security, we are asking that you prevent to the maximum degree this type of victimization.

Senator DOUGLAS. I am very glad you clarified you position on this which, I think, you have always held but which is sometimes misunderstood by critics of the Office of Economic Opportunity.

The Office of Economic Opportunity tries to help the disadvantaged who have never been able to establish a work relationship adequate to bringing in an income while they are working and who, therefore, afll outside the scope or protection of unemployment insurance.

Mrs. WICKENDEN. I quite agree, Senator. I do not have any disagreement with that. In fact, I think that to the extent that the Senate bill deals with this problem it aids it by encouraging, by requir ing, Sates to make payments for periods of retraining.

Now, it is true that only applies to the older worker, but it is in line with what you are saying.

I would like to take 2 minutes, if I have them, of my time to discuss something on which I feel a particular competence, and that is the matter of Federal-State relationships, because I feel quite strongly, and I think that most of these organizations for which I speak share the opinion, that the States do have a continuing role in our system and should not be written off.

But I find myself in total disagreement with those opponents of this measure who say if you have Federal standards in a State-administered program this is, in effect, destroying the role of the States.

Actually, it is interesting to me from where I sit that there is an even stronger feeling in certain circles that the States have actually outlived their usefulness. I do not hold this view.

Senator DoUGLAS. Nor do I.

Mrs. WICKENDEN. But I hear it said all the time because they can neither I want this all in quotes-"the States can neither deal with a nationwide problem, nor can they deal with the problems adequately of their own political subdivisions."

One way to make it possible for the States effectively to deal with a nationwide problem, and certainly unemployment derives from conditions which are national in origin-is to have them become the administrative agents of a program in which the standards operate on a national basis.

It is interesting on another front that I was, as you perhaps remember, Senator, for many years the representative of the American Public Welfare Association which is the agency of another Stateadministered or local-administered program, the public assistance program, and for the most part this organization has consistently asked for Federal standards in order to equalize among the States the disadvantages that they feel.

I have just completed a period of service on the Federal Advisory Council on Public Welfare which was established by the 1962 Social Security Amendments, and that Council came forward unanimously requesting a change in the public welfare law which would have the effect of mandating and financing, nationwide minimum standards. So that I feel-and this is the position stated in this document-that quite contrary to the consistent statement of one of the opponents of this bill, that this was a federalizing measure, and I am referring now to Senator McCarthy's bill-quite the contrary, this is a proposal to

save the States from what may, might well, be the folly of permitting the program to become so depreciated in its usefulness that State administration was no longer possible.

Of course, the one other point that I would make at this point is that if you cannot act in a period of relatively low unemployment to strengthen your basic institutional structure, which is what I am concerned with, you run a grave risk of doing a very inadequate, hasty job if you are later confronted with a crisis.

So, from the point of view that I represent, it is really a conservative position to ask that action be taken now to strengthen the State programs to Federal action so that they can effectively replace income lost due to unemployment and thus prevent need and thus, in effect, reduce the costs, both social and economic, that occur when that happens.

Senator DOUGLAS. Of course, this is one of the reasons why those of us who have supported the Supreme Court decisions on reapportionment held very strongly that the State legislatures would become more representative of the population, and that they will be more zealous in protecting the interests of wage earners.

Mrs. WICKENDEN. I think that is happening. It takes a little time. Senator DOUGLAS. We hope that legislative reapportionment will lead to greater emphasis by the State legislatures on these matters and, hence, head off the movements for national administration.

Mrs. WICKENDEN. Yes. But that would not meet the problem that Senator Long referred to of competition among the States. Senator DOUGLAS. That is right.

Mrs. WICKENDEN. I happen to live in a State which has-New York which has rather a high level, and there is a constant fear that any further improvements in the program will weaken the State's competitive position.

Senator DOUGLAS. That is correct.

Mrs. WICKENDEN. So only Federal action can deal with that problem.

Senator DOUGLAS. That is what held back child labor legislation for many years, and ultimately required a Federal act.

Thank you very much. I have been reading your articles for many years.

Mrs. WICKENDEN. May I insert this list for the record?

(The document referred to may be found in the committee files.) Senator DOUGLAS. The next witness is Mr. Carl Shipley, of the firm of Shipley, Akerman & Pickett. Good morning, Mr. Shipley. Will you proceed.

I notice, Mr. Shipley, at the bottom of page 1 of your statement you refer to a letter which you addressed to the chairman on June 30 of this year and without objection I am going to make that part of the record.

Mr. SHIPLEY. Thank you, Senator.

STATEMENT OF CARL L. SHIPLEY, ATTORNEY, WASHINGTON, D.C.

Mr. SHIPLEY. Senator, in accordance with my conversations with Tom and with the chairman's statements, I am submitting my statement of several pages for the record. I am doing this for the purpose,

too, of saving the time of this committee and your time in considering this serious problem.

(The prepared statement and letter of Carl L. Shipley, follow :)

LAW OFFICES,

SHIPLEY, AKERMAN & PICKETT,
Washington D.C., June 30, 1966.

Hon. RUSSELL B. LONG,
Senate Finance Committee,
Senate Office Building,
Washington, D.C.

DEAR CHAIRMAN LONG: Our office shares with many of our business clients we represent the hope that the federal unemployment compensation bill passed by the House will be accepted by the Senate without major modifications. At a time when the dollar is under attack, and inflation is undermining the savings of our older citizens, it would not be in the national interest to increase the cost of unemployment compensation for employers. This additional cost naturally will be reflected in price increases of goods and services employers supply to consumers throughout the nation.

As we understand it, the House-passed bill (H.R. 15119) will extend benefits to an additional 3.5 million persons who are not currently covered. The retention of employer "experience ratings" and the existing federal-state structure of the system is far superior to the federalization of unemployment compensation by the establishment of federal standards.

The House bill will increase the federal payroll tax levied on employers to 3.3% from the present 3.1%, which will increase the federal share of the tax from 0.4% to 0.6%, and will permit employers to continue to claim a credit equal to the remainder of their 3.3% liability for taxes above that paid to State compensation funds. The House bill will increase the current $3,000.00 annual wage base to $3,900.00 in 1969, and to $4,200.00 in 1972, which will produce estimated additional revenue of $272 million in 1967, and as much as $628 million commencing in 1972. This expansion of the existing system would seem to be reasonable under the circumstances, and we strongly recommend that it be adopted in the Senate without substantial change. Will you please associate this letter with the record of hearings on the proposal? Very truly yours,

SHIPLEY, AKERMAN & PICKETT. WASHINGTON, D.C., July 21, 1966.

Re H.R. 15119, Federal unemployment insurance bill.

Hon. RUSSELL B. LONG,

Chairman, Finance Committee,
Senate Office Building,

Washington, D.C.

DEAR CHAIRMAN LONG: It is our understanding that the Senate Finance Committee in considering proposed amendments to the present Federal-State unemployment compensation program is holding this hearing to receive comments respecting the Unemployment Insurance Amendments of 1966 provided in H.R. 15119, the House-passed bill to extend and improve the Federal-State unemploy ment compensation program, and that the Committee is not considering S. 1991, which was a counterpart to the original House bill, H.R. 8282, sponsored by the Administration. The views we express are our own and not necessarily the views of our clients, although as citizens and taxpayers we share with them and other interested persons a deep concern that Congress not take any action at this time which will aggravate inflation by increasing the cost of doing business, and ultimately increasing the cost of goods and services to consumers. In a letter dated June 30, 1966 we forwarded to you some views in connection with H.R. 15119, and this statement is intended to supplement that letter.

When the present Federal-State unemployment compensation system was enacted by Congress in 1935 as part of the Social Security Act, a rather unique Federal tax device was incorporated to stimulate action on the part of the various States in implementing the system. Under the existing plan, a Federal 3.1% tax on the first $3,000 of each covered employee's annual pay, defined as the

"taxable wage base" is imposed. Each employer, provided the Secretary of Labor has determined the State system involved to be eligible, is permitted an "off-set" or deduction from his Federal tax of an amount up to 2.7% of amounts paid in State unemployment compensation taxes.

Thus, the net Federal tax under the present system is 0.4%, most of which is ultimately redistributed to the various States for administrative expenses. During the past 30 years this system has worked remarkably well and has assisted millions of employees during periods of involuntary unemployment. It has proved to be a stabilizing influence for the national economy and has helped to moderate and avoid the sharp effects of temporary economic recession.

In view of the fact no real need for amending existing law has been shown, we believe Congress should defer action on this proposal until the military and economic picture clarifies. Our country is faced daily with increasing evidence of serious economic dislocation. Inflation is increasing, Federal and State tax increases are under serious study, wages and other costs of business are constantly spiraling upward, and there is a shortage of labor. And unemployment has reached the lowest point in many years. In addition there are a number of other Federal programs such as the Manpower Training Act and the proposed Human Investment Act, which will meet some of the problems sought to be remedied by the pending legislation. The inter-relationship between the FederalState unemployment compensation program and other developing Federal programs should be studied further before action is taken.

If the Senate Finance Committee determines to report a bill, despite these other considerations, it is our recommendation that it report H.R. 15119 in its present form. Today almost 50 million jobs, including those of Federal employees, ex-servicemen, and railroad workers, are covered by unemployment compensation. Only 15 million jobs are not covered, and nearly half of those are in State or local governments. The House bill will extend coverage to another 3.5 million persons, largely by redefinitions of the terms "employer", "employee" and "agricultural labor", and by requiring States to provide coverage for certain employees of non-profit organizations, State hospitals, and institutions of higher learning. This will increase the total number of covered workers to almost 53 million, a little over 82% of all wage and salary workers in the United States. These changes are set forth in the report of the Committee of Ways and Means of the House of Representatives to accompany H.R. 15119 at page 2, and we incorporate them by reference.

The bill would require the various States to enact laws establishing a new permanent program to take effect on January 1, 1969 to pay extended benefits during periods of high unemployment to workers who exhaust their basic entitlement to unemployment insurance, with the Federal Government and the States each paying 50% of the cost. The "extended benefits" would be triggered by either a national or State "on" indicator. Under present law all States except two pay benefits for at least half a working year, i.e., 26 weeks or more. Under H.R. 15119 additional State benefits will be paid for as much as another onefourth of a year, i.e., 13 additional weeks. In individual States such benefits will go into effect when the rate of insured unemployment over a 13-week period is 20% higher than it averaged in the corresponding period in the two preceding years, and the total of unemployment is at least 3%. On a national basis, the extended benefits will be triggered when the insured unemployment rate is at least 5% and the rate of benefit "exhaustions" is at least 1%. To protect against difficulties experienced under previous temporary extensions that permitted some persons to get a job, work a short time, and then draw many months of unemployment benefits, H.R. 15119 will allow the States to limit the additional benefits to those who are regularly a part of the labor force and have to work for a living.

The House-passed bill under consideration by the Senate Finance Committee will be financed by increasing the rate of tax under the Federal Unemployment Tax Act from the present 3.1% of taxable wages to 3.3% commencing in 1967. No change will be made in the 2.7% credit allowed to employers in the various States. The bill raises from $3,000 to $3,900 those wages subject to the Federal tax for the years 1969 through 1971, and further increases the wages base to $4,200 per year in 1972. This will result in a net increase in the Federal unemployment tax from 0.4% to 0.6%, of which 0.1% will go into a separate new account in the unemployment trust fund to finance the Federal share of the extended benefits provided by H.R. 15119.

We believe H.R. 15119 as passed by the House is far superior to the proposal contained in S. 1991, which would cause the various States to abandon "experience-ratings" under which employers are given an incentive to avoid lay-offs and maintain employment. Also, as we understand S. 1991, it would establish a new program of Federal unemployment benefits on top of State unemployment compensation payable for 26 weeks in good times and bad, as well as a Federal subsidy to various States claiming to have high benefit costs. In addition, it is our understanding that S. 1991 would impose Federal standards governing eligibility, the size of benefits, and the length of time benefits would be paid by the various States, thus destroying much of the flexibility inherent in the present system under which States can shape their unemployment compensation programs to local needs. One of the worst features of S. 1991 would be its proposed Federal requirement that every State pay benefits to anyone who quits a job voluntarily or who has been fired for misconduct or has refused to take suitable employment while drawing unemployment insurance benefits.

H.R. 15119 preserves the Federal-State system which has worked so well for nearly a generation, while at the same time strengthening some aspects of it and eliminating certain abuses. Contrarily, in our judgment S. 1991 would completely alter the basic structure of the Federal-State system and shift it away from its present pattern of providing unemployment insurance and convert it to a welfare-type program which would ultimately destroy it.

The present unemployment insurance program is designed to protect the worker who loses his job because of circumstances over which he has no control, until he can obtain other employment. It is aimed at relatively short-time unemployment, and is based on the principle of providing unemployment insurance adapted to meet local conditions. Many people believe the changes proposed by S. 1991 would transform the present insurance system into a relief-type program, moving toward a Federal guarantee of regular "wage income" whether a person is working or not.

It is the responsibility of an orderly society to take care of those persons who are the victims of long-term unemployment and need training and retraining. There are a number of Federal and State programs designed to solve that problem. However, unemployment insurance should not be confused with welfare and relief programs, nor should the present Federal-State unemployment compensation system be converted into a welfare program. It is for this reason that we are opposed to the "federalization" of the existing unemployment compensation system and recommend that this Committee, if it feels called upon to take any action, accept H.R. 15119 in its present form. Respectfully submitted.

SHIPLEY, AKERMAN & PICKETT, By CARL L. SHIPLEY.

Mr. SHIPLEY. However, there is one aspect of the proposed bill, as I understand it-it is H.R. 15119, the House bill, which this committee is considering, which I have not dealt with at any length in my statement. I wish to call to your attention, Senator, that the billand no one can quarrel with the social purposes of the bill or the soundness of the approach. I think

Senator DOUGLAS. Are you referring to the House bill?

Mr. SHIPLEY. Yes, sir; to the House bill.

Senator DOUGLAS. I see.

Mr. SHIPLEY. I am not discussing the Senate bill because I think the political possibilities of it receiving any serious consideration are very remote indeed.

Senator DOUGLAS. You say you are an expert on that subject?

Mr. SHIPLEY. Only to the extent of having talked with a good many interested persons who have been dealing with this problem over many months, and seemingly the House bill is a kind of a consensus bill, so to speak, which meets many of the areas of objection, and thus there probably won't be any rerun of all the debates and discussions that