UNEMPLOYMENT INSURANCE AMENDMENTS OF 1966 FRIDAY, JULY 22, 1966 U.S. SENATE, COMMITTEE ON FINANCE, Washington, D.C. The committee met, pursuant to recess, at 9:10 a.m., in room 2221, New Senate Office Building, Senator Russell B. Long (chairman) presiding. Present: Senators Long (presiding), Anderson, Talmadge, McCarthy, Williams, and Morton. Also present: Tom Vail, chief counsel. The CHAIRMAN. We are glad to have as our first witness this morning Mr. Robert J. Brown, commissioner of the Minnesota Department of Employment Security. Other witnesses today will come from Massachusetts and Texas. Mr. Brown, we are pleased to have to have you today. STATEMENT OF ROBERT J. BROWN, COMMISSIONER, MINNESOTA DEPARTMENT OF EMPLOYMENT SECURITY The CHAIRMAN. Our procedure here, Mr. Brown, is for the witness to have a prepared statement. I believe you do have. Mr. BROWN. Yes, sir. The CHAIRMAN. We will ask you to summarize the statement. I will just take a minute to read the statement over. All right. Mr. BROWN. Mr. Chairman, members of the committee, first I want to thank the committee for the opportunity to express my views with regard to H.R. 15119. My statement indicates generally some concern with regard to the extended benefits provisions of that bill. Basically I believe it does not go far enough. I think it handles an extremely distressful situation with regard to an entire State or with regard to the Nation, but all of us know and realize that in this age of advanced technology, jobs are being displaced every day, even in full employment, and so some provision ought to be made with regard to extended benefits for these people. These are the unfortunate people who are displaced because of technology or because they live in an area of a State which is distressed. Now, the bill does not provide for either of these situations, and I believe that this should be included as an amendment to H.R. 15119. Of course, the most important exclusion of the bill is the benefits. standard. The State administrators had a special meeting with regard to H.R. 8282 when it was in the House. They met 2 days and 65-992-66- -31 the State administrators by a vote of 34 to 12 supported a benefits standard. I think all of us realized that we have long had unemployment compensation standards in regard to many other facets of our unemployment compensation program, but we have not had standards with regard to benefits. Really that is what the unemployment compensation is all about. And there are great differences among the States. And there has been a great dilution in terms of the benefits paid in the several States through the years. When the program began, the benefits were high in relationship to the average wage in the State. As a matter of fact, they were over 50 percent in all but two States; but today, as you know, the great majority of the States pay benefits that are below 50 percent. It seems to me that the one most important thing this bill really ought to have is a benefits standard, and it really makes or breaks the unemployment compensation program amendments this year. So I would strongly urge that the Senate provide an amendment in concurrence with the suggestion of the State administrators that a benefits standard be established at 50 percent of the average wage basis in the State, that each individual be entitled to 50 percent of his average wage when he is unemployed through no fault of his own. The CHAIRMAN. Here is a thought that occurs to me, and frankly I haven't closed my mind on it at all. Congress started out by simply imposing a tax and then we said, "Now, here is about what we think the States ought to do with this. If the States want to move in the field, we will give a credit for the whole State part of it 2.7, and here is what we think they ought to do." A great number of States just sent to Washington saying, "Would you mind sending us a model statute on how you think it ought to be done." Washington gave the one and that is what most of them adopted. They weren't made to do it but they thought that would be a good way to proceed because they had no experience in the field. The Federal Government had none either, but it was relying mainly on the Wisconsin experience. Now, all this fight to keep the benefits from going up has for the most part been based on the fact that it would cause an increase in State taxes. In some States the experience rating puts the rate down to zero. The thought occurs to me that if we simply required experience rating to be used the way it was intended to be used and not used to reduce the tax down to zero, there might be enough money to go ahead and do these things. The States might very well do them if we simply saw to it that the money was there. What is your reaction to that? Mr. BROWN. In my prepared statement I did indicate that I thought it was very important that we increase the taxable wage base. This is one of the major reasons why we ought to do it. There is no question that the taxable wage base, the Federal taxable wage base, has tended to hold the taxable wage base down in several States. This has meant that reserve funds in the States have been reduced when measured against total wages. As a reserve fund is reduced as a measure against whole wages, there is a natural reluctance to increase wage benefits, because it is going to be more difficult to pay benefits unless you have an adequate reserve. So both of these things mitigate against raising and keeping benefits equitable in relationship to the cost of living. So I would encourage that the taxable wage base be increased for that reason and also for another reason. I think we recognize that you have been doing some wonderful things with manpower programs in the Congress the last 10 to 20 years, with the Area Redevelopment Act, the Economic Development Act, the expansionary fiscal policies. We have done a great job in terms of reducing unemployment, but people are still unemployed. It seems to me that we just have to recognize that if we are going to take that extra step in terms of reducing unemployment below 4 percent without causing inflation, we must recognize that we have got to match people to jobs quicker, and one of the best ways to do that is improve the U.S. Employment Service. If we can cut down a week or 2 weeks between jobs, we can significantly reduce that unemployment rate without causing inflation. The reason we have inflation obviously is because we don't have the skills, the trained people for jobs. Through training and accelerated placement through the U.S. Employment Service, I believe we can reduce unemployment below 4 percent at least to some degree without putting additional pressures on the inflationary problem. Now, as you know, the U.S. Employment Service is supported by this tax, and as a matter of fact on a taxable wage base of $3,000. This was almost total wages when it was enacted, and now, of course, it Senator ANDERSON. Almost what? Mr. BROWN. Almost total wages. Total wages of the average individual when it was enacted. Now $3,000, of course is considerably below the average wage across the country which, as I recall, is around $5,600. So if we are going to really provide the U.S. Employment Service with the tools to do the job, we have to provide adequate funds. And this is an additional reason for raising the taxable wage base. The CHAIRMAN. Senator Anderson? Senator ANDERSON. What would you do to this bill H.R. 15119 if you were writing the law? Mr. BROWN. Well, sir, I would provide a benefit standard, if I personally were to write this bill. Senator ANDERSON. I am not asking what Minnesota-what would you do if you were sitting up here? Mr. BROWN. I would provide a benefit standard as the number one important inclusion in the bill. I would provide extended benefits to anyone who has a long solid attachment to the labor force and is unemployed over 6 weeks, regardless of whether or not he is in a distressed area or whether or not the country is in a recessionary period. This individual, if he meets the requirements of the State unemployment compensation law, if he is ready, able and willing to work, is looking for a job and is unable to find one; and the condition of the economy at that time, it seems to me, is not particularly important; what is important to that individual is trying to support his family and if he has had a firm labor attachment, something like 18 months in the last 3 years, then I think he ought to be eligible for extended benefits. In addition, I think it would be important to raise the taxable wage base to $5,600 immediately and to $6,600 in 1971. I would also include a restriction against onerous or unusual disqualifications for voluntary quitting. I would not include-I would not allow by statute disqualification for above 6 weeks for voluntary leaving. There are many reasons why a person leaves a job voluntarily and ordinarily he is able to find another job in 6 weeks. I think he ought to be disqualified for that period of time. But some States go far beyond that. Some States simply indicate he is ineligible for unemployment insurance during the entire period of his unemployment, which may be 15 weeks, maybe 20 weeks. So I would recommend that a restriction against onerous disqualification should be included in the bill. Basically, then, I suggest four additions to the bill: benefit standards, improved extended benefits, restriction against disqualification, and an increase in the taxable wage base. Senator ANDERSON. You said that when this was started it was about half the wages, did you? Nearly all the wages? Mr. BROWN. Nearly all the wages in terms of taxation. Senator ANDERSON. Have you looked back on the history of it to be sure of that statement? Mr. BROWN. Yes, sir. As a matter of fact, when the bill was first enacted, it was total wages. Senator ANDERSON. It was what? Mr. BROWN. When the bill was first enacted it was on total wages and I believe in 1939 the taxable wage base was set at $3,000 which was then-which then included almost everyone who was employed, with rare exception. Senator ANDERSON. I was administering a program like that in 1935 and 1936. My memory isn't quite the same as yours. I will have to check up. Mr. BROWN. I will be glad to submit the exact figures for the Senator. (The following table was subsequently submitted for the record :) TABLE 17.-Percentages of wages taxable under State UI laws, 1938-64 1 Total wages in covered employment subject to State contributions in all States except Michigan and New York, where $3,000 base was in effect during all of 1938 and 1939; Delaware, $3,000 beginning October 1939; and South Carolina, $3,000 beginning July 1939. |