tied into duration, is qualification and these other things, so that when you change one standard or one thing in the law you have to look at them all or you get yourself all tangled up in something.

Senator TALMADGE. Are you satisfied with the provisions for judicial review in H.R. 15119?

Mr. WILLIAMSON. I think it is better than nothing. But I always like to play my cards above the table. I would rather have a de novo review, and not one of these automatic affirmances of the rulings of the Secretary of Labor. I would rather have political review than an automatic acceptance of the findings of the Secretary of Labor.

I have been engaged in a lot of these conformity hearings. I helped represent New Hampshire and South Dakota. New Hampshire did the heinous crime of sending a check to a lawyer, a benefit check to a lawyer, who had carried a case, a benefit case, to the Supreme Court and won it. They said that was not paying benefits to the claimant when due.

Since then the Congress has changed the law and requires the Federal Government to recognize an attorney as an attorney and deal with him.

Senator TALMADGE. Thank you, Mr. Williamson.

Thank you, Mr. Chairman.

The CHAIRMAN. Thank you very much.

Mr. WILLIAMSON. I enjoyed being with you, Mr. Chairman. The CHAIRMAN. The next witness is Mr. Colin L. Smith, Employers' Unemployment Compensation Council of Michigan.

Mr. Smith has notified us that he is hospitalized today and will not be able to be here, and he has submitted his statement which we will have printed in the record in support of his position. (The statement referred to follows:)

STATEMENT OF COLIN L. SMITH, EXECUTIVE DIRECTOR, EMPLOYERS' UNEMPLOYMENT COMPENSATION COUNCIL OF MICHIGAN, IN SUPPORT OF H.R. 15119 AND IN OPPOSITION TO S. 1991

I. Representation

SUMMARY

This statement is made on behalf of Michigan organizations representing approximately 91,500 employers in the State.

II. Position on S. 1991

We are strongly opposed to Senate Bill 1991, the companion bill to H.R. 8282. for reasons stated in our testimony to the House Ways and Means Committee which is attached to this statement.

III. Position on H.R. 15119

As

H.R. 15119 represents a reasonable compromise worked out by the Ways and Means Committee between the conflicting view points of interested parties. such, we support it and urge its approval by the Senate without change. Since H.R. 15119 is a compromise, we are supporting it notwithstanding that it infringes to a minor degree on certain principles to which we subscribe. We intend to continue to support those principles in evaluating any future proposed legislation modifying the federal unemployment compensation provisions. Those principles are covered in the following statement.

STATEMENT OF COLIN L. SMITH, EXECUTIVE DIRECTOR, EMPLOYERS' UNEMPLOYMENT COMPENSATION COUNCIL OF MICHIGAN, IN SUPPORT OF H.R. 15119 AND IN OPPOSITION TO S. 1991

I. REPRESENTATION

My name is Colin L. Smith. I am Executive Director of the Employers' Unemployment Compensation Council, a non-profit Michigan corporation, whose pur

pose is, through processes of research and education, to promote sound features in the state and federal unemployment compensation laws and their fair and efficient administration.

Our Council is supported by membership dues paid directly by some 750 employers and indirectly (through affiliated organizations) by an additional 700 employers. Although our members employ about 650,000 people in Michigan, 65 per cent of our members employ less than 200 employees.

Our Council is generally recognized by employers and others concerned with the subject of unemployment insurance in Michigan as being a specialist in the field. In line with this, and to conserve time at these hearings, I come here with an endorsement of this statement from thirty-one statewide and local employer organizations in Michigan. The names of these organizations, each of which has reviewed and subscribed the positions taken in this statement, are listed in the Appendix to this statement. In total, they represent 91,500 employers in the State of Michigan.

I am an attorney. I have served in both Houses of the Michigan Legislature; and I have been specializing in unemployment compensation legislation since 1952. I am a management member and Secretary of the statutory labor-management Employment Security Advisory Council. In 1965 this Council unanimously recommended the compromise, package bill which made the most sweeping and fundamental changes in the employment security act in eighteen years.

II. POSITION ON S. 1991

Companion Bill to H.R. 8282.-Senate Bill 1991 has been referred to this Committee. It is the companion bill to H.R. 8282 which was considered by the Ways and Means Committee for nearly a year before it recommended the bill which passed the House by an overwhelming majority, namely, H.R. 15119.

We are opposed to S. 1991 for the same reasons we opposed H.R. 8282 at the hearings before the Ways and Means Committee almost a year ago. For your convenient reference, a copy of our August 26, 1965, statement to the Ways and Means Committee on H.R. 8282 is attached to this statement; and we ask that it be included in the record of these hearings. We are opposed to adding any amendments to H.R. 15119 which would incorporate therein any provisions of H.R. 8282 which were rejected by the House.

Benefit Rate Standards.-One of the proposed controls over state legislation which was thus rejected by the House concerned the level of weekly benefits to be paid under state laws. We want to emphasize here the position on this issue that was developed in detail in the appended statement on H.R. 8282.

As indicated in our attached 1965 testimony, Michigan and her sister states of Illinois and Indiana, have pioneered in developing a benefit formula which makes it possible to "meet the needs of the unemployed worker and his family" (as the objective of the state laws is usually stated in their public policy declarations) without providing a disproportionately favorable-and prohibitively costlystandard of living for that large proportion of benefit claimants who have no persons dependent on them or who themselves are secondary earners.

As an example, Michigan's present benefit rate formula provides each claimant a benefit equal to 55% of his individual average weekly wage up to a maximum which the legislature deems adequate to provide for the necessities of life for the unemployed claimant and his family, if any. This "variable maximum" approach can be summarized as follows:

The federal "benefit standard" proposed in H.R. 8282 and S. 1991 would make it impossible for these pioneering states to continue to observe this constructive approach. A literal interpretation of the language of these bills would outlaw the idea of having more than one maximum, because the bills say that all claimants must be paid at least 50% of their individual average weekly wages, up to the maximum weekly benefit available under the law. As applied to Michigan, this would mean that the present highest maximum of $72 could only be retained by making it available to all claimants regardless of family obligations. The only other course would be to cut the maximums for claimants with large families down to % of the state-wide average weekly wage of covered workers and raise the maximums for the others, who have few or no dependents, to the same level.

Even if this specific barrier were removed from the language of the bill, these states with variable maximums would, as a practical matter, have to abandon them in order to avoid prohibitive cost penalties relative to other states. In Michigan, Illinois and Indiana, any variation in maximums related to dependencies would have to be in addition to benefits which conform to the federal requirement and could only be retained at prohibitive competitive cost penalties. A similar problem exists for the eight other states that have decided to augment their wage-related benefits with dependents' allowances for claimants with families.

Federal control over state legislation is especially unsound and objectionable when, as proposed in H.R. 8282 and S. 1991, it needlessly forces states into a mould of uniformity at the expense of highly constructive local innovations.

III. POSITION ON H.R. 15119

As you know, the Ways and Means Committee spent several weeks conducting the hearings on H.R. 8282. The printed record of the hearings takes up almost 2,200 pages.

The Ways and Means Committee also spent seven weeks in executive sessions in analyzing and resolving the conflicting view points about that bill. As the Committee stated in its report, "The bill (H.R. 15119) is the product of the broadest and most intensive review your committee has given to the unemployment compensation program since it was enacted in 1935. . . .”

A. COMPROMISE SUPPORTED

As we view it. H.R. 15119 represents essentially a compromise worked out by the Ways and Means Committee between the divergent views of Organized Labor. the U.S. Department of Labor, the State Employment Security Agencies and Management Representatives. H.R. 15119 is not a compromise in the sense that it embodies an agreement between these various interests; but it is a compromise in the sense that the Ways and Means Committee has made significant deletions from the original bill and has moderated other proposals made by the advocates of the original bill. Thus the advocates of the original bill are making gains, but at a less precipitate rate than they had hoped; and the opponents of H.R. 8282 and S. 1991 will be subjected to changes to which they are opposed, but not nearly so radical as in the original bills.

We wish to declare ourselves in support of this moderate measure as a reasonable compromise. Since it is a compromise, we ask that every effort be made to protect it against any change. Any substantial change would destroy the equity from which broad-based support or acceptance must derive.

B. Federal-State recession program to pay extended benefits supported

We enthusiastically prefer the moderate approach to extended-duration unemployment benefits contained in H.R. 15119 to the wasteful and much more expensive program contained in H.R. 8282 and S. 1991.

Past experience supports the conclusion that a 50% extension of the basic duration is sufficient to meet the problem of most industrial workers who are unemployed in times of business recession, and that the normal duration. typically ranging up to 26 weeks, under state laws is sufficient for normal and good times.

We are in accord with the 50% federal financing of an extended benefits program to operate in times of business recession. The decision to leave the states free to select an appropriate revenue source for financing the states' share of the cost of the extended benefits was a wise one. Unemployment which lasts more than 6 months is much more attributable to general economic conditions

than it is to the fact that the employee was laid off originally. There is a good case for financing at least a part of the cost of extended benefits from general revenue; and we are happy that the House properly left the states free to make this choice.

We are not convinced that it was necessary or desirable to make it compulsory for states to pay extended benefits when their local unemployment reaches nationally-prescribed levels, even though there is no national recession problem. Also, it might have been better to give the states more latitude to work out and test qualifying requirements, eligibility rules and disqualifications which would be appropriate for individuals who have been unemployed a long time. Perhaps improvements along these lines will be considered in the future. C. Increase in tax base and rate supported

H.R. 15119 raises both the rate of tax and the ceiling on the amount of wages per employee per employer per year that is subject to tax. The rate is increased from 3.1% to 3.3%, with all of the increase allocated to federal functions such as administrative grants, extended benefits grants and advances to states whose funds are inadequate. The taxable wage base is increased, from $3.000 at present, to $3,900 in 1969-1971 and $4,200 starting in 1972.

Taken in combination, the tax increases called for in H.R. 15119, although substantial, are much more moderate than would have been required by H.R. 8282 or S. 1991. Recognizing this fact, together with the projected need for increased federal revenue to meet the mounting cost of state and federal administration together with the cost of extended benefits to be provided under the bill, the tax changes contained in H.R. 15119 are acceptable to us.

However, for the record we note that these tax changes leave untouched a major problem area in the federal law which is also in need of modernization. We refer to the gross federal tax rate and the maximum allowable offset against the federal tax. The latter has stagnated at 2.7% since the beginning. If it were increased, that would remove a federal obstacle to broadening the range of available tax rates which may be assigned to employers in accordance with their experience under the law. While potential benefits per employee per year have increased by several multiples, this key aspect of the tax formula has stayed fixed or has been increased only to a relatively minor degree. The result has been that experience rating has ceased to operate as broadly or as effectively as at the outset, and the program is losing the benefit of the many constructive things that employers can and will do to conserve the fund when experience rating provides the financial justification for such activities. D. Judicial review of Labor Department "conformity" decisions supported

H.R. 15119 contains a provision, not proposed in H.R. 8282 or in S. 1991, which will be a significant improvement in the operation of the federal-state employment security program. We refer to the proposed provisions granting appropriate state officials access to the federal courts for review of U.S. Labor Department decisions holding that a state law, or its administration, is not in conformity with the federal law.

There can be no question that the sovereign states should have the same access to the courts in matters affecting many thousands of their citizens as the citizens themselves would have if they were adversely affected by a quasi-judicial determination of a federal administrative agency.

Access to court review will also increase the flexibility of the states' programs by giving the states courage to experiment with provisions or practices which they believe are permissible under federal law and not be discouraged by questions of conformity raised by federal officials with reference to such proposals. E. Issues of principle

The comprise embodied in H.R. 15119 not only included some of the substance of H.R. 8282 but also infringes on some of the principles which we regard as basic to a sound and constructive program.

We feel it is essential to make our position clear in reference to these principles-not because we hope or even desire to bring about any modification in the provisions of the compromise embodied in H.R. 15119, but to make it clear on the record that we do not abandon these principles for the future in supporting this compromise bill. The points which involve such issues of principle are as follows:

(1) Making Coverage a Condition of Tax Offset for All Employers in the State.-H.R. 15119 creates a new avenue of control over state unemployment

compensation legislation. It makes a "conformity issue" of providing state benefits to certain classes of employees. Hitherto, a state's failure to cover an employer's employees whose wages were subject to the federal unemployment tax resulted in loss of tax offset only to the employer involved and only in proportion to the wages he paid to the non-covered employees. Now, in certain categories, the failure of the state to provide benefit protection to a handful of employees can result in prohibitive tax penalties on all the employers subject to the state law.

(2) Federal Control of Details of State Benefit Formulas.-H.R. 15119 imposes a new federal control over the method of determining benefit entitlement under state laws. The objective is praiseworthy-namely, to prevent chance windfalls of extra benefits for certain claimants due to poorly conceived state benefit formulas which permit lucky claimants to draw nearly double the normal benefit entitlement following a single separation from employment. But we are not in accord with the principle of federal control over the details of state benefit formulas.

(3) Federal Control of Effectiveness of State Disqualifications.-H.R. 15119 prohibits the policy of a number of state unemployment compensation laws, under which an employer is not required to pay for benefits for an employee who causes his own unemployment by quitting that employer or refusing an offer of suitable work from that employer. (Such "cancellation" would be permitted, however, in cases of fraud or discharge for misconduct).

Until 1965, we had in our Michigan law provisions for "cancellation" of benefit credits in cases where it would be prohibited under H.R. 15119. They had been enacted in 1947 in an effort to put a stop to waste and abuse of the unemployment fund under the law. In 1965, these provisions were deleted from the law in accordance with agreement of labor and management representatives on our statutory advisory council as a part of a compromise, omnibus bill of amendments to the law.

While this new control over state disqualifications would not affect the Michigan law, based on our experience in 1947 we know that it may be necessary for a state to adopt such measures as this to correct a bad situation; and we believe that the federal government will eventually find it advisable to restore this recourse to the states.

(4) Federal Control of Benefits to be Paid to Out-of-State Claimants.-H.R. 15119 will prohibit the states from reducing weekly benefits payable to a claimant when he moves from a high-wage state (where he built up his benefit entitlement) to a low-wage state and continues his benefit claim in the low-wage state.

We believe in and support the Interstate Benefit Payment Plan under which an individual may move from the state where he earned his benefit credits and file claims in another state for such benefits. We do not believe crossing a state line should become an obstacle to drawing unemployment benefits which are properly due. In Michigan we pay the same benefits to a laid-off industrial worker who goes to another state to seek work as we do to the laid-off industrial worker who does not move.

This new federal control would not affect our policies or coverage for enployees. Nevertheless, we can conceive of situations-in fact, we believe such a situation exists in the State of Alaska and was described in the House hearings, where it would be destructive of the incentive to accept work to continue payment of benefits at the high Alaska rates when claimants move to low-wage states.

This problem could also exist within the borders of a single state; but it would not be possible to control the intra-state problem if the federal law required that benefits be paid at normal rates in all interstate situations.

IV. CONCLUSION

In conclusion, we support H.R. 15119 as reasonable, compromise legislation. As such, understandably it contains some provisions we do not like and omits other provisions which we think should have been included. We support the bill because, through long and earnest effort, the Ways and Means Committee has embodied in it a compromise formula which recognized to the maximum practical degree the differing views of all the parties in interest in the legislation. We therefore urge that this Committee and the Senate approve this bill in the form in which it passed the House, and speed its enactment.