in the same amount, on the same terms and subject to the same conditions as the compensation which would be payable to such individual under the unemployment compensation law of the State in which he last performed Federal service if such individual's Federal service and Federal wages had (subject to regulations of the Secretary of Labor concerning the allocation of such service and wages among the several States) been included as employment and wages under such law: Provided, That in the case of a Federal employee who last performed Federal service outside of any State, his compensation shall be determined under the unemployment compensation law of the State of his residence.

"(c) If in the case of any State an agreement is not entered into under this section, or if the State agency of any State party to any such agreement fails to make payments in accordance with such agreement, the Secretary, in accordance with regulations prescribed by him, shall make payments of compensation to Federal employees who file claims for compensation which are payable under such agreement, or would be payable if such agreement were entered into, on a basis which will provide that they will be paid compensation in the same amounts, on substantially the same terms, and subject to substantially the same conditions as though such agreements had been entered into and such agency made such payments. Final determination by the Secretary of entitlement to such payments shall be subject to review by the courts in the same manner and to the same extent as is provided in section 205 (g) of title II of the Social Security Act, as amended, with respect to decisions under such title.

"ADJUSTMENT OF DUPLICATE BENEFITS

"SEC. 1404. Where compensation is payable to a Federal employee under this title and where for the same period an allowance is received under title V of the Servicemen's Readjustment Act of 1944, as amended, the amount of such allowance shall be deducted from the compensation payable under this title under regulations prescribed by the Secretary.

"PAYMENT OF ACCRUED ANNUAL LEAVE

"SEC. 1405. For the purposes of this title, employment of a Federal employee by the United States shall not be deemed to have been terminated upon cessation of Federal service until the expiration of any period with respect to which he has received or is receiving payment of annual leave accrued pursuant to the Act of March 14, 1936 (49 Stat. 1161), as amended, or pursuant to any other applicable law.

"OPERATION

"SEC. 1406. (a) Determination of entitlement to payments of compensation by a State agency under an agreement under this title shall be subject to review in the same manner and to the same extent as determinations under the State unemployment compensation law, and only in such manner and to such extent.

"(b) For the purpose of payments made to a State under title III of the Social Security Act, as amended, administration by the State agency of such State pursuant to an agreement under this title shall be deemed to be a part of the administration of the State unemployment compensation law.

"(c) The State agency of each State shall furnish to the Secretary such information as the Secretary may find necessary or appropriate in carrying out the provisions of this title, and such information shall be deemed reports required by the Secretary for the purposes of paragraph (6) of subsection (a) of section 303 of the Social Security Act, as amended.

"PAYMENTS TO STATES

"SEC. 1407. (a) Each State shall be entitled to be paid by the United States an amount equal to the additional cost to the State of payments of compensation made under and in accordance with an agreement under this title, which would not have been incurred by the State but for the agreement.

"(b) In making payments pursuant to subsection (a) of this section, there shall be paid to the State, either in advance or by way of reimbursement, as may be determined by the Secretary, such sum as the Secretary estimates the State will be entitled to receive under this title for each calendar quarter, reduced or in

creased, as the case may be, by any sum by which the Secretary finds that his estimates for any prior calendar quarter were greater or less than the amounts which should have been paid to the State. The amounts of such payments may be determined by such statistical sampling, or other method as may be agreed upon by the Secretary and the State agency.

"(c) The Secretary shall from time to time certify to the Secretary of the Treasury for payment to each State sums payable to such State under this section. The Secretary of the Treasury, prior to audit or settlement by the General Accounting Office, shall make payment to the State in accordance with such certification, from the funds for carrying out the purpose of this title.

"(d) All money paid a State under this title shall be used solely for the purposes for which it is paid; and any money so paid which is not used for such purposes shall be returned to the Treasury upon termination of the agreement.

"(e) An agreement under this title may require any officer or employee of the State certifying payments or disbursing funds pursuant to the agreement, or otherwise participating in its performance, to give a surety bond to the United States in such amount as the Secretary may deem necessary, and may provide for the payment of the cost of such bond from funds for carrying out the purposes of this title.

"(f) No person designated by the Secretary, or designated pursuant to an agreement under this title, as a certifying officer, shall, in the absence of gross negligence or intent to defraud the United States, be liable with respect to the payment of any compensation certified by him under this title.

(g) No disbursing officer shall, in the absence of gross negligence or intent to defraud the United States, be liable with respect to any payment by him under this title if it was based upon a voucher signed by a certifying officer designated as provided in subsection (f) of this section.

"PENALTIES

"SEC. 1408. (a) Whoever, for the purpose of causing any compensation to be paid under this title or under an agreement thereunder where none is authorized to be so paid, shall make or cause to be made any false statement or representation as to any Federal or other wages paid or received, or whoever makes or causes to be made any false statement of a material fact in any claim for any compensation authorized to be paid under this title or under an agreement thereunder, or whoever makes or causes to be made any false statement, representation, affidavit, or document in connection with such claim, shall, upon conviction thereof, be fined not more than $1,000 or imprisoned for not more than one year, or both.

"(b) Whoever shall obtain or receive any money, check, or compensation under this title or an agreement thereunder, without being entitled thereto and with intent to defraud the United States, shall, upon conviction thereof, be fined not more than $1,000 or imprisoned for not more than one year, or both.

"REGULATIONS

"SEC. 1409. The Secretary of Labor is hereby authorized to make such rules and regulations as may be necessary to carry out the provisions of this title.

"APPROPRIATIONS

"SEC. 1410. There are hereby authorized to be appropriated out of any moneys not otherwise appropriated such sums as are necessary to carry out the provisions of this title."

Mr. FORAND. The first speaker scheduled for this morning was to be the Secretary of Labor, the Honorable Maurice Tobin. Mr. Tobin has been called to the White House and expects to be here later. So if there is no objection, the subcommittee will now hear Mr. Goodwin, Director of the Bureau of Employment Security, and we will interrupt you, Mr. Goodwin, when the Secretary arrives and permit him to make his statement.

Mr. Goodwin, do you have a statement to present?

STATEMENT OF ROBERT C. GOODWIN, DIRECTOR, BUREAU OF EMPLOYMENT SECURITY, UNITED STATES DEPARTMENT OF LABOR

Mr. GOODWIN. Yes, I do.

Mr. FORAND. Would you prefer to make your statement without interruption?

Mr. GOODWIN. Whichever you wish.

Mr. FORAND. That will be left to the committee.

You may proceed, Mr. Goodwin.

Mr. GOODWIN. Mr. Chairman and members of the committee, I am glad to have this opportunity to present my views and the views of the Bureau of Employment Security on the unemployment insurance legislation. Unemployment insurance is now this country's main defense against the effects of economic maladjustments which create unemployment and reduce consumer income. Even as simply a fiscal device, it is the only program which operates automatically, in direct relation to the volume of unemployment to augment the stream of purchasing power whenever and wherever unemployment causes wage To illustrate, unemployment rose from about 1.6 million in October 1948 to a high of a little over 4,000,000 in July 1949, then, after a dip, to a new postwar high of about 4.7 million in February 1950. Unemployment benefits likewise rose from 55.4 million dollars in October 1948 to 170.6 million dollars in August 1949 and, after a slight drop, to $187,000,000 in March 1950. Since then it has dropped to less than $60,000,000 for October. Throughout this period retail sales remained at a high level. This compensatory flow of funds is widely and correctly accepted as a major factor in counteracting economic set-backs and in thwarting the development of those chain reactions which lead to depressions.

Of course, unemployment insurance is more than a fiscal device to maintain the health of our economy. As the Secretary will point out in his statement later, its purpose is to meet the needs of human beings whose income is interrupted because of lack of work. Therefore we must consider the program not only in the light of its general effect on the economy but, what is even more significant, from the standpoint of how well, for the individual, it is compensating wage loss.

Our Nation-wide system of unemployment insurance was established by the Social Security Act in 1935. Under it, a Federal tax of 3 percent was placed on the payrolls of employers having 8 or more employees engaged, generally, in commercial and industrial employment. If the employer's payroll is subject to tax under a State law meeting standards set forth by Congress in the Social Security Act, he is entitled to a credit against the Federal tax, up to 90 percent of the Federal tax, that is, 2.7 percent. States meeting standards prescribed in the Social Security Act are also entitled to grants from moneys appropriated by Congress, for the costs of administration. The standards are, on the whole, of an administrative character, not prescribing the conditions of eligibility for benefits, their amount or duration. One standard, however, prohibits disqualification from benefits under certain conditions which would undermine labor standards.

In the 15 long years since 1935 the unemployment insurance program has not been subjected to any substantial revision by Con

gress, such as that recently made for the old-age and survivors insurance program. This is true in spite of the fact that the program has been criticized severely because of gaps in coverage, inadequate benefit payments for too short a duration, disqualifications which thwart the objectives of the program, and insecure financing. The staff report of the Ways and Means Committee in 1946 clearly pointed to these shortcomings. Earlier, in 1944, the reports of the House and Senate Committees on Postwar Economic Policy and Planning pointed out that the program needed strengthening in a number of respects, especially regarding coverage and benefit provisions. All of these areas were regarded as having serious shortcomings by the Advisory Council to the Senate's Finance Committee, in its report in 1948, and by the Federal Advisory Council in its recent report.

The need for action is no less now than earlier in the program's history. Immediate action by the Congress can promptly resolve such problems as the Knowland amendment, noncoverage of significant components of our economy, and inadequate authorization to handle the problems of interstate workers. An immediate improvement in the benefit structure of the program is also required. However high the level of total production and of private and public expenditures for goods and services, some unemployment is inevitable and is now occuring as shifts take place in the economy because of shortage of materials or productive facilities, geographical shifts in plant locations, shifts in the objectives of public spending and in foreign commitments and, of course, the continuing factor of never being able completely to achieve a perfect matching of men and jobs. The heavy responsibility which the Federal Government now has for the level of national production emphasizes its equally great responsibility to those who, because of economic changes, involuntarily suffer unemployment.

However, it must be recognized that any action taken now by Congress to make benefit provisions more adequate will not become effective until after State legislatures have had an opportunity to amend the State laws to conform with such action. This inevitable lag emphasizes the need for congressional action now if we are going to be able to meet the stresses and strains to which the economy of our country will be subjected within the next few years.

Mr. MASON. May I interrupt, Mr. Chairman?

Mr. FORAND. Mr. Mason.

Mr. MASON. There are just two questions on that page 3. At the top of the page, in the first line, you say:

and by the Federal Advisory Council in its recent report.

When was that report issued?

Mr. GOODWIN. The date of that was March of 1950.

Mr. MASON. Is a copy of that available for us so that we may have the background on this?

Mr. GOODWIN. Yes, sir.

Mr. MASON. And at the third line from the bottom, you referred to "the need for congressional action now." You do not mean congressional action at this short session?

Mr. GOODWIN. Oh, no.

Mr. MASON. All right.

EXTENSION OF COVERAGE

Mr. GOODWIN. One of the major deficiencies of the unemployment insurance program is found in its incomplete coverage, the fact that nearly one-third of the workers of this country who are dependent upon wages and salaries for their livelihood, totaling almost 15,000,000 men and women, are outside the program's protection. This weakness was identified as a serious one and deserving of correction in the report of the technical staff of this very committee in 1946, in the 1949 report of the Advisory Council on Social Security to the Senate Finance Committee, and by the Federal Advisory Council. The social-security amendments of 1950, Public Law 734, demonstrates the recognition by this Congress, and particularly by this committee, of the importance of extension of coverage of the old-age and survivors insurance program. It appears appropriate that the strengthening of the old-age and survivors insurance system by the inclusion of nearly 10,000,000 workers should be promptly followed by a comparable improvement in the unemployment insurance program.

An indication of the magnitude of the gap in the protection afforded by the program is found in the fact that only $1 out of every $M lost in wages during 1949 on account of unemployment was replaced by unemployment insurance. Of course, not all of this difference was due to coverage exclusions, but the removal of the exclusions will go far toward closing this gap. In considering the need for broadening the protection of the program, your committee's technical staff pointed out, more than 4 years ago:

The Congress in effect limited unemployment compensation protection to specified groups of workers when it passed the Social Security Act * ** The question now arises as to whether the considerations which initially influenced the Congress to treat some groups of citizens differently from other groups, when the only essential difference between them is the kind of work they do or the size of firm in which they work, still prevail, or whether the national interest now requires their coverage. If complete protection of groups now excluded is considered essential to the national interest, it can be assured only by extending the Federal act so as to make it apply to them (p. 458).

In absolute terms, the number of individuals in employments covered by the State unemployment insurance laws has increased markedly over the past dozen years. From average monthly employment of about 20,000,000 in 1938, covered employment rose to 34,000,000 in October 1950. While much of this increase has resulted from the growth of our labor force, it also reflects changes in the size-of-firm provisions of the State laws which have taken place. About half of the States have broadened their size-of-firm provisions and a few have covered some types of employment not under the Unemployment Tax Act. Maritime service, however, represents the only type of work originally excluded to which coverage has been extended on a general scale. Approximately 6,000,000 additional workers could now be protected against unemployment with no substantial legal or administrative difficulties by extending coverage to employees in small firms, the Federal Government, border line agricultural services, and to those excluded by the present restrictive definition of "employee". The Department of Labor strongly recommends those changes at this time.