks than these recipients had been paid under the regular program. In some situations, benefits might be further restricted to the primary wage earners among the exhaustees. The tax burden of the auxiliary program would be lighter than that of the regular program not only because the benefit costs would be smaller but also because this smaller cost would be shared among three contributors: employers, employees, and the Federal Government.

Although the auxiliary program's costs would be relatively small, its effects would be considerable. Its most obvious effect would be to provide help to those who were most desperately in need of help. But it would have another very important effect. It would make possible the preservation of the regular program, which could then retain the competitive characteristics that fit it to operate effectively in normal periods.

The CHAIRMAN. Does that conclude your presentation, Father Becker?

Father BECKER. That concludes my statement.

The CHAIRMAN. Are there any questions of Father Becker?
Mr. MASON. Yes, Mr. Chairman.

The CHAIRMAN. Mr. Mason will inquire.

Mr. MASON. Father Becker, your presentation intrigues me very, very much. In the first place, you have given us, in my estimation, the best analysis of our problem in connection with this unemployment compensation business that we have ever had and you have done it in an impersonal or scientific manner which intrigues me, too.

Do I gather that your main recommendation is that we should maintain our present program substantially as it is for normal periods of unemployment and then for abnormal periods that come once in a while that we should have a supplementary program with a cost divided between the Federal Government and the State unemployment program and perhaps the participants, the employees, might be charged with part of that cost?

We could do that very nicely if this three-tenths of 1 percent that the Federal Government collects now and which is not enough to pay for the cost of administration to build up that fund were increased to four-tenths and five-tenths to build up this fund for this supplementary program and use that supplementary fund on the part of the Federal Government to encourage or stimulate the States to also have a supplementary program and the Federal Government would assume part of it.

Is that, in essence, your program?

Father BECKER. Yes, Congressman Mason.

Mr. MASON. I think it is a very excellent one and I think it is the best solution that we have had presented to us to avoid, shall we say, imposing on States rights and avoid having the Federal Government

set up standards and all that kind of thing which some of us do not like to go along with, and yet you would be taking care of the needs of these abnormal unemployment compensation periods.

That is all, Mr. Chairman.

The CHAIRMAN. Are there any further questions of Father Becker? Mr. Curtis will inquire.

Mr. CURTIS. I want to compliment Father Becker also on this very clear presentation. I can think, in my own mind, that unconsciously this committee was grappling with this problem but was not quite as aware of what we were grappling with.

Last year when we had temporary unemployment compensation actually at times in our executive meetings discussion would come up between welfare and, let us say, insurance.

I have one thing I want to ask you. I myself am thinking in terms of shifting gears. I did not have it this clearly thought out, but this certainly fits exactly the line in which I have been thinking.

We thought of this temporary unemployment compensation in the line of who would be administering the funds and one thing which disturbed us in temporary unemployment compensation was that, if we made it too much of a welfare program, we would be taking the personnel who were experienced in handling the insurance type program and they would have to apply these standards of people getting back to work and so forth. We had the fear that if we turned over what would be a need type of test to people who were doing other types of things that we might be straining the abilities of that experienced group.

In your proposed auxiliary program, I presume you would have the same personnel probably handle it, would you not?

Father BECKER. Yes.

Mr. CURTIS. And take, for example, when it came to a question of a job being presented to a person, under the insurance program, if I may use it for ready reference, we can tend to be a little strict both ways. If an employee does not want to take a job that he feels is not along the lines of his work, we tend to protect that right, so that he retains his unemployment compensation.

On the other hand, we also are strict in seeing to it that he really is in the labor market.

Under the auxiliary program, I can see the strictness would break down or should break down both ways, should it not? I am thinking, for example, if a job that is not maybe exactly to the person's liking were offered in the auxiliary period, we can afford to be less strict in his behalf. Would you comment on that because that might help me in my thinking.

Father BECKER. The details would be subject to a great deal of working out but, in general, the process that you describe would naturally take place.

It takes place in the regular program now as a matter of fact. After an unemployed claimant has been unemployed for a large number of weeks, the definition of what is suitable work for him generally undergoes some modification and he is expected to lower his sights somewhat.

The particular way in which that is done is extremely complicated and it is easy to make mistakes with regard to it. Usually it is not