The New Jersey Legislature is considering a revision upward of our benefit formula and an extended coverage to include employers of one or more employees. Our fund is sound, and we feel able, short of extreme emergency, to keep it so.

At the present time we do not want subsidies. We feel they are premature, unnecessary, and damaging to a Federal-State system. It was only in 1942 that the fear of large-scale unemployment due to conversion from peace to war was met with the proposal of war displacement benefits. We would respectfully note that no national emergency materialized, and we will hope this circumstance may be, in part at least, repeated.

A further proposal that I understand is before you is the question of the reinsurance of unemployment compensation funds. The first line of defense should be the States themselves. We are convinced that under the proper guidance and good offices of the Social Security Board much could be done on a voluntary basis to prepare the States for whatever hazards and for whatever remedies the Board may think likely or necessary. The second line of defense might well be a reinsurance program applicable to the several State funds. But here again we would propose State participation-perhaps the establishment of a Federal Unemployment Compensation Insurance Corporation, capitalized with State funds, supported by premiums based on a ratio of reserves to covered workers, and managed by a board of directors representing both the Federal Government and the States. Perhaps this type of organization is necessary to preserve American Federal Government as an intermediate agency giving a dual expression to cooperative undertakings. The third line of defense would be for the extreme emergency. At this point we might reluctantly talk subsidies but even here we would wish subsidies used as special remedies for special conditions. But to freeze into a self-governing Nation, the paternalism and restrictions that should accompany only an economic collapse is to threaten the American Federal system.

We would urge the point that our States are in general competent government entities with a long record of social accomplishments before the advent of Federal social-security programs. It is true that the Federal Government is able to bring to its aid funds, facilities, and technical assistance that are beyond the reach of all except a few of our States. But let us remember that no national plan, no matter how well conceived, is any better in operation than the environment. in which it is placed. The Federal Government should be the counselor, examiner, and auditor of undertakings vested with a national interest. It should not enter into operations involving a diversity of local values unless under conditions of emergency. It should use its financial resources only to stimulate a national development or to give it continuing support. Routine growth, day-by-day operations, determination of localized policies beyond a minimum standard of performance, should be State and local matters. It is a mistake to base a Federal-State policy on the estimated performance of the weakest members.

There are other phases of the unemployment compensation problem that we can only mention. Benefits for unemployed ex-servicemen are recognized as a special problem. Nearly all the States have

enacted so-called freezing provisions to preserve the benefit rights of persons in military service. One or two States have provided military wage credits for those who were residents of the States at the time of induction. A "freezing law," however, is about all the States can do under the principles of unemployment compensation; and it seems likely that Congress will assume responsibility for this type of benefit. The New Jersey Unemployment Compensation Commission has, however, made a careful study of this matter and proposed two plans one would provide wage credits for military service to those veterans who were residents of New Jersey at the time of induction; the other would provide benefits only to veterans who had earned wage credits during 18 months prior to induction. No action, however, has been taken, pending Federal clarification. We are not satisfied with the formula allocating operational funds for the administration of our unemployment compensation program. Its application results in a persistent reduction in our grants; the annual payments under the 3 percent tax are far in excess of our administrative costs; and in the national aggregate, far in excess of the combined administrative costs of all the States. The result (1943) was an excess of over $100,000,000 to the credit of the United States Treasury.

The Employment Service in New Jersey continues, as in all other States, to be under Federal jurisdiction, although close cooperation is maintained with the War Manpower Commission which now exercises control over this service. The New Jersey unemploymentcompensation law calls for its return at the close of the emergency and we anticipate it will again function as an integral part of our Unemployment Compensation Commission.

New Jersey wants to run its own services. We are both willing and eager to conform to national standards insofar as they are necessary to give effective expression to a national movement. But we do not want to be nationalized. Indeed, we would like assurance that as we demonstrate capacity to discharge our responsibilities effectively we would be increasingly denationalized. We would welcome the custody of our State funds. They could be as useful to us as they now are to the Federal Government, and would be, we think, as safely guarded. Perhaps it would be appropriate for Congress to appoint a special committee on Federal-State relations and to explore the whole field of the relation of the States to the Federal Government. action might even lead to the establishment of a new agency-perhaps a division of Federal-State relations as a part of the Bureau of the Budget, or even as a staff agency of Congress, to pass continuously upon these vital relationships, and to assist in maintaining the balance which will sustain the American Federal system.

That concludes the statement, Mr. Chairman.

The CHAIRMAN. Any questions, Senator Austin?
Senator AUSTIN. No.

The CHAIRMAN. Mr. Russell?

Mr. RUSSELL. I have no questions, Mr. Chairman.
The CHAIRMAN. Thank you very much, Doctor.
Dr. SLY. Thank you, sir.

The CHAIRMAN. Mr. McKee.

Such

STATEMENT OF WILLIAM L. MCKEE, CHAIRMAN, UNEMPLOYMENT COMPENSATION COMMISSION OF VERMONT

The CHAIRMAN. Mr. McKee, you may identify yourself for the record, please. Mr. McKEE. William L. McKee, chairman of the Unemployment Compensation Commission of Vermont, and representing Governor Willis.

Senator George, I appreciate this opportunity to appear and express my views on unemployment compensation and the effect of the proposed legislation on the present system as operated by the States. It is an added pleasure this morning to appear before our distinguished Senator from Vermont.

I shall be brief and touch upon only a few of the features, because I feel that if I went into detail I would be duplicating what has already been very ably presented by coadministrators from the other States. These administrators have furnished you with information gathered from practical experience, past and present studies over a period of more than 8 years, and not from any theories, or assumptions, or perhaps prejudices.

I would particularly refer you to the testimony given by Mr. Raushenbush, of Wisconsin, and Mr. Williams, of Texas, the president of the Interstate Conference.

It would be difficult to conceive of the State of Vermont condoning any legislation or plan for the expansion of control by the Federal Government over State functions, and that is exactly what would happen if this Congress should vote to subsidize benefit payments under the State Unemployment Compensation laws. Uniform stand-. ards and uniform benefits ignore the individual characteristics of the respective States. I have yet to see a more defeatist attitude leveled against our great country than that implied in the proposed legislation, or any similar measures. We have a feeling back home in Vermont that the people like to have the State legislate concerning its own affairs. Our people believe in thrift and that the privilege of being free individuals carries certain responsibilities which they must assume for themselves if they are to retain their independence.

I want to emphasize the question of the adequacy of benefits. The adequacy of benefits has been criticized by the Social Security Board, and the reason for the large fund which the States have today is attributed by them to the inadequacy of benefits.

Now, we feel that the States back home know their conditions much better than they do in Washington, and that we are in a much better position to determine what is adequate for the economic condition of our particular State.

I might give you an illustration of what happens in the State of Vermont when we are considering a change in the unemploymentcompensation law. We call together the representatives of labor, discuss with them the proposals and get their suggestions. We then call the manufacturers' associations of Vermont and discuss it with them. During the last legislature, through a meeting of minds of the Commission, labor, and the manufacturers, the law of the State of Vermont was expanded so as to provide more liberal benefits.

The disqualifications which have been attacked by some members of the Social Security Board who have appeared before this committee are necessarily characteristic of the conditions with which each State agency is presented. In advocating larger amounts of weekly benefits it seems to me that the disqualifications would necessarily have to be restricted, otherwise you would have chaos in employment. There must be some differential substantial differential-between benefit payments and wages for employment.

So far as the State of Vermont is concerned, the Social Security statistics show that we stand within the first nine in the strength of our State fund. I do not know of any agency that has operated with any more smoothness and satisfaction to the individuals involved than the unemployment compensation system in Vermont.

I do not believe that there is any emergency at the present time to justify a change of either the coverage, the amount of weekly benefits, or the duration of benefits.

I think that the selection of the number of employees to be covered is a matter for the States to determine, and I believe changes should be made over a period where experience rather than expediency would control.

We have some 60,000 workers covered in Vermont. We are not a large industrial State, but we have been increasing for a number of years. We have in our fund, as of April 30, $9,250,000. That would be enough to pay 60 percent of the covered workers of Vermont for the full duration payments.

We have made a careful study of the post-war period and the potential expenditure, and our statistical department shows that we could take care of any load of unemployment compensation and at the end of the period the fund would still be in a solvent condition.

We are opposed to this legislation. We do not believe that it is necessary to subsidize unemployment compensation and that it will only lead to total federalization.

I thank you.

The CHAIRMAN. By what percentage, Mr. McKee, have those in your covered industries increased during the war?

We

Mr. McKEE. We have increased about 15,000 workers, or 33 percent, mostly in the machine tool, ordnance, and textiles industries. The increase in the textile industry consists largely of women. expect, of course, that a large number of these women will return to their household duties.

There is one matter I failed to speak about, what evidently has brought about this legislation, that is, the uncovered workers, and particularly those who are working in industries which ordinarily would be considered as being covered under unemployment compensation laws. I mean the shipyards operated by the Federal Government. There is no question but what there is a problem there. If the Federal Government feels that they should do something about them, it seems to me that that could be done, as has already been suggested, through the States by covering these men under the laws of the States, either at the place where they worked or the place of their residence. These workers who have migrated from one State to another no doubt will want to return to their homes. It seems to me that it would be much simpler and much better all around to have these men covered under in the State where they reside and to which they return. They would

then be on the same basis as the men who were working in covered industry during the time that they had worked in another State. I think the interstate agreements between the States have been very well covered here and it is clear that a man now is afforded the fullest protection. That is, if he worked in another State and returned to his own State, the State in which he lived would handle his claim and he would receive full unemployment compensation benefits for the period that he was unemployed.

The CHAIRMAN. Are there any questions?

Senator AUSTIN. There is one question that I would like to ask. It deals with the returning soldier. We have had for some years a statute in Vermont that provides payment to members of the National Guard whenever they are called out in time of war, and some months before war was declared or recognized by the Federal Government, our State, by an act of the legislature, recognized the existence of a state of war, and it did so for the purpose of having that bonus or additional payment to our National Guard members payable to them. Can you say whether that statute is broad enough to cover other soldiers from Vermont than the National Guard?

Mr. McKEE. Yes. My understanding, Senator, is that it covers every soldier inducted into the Army.

Senator AUSTIN. I see. So that the law would operate uniformly as to those returning soldiers, whether they were in the National Guard when inducted or whether they were inducted through the Selective Service System?

Mr. McKEE. Yes, sir.

Senator AUSTIN. Thank you.

The CHAIRMAN. Thank you very much, Mr. McKee. Are there any questions, Mr. Russell?

Mr. RUSSELL. I have no questions, Senator.
The CHAIRMAN. Mr. Cromwell.

STATEMENT OF S. C. CROMWELL, DIRECTOR, UNEMPLOYMENT COMPENSATION DIVISION OF THE STATE OF MARYLAND

Mr. CROMWELL. My name is S. C. Cromwell. I am the Director of the Unemployment Compensation Division of the State of Maryland.

Gentlemen, I just desire to request permission to place in the record a copy of the address of Governor O'Conor of Maryland made before the Governors' Conference at Hershey, Pa., on May 29, 1944, covering this question that is pertinent to the subject under discussion. have sufficient copies here for members of the committee.

I

The CHAIRMAN. We will be pleased to have it printed in the record. Thank you very much.

(The address referred to follows:)

SOCIAL SECURITY IN THE POST-WAR ERA-ADDRESS OF GOVERNOR HERBERT R. O'CONOR, OF MARYLAND, BEFORE 36TH ANNUAL CONFERENCE OF GOVERNORS, HERSHEY, PA., MAY 29, 1944

It is not overstatement to declare that in the period following the war socialsecurity programs will occupy the foremost position. In fact, they may well prove to be the bulwark of our society against disruption and possible chaos.

Therefore, it is timely to discuss certain problems inherent in improving or expanding the scope of social security. Most especially should consideration be