CONCLUSION

(N.B.: For full testimony see Hearings Before House Ways and Means Committee on H.R. 8282, Part 4, pp. 1669-1701.)

The CHAIRMAN. The next witness will be Mr. Thomas Peavy, of the Arkansas Chamber of Commerce.

Mr. Peavy, Senator Fulbright asked me to tell you that he would have liked to have been here to introduce you but he is conducting hearings in his committee at this very moment, and was not able to be here, and Senator McClellan is over in the Judiciary Committee at this moment.

STATEMENT OF TOM H. PEAVY FOR THE ARKANSAS STATE CHAMBER OF COMMERCE

Mr. PEAVY. Thank you, Mr. Chairman.

In the interests of conserving time, I have filed a statement with the committee. I would like to state my qualifications and give a brief summary of the points which are made in the statement. Is that agreeable?

The CHAIRMAN. That would be fine.

Mr. PEAVY. My name is Tom H. Peavy. I am general staff manager for the Southwestern Bell Telephone Co., in Little Rock. I am chairman of the Joint Subcommittee on Unemployment Insurance of the Arkansas State Chamber of Commerce, and Associated Industries of Arkansas, Inc.

I am also a member of the board of directors and chairman of the governmental affairs department of the Little Rock Chamber of Commerce.

I appear here as a representative of the above organizations which have a combined membership of more than 4,500 firms and individuals, employing more than 100,000 Arkansas citizens who are subject to the coverage of the Arkansas Employment Security Act.

Names of other statewide organizations joining in this statement are listed in the appendix to my statement.

I wish to present the views of these organizations of employers with respect to H.R. 15119, which we favor in its present form, and now under consideration by this distinguished committee.

I am also an employer member of the advisory council of the Employment Security Division of the State of Arkansas serving under an appointment by the Governor. I have held this appointment for the past 15 years.

To summarize my statement which has been filed, I have five points: 1. The Arkansas unemployment compensation has recognized and kept pace with the general increase in wage levels. The 50-percent escalator, now a part of the Arkansas statutes, has increased maximum weekly benefits from $30 in 1963 to the present $39 effective July 1, 1965. As the wage levels continue to rise, the amount of the maximum benefits will necessarily increase. H.R. 15119 will have no effect in this respect on our State benefit standards.

2. S. 1991 proposes an increase in maximum weekly benefits to 60 percent in 1969, and 66% in 1971 of the average weekly wages, and a combined duration of State and Federal benefits of 52 weeks. Presently we estimate the 50-percent average weekly benefits provided

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under the Arkansas law represents a range of about 70 percent of the take-home pay in our State.

To increase this percentage can only result, we feel, in malingering and abuse and contribute to increased unemployment resulting in unemployment benefit payments, becoming more of a welfare payment or simply a dole.

3. H.R. 15119 does not impose a Federal standard uniform duration of benefit payments to all States irrespective of the industrial or economic condition of a State.

This is recognized to be sound in the U.S. Senate committee report on title IX of the Organizational Social Security Act in 1935, which established a present unemployment compensation system.

4. H.R. 15119 will not preempt the State unemployment compensation and replace it with a Federal system of welfare and relief. This upholds the whole purpose of unemployment insurance.

5. We feel that S. 1991, with its liberal claimant qualifications, can only result in encouraging the secondary wage earner to obtain a job, qualify for benefits, voluntarily quit to assume the duties of a housewife and draw benefits for 52 weeks. On exhaustion of benefits she would begin the same cycle. These inevitable results are a long way from the true intent and philosophy of unemployment compensation to a worker unemployed through no fault of his own and actively seeking employment.

I would like to add to that the fact that as a member of the Arkansas Advisory Council, we had a study prepared by our security division on what we term noncharge benefits, which are benefits to people who have quit jobs through no fault of the employer, and we find that in excess of 20 percent of all payouts in the State of Arkansas are paid to people who voluntarily quit on their own through no fault of the employer. I have a copy of this statement with me.

The CHAIRMAN. If you people can show us ways that we could or should cooperate and to reduce or eliminate malingering or improper filing and collection of claims, I believe that the committee would be interested in doing something along that line. I think I would.

Of course I have had the impression that there couldn't be as much of it as some people might think because the average for most States seems to be about 22 percent of those covered being unemployed, and that would mean that about 971⁄2 percent of them would be on the jobs emploved.

But I do feel, and I am sure that the committee would agree with me if there is some way that we can appropriately reduce malingering or abuse of the program we would like to cooperate.

Mr. PEAVY. Mr. Chairman, I only have this one copy of the study with me, and with your permission, I would like to send you additional copies. This is prepared by the Arkansas Employment Securities Commission.

The CHAIRMAN. We have modernized the committee procedures to where we can reproduce that for you before you leave at noon. Mr. PEAVY. I would be glad to leave this with you, sir.

The CHAIRMAN. Fine. I would just like to have our staff make a copy of it and have it available for us. That discusses the abuses that you discovered?

Mr. PEAVY. Yes, sir.

The CHAIRMAN. Do you have some recommendations as to how they might be curbed?

Mr. PEAVY. We did make some recommendations to our State legislature 2 years ago. They were not passed, sir.

The CHAIRMAN. Well, I wish you luck with it because I don't think any of us who are interested in this program want to see this program. abused or the employers, the public or other workers victimized by the misconduct of those who would do such as that.

Well, thank you very much, Mr. Peavy.

Mr. PEAVY. I would like to make one concluding remark, sir: Many of my colleagues and people whom I represent have studied H.R. 15119, and we believe, sir, that it is realistic and workable in its present form. We, therefore, respectfully urge this committee to make positive recommendations for its passage in its present form without amendment.

Thank you very much.

The CHAIRMAN. Thank you, Mr. Peavy.

(The prepared statement follows:)

STATEMENT OF TOM H. PEAVY, REPRESENTING THE ARKANSAS STATE CHAMBER OF COMMERCE, ASSOCIATED INDUSTRIES OF ARKANSAS, INC., CHAMBER OF COMMERCE OF LITTLE ROCK, ARK., AND FOR LITTLE ROCK INDUSTRIAL DISTRICT ASSOCIATION My name is Tom H. Peavy. I am General Staff Manager, Southwestern Bell Telephone Company, at Little Rock, Arkansas; Chairman of the Joint Subcommittee on Unemployment Insurance of the Arkansas State Chamber of Commerce and Associated Industries of Arkansas, Inc.; a member of the Board of Directors and Chairman of the Governmental Affairs Department of the Little Rock Chamber of Commerce. I appear here as a representative of the above organizations which have a combined membership of more than 4,500 firms and individuals, employing more than 100,000 Arkansas citizens who are subject to the coverage of the Arkansas Employment Security Act. Names of other statewide organizations joining in this statement are listed in an appendix. I wish to present the views of these organizations of employers, with respect to H.R. 15119 and S-1991, now under consideration by this distinguished Committee of the U.S. Senate. I am also an "employer member" of the tri-partite Advisory Council of the Employment Security Division, Department of Labor, State of Arkansas, serving under an appointment by the governor. I have held this appointment for the past 15 years.

My presentation will stress the following points:

A. We urge that the U. S. Senate pass H. R. 15119 intact, without any amendments whatsoever.

B. We urge that this Committee reject completely S-1991 to which we are unalterably opposed.

C. Arkansas and other states have kept the pace in the unemployment compensation field.

D. The real issue-unemployment compensation or a dole?

E. A balanced federal-state relationship should be preserved.

A. We urge that the U.S. Senate pass H.R. 15119 intact, without any amendments whatsoever

The Committee on Ways and Means of the U.S. House of Representatives has made an exhaustive and comprehensive survey of the present and foreseeable needs of the federal-state unemployment insurance system. H.R. 15119 is the end-product of an "in depth" study covering a period of several months.

In reporting out this measure, the Ways and Means Committee thereby rejected H.R. 8282, a bill which would have meant de facto federalization of the American unemployment insurance program. Our information is that the proponents of H.R. 8282 and its companion S-1991 now seek to amend H.R. 15119 by offering some or all of the various provisions which were unacceptable to the Ways and Means Committee, the Interstate Conference of Employment Security Administrators, and, we feel, the majority of organizations and individuals who are knowledgeable in unemployment insurance matters.

The U.S. House of Representatives passed H.R. 15119 by the overwhelming majority of 374-10. This amounts to a consensus of unusual significance. Certainly it would be regrettable if the bill should now be altered by the addition of provisions already rejected in the House.

We do not claim the bill is perfect. There have been compromises in certain areas where we would have preferred otherwise. However, it is a considered judgment of the present needs of our nation, and we are strongly recommending to our members that they support its passage in Congress.

One of its provisions, alone, would be the most fundamental improvement passed by Congress in years. That is the provision for judicial review of the U.S. Secretary of Labor's rulings on "conformity" issues. If the Secretary now holds that a state has done something to its law, by amendment or interpretation, so that the state law no longer "conforms" to the Secretary's interpretation of federal "requirements," there is no appeal from such a ruling. H.R. 15119 would provide for judicial review.

B. Arkansas has kept pace in the U.C. field

In 1944 the average weekly wage in covered employment in Arkansas was $27.54 and the average weekly amount paid to claimants for total unemployment was $11.15. The average weekly benefit amount in 1944 was approximately 40% of the average weekly wage, and the percentage of claimants exhausting their benefits in 1944 was 38.9. In 1965, the average weekly wage had risen to $77.86. The 1964 average weekly benefit amount for total unemployment was $26.49, and at the same time, the percentage of those persons exhausting their benefits had fallen to 25.7.

Since 1963, the Arkansas law has provided for an automatic annual increase in maximum weekly benefit amount, based on 50% of the average weekly wage during the preceding year. With a maximum duration of 26 weeks, this means that the new maximum weekly benefit as of July 1, 1966, in Arkansas, of $39.00, will provide a total benefit of $1,014.00. This is 422.5% of the comparable total benefit amount of $240.00, in 1944, when the maximum weekly benefit was $15.00 and maximum duration was 16 weeks.

The 1965 average weekly wage of $77.86 was 282.7% of the 1944 average weekly wage of $27.54. Therefore, in Arkansas, the liberalization of unemployment benefits has far outstripped the increase in average weekly wages.

Since the inception of its program in 1937, Arkansas has had "coverage" of employers with "one or more" employees, which rates high on any "liberality" index.

Arkansas employers have concretely demonstrated their sense of responsibility. and their readiness to support higher rates of contribution to meet the more liberal benefit amounts mentioned above. Chiefly due to increased benefit maximums, the Arkansas fund balance declined from $46 million in 1956 to $30 million in 1962. To maintain the solvency of the Arkansas fund, and meet the increased costs of liberalized benefits, business and industrial groups took the initiative in sponsoring and supporting legislation passed by the 1963 Arkansas General Assembly which provided for stiff increases in contribution rates. The maximum rate was raised from 2.7% to 4.0%. Variable rate schedules were enacted, geared to the fund balance as of June 30 each year. Total contributions paid by Arkansas employers rose from $9.4 million in 1961 to $13 million in 1964. No rate reductions have been sought since 1955. This is an impressive display of how "experience rating" works.

C. The real issue-unemployment compensation or a dole?

As we are informed, the two key provisions sought by the advocates of S-1991 are: (1) federal standards governing the weekly amount of state benefit payments, and (2) federal standards controlling the duration of the payments. Mentioned most often are requirements that the state maximum weekly amount be at least 2% of its average weekly wage, coupled with a uniform duration of 26 weeks, regardless of the employment history of a claimant.

It has been proposed that all claimants with 20 or more weeks of employment must be eligible for at least 26 weeks of benefits. This would greatly restrict the states' ability to vary the duration of benefits in proportion to the amount of previous employment or earnings of the claimants.

The question of "variable" versus "uniform" duration of benefits has always been a major issue in the unemployment insurance program. The trend has been away from uniform duration: in 1941, 16 states had uniform duration while by April, 1966, only 8 states had uniform duration.

The same groups who favor drastic increases in benefit maximums, and uniform duration of payments, also would reduce the disqualification penalties which the states could impose, for such acts as voluntary leaving without good cause, or discharge for misconduct. In most cases, the disqualification would be limited to six weeks. This is a totally unrealistic requirement.

If the states have learned anything after thirty years of administering their own programs-and the evidence is that they have, indeed, learned their lesson well-it is that reasonable, sensible qualification requirements are an absolute "must." In the infancy of their programs, most states had waiting periods of four or five weeks as penalties for voluntary quitting or discharge for misconduct. The inadequacy of such brief waiting periods became quickly obvious. Almost without exception, the states began to stiffen their disqualifications, to protect their funds from depletion due to payments of benefits to those who were voluntarily unemployed.

A Gallup Poll of September 16, 1965 indicated that, in a nationwide survey, 75% of American adults believe many people collect unemployment benefits even though they could find work. In the same survey, 69% favored making the unemployment laws more strict.

Since 1955 we have had in Arkansas a provision for the "non-charging" of employer accounts in cases where a worker voluntarily quits without good cause connected with the work, or was discharged for misconduct. The benefits are paid to the claimant, but are not charged to the employer as would ordinarily be done. The volume of these "non-charged" benefits, therefore, gives a revealing insight or index to the amount of voluntary unemployment which is being compensated at present. In 1965, over 20% of total benefits paid went to claimants who separated from their last, or base period employment, due to voluntary quitting or discharge for misconduct. About 80% of the non-charges involved voluntary quitters. This gives some indication of the problem which would be greatly aggravated by a 26-week uniform duration and ultra-liberal benefit maximums. The "secondary wage earners," housewives, pensioners, and parttime workers (most of whom are only casually attached to the labor market, and are habitually unemployed, often by choice) would enjoy the greatest windfall in the history of the program. They would have tax-free unemployment benefits equal almost to their regular take-home pay. There would be no incentive to seek work.

In contrast, H.R. 15119 (following the Interstate Conference's proposal as to extended benefits) would restrict such extended benefits to recession periods, provide for a federal-state sharing of the cost, limit the maximum payment to an extra 13 weeks, under state terms and conditions (subject to defined 'trigger" points), and permit the states to require extended benefit claimants to show a substantial work history. This, we submit, is a much more realistic and wise approach than a blanket uniform duration requirement, with inadequate safeguards in regard to attachment to the labor market. Again, this reflects the wisdom and experience of those who have been actually in charge of administering state programs.

D. A balanced federal-state relationship should be preserved

In the area of unemployment insurance, the federal-state relationship should be that of a partnership-not master and servant. Whether the particular federal standards now under consideration are beneficial, or not, is actually not relevant to the larger issue of permanently altering the areas of responsibility and discretion which have been historically left to the states.

The U.S. Senate Committee report on Title IX of the original Social Security Act (1935) which established the American program stated the principle simply and eloquently:

"Except for a few standards which are necessary to render certain that the State unemployment compensation systems are genuine unemployment compensation laws and not merely relief measures. the States are left free to set up any unemployment compensation system they wish, without dictation from Washington. . . . The States may determine their own compensation rates, waiting periods, and maximum duration of benefits. Such latitude is very essential because the rate of unemployment varies greatly in different States, being twice as great in some States as others."

Now Mr. Chairman, Members of the Committee, I shall briefly summarize the points covered in my testimony.

1. Arkansas Unemployment Compensation has recognized and kept pace with the general increase in wage levels. The 50% escalator now a part of the