bare subsistence budget which provided money mostly for food and shelter. For a family of four with two children aged 6 to 12, the budget allowed about $230 per month. Adjusted for subsequent cost of living increases this would be about $250 per month in 1965 dollars. In Ohio today, the average unemployed worker with two children gets about $220 per month, or about $30 less than is called for in the welfare department's poverty budget.

Another yardstick for adequacy of benefits is the U.S. Department of Labor's city worker's family budget for a family of four in the city of Cincinnati. This budget, adjusted for subsequent increases in the cost of living, calls for about $67 per week for food and shelter alone. But this is about $15 more per week than the average unemployed worker with two children is receiving in a week. And this does not take into account money needed for clothing, personal services, medical care, school expenses, insurance and the like.

Unemployment costs money. The employer has to pay his unemployment insurance tax, but the individual worker pays even more. He makes up the deficit caused by low weekly benefits out of his meager savings, cashed-in life insurance policies, loans from relatives and, in general, by a drastic lowering of his standard of living. The price he pays for unemployment is his dignity and the economic stability of his family. This is too great a price. The workers of this country undergird our economic system with their sweat, and reap the smaller part of the rewards. When the system fails, they are asked to suffer the most for the failure.

Some will say that the unemployment funds in several states are too low and that this is no time to increase benefits. These same groups never wanted to increase benefits when the funds were at their highest. If the financing of a fund is in error, it should be corrected. By the same token, if our unemployment benefits are inadequate, they should be raised. However, no state should use low funds as a reason for not making an unemployment system an adequate one. This is not a poor country. Personal and corporate incomes are at an all-time high as the result of our economic system. This same economic system produces casualties-the unemployed. There is no reason in humanity or economics that dictates that unemployed workers should take such a slash in their living standards as they are presently forced to do.

When the unemployment program was instituted during the depression years. employers paid a rate of 2.7 per cent on total payroll. Our present effective rate on total payroll is only 1.2 per cent, or less than half of what it was in the late thirties. We can well afford to pay in the sixties for an adequate program of unemployment insurance.

The benefit standards as contained in S. 1991 would create a benefit floor of half of each unemployed worker's wage loss. This is minimum protection for the unemployed, and is long overdue.

DURATION

Under present Ohio law, a claimant may receive 20 to 26 weeks of benefits, depending on the number of weeks worked in his base period. The changes in benefit duration proposed in S. 1991 would require a uniform 26 weeks of compensation for all claimants under the state law and also grant an additional 26 weeks of long-term adjustment benefits for those who use up all their state rights. Both of these changes would be highly beneficial to Ohio workers.

During the last five years, one out of every four Ohio workers who has received unemployment benefits has exhausted all of his state benefits. In the case of Negro workers and workers over 45. the exhaustion rate has been even higher. The problem of duration of compensation has been a thorn in the side of the Ohio Legislature for the last seven years, and it has been a problem which the Legislature has refused to face. In fact, in the 1963 session of the Legislature, the problem was accentuated by highly regressive legislation.

In 1958, when 147.732 workers exhausted their benefits, a special session of the Ohio General Assembly was called and a temporary extension of 13 weeks of benefits was granted. The General Assembly in 1959 also granted an extension of benefits. In November of 1960 another special session was called because the state was faced with an exhaustion problem that was proportionately greater than during 1958. The Legislature took no action.

In 1961, the General Assembly again took up the question of duration and the solution proposed by the majority party was a "triggered" extension wrapped in a mixture of disqualifications. Labor opposed the proposal because of its inadequacy and its demand for the proverbial pound of flesh. The Governor

vetoed the legislation and as the Legislature started to debate the proposition anew, Congress passed a temporary federal extension.

The problem of duration was again faced by the Ohio General Assembly in the 1963 session and the resulting legislation was disastrous. Instead of increasing duration as had been done in some other states, the Ohio Legislature actually decreased the duration. Prior to 1963, more than 99 per cent of all claimants were eligible to receive 26 weeks of compensation. However, under the so-called "variable maximum" system instituted in 1963, only 75 per cent were eligible for 26 weeks of benefits. According to the estimates of the Ohio Bureau of Unemployment Compensation this one change in our law will, in an average year of unemployment, reduce compensation by 150,000 weeks, or close to $6 million a year. Fortunately, we have had record years of low unemployment since 1963, but should we experience another recession such as we had in 1958 or 1960, the resulting exhaustion rate in Ohio will be staggering.

DISQUALIFICATIONS

How long should a claimant be disqualified from receiving unemployment benefits? Presently, in Ohio, a claimant may be disqualified for the "duration of his unemployment" plus six weeks. Technically, this means that a claimant is disqualified until he is re-employed and works six weeks and earns at least six times his weekly benefit amount. Last year the average claimant drawing benefits went about 13 weeks before he became re-employed. In all probability, then, the average disqualified claimant was penalized for a period of over 19 weeks. This is a much harsher provision than Ohio's original law, under which disqualification extended the claimant's waiting period for three weeks and shortened his benefit period by a like amount. And yet it is not so harsh as the old wage cancellation provision, which Ohio had until 1959, and which some employer groups repeatedly attempt to rewrite into Ohio law.

Under the old wage cancellation penalty, a worker would have all of his wage credits cancelled in regard to his most recent employer. If he had been a steady worker-one who had worked for the same employer throughout his base period-he had his entire base period wages cancelled and was unable to get unemployment compensation until he found a new job in covered employment and established a new base period; that is, until he worked at least 20 weeks on the new job and earned at least $240.

To demonstrate how perversely this ill-conceived plan operated: Assume the case of a worker who quit his job for better employment. Assume further it was a steady worker who had been in the employ of the same employer throughout his base period-the normal history of the average worker. The steady worker who quit his job without just cause, or was discharged for just cause in connection with his work, had all his base period wage credits cancelled. That is, he had to find work in covered employment and be employed at least 20 weeks and earn at least $240 before he was again eligible for benefits.

On the other hand, there was the worker who was a job-jumper. What happened to him under the wage cancellation provision? Suppose the job-jumper had four employers in his base period. Only the wage credits pertaining to the last employer he quit were cancelled. Therefore, if there were still 20 weeks and $240 in earnings remaining in his base period, this worker, to become eligible for benefits, had only to find a job in covered employment and earn wages equivalent to his weekly benefit amount.

Under this grotesque approach, the steady worker was punished with the greatest severity while the less-deserving worker was handled in a much more gentle fashion. This treatment of the steady worker was espoused in the past and continues to be advocated by employers who claim they are always ready to protect the steady worker.

The end result of wage cancellation was no accident-these employers were not interested in weeding out chislers or floaters, who are relatively few in number. The employers who supported and still support wage cancellation are aiming at the much larger group of steady workers-not on a basis of justice, but to save money, no matter who is hurt in the process.

Obviously, the worker who quits or is discharged for good cause can be said to be initially unemployed through his own act. Therefore, it may be well to make him wait an additional period of time for his compensation. But when that same worker subsequently cannot find employment elsewhere, though he searches diligently, it cannot be said that his continued unemployment is a matter of his own doing. His continued unemployment is the result of economic

dislocations over which he has no control. He should not be punished for his continued unemployment even though his original unemployment was the result of some act on his own part. S. 1991 recognizes this fact by placing a reasonable limitation of six weeks of penalties on most disqualifications.

INTERSTATE CLAIMS

In 1963 an invidious device was introduced into the Ohio unemployment law. The General Assembly assessed a special penalty against Ohio workers who go into other states to look for work. An unemployed worker who files a claim in another state with an average weekly benefit amount less than Ohio's is eligible to receive only the lesser amount. For example, an unemployed Ohio worker with two children is eligible to reecive a maximum of $53 per week. If he looks for work in Indiana, and files a claim, he is eligible to receive the average weekly benefit paid in Indiana, $32. This means a reduction of $21 a week and certainly does not inspire a worker to go out of the state of Ohio to seek work. At present, Ohio and two other states have this kind of penalty in their unemployment laws. A spread of similar penalties throughout all the state laws would have a disastrous effect on labor mobility at the very time the government is making efforts to encourage workers to relocate. Establishment of an interstate system of unemployment compensation has helped encourage labor mobility. The section in S. 1991 which would prevent such discriminatory acts by states is a most desirable standard if we are to keep a strong interstate system of unemployment insurance.

FINANCING

Financing is another weak spot in the present Ohio unemployment insurance law. A combination of under financing and high benefit cost during the 10-year period 1954-63 almost sent the Ohio trust fund into bankruptcy. At one point our trust fund contained under $90 million, or about enough money to cover the payout for three months during a recession period.

In 1953, employer groups were able to have passed by the General Assembly legislation to "adjust" their rates. From that adjustment and until last year the Ohio tax rate has not in any year produced enough contributions to cover the annual benefit costs to the fund. These so-called adjustments, plus high payouts in 1957-58 and 1960-61, reduced the Ohio fund from an all-time high in 1953 of $686 million to $123 million in 1962.

The Legislature in 1963 took action to restore the fund to solvency. The resulting legislation was an increase in contribution rates for employers and a hodgepodge of amendments designed to reduce benefit costs by about 10 per cent. The combination of this legislation and an unusually low unemployment rate for the state allowed Ohio to end 1964 with a trust fund of over $232 million. This is still a dangerously low level when it is compared with the $455 million benefit cost for the 1960-61 recession period.

However, it is doubtful if the Ohio fund will even reach a solvent level. The 1963 legislation mentioned earlier set the maximum fund level at only one and a quarter times the highest 12-month payout, or approximately $377 million. Eli Artenberg, an actuary with the U.S. Department of Labor, recommended to the Ohio House Industry and Labor Committee a minimum fund level of $455 million, or one and a half times the highest 12-month payout. He suggested a maximum fund level of twice this amount.

Under present Ohio law, when the fund level reaches $377 million, employer tax rates will automatically be reduced. With a maximum fund level this low, the Ohio fund is destined for a state of perpetual near-bankruptcy. A fund established at such a low level will support only a minimum unemployment insurance program. And this is the type of unemployment program Ohio can expect in the future unless federal standards such as S. 1991 are enacted into law.

One of the weakest points of Ohio's unemployment financing structure is the continued retention of a $3,000 taxable base, which constitutes only about 51 percent of the state's total wage.

The present low tax base has caused serious defects in our financing system. It produces serious discrepancies between the actual effective rates of different employers, even though they are nominally paying the same rate of tax.

For example, an employer whose wages amount to only $3,000 per year per employe may be paying the maximum present rate of 3.2 per cent and this would be an effective rate of 3.2 per cent of his total payroll. An employer whose wages average $6,000 per employe may also be paying the maximum rate of 3.2 per cent,

but since he pays it on only the first $3,000 of each employe's wage, his effective rate is only 1.6 per cent of his total payroll. Thus, we have large group of employers who have received by reason of the low tax base a hidden tax cut, and this in large part, is the cause of the difficulty with respect to the trust fund. The difficulty is even greater because unemployment seems to be worse among the high-wage employers-the construction industry and manufacturers, those who are making tangible things for sale. Unemployment seems to be less severe in the service industries, retail and wholesale trade, finance, insurance, grain elevators, real estate and the like. Thus we find that the "red balance" employers (those whose employes have drawn more in benefits that has been paid by their employer into the fund) are concentrated among the high wage industries. These are the very ones who have received the hidden tax cut from the low wage base, and the ones who are not paying their way.

Ohio's preset $3,000 limitation has resulted in a static wage base for taxing purposes. Ohio's taxable wage reached an all-time high of $7.5 billion in 1957. The taxable base for 1964 was $7.4 billion. While the tax base has remained static, benefits costs have continued to increase. So long as the taxable wage base remains at one level, increased contributions to the fund can come only through increased tax rates, which require legislative action. Past history shows such state action in this area comes only after a crisis period is reached. An increase to a $6,600 taxable wage as contained in S. 1991 would improve this situation by introducing a more realistic and flexible tax base to the state financing structure. I would like to comment briefly on that part of S. 1991 which would provide matching grants for excess benefit costs over two per cent of the total wage. The fact that recessions have their greatest impact on industrial states is well known. Usually we are the first ones to slide into a recession and the last to pull out of it. The United States is made up of a number of interdependent regional economies and excessive unemployment during a recession can be attributed only to national economic factors beyond the control of any single state.

The stress of the last two recessions left our unemployment fund nearly bankrupt, and it seems unfair that Ohio and other similar industrial states should bear these unusual recession costs alone. Ohio and other industrial states are big contributors to federal taxes and usually receive less back in federal taxes than they pay. We acknowledge, although not always graciously, that "government taxes where the money is, and spends it where the need is." But in this particular instance we feel federal matching grants for excess benefit costs are needed to help recoup the deficits caused by excessive benefit costs of national origin.

CLOSING

Time is proving that unemployment insurance is of utmost importance as a means of checking the downward slide into a recession.

Not the least significant is the automatic nature of its operation as a floor under purchasing power. As the nation moves into unemployment, government officials and legislators are uncertain as to how far the recession may go and whether action is necessary or whether the situation may be self-correcting. If they suspect that the situation requires action, there follows a prolonged debate as to what should be done. If, at length, measures are adopted, there is bound to be a substantial delay in their effect on the economy.

The superiority of unemployment compensation is that payments begin im mediately without policy decisions on the part of anyone, and are in proportion to the extent of unemployment. While the legislators are debating, the benefit dollars go to work to undergird purchasing power.

In a declining economy, there is a snowballing effect. When wages are paid, these dollars turn over. They are spent for food, rent, clothing and other necessities. Those who receive them spend them again. It is likely that each wage dollar turns over at least three times on the average before it is taken out of cir culation. Thus every $100 loss in wages has a $300 effect on the total economy. It is, therefore, obvious that unemployment insurance, to the extent that it prevents decline in purchasing power, is of real help slowing the downward spiral of a recession.

The power of unemployment insurance payments to check a recession under present state systems is limited by low level of benefits, too narrow coverage, too many disqualifications and too short duration. The "Monthly Business Review" of the Federal Reserve Bank of Cleveland for December, 1961, in an article entitled "Unemployment Insurance as an Economic Stabilizer" points out the following limitations in the state unemployment system:

"In its capacity as a social stabilizer, unemployment insurance has several limitations. First of all, benefits are limited to those covered by unemployment insurance programs-currently about 80 per cent of those in civilian wage and salary employment. Second, unemployment insurance is intended to provide only relatively short-term help the maximum duration of benefits is 26 weeks in most states. Also, in most states, the maximum benefit levels represent less than half of the earnings they are intended to replace, and, for many claimants, benefits are in practice often less than the maximum because these claimants cannot fulfill the requirements which state laws impose as to earnings and the length of time spent in covered employment."

The federal standards as proposed in S. 1991 would correct the limitations set forth in the article quoted. It is the feeling of Labor in Ohio that these changes are needed now. Passage of S. 1991 will mean equity for the unemployed workers of America, stronger state unemployment systems and greater economic stability for the country nationally.

Senator TALMADGE. Senator Javits has just arrived and I presume he desires to make a statement of some kind. Senators are extremely busy, and I would like to defer hearing from the next witness until we hear from Senator Javits, if you will.

STATEMENT OF HON. JACOBS JAVITS, A U.S. SENATOR FROM THE STATE OF NEW YORK

Senator JAVITS. If Miss Tetrault will forgive me

Senator TALMADGE. We are delighted to have the distinguished senior Senator from New York.

Senator JAVITS. I express my gratitude to my friend, the occupant of the chair. I am here primarily to introduce Miss Tetrault and Mr. Golodner in their testimony and to make a short statement on their behalf.

Actors' Equity is proposing an amendment to cover the difficult problem of multiple interstate claims for unemployment compensation. Under existing law, all but six States have entered into agreements covering these cases. Credits accumulated, and paid for, in one of the six States are wholly or partially lost when the employee moves to another State; the same thing is true when the employee moves to one of the six States. Even in the remaining States, which do have agreements, some claimants are ineligible for benefits anyway, or are eligible only for partial benefits, because there is no provision in the agreements, much less a uniform provision, for definition of the base period on which eligibility and benefits are computed. Actors' Equity proposes, and I will introduce as an amendment, a simple requirement that all States participate in arrangements with other States including one uniform and quite reasonable principle, that is, that the base period shall be determined under the law of the State which pays the benefits. In that way, employees who meet the requirements of the paying State will receive the full amount of benefits, regardless of the base period requirements of the State or States in which they previously worked.

This is clearly a needed and desirable amendment to the law. Our Nation is facing manpower demands which make it absolutely indispensable that there be true labor mobility throughout the Nation. The Congress has recognized this fact in a number of ways, including tax relief for moving expenses of employees and labor mobility assistance under the Manpower Development and Training Act. It should also avoid penalizing employees for interstate movement under the Unemployment Compensation Act.