When did the advisory committee first meet under your administration, approximately?

Secretary TOBIN. With great promptness following the Bureau of Employment Security coming into the Department of Labor. Mr. MASON. I have been told that it was around September 1949. Secretary TOBIN. I would say that it was September 1949. Mr. MASON. How many meetings have they had?

Secretary TOBIN. I would be glad to submit that for the record, which is the best way, rather than for me to just generalize as to the number of meetings they have held and the number of days that they have been in session. I will be delighted to provide that.

Mr. MASON. I wish you would, Mr. Secretary, because I understand that they met in September and that they met in October and that in November you issued a statement of principle which you sent out to the heads of unemployment in each State, requesting their reaction to it. Then I understand that you called this Council into session in December of that same year and submitted the statement of principles to them for their action at that time, but that they hadn't been consulted before you sent that statement out.

Secretary TOBIN. Who hadn't been consulted?

Mr. MASON. These members of your Advisory Council.

Secretary TOBIN. Well, they appointed a subcommittee and gave authority to that subcommittee, within the framework of certain basic principles that they had laid down, to write a report and to make recommendations. I think you will find in the records that there was a subcommittee of six appointed and that that subcommittee of six went forward and spent a great deal of time studying the various phases of unemployment compensation insurance.

Mr. MASON. On page 5 of your statement you state:

At the conclusion of my remarks, I would like to submit to the committee the conclusions reached by the Council in respect to strengthening our unemployment insurance program.

Do you have those conclusions? Do you have a report giving those conclusions?

Secretary TOBIN. Yes. I will be glad to leave a copy with the committee.

Mr. MASON. Mr. Goodwin told me yesterday, or the day before, that he would file that for the record, and that is one thing that I would like to have.

Secretary TOBIN. Congressman Mason, I have here a copy which I present to you.

Mr. MASON. Thank you. We want that as a part of the record. Mr. FORAND. Without objection, it will be made a part of the record. (The report is as follows:)

STRENGTHENING UNEMPLOYMENT INSURANCE

Conclusions of Report of the Federal Advisory Council to the Secretary of Labor, and the Director, Bureau of Employment Security

CONCLUSIONS

The Council has reviewed the experience in the Federal-State system of unemployment insurance. We have noted the accomplishments of the program and outlined major objectives that unemployment insurance should accomplish.

We have unanimously agreed that substantial defects and gaps exist that require speedy correction. The urgency of action is increased by an official report that nearly 5,000,000 workers are now unemployed.

Our recommendations for improvement can best be indicated in connection with a summary of the shortcomings of the program already outlined.

1. Gaps in coverage

About one-third of all jobs are not covered, so that approximately 15,000,000 workers have no protection and others have too little. If these gaps in coverage are to be closed, Federal action is indispensable. Therefore the Council particularly urges immediate extension of coverage to employers of one or more employees by removal of the present restriction of coverage of the Federal unemployment tax to employers of eight or more employees. It also recommends that coverage be extended as far as is administratively feasible to the excluded groups. 2. Benefit amounts, duration, and disqualifications

Benefit amounts in too large a number of instances are below 50 percent of wages, principally because of the limitations imposed on weekly benefits by maximum provisions. More than one-half of new claimants are eligible for the maximum. Benefits average less than 40 percent of average wages. The Council believes that in those States where, in a significant number of cases, the maximum is operating to prevent payment of benefits in line with the principle of 50 percent of wages, the maximum limit on weekly benefit amounts should be raised to permit this principle to operate.

The Council is concerned that in many States more than one-half of those who received unemployment insurance benefits are exhausting their benefit rights before going back to their old job or finding a new one. More than 1.9 million workers exhausted benefits during 1949. They had drawn benefits for 18 weeks on the average. The evidence is clear that in at least a considerable number of States unemployment insurance is providing insufficient public protection of the normally employed throughout the first major phase of their unemployment. Twelve years' experience has demonstrated that no significant number of workers will take advantage of any extension of duration of benefits by purposely remaining unemployed. The Council recommends a duration on benefits of at least 26 weeks in a benefit year.

While disqualifying provisions are necessary to any sound unemployment insurance program, the Council is of the opinion that the present rate of 16 disqualifications out of every 100 otherwise eligible claimants is a cause for concern. Undoubtedly there are included in the group of those disqualified many who should have been disqualified, since their unemployment was not genuinely of an involuntary nature. It is also evident, however, that there were a very considerable number included who were in fact involuntarily unemployed. The tendency in general over the past several years has been in the direction of greater stringency in the disqualification provisions, with a resulting increase in the latter group.

This tendency has been due in part to evident of above of the syetem but also due in part to a tendency to limit benefits to unemployment directly attributable to the employer because of objections of employers to charging their accounts under experience rating with unemployment due to other causes, no matter how justifiable. The Council believes that the problem of chiseling and fraud can be met without penalizing workers who are genuinely unemployed. Disqualification provisions now in existence in many States which deny benefits to workers who are genuinely unemployed should be corrected.

The Council members do not agree on the most effective method of securing improvements in regard to benefit amounts, duration, and disqualifications. Some members, including all of the representatives of labor, advocate a completely national system of unemployment insurance and believe that this session of Congress should at least enact minimum Federal standards on benefit amounts, duration, and disqualifications. Other members, who do not believe federalization of the system is desirable, also believe that minimum Federal standards on these matters are necessary if the present Federal-State system is to be made reasonably adequate and satisfactory. Still other members of the Council, while recognizing deficiencies in present State laws, believe that the States can be relied upon to correct them. Without prejudice to the foregoing positions, the Council nevertheless unanimously agrees that deficiencies exist that should be corrected immediately.

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3. Interstate workers

The Council finds that there is a problem in reference to the payment of benefits to interstate workers. The problem has two parts: (1) prompt payment and (2) combining of wage credits. There are many thousands of claimants who are entirely or partially deprived of benefits or whose benefits are delayed. Efforts to get agreement among the States to combine wage credits on a voluntary basis have had only a limited success: seven States have refused to agree on any combination, and the others combine only when necessary to establish eligibility for benefits. There is no combining of wage credits to determine amount and duration of benefits. Undue delays exist in processing interstate claims. The Council agrees that Congress should give the Secretary of Labor authority to require State participation in methods for combining wage credits earned by workers in several States and for the payment of interstate claims in order to assure prompt and adequate payment of benefits in such situations.

4. Problems of financing

The costs of unemployment insurance inevitably vary in the different States because of the differences in the rates of insured unemployment which vary with the distribution of industries within the States. Rhode Island, for example, over the last decade has had a rate of unemployment several times that of Texas. Rhode Island should not have to suffer because of its small size and industrial characteristics. At present there is no provision to meet the financial problem which endangers the continued payment of benefits in States with high unemployment and costs. The Council recommends that the Federal unemployment account be used to assist such States in maintaining the solvency of their funds without jeopardizing their benefit standards.

Some members believe that such money should be made available as reinsurance grants, as recommended by the Secretary of Labor, in order to help offset continuing inequalities in rates of unemployment, and to avoid constitutional questions in about half the States concerning their ability to utilize loans; others believe that Federal loans such as provided in the George Act will be sufficient to meet the problem and fear that increased Federal control would result from the provision of reinsurance grants.

Under the experience-rating provisions in most State laws an employer contributions are cut when he can best afford to pay them and increased when he is least able to bear them. The Council believes that it is highly desirable to accumulate reserves during periods of peak business activities so as to make it unnecessary to levy as heavy taxes during periods of considerable unemployment. However, the fact that tax rates have been reduced, largely due to the extremely favorable war and postwar experience, should not act as a deterrent to the provision of adequate unemployment compensation now, even if increased rates are required. · The council urges that the Bureau of Employment Security pursue its study of methods of revising the present financing scheme to avoid high tax rates during depressions and low tax rates during prosperity.

The council recommends that the present taxable wage limit of $3,000 on annual earnings be substantially raised and if possible, be uniform with that for old-age and survivors insurance.

5. Appropriations and administration

The program has suffered from inadequate appropriations, which have affected the Federal Bureau as well as the State agencies and have especially hampered the functions of the public employment offices. The Council recommends to Congress the importance of adequate appropriations, including a contingency fund sufficiently large to cover probable needs. The Council further recommends immediate Federal legislation to earmark the proceeds of the Federal unemployment tax for the Federal unemployment account, to be used for administration and loans or reinsurance with the understanding that, when necessary, Congress should appropriate additional funds from the general funds of the Treasury out of the approximately $1,000,000,000 excess that has been collected from the Federal unemployment tax over administrative expenses of the system.

Congress should clarify the authority of the Secretary of Labor to require methods of administration which will prevent the payment of fraudulent claims as well as assure the prompt payment of benefits when due.

The council, in transmitting this report to the Secretary of Labor, urges him to continue taking vigorous steps to improve the unemployment insurance program, including submitting this report to the President and the Congress with an urgent

request for appropriate Federal action at this session of Congress and at the same time making the strongest representations to the State Governors that the States should take prompt action to correct the deficiencies in their laws, whether or not the Federal Government establishes minimum standards for the program.

Mr. MASON. Now, Secretary Tobin, you are recommending here that Federal employees be included in this unemployment group. That matter, as I remember, was taken up after World War II, and the argument against it then was that they had leave pay coming which took the place of unemployment insurance and which tided them over that change in employment. Isn't that true now?

Secretary TOBIN. Mr. Mason, the only leave they would have would be any vacation pay that they have not received, but it has to be within the calendar year. But it would carry them for only a very short period of time. There was no separation pay as such for any Federal employees.

Mr. MASON. I thought there was terminal leave pay granted at that time.

Secretary TOBIN. Our proposal was that in the event they did have accumulated leave that they had not taken, they would not be entitled to unemployment compensation until such leave as they were entitled to in the calendar year had been used, and since that dies at the end of the calendar year the unemployment compensation would not be paid until their leave had terminated.

Mr. MASON. Referring to the second paragraph on page 6, as I read it, I understand that it is an argument to place the benefits paid Federal employees on an experience rating proposal. Is that the substance of the second paragraph on page 6?

Secretary TOBIN (reading). Our increased defense effort will, of course, require the employment of thousands of additional Federal civilian workers for at least a temporary period of time. It is imperative, therefore, that prompt action be taken on this proposal.

Well, Congressman Mason, it is my feeling that if the Government of the United States felt it proper and right that private employers should be members of an insurance system that will protect workers when they are laid off, certainly the Government of the United States should at least live up to the same standards, and that is why I strongly urge that there is a need for a prompt enactment of this legislation. There will be areas over the country where a great many employees will be laid off-and they were laid off in many instances right in the middle of World War II-and will have no compensation of any kind accruing to them.

Mr. MASON. As I gather, you are criticizing this experience rating proposal because it varied in the different States?

Secretary TOBIN. This has nothing to do with experience rating, nothing whatsoever. Experience_rating has nothing to do with unemployment compensation for Federal employees. The proposal that we make is that the States be empowered to pay unemployment compensation to Federal workers who have been laid off. We believe that that is going to become a very serious problem, because tens of thousands of workers are being recruited now by the Federal Government for work in navy yards, hospitals, and arsenals and the like. Someday these workers are going to be laid off because most of them are going to have a temporary status. When they are laid off, they will have no unemployment compensation insurance to draw upon,

whereas other American workers, working for private employers, will have accrued rights in their respective unemployment compensation funds of the States. I feel very strongly that we, as the Government, should live up to the standards that we establish for private employers. Mr. FORAND. Will you yield there, Mr. Mason?

Mr. MASON. Yes.

Mr. FORAND. Supplementing that which you have just said, Mr. Secretary, I might say that we had quite a serious experience along that line, not only among men and women who were employed on a temporary basis, but with respect to civil service employees who were at the torpedo station in Newport, in my own State of Rhode Island. You probably recall that. Many men with 25 and 26 and 27 years of service were thrown out of employment by the cut-backs, the result being that they had no income whatsoever because they were not eligible for unemployment compensation. They had been in the civil service too long to withdraw their retirement fund. So I can well appreciate the point that you are making.

I recall that while we were considering a subject quite akin to this in the Ways and Means Committee-and I believe Mr. Mason will recall this as I am quite sure he was there the former Secretary of State, James Byrnes, came before the committee and told us then in executive session that following World War I so many Federal employees were thrown out of employment and were left without funds that they couldn't even return to their homes, and that Bernard Baruch came along and out of his own pocket paid out approximately $250,000 to pay the transportation back home for those employees. I hope we never again face a similar situation.

Mr. MASON. At the top of page 7, Mr. Secretary, the paragraph there argues for uniformity in the States as to their benefits. You cite the price index, and so forth. If there is to be Federal legislation to make workmen's compensation payments uniform, shouldn't there be Federal legislation to make public assistance uniform?

Secretary TOBIN. No. This does not make it uniform. It merely establishes standards, and there is great latitude for the respective States within the framework of those standards. It provides for a maximum payment up to $30 a week on the basis of 50 percent of the worker's wage, and it provides standards as to period of duration of payments. But outside of that any further standards rest completely within the hands of the State.

Mr. MASON. You refer in the paragraph at the top of page 7 to the consumers' price index of 174.8 as of October 15, 1950. Can you tell me or can you furnish for the record a statement as to whether the unemployment benefit payments as a whole, Nation-wide, have not gone up practically the same amount as the consumers' price index?

Secretary TOBIN. I would say that the average increase is about the same, but there is a great disparity in the States. I pointed out to you at least two States which in two respects have never changed their basic law and that one State has never given recognition to the increased cost of living and have never given recognition to increases in wages that have occurred since the law was written in 1936 in the States. The other States raised the maximum weekly benefit amounts in varying sums, generally 33.3 or 67.7 percent, with only one State increasing the amount as much as 80 percent. I would like to insert