f. I worked (anywhere) in a job not covered by Unemployment Insurance

STATE OF CALIFORNIA-EMPLOYMENT RELATIONS AGENCY

DEPARTMENT OF EMPLOYMENT
SACRAMENTO 95014

REFER TOI

EDMUND G. BROWN, Governor

Under instructions of the California Legislature, the Department of Employment is conducting a survey of weekly wages earned by employees who became unemployment insurance claimants. A very small sample of recent claimants has been selected for the survey, in order to keep the burden on the employer as small as possible.

Our records show that the person identified on the reverse side of this letter worked for you at sometime between April 1963 and the present date. Please provide us with the earnings information requested about this person by completing the reverse side of this letter and returning it in the enclosed postage-paid envelope.

Your cooperation in helping us to complete this study will be greatly

UNITED AUTOMOBILE, AEROSPACE, AGRICULTURAL IMPLEMENT WORKERS OF AMERICA (UAW)

Mr. Paul W. McCracken, chairman of the President's Council of Economic Advisers, recently (The New York Times, October 2, 1969) told an audience of businessmen tht "we must not lose our cool if we see a good many of the wrong things entering the picture." The present fiscal and monetary restraints, which he said "* were beginning to bite," begin to bite deeper as the economy

cools.

Mr. McCracken told the lunching members of the National Industrial Conference Board: "This is bound to happen during an interlude in a transition period for the economy."

The question is who is going to be bitten most severely, and the answer is easy: not the members of the National Industrial Conference Board or the Council of Economic Advisers but wage-earners, particularly those wage-earners whose existence tends to be one long transitional interlude at the bottom of the economic aid social heap. When unemployment strikes for such workers, they have no access to corporate reserves, few if any personal savings. What they have is the far from cooling prospect that obstacles put by State law between them and an unemployment check will deny them any help; or that the check, if they manage to qualify for one, will cut family income by half or more.1

The central and fundamental flaw in the Administration's unemployment insurance proposals is that they do not assure improvement of average benefits as a proportion of lost wages. In this crucial matter-cruical to men and women facing the personal setbacks and deprivations of unemployment—the Administration bill offers only the pious hope that the several States, given two more years of grace in which to raise benefits, ("thereby averting the need for Federal action"President Nixon) will energetically come to grips with a problem most have evaded since the unemployment insurance system was established.

The government-both the White House and the Congress-has a heavy economic and moral obligation during the present legislative session to abandon this unrealistic expectation that the States, left to their own devices, will come up with adequate UI benefits in the short span of two years, after they have failed to produce them in the fifteen years since the 1959 Eisenhower plea for action. Mr. McCracken is not alone in detecting a cooling trend. The Wall Street Journal (September 30, 1969) reported that "most economists," while doubting recession, see a flattening out of real GNP, accompanied by a rise in unemployment. (As this is written it is reported that unemployment has risen to 4 percent of the labor force.) According to the paper, William H. Gassett, economist for the Boston investment firm of Eaton & Howard Inc., predicts that: "the jobless rate will climb to about 4.3% of the labor force before mid-1970 and then will 'stay there.' This would be nearly a percentage point higher than the 3.5% that has recently prevailed ****

Economics being the inexact science that it is, such predictions are subject to greater error than weather forecasts. The business section of The New York Times (September 28, 1969) reports:

"To many people, the crucial question is whether the delicate transition to less restraint on the economy can be accomplished in time to prevent a serious recession and sharp rise in unemployment, and yet still avoid a further fanning of the flames of inflation ***."

If unemployment is now to increase because of a deliberate Administration choice of anti-inflationary policies that will bear most severely upon the workers, the Administration has the obligation to provide the victims of such economic policies with better unemployment insurance than it presently proposes. Under the circumstances, the President and the Congress cannot afford to indulge any new-federalist hopes of rapid and substantial improvement of benefits through State action.

STATES ARE NOT READY

The States are not prepared to assume the responsibility the Administration's unemployment insurance bill seeks to hand them under the banner of the new federalism. Most of them have spotty and sorry records of response to social needs. While under our Constitution they have important powers, they have failed to use them or adapt them in order to cope with the recent and growing crises of urban America.

1 For further details on size of groups affected by unemployment see Appendix.

The states have not acted to improve unemployment insurance and are unlikely to act in response to mere exhortation. Under experience rating the states are in competition with each other to offer employers the lowest political practicable unemployment insurance contribution rates in an effort to attract and hold industry. Employers have not been reluctant to hold the threat of plant relocation over the heads of state legislators contemplating unemployment insurance improvements.

Because of this competition to save employers money at the expense of unemployed workers the states will not act separately in any meaningful way. They can be made to move together by effective Federal action.

State unemployment security agencies over the years have been among the foremost practitioners of retrograde social policies. Under the experience rating provisions of the law, they have administered an unemployment insurance system which has been akin to welfare programs in that it has been more intent upon saving money for employers than shoring up workers' incomes and lives in critical periods. State legislatures, UI agencies and employers have gone to cruel and ingenious lengths to frustrate the original intent of unemployment compensation: the payment of benefits to unemployed workers.

According to the 1969 Manpower Report of the President, "1 out of every 4 workers in the country is still excluded altogether from UI protection," and by mid-1968 only 21 states out of the 50 "had basic maximums amounting to 50 percent or more of their workers' average weekly wage.'

In a September 29, 1969 address on manpower policy before a conference of employment security administrators, Secretary of Labor Shultz spoke of responsibilities expected to devolve on state employment security agencies under the proposed Administration manpower training bill. His remarks suggest an acute awareness of administrative shortcomings in the state agencies. The Secretary said that those agencies that have earned good marks for past performance "should have no fear of subjecting themselves to the admittedly more rigorous demands which implementation of this bill would make," and he continued:

"... there are much greater risks under intense public scrutiny. The Employment Security agencies as the main line manpower agency will be placed squarely on the line of producing or failing in their responsibilities.

"It is our intent, and indeed the intent of this Administration, to enhance the capacity of existing institutions to deal with the problems of the 1970s while preserving the capacity to innovate."

This may be the Administration's intent, but H.R. 12625 is a frail vessel to embark on such an ambitious course with respect to unemployment insurance. It has a hole in its hull before it ever sets to sea: the failure to set Federal standards requiring the States to raise benefit maximums high enough to assure benefits of 50 percent of wages to at least 80 percent of insured workers.

The President opened the hole himself in his July 8, 1969 message to the Congress, when he stated:

"Up to now, the responsibility for determining benefit amounts has been the responsibility of the States. There are advantages in States having that freedom. However, the overriding consideration is that the objective of adequate benefits be achieved. I call upon the States to act within the next two years to meet this goal, thereby averting the need for Federal action." [Emphasis added.]

FEDERAL STANDARDS ESSENTIAL

Like so many aspects of the Administration's policy initiatives, this Presidential statement faces in two directions and is clouded wth ambiguity. On the one hand the overriding consideration is achievement of adequate benefits; on the other hand, the overriding consideration is to avert the need for Federal action and therefore the States should be given two more years to do what they could not or would not do in decades.

Let the Administration and the Congress face the facts in this matter, a matter which can be crucial to millions of the most forgotten Americans. In federalism old or new, a strong Federal lead is essential. Secretary Shultz himself, in a White House press conference on the President's unemployment insurance message, touched on the problem of benefit levels in these words:

"A second area has to do with the level of benefits. Here the President calls for strong action by the States. The problem is that while the States almost all

1 For further details on postwar trend see Appendix.