under varying patterns of unemployment, the relationship between the unemployment compensation and other social insurance programs, the effect of State eligibility and disqualification provisions, the personal characteristics, family situations, emplovment background and experience of claimants, with the results of such studies to be made public; and

"(2) establish a program of research to develop information (which shall be made public) as to the effect and impact of extending coverage to excluded groups.

"Authorization of Appropriations

"(b) [To assist in the establishment and provide for the continuation of the comprehensive research program relating to the unemployment compensation system, there] There are hereby authorized to be appropriated for the fiscal year ending June 30, 1967, and for each fiscal year thereafter such sums as may be necessary to carry out the purposes of this section. From the sums authorized to be appropriated by this subsection the Secretary may provide for the conduct of such research through grants or contracts.'

Explanation. The proposed change is a technical one to insure that the authorization of appropriations applies to both programs authorized by subsection (1) of section 906.

Amendment. Title I of the bill, page 24, should be further amended by adding at the end thereof a new Part E-BENEFIT REQUIREMENTS, as follows:

"PART E-BENEFIT REQUIREMENTS

"SEC. 151. The Internal Revenue Code of 1954 is hereby further amended adding a new section 3312 as follows:

"SEC. 3312. (a) CERTIFICATION. On October 31, 1968, and October 31 of each calendar year thereafter, the Secretary of Labor shall certify to the Secretary each State whose law he finds is in accord with the requirements of subsection (c) and has been in accord with such requirements for substantially all of the 12-month period ending on such October 31 (except that for 1968, it shall be the 4-month period ending on October 31) and that there has been substantial compliance with such State law requirements during such period. The Secretary of Labor shall not withhold his certification to the Secretary unless, after reasonable notice and opportunity for hearing to the State agency, he finds that the State law is not in accord with the requirements of subsection (c) or has not been in accord with such requirements for substantially all of the 12month period ending on such October 31 (except that for 1968, it shall be the 4-month period ending on October 31) or that there has been a failure to comply substantially with such State law requirements during such period. For any State which is not certified under this subsection on any October 31, the Secretary of Labor shall within 10 days thereafter notify the Secretary of the reduction in the credit allowable to taxpayers subject to the unemployment compensation law of such State pursuant to section 3302 (c)(4).

66 6

(b) NOTICE TO GOVERNOR OF NONCERTIFICATION.

'If at any time the Secretary of Labor has reason to believe that a State may not be certified under subsection (a) he shall promptly notify the Governor of such State.

"(c) REQUIREMENTS.

"(1) WITH RESPECT TO BENEFIT YEARS BEGINNING ON OR

AFTER JULY 1, 1968.

"(A) the State law shall not require that an individual have more than 20 weeks of employment (or the equivalent as provided in subsection (4)) in the base period to qualify for unemployment compensation;

"(B) the State law shall provide that the weekly benefit amount of any eligible individual for a week of total unemployment shall be (i) an amount equal to at least one-half of such individual's average weekly wage as determined by the State agency, or (ii) the State maximum weekly benefit amount (exclusive of allowances with respect to dependents) payable with respect to such week under such law, whichever is the lesser: (C) the State law shall provide for an individual with 20 weeks of employment (or the equivalent) in the base period, benefits in a benefit year equal to at least 26 times his weekly benefit amount.

"Any weekly benefit amount payable under a State law may be rounded to an even dollar amount in accordance with such State law.

'(2) The State maximum weekly benefit amount (exclusive of allowances with respect to dependents) shall be no less than 66% percent of the Statewide average weekly wage most recently computed before the beginning of any benefit year, except that, for benefit years beginning between July 1, 1968, and June 30, 1970, such amount shall be no less than 50 percent of such Statewide average weekly wage, and for benefit years beginning between July 1, 1970, and June 30, 1972, such amount shall be no less than 60 percent of such Statewide average weekly wage.

"(3) In determining whether an individual has 20 weeks of employment, there must be counted as a week, any week in which the individual earned at least 25 percent of the Statewide average weekly wage.

(4) For the purpose of subsections (c)(1)(A) and (C), the equivalent of 20 weeks of employment in a State which uses highquarter wages is total base period wages equal to five times the Statewide average weekly wage, and either one and one-half times the individual's high-quarter earnings or forty times his weekly benefit amount, whichever is appropriate under State law. (d) DEFINITIONS.

""(1) "benefit year" means a period as defined in State law except that it shall not exceed one year beginning subsequent to the end of an individual's base period.

(2) "base period" means a period as defined in State law but it shall be fifty-two consecutive weeks, one year, or four consecutive calendar quarters ending not earlier than six months prior to the beginning of an individual's benefit year.

"""(3) "high-quarter wages" means the amount of wages for services performed in employment covered under the State law paid to an individual in that quarter of his base period in which such wages were highest, irrespective of the limitation on the amount of wages subject to contributions under such State law.

"(4) "individual's average weekly wage" means an amount computed equal to (A) one-thirteenth of an individual's high-quarter

wages, in a State which bases eligibility on high-quarter wages paid in the base period or (B) in any other State, the amount obtained by dividing the total amount of wages (irrespective of the limitation on the amount of wages subject to contributions under the State law) paid to such individual during his base period by the number of weeks in which he performed services in employment covered under such law during such period.

"(5) "statewide average weekly wage" means the amount computed by the State agency at least once each year on the basis of the aggregate amount of wages, irrespective of the limitation on the amount of wages subject to contributions under such State law, reported by employers as paid for services covered under such State law during the first four of the last six completed calendar quarters prior to the effective date of the computation, divided by a figure representing fifty-two times the twelve-month average of the number of employees in the pay period which includes the twelfth day of each month during the same four calendar quarters, as reported by such employers.'

"LIMITATION ON CREDIT AGAINST TAX

"SEC. 152. (a) Section 3302 of the Internal Revenue Code of 1954 is amended by adding at the end of subsection (c) thereof a new paragraph (4) as follows:

(4) If the unemployment compensation law of a State has not been certified for a twelve-month period ending on October 31 pursuant to section 3312(a), then the total credits (after applying subsections (a) and (b) end paragraphs (1), (2), and (3) of this subsection) otherwise allowable under this section for the taxable year in which such October 31 occurs in the case of a taxpayer subject to the unemployment compensation law of such State shall be reduced by the amount by which 2.7 percent exceeds the four-year benefit cost rate applicable to such State for such taxable year in accordance with the notification of the Secretary of Labor pursuant to section 3312(a).' "(b) Subsection (c)(3)(C)(i) of section 3302 is amended by substituting the term '4-year' for the term '5-year'."

"(c) The heading for paragraph (5) of subsection (d) of section 3302 is revised to read '4-year benefit cost rate', and the paragraph is amended to read:

"For purposes of subsection (c)(4) and subparagraph (C) of subsection (c)(3), the four-year benefit cost rate applicable to any State for any taxable year is that percentage obtained by dividing

"(A) One-fourth of the total compensation paid under the State unemployment compensation law during the four-year period ending at the close of the first calendar year preceding such taxable year, by

"(B) The total of the remuneration subject to contributions under the State unemployment compensation law with respect to the first calendar year preceding such taxable year. "Remuneration" for the purpose of this subparagraph shall include the amount of wages for services covered under the State law irrespective of the limitation of the amount of wages subject to contribution under such State law paid to an individual by an employer during any calendar year beginning with 1968 up to $5,600, and beginning with 1971, up to $6,600; for States for which it is necessary, the Secretary of Labor shall estimate the

remuneration with respect to the calendar year preceding the

taxable year.'"

Explanation. The proposed changes add to the provisions in H.R. 15119 requirements as to State benefits which must be met by a State if employers in that State are to receive full tax credit against the Federal unemployment tax for contributions paid to the State. If a State provides benefits meeting the prescribed minimum levels of benefit adequacy, employers in the State would be eligible for the full 2.7 percent credit against the Federal tax; if, however, the State benefits are below the established level, employers' Federal tax credit is limited to the actual average cost of the benefits being provided. This proposed addition represents the most significant improvement to H.R. 15119.

The purpose of the benefit requirements and reduced credit provisions is to protect the States which want to provide adequate benefits by assuring that no State can get for its employers a reduction in a Federal tax by providing inadequate protection to the unemployed workers in the State. Thus, the requirements restore the Federal unemployment tax to its original and intended role of eliminating the fears of interstate competitive tax disadvantages as a deterrent to State action.

The benefit requirements relate to the three primary factors determining the adequacy of protection-the measure of past labor force attachment required to qualify for benefits, the weekly benefit amount, and the duration of benefits payable.

The language provides that the qualifying employment or qualifying wage requirements in the State benefit formula cannot exclude from benefits workers who have had 20 weeks of employment (or the equivalent) in a 1-year base period.

The qualifying requirement limits the program's protection to regular members of the labor force. It should be high enough to eliminate workers with insignificant past employment, without eliminating workers regularly attached to the labor force who have had some unemployment, underemployment, or noncovered work during their base period.

The proposal is expected to influence States with very low qualifying requirements to amend their law to provide more adequate measures of attachment while at the same time it protects workers against unreasonably high requirements.

Under the proposal, the State law would be required to provide that those who meet the State qualifying requirement be entitled to a weekly benefit amount of at least 50 percent of the individual's weekly wage, up to the State maximum. States are free to pay some or all claimants a benefit which represents more than 50 percent of their weekly wages.

The State maximum, exclusive of any amount payable with respect to dependents must be set, for benefit years beginning between July 1, 1968, and June 30, 1970, at a level representing 50 percent of the statewide average weekly wage. In order to assure that most covered workers will be able to receive a benefit of at least half their own wages, the maximum must be higher than 50 percent of average wages. Therefore, the maximum would have to increase to 60 percent of the statewide average weekly wage for benefit years beginning between July 1, 1970, and June 30, 1972, and to 66% percent of the statewide average for subsequent benefit years. At all stages, the individual

benefit need not represent more than 50 percent of the individual's wage; at the final stage, it is estimated that about 75 percent of the male claimants would receive a benefit of 50 percent of their own wages; the other 25 percent would still be cut off by the maximum.

With respect to duration, the proposal would require State laws to provide eligible claimants having 20 weeks of base period employment, or its equivalent, with potential duration of at least 26 times the weekly rate. This does not mean that the State must provide uniform duration for all who qualify for benefits under State law. Workers who qualify with less than 20 weeks of employment may be provided potential duration of less than 26 weeks. A State which provides benefits in excess of 26 weeks may restrict the longer duration to workers with more than 20 weeks of employment.

Moreover, without a requirement as to duration, there may be pressures to meet the weekly benefit amount requirement at the expense of reduced duration.

The proposal includes necessary definitions. It provides for a uniform method of computing the statewide average weekly wage on the basis of information currently available from required reports. The aggregate remuneration paid during a year to all individuals covered under the State law is divided by 52 to convert it to a weekly basis, and then divided by the average number of persons employed at midmonth periods. The resulting figure is the amount paid to an average worker while working in a covered job. While this figure reflects the wages paid to high-paid executives, it also includes wages for casual and part-time jobs. The high- and low-paid jobs tend to offset each other's effect on the average wage. In 16 States which now relate the maximum weekly benefit to statewide average wages, this is essentially the formula used to compute average wages.

TITLE II-FEDERAL-STATE EXTENDED UNEMPLOYMENT
COMPENSATION PROGRAM

General explanation. The proposal would retain with few changes the Federal-State extended unemployment compensation program contained in H.R. 15119. The principal change The principal change is that benefits paid during an extended benefit period would be financed 100 percent by the Federal Government. It would, however, provide an additional program for the long-term unemployed. There would be a 50 percent sharing by the Federal Government of regular State benefits paid between 26 and 39 weeks in a benefit year. This would encourage, but not compel, the States to provide such additional duration.

Amendment.-Title II of the bill, page 24, line 18 through page 39, line 13 is amended to read as follows:

"SHORT TITLE

"SEC. 201. This title may be cited as the 'Federal-State Extended Unemployment Compensation Act of 1966'.