POST-WAR ECONOMIC POLICY AND PLANNING WEDNESDAY, MAY 31, 1944 UNITED STATES SENATE, COMMITTEE ON POST-WAR ECONOMIC POLICY AND PLANNING, Washington, D. C. The committee met, pursuant to adjournment, at 10 a. m., in room 312, Senate Office Building, Senator Walter F. George (chairman) presiding. Present: Senators George (chairman), Murray, Mead, La Follette, Vandenberg, and Taft. Also present: Mr. Scott Russell, counsel for the committee; and Mr. Kurt Borchardt, special counsel, War Contracts Subcommittee of the Senate Committee on Military Affairs. The CHAIRMAN. The hearing will come to order, please. STATEMENT OF PAUL A. RAUSHENBUSH, DIRECTOR OF THE UNEMPLOYMENT COMPENSATION DEPARTMENT OF THE WISCONSIN INDUSTRIAL COMMISSION The CHAIRMAN. Mr. Raushenbush, we have had the pleasure of hearing you before the Finance Committee on a previous occasion, and you are advised of the particular inquiry that this committee is considering. I suppose you were furnished with a memorandum. Mr. RUSSELL. No; only the statement that we were considering changes in the unemployment-compensation law. The CHAIRMAN. That is right. We desire to hear from the State administrators and Governors, if they wish to come, but the administrators on the question of the unemployment-compensation fund, the administration of that fund, and the suggested changes for the reconversion period following the cessation of hostilities. Now you may make such statement as you wish to submit first, and we may ask you some questions. Mr. RAUSHENBUSH. I am speaking on behalf of Wisconsin's Acting Governor, Walter Goodland, as well as the Industrial Commission of Wisconsin and myself, based on some 10 years of experience in administering our State unemployment-compensation law. I may indicate the interest expressed by our Governor, first, by quoting briefly from a wire he sent to Senator George as chairman of this committee. Governor Goodland indicated his interest in the following words: We understand that your special committee has begun hearings on various farreaching proposals for superimposing a whole new system of direct or supplementary Federal unemployment benefits for civilian workers, on top of State unemployment-compensation laws. Such plans would apparently involve large Federal subsidies, and corresponding Federal controls and interference with State laws and administration. We question whether such legislation is necessary, or desirable, or urgent at this time. Further, we note that every State has a vital interest in any such proposal. I want to cover, as rapidly as I can, several dozen points under four general headings: 1. The adequacy of State unemployment compensation funds. 2. The adequacy of State unemployment compensation benefits. 3. Some coverage problems and their possible solution. 4. The effect of various other proposals for Federal action--which are apparently pending but have not all been reduced to written form, I gather. ADEQUACY OF STATE FUNDS Turning to the first heading, then, as to the adequacy of State unemployment compensation funds. This committee is already familiar with the fact that the present total of all State unemployment compensation funds runs about 5.4 billion dollars. The exact figures are not available at this moment, but it will run pretty close to that, I believe. That means, furthermore, that each State has a very large reserve; and I might say, sir, it is a genuine reserve in the sense that these funds are invested in the securities of the Federal Government, and not of the State. That reserve in every State is far larger than any reserve the State has ever before accumulated, for any purpose whatsoever. I dare say that is true in every State. It will, in many cases, exceed by two or three times the annual budget of the State for other purposes. So there is a very large unemployment reserve. Furthermore, we did not have this reserve available in the depression of 1929 to 1933, or however you want to designate those years. So you have here a very substantial reserve built up, which was wholly lacking then. I would like to give you the most recent State-by-State figures that are available on this; and I believe the table I am going to give you at this point is more recent than anything else you have been able to secure. (See table 15.) This is based on State estimates, supplied just within the last couple of weeks; and it may be of some interest to the members of the committee. The corrections indicate that some of the figures came in rather recently. Now, the explanation of what this table does and does not mean is on one side; and the detail of the table is on the other. You will notice that-with one State, namely, Hawaii, missing-the reserves about the middle of May ran substantially over $5,000,000,000 approaching 5% billion. Those figures are shown in thousands, under column B. As a matter of fact, a few States gave their figures as of April 30, before they had their full collections deposited for the pay rolls of January to March; but most of the States have given figures for the middle of May, which would reflect their collections for the first quarter's pay roll, those collections being due generally on April 30. Then there are also various other figures on table 15 which I may have occasion to refer to later, such as the maximum weekly benefit amount specified in the State law, under column C. It also gives a rough estimate-in_column_ D-as to the probable average weekly check which might be paid late in 1944, if there were many war-pro duction workers unemployed. Of course, those workers could generally draw the largest benefits. Column E shows the law's maximum duration, in terms of weeks; column F shows the product of average check and maximum duration, and then column G shows the number of workers who could be paid that amount from the currently available funds. As you will notice, that runs to over 18,000,000 workers, as a possible figure for the country as a whole, who could be paid from the present funds, under the present benefit provisions of the various laws. The last column states that number of workers as a percentage of the total number of covered workers as shown in column A; and that gives some rough indication at least as to the strength of each State fund. Of course, column H is not a prediction as to how much unemployment there will in fact be or how long it will last. Without dwelling on those figures further at this moment, I do think you will find this table of considerable interest. (The explanation and table 15 follow:) SOLVENCY OF STATE UNEMPLOYMENT COMPENSATION FUNDS, AS OF MAY 15, 1944 The table below, which is based on State figures and estimates, throws some light on the ability of the several State unemployment compensation funds to pay the benefits promised by the respective State laws. [These figures are similar to older (June 30) data released by the Bureau of Employment Security of the Social Security Board, on November 27, 1943.] The figures shown below are the latest available State estimates of this kind. They are based on (A) The number of covered workers currently employed as of late December 1943. (B) The State unemployment funds available as of May 14, 1944. (C) The benefit provisions of State laws, as of May 15, 1944. (D) Each State's estimate as to its probable average benefit check ("per week of total unemployment, for late 1944, assuming that many war-production workers might then be drawing benefits"). As a very rough indicator of how heavy a percentage of unemployment each State could have, and still pay its promised benefits: (1) The State's estimated average weekly check was first multiplied by its maximum duration, to arrive at a rough (possible) total amount of benefits per worker, which might have to be paid to an individual claimant. (2) Assuming that such a total amount were in fact paid out to each unemployed claimant, then: To what percent of all covered workers could that much be paid, before exhausting the State's fund? (3) To answer that question, the fund's May 14, 1944, balance was divided by the above total amount "per worker," thereby showing to how many workers the fund (as of that date) could pay that amount. (4) The resulting number of workers was stated as a percentage of all covered workers (currently employed as of late December 1943). So the last column of figures, below, roughly suggests how heavy a percentage of unemployment each State could have, and still pay in full the benefits promised by its present law-from the funds it already has on hand (as of May 14, 1944).1 1 (1) 2 main factors tend to make these percentages (in column H, below) rather conservative: (a) Each State fund will have a considerably higher balance--than it now has-before much readjustment unemployment occurs; and (b) not all benefit claimants will receive the law's "maximum" duration. (2) On the other hand, the number of covered workers "currently employed as of late December 1943" is lower than the cumulative number employed within a year, and does not include all potential claimants having some benefit rights. (3) Please note, finally, that these figures are not "predictions," in any way, as to how much unemployment will in fact occur. TABLE 15.-Data and estimates supplied by State unemployment compensation agencies (through May 25, 1944) 1 As of Apr. 30, 1944. Column A, 39. 4; column H, 58.1.) 2 Apparently based on cumulative, rather than December 1943, figures. ("Spot" figures for Wyoming: 3 Data not available by May 25, 1944. Senator TAFT. Taking column F, that figure is the maximum that can be paid to a worker, is that right? Mr. RAUSHENBUSH. No, that is not the maximum that can be paid to a worker; that is the product of an estimated average check times the maximum duration. Senator TAFT. I mean if you took 1,000 Ohio workers, that would be $270,000 and that would be the maximum they could be paid. Does that mean for the average group? Mr. RAUSHENBUSH. That is the average maximum, of course. The weekly maximum is indicated in column C, whereas column D is the average estimated check, which is somewhat lower than that. Senator TAFT. I mean it is fairly representative? Mr. RAUSHENBUSH. It is a fairly typical figure, especially as to war-production workers. Senator TAFT. You take in Ohio, the $270,000 in column F, that means a thousand workers who are average workers get that $270,000. Mr. RAUSHENBUSH. Yes. What has been done to arrive at column G was simply to divide the fund balance as of May 14, or thereabouts, by this product in column F. For instance, in Ohio a $270 average, divided into the fund balance of $364,000,000, will give you 1,348,000 workers who might draw that amount before the fund would be exhausted. Senator VANDENBERG. How does it happen that Michigan workers are so much better off than Ohio workers? Senator TAFT. That is because employment is not so steady. Is not that the reason? Mr. RAUSHENBUSH. There may be something to that, but you will notice that all of these States have very substantial reserves, and that they would in many cases be able to pay a very high proportion of their workers these benefit amounts, indicated under their present laws. That is apart from the additional money that is coming in. For instance, I would say at a rough guess that Michigan would probably have another $40,000,000 added to that fund by the close of next January. That would take care of another 100,000 Michigan workers. (These figures approximate the rate at which Michigan is collecting.) It would be safe to say for all State laws with three-quarters of a year additional pay roll, the corresponding collections may add nearly a billion dollars to their funds by the close of January 1945. The States, as the program now stands, do have a clear-cut responsibility for assuring the solvency of their own funds. They have the possibility of collecting either higher or lower contribution rates; and they have to recognize that it is up to them to do the advance planning, and to build up sufficient reserves, and I think most of them have done a pretty thorough job of that. In fact, we are now hearing more the suggestion that the funds are too sufficient, rather than the danger of their proving insufficient. I know of no State agency which now predicts that its fund will go broke under the impact of post-war readjustment unemployment, with the benefits provided in its present law; and I think it is clear that a number of the States have leeway enough to liberalize their laws and will doubtless do so. |