policy standards. For instance, one of them provides that in order to be approved all laws must be administered under a merit system, and that all employees of each of the agencies must be selected under a merit system that is properly maintained. Another standard has to do with the payment of benefits, and it requires that all benefits must be paid through employment offices throughout the State. Still another standard is one that has to do with the maintenance of labor standards; that is, that individuals shall not be required to accept employment at less than the prevailing wage for the particular job to which they are referred, or that they shall not be disqualified for refusing to accept employment if the position is vacant due to a strike or lockout.

All of those standards are administrative standards which fit into every law regardless of the other provisions of the law. However, the new proposals for additional standards have to do with the duration of benefits and weekly benefit amounts. It has been generally recognized from the very beginning that benefit payments respecting both the weekly benefit amount and the maximum duration are matters that should be geared to the economic condition of the particular State, and that the States themselves, through their legislatures, should make the determination of how much the weekly benefit amount should be and for how long a duration it should continue.

If this type of standard is incorporated in the law it will completely remove from the States the right to legislate respecting the basic, fundamental provisions of their unemployment compensation laws. They will no longer be able to gear them to the economic conditions of the States.

Mr. RUSSELL. Mr. Chairman, may I ask Mr. Rozier a question right there?

What is there in the different economic conditions that would be influential on the period of time? I can follow your argument on the different amounts because of the different pay standards, but what is there as regards the period of time?

Mr. ROZIER. Well, Mr. Russell, it is just this: If we legislate respecting the period of time we would have to presuppose that an individual, upon being qualified at all, would be required to be paid benefits for a particular period of time.

Mr. RUSSELL. No; I mean if he has credits.
Mr. ROZIER. Assume that he had his credits?
Mr. RUSSELL. Yes.

Assume that.

Mr. ROZIER. Well, it is just this: In some States the labor turn-over is smaller than it is in others. In some States the employment is of a different nature than it is in others.

There isn't any question that in the South a different situation exists with respect to economic conditions than in the North. If the duration is extended beyond the period the State legislature, which knows the situation in that particular State, believes it should be, you will create a situation where people will be inclined to remain in idleness rather than get a job.

The idea of unemployment compensation is to take care of the individual on the basis of right, not need, during the period he is unemployed through no fault of his own. If the standards go beyond the point the legislature of a particular State believes that an indi

vidual should be protected, the inclination will be for the individual to remain unemployed as he will not have the incentive to get out and get a job. The longer you pay a man benefits the longer his incentive to get out and get new employment for himself will be diminished.

Mr. RUSSELL. As between different States, though, that is purely relative, is it not? The Legislature of Missouri in relation to the Legislature of Massachusetts, for instance, has no yardstick to go by, have they?

Mr. ROZIER. Well, they have this yardstick, that each of the legislatures certainly knows the situations in their respective States and they can certainly be relied upon to enact legislation that will be geared to the needs of the particular State, from the standpoint of that particular State's economy. At any rate, these standards respecting the duration of benefits and weekly benefit amounts are standards which we believe should definitely not be incorporated in any Federal act.

Further, respecting extended benefits, such as have been proposed here: If a number of weeks of extended benefits are tacked on to a State law and the State can pay these benefits without any cost to themselves, with handouts from the Federal Treasury, all the initiative of the States to liberalize their laws will be completely throttled. Why should a State continue to broaden the coverage of its own law and pay benefits from taxes imposed directly on the taxpayers of that particular State if, instead of broadening its own law, it can sit back and take the money from the Federal Government and continue to pay benefits without any cost to the local taxpayers? That proposal will, I think, completely throttle the individual initiative of the States to cover the workers for a longer period of time and for a greater amount of benefit.

Another proposal which I would like to discuss very briefly, is one respecting the extending of coverage to Federal workers. One type of Federal workers that seems to be in great need of coverage for unemployment compensation and who are not now covered under any law of any kind, Federal or State, are maritime workers. The States have worked out a proposal for the coverage of these workers, which I would like to submit to the committee in rough draft. I have a number of copies which, if I may, I would like to hand to the reporter to make available to the committee. We think the proposal, if enacted, will cover approximately 200,000 maritime workersseamen who are not now covered by any type of unemployment compensation law.

Senator AUSTIN. Why not have this in the printed record?

Mr. ROZIER. I would like it to be in the printed record, but I have a number of copies so each member of the committee may have one. The CHAIRMAN. It will be entered in the record also, so we will have it before us.

(The proposal referred to follows:)

PROPOSAL FOR UNEMPLOYMENT INSURANCE BENEFITS FOR SEAMEN

1. Amend the Federal Unemployment Tax Act in section 1607 (c) byFirst. Including in the first paragraph of the section (defining employment) service connected with an American vessel under contract executed in the United States or during the performance of which the vessel touches a United States port. (Can be identical to the language of section 1425 (b), first paragraph.)

Second. Strike out paragraph numbered (4) of section 1607 (c) (excluding service performed as an officer or member of the crew of a vessel on the navigable waters of the United States) and inserting a new paragraph excluding certain foreign service, identical with the present section 1426 (b) (5) of the Internal Revenue Code applying to old-age and survivors insurance.

Third. Add a new paragraph numbered 1607 (c) (16) excluding service in taking fish, sponges, seaweed, etc., performed on vessels of less than 10 net tons, identical with the provisions of section 1426 (b) (14) of the Internal Revenue Code applying to old-age and survivors insurance.

Fourth. Amend the War Shipping Administration Act in such a manner as to provide that the agents of the War Shipping Administration shall be subject to the provisions of the State unemployment insurance laws of the respective States, and shall comply with such laws in all respects as is required of other employers subject to such laws.

Mr. ROZIER. Now, another matter I would like to discuss is the proposition of the extended coverage under State laws to build up the State funds to meet the post-war emergency. The proposals that are now being considered by this committee are proposals to meet the post-war emergency. I would like to point out to the committee that the States have had this problem under consideration from the very beginning of the war and early in the war it was recognized that higher wartime contribution rates should be collected from war-expanded employers in order to more nearly cover the post-war benefit costs, to help assure the post-war solvency of the fund, and to permit the legislating of more adequate benefits where needed.

It was apparent that the war industries were mushrooming and employment in those industries was increasd by as much as 5,000 percent and even higher as they expanded. It was apparent also that after the war was over, during that period when we reconverted again back to peacetime economy from wartime economy, at least for a number of weeks a large number of people would be unemployed. The States, in order to meet this very problem which the Murray proposals seek to meet, considered the question of the solvency of their funds, and they determined there should be additional contributions collected from the war-expanded employers because of the fact that the contributions that were being collected under the present State laws would not be sufficient to pay the drain of benefits that would be made on the fund by these wartime workers when they become unemployed, unless the war continued indefinitely so that sufficient contributions could be collected over a period of years, to provide money to pay the benefits. This was a reasonable solution and it was recognized even by the Social Security Board, although they did not publicize it and did not in any way urge the States to enact legislation of this kind. However, 10 States did enact legislation increasing the contributions to be paid by the war-expanded employers. These States were Alabama, Florida, Illinois, Iowa, Missouri, Maryland, Ohio, Oklahoma, and Wisconsin.

Now, I do not know about the experience in all of these other States, but I understand that each of them have had problems somewhat similar to those we had in Missouri. I would like to tell the committee the history of what occurred in Missouri when we were attempting to and when we did pass legislation to finance the benefit payments that would be made during the post-war era-when we were solving, on a State level, the very problem that is now sought to be solved on a Federal level. First of all, we engaged in definite planning about it, and brought about consultation with different interested groups of

both labor and industry. Incidentally, the bill increasing the contributions of war-expanded employers was endorsed by both labor and industry in Missouri. Finally, the bill was drafted and introduced by two of the leading Senators of our State. Almost as soon as the bill was introduced, however, the Army and Navy of the United States, through their respective departments, began an active lobby in the State Legislature of Missouri against the provisions of the bill.

In the light of the proposals to hand out to the States not millions but billions of dollars from the Federal Treasury, we are somewhat mystified that the Federal Government, through some of its other agencies, would come into the States and keep us from passing legislation which would cover the cost on the State level and not put another drain on the Federal Treasury at the end of the war.

We do not want to say to the committee that we oppose any Federal agencies coming to the State legislatures to oppose the enactment of a law, because we are doing the same thing right here now-we are coming before Congress opposing the enactment of the law. We believe they should be able to do this. But I want to tell the committee what happened. When the Army and Navy representatives came down there they did not confine themselves to the provisions of the bill and show it was bad. They even attacked the integrity of the Senators and indicated this bill was drafted by some perfidious influence and came into the Senators' hands by reason of some conspiracy of some kind. They attacked the two Senators who introduced the bill on the ground they were increasing the cost of the war and increasing the cost of the war effort generally. However, the legislature disregarded the activities of the Army and Navy and passed the bill, and when the bill came to the desk of the Governor he received a letter from Mr. Patterson and also other letters from both the Army and Navy Departments protesting the signing of the bill and urging him to veto it, in which they again covered the ground they presented before the committee.

This bill was enacted into law when the Governor signed it, and thereafter, generally speaking, throughout our State all of the employers accepted this legislation as good legislation. There were some controversies about the average annual pay roll that had to be established because the increased tax that we levied was a tax over and above the average annual pay rolls during the years before the war. But, generally speaking, the bill was accepted as good legislation to build up our fund.

Was

Senator AUSTIN. Let me interrupt to ask you a question. the Army interposing an objection on the ground that these cost-plus contracts were increased by this legislation?

Mr. ROZIER. The ground for attack was that if this law went into effect it would impose a 3.6 percent tax on the pay rolls of the people that were working for these private employers on a cost-plus basis. That is correct. But the total cost to the Army and Navy in our State would have been about $2,000,000 annually, not billions as is proposed to hand out under these proposals. These taxes represented a relatively small amount to be paid to help our State take care of our post-war situation.

Senator AUSTIN. It ultimately will be paid by the Federal Government?

Mr. ROZIER. Yes; it ultimately will be paid by the Federal Government. The legislation went into effect, and, as I say, we had these little controversies respecting it, but finally we encountered a protest filed by Pratt & Whitney, a principal contractor of the Navy Department in Kansas City.

It is interesting to note that they came over to the hearing against our fixing the base on which this tax would be levied. That was the only employer in our State which attacked the constitutionality of our State law.

Now, bear in mind that this law was generally accepted by all the big employers of the State, whether they were war contractors or not, because of the fact it was a law to take care of post-war unemployment. But the Navy Department insisted that the Pratt & Whitney people bring their case to a hearing and take it into our courts. They insisted that Pratt & Whitney attack the constitutionality of our law. High officials of the Navy Department came to Missouri from Washington to appear at this hearing and oppose the tax that we were levying on the ground that it was unconstitutional.

So, we find ourselves in the situation where we have a law in Missouri which will provide funds for post-war benefits. We have a solvent fund; we have sufficient funds to pay the benefits during the post-war era, but while one group in the Federal Government is advocating this Federal hand-out of billions of dollars in order to take care of a situation that does not exist at all, money that the States deny the need of, we find another Federal agency, the Navy Department, actually going into the courts of our State and saying that the law passed by our legislature to take care of its own particular need is unconstitutional.

Senator AUSTIN. Mr. Chairman, may I interrupt for a question? The CHAIRMAN. Yes, Senator Austin.

Senator AUSTIN. They are both serving the same purpose, are they not? Both methods were methods of attack on your bill, were they not, or on your legislation?

Mr. ROZIER. Senator, frankly, I do not quite understand your question.

Senator AUSTIN. You talked about the Army lobbying against the bill.

Mr. ROZIER. Yes.

Senator AUSTIN. Then you talked about the Navy attacking the constitutionality.

Mr. ROZIER. Both the Army and Navy lobbied against the bill. Senator AUSTIN. So they both opposed your bill?

Mr. ROZIER. That is right.

Senator AUSTIN. Let me ask you one further question. You referred to 10 States, did you not?

Mr. ROZIER. I am only talking about Missouri's experience. Senator AUSTIN. Let me ask you this: Do you know whether the other nine States enacted legislation similar to that of Missouri? Mr. ROZIER. They did.

Senator AUSTIN. Did they have similar experiences?

Mr. ROZIER. They had similar experiences, but I do not know the extent of them, Senator. I would not want to say that each State had exactly the same experience as Missouri because I do not know.