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Thank you very much.

Senator TALMADGE. Thank you, Mr. Mitchell.

The next witness is Mrs. Geraldine Beideman, representing the California Retailers Association.

STATEMENT OF GERALDINE M. BEIDEMAN, REPRESENTING SELECTED CALIFORNIA EMPLOYERS AND EMPLOYER ASSOCIATIONS

Mrs. BEIDEMAN. Mr. Chairman and members of the committee, my name is Geraldine M. Beideman, and I am representing a number of California employers and employer associations.

These employers and employer associations account for the bulk of private industry employment in California. The list of sponsors of this presentation are on the final page of my text.

I would like to speak very briefly on these employers' views on Federal unemployment insurance legislation and request that my statement be made a part of the record.

Senator TALMADGE. Without objection, your statement will be inserted in the record, and you may speak as you see fit.

Mrs. BEIDEMAN. Thank you, Mr. Chairman. It is the view of the California employers that the House-passed bill, H.R. 15119, is worthy of support as it came out of the House.

The important reason for our support of that bill is that it respects the long-established definition of Federal and State responsibilities for unemployment insurance legislation.

Traditionally, the Federal Government has had responsibility for certain facets of unemployment insurance legislation, including coverage of Federal taxation, extended duration benefits, and many other features of that kind.

I should say that California is in a somewhat different position than many of the other States which have been represented here today, and in previous testimony, and that we have already anticipated many of the changes that are in H.R. 15119. We have extended coverage, we have provided for recession benefits, we have allowed training benefits to employees who are drawing unemployment insurance, and we have raised the taxable wage base and made a number of other changes.

Many States, however, have not been in this position, and have waited for Federal action, and it is within the Federal prerogative to take into account these kinds of legislative changes.

I should mention, too, that while we have anticipated many changes in the law, California employers are going to be subject to a considerable increase in their unemployment insurance taxes, as a result of the House-passed bill. When the bill comes fully active, it will be increased by 110 percent, which is a significant increase.

In contrast to the House-passed bill, S. 1991 does change the role of the Federal Government and the State government in unemployment insurance compensation. The Senate bill would set various Federal requirements which would give a series of floors and ceilings, defining the weekly benefit amount, the length of time they could be paid, the conditions under which benefits would be granted, and a number of other conditions.

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I would like to mention, since there was some interest in the committee on this matter of disqualification, S. 1991 provides currently for a 6-week postponement of benefits for people who leave their jobs under certain conditions, and the Secretary, in his presentation last week, modified that by suggesting, perhaps, as long as a 13-week postponement. California had a postponement of benefits of 5 weeks for about 30 years, and it became the general impression throughout the State that there was considerable room for abuse of the program, because people could simply wait out the 5-week period, and then draw their full term of benefits, which, in California, is quite a considerable amount, that is, a maximum of $65 a week times 26 weeks of benefits at the top end.

So, in 1965, the California Legislature and you undoubtedly know it is a fairly liberal legislature came in with a committee bill which included a requalifying requirement for disqualifications on voluntary quits and misconduct discharges. In other words, the claimant who left his job under those conditions had to go back to work in bona fide employment and earn five times his weekly benefit amount before he could draw benefits. That would be somewhere five times $25 at the bottom and five times $65 at the top.

I might mention that our disqualification for voluntary quits includes good cause which has to do with personal reasons. It is not strictly limited to quitting in connection with the work.

The Governor not only signed that bill, he had independently come in with his own recommendation that there be a provision for canceling the benefits for each week of disqualification, somewhat different from the legislators' proposal. But I am mentioning it only to say that there was a very general feeling throughout the State that something had to be done in reference to this voluntary quit, misconduct situation. I could speak on a number of other facets, but there is no point in taking the time of the committee unless you have interest, because they are all outlined in the statement.

We would respectfully request that the Senate consider favorably the House-passed bill and not S. 1991.

(The prepared statement of Mrs. Beideman follows:)

STATEMENT OF GERALDINE M. BEIDEMAN, ON BEHALF OF SELECTED CALIFORNIA EMPLOYERS AND EMPLOYER ASSOCIATIONS

The value of H.R. 15119

SUMMARY

The measure proposes significant improvements in the federal unemployment insurance law. While it is true that some of these proposed changes already have been incorporated in the California law, many states have awaited federal action to extend coverage, furnish recession benefits, permit benefit payments to trainees, and raise the tax base. Generally, over the years it has been the federal responsibility to enact provisions such as these. It should be noted that the proposed legislation calls for increases in employers' federal payroll taxes. It is recognized, however, that the recession benefit program must be funded and that there is a need for additional monies to administer the employment security program.

Changes in the Federal-State relationship required by 8. 1991

In contrast to H.R. 15119, S. 1991 not only would make significant changes in the federal unemployment insurance provisions but it also would assume for the federal government many important legislative responsibilities that from the start of the program have been left with the states. In California, S. 1991 would have the effect of increasing weekly benefits, lengthening the duration

of payments for many seasonal and intermittent workers, lowering the admittance requirements for benefit eligibility, and liberalizing some of the disqualification provisions. In addition, it would require a substantial increase in California employers' state payroll taxes to support the federally-devised benefit requirements. Furthermore, S. 1991 would increase California employers' federal payroll taxes far beyond the rise proposed in H.R. 15119. Federal and state unemployment insurance taxes on California employer payrolls now approximate 2.0 percent; if S. 1991 were enacted, the tax on California payrolls would rise to at least 2.8 percent.

Recommendations

Representative employers of California suggest that H.R. 15119 not only represents an important updating of federal unemployment insurance provisions but that it also adheres to the long-established legislative roles of the federal and state governments. Over the years, the California Legislature has given very careful attention to the particulars of the California labor force and the employment conditions and have designed an unemployment insurance program that "fits" California. S. 1991 largely would substitute federally devised requirements for the comprehensive program review and modification that the California Legislature undertakes regularly.

The California employers whose views are presented in this statement respectfully request favorable consideration of H.R. 15119. The measure contains important improvements and at the same time maintains the balance in federal and state responsibilities for unemployment insurance legislation.

THE ADVANTAGES OFFERED IN H.R. 15119

In this federal-state system of unemployment insurance, H.R. 15119 provides an important updating of the federal role in the program. Over the years since the Social Security Act was passed, federal responsibilities have encompassed the following:

1. Defining the pattern of coverage by designating the employer groups that are subject to the tax;

2. Safeguarding workers' rights in relation to the maintenance of labor standards and the appeals process;

3. Setting up two special programs for the payment of extra benefits during times of recession;

4. Taxing the payrolls of insured employers to support the administration of the employment security program, finance the federal loan fund, and pay for the special recession benefits.

Left with the states ever since 1935 have been the responsibilities of: 1. Determining the size of the weekly benefit payments;

2. Deciding upon the length of time these payments could be made; 3. Establishing the conditions under which benefits would be granted; 4. Raising the necessary monies to pay unemployment insurance benefits. The provisions of H.R. 15119 generally maintain this division of responsibility for unemployment insurance. At the same time, H.R. 15119 contains significant improvements which would have far-reaching effects on the system.

Application of H.R. 15119 to the California law.—California has anticipated many of the changes called for by the proposed legislation. Employees in firms having one or more workers have been protected ever since 1946, and agricultural processing workers were insured even earlier. California's extended duration program to pay extra benefits to claimants during times of high unemployment dates back to 1959 and so, too, does the provision for paying benefits to claimants who are enrolled in retraining courses. The state's lag-period provision to guard against the "double-dip" goes back some 15 years.

Because these provisions so far have not been a part of the federal law, however, many state programs have not contained these features. The enactment of H.R. 15119 thus would up-grade the entire federal-state system.

Two provisions in H.R. 15119 are especially worthy of note. That which establishes a permanent program for paying extra benefits when unemployment is high has a number of advantages. One of these advantages is that the program would go into operation automatically in the times when it is needed-that is, when jobs are hard to find and individual claimants have used up all their regular benefits and still are unemployed. Another advantage is that the program is designed to operate nationwide when the general economy turns down and also to operate individually in any state experiencing heavy unemployment, even

though labor market conditions elsewhere may be prosperous. Moreover, the program calls for orderly pre-funding to meet the cost of the extra benefits that may be paid.

Twice in recent years Congress has responded to the need to extend the length of unemployment insurance payments during times of general recession. While these temporary programs were commendable, they had certain limitations. The timing of the extra payments was one; they came into effect some time after high-level unemployment became apparent and they remained in effect some time after employment was on the upturn. Another disadvantage was that the differences in unemployment levels among the states were not taken into account; the temporary measures, in other words, operated on a nationwide basis. A third problem concerned financing. Employers were assessed extra federal taxes after the benefits were paid. California employers, for example, had to pay these special federal taxes on their 1962, 1963 and 1964 payrolls to repay the cost of the extended benefits under the Temporary Unemployment Compensation Act of 1958 and the Temporary Extended Unemployment Compensation Act of 1961. And yet, in those years of repayment, unemployment was at a very high level in California. The substitution of an automatic and prefunded system to operate on a state-by-state or on a nationwide basis as provided for in H.R. 15119 overcomes the problems encountered under the emergency measures.

The second provision that is subject to special mention is the one which gives the states the right to protest the Secretary of Labor's findings on issues of conformity and compliance. In any situation where one government agency has administrative jurisdiction over another-as in the case of the Department of Labor over the state employment security agencies, including the California Department of Employment-there is the opportunity for arbitrary interpretation or application of the law. The judicial review provision in H.R. 15119 furnishes a safeguard against such contingencies.

The cost of H.R. 15119 to California employers.-There is a price attached to H.R. 15119 in the form of higher federal payroll taxes to be levied on employers. Moreover, many California employers, especially those employing fewer than four workers, would be required to pay the federal unemployment insurance taxes for the first time. With California employees' average annual earnings in insured employment approximating $6,500 now, it can be expected that employers will experience higher taxes than currently, not only as a result of the rate increase, but also because of the provision raising the taxable wage base.

What California employers will pay in federal unemployment insurance payroll taxes for each employee earning up to the taxable wage base, as compared with the current amount, is shown in the following table:

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Undesirable as a tax increase may be, most in industry believe that the one called for in H.R. 15119 is the price that employers would have to pay for the favorable aspects of H.R. 15119. It is understood that a new benefit provision such as the permanent extended duration program must be financed. Prefunding, moreover, is a preferable method to the reimbursements required under the two recent temporary programs. In addition, there apparently is a need for additional administrative funds, and a portion of the tax advance would satisfy this requirement.

It should be noted that H.R. 15119 would not require an increase in California payroll taxes. While relatively minor adjustments in the taxable wage base would have to be made, the state tax rate could be adjusted accordingly.

THE CHANGE IN THE FEDERAL ROLE THAT WOULD RESULT FROM S. 1991

Unlike H.R. 15119 which adheres generally to the traditional legislative role of the federal and state governments for unemployment insurance purposes, S. 1991 calls for the federal government to assume many of the responsibilities heretofore reserved to the states. The proposed legislation would materially

change the California law, as the discussion below indicates.

Qualifying requirements

Ever since the California program has been in operation, claimants have had to earn some minimum amount of wages in their base year in order to gain benefit entitlement. There is no time-worked requirement such as 20 weeks of work in the base year. The base-year earnings requirement customarily has been kept low in comparison with prevailing wages. California typically has many short-time workers in its labor force because of the nature of our industries. Here, large numbers of people are needed to work in logging and lumbering activities, in fishing and fish canneries, in fruit and vegetable canneries and packing houses, and in various services related to agriculture. Here, too, is the main concentration of the entertainment industry-motion picture, radio, and television production and similar activities. The tourist industry also is an important one in California, and it requires extra workers for the winter season at desert and ski resorts and for the summer season in the mountain and beach

areas.

Because much of the labor demand has been for less than year-round workers, the California Legislature has consistently rejected any eligibility requirements that would rule out of benefit status those workers who were employed more than just casually. Consequently, from 1955 to 1965, the minimum earnings requirement in a base year was held at $600. In the 1965 Session of the California Legislature, the money requirement was raised to $720, a modest increase of 20 percent compared with a 47 percent rise in wages, a 150 percent advance in the minimum weekly benefit, and a 97 percent increase in the maximum weekly benefit during the same period.

S. 1991 would require that the benefit entitlement provision be no more than 20 weeks in the base year or the equivalent. The equivalent-the provision California would have to follow-is defined as five times the average weekly wage. Depending upon the coverage provisions adopted, California's base year earnings requirement would have to drop back to $600 or $625. This would return it to about where it was starting in 1955.

Under present coverage provisions, the average weekly wage is $125. To meet the current $720 base-year qualification, only 5.8 weeks of work is needed. At the minimum wage of $52, only 13.7 weeks of base-year work is required. These qualifications for admission to benefit status appear quite easy, and yet under S. 1991 they would become easier still.

The Administration has noted that there has been a tendency for states to balance increases in benefits with increases in minimum qualifying requirements. This tendency appears to be the reason for the proposed ceiling on eligibility provisions. And, yet, if wages increase and thus push up benefits, it would seem logical that the same wage gains should result in increases in the minimum entitlement provisions.

Allowed, too, in the proposed ceiling to be placed on state eligibility requirements is that states might adopt provisions to eliminate short-time workers. In addition to the base-year earnings of five times the average weekly wage, states might also require claimants to have either: (1) one-third of their base-year earnings outside their quarter of highest earnings, or (2) base-year earnings of 40 times their weekly benefit.

The problems of trying to fit work patterns into such artificial time spans as the calendar quarter are well-known in California. For some years, the California law contained a secondary eligibility requirement which was intended to rule out the very short-term workers. Known as the "75-percent rule", in its most recent form it applied only to claimants having very low base-year earnings-those between $600 and $750. If these claimants earned more than threefourths of their base-year wages in a single calendar quarter, they had to have more earnings to qualify for benefits than did claimants whose previous wages were spread over a longer period of their base year. This special provision resulted in certain inequities. For example, two claimants might work the same length of time in their base year and earn the same amount of wages; yet because of the timing of their employment, one might qualify for benefits while the other

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