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Furthermore, under the higher tax base provided in the amendment, it would not be necessary to revise the tax structure as frequently in order to counteract an eroding wage base.

RESEARCH AND TRAINING PROGRAMS

The provision in H.R. 12625 for programs for unemployment insurance research and staff training are essential if we are to have an effective unemployment insurance program. It is my impression from observing the functioning of this program in Germany that we are far behind in this country in such research and staff training programs.

I appreciate this opportunity to present my views on the sections of H.R. 12625 of particular interest to me. Please feel free to call upon me for further information, and, if necessary, testimony before your Committee on this important matter.

Sincerely,

LOUIS F. BUCKLEY, Professor of Economics.

STATEMENT OF EDWARD L. CUSHMAN, EXECUTIVE VICE PRESIDENT, Wayne State UNIVERSITY, DETROIT, MICH.

SUMMARY

I wish to express to your Committee my endorsement of the amendments to the Federal laws on unemployment insurance which are contained in H.R. 12625. I have long had an interest in and a close association with the Federal-State unemployment insurance system. I was associated with the Michigan Employment Security Commission in a number of capacities, beginning in 1937, and served as its Executive Director in 1947. I have been interested in the program, first as student at the University of Michigan in 1936, when I worked as an aide to the Governor's Study Commission which drafted the original Michigan Unemployment Compensation Bill; and more recently as a faculty member and now Executive Vice President at Wayne State University. I dealt with it very directly in my former position as Vice President in charge of Industrial Relations and central administrative activities of the American Motors Corporation (with which I continue to be associated as a member of the Board of Directors), as well as in the capacity of Director of the National Bank of Jackson and of a number of other business enterprises. In addition, I have served as a management representative on the Federal Employment Security Advisory Council. I consider the improvements of the system proposed in H.R. 12625 as the minimum that should be done at the present time.

EXTENSION OF COVERAGE

The extensions of coverage to employees of small firms, to farm workers, and to employees of nonprofit organizations and of State hospitals and institutions of higher education as important steps toward the goal of achieving the broadest possible coverage of individuals who depend on employment by others for their livelihood and encounter the risk of involuntary unemployment. I hope your Committee will consider not only the potential benefit to the additional workers who will be newly covered by these provisions, but also to workers already covered whose benefits have been lessened by the fact that some of their employment has been in non-covered work.

MULTISTATE WORKERS

This same rounding out of full protection to the unemployed is also provided in the section of the Bill dealing with plans for combining the wages in several States of those whose occupations result in a diffusion of their wage credits among the States.

EXTENDED BENEFITS

I want particularly to emphasize the importance of the provisions of the Bill which establish a system of extended benefits in times of heavier unemployment. The record of the existing Federal-State system has been that most workers draw

benefits for only relatively short periods except in times of economic stress, but that when heavy unemployment occurs the duration of benefits normally provided in the State laws is insufficient to maintain the incomes of a substantial number of workers, even though they may be fully expected to return to their normal employment when business recovers. A permanent provision based on "trigger" factors would seem a much more orderly way to deal with this problem than the separate enactment of special provisions each time the country experiences an economic downturn.

TAXABLE WAGE BASE

From my knowledge of the past and present operation of the system, it would be my opinion that the proposed increases in the taxable wage base are necessary to provide a safe reserve for payment of extended benefits and to assure that the financial resources for administration of the program will keep pace with the needs of the State and Federal agencies in a nation which must depend on an ever expanding level of production and other business activity with their implications of a steady increase in the level of prices and wages.

The increase in the taxable wage base is also important to provide a more rational system of taxation under the State unemployment insurance laws. The present limitation on taxable wages of $3,000 in most States and even $3,600 in the State of Michigan represents a system of taxation which has been increasingly regressive because of the increases in wage and salary rates since the $3,000 limitation was first adopted in 1939. It places the heaviest burden of taxation on the businesses and industries which pay the lowest wage rates, even though in most States the benefit rights of the workers are based on a greater proportion of their earnings. This artificial limitation on the amount of wage subject to the tax is also contrary to the principle of experience rating which has become an important element of the unemployment insurance tax systems. By way of example, an employer whose workers are concentrated in low wage occupations may have as much as 90 percent of his total payroll subject to taxation while another employer whose workers are concentrated in higher paying jobs may be paying a tax on less than 50 percent of his payroll. The low wage employer may then be paying a higher percentage of his payroll costs as taxes than the employer with the higher wage rates, even though his experience may entitle him to a lower tax rate, and even though the high wage employer's experience reflects far greater charges for benefits than the amount of his tax contributions. These considerations make it imperative that any change in the tax formula be in terms of increasing the tax base as opposed to raising the rates.

IMPROVED ADMINISTRATION

As a former State administrator, I also endorse the provision for expanded research as necessary to better guide the future development of the program and the provision for expanded personnel training as essential to wise administration of the program and to assuring that benefits are paid to those who are entitled to them and denied to those whose unemployment availability for new employment are such that payments to them would represent an unwarranted use of the trust funds and an unfair burden on the taxable employers and the economy in general.

ELIGIBILITY REQUIREMENTS

The Bill also wisely provides in Section 121 for certain requirements to be included in State laws which will better assure payment or denial of benefits in appropriate circumstances.

Especially important is the provision which would prevent denial of benefits to individuals who are enrolled in approved training programs. The Michigan State law has long had a provision to allow benefits during training, but it has become important only with the recent expansion of training opportunities under the national manpower programs and expanded efforts in the private sector. The continuation of benefits during training is a much more sensible way to deal with the long run needs of many people in the work force than forcing them to return as marginal workers to types of types of employment which fail to assure steady income.

CONCLUSION

In summary, it is my opinion that H.R. 12625 represents a practical approach Lo meeting the problems to which it is addressed and a reasonable middle ground among the various positions of the Administration, the House, and the Senate which developed in the considerations of H.R. 15119 during the 89th Congress. I hope your Committee will see fit to report it favorably.

HON. WILBUR D. MILLS,

CAMBRIDGE CENTER FOR SOCIAL STUDIES,
Cambridge, Mass., October 9, 1969.

Chairman, House Committee on Ways and Means,
Washington, D.C.:

In my judgment something like H.R. 12625 is very much needed. Even better, however, would be something more like the 1966 bill of your committee, H.R. 15119.

HON. WILBUR D. MILLS,

JOSEPH M. BECKER.

ALUMINUM Co. OF AMERICA,
Pittsburgh, Pa., October 1, 1969.

Chairman, House Committee on Ways and Means,
U.S. House of Representatives,
Washington, D.C.:

SIR: We appreciate this opportunity to express our views with respect to HR 12625, the Employment Security Amendments of 1969, currently before your Committee for consideration. Aluminum Company of America and subsidiaries have approximately 42,000 employees within the United States, all of whom are covered by the Unemployment Compensation Laws of the various states.

Alcoa realizes that certain statutory changes are necessary in the Unemployment Compensation area from time to time, and in 1966 we endorsed HR 15119 as did many other employers and organizations. However, despite the many months of effort on the part of the House Committee on Ways and Means, most segments of industry, the State U.C. Administrators, and the public, that bill died in Conference Committee as a result of the federal benefit standards and other crippling amendments added by the Senate. Alcoa has serious objections to any further liberalization, as now proposed in HR 12625, over and above the provisions which were contained in the original HR 15119. The attached statement contains our comments and recommendations with respect to HR 12625.

We request that this letter and its attachments be made,a part of the official record of your committee hearings as if presented in oral testimony.

Respectfully,

General Comment

C. E. WINCKLER.

While Alcoa is not against all provisions of HR 12625, we believe there are certain areas that go far beyond the compromise bill of 1966 (HR 15119). Below are our comments as to those provisions we find objectionable.

TITLE I-UNEMPLOYMENT COMPENSATION AMENDMENTS

Part A-Coverage

Alcoa feels that farm workers should not be covered unless they are full time employees and have a firm attachment to the labor market, as in industry. Coverage of farm workers has been consistently rejected by both Houses of Congress, and at the present time only three jurisdictions provide coverage.

Part B-Provisions of State Law

Alcoa believes there is merit in the proposals contained in Part B, however, we strongly feel these areas should be handled only at the state level. The enactment of these provisions would establish Federal authority over the vital process of determining who are to be the beneficiaries of State Unemployment Compensation

Benefits. If all the above standards were enacted at the Federal level, relatively few people would receive benefits who do not now receive them, and few would be denied who are not now denied; therefore, we feel these matters should be left to state jurisdiction.

TITLE II-FEDERAL-STATE EXTENDED UNEMPLOYMENT COMPENSATION PROGRAM

Extended benefit programs were enacted at the Federal level twice before, in 1958 and again in 1961. These programs proved costly, and in some states completely unnecessary. Since that time, eight states have enacted legislation which extends the duration for claimants who exhaust benefits when unemployment has reached a certain percentage level of covered employees. However, all the states require a rate of insured unemployment higher than the 4.5% contained in HR 12625. Rates range from 5% in Illinois to 9% in North Carolina.

Alcoa feels that "triggering in" extended benefits should be a joint FederalState program, financed 50% from Federal Unemployment Taxes and 50% by State U.C. Revenues. With the trigger on a state-to-state basis, it would not be necessary for the states to rely on a national trigger and would take into account the widely varying unemployment conditions among the states. This was the theory contained in HR 15119 as passed in 1966 by the House. In any event, the trigger point should be at least 5%, and extended benefits should not be more than 13 weeks with a maximum combination fo 39 weeks, covering both regular state benefits and extended benefits.

TITLE III-FINANCING PROVISIONS

The proposed amendments to Title III would increase the taxable wage base from $3,000 to $4,800 in 1972, and $6,000 in 1974. This would be a 100% increase in a four year period. The tax burden at the state level would also be greatly increased until such time that the state tax rates become adjusted to reduce the impact caused by the probable increase in the state taxable wage base. It is our understanding that tax receipts under HR 12625, between 1970 and 1975, would produce a surplus of 1.7 billion dollars over the Department of Labor's projected administrative costs, which would be far in excess of revenues needed to finance any extended benefits. Although there is little doubt that the Department will need additional revenue for administrative purposes as well as for the extended benefits program, Alcoa believes it would be far more realistic to meet the increased costs only through increases in the tax rate at this time, with moderate increases in the base in the future as conditions require from time to time.

STATEMENT OF B. C. HUSELTON, VICE PRESIDENT, PERSONNEL AND PUBLIC RELATIONS, ARMCO STEEL CORP.

UNEMPLOYMENT COMPENSATION

My name is B. Chandler Huselton. I am Vice President-Personnel and Public Relations for Armco Steel Corporation. Our company is an organization made up of 45.000 men and women, the majority of whom work in basic steel production or fabrication. Armco operates 10 steel-producing plants in the United States. 35 specialized manufacturing operations in the United States and 39 fabricating plants in 22 countries in the free world. About 8,000 of our people are employe by our foreign operations and the largest concentrations of our domestic employees are located in California, Kentucky, Missouri, Ohio, Pennsylvania and Texas. We are opposed to the provisions of H.R. 12625 on two basic grounds:

1. The financing provisions proposed are unfair to high-wage employers: 2. The bill would change some aspects of a state program into a Federal program.

1. The financing provisions of H.R. 12625 (Sections 301-305) are unfair to high-wage employers. The proposal to increase the taxable wage base from $3.000 to $4.800 in 1972 and again to $6.000 in 1974 places most of the increased tax load on those employers that are already paying the most. It is our understanding that the need for increased revenues at the Federal level is primarily for administrative costs. It would, therefore, be far more equitable for the increased

costs to be borne by all employers, since all employers contribute to the administrative work load. We believe that any such needed revenue increases should be met by increases in the tax rate rather than the tax base.

The proposed increases in the Federal taxable wage base would trigger increases in state wage bases, since no state would want to lose control of the major portion of this tax revenue. Without remedial changes in the rate structures of the several states, high-wage employers would also pay increased state unemployment compensation taxes.

From a practical standpoint, additional revenue realized from a tax rate increase can be more accurately predicted than revenue from a change in the wage base. Thus, a change on the tax rate would give greater assurance that revenue produced would come close to revenue needed to pay unemployment compenesation benefits.

In its present form the proposed legislation would double Armco's unemployment compensation taxes. We believe first consideration should be given to an increase in the tax rate rather than the taxable wage base.

2. Proposals within the New Federal Standards Governing Eligibility for State Benefits (Section 121) restrict the rights of individual states in creating their standards and administering their own unemployment compensation programs. We believe that the rules for benefit eligibility should remain with the individual states.

Hon. WILBUR D. MILLS,

BLUE BIRD FOOD PRODUCTS Co.,
Philadelphia, Pa., October 6, 1969.

Chairman of the Committee on Ways and Means,
Washington, D.C.

DEAR MR. MILLS: We are most distressed at the prospect of an increased taxable wage base for Pennsylvania as provided in the above bill. Pennsylvania unemployment rates have been carefully constructed, and we feel are equitable and practical predicated on the present taxable wage base of $3,600.00. For us an increase in the taxable wage base can only mean increased cost and an "out of tune" rate structure.

We, therefore, strongly urge you to amend H.R. 12625 to allow each state to establish its taxable wage base on the basis of need rather than in conformance with Federal Unemployment Tax Standards.

Very truly yours,

JOHN I. MACKERELL, Controller.

THE BUDD Co., Philadelphia, Pa., October 2, 1969.

Hon. WILBUR D. MILLS,
House Office Building,
Washington, D.C.

DEAR CONGRESSMAN MILLS: The proposals of the Labor Department incorporated in H.R. 12625 now pending before the Ways and Means Committee to extend the coverage, establish eligibility standards, increase the tax base and otherwise revise the Federal Unemployment Compensation Laws will be unreasonably costly and unfair to large employers with favorable, well-established unemployment compensation practices, especially those who have entered into long-term collective bargaining agreements with their employees to pay supplemental unemployment benefits. While it is true that theoretically the proposed increases in the taxable wage base might permit future reduction in rates, practically, that is never the result. Thus, under the proposed bill, a large employer like The Budd Company, which under the unemployment compensation laws of the various states in which it is engaged in business and in accordance with its agreements with its employees already pays for a better scheme of benefits with fuller coverage than H.R. 12625 would require, would nonetheless have its unemployment compensation tax costs, aggregate Federal and State, nearly doubled, from a present annual amount approaching $1,700,000 to a proposed amount estimated to reach $3,100,000. To give you some idea of the burden of that increased cost, $1,400,000 is more than 16% of the world-wide average annual earnings of The Budd Company, more than 38% of average annual dividends paid to its shareholders, for the past five years!

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