(2) The term "regular compensation" means compensation payable to an individual under any State unemployment compensation law (including compensation payable pursuant to title XV of the Social Security Act), other than extended compensation and additional compensation. (3) The term "extended compensation" means compensation (including additional compensation and compensation payable pursuant to title XV of the Social Security Act) payable for weeks of unemployment beginning in an extended benefit period to an individual under those provisions of the State law which satisfy the requirements of this title with respect to the payment of extended compensation. (4) The term "additional compensation" means compensation payable to exhaustees by reason of conditions of high unemployment or by reason of other special factors. (5) The term "benefit year" means the benefit year as defined in the applicable State law. (6) The term "base period" means the base period as determined under applicable State law for the benefit year. (7) The term "Secretary" means the Secretary of Labor of the United States. (8) The term "State" includes the District of Columbia and the Commonwealth of Puerto Rico. (9) The term "State agency" means the agency of the State which administers its State law. (10) The term "State law" means the unemployment compensation law of the State, approved by the Secretary under section 3304 of the Internal Revenue Code of 1954. (11) The term "week" means a week as defined in the applicable State law. EXTENDED UNEMPLOYMENT COMPENSATION ACCOUNT SEC. 206. (a) Title IX of the Social Security Act is amended by striking out section 905 and inserting in lieu thereof the following new section: EXTENDED UNEMPLOYMENT COMPENSATION ACCOUNT "ESTABLISHMENT OF ACCOUNT "SEC. 905. (a) There is hereby established in the Unemployment Trust Fund an extended unemployment compensation account. For the purposes provided for in section 904(e), such account shall be maintained as a separate book account. "Transfers to Account "(b) (1) The Secretary of the Treasury shall transfer (as of the close of January 1968, and each month thereafter), from the employment security adminis tration account to the extended unemployment compensation account established by subsection (a), an amount determined by him to be equal to 16% per centum of the amount by which "(A) transfers to the employment security administration account pursuant to section 901 (b) (2) during such month, exceed "(B) payments during such month from the employment security administration account pursuant to section 901(b) (3) and (d). If for any such month the payments referred to in subparagraph (B) exceed the transfers referred to in subparagraph (A), proper adjustments shall be made in the amounts subsequently transferred. "(2) Whenever the Secretary of the Treasury determines pursuant to section 901(f) that there is an excess in the employment security administration account as of the close of any fiscal year beginning after June 30, 1967, there shall be transferred (as of the beginning of the succeeding fiscal year) to the extended unemployment compensation account the total amount of such excess or so much thereof as is required to increase the amount in the extended unemployment compensation account to whichever of the following is the greater: "(A) $500,000.000, or "(B) the amount (determined by the Secretary of Labor and certified by him to the Secretary of the Treasury) equal to two-tenths of 1 per centum of the total wages subject (determined without any limitation on amount) to contributions under all State unemployment compensation laws for the calendar year ending during the fiscal year for which the excess is determined. "Transfers to State Accounts "(c) Amounts in the extended unemployment compensation fund shall be available for transfer to the accounts of the States in the unemployment trust fund as provided by section 204(e) of the Federal-State Extended Unemployment Compensation Act of 1966. "Transfers to Federal Unemployment Account "(d) If the balance in the extended unemployment compensation account as of the close of any fiscal year exceeds the greater of the amounts referred to in subparagraphs (A) and (B) of subsection (b) (2), the Secretary of the Treasury shall transfer (as of the close of such fiscal year) from such account to the Federal unemployment account an amount equal to such excess. In applying section 902(b), any amount transferred pursuant to this subsection as of the close of any fiscal year shall be treated as an amount in the Federal unemployment account as of the close of such fiscal year. "Advances to Extended Unemployment Compensation Account "(e) There are hereby authorized to be appropriated to the extended unemployment compensation account, as repayable advances (without interest), such sums as may be necessary to provide for the transfers referred to in subsection (c).” (b) (1) Section 901(f)(3) of the Social Security Act is amended by striking out "to the Federal unemployment account” and inserting in lieu thereof “to the extended unemployment compensation account, to the Federal unemployment account, or both,”. (2) Section 902(a) of such Act is amended by striking out "the total amount of such excess" and inserting in lieu thereof "the portion of such excess remaining after the application of section 905(b) (2)”. (3) The second sentence of section 1203 of such Act is amended to read as follows: "Whenever, after the application of section 901(f) (3) with respect to the excess in the employment security administration account as of the close of any fiscal year, there remains any portion of such excess, so much of such remainder as does not exceed the balances of advances made pursuant to section 905(e) or this section shall be transferred to the general fund of the Treasury and shall be credited against, and shall operate to reduce, first the balance of advances under section 905 (e) and then the balance of advances under this section." APPROVAL OF STATE LAWS SEC. 207. Section 3304 (a) of the Internal Revenue Code of 1954 is amended by inserting after paragraph (10) (added by section 121 (a) of this Act) the following new paragraph: "(11) extended compensation shall be payable as provided by the Federal State Extended Unemployment Compensation Act of 1966; and". EFFECTIVE DATES SEC. 208. (a) In applying section 203, no extended benefit period may begin with a week beginning before January 1, 1969. (b) Section 204 shall apply with respect to weeks of unemployment beginning after December 31, 1968. (c) The amendment made by section 207 shall apply to the taxable year 1969 and taxable years thereafter. TITLE III-FINANCING INCREASE IN TAX RATE SEC. 301. (a) Section 3301 of the Internal Revenue Code of 1954 (relating to rate of tax under Federal Unemployment Tax Act) is amended- (1) by striking out "1961" and inserting in lieu thereof "1967”, (2) by striking out “3.1 percent" in the first sentence and inserting in lieu thereof "3.3 percent", and (3) by striking out the last two sentences. (b) The amendments made by subsection (a) shall apply with respect to the calendar year 1967 and calendar years thereafter. INCREASE IN WAGE BASE SEC. 302. (a) Effective with respect to remuneration paid after December 31, 1968, section 3306(b)(1) of the Internal Revenue Code of 1954 is amended by striking out "$3,000" each place it appears and inserting in lieu thereof "$3,900". (b) Effective with respect to remuneration paid after December 31, 1971, section 3306(b)(1) of such Code (as amended by subsection (a)) is amended by striking out "$3,900” each place it appears and inserting in lieu thereof "$4,200”. Passed the House of Representatives June 22, 1966. Attest: RALPH R. ROBERTS, Clerk. The CHAIRMAN. I will ask that each Senator limit himself to 10 minutes on the first round of interrogating Secretary Wirtz, and thereafter, why we will let each Senator ask as many questions as he wants to when his next turn comes. The Honorable W. Willard Wirtz, Secretary of Labor, is our first witness. You are a very busy man these days, Mr. Secretary, and we know you have important responsibilities. We wish you very well, and we will try to expedite this hearing as far as your testimony is concerned to meet your schedule. You may proceed as you would prefer, Mr. Wirtz. I have a copy of your prepared statement. HON. W. WILLARD WIRTZ, SECRETARY OF LABOR; ACCOMPANIED BY STANLEY H. RUTTENBERG, ASSISTANT SECRETARY FOR MANPOWER; ROBERT C. GOODWIN, ADMINISTRATOR, BUREAU OF EMPLOYMENT SECURITY; WILLIAM U. NORWOOD, JR., DIRECTOR, UNEMPLOYMENT INSURANCE SERVICE, BUREAU OF EMPLOYMENT SECURITY; AND SAMUEL V. MERRICK, SPECIAL ASSISTANT TO THE SECRETARY FOR LEGISLATIVE AFFAIRS; THE DEPARTMENT OF LABOR Secretary WIRTZ. Thank you very much, Mr. Chairman and members of the committee. First, with respect to the importance of anything else, nothing else can compare with the importance of this particular piece of legislation as far as the interests of the Department are concerned. I have filed or have for the committee, Mr. Chairman, copies of the statement which have been prepared. If it meets your convenience, I should like very much to suggest that it be filed and made a part of the record and I will summarize it. The CHAIRMAN. Without objection we will do that. That is what the reorganization calls for, Mr. Secretary. It is perfectly all right with me and we will proceed on that basis. (The prepared statement, with attachment, follow:) PREPARED STATEMENT OF HON. W. WILLARD WIRTZ, SECRETARY OF LABOR Mr. Chairman and Members of the Committee, too many times, a Secretary of Labor has had to appear before this Committee to discuss unemployment insurance in a setting of widespread unemployment. Today's picture is of a generally prosperous economy. In June, total employment stood at 75.7 million, an increase of 2.0 million from a year earlier. On a seasonally-adjusted basis, the unemployment rate has been 4.0% or below since February, lower than during any period since early 1957. There are two proposals before this Committee for considertion today relating to this nation's unemployment insurance system-S. 1991, the Administration bill, and H.R. 15119, the House passed bill. As you know, H.R. 15119 was developed by the House Ways and Means Committee after lengthy public hearings and Committee consideration in executive sessions. We recognize that changes have taken place since May 1965 when S. 1991 was introduced. The economy has continued to improve. There has been a reduction in long-term unemployment of experienced workers, and there has been an opportunity to develop alternatives to meet the goals. With this in mind, I will review both H.R. 15119 and S. 1991 and suggest what we consider to be the best legislation in terms of program goals and needs. Even a 4% unemployment rate, in a country like ours, represents a lot of people. In June there were a million adult men and slightly less than a million adult women looking for jobs. It is for people like these, and for the families they support, that our unemployment insurance system is designed. Even at our low levels of insured unemployment-the lowest since World War II-there have been more than 3 million different people so far this year that have filed for unemployment insurance. Obscured by the national average, and concealed by the gross statistics, are the much larger numbers of people affected by the continuous movements taking place in the job market. In 1965, for example, there were, on the average, 76 million people in the labor force-72 million employed and 3.5 million unemployed. But during the year 90 million different individuals are estimated to have been in the work force at some time; 87 million different individuals are estimated to have held jobs; 14.1 million are estimated to have experienced some unemployment; 7.5 million filed claims for unemployment insurance; 6.1 million qualified for unemployment insurance benefits; 5.0 million were unemployed long enuogh to receive unemployment benefits; 1.1 million were unemployed long enough to draw all the benefits available to them, and 0.5 million exhausted 26 weeks or more. Figures for 1966 are of course not yet available, but they will show a similar pattern. Thus, the general level of unemployment must be distinguished from the displacement of particular workers at particular times and places. In 1965 the unemployment rate ranged From 2.3% to 7.8% by State; From 1.7% to 8.1% by major labor areas; From 0.4% to 8.4% by broad occupational groups; From 2.5% to 15.7% by age; and From 4.1% to 8.3% by race. History suggests "Constant displacement is the price of a dynamic economy. that it is a price worth paying. But the accompanying burdens and benefits should be distributed fairly." With this statement of the National Committee on Technology, Automation and Economic Progress, I am in complete accord. And I suggest that one of the most effective ways to assure the fair distribution of the burdens is through the strengthening of our present Federal-State unemployment insurance system. Unemployment insurance is an important aspect of manpower policy. In our present-day economy over 80% of the nation's total labor force make their living through working for others-in contrast to earlier periods in our history when the majority of people worked on the land, or were otherwise "working for themselves" in self-owned (or family-owned) professional, business, and service activities. Today wage earning is the center of economic life. Preparing for a job, getting, holding and separating from a job, having income between jobs and finding another to replace the lost one are crucial for large numbers of workers. Unemployment insurance is designed to make up the worker's wage loss in a way which helps him to meet his economic and social needs with dignity and without loss of self-respect. The payment is a predictable, objectively determined cash payment related to his customary earnings but unrelated to his wealth or his "need" and received as a matter of insured right deriving from his status-both past and present-as an active member of the labor force. The value of our unemployment insurance system has been amply proven during its 30 years of existence. Its basic goals remain essentially unchanged. Its purpose is to provide Partial replacement of wages lost by reason of lack of work; In a way that preserves dignity; But does not put a premium on idleness. The system is designed to protect, insofar as possible, all who work for wages; to assure most workers a stipulated fraction of their own usual wages for the period of their unemployment due to economic causes; but to provide no payment for periods when individuals are not clearly in the labor force. By providing wage replacement for the individual unemployed worker it helps maintain purchasing power, prevents the dispersal of an employer's workers during periods of brief interruption of work. It helps to conserve workers' skills and preserve labor standards by making it unnecessary for the worker to accept, because of economic desperation, the first available job regardless of its suitability. The costs of the system, both State and Federal, amount to somewhat less than 11⁄2 cents per payroll dollar; the entire Federal and State cost for a system containing all the improvements included in the Administration's original recommendations would be less than 2 cents per payroll dollar. It is not my intention to urge the enactment of S. 1991 as a total substitute for H.R. 15119. H.R. 15119 recognizes some of the deficiencies in our present system, introduces some significant forward steps, and provides for improvements in the system which are in the right direction. But HR. 15119 falls short of meeting the basic goals of the system in four important areas: It fails to provide the benefit requirements proposed by S. 1991; Its extended benefits program fails to provide needed protection for the long-term unemployed in periods other than State or national recessions; Its increases in the taxable wage base are inadequate; and Its coverage provisions warrant further consideration. In its coverage of employees of nonprofit and State hospitals and educational institutions, H.R. 15119 has broken new ground and introduced new concepts for which we owe a great deal to the House Ways and Means Committee. The House acted to extend coverage to an additional 3.5 million workers. These were distributed by categories as follows: Employers of 1 or more in 20 weeks or wages paid of $1500 or more in a calendar quarter Definition of agricultural labor (add some agricultural processing workers) State hospitals and colleges_ Total 1.2 .2 2 1.4 5 3.5 I recommend broader coverage than that provided in H.R. 15119 so far as the "size of firm" is concerned. The feasibility of the S. 1991 provision for covering employers of one or more at any time has been amply demonstrated by experience under OASDI and under unemployment compensation laws of States of varying sizes and industrial composition. The Interstate Conference of Employment Security Agencies recommended coverage of employers of one or more if the employer had at least a $300 payroll in a quarter. This payroll limit represents the highest quarterly limit used now by States which determine coverage solely by size of quarterly payroll. I recommend it for your consideration. I also recommend advancing the effective date of this coverage to January 1, 1968. The other coverage change that I would recommend is with respect to farm workers. While everyone generally agrees that farm workers have a real need for unemployment insurance protection, in the past it has been difficult to work out a proposal that was administratively feasible. We have continued to study this problem and we believe we have a proposal that would provide some meaningful protection to the farm worker, and would at the same time meet some of the objections of earlier proposals. Under this alternative, coverage would be extended to farmers who report at least 50 workers for OASDI purposes but only for those workers who had wages of at least $300 in a calendar quarter. |