The CHAIRMAN. Without objection, the full statement will be made a part of the record. (The statement follows:) STATEMENT ON PROPOSALS TO AMEND UNEMPLOYMENT COMPENSATION BY E. S. WILLIS My name is E. S. Willis. I am consultant on employee benefit plans for the General Electric Co., and am a member of the national chamber's committee on economic security. I am here to present the views of the Chamber of Commerce of the United States, representing more than 3,400 chambers of commerce and trade associations. May I thank the committee for this opportunity to appear here to express the views of our members on certain proposals for Federal legislation which would drastically affect the unemployment compensation program. The business community represented by the national chamber is fully aware of the human problems of unemployment. However, we believe H.R. 3547 and similar bills would undermine the present soundly operated unemployment compensation program. THE CHAMBER'S POSITION ON UNEMPLOYMENT COMPENSATION The national chamber supports the basic principles of the Federal-State unemployment compensation system. We believe it is entirely proper to have such a public program to handle on a nondiscriminatory basis the problem of shortrun layoffs due to lack of work. This Federal-State unemployment compensation system, with a favorable experience of more than 20 years, places the responsibility on each State to operate its own program. From the outset, Congress recognized the wide differences in the economies of the different States, and differences within the economy of single States. Consequently, it placed both responsibility and control with each State. Each was deemed best qualified to tailor its own unemployment compensation program to meet the unique characteristics of its economy, and to adjust it in the light of changing conditions. By leaving the operation and control with State legislatures each State has been free to experiment, to pioneer, and to make changes and improvements in the light of experience. Thus, States could profit from the mistakes and from the improvements made by others. If a State should find that some change was a mistake or moved too far and too fast-the adverse consequences were thus confined to that particular State. Moreover, the State could easily correct the difficulty by legislative action. We support the unique American aspect of unemployment compensation which encourages employers to provide steady jobs through the financial incentive of individual employer experience rating. To some extent, unemployment is controllable, and we believe this encouragement is important. Moreover, experience rating fairly allocates the costs of unemployment among employers and on the products they turn out. It also helps to insure that unemployment compensation tax money is used for benefits only for those genuinely attached to the labor force and laid off through no fault of their own. It serves to prevent abuse. Thus, this employer-incentive arrangement is in the interest of the workers themselves, as well as in the public interest. THE UNEMPLOYMENT COMPENSATION PROGRESS OF THE STATES Intermittently, one hears rash charges that the States, by and large, have failed miserably in modernizing their unemployment compensation programs. The facts do not support these accusations. Some criticize the States for not keeping their unemployment compensation benefits up to date. The fact is, however, that the purchasing power of the average benefit today is substantially greater than in 1939. In 1939, the average weekly payment was $10.66; in October 1958, it was $30.45. In 1939, the cost-of-living index was 59.4; by October 1958, it had increased to 123.7-or by 108 percent. Thus, today, it would take $22.17 to buy the same amount of goods and services that could have been bought for $10.66 in 1939. But the average weekly benefit in 1958 was $30.45-about 38 percent above $22.17. In short, despite much higher prices, the average weekly benefit today will buy for more goods and services than the average weekly benefit in 1939. The table below shows that, in 40 States, the average unemployment compensation benefit in October 1958-after adjustment for price rises-would buy 25 percent or more in goods and services than its 1939 counterpart. buying power ranged from 11 percent to 84 percent. Increases in Today's unemployment compensation benefit buys more than its prewar counterpart despite a much higher cost of living 1 Data from "Handbook of Unemployment Insurance Data, 1938-51," U.S. Department of Labor, Bureau of Employment Security, November 1952. 2 Data from the Social Security Bulletin (January 1959), U.S. Department of Health, Education, and Welfare. 3 The October 1958 cost of living was 108 percent above the 1939 level. These percentates show the greater purchasing power of the average unemployment compensation benefit of October 1958, after adjustment for today's higher prices. But these facts don't tell the whole story. Allowance should be made for income tax and social security tax increases since 1939 in this comparison of today's benefits with prewar benefits. Obviously, the true loss of income of an unemployed worker is his "take home" pay after these deductions. In 1939, the maximum social security tax was only $30, in 1958 it was $94.50. And in 1939, the Federal income tax was negligible. As a result, virtually all of an employee's gross wage in 1939 was "take home" pay. But that's obviously not so today. This means that the comparison of the purchasing power of today's average unemployment benefit-benefits which are tax free-with that of 1939 is even more favorable. Thus, all States have improved the real buying power of unemployment compensation benefits over the past 2 decades. Virtually every State today provides greater total protection than 20 years ago. The table below shows the total benefits payable at the maximum in 1939 and 1959. For example, the maximum benefits a worker in Missouri could have received in 1939 was $180. Today he could receive $858 and, adjusted for the cost of living, $417—a real increase of 131 percent. The total unemployment compensation protection provided in 1959 is greater than in 1939 Some contend there has not been much improvement in benefits since 1954 when President Eisenhower first urged the States to reexamine and revise their programs. However, today's benefits are actually ahead of the times. Since 1954, the U.S. average weekly benefit has increased faster than wages and the cost of living. The average benefit check in 1954 was $24.93. As of May 1958, the average benefit check had increased 23.6 percent. In this same period the average wage in covered employment had gone up about 15 percent, and the cost of living, less than 9 percent. Again, the comparison would be more striking if the "average weekly wage" were adjusted to a "take-home" pay basis. Thus, the average unemployment compensation benefit has been improved during the past few years. Some doubtless believe sincerely that the 20-year record in unemployment compensation benefits is a long trail of degradation. The sponsor of H.R. 3547 stated in the House that, "In 1939 the weekly benefits payable to insured unemployed workers actually averaged 50 percent of their full-time weekly wages. Today, average weekly unemployment benefit payments have fallen until they are now less than 33 percent of full-time weekly wages." (See Congressional Record, Jan. 29, 1959, p. 1311.) This and similar statements have received wide publicity and, unfortunately, wide acceptance. We're sure this improper comparison of the ratios of benefits to full-time weekly wages of the beneficiaries in 1939 with benefits to full-time weekly wages of all covered workers was done unwittingly. The only meaningful comparison is average unemployment compensation benefits with the average weekly wages of the beneficiaries when working. We do know that available data indicates more than half of today's beneficiaries are receiving at least 50 percent of their own gross weekly wages. Still another criticism is that benefits are not paid long enough. The record shows the length of time for which benefits are paid by various State programs has steadily been extended. Twenty years ago, 42 States limited payments to 16 weeks or less; none paid benefits more than than 20 weeks. Today, only three States have a maximum duration of less than 20 weeks. More than 75 percent of all covered workers are in States which provide 26 or more weeks of normal uniform duration, or 26 or more weeks of normal maximum variable duration. In the absence of sharp recession or depression, most persons who really want to work can find a job within 26 weeks-six months. Thus, the States have extended the duration of benefits, materially. Already this year, nine States have again extended duration. Finally, some contend that a few States gear their benefit schedules to produce low tax rates to attract employers from other States. However, a comparison of average employer tax rates in the various States does not support this view. Referring to the table below, we know the unemployment tax rates could not cause a plant to move from, say, New Hampshire to South Carolina where the difference in the average tax rate is no more than four-tenths of 1 percent. Or, to move from Connecticut to Georgia with no difference in the average tax rates. In fact, we seriously doubt that any employer could afford to move from a State where he had a rate of 2.7 percent to another State where his tax rate might be zero--a cost savings in unemployment compensation taxes of not more than $81 per employee per year, or 4 cents an hour. Comparison of average employer tax rates in 1958 The difference in unemployment compensation tax costs between some Northern States and others to the south is far too small an element in the total cost picture to induce any employers to shift their plant operations. Wage levels, raw materials, geographical relationship to new growing markets, the business climate to mention a few-are much more important factors explaining why some firms have expanded their production and other operations by building new plants in other States. Even Mr. Nelson Cruikshank, director of the social security department, AFL-CIO, stated-in hearings before the Senate Finance Committee, "I do not think employers actually choose a plant location, because of 1 or 2 percent variation in unemployment compensation contribution * (See unemploy ment compensation hearing, Senate Finance Committee, 85th Cong., 2d sess., p. 401.) Employers pay at various tax rates based upon their own individual employment experience. The fact that one may pay 1.2 percent in one State has absolutely nothing to do with what he is going to pay in another State. WHY MINIMUM FEDERAL REQUIREMENTS? With the so-called standards in H.R. 3547, the Federal Government would fix by decree (1) A ceiling on the conditions of eligibility which any State could require for benefits. (2) A floor under the maximum weekly benefit payable. (3) An absolute floor under the duration of benefit payments. Since no State today meets the proposed three minimum requirements, it may be seen that these requirements would effectively take control of unemployment compensation away from each State. The Federal Government would determine the weeks of work or the amount of earnings required for an unemployed person to establish a genuine, or substantial, attachment to the labor force and thus eligibility for unemployment compensation benefits. No State would be permitted to require one more day of work, or $1 more of earnings, to be eligible. Congress would decide what maximum weekly benefit would represent a floor of protection for those in the higher pay levels. And it would rule on the minimum number of weeks that every State must pay benefits to every eligible unemployed person with a very modest prior work record. States would be reduced to the status of tax collecting and disbursing agents under Federal rules. Nowhere have the advocates of H.R. 3547 presented an analysis of unemployment experience data showing the reasonableness of these minimum requirements. No comprehensive analysis has been presented showing why a maximum benefit for those unemployed should be equal to two-thirds of the statewide average weekly earnings of those working, including highly skilled and steadily employed persons in any State. Still less has it been established why this would be an appropriate requirement in all the States. It might prove to be too high in some, and perhaps not so in others. The prevailing differences in maximum benefits among the various States has been singled out as one aspect of this interstate competition, but no evidence has been submitted that this two-thirds of the average weekly wage requirement would remove these differences. Might the differences be increased or remain virtually the same? Absolutely nothing has been presented to show how each State would be affected by the new requirement. Actually this two-third requirement would not eliminate prevailing differences but, in fact, would result in even greater variations. For example, the maximum weekly benefit under existing law for one industrial State is now $33. The maximums in nine Southern States range from $26 to $34 or as a percentage of the $33, from 79 percent to 103 percent. Under the minimum Federal requirement, the maximum in the industrial State would become $61 and the maximums in these nine Southern States would range from $39 to $52. Again related in percentage terms to the maximum in the Northern State, these nine maximums would in every case be smaller than at present. When a similar comparison between the maximums under present laws and under this two-thirds requirement is made for other industrial States with the same Southern States, the maximums in some of the Southern States would be raised relatively to those in the Northern States, and would be reduced in others. Is this result a desirable one? Have the advocates of the minimum Federal requirements made no effort to apply these standards, to see what the effect might be? What is the real objective? Since these Federal requirements would probably result in wider benefit variations, would we not also have wider variations in average State unemployment compensation tax rates? Of course, some States would probably have to tax all employers at their top rates. Presumably, other would not. Thus, these requirements might well produce wider differentials in average tax rates as well as in benefits. And if such a result should materialize, as seems likely, would the next demand be that we eliminate this interstate competition in tax rates? If this step should be taken, how could we avoid a completely federalized program? We wonder-are not these demands today for minimum Federal requirements really a smokescreen? The AFL-CIO basic position is a comprehensive overhauling of unemployment compensation under a single Federal program. We believe these requirements would wreck the present sound unemployment compensation system and ultimately compel the Federal Government to take over. Another section in the bill, H.R. 3547, to which we are opposed is the provision for Federal grants, nonrepayable grants, under certain conditions to each State from the Federal unemployment account. We believe this would encourage financial irresponsibility and, ultimately, require the imposition of the "needs test" in unemployment compensation. This is why we are opposed. Under this section, Federal grants would be made whenever a State found that its unemployment compensation reserve account had declined to a specified level. The only source of revenues for the Federal unemployment account would 39678-59--51 |