United Nations Social and Economic Council. The appointment, which is for a 2-year term, was announced by the White House on November 6 and later confirmed by the General Assembly of the United Nations and by the United States Senate. Mr. Altmeyer was also selected as one of nine members of the United Nations Staff Benefit Committee to advise on the development of a permanent retirement system for UN employees.

President's Messages on the State of

the Union and on the Budget

In his message on the state of the Union, presented to the Eightieth Congress on January 6, President Truman declared that the solution of labor-management difficulties listed as the first of five major economic policies which he believes the Government should pursue during 1947— is to be found "not only in legislation dealing directly with labor relations, but also in a program designed to remove the causes of insecurity felt by many workers in our industrial society. In this connection, for example, the Congress should consider the extension and broadening of our social security system, better housing, a comprehensive national health program, and provision for a fair minimum wage."

Of all our natural resources, the President said, "none is of more basic value than the health of our people. Over a year ago I presented to the Congress my views on a national health program. The Congress acted on several of the recommendations in this program-mental health, the health of mothers and children, and hospital construction. I urge this Congress to complete the work begun last year and to enact the most important recommendation of the program-to provide adequate medical care to all who need it, not as charity but on the basis of payments made by the beneficiaries of the program.

"One administrative change," the President continued, "would help greatly to further our national program in the fields of health, education, and welfare. I again recommend the establishment of a well-integrated Department of Welfare."

In discussing the program for veterans, Mr. Truman pointed out that, exclusive of mustering-out payments

and terminal-leave pay, the program for veterans of all wars is costing more than $7 billion a year-one-fifth of our total Federal budget. "This is the most far-reaching and complete veterans' program ever conceived by any nation. Except for minor adjustments, I believe that our program of benefits for veterans is now complete . . . History will judge us not by the money we spend, but by the further contribution we enable our veterans to make to their country. In considering any additional legislation that must be our criterion."

The President's budget for the fiscal year 1948, sent to Congress on January 10, included $1,654 million for promoting the Nation's social welfare, health, and security. In his accompanying message, Mr. Truman reiterated the need for extension of old-age and survivors insurance and unemployment insurance to groups now excluded and for liberalizing the present retirement benefits under the former program "to reduce the necessity for piecing out insurance benefits with public assistance payments."

There is serious need, the message continued, "to correct inequalities between States in public assistance payments and to extend the scope of Federal aid to include general assistance programs." Since the temporary increase in Federal grants for public assistance will expire December 31, 1947, Congress was urged to consider permanent legislation. The President also repeated his earlier recommendations for a national health program and for a Cabinet department of health, education, and social security.

President's Economic Report to
Congress

Immediate steps to revise benefit payments under the social security system, together with a long-range strengthening and extension of the program, were urged by President Truman in his Economic Report to Congress on January 8. The social security program, the report stated, "has not kept pace with the times or with our increase in general living standards."

The President's report was the first of a series of analyses and recommendations related to elements in a

national economic policy, to be made annually under the terms of the Employment Act of 1946. It was preceded in December by the first report of his three-member Council of Economic Advisers, also set up under the Employment Act to aid the Chief Executive in analyzing and interpreting economic developments, appraising programs and activities of the Government, and formulating and recommending national economic policy. The President's report goes to a permanent joint committee of Congress, which, under the terms of the act as amended, must submit to both Houses of Congress by February 1 its findings and recommendations on each of the President's main recommendations.

While his short-range recommendations have long-range significance as well, Mr. Truman pointed out that they merited immediate attention from Congress and the people as a whole, because of their influence on economic conditions in 1947. Among his proposals, the President listed immediate steps to revise benefit payments under the social security system as desirable in view of current economic trends. "The Congress has already authorized a temporary increase in public assistance benefits," the report stated. "This legislation expires by the end of this year and new legislative action is required. Benefits under the old-age and survivors insurance system should also be adjusted. These measures are necessary to alleviate real hardship which has been aggravated by increases in the cost of living. Beyond that, adequate social security benefit payments provide a desirable support to mass purchasing power."

The major part of the President's recommendations centered on the long-range objectives of efficient utilization of the labor force; maximum utilization of productive resources; encouragement of free competitive enterprise; promoting welfare, health, and security; cooperation in international economic relations; and combating economic fluctuations.

Certain programs of Government which have come to be looked upon as "welfare programs" in a narrow sense and therefore insulated from the needs of the economy as a whole are

in fact, Mr. Truman declared, part of the problem of maximum employment, production, and purchasing power. The Employment Act presents the opportunity to abandon this insulation and to put these programs back in the economic setting from which they must draw their sustenance.

"Unemployment insurance is designed to take care of the unemployed as a matter of right rather than of charity," the report continued, "but it also provides purchasing power as a cushion against recessions, and its tax features are of general economic significance. Retirement and pension systems exist to take care of workers who have given of their years in factory, field, or office. But these systems, both on the income and outgo side, have a profound effect upon volumes of purchasing power, and the retirement age needs to be adjusted to the size and composition of our labor force and the trend of improved technologies. Health insurance relates clearly to the efficiency of workers and thus to the productivity of industry and agriculture. And this is even more true of education, which must be reshaped continuously to meet the changing demands and job opportunities of the machine age-or, some day, of the atomic age.

"The total amounts of public outlays for these and other purposes need to be measured against the total size of our economy-its wealth and resources today, and the trends and policies which shape its future." Many of these programs, the President said, were born of a "depression psychology," proceeding from the assumption of inescapable mass unemployment from time to time and the need to bring forward these other programs "to prime the pump or fill in the gaps. Here, too, we need a restatement. We should regard them rather as an inescapable obligation of an enlightened people, and we should expand them as our resources permit."

Turning specifically to social security, Mr. Truman pointed out that, though maximum employment would protect wage earners generally from the effects of prolonged mass unem

ployment, the individual is still exposed to many hazards of economic insecurity. "Our social security program has not kept pace with the times, or with our increase in general living standards." Many individuals are not covered by the present provisions of the act, and the benefit payments to those covered are inadequate under today's conditions.

"I recommend that the Congress, cooperating with the States, take action that will lead to increasing the amount and duration of unemployment benefits. Present unemployment reserve funds are ample to support such increases." The President also recommended extension of oldage and survivors insurance to occupational groups not now covered and extension of the Federal Unemployment Tax Act to all employers of one or more workers in covered industries.

Lack of provision for compensating workers for loss of earnings from temporary or permanent disability, or against the costs of medical care, represents not only a heavy loss for the individual but a great waste of productive manpower, the President continued. He urged Congress to give early consideration to his recommendations, presented in a previous message, for a program which would spread the risks arising from sickness and disability by insuring workers against the loss of income and by providing, through social insurance, ready access to essential preventive and curative medical services.

"Our present social insurance system," the report went on to say, "is financed by employee and employer contributions. We must recognize, however, that the employees' contributions and the employers' pay-roll tax curtail mass purchasing power and increase businessmen's costs. From an economic point of view, it would be desirable to finance a part of the social security system out of the general budget. Therefore, I propose that the Congress, in working out a system of financing an expanded social security program, give full consideration to the economic as well as the social import of various

methods of taxation for this purpose."

Concerning public health and education programs, the report stressed the point that relatively small Government expenditures in these fields yield a high national dividend. "It is more economical to prepare people to earn a decent living than to care for them through relief. The Federal Government is now spending a large amount of money for health and education programs for war veterans, but general expenditures in these - fields are relatively small. I urge the Congress to give early consideration to expanded peacetime programs of public health, nutrition, and education."

In connection with health and education and other programs in which the Federal Government makes grants-in-aid to State and local governments involving large amounts of money, the President said he had asked the Council of Economic Advisers to cooperate with the Bureau of the Budget and other Federal agencies concerned, and with State and local advisory committees, to undertake a study to determine "to what extent revised standards for the distribution of these grants may take into account more fully the needs for support that exist in various parts of the country." He also asserted that farm communities have never received comparable treatment with cities in such matters as education, housing, medical care, health, nutrition, and social security, and declared that Federal and State programs in these fields should give increasing attention to the needs of rural areas.

In discussing, in an earlier part of the report, the efficient utilization of the labor force, President Truman declared that the "return of the employment service to State administration should not result in its disintegration into 48 disconnected pieces, or in the subordination of the placement service to unemployment insurance. An efficient placement service requires uniform minimum standards and an integrated interstate system for disseminating job information and placing workers across State lines."

waiting period and never drew a benefit check. The claimants who drew benefits remained on the rolls for about 11-12 weeks, far less than the duration of benefits to which they were entitled. In the week ended October 26, 1946, the 830,000 civilian unemployed workers who were drawing benefits represented only about 3 percent of the employed civilian covered workers. For the individuals who did continue to draw benefits, unemployment insurance performed a necessary function, not only for them but for society as a whole. The Period Abead

We should not be lulled into a feeling of complacency about the future, however. It is true that employment is still high, and that shortage of workers today is the paramount manpower problem. Unemployment, we hope, will remain during the coming months at the low figure where it now is. But the necessary postwar adjustments of our economy have not all been made, and it may well be that 1947 will see those adjustments reflected in significant changes in production and employment. Under those circumstances, wisdom demands that we strengthen the program for both the immediate situation and the more distant future. Our experience has indicated that even in the period of a full-fledged war economy many people become unemployed for labor-market reasons. In a full-employment, peace economy with controls withdrawn, frictional unemployment will continue to exist and must be adequately compensated.

It is fortunate that we can face the period ahead with ample funds and with staff skilled in the administrative jobs that must be done. When the 1947 State legislative sessions convene, almost $7 billion will probably have accumulated in the State unemployment funds. There is general agreement that these funds are sufficient for a more adequate program. There is every reason, therefore, why the States should examine their unemployment insurance programs now and make such changes as are desirable.

In the tasks that lie ahead, it will be the responsibility of the States, as expressed not only by Congress but by

representatives of the States themselves, to make the unemployment insurance program effective in the postwar period-effective for unemployed workers, for private enterprise, and for the community in general. The coverage of the laws should be extended to many workers not now included under unemployment insurance. Benefit rates must be increased in order to reflect the rise in weekly wages. Duration of benefits should be lengthened. No State yet provides for both a maximum weekly benefit of $25 and a uniform duration of 26 weeks. The disqualification provisions need amendment in order that they not continue to nullify the purpose of the program, which is to compensate for involuntary unemployment. Consideration should be given to the payment of benefits to persons who have worked in covered employment and who, upon becoming unemployed, undertake training which will enhance their opportunity for employment. Administration should be simplified in order to expedite the payment of benefits, reduce the difficulties of employer reporting, increase the understanding of workers, and reduce administrative expenses. There needs to be a closer relationship between the administrative agencies and the beneficiaries of the program-workers, employers, and the public-if it is to continue to develop and meet the needs of the community. Only two States provide protection to workers when they are unemployed because of non-work-connected sickness or dis

ability.

Coverage

Regardless of the small amount of unemployment that exists at the moment, there still are millions of workers who, though potentially subject to the risk of unemployment, are without protection against it. Some of these individuals are now veterans who are protected by the readjustment allowance provisions of the GI Bill of Rights based wholly on military service. As they move into civilian employment not included in the unemployment insurance system, it will seem anomalous to them that they receive no protection during their periods of unemployment. Workers in small firms in many States, State and local government

employees, agricultural and domestic workers, and workers in nonprofit institutions are still without unemployment protection. There is general agreement that coverage should be extended to these groups. The States should give consideration to the significance of these groups in their total economy and extend the coverage of the system to as large a proportion of their wage-earning population as possible. A time of high-level employment is probably the best time for such action, instead of waiting until heavy unemployment besets the country and the unemployment insurance mechanism can be of little immediate aid for newly covered groups.

States which have not already done so should take advantage of recent congressional legislation permitting a State to cover maritime workers in private employment. Such employers are now subject to the Federal Unemployment Tax Act, while their employees are not entitled to any protection until covered by a State law. Some States, looking forward to possible extension of the Federal tax, have written provisions into their law which would automatically extend the coverage of their laws to any employment covered by the Federal Unemployment Tax Act. While States should continue to extend coverage beyond the limits of the Federal act, they might also include provision for the automatic extension of State coverage, in the event of extension of the Federal act.

Benefit Amount

Under a system intended to compensate a certain fraction of wage loss, the benefits must constantly be examined in relation to changing wage patterns. Even with the changes that have been made, the weekly benefits provided under State laws have failed to keep pace with rising wage levels. Maximum benefits continue to limit the benefit rights of the great majority of claimants. In the first quarter of 1946, 70 percent of the claimants who established benefit rights were entitled to the maximum weekly payment. As a result, a large proportion of the workers drawing unemployment insurance are receiving less than half their previous earnings because of the limiting maximum

benefits. In that first quarter, average weekly benefits were less than 45 percent of average weekly earnings. In most States, in fact, the maximum weekly benefit is now less than half the average weekly earnings of covered workers. Only seven States now pay a maximum weekly benefit of $25. If our unemployment insurance system is to maintain its role as a protector against a serious slump in living standards, the maximum should be raised to that level in the other States.

There are other ways of assuring the average worker a higher proportion of wage loss than he now receives. When the prices workers pay for basic necessities are rising markedly, a benefit pegged in relation to past wages decreases in adequacy, particularly for the worker with family obligations. If a worker without dependents requires 50 percent of wage loss as a safeguard against a drop in living standards, the worker with dependents needs a higher percentage.

The addition of dependents' allowances does not mean the abandonment of the wage-loss idea or the adoption of a "needs test" in unemployment insurance. Relating basic benefits to prior earnings assures claimants a minimum proportion of wages when they are unemployed and provides the flexibility necessary in a country with as wide a range in wages as the United States. By adding dependents' allowances we recognize the fact that the worker with a family must spend a higher proportion of his usual wages to buy food, pay his rent, and make the other purchases he cannot defer when he is unemployed. The addition of dependents' allowances is both a socially sound and an economical way to strengthen the program.

During the 1945 legislative sessions, Connecticut, Nevada, and Michigan joined the District of Columbia in increasing the weekly benefit for claimants with dependents, and in 1946 the Massachusetts Legislature added dependents' allowances to the law, effective April 1, 1947. Once the initial stages have been passed, the payment of dependents' allowances does not present any great administrative problems.

Duration of Benefits

The extension of duration provisions made in the 1945-46 State legislative sessions, as well as high wartime earnings, has meant that the average worker could expect to receive benefits for about 20 weeks, in contrast to the average potential duration of about 13 or 14 weeks in 1941 and 1942.

Most of the improvements in the duration provisions of State laws have taken the form of increases in the maximum potential duration of benefits.

In 1946, more than four-fifths of all covered workers were in the 34 States with a maximum duration of 20 weeks or more; under the 1940 laws, only 18 percent of all workers were in States with such provisions. In only one State can all insured workers receive benefits for as long as 26 weeks.

Only 14 States provide a uniform duration of benefits for all eligible workers. In the other States, potential duration of benefits is based on an individual's prior earnings and may be less than the maximum provided in the State law. In 21 States some eligible workers are still limited to less than 8 weeks of benefits. Because of high wartime earnings, not many workers would have qualified in the past year for such a short duration of benefits. In 2 States, however, no individual could receive benefits for as long as 16 weeks. As workers' annual earnings decline, moreover, the proportion with brief duration can be expected to increase markedly.

This

Even in the fiscal year 1945-46, more than a million workers exhausted their benefit rights. They represented about 40 percent of all beneficiaries. In some States more than half the claimants were still unemployed when they received their final check. ratio varied from about 30 to 50 percent in most industrial States, where employment opportunities were good, and from about 50 to 80 percent in most agricultural States, where cessation of war activities left workers with few comparable job opportunities.

Despite the marked improvement in duration of benefits provided by State laws, each State law should provide 26 weeks' potential duration of benefits for every eligible claimant. Disqualifications and Eligibility for Benefits

Provisions for adequate benefits

can be defeated if the unemployment insurance laws contain unduly restrictive and unsound disqualification provisions. Although the trend toward severe disqualifications was curtailed during the State legislative sessions of 1945, many State laws still contain provisions which cancel or reduce a worker's benefit rights or postpone benefits unduly. Certainly every State law should contain provisions which disqualify a worker from receiving benefits if he leaves work voluntarily without good cause, if he loses his job through misconduct connected with his work, if he refuses suitable work without good cause, or if he is participating in a labor dispute. Such provisions are necessary to limit the risks covered by the program, but these provisions should not be viewed as penalties.

There is no place in the unemployment insurance program for imposing disqualifications for refusal of suitable work, voluntary leaving, and discharge for misconduct solely for punitive purposes. Disqualifications properly should prevent the payment of benefits for voluntary unemployment but never completely bar payments to eligible individuals who are involuntarily unemployed, able, willing, and available for work. Unemployment insurance should not be payable for periods of voluntary unemployment, but neither should it act to introduce rigidities in the system or hinder the free mobility of labor, especially in this period. Disqualifications might well be limited to a suspension of benefits for the weeks, up to 4 or 5, which immediately follow the act for which the individual is disqualified. Such suspensions are sufficient to deter workers from voluntarily becoming unemployed and to bar the compensation of voluntary unemployment. Cancellations or reductions in benefit rights, on the other hand, nullify the duration provisions and prevent the compensation of involuntary unemployment. By so doing they withdraw insurance protection from both business and workers and curtail the usefulness of unemployment compensation, particularly for the kind of economic period that is ahead. The administrators of the 26 State laws which contain provisions canceling all or part of a worker's benefit right for a disqualifying act