If the administration is inefficient and condones misuse of unemployment insurance, then a businessman may well question the productivity and commitment of the labor force. If the administration is proficient and dedicated to paying benefits only to those unemployed who deserve them and to getting the unemployed back to work, then the whole community will impress him as conducive to an atmosphere of labor productivity. (This is why we strongly oppose the proposals regarding disqualifications as discussed below.) Contrary to the fallacies in the proponents' position, therefore, the present federal-state system of handling unemployment insurance has worked well, will work well in the future, and should not be changed in a revolutionary manner by imposing federal benefit standards. Now we will discuss briefly certain other federal standards proposed by S. 1991 which we consider of fundamental importance. D. EXTENSION OF COVERAGE TO EMPLOYERS WITH ONE OR MORE EMPLOYEES S. 1991 proposes to require states to extend the coverage of the Act to every employer who at any time during the year, hires a single employee for a single day. Thus, a self-employed house painter who hires a helper for one day becomes covered by the Act, has to file reports, pay taxes, and the Texas Employment Commission has to establish and maintain records on him. The Texas Act now covers 80,000 employers. This proposal would add 100,000 additional employers to such coverage. But only 175,000 more employees would be added to the 2,000,000 employees now covered. This is an extreme proposal to cover casual labor usually hired in very small activities, some of which hardly could be called businesses. It makes one wonder whether the proponents of S. 1991 really appreciate the implications throughout the nation of their proposals. It emphasizes the importance of leaving to local option the decision on localized matters. Certainly, when it gets down to taking care of those who work casually in a state, the citizens of that state are in the best position to decide whether such cases will be rendered through unemployment insurance or some other means. E. DISQUALIFICATION The proposed standard provides that no person shall be disqualified for more than seven weeks for any disqualifying act, with certain few exceptions under which disqualifications may be for a longer period (such as 36 months in case of fraud under the state law, unemployment due to a labor dispute, and 52 weeks beginning with the conviction of a crime in connection with his work). The practical effect of this proposal is to prevent the state from disqualifying any person for voluntarily quitting work without just cause or for discharge for misconduct. Under Texas law, the Texas Employment Commission had discretion to assess a disqualification of from 1 to 26 weeks. (Currently the commission is assessing average disqualifications of approximately four weeks in each case.) Moreover, when the commission assesses a disqualification for a certain number of weeks, the claimant may lose his benefits for those weeks; whereas, under the S. 1991 provision, "disqualification" merely would mean postponement of benefits. This proposed weakening of the disqualification provision constitutes one of the most serious threats to the sound administration of the law. It is the kind of provision under which an employee could quit his job to take an extended vacation secure in the knowledge that on his return his benefits would be waiting for him. He could actually leave his job to work for himself, and then claim benefits. Perhaps the doleful intent and effect of this proposal is best summed up in the Labor Department's Memorandum (page 9) where it says, "Benefits could not be reduced, or benefit rights cancelled, as a penalty for a disqualifying act, such as a refusal of work." F. DURATION OF BENEFITS Another pernicious feature of S. 1991 is the requirement that any person who works at least 20 weeks (or its equivalent) is automatically entitled to 26 weeks of benefits. This would open the door to all kinds of abuse which could milk the unemployment insurance fund. Thus, an individual who works only 20 weeks and (pursuant to the disqualification standard discussed above) quits "to go fishing" would qualify for the same duration of benefits as an individual who An works a full year and then loses his job for reasons beyond his control. employer could put his relatives on the payroll for 20 weeks, and then they would draw benefits for 26 weeks. This is a good illustration of why such matters should be left to the states. We understand that six states which adopted uniform duration of benefis had such adverse experience that they were impelled to return to the variable duration which is in effect in most states. Other examples of possible abuse can be obtained by the committee from the state administrators who will testify, and who are in a better position than we are to cite more examples of abuses which this provision will generate. G. DENIAL OF BENEFITS TO TRAINEES This standard proposes that benefits cannot be denied to a claimant because he is taking an approved training course. We approve of the idea that persons whose jobs have evaporated be encouraged to undergo retraining to qualify themselves for other types of work. However, to latch retraining on to the unemployment insurance program tends to warp the program unnecessarily. This kind of situation should be handled outside the program through training allowances geared to the training program. The unemployment insurance program should be restricted to those who are available for work. IV. NEW FEDERAL PROGRAMS We now turn to those portions of S. 1991 which would establish a new federal program for extended benefits, and provide for matching grants to certain states, to be financed by substantial increases in payroll taxes. A. FEDERAL UNEMPLOYMENT ADJUSTMENT BENEFITS S. 1991 would provide for Federal Unemployment Adjustment Benefits for unemployment after June 30, 1966. In substance, an additional 26 weeks of benefits would be available to qualifying individuals after the exhaustion of state benefits. We agree that some program is desirable to help the long-term unemployed readjust themselves so that they can become self-supporting. But, such a readjustment program should be handled outside of the existing unemployment insurance program. The unemployment insurance program is designed to handle relatively shortterm unemployment of individuals attached to the labor force. We recognize that twice Congress has enacted programs to provide extended unemployment insurance benefits. But, those were emergency programs generated by recession conditions. If, however, the committee feels that some permanent legislation should be enacted to deal with the problem of long-term unemployment, and that the unemployment insurance program is the most expedient instrument for that purpose, we urge the committee to consider the proposals of a special committee of the Interstate Conference of Employment Security Agencies, embodied in H.R. 7476 and H.R. 7477 as we believe the approach taken in those bills is preferable to the approach taken in S. 1991. B. MATCHING GRANTS S. 1991 provides that a matching grant will be made by the federal government to a state of two-thirds of the amount by which unemployment insurance benefits paid by that state exceed two percent of wages in covered employment in a calendar year. The Labor Department memorandum states as the reason for this proposal: This grant is a recognition of the fact that the uneven incidence of unemployment between states is in part the result of national policies and national forces. It also operates to minimize interstate tax competition as a factor in shaping unemployment insurance provisions. (page 6) It is difficult to discuss the pratical effect of this proposal in the absence of figures and examples of how it might operate. We can, however, point out the basic issue presented by this proposal. The precise issue posed by this proposal was present in more serious form when the unemployment insurance system was established. All the "national we will show it to you-on page 40 is chart 22, which indicates that present maximum weekly benefits are relatively much lower than earlier levels. A comparison of the years 1939 and 1966 shows that the ratio of maximum weekly benefit amounts to State average weekly covered wage has declined due, I would assume, to the depreciation in the value of our currency more than to any other single factor. Now, if we were merely trying to put this ratio closer to where it was when the program started, would you say that the House bill does that by making additional revenue available to the States with which they could do this? Mr. COTABISH. Well, the House bill makes no change in the benefit levels, is my understanding, sir. But the States themselves have been making changes in benefit levels and these, of course, come up every time the State legislatures are in session, and we anticipate the same activity in our own State legislature in Ohio. The CHAIRMAN. Does not the House bill make available to the States more money with which they can increase benefit levels if they are so disposed? Mr. COTABISH. I believe the House bill has the financing divided between the provisions for building up an extended benefits fund, which would be your recession benefits, and then increases in the administrative expenses. The CHAIRMAN. Well, now the State taxable base goes up from $3,000 to $4,200. Applied against that greater tax rate, would not that make available larger amounts of money to the States to increase levels of benefits or to provide additional benefits beyond what they are presently providing if the States were so disposed? Mr. COTABISH. I do not believe it follows that the State has to increase its own revenues. Now, they can, if they take this measure as far as the State funds are concerned. The CHAIRMAN. You say the State does not have to, but unless the State moved to find ways to keep this tax from applying, as it would under their existing law, wouldn't the increase of the base to which the tax is applicable cause the States to have a very substantial amount of additional money available with which they could increase benefits if they wanted to? Mr. COTABISH. That would apply, sir. We had the experience in Ohio, prior to the 1963 session of the legislature, where our fund was down from over $600 million to down to $67 million, which was nearly a bankrupt condition in the Ohio employment fund, and without changing the taxable wage base we revised the rate schedule in Ohio, going from a maximum of 3 percent to a maximum of 4.2 percent, and this has built the Ohio fund up in less than 3 years to nearly $400 million where a minor-well, I won't say minor-but any revision that produces that much additional revenue is certainly a contributing factor in there. So that it can be accomplished in either direction by increasing the taxable wage base or by increasing the tax rate. The CHAIRMAN. You see, when Congress started this program Congress did not set the standards for the States. The Congress passed a tax. We gave the States a 90-percent credit against that tax if the States wanted to get into the field and to do a job here. The States, in general, were not made to do it, but because of lack of prior experience the States felt they would like to see some sort of a model statute, and most of them patterned their laws after a model statute that was sent out from Washington. It has been modified in many respects since that time. In some respects this House bill does follow and in some respects we might consider simply following the precedent that has existed for some time. We could say to the States this is what we think is desirable. We will be making more money available to you, and we would hope that you would use that to provide more adequate benefits. At the same time, we would not try to set your standards for you, do it the way you want to do it. I just wonder if that approach is not already in the House bill and yet, that might not be the approach that this committee should adopt if it wanted to go a step beyond what the House did, and I was just seeking your reaction to that. Mr. COTABISH. I see. I believe that our feeling is that the actual funding of State programs can be accomplished by either means or by a combination of both of them, and really the revenue-producing factor in the State programs has not been a deterrent to the increasing of benefits. It has been essentially a judgment of the legislature as to what the proper benefit level should be, sir. The CHAIRMAN. What I am getting at is: Doesn't this House bill that was passed mean that more funds will be made available to the States with the expectation that the States are going to provide greater benefits than they have at the present time? In the main, in general, States will increase benefits. Mr. COTABISH. My understanding, Senator, is that the revenue produced by the House bill would provide for the creation of a recession fund which would be held by the Federal Treasury, and for an increase in Federal taxes which would be then available for improvements in the administration of the program and for certain training of the employment service people. The CHAIRMAN. Well, when the States come into conformity on their tax base, doesn't that give them more funds with which they can provide additional benefits in the event they are disposed to do so, without raising taxes? In other words, when they tax wages up to $4,200 as contrasted to the present $3,000, they are taxing $1,200 more of the wage base than they were before. Unless they are going to act to reduce their tax rate, doesn't that provide them with additional funds with which they could provide benefits? Mr. COTABISH. Yes, sir. The CHAIRMAN. Thank you very much. Senator WILLIAMS. Isn't it also important, though, that the States use some of this additional funds to build up their reserve against the possibility that we will have a recession, where there would be heavier withdrawals such as you had in Ohio a few years ago? Mr. COTABISH. It would be important that all of them are adequately funded for their primary obligation which is, of course, the payment of benefits for the first 26 weeks or some of the States, I believe, have gone beyond 26 weeks now. Senator WILLIAMS. And in establishing those rates they have to take into consideration the possibility that the unemployment rate can be substantially higher than it is today? Mr. COTABISH. Yes, that would be true. Senator WILLIAMS. No further questions. The CHAIRMAN. Thank you very much for that very fine statement, Mr. Cotabish. The next witness is Mr. Marion Williamson of the Georgia Employment Security Agency. Senator TALMADGE. Mr. Chairman, it is a pleasure indeed to welcome to our committee a constituent and friend for more than 30 years. We are happy to have you here. Mr. WILLIAMSON. Thank you, sir. The CHAIRMAN. May I say, Mr. Williamson, that is a very fine recommendation. Mr. WILLIAMSON. He used to be my boss down there. The CHAIRMAN. What is that? Mr. WILLIAMSON. He used to be my boss. The CHAIRMAN. He is a mighty good boss. STATEMENT OF MARION WILLIAMSON, DIRECTOR, EMPLOYMENT SECURITY AGENCY, GEORGIA DEPARTMENT OF LABOR Mr. WILLIAMSON. Mr. Chairman and honorable members of the committee, for the record I am Marion Williamson, since 1944 director of Georgia's Employment Security Agency. I have served the Interstate Conference of Employment Security Agencies as president and in other capacities, but am honored to accept your invitation to appear before you as one who is impelled by an intense and increasing concern for the preservation and continuing deveopment of an effective, constantly improving, and soundly financed unemployment insurance system based on insurance principles and attuned to local conditions. I approach you today in support of H.R. 15119, the "Unemployment Insurance Amendments of 1966," which the House of Representatives approved by the overwhelming majority of 374 to 10 after having wisely rejected the drastic proposals in H.R. 8282. I might say that some of them thought it went too far in this bill. H.R. 15119 is the product of diligent, thorough study and vigorous debate, and in my judgment is a measure that is reasonable and sound in its objectives. It commendably amends fundamental statutes to provide for broader coverage of workers, an extension of payments for limited periods to those who have exhausted regular payments during periods of high unemployment, a moderate increase in the wage base and tax rate, and a statutory process for State use in obtaining judicial review of findings by the Secretary of Labor. In my opinion, gentlemen, the architects of H.R. 15119 have constructed a bill that is progressive, fair, workable, and in keeping with those principles which are necessary to preserve the present State-Federal partnership with its sound and proven concepts. H.R. 15119 properly rejects the concept of those who would impose ever increasing Federal controls and standards on the theory that all |