Refusal of an offer of suitable work (sec. 211, subsec. 7, p. 45) The Ohio law denies benefits for the duration of the resulting unemployment where a claimant refuses an offer of suitable work. We emphasize that, if the job is not suitable, no disqualification results. There are adequate tests prescribed so that a fair determination can be made as to the suitability of the work for the particular claimant. Neither is there any disqualification imposed under our law for voluntary quitting, if the quit is for just cause. The reason for separation is always subject to review by the Board of Review, and an opportunity for a fair hearing afforded if the party affected is not satisfied with the decision of the administrator. We submit, these are reasonable and proper conditions for the receipt of benefits. Self-imposed unemployment should not be, and never was intended to be, compensated under this program. Yet, in this bill, these tests of eligibility in our law would have to be repealed by our state legislature if Ohio employers are to receive the full offset of state contributions against their federal tax. Benefits to seasonal workers The Ohio provision for paying benefits to seasonal workers is rooted deep in the history of our law. An Ohio Unemployment Compensation Study Commission was appointed in 1931 by the Governor under a Joint Resolution of the legislature. It was instructed to study and report to the legislature the feasibility of a state unemployment insurance law for Ohio. It made its report in 1932 and recommended a bill on this subject. Concern was expressed about the impact on the fund if benefits were paid to employees in seasonal industries beyond their regular season. The Commission felt this type of regularly recurring unemployment, which was known and expected by the employee, and which was due to climatic conditions over which the employer had no control, was not the type of unemployment that unemployment insurance could properly insure against. The bill, recommended by the original Ohio Study Commission, therefore, contained a provision respecting seasonal employment which was incorporated practically verbatim in the first Ohio law adopted in 1936 and has remained a part of our law since that date. It provided, in effect, that where, because of climatic conditions it is customary to operate only during regularly recurring periods of less than 36 weeks, benefits should be payable only during such seasonal period. After the law had been in effect for several years, the attention of the legislature was called to the fact that seamen on the Great Lakes were engaged in employment over a 40-week seasonal period due purely to climatic conditions affecting transportation on the Great Lakes during the winter months. However, due to the general provision limiting this special treatment for seasonal periods of less than 36 weeks, it was necessary for the legislature to enact a special provision governing the 40-week season for seamen on the Great Lakes. A witness before this Committee, on behalf of the Lake Carriers Association, discussed this subject in some detail. The concern of other employers in Ohio is the financial burden to the fund if seamen on the Great Lakes were to be paid benefits for the 12 weeks each year when they are not actually working. In many respects it would be comparable to paying school teachers benefits for the 10 or 12 weeks they are on vacation during the summer. That problem has been solved by paying their yearly salary over a 12 month period. This Committee has heard testimony showing that the average weekly wage of seamen over a 52 week year is about $181.00, the second highest paid industry in the state; that the number of hours actually worked are not substantially different that other year-round employees. If the legislature is forced to repeal this provision respecting seamen, other employees will be called upon to make up the difference between the benefits paid out and the contributions paid in by the employers of these seamen, which has been estimated as high as $3 million annually. Benefits to out-of-State claimants (subsec. 11, p. 46) Another provision in our law relating to claimants who qualify for benefits by working for an Ohio employer and then leaving the state, would be "struck down" by the bill now before you. For several years, Ohio had the distinction of paying the highest average weekly benefit check of any state in the nation. Thousands of claimants would qualify for benefits in Ohio, then leave the state and file for their benefits from another state. Now we, like our neighboring states, even though their standards of living in some cases are lower than ours. But we do not feel that Ohio employers should be forced to finance these unemployed workers on higher levels than their home states just because they come to Ohio to work and then return to their state or residence. In 1961 alone, Ohio paid $18.7 million in benefits to claimants who qualified by working in Ohio and then filed from another state. For example, California $728,900, Florida $966,269, Kentucky $3.7 million, West Virginia $3.3 million, Tennessee $1.57 million. In 1963 the legislature provided that in these cases, benefits would be payable at the average rate being paid to claimants in the other state to which the claimants chose to remove themselves. If this bill were to become law, then this Congress would be saying to our legislature "No, you may no longer do this-else we will not approve your law and all your employers will be denied credit for their state contributions against the federal tax." When we think of this in connection with the allowance of benefits for voluntary quitting, which is allowed in full under this bill after a six week waiting period, then the full impact of this provision of H.R. 8282 becomes apparent. An employee could quit an Ohio employer for no reason whatsoever, go to another state where living expenses are much lower, and draw the high unemployment benefits provided in the Ohio law with no deterrent except a six week waiting period. INCREASE IN WEEKLY BENEFITS AND DURATION Neither can a case be made against the states on the ground that their legislature have failed to increase weekly benefit payments and the number of weeks for which benefits can be paid. A typical example of the consistent trend of increased benefits is my own state. We have increased benefits from $15 per week for 16 weeks or $240 in a benefit year in 1939, to $53 per week for 26 weeks or $1,378 today. This is an increase of 253% in the maximum weekly benefit amount, and 474% in the maximum benefits in a benefit year. The following table shows the frequent times that the legislature has made these increases: Average weekly benefit check versus gross weekly wage-Ohio Not only have the weekly benefits and duration been consistently increased, but the actual weekly benefit check has increased in about the same proportions as the gross weekly wage. The average weekly check has increased from $10.25 in 1939 to $40.06 in 1964, an increase of 291%. During this same period, the average gross weekly wage increased from $27.91 to $114.00, an increase of 308.5%. The following table, using selected years as above, clearly illustrates this trend: Very little, if any, tax deductions were made from the employee's pay check in 1939. Today these deductions are substantial. Unemployment benefits are tax free. It may also be noted that the average weekly benefit check for claimants with dependents in 1964 was $47.53. Increase in average benefit check versus cost-of-living index—Ohio The weekly benefit check in Ohio has increased much faster than the increase in the cost of living. In 1939, the cost of living index, based on the 1957-59 averages, stood at 48.4% for Ohio. In 1964, it was 108.1% an increase of 123%. The average weekly benefit check was $10.25 in 1939. It was $40.06 in 1964, an increase of 291%. The increase over this period is shown below: Ohio already bases benefits on 50% of an individual's average weekly wage, and like 48 other states, pays for a maximum of 26 weeks. There is no need for federal legislation in this area as proposed in H.R. 8282. WEEKLY BENEFITS UNDER H.R. 8282 The Division of Research and Statistics of the Ohio Bureau has estimated that maximum weekly benefits in Ohio, exclusive of dependents allowances, under this bill would be $62 in 1967, $79 in 1969 and $92 in 1971. If the present $11 dependents allowance is continued, then these weekly benefits would be $73 in 1967, $90 in 1969 and $103 in 1971. Based on a 40 hour week, this is $1.82 per hour in 1967, $2.25 per hour in 1969 and $2.57 per hour in 1971. The following table shows the computation of these results: Who pays the piper? Ohio employers would have to pay an additional $122 million in taxes to finance the increased state benefits proposed in this bill. Another $52 million would have to come from Ohio employers to finance the increased federal benefits. A total of $174 million annually. Who will pay? It is obvious that an increased tax burden of this size must be passed on in many cases, in the form of higher prices, if an employer hopes to stay in business. To the extent this cost is passed on to the consumer, it will be paid largely by the wage earner, many of whom will not be fortunate enough to earn while working as much per hour as those who are not working receive in unemployment benefits. Draining off another $174 million from Oh'o employers in additional taxes unquestionably will injure the economy of the state. This is money which could better be spent for expansion and the creation of additional jobs, the only answer to the unemployment problem. It cannot be spent both ways. The success of our program in Ohio of encouraging industry so it will expand and create more jobs demonstrates this is a much better and more constructive approach to the unemployment problem. Punishing the economy by heaping increased taxes on those who provide the jobs is not the answer. Increase in wage base excessive H.R. 8282 conveniently leaves to the state legislatures the unenviable job of passing legislation raising sufficient taxes to finance the increased state benefits which its provisions would demand. Since this is a state responsibility, we believe some latitude should be left to the states in determining whether an increase in rates or an increase in the wage base is more appropriate. The Ohio fund reached a low of about $70 million in April, 1963. The legislature revised the tax rate schedule requiring a rate as high as 4.7% for those employers with high unemployment experience. At the same time it retained the $3.000 tax base. Since that time, the fund has recouped itself until today the balance is $343 million. Our experience demonstrates that a state can adjust its merit rating tax schedule under the present $3,000 base so as to yield whatever amount is found necessary. The arguments about the inequities between high pay employers vs. low pay employers and high risk employers vs. low risk employers are unconvincing. In fact, a levy on a per capita basis would be about as equitable as any other, since in the final analysis this is what a payroll tax amounts to. If a merit rating plan is working properly, then most employers will find their tax level between the minimum and maximum rates and pay a tax sufficient to finance the benefits which are paid to their employers. This can be accomplished under a $3,000 base just as readily as under a $6,000 base by applying a sufficiently wide range of tax rates as was done in our state. States should be left free to administer own laws We suggest that federal standards continue to be confined to taxable wage base, coverage, and the other conditions which have been in the federal law over the years. Additional federal standards are not needed to insure that proper unemployment compensation laws are kept on the state statutes. Provisions relating to qualifications, disqualifications, method of computing the weekly benefit amount and other details should be left to state legislatures which are much better qualified to decide these issues. However, once federal standards are finally determined for the states, then the administration should be left to the states, unhampered and without interference from Washington. Determination as to whether a state law contains these requirements can be made by the Solicitor General's office or other appropriate legal department of the Government and certified to the Congress and Secretary of the Treasury. From this point on, the checks and balances which are exercised at the state level by interested groups such as employee and employer organizations and advisory councils, as well as Governors, Boards of Review and the Courts, are sufficient to insure that the law, once on the statute books, will be fairly administered. Senator TALMADGE. Thank you, Mr. Mackey. Any questions, Senator Williams? Senator WILLIAMS. No questions. Senator TALMADGE. IS Mr. Charles H. Taylor of the Virginia Manufacturers Association present? He has sent a letter to the chairman of the committee, enclosing a copy of his prepared statement. In his absence at this point I will insert his letter, together with his testimony, in the record. Without objection. (The documents referred to follow :) VIRGINIA MANUFACTURERS ASSOCIATION, Richmond, Va., July 15, 1966. Senator RUSSELL B. LONG, Chairman, Senate Finance Committee, DEAR SENATOR LONG: To save your Committee time, we are asking that you receive our statement in support of H.R. 15119 for inclusion in the record. Sincerely, CHARLES H. TAYLOR. STATEMENT OF THE VIRGINIA MANUFACTURERS ASSOCIATION BEFORE THE SENATE FINANCE COMMITTEE ON H.R. 15119, UNEMPLOYMENT INSURANCE AMENDMENTS OF 1966, JULY 18, 1966 Mr. Chairman and Members of the Senate Finance Committee, the Virginia Manufacturers Association presents this statement in support of H.R. 15119, which has been carefully put together by the House Ways and Means Committee and overwhelmingly adopted by the House of Representatives. This measure is the product of long months of exhaustive study by the House and Ways Means Committee, and a wide and complete variety of testimony from the parties of interest, including state administrators, the Department of Labor, employee groups, and employer groups. We strongly urge that this measure be reported without amendment. H.R. 15119 adequately provides for all of the demonstrated basic improvement needs of our state-federal unemployment compensation insurance program. The record clearly shows that continuing improvements have been made by the states to meet the changing economic conditions and that employers have given their support to accomplish this. We would expect to continue to do this. H.R. 15119 preserves state responsibility and management of this program. It is to the credit of the states that they have conclusively demonstrated their ability to manage their programs responsibly and effectively for the nearly 30 years of their existence. We are unalterably opposed to S. 1991, the companion measure to H.R. 8282 which was thoroughly evaluated and rejected by the House Ways and Means Committee. The main thrust of this measure is a federal minimum benefit payment standard which, in application to the various state systems, would not accomplish the results represented. When this feature was thoroughly exposed on the House side, it was found that it would require federal standards for all basic features of the program to accomplish a workable federal minimum benefit payment standard. This would mean complete federalization of our state programs. Some of the main backers of this legislation have made it clear that this is precisely the objective. We hope that it will be your judgment to report H.R. 15119 without amendment. CHARLES H. TAYLOR, Executive Vice President. Senator TALMADGE. The committee will stand in recess at this point until 9 a.m. tomorrow morning. (Whereupon, at 11:05 a.m., the committee adjourned to reconvene at 9 a.m., Tuesday, July 19, 1966.) |