about the ultimate effect of just continuing to increase the payroll tax indefinitely. There obviously has to be an optimum point which, when passed, will result in adverse economic effects. Thank you, Mr. Chairman. That is all I have. The CHAIRMAN. Thank you, again, Mr. Munts. We appreciate your coming back to the committee. That completes the calendar for today and, without objection, the committee will adjourn until 10 o'clock in the morning. Whereupon, at 4:35 p.m., the committee adjourned, to reconvene at 10 a.m., Tuesday, October 7, 1969. AMENDMENTS TO FEDERAL UNEMPLOYMENT COMPENSATION LAWS TUESDAY, OCTOBER 7, 1969 HOUSE OF REPRESENTATIVES, Washington, D.C. The committee met at 10 a.m., pursuant to notice, in the committee room, Longworth House Office Building, Hon. Wilbur D. Mills (chairman of the committee) presiding. The CHAIRMAN. The committee will please be in order. Our first witness this morning is our colleague from Hawaii, the Honorable Spark M. Matsunaga. We appreciate your coming. We will be glad to recognize you. STATEMENT OF HON. SPARK M. MATSUNAGA, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF HAWAII Mr. MATSUNAGA. Mr. Chairman and members of the committee, I thank you for this opportunity of appearing before you and suggesting an amendment to H.R. 12625, the Employment Security Amendments of 1969. For many years, American contractors have drawn heavily upon the labor market in Hawaii as well as in other States to fill their personnel requirements in connection with overseas construction projects. The workmen who have answered their government's call for the development of our Pacific bases and the Trust Territory of the Pacific Islands have often left their family and given up the opportunity of securing permanent employment in their home States. In Hawaii, as it must also be true in the Continental United States, many of the returning workmen have experienced difficulties in obtaining other employment immediately. It is during this period between jobs that the returnee from overseas construction employment is apt to discover, much to his amazement, that he is not covered by our unemployment compensation laws. The result, I believe, is an unintended inequity, which traces its origin to our unemployment compensation laws which predate our expanded overseas building program and the heavy reliance on American personnel to carry on that program. I am here to propose an amendment to H.R. 12625 which would correct this inequity by including in the unemployment compensation program our American workers who have been hired by American contractors on overseas projects. I now offer the amendment and ask that it be made a part of the hearing record. The language of the 35-277 0-69- -28 amendment was written by the Solicitor's Office of the Department of Labor. Mr. Chairman and members of the committee, I strongly urge that this amendment be adopted by the committee in executive session. The CHAIRMAN. Without objection, the amendment will be included in the record at this point, and we do appreciate your calling this matter to our attention. Mr. MATSUNAGA. Thank you. (The amendment referred to follows:) SEC.. COVERAGE OF CERTAIN SERVICES PERFORMED (a) That portion of section 3306(c) of the Internal Revenue Code of 1954 which precedes paragraph (1) thereof is amended to read as follows: "(c) EMPLOYMENT.-For purposes of this chapter, the term 'employment' means any service performed prior to 1955, which was employment for purposes of subchapter C of chapter 9 of the Internal Revenue Code of 1939 under the law applicable to the period in which such service was performed, and (A) any service, of whatever nature, performed after 1954 by an employee for the person employing him, irrespective of the citizenship or residence of either, (i) within the United States, or (ii) on or in connection with an American vessel or American aircraft under a contract of service which is entered into within the United States or during the performance of which and while the employee is employed on the vessel or aircraft it touches at a port in the United States, if the employee is employed on and in connection with such vessel or aircraft when outside the United States, and (B) any service, of whatever nature, performed after 1971 outside the United States by a citizen of the United States as an employee of an American employer (as defined in subsection (j)), except—”. (b) Section 3306 (j) of the Internal Revenue Code of 1954 is amended by adding at the end thereof a new paragraph to read as follows: "(3) AMERICAN EMPLOYER.-The Term 'American employer' means an employer which is (A) an individual who is a resident of the United States, (B) a partnership, if two-thirds or more of the partners are residents of the United States, (C) a trust, if all of the trustees are residents of the United States, or (D) a corporation organized under the laws of the United States or of any State." (c) The amendments made by this section shall apply with respect to service performed after December 31, 1971. The CHAIRMAN. Any questions? The CHAIRMAN. Mr. Ullman. Mr. ULLMAN. I want to join in welcoming my friend from Hawaii and also want to thank him for bringing this matter up. We had not had this called to our attention prior to this time and I want to assure the gentleman that we will give it our serious consideration. Mr. MATSUNAGA. Thank you, Mr. Ullman. The CHAIRMAN. Thank you, again. Mr. MATSUNAGA. Thank you. (The following additional statement by Congress Matsunaga was received by the committee:) STATEMENT OF HON. SPARK M. MATSUNAGA, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF HAWAII Mr. Chairman and members of the Committee, I make this statement in support of Section 104 of H.R. 12625. I voice my support not only because Hawaii is one of the three states which has had compulsory unemployment insurance coverage for most nonprofit organizations for many years, but also because this section is a significant improvement over existing law which requires nonprofit organizations to create the same reserves as profit making industry. Established public policy has placed nonprofit organizations in a special position with respect to the nature of their business, taxation, ownership of property, etc., and to require them to create large reserves and make contributions which support profit making industry is inconsistent with these principles. Section 104 provides nonprofit organizations an alternate method of financing unemployment insurance benefits which would permit them to pay their own unemployment insurance claims without a general subsidy to the system. This section also would permit the states to establish a transitional period in which nonprofit organizations may use their accumulated reserves to pay future unemployment insurance claims. This is fair and just. Provision is also made for the utilization of those reserves created for a five year period immediately preceding January 1, 1969. This is unreasonably restrictive and should be extended to ten or twelve years in order to make available to these organizations substantially all of their accumulated reserves for payment of unemployment insurance claims. This is completely reasonable since these reserves were created by the nonprofit organizations to pay future claims. The nonprofit hospitals in Hawaii have reserves of approximately one million dollars in the unemployment insurance fund. It would be strange indeed if these hospitals were forced to donate these reserves to the unemployment insurance system in order to take advantage of the alternate financing provisions of Section 104. It becomes even more contradictory when we consider that these reserves were created in part by payments for hospital services in behalf of recipients of medicaid and medicare. This would be essentially a subsidy to profit making business from the Social Security system through the hospitals. In summary, I urge the committee to approve Section 104 of H.R. 12625 because it is a reasonable and desirable compromise between the objective of extending unemployment insurance benefits and minimizing the costs to nonprofit organizations; and I urge the committee to provide a ten or twelve year period for the utilization of unemployment insurance reserves which have been accumulated by nonprofit organizations already in the system. Thank you very much. The CHAIRMAN. Our next witness is Mr. Clinton M. Fair. We are glad to have you with us today, Mr. Fair, and for this particular record we will ask you to identify yourself again. STATEMENT OF CLINTON M. FAIR, LEGISLATIVE REPRESENTATIVE, AMERICAN FEDERATION OF LABOR AND CONGRESS OF INDUSTRIAL ORGANIZATIONS; ACCOMPANIED BY JAMES O'BRIEN, SOCIAL SECURITY DEPARTMENT, AFL-CIO SUMMARY OF STATEMENT Over 11 million workers and their families have been victims of unemployment annually during the past few years-11.5 million workers were unemployed during the prosperous year of 1967. Unemployment of this magnitude during a period of relative prosperity indicates the need for an adequate system of unemployment insurance. However, the existing unemployment insurance program must be modernized if it is to perform adequately. We are approaching the point, if we have not already reached it, where only three out of ten jobless workers receive any benefit from the system. Weekly benefits when available replace slightly more than one-third of wages lost, and they are terminated in far too many cases before jobless workers are able to return to gainful employment. We agree wholeheartedly with the statement contained in the President's message of July 8, 1969, "The best time to strengthen our unemployment insurance system is during a period of relatively full employment." But, we are convinced his failure to call upon the Congress to enact minimum federal benefit stan ar ́s now will only result in continued economic suffering for jobless workers and their families. The AFL-CIO regards some of the proposals in H.R. 12625 as constructive, but they do not go far enough. We have included a number of recommendations in our testimony that we feel are essential if the program is to function properly as an economic stabilizer in the 1970's. Coverage. We favor the extension of coverage proposed in H.R. 12625, but we feel it should be broadened substantially to include the majority of the approximately 17 million workers presently uncovered. Our recommendation is to cover all wage and salary workers. As a minimum, immediate coverage should be extended to workers in small firms, domestic workers, agricultural workers, workers employed by nonprofit organizations, and public employees. Qualifying Requirements.-Qualifying requirements are arbitrary definitions of who is attached to the labor force. Because they are arbitrary they are controversial. Any minimum qualifying requirement should be set at a reasonable level and tied to a minimum duration standard. The minimum qualifying standard should not require any state to tighten existing qualifying requirements. Employment should not be required in more than two quarters of the base year. Low wage earners should not have to work longer than high wage earners to establish their benefit rights. Maximum qualifying requirements should not exceed 20 weeks of work or its equivalent, and it should be coupled with a 26 week duration standard. Disqualifications. We favor establishing a federal standard that would restrict the imposition of harsh disqualifications. We support the proposal to prohibit the imposition of a disqualification upon workers participating in training programs. We are disappointed at the effort made in H.R. 12625 to prohibit the cancellation of wage credits or reduction of benefit rights. The provisions in the bill implies that the Administration recognizes the basic injustice of these practices, but the bill would not eliminate them. The bill should be amended to prohibit any cancellation or reduction of benefit rights. The proposed labor dspute disqualification is completely unnecessary in our opinion, and we are opposed to it. We believe the maximum penalty that should be imposed in applying disqualifications should be limited to the average spell of unemployment in a fairly good labor market. Six weeks is about the duration of a normal spell of unemployment. Unemployment lasting longer than six weeks should be attributed to the slackness of the labor market. Benefits.-The wage related benefit structure of the program has been seriously damaged, and federal legislation is needed to repair it. The AFL-CIO favors establishing a federal benefit standard that will replace at least 66% percent of a jobless worker's full time weekly wage. This wage replacement benefit should be available to the great majority of covered workers. Financing. The proposed increase in the taxable wage base to $6,000 is a step in the right direction. However, it does not go far enough. We favor returning the taxable wage base to social security wage base level. We also favor greater application of the experience rating proposal contained in H.R. 12625. We recommend that these provisions be extended to all employers if a state wishes to reduce rates on a basis other than experience rating. We see no reason to limit the provisions to new or newly covered employers. Extended Benefit Program.-We are opposed to the triggered approach proposed for an extended benefit program. We favor establishing a federal program for the long-term unemployed on a continuing basis. Such a program should provide not only income maintenance, but job training, retraining, and upgrading of skills in cases where such action will help jobless workers to gainful employment. Mr. FAIR. Mr. Chairman, my name is Clinton Fair. I am a legislative representative of the AFL-CIO, and with me is Mr. O'Brien, who is with our Social Security department staff. The CHAIRMAN. We are glad to have both of you gentlemen with us, and you are recognized. Mr. FAIR. Mr. Chairman, members of the committee, we appreciate this opportunity to present the views of the American Federation of Labor and Congress of Industrial Organizations on H.R. 12625legislation to improve the Federal-State unemployment insurance program. |