insurance. A wide diversity of practices, developed since the first passage of unemployment insurance legislation, has resulted in widely differing requirements as to prior employment or earnings before a worker is deemed to meet the initial entitlement to benefits. This patchwork quilt of varied requirements, frequently developed without justification in fact, can only be remedied by Congressional action and the promulgation of standards binding on all the states. Examination of the experience of workers seriously attached to the labor market suggests that in no case should states be permitted to require more than 15 weeks of base period employment to qualify for entry into the system, or in the alternative a maximum of 30 weeks of employment during the base period and the immediately preceding year, provided there are at least 10 weeks of employment in the base period. Where states rely on base period earnings as a qualifying test, base period earnings requirements (on an equivalent basis to a standard measured in weeks of prior employment when benefit rates are set to approximate two-thirds of base period weekly wages) shall not exceed 20 times the weekly benefit amount or 1.2 times the level of high quarter earnings. Furthermore, states should be prohibited from requiring employment to be measured in terms of a number of quarters in the base period and of course, no claimant should be required to meet more than a single test of employment or wage qualifying requirement. We recommend that the same tax base should be adopted by the Congress for unemployment insurance purposes as for Old Age, Survivors and Disability Insurance. When the original Social Security Act was first taken up by the Congress, it was proposed to levy a tax for unemployment insurance purposes on total covered payrolls. However, a $3,000 limitation was thereafter adopted, the same as for Old Age and Survivors Insurance, because the overwhelming number of covered workers did not earn much over $3,000 at that time. With the advances in wage and salary levels this ceiling became obsolete. While in the case of Old Age, Survivors and Disability Insurance it has been gradually lifted to $7,800 beginning with 1968, no change in taxable wage base has ever been made for the Federal Unemployment Insurance Tax. As a result, anomalies developed in the tax structure with some employers paying a lower proportion of their total payrolls than others. At the same time, inadequate financing, coupled with frequently unsound experience rating provisions, placed undue restraints on needed improvements in unemployment insurance legislation. In view of interstate competition, it is essential for Congress to provide at least the same tax base for unemployment insurance purposes as it has done for Old Age, Survivors and Disability Insurance. There is no justification for postponing such action to 1973 or to set a lower tax base for unemployment insurance as is proposed by the President and H.R. 12625. In considering unemployment insurance financing, it is to be hoped that your Committee will also review the existing chaotic experience rating practices under the various state laws. These unwise provisions have often weakened reserve funds and fostered perpetuation of inadequate levels of benefits and of benefit duration. Hopefully, your Committee will recognize, as do a number of authorities on the subject, that experience rating should be eliminated from the system, or if it be retained, should be severely limited. The range of variation between minimum and maximum permissible tax rates should be narrowed, with no rates permitted to fall below one percent of the total payroll of the taxed employer. In any event, the schedule of tax rates should vary up or down in such manner as to insure that available reserves do not fall below an amount equal to the highest benefit payments over a continuous 18 month period in the preceding 10 years. CONCLUSION We submit to your Committee that H.R. 12625 fails to meet the current needs of the United States for a modernized unemployment insurance system. We have provided your Committee with a number of recommendations for needed reforms, including the appropriate standards that are needed for the guidance of the state legislatures. We hope that these will meet with your Committee's approval and will find their way into the bill that will be reported out. STATEMENT OF THE AMERICAN HOTEL & MOTEL ASSOCIATION The American Hotel & Motel Association is a federation of hotel and motel associations located in the fifty states, the District of Columbia, Puerto Rico, and the Virgin Islands, having a membership in excess of 6,800 hotels and motels containing in excess of 750,000 rentable rooms. The Association maintains offices at 221 West 57th Street, New York, New York, and at 777-14th Street, N.W., Washington, D.C. The American Hotel & Motel Association recognizes that a review of the unemployment compensation laws is much more desirable during a period of relatively high employment than during a period of substantial unemployment. However, we are opposed to present proposals which would substantially increase the taxable wage base at this time. Our industry which is service oriented can no longer be forced to absorb the continued costs attendant with taxation without increasing our own costs. At a time of spiraling inflation, we feel this is not in the national interest. The hotel/motel industry is facing increased wage scales due to the prospective "increases" in the wage and hour law enacted by Congress in 1966 and is facing increased payroll costs due to the prospective rate increases in the Social Security amendments enacted in 1967. One has to wonder how much further this generation can commit future generations. Our industry is one of the largest employers of unskilled, marginal labor. These are the very people who will be faced with losing their jobs if hotels and motels are forced to absorb additional "artificially imposed" operational costssuch as the proposed increase in the taxable wage base. These very companies who will be forced to cut back to meet the continued rise in the current graduated minimum wage along with the possibility of a further statutory increase in minimum wage would be charged with unemployment insurance benefits paid to those very people they were forced to lay off in order to stay in business, thus increasing their unemployment insurance rate and total operation costs. In the main, many of the proposals advocated in this bill are acceptable to our industry. Some are not. For the sake of clarity, we shall outline some provisions to which we are opposed and state our recommendations. (1) Extended benefits.—We refer specifically to the provisions in H.R. 12625 which proposes a nation-wide system of benefits triggered in and triggered out on national employment figures and financed solely by the Federal government. AH&MA believes such an antirecessionary scheme is undesirable when one realizes that recessions are generally sectional and rarely national. Therefore, a national trigger would in some instances extend benefits to certain states long after they are needed. We recommend the arrangement which was devised by this distinguished committee in H.R. 15119 which permitted financing on a 50-50 state/Federal basis. In this way the preservation of our state/Federal system, so vital to our nation's continued well being, is preserved. (2) Increasing the Taxable Wage Base.-H.R. 12625 has as its aim to raise the taxable wage base from its present $3,000 to $6,000 sometime after 1973. AH&MA feels that a modest increase in the wage base may be warranted, but an increase of 100 percent within 5 years is highly imprudent. We would recommend that this committee review the need for moderately increasing the wage base keeping in mind the inflationary pressures which are currently hampering this nation's fiscal stability. (3) Judicial Review.-This section of the bill provides that findings of the Secretary of Labor if supported by "substantial evidence" are binding in the courts. AH&MA would recommend to the committee that the language found in H.R. 15119 which proposed that the Secretary's findings were conslusive "unless contrary to the weight of evidence" be adopted in lieu of the Administration request. In this way the states would be offered a greater degree of protection. In conclusion, AH&MA urges this committee to repudiate the Administration's call for virtually a 100 percent increase in the taxable wage base to occur within 5 years. Legislation passed in prior years to take effect in future years is now having a substantial impact on the cost structure of our industry. We therefore feel that the legislation before this committee be passed only with the idea of meeting "present" needs, not possible "future" demands. SERVICE EMPLOYEES INTERNATIONAL UNION, Hon. WILBUR D. MILLS, DEAR CONGRESSMAN MILLS: I am writing to you to indicate our interest in H.R. 12625, and other proposals affecting Unemployment Compensation. I would appreciate it if you would accept this letter as our official testimony. I would say first of all that we endorse the testimony being presented before your committee by the AFL-CIO. We are in accord with the drastic need for benefit standards. There are two shortcomings in H.R. 12625 to which we would like to draw your Committee's special attention: 1. Public Employees.-H.R. 12625 fails to cover elementary and secondary education employees, and many other public employees. We do not think the coverage of only state hospitals and higher education employees is sufficient and think coverage should be extended to all employees of state and local government. 2. Non-Profit Institutions.-H.R. 12625 fails to include non-profit institutions with less than four employees. These 600,000 employees also deserve to be covered. An exclsuion for members of religious orders, similar to the "religious exclusion" in FLSA would solve problems with this coverage. On behalf of our 400,000 members, I want to thank you for your consideration of these points. Sincerely, DAVID SULLIVAN, STATEMENT OF IRA H. NUNN, COUNSEL, NATIONAL RESTAURANT ASSOCIATION SUMMARY OF COMMENTS AND CONCLUSIONS 1. The National Restaurant Association supports those changes in the unemployment compensation law necessary to meet administrative costs for the operation of public employment services and unemployment insurance programs. However, by doubling the taxable wage base, H.R. 12625 will impose taxes on employers in far greater amounts than are needed to meet these administrative costs. The Federal Unemployment Tax is designed to raise funds only to meet costs of administering the program, not the costs of unemployment benefits, which are provided by the States. There is no relationship between an unemployed worker's former earnings and the cost of administering the program. We recommend a modest raise in the taxable wage base to $3600, which will produce sufficient funds to meet anticipated administrative costs. 2. We support a program for extended benefits to be available in recession periods. but oppose the adoption of the Federal program incorporated in H.R. 12625. The proposed Federal program is too rigid and inflexible to be responsive to local needs. It is based on standards that are national in scope and depends entirely upon a national rate of unemployment. It is apparent that it will be inadequate to meet the problems created by regionally isolated pockets of unemployment. State plans for extended benefits in recession periods offer the flexibility necessary to meet such local conditions. Even if the Federal program offered in H.R. 12625 were adopted, most States would have to maintain a separate similar program to meet their local needs. The availability of Federal funds to assist States in their programs may be desirable. 3. We oppose the imposition of Federal standards on the administration of State unemployment compensation programs for the following reasons: (a) They are demonstrably unnecessary. (b) They are inconsistent with the sound principles advanced by the President to view unemployment insurance as a creative Federal-State partnership with the nature of the program being left to the State. (c) They would add substantially to the cost of administration by requir ing a major increase in the Federal bureaus to administer them. Section 121 of H.R. 12625 imposes seven Federal standards on the administration of State programs. We recommend deletion of that section. 4. We support the principle of judicial review of the Secretary of Labor's determinations on the conformity or compliance of State laws with Federal statutes. However, the type of review provided in H.R. 12625 would be so restricted as to be meaningless. The proposed legislation would authorize the court to disturb the Secretary's findings only if they are not supported by substantial evidence. We suggest a better standard to provide a meaningful review would be to allow the court to sustain the Secretary, "unless his findings are contrary to the evidence." STATEMENT The National Restaurant Association supports a fair and equitable unemployment insurance program administered by the States-a program fully responsive to the needs of the people it is designed to serve. Certain features of H.R. 12625 we believe to be inconsistent with the concept of the program as it was designated by the Congress and developed by the States. Our principal objections are as follows: 1. Doubling the Taxable Wage Base: H.R. 12625 would raise the taxable wage base from $3000 to $6000 over the next four years. The Federal Unemployment Tax is imposed to raise funds to administer the unemployment compensation program and employment services. It is not intended to provide funds for unemployment compensation benefit payments. The States finance these through taxes on employers based upon experience ratings. The Federal Tax was created only to meet administrative costs. The administrative costs of the program and the cost of job referral services bear no relation to an unemployed worker's former earnings. The benefits derived from proper administration are available to all covered employees, regardless of their former earnings. According to information available to us, raising the taxable wage base by 100 per cent will produce a surplus of well over one billion dollars above the projected administrative costs. If the proposed doubling of the taxable wage base bears no relation to anticipated administrative costs, it must have another purpose. One clear result of such an increase will be to force the States to raise their respective wage bases to match it. Such a forcing action is clearly inconsistent with the basic principle of State administration of their own programs. The States currently have over twelve billion dollars in their trust funds. They appear to have done a praiseworthy job in furnishing the funds needed to meet their obligations under the program. They should be allowed to continue to select the means best suited to their economy and their program to raise funds in the future. Some States elect to raise the rate, others elect to raise the wage base. By doubling the wage base, the Federal Government dictates the future course of fund raising for State programs. We believe in and support the taxes necessary for adequate administrative funding. We believe the proposal before you is unfair to the taxpayer employer and will hinder effective administration of the program through the creation of unnecessary surplus and distortion of state tax structures. 2. Programs for Extended Benefits: We agree that it is sound management to develop a program that will make extended benefits available during recession periods. However, we cannot support a program that is geared entirely to national rates of unemployment. To be truly effective, such a program must be responsive to isolated pockets of unemployment, located in individual States or regions. Experience has demonstrated that we will have such pockets. Any Federal program based upon national averages is inherently unable to respond to localized economic recession. The Federal Government can effectively assist the States in developing State programs that will provide extended benefits responsive to local situations. To adopt the Federal program proposed in H.R. 12625 will merely ensure the necessity for both a national and individual State program and will obscure the need for the establishment of flexible, responsive plans geared to the needs of those whom we seek to protect. 3. Federal Standards: Section 121 of Part B in H.R. 12625 would establish seven new Federal standards to be met in each State's unemployment compensation law. We refer to (1) the elimination of the "double dip"; (2) no denial of benefits to people taking training; (3) no denial or reduction of benefits solely because the claimant files in or resides in another State or Canada; (4) States must make special arrangements for payment of benefits that will combine wages earned in two or more States; (5) denial of benefits to strikers; (6) no total cancellation of wage credits or benefit rights except for misconduct, fraud, or receipt of disqualifying income; and (7) no benefits ot a claimant with less than 15 weeks work to his credit in the base period. We strongly believe that if the unemployment compensation program is to continue as the product of a creative Federal-State partnership, with the States guiding the program so as to provide a flexible response to local conditions, Federal standards must be kept to an absolute minimum. We do not agree that an examination of the response of the States to the problems attacked by these standards has been so deficient that we can call them national problems. We agree with many of these standards and would like to see them applied in all States, but we also believe it is a State problem. Federal intervention in these matters will compel a great increase in the bureaucracy needed to administer the program, without a corresponding benefit to the taxpayer or the intended beneficiaries. 4. Judicial Review: We concur in the principle of judicial review of the Secretary of Labor's determinations on the conformity or compliance of State laws with the Federal Statutes. The fact that H.R. 12625 recognizes the need for such review is encouraging. However, the bill, Section 3311(b), makes the findings of fact by the Secretary of Labor conclusive, “if supported by substantial evidence.” We believe this standard to be unduly restrictive and potentially one-sided where a State government contests the validity of the Secretary's determination. In the interest of fundamental fairness, to both contesting parties, we would recommend that the Secretary of Labor's findings of fact be conclusive "unless contrary to the weight of the evidence." This standard will permit a more meaningful review of all the evidence by the court. 5. Creative Federal-State Partnership: We are encouraged by the Administration's recognition of the basic principle that the unemployment compensation program is a creative Federal-State partnership, with the States predominant in establishing the nature of the program within their individual boundaries. There is ample evidence that the States have not only maintained fiscally sound programs, but have shown a marked spirit of cooperation in attacking problems that affect them all. We would ask the Congress to recognize the inherent flexibility and responsiveness in State administered programs and to abjure the temptation to impose Federal uniformity for the sake of uniformity alone. Hon. WILBUR D. MILLS, CALIFORNIA STATE CHAMBER OF COMMERCE, Chairman, Committee on Ways and Means, U. S. House of Representatives Washington, D.C. Sacramento, Calif., October 7, 1969. DEAR MR. MILLS: The California State Chamber of Commerce was one of the organizations represented by the California Employers Research Council when testimony was presented on H.R. 12625. However, we wish to file an additional statement on certain points. They are: 1. We oppose the section of the Employment Security Amendment of 1969 to provide for the inclusion of additional groups or classes. If extensions are to be made, they should be made by the state legislature on the state level. We oppose extensions of coverage to agricultural workers unless adequate and equitable eligibility and financing provisions have been established. California has 48% of the estimated national farm work force. We joined other employer associations in supporting, with modifications, AB 807 (1969 Session of the California Legislature) which would have extended Unemployment Insurance to agricultural workers in California. However, this legislative proposal did not come out of committee. This bill defined agricultural labor, called for a change in the formula for computing weekly benefits and increased the minimum earnings requirements. It was an effort to solve the problem of coverage for agricultural workers in California. 2. We support the provision for judicial review of conformity decisions of the Secretary of Labor. We call your attention to the statement of the U. S. Chamber of Commerce on Section 131 of the proposed act which recommends that findings of fact would be conclusive if supported by substantiated evidence rather than by weight of evidence. |