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UNEMPLOYMENT INSURANCE

TUESDAY, DECEMBER 12, 1950

HOUSE OF REPRESENTATIVES,

SUBCOMMITTEE OF THE COMMITTEE ON WAYS AND MEANS,

Washington, D. C.

The subcommittee met, pursuant to call, at 10 a. m., in room 213, Old House Office Building, the Honorable Aime J. Forand (chairman of the subcommittee) presiding.

Mr. FORAND. The subcommittee will come to order.

The Subcommittee on Unemployment Insurance of the Committee on Ways and Means of the House of Representatives meets today pursuant to the following authorization:

(1) Section 136 of the Legislative Reorganization Act of 1946, which provides that

Each standing committee of the Senate and House of Representatives shall exercise continuous watchfulness of the execution by the administrative agencies concerned of any laws, the subject matter of which is within the jurisdiction of such committee.

(2) House Resolution 293, agreed to by the House of Representatives on August 17, 1949, copy of which is submitted for the record. (3) Action taken unanimously by the Committee on Ways and Means on July 12, 1950, to establish a Subcommittee on Unemployment Insurance

to maintain scrutiny over the administration of, and to recommend to the full committee any necessary amendments to, the following laws:

1. Title III of the Social Security Act (relating to grants to States for unemployment-compensation administration).

2. Title XII of the Social Security Act (relating to advances to State unemployment funds).

3. Title XIII of the Social Security Act (relating to reconversion unemployment benefits for seamen).

4. Subchapter C of chapter 9 of the Internal Revenue Code (relating to the tax on employers of eight or more).

5. All other phases of unemployment insurance legislation.

(4) Appointment of the subcommittee of four members by the chairman of the Committee on Ways and Means as announced in a press release dated July 29, 1950, copy of which is submitted for the record.

Mr. Byrnes was subsequently appointed a member of the subcommittee, and we welcome Mr. Byrnes to our ranks.

(5) Agreement reached by Subcommittee on Unemployment Insurance at a meeting on December 7, 1950, to begin hearings on pending unemployment insurance legislation on Tuesday, December 12, 1950, at 10 a. m., as announced in a press release of the same date, copy of which is also submitted for the record.

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If there is no objection, the Chair also offers for the record a copy of the message of the President of the United States on unemployment insurance, dated April 6, 1950, which has been published as House Document No. 547, Eighty-first Congress, second session, and a copy of H. R. 8059, which was introduced on the same date by the Honorable John W. McCormack, the majority leader.

Is there objection? The Chair hears none, and it is so ordered. (The items offered for the record are as follows:)

[H. Res. 293, 81st Cong., 1st sess.]
RESOLUTION

Resolved, That the Committee on Ways and Means, acting as a whole or by subcommittee, is authorized and directed to conduct thorough studies and investigations of all matters coming within the jurisdiction of such committee.

SEC. 2. For the purposes of this resolution, the committee, or any subcommittee thereof, is authorized to hold such hearings, to sit and act during the present Congress at such times and places, within or without continental United States, as the committee may determine, whether or not the House is in session, has recessed, or has adjourned, to require the attendance of such witnesses and the production of such books, papers, and documents by subpena or otherwise, and take testimony, as it deems necessary. Subpenas may be issued under the signature of the chairman of the committee and shall be served by any person designated by such chairman. The chairman of the committee or any member designated by him may administer oaths to witnesses.

[Press Release, Washington, D. C., July 29, 1950]

CHAIRMAN DOUGHTON ANNOUNCES APPOINTMENT OF WAYS AND MEANS SUBCOMMITTEES ON UNEMPLOYMENT INSURANCE AND ON CUSTOMS ADMINISTRATION AND FOREIGN-TRADE ZONES

Chairman Doughton of the House Committee on Ways and Means today announced the appointment of the following subcommittees:

Subcommittee on Unemployment Insurance: Aime J. Forand (Democrat, Rhode Island), Chairman; J. M. Combs (Democrat, Texas); John A. Carroll (Democrat, Colorado); Noah M. Mason (Republican, Illinois); John W. Byrnes (Republican, Wisconsin).

Subcommittee on Customs Administration and Foreign-Trade Zones: Wilbur D. Mills (Democrat, Arkansas), Chairman; Noble J. Gregory (Democrat, Kentucky); A. Sidney Camp (Democrat, Georgia); Hale Boggs (Democrat, Louisiana); Thomas A. Jenkins (Republican, Ohio); Richard M. Simpson (Republican, Pennsylvania); Hal Holmes (Republican, Washington).

Mr. Doughton had previously announced the appointment of a seven-man Subcommittee on Administration of the Internal Revenue Laws under the chairmanship of Walter A. Lynch (Democrat, New York), with the following other members: Cecil R. King (Democrat, California); Thomas J. O'Brien (Democrat, Illinois); Stephen M. Young (Democrat, Ohio); Robert W. Kean (Republican, New Jersey); Carl T. Curtis (Republican, Nebraska); John W. Byrnes (Republican, Wisconsin).

Mr. Doughton stated that the subcommittees are being established in fulfillment of the responsibility of the Committee on Ways and Means to maintain scrutiny over the administration of legislation within the jurisdiction of the Committee on Ways and Means. He cited section 136 of the Rules of the House of Representatives, which provides that, "to assist the Congress in appraising the administration of the laws and in developing such amendments or related legislation as it may deem necessary, each standing committee of the Senate and the House of Representatives shall exercise continuous watchfulness of the execution by the administrative agencies concerned of any laws, the subject matter of which is within the jurisdiction of such committee."

Mr. Doughton also announced that representatives of the Department of Defense have been asked to appear at executive hearings scheduled before the full committee for next Wednesday, August 2, 1950, at 10 p. m. for consideration of H. R. 9246 (to provide for the renegotiation of contracts, and for other purposes), introduced by Mr. Vinson, chairman of the Committee on Armed Services.

[Press Release, December 7, 1950]

WAYS AND MEANS SUBCOMMITTEE SCHEDULES UNEMPLOYMENT INSURANCE HEARINGS

Chairman Aime J. Forand (Democrat, Rhode Island) of the Ways and Means Subcommittee on Unemployment Insurance announced today that the subcommittee will_begin_hearings on pending unemployment insurance legislation next Tuesday, December 12, at 10 a. m.

First witnesses will be Secretary of Labor Tobin and other spokesmen for the Department of Labor. State officials and representatives of organized labor, management, and the public will then be heard.

Chairman Forand stated that, although legislation during this Congress is not possible, the hearings will develop facts that can be used as a basis for a report to the full committee.

Mr. Forand added, "A period of low unemployment affords an opportunity for careful and objective consideration of a most important segment of our socialsecurity system. Moreover, even with present record employment levels, there will be temporary dislocations resulting from conversion to defense production.” Other members of the subcommittee are Representatives J. M. Combs (Democrat, Texas); John A. Carroll (Democrat, Colorado); Noah M. Mason (Republican, Illinois); and John W. Byrnes (Republican, Wisconsin).

[H. Doc. No. 547, 81st Cong., 2d sess.]

MESSAGE FROM THE PRESIDENT OF THE UNITED STATES TRANSMITTING A MESSAGE ON UNEMPLOYMENT INSURANCE

To the Congress of the United States:

One of the great advances in economic legislation made during the 1930's was to establish the Federal-State system of employment security. This system has two parts-first, a Nation-wide employment service to help workers find jobs and employers find job seekers, and, second, a Nation-wide system of unemployment insurance to help tide workers over periods of unemployment.

Finding a job is of more importance to an unemployed worker, of course, than receiving unemployment-insurance benefits. Consequently, great emphasis has always been placed on strengthening and improving the employment service.

We cannot, however, completely eliminate unemployment; even in times of high employment, there will be turn-over of jobs and numerous shifts and changes in job opportunities. Consequently, we must have a strong and steadily improving system of unemployment insurance.

Under our Federal-State unemployment-insurance system, benefits are paid, in accordance with State laws, to workers who, while able and seeking to work, are unemployed through no fault of their own. These benefits are paid from the proceeds of State pay-roll taxes, which are deposited in reserve accounts-one for each State-in the unemployment trust fund in the United States Treasury.

In the past 12 years, unemployment insurance has proved its worth not only as an invaluable source of support to unemployed workers and their families, but also as a means of maintaining purchasing power of great value to the entire. economy. In 1949, for example, 1.7 billion dollars in benefits were paid to more than 7,000,000 individuals, the largest amount for any year in the history of the system. This was a significant factor in preventing serious dislocations during last year's period of economic readiustment.

Our experience with unemployment insurance has revealed weaknesses as well as strengths in the existing system. While many improvements have been made in the State laws since the program began, the system is far from adequate today. Over 15,000,000 workers-about one-third of all employees-are not protected by unemployment insurance. In 1949 only about one-fifth of the purchasing power lost through unemployment was replaced by unemployment insurance benefits. In 1949 weekly benefits averaged only about $20-not enough to preserve a minimum standard of living. Nearly 2,000,000 workers used up their benefits entirely-showing that benefits were not available for a long enough period. While the unemployment reserve funds of the States have so far proved to be adequate, a few States may soon face financial difficulties because of local concentration of unemployment.

On several occasions in recent years, I have recommended that the system be improved so as to extend protection to many workers not now covered; to provide,

in every State, benefits for 26 weeks ranging up to $30 a week for single persons, with additional benefits for dependents; and to increase the financial stability of the system.

Action on these proposals has become more urgent as unemployment has increased somewhat in spite of the continuing high levels of business activity. While unemployment dropped over half a million between February and March, on the average nearly 41⁄2 million persons were looking for work during the first 3 months of this year, as compared to 3 million in the same months of 1949, and nearly 21⁄2 million in 1948. Furthermore, the length of time it takes people to find jobs is becoming longer. One million people-about one out of every four unemployed-have been out of work for 15 weeks or more. A year ago only 420,000 were without jobs that long, and in 1948 only 330,000.

This gradual growth in unemployment over the last 2 years is not because there are fewer jobs. Employment has remained at high levels, along with industrial production, consumer incomes, and other indicators of the health of our economy.

But there are more people looking for work. In recent years, up to 1,000,000 more people have come into the labor market each year, looking for work, than have left the labor market. Part of the new group entering the labor market this year will be the largest number of college graduates in our history-some 500,000 young people, including about 250,000 veterans. In addition, of course, a large number of high-school graduates will also be looking for jobs.

Furthermore, as new plants and equipment have been added and supplies of raw materials have become more ample, businessmen have been able to produce more with the same number of workers.

Thus, our labor force has increased, our productivity has increased, but the. number of jobs has not kept pace. This emphasizes the importance of expanding our economy so that new jobs will be created to use skills and energies that are now being wasted. It also emphasizes the importance of making better provision for those who are temporarily out of work.

The Congress now is well along toward completing action on legislation to improve the old-age and survivors' insurance and public assistance programs. Like those programs, the unemployment insurance system needs to be improved in the light of experience. Accordingly, I recommend that the Congress turn its attention as soon as possible to strengthening our Federal-State unemployment insurance system.

First, I recommend that coverage be extended to about 6,000,000 workers not now covered. The first major deficiency in the present Federal-State system of unemployment insurance is that it excludes large numbers of workers.

Coverage should be extended to employees of small firms-those employing one to seven workers. Workers in firms employing fewer than eight workers were originally left out of the Federal law because of expected administrative difficulties. In fact, however, such employees have been satisfactorily covered for years under the Federal old-age and survivors' insurance system, and 17 States have already extended their unemployment compensation systems to cover them, without encountering any serious administrative difficulties. Many other States are waiting for the Federal Government to act and have provisions in their laws which would cover these employees automatically when the coverage_of_the Federal act is extended. No reason exists for discriminating longer in the Federal law against such workers.

Coverage should also be extended to Federal Government civilian employees. Although the Federal Government took the leadership in establishing a system of unemployment insurance for workers in private industry, it has not assumed the same obligation toward its own employees. Yet the rate at which Federal workers-especially manual workers are separated from their jobs is approximately as high as in private industry. Federal workers should no longer be denied the protection of unemployment insurance.

I also propose extensions of coverage to about 500,000 persons who are employed on a commission basis, and about 200,000 workers in occupations of an industrial nature connected with agriculture, all of whom are excluded at present. Moreover, the Federal unemployment-insurance legislation should be extended to Puerto Rico, subject to its acceptance by the Territorial legislature.

Second, I recommend the establishment of Nation-wide minimum levels for amounts and duration of unemployment benefits, in order to correct the second major deficiency in the present insurance system-the inadequacy of benefits. At present, while the Federal law includes a number of standards which the States are required to meet, it does not establish minimum levels for benefit

amounts or duration. Maximum weekly benefits in the various States now range from $15 to $27 for single persons. Benefits are somewhat larger for persons with dependents in the 11 States providing dependents' allowances. With these maximum levels, average weekly benefits for the Nation as a whole were just over $20 in 1949.

The variations among States create serious inequities. They mean that workers who lose their jobs in identical circumstances are treated very differently because of the accident of geographical location. They mean that businessmen in some States suffer a greater loss in markets when unemployment occurs than do those in other States.

Furthermore, while the States have generally increased benefits in recent years, so that the situation is not nearly so bad as in the case of old-age and survivors benefits, in most States the increases in benefits have lagged considerably behind increases in wages and costs of living. Thus, unemployment benefits today replace a smaller proportion of a worker's regular wages than was the case when the system was started.

For these reasons, I believe that Nation-wide minimums should be established by law which will assure adequate benefits in all States. The standards proposed are these: Benefits for single persons should approximate 50 percent of normal earnings, up to a maximum of at least $30 a week. Additional allowances should be granted for individuals with dependents. The proportion of previous earnings replaced would vary with the number of dependents, up to a maximum of 70 percent of wages, or $42, whichever is lower, for an individual with three or more dependents.

These standards are not high. If they had been in effect, the national average weekly benefits in 1949 would have been just over $24. But this would be a substantial improvement in an income level which, at best, is intended to provide only for subsistence expenses. Furthermore, uniform standards would reduce present inequities in benefit levels among different States. Some variation in benefit amounts would and should remain, reflecting the differences in wage levels and costs of living in different parts of the country.

At present, the maximum duration of benefits varies among the States from 12 to 26 weeks. Like the variation in size of benefits, this is inequitable, and in many States simply represents a lag in reaching what was considered from the beginning to be a desirable standard, but which was originally set low because of actuarial uncertainties. With this wide range, the average duration of benefits in 1949 was less than 13 weeks. Because of the short duration of benefits, nearly 2,000,000 workers exhausted their rights to benefits before finding another job.

Benefits should be available for at least 26 weeks in a year to all workers who are out of work that long. Experience in the States which have increased the duration of benefits is that while average duration does not rise very much, because most workers find a new job before using up benefits, the number who use up their benefits entirely is markedly decreased. It is estimated that, under my proposal, the number of workers who exhausted their benefits in 1949 would have been only half as large as it was.

The combined effect of my recommendations for extended coverage, higher benefits, and longer duration, would have resulted in about $850,000,000 more in benefits, and in consumer demand, in 1949. The cost of these improvements would be moderate. At the same time that weekly benefits are raised, the upper limit to the amount of wages taxed should be raised from $3,000 to $4,800 per worker, in line with the increases in wage levels. On this basis, the combined cost of all benefits for all States under these proposals would have been about 1.2 percent of taxable pay rolls in 1948 and 2.5 percent in 1949 compared with actual costs (on the basis of the present $3,000 wage limit) of 0.9 percent of taxable pay rolls in 1948 and 2.2 percent in 1949.

In most States the rate of tax has been extremely low in recent years-many employers have had to pay no tax whatever. Some States have had to increase rates somewhat last year or this year, but in all but a few cases taxes are still well below the rate of 2.7 percent contemplated when the system was started. Under my proposals many States would not have to increase tax rates to cover all the increased costs, since they still have excess reserves. Most, if not all, States would find no trouble meeting the additional costs within the 2.7 percent

tax rate.

Consequently, I believe that the standards I propose will achieve substantial improvement in the unemployment insurance system, benefiting both workers and businessmen, at very reasonable costs. As is the case at present with respect to coverage, the Federal law should not prevent the States from exceeding the minimum standards if they wish to do so.

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