sides at Nashville, Tenn., and is president of the Tennessee State Labor Council. I am sure that his statement will be of interest to the committee.

STATEMENT OF STANTON E. SMITH, PRESIDENT, TENNESSEE STATE LABOR COUNCIL, AFL-CIO, NASHVILLE, TENN.

Mr. SMITH. Thank you, Congressman.

The CHAIRMAN. We are glad to have you with us, Mr. Smith, and you are recognized.

Mr. SMITH. Thank you.

Mr. Chairman and gentlemen of the committee, I certainly appreciate the very warm introduction which Congressman Frazier gave We have been acquainted for many years and it has been a very pleasant acquaintance.

me.

My name is Stanton Smith. I am president of the Tennessee State Labor Council, the State branch of the AFL-CIO, representing some 175,000 organized workers in my State.

I appear here today because we are both alarmed and disturbed at the magnitude of the unemployment situation in our State and the inadequacy of the unemployment compensation system to meet the needs of the unemployed.

Three of the four major cities in Tennessee are classified as having substantial labor surplus-a polite name for people without jobs. These cities are Chattanooga, with average unemployment in 1958 of 7.8 percent, Knoxville with 9.7 percent, and Memphis with 7.2 percent. Only Nashville does not fall in the substantial labor surplus list.

In addition, we have serious, and, I fear, chronic unemployment in the coal fields of east Tennessee and in many rural and semirural counties of the State. This, of course, poses an additional problem which will require solutions over and beyond that offered by improvements in unemployment compensation.

Furthermore, the rate of exhaustion of unemployment insurance payments last year was the highest since the program was established. About 48,000 individuals used up the full 22 weeks of compensation without finding employment. This is about 7.7 percent of all those covered by unemployment insurance and is about 40 percent of all beneficiaries. As an example of how serious this is, I am informed that in one local union of plumbers and pipefitters in upper east Tennessee, over 300 members of a total membership of 500 are out of work and over 200 have exhausted their unemployment benefits.

A factor which has substantially contributed to the severity of the unemployment situation in the Knoxville area, and one which argues strongly for Federal responsibility, is the decline in construction jobs at the Atomic Energy plants at Oak Ridge near Knoxville. The tremendous demand for construction workers when Oak Ridge was being built and expanded brought a large number of construction workers to that area.

Because of the unusually long duration of construction employment, these workers became permanent residents of the Knoxville-Oak Ridge area. Many of them are now unable to find work. The same kind of situation exists in other parts of the State to a lesser degree.

One of the strongest arguments for Federal minimum standards is that under State control, the entire system has gone downhill and has fallen behind the standards that were set up 20 years ago, when the program was first enacted. Furthermore, the wide divergence in the amount and duration of benefits and the qualifying requirements, from State to State, has made a hodgepodge of the system.

One of the principal factors causing this decline has been the pressure by employers for lower tax rates. This has been encouraged and stimulated by the experience rating formulas by which the tax rate of the individual employer is determined. This has led not only to lower benefit levels but increasingly severe disqualification pro

visions.

However, in recent years, a new factor has entered the picture particularly in the region I come from; namely, the competition for industry. Mistakenly or not, State legislatures, pressure by industryhungry communities, are looking at unemployment taxes as a competitive factor in securing new industry for their States.

This process can spread far and wide and could ultimately destroy the unemployment compensation system by reducing it to an ineffective minimum program, as State competes with State for the dubious distinction of having the lowest unemployment taxes. Only the Federal Government can assure uniform standards at adequate levels, reverse the downward trend, and eliminate this senseless use of the unemployment insurance tax as a factor in State competition for industry.

Tennessee now provides a maximum of $32 per week for 22 weeks. It has just been increased in this last legislature.

Would anyone seriously contend that $32 is adequate even to meet the barest needs of a family? And what about those who receive less? The average weekly benefit amount is only about $22 and what about those who exhaust their benefits or were never covered? And for the two reasons stated above there is no real chance that these inadequacies will be corrected by the States themselves.

We have been fortunate in Tennessee in one respect. That is, we have so far avoided some of the more severe disqualification provisions that have been written into the laws of some other States. However, the pressures grow greater at each session of the legislature and it it not certain how long they can be withstood.

This is an area of legislative action in which the Congress most certainly can help to preserve the intent and purposes of the law; to give the unemployed worker a means of subsistence until a new job is found, and to cushion the effects on our economy of large-scale unemployment.

May I conclude by saying that it is false economy to skimp on unemployment compensation. When a worker exhausts his compensation without finding work, he often becomes a statistic on the welfare rolls. Surely, we have not so soon forgotten the lessons of the great depression of the 1930's that we must repeat that experience before we will act to buttress the stabilizers which were built into our economy as a consequence of that depression.

We must make certain these stabilizers perform the functions for which they were designed. No better start could be made in my opinion than by passing H.R. 3547.

Thank you very much for the opportunity to appear here and to express our concern with this very important problem.

The CHAIRMAN. Mr. Smith, we thank you, sir, for your very fine statement in support of your views on H.R. 3547. We appreciate your coming to the committee.

Are there any questions?

Mr. Baker will inquire, Mr. Smith.

Mr. BAKER. Mr. Chairman, I would like to add to the statement of my colleague, Mr. Frazier, concerning Stanton Smith. To my mind he is one of the outstanding leaders in the labor movement and I have always found him fair and honorable. Of course, you do not say that this bill would solve our depressed areas situation. I know you don't mean that.

Mr. SMITH. No; that is correct.

Mr. BAKER. It would be helpful, as I gather the effect of your testimony. There are areas in Tennessee that are highly chronic, especially east Tennessee.

Mr. SMITH. That is right.

Mr. BAKER. And there are other measures pending that you do support, I assume.

Mr. SMITH. Yes, Congressman. We support the area redevelopment bill.

Mr. BAKER. Just to go into the legislative history in Tennessee, it is now 22 weeks, I believe, maximum at $34 a week.

Mr. SMITH. $32. It went from $30 to $32.

Mr. BAKER. There has been no change in that for quite a number of years, has there?

Mr. SMITH. There have been small changes made over the period of last 10 years, $2 at a time, so that there has been some increase, but in terms of the standard that has been set up to 50 percent of the workers own average weekly wage, with a maximum of two-thirds of the State's average, the $32 does not approach the two-thirds figure, and if the formula were carried on to its logical conclusion we would have a maximum of $47 instead of $32.

Mr. BAKER. My recollection is that there has been substantially more stabilization or improvement under the workmen's compensation laws than there has under unemployment compensation. Is that true?

Mr. SMITH. Not in the case of Tennessee. The workmen's compensation law in Tennessee presents a real problem to us. I would not say that we have made more progress there than in unemployment compensation, but in neither case is the progress adequate to meet the general increase in the price level and the wage levels that have occurred in the last 20 years.

Mr. BAKER. That is all, Mr. Chairman.

The CHAIRMAN. Are there any further questions of Mr. Smith? If not, Mr. Smith, we thank you again, sir, for coming to the committee.

Mr. SMITH. Thank you very much.

The CHAIRMAN. Our next witness is Mr. Glen Ireland.

Please come forward to the witness table and identify yourself for the record by giving us your name, address, and capacity in which you appear.

STATEMENT OF GLEN IRELAND, VICE PRESIDENT OF OPERATIONS OF THE PACIFIC TELEPHONE & TELEGRAPH CO.

Mr. IRELAND. My name is Glen Ireland. I am vice president of operations of the Pacific Telephone & Telegraph Co., and its subsidiary, Bell of Nevada.

As such, I am responsible for all operations of this Bell System Co. in the States of California, Oregon, Washington, and Nevada, and a portion of Idaho.

The CHAIRMAN. Mr. Ireland, the Chair wants to recognize Mr. King. Will you please suspend?

Mr. KING. Mr. Chairman, I merely wanted to state on behalf of Mr. Ireland that he is a distinguished citizen in our State, and, as you know, and I believe many of the committee know, the branch of the Bell System it deals in our State is the largest of the Bell System. He has been vice president in more capacities in this great enterprise than perhaps any other man, and was loaned to Government service during the war, and I just felt the committee should know that. We don't have many witnesses who come from California and those that do come I am pleased to state are most representative.

Mr. Ireland is one of them.

The CHAIRMAN. Mr. Ireland, we appreciate having you, and, Mr. King, we appreciate your remarks in regard to Mr. Ireland.

Mr. IRELAND. Thank you, sir.

The CHAIRMAN. You are recognized, sir.

Mr. IRELAND. My company serves nearly 5 million customers. We have some 83,000 employees with an annual payroll of about $440 million. Prior to November 1957, I was vice president of personnel of that company for 6 years.

In these capacities, I have become familiar with employment matters on the west coast, including the important matter of unemployment insurance. Prior to 1947, I was a member of the Department of Operation and Engineering of American Telephone & Telegraph Co. in New York. In that capacity, I was generally familiar with many employment matters throughout the Bell System.

Today I am here representing the Pacific Telephone & Telegraph Co. and the other Bell System telephone companies. These companies give telephone service to over 38 million customers. They have in total some 590,000 employees with an annual payroll of nearly $3 billion.

My purpose in appearing is to comment on several features of H.R. 3547 and a number of other identical bills pending before this committee. As others have brought out, this bill, through the device of minimum benefit standards would force the individual States to increase greatly the amount and duration of benefits.

The proposed minimum Federal standards would force a large increase in the amount and cost of weekly benefits. The maximum compensation in California, for example, would be increased from $40 to $69 weekly by the requirement that it equal two-thirds of the average weekly wage in the State.

Further heavy costs would result from the requirement that those now qualifying for the maximum should receive at least one-half of their average weekly wage (exclusive of compensation payable to dependents).

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The maximum duration of benefits presently ranging, I believe, from 16 to 30 weeks (26 weeks or more in most States), and this has been changing, would be increased to at least 39 weeks in all States. This duration would be applicable to all who could qualify for benefits, even those who attach themselves to the labor market for brief periods. For example, an occasional worker in California earning a total of $600 in the preceding base year (with $450 in his highest quarter) now draws $20 per week for 15 weeks.

Under the proposed law, he would be eligible for not less than 39 weeks of benefits.

Turning to the financing provisions of this bill, a system of Federal grants is proposed to finance three-fourths of the benefit costs in excess of 2 percent of a State taxable payroll. To qualify for these grants, the individual State's reserve fund must be less than the compensation paid from such fund during the preceding 6 months. Also the minimum rate of any employer's contribution to be paid into the State fund in any of 5 immediately preceding years must have been at least 1.2 percent of his taxable payroll if in such year the State reserve fund was less than 6 percent of taxable payroll (or the compensation paid out from the fund in the preceding 2 years, whichever is greater), in order to be entitled to a Federal grant in any calendar quarter.

In another provision representing an important change from present law, the individual employer may receive an additional tax credit against his 3 percent Federal tax if contributions of all employers to the State fund are at a uniform rate imposed by the State law.

Under present law additional credits are made available to employers only under varying rates, depending upon their individual experience rating.

Although it has been asserted by some proponents of this bill that the experience rating system could still be maintained if the States so desired, the practical effect of its several provisions would be such as to seriously cripple if not destroy the system.

I should like to explain.

Some six or seven States are now-by now I mean if this bill should become law-are in a position to qualify for these proposed Federal grants. Since the grants would be for three-quarters of the benefit costs in excess of 2 percent of taxable payroll, the unemployment costs would be reduced to these States.

They would have little or no incentive to improve this reserve situation either by careful administration of costs or by increasing taxes. But they would, of course, make sure that they had in effect a minimum rate of employer contribution of at least 1.2 percent so as to qualify for Federal money.

With the Federal Government picking up three-quarters of the tab, it would be very difficult for these States to resist continuing pressures and I think you gentlemen know about these pressures better than I do-to liberalize benefits still further. And threequarters of any further increases in cost would likewise be paid for by the Federal Government.

A number of other States are in borderline situations where, with higher benefits and benefits costs brought about by this bill and marked reduction of reserves, they likewise could soon qualify for Federal