PARTICIPATING EMPLOYER ORGANIZATIONS Michigan Farm Bureau, Dan E. Reed, Legislative Counsel. Greater Detroit Board of Commerce, Dwight Havens, President. Michigan Retailers Association, Richard O. Cook, Executive Vice President. Michigan State Chamber of Commerce, Harry R. Hall, Executive Vice President. Michigan Manufacturers' Association, John C. McCurry, General Manager. Employers' Unemployment Compensation Council, Colin L. Smith, Executive Director. Michigan Shoe Association, Tom Willoughby, President. Michigan Clothiers Association, Robert Storrer, Jr., President. Greater Saginaw Chamber of Commerce, Robert H. Albert, General Manager. Professional Photographers of Michigan, Earl D. Austin, President. Michigan Retail Lumber Dealers Association, Donald J. Moe, Secretary-Manager. Employers' Association of Detroit, Wayne Stettbacher, General Manager. Midland Chamber of Commerce, Robert Parker, Secretary-Manager. Michigan Oil and Gas Association. Associated Petroleum Industries of Michigan, William Palmer, Executive Secretary. Michigan Apparel Association, Carl Holmgren, President. Michigan Hotel and Motor Hotel Association, Mrs. Belle L. Thomas, Executive Secretary. Employers' Association of Grand Rapids, Stanley Benford, Executive Manager. Michigan Furniture Association, John Aldrich, President. Muskegon Manufacturers' Association, Robert Sumners, Secretary-Manager. Detroit Electrical Contractors' Association, Perry T. Shilts, Secretary-Manager. Michigan Dry Goods and Variety Association, William McDaniel, President. Michigan Stationers Association, Thor Marsh, President. Michigan Floor Covering Association, Clifford I. Clawson, President. Michigan Association of Opticians & Optometrists, Jack Wallace, President. Michigan Record and Music Dealers Association, Ken Helber, President. Michigan Sporting Goods and Marine Dealers, C. H. Johnson, Chairman. Michigan Mining Association, James Trosvig, Chairman. The CHAIRMAN. The next witness is Mr. Frederick H. Waterhouse, Manufacturers Association of Connecticut. STATEMENT OF FREDERICK H. WATERHOUSE, EXECUTIVE VICE PRESIDENT, THE MANUFACTURERS ASSOCIATION OF CONNECTICUT Mr. WATERHOUSE. Mr. Chairman and members of the committee, I have filed a rather lengthy statement, but as we have only 10 minutes, I have tried to abbreviate it for your purposes. I have covered many of the important points and in the full statement you will find some further arguments or explanations or points that are not in this abbreviated statement. The CHAIRMAN. Yes, sir. We will undertake to read your whole statement, and we will allow you 10 minutes to summarize it. Mr. WATERHOUSE. Yes. Mr. Chairman and members of the committee, my name is Frederick H. Waterhouse. I live in West Hartford, Conn. I am executive vice president of the Manufacturers Association of Connecticut, which has as its members approximately 2,100 manufacturing employers. These companies employ more than 100,000 employees--over 90 percent of the total manufacturing employment in Connecticut and almost 50 percent of the total number of employees covered by the unemployment compensation law of Connecticut. Your committee is being urged by some to report out a bill which would reinstate all or some of the provisions of H.R. 8282 as found in S. 1991, which the House committee and the House in its wisdom have rejected. Because I feel that this attack on H.R. 15119 advocates the most dangerous course which could be pursued, I will, with the committee's indulgence, address most of my remarks to those features of S. 1991 which you are thus being urged to reinstate. The Connecticut unemployment compensation law is not a static law; it is quite impossible for any law designed to do the job that this law is called upon to do ever to be static. This law is a growing, changing system, which has been hammered out session after session before our general assembly by people who have spent years in qualifying as experts in this area. To accomplish its purpose it must remain flexible. As I see it, the basic premise of S. 1991 is that the system in Connecticut has not satisfactorily achieved the object for which it was designed and, therefore, it is necessary now, after 36 years, for the Federal Government to step in and lay down certain minimum conditions which the State of Connecticut must henceforth meet. Once the principle that the Federal Government shall henceforth continually tamper with the rules of the game is adopted, which is exactly what is involved in this bill, then the basic authority of the States over their own system is at an end, and the systems will have become federalized. Under these circumstances, the proponents of such a radical shift of power in our Federal-State system of Government should have to meet the heavy burden of showing the necessity for the shift. This can only be met by showing that the present system is working badly. There is no valid evidence to this effect. Indeed, the evidence is all in the opposite direction. Under these conditions, you are asked by S. 1991 to inaugurate a system in which the bulk of the taxes will continue to be imposed by the States but the liberality by which they are to be dispensed shall be dictated by the Congress. The very substantial wage base and tax increases proposed by S. 1991, in addition to tripling our employers' Federal tax, would require a complete overhaul of our State tax tables if we were not to more than double our State taxes also. Tax increases of this magnitude, timed to become effective so shortly after the recently enacted huge increase in the employers' share of FICA taxes, are truly astonishing. As the Federal Government elbows its way further into the State programs, it will need a greater share of the total tax to finance its adventures. The time tested Connecticut unemployment compensation system is purposely designed to maintain in Connecticut as high a rate of employment and as low a rate of unemployment as possible. That this system is working well is shown by the fact that at the present time the percentage of covered unemployed in Connecticut ist 1.2 percent of the covered work force-a percentage which is just about the irreducible minimum. In 1939, Connecticut adopted the model bill prepared by the U.S. Department of Labor with a maximum benefit entitlement of $195. The maximum benefit entitlement in Connecticut today is $1,950-an increase of exactly 1,000 percent. Even if the 1939 amount is raised to its equivalent in 1965 dollars, this would amount only to $451. The 1965 benefit amount is still more than four times this figure. The proponents of S. 1991 talk about and propose weekly benefit amounts of 50 percent of average wage, 60 percent of average wage and even 60% percent of average wage as a maximum. Let's look at what that would mean in Connecticut. At present our maximum for a single person is $50 per week. At the present average wage of $120 per week, such a single person will receive 51.6 percent of his take-home pay. With our $5 per week per dependent child allowance this percent increases until a claimant with five children receives 67.2 percent of his take-home pay. If we use the 50 percent of average wages the maximum would be $60 per week for the single person. He would then be receiving 61.9 percent of his take-home pay and the same progression pertains so that the claimant with five children would get 76.2 percent of his take-home pay. If we use the 663 percent of the average wage we have a maximum of $80 per week. Since the employee with $120 earnings is limited to 50 percent of his gross pay he still receives the $50 per week mentioned above. However, the single person getting as much as $160 per week, which is what he must get to be eligible for the $80 maximum, will get 63.1 percent of his take-home pay with a progression to those with dependent children until the man with five children receives 73.1 percent of his take-home pay. As pointed out in the complete statement I submitted, among other things, results as above would seriously endanger our dependency allowance provision. In addition to putting Connecticut's system of dependency allowances in grave jeopardy, S. 1991 would also imperil our State's merit rating system. In Connecticut as well as elsewhere merit rating has been under constant attack by leaders of organized labor and others who feel that the system gives employers an incentive to contest unemployment claims which would otherwise be accepted without dispute. This is true, but I sincerely urge that this is a reason why merit rating should be retained rather than otherwise. Unless there is an adversary interest to be protected against unjustified unemployment benefit claims, the system runs the grave risk of degenerating into a dole for the unscrupulous, instead of fulfilling its rightful function of providing assistance to those temporarily unemployed because no work is available. The Connecticut unemployment compensation law would also be seriously weakened by the provisions of S. 1991 which would require a State to provide 26 weeks of benefits to any worker who had worked for 20 weeks. The Connecticut law is based on the concept that the extent of unemployment compensation should bear some reasonable relationship to the firmness of a worker's atachment to the labor force. This concept is reflected in provisions in our law which have the effect of limiting the duration of benefits to a claimant with limited earnings in his base period so that one bears some logical relationship to the other. We believe this principle is sound and that it should not be jeopardized. Over the years we have hammered out many provisions to eliminate abuses but protect the legitimate claimant. They have called for amendments as unforeseen and inequitable results developed. We have been quick to adopt such changes. With the limitation on disqualifications proposed by S. 1991 our safeguards would be abolished and the raid on our fund by those not within the basis intent of the law would seriously endanger our whole program. Some of the items covered in my statement are the development of equitable treatment for those women who leave the labor market to raise a family. The proper treatment of severance pay and pensions. The proper treatment of those receiving workmen's compensation or arbitration awards granting back pay for weeks for which they have received unemployment benefits. The disqualification of students while they are attending full time at schools or colleges. The proper treatment of those who, while on layoffs, accept other work which they leave to return to their original jobs and are then laid off again within a period which would otherwise disqualify them for having left the interim job voluntarily. These are a few examples of the need for flexibility in the State programs. I am sure other States have individaul or local problems calling for the same type of local treatment. S. 1991 would definitely destroy this flexibility. Regarding H.R. 15119, we believe the proposed tax increases to be unjustified. The sums allegedly to be used for administration can only be justified by assuming that Federal intervention and control will be greatly expanded. The sums to be deposited in the "extended unemployment compensation account" are to be used for an "extended duration" we believe is better left to the States. In Connecticut we trigger an extra 50 percent of benefit-weeks when unemployment reaches 6 percent for a period of 8 out of 10 weeks. We can and will finance this program ourselves. Under H.R. 15119 it would appear extended benefits will be “on” when the unemployment rate reaches 3 percent in Connecticut. The adoption of the 5-percent rate on a national basis is slightly more realistic but those responsible for the individual State programs should retain the right to establish their own extended benefits program. Certainly an unemployment of 3 percent does not indicate the kind of mass or lengthy unemployment calling for the payment of additional benefits. Indeed the U.S. Bureau of Employment Security classifies labor supply areas with 1.5 to 2.9 percent as low unemployment and from 3 to 5 percent as moderate unemployment. We do not believe it realistic to trigger in extended benefits when a State barely moves from low unemployment to moderate unemployment. Other points are made in the full statement I have submitted, together with supporting facts and arguments I trust your committee will consider. Thank you for the opportunity to express our thoughts. (The prepared statement of Mr. Waterhouse follows:) SUMMARY AND STATEMENT OF FREDERICK H. WATERHOUSE, EXECUTIVE VICE PRESIDENT, MANUFACTURERS ASSOCIATION OF CONNECTICUT, INC. SUMMARY OF POINTS MADE BY FREDRICK H. WATERHOUSE, EXECUTIVE VICE PRESIDENT, THE MANUFACTURERS ASSOCIATION OF CONNECTICUT, INC. 1. H.R. 15119 is a great improvement on H.R. 8282, the original bill introduced in the House. Your committee is respectfully urged to refuse to adopt any amendments to H.R. 15119 which would seek to reinstate any of the provisions of S. 1991 as in H.R. 8282 which were stricken by the Ways and Means Committee from the final bill. This point is of prime importance to those who desire to maintain the integrity and independence of all state unemployment compensation systems. For this reason, this will be the chief subject of my testimony today, with your kind indulgence. 2. Even though H.R. 15119 is a distinct improvement on H.R. 8282, it would nevertheless more than double the federal unemployment taxes on employers without sufficient necessity. For this reason, we must register our objection to this part of the bill. 3. The Connecticut unemployment compensation law provides for the payment of benefits to unemployed workers for an additional period up to 13 weeks during periods of substantial unemployment. This legislation closely resembles the temporary extended programs enacted by the Congress in 1958 and again in 1961. These additional payments are financed by taxes levied upon Connecticut employers. We therefore believe that it is unnecessary for the federal government to duplicate this program, particularly since the portion of H.R. 15119 which would do so is the reason for most of the increase in federal unemployment taxes contemplated by the bill. 4. We wish to express our enthusiastic support for that portion of H.R. 15119 which provides for judicial review of a decision of the Secretary of Labor that a state law or state administration of its law does not meet the requirements of the federal law. The absence of such a provision from existing law has made the decision of the Secretary of Labor on this question final, a most unhealthy situation. STATEMENT OF FREDRICK H. WATERHOUSE, EXECUTIVE VICE PRESIDENT, THE MANUFACTURERS ASSOCIATION OF CONNECTICUT, INC., BEFORE THE SENATE COMMITTEE ON FINANCE, ON H.R. 15119, THE EMPLOYMENT SECURITY AMENDMENTS OF 1966, JULY 25, 1966 My name is Fredrick H. Waterhouse. I live in West Hartford, Connecticut. I am executive vice president of The Manufacturers Association of Connecticut, which has as its members approximately 2,100 manufacturing employers. These companies employ more than 400,000 employees-90% of the total manufacturing employment in Connecticut and almost 50% of the total number of employees covered by the Unemployment Compensation law of Connecticut. I appear before you to speak in behalf of that Association and its member companies, all of which would be vitally affected by this legislation. I think the House Ways and Means Committee and the House staff showed statesmanship of a very high order when they refused to accept the many questionable provisions of H.R. 8282 which would for the first time in the history of our Unemployment Compensation Laws have the Congress dictate federal "standards" to supplant the independent standards imposed by each state. Your committee is being urged by some to report out a bill which would reinstate all or some of the provisions of H.R. 8282 as found in S. 1991 which the House Committee and the House in its wisdom have rejected. Because I feel that this attack on H.R. 15119 advocates the most dangerous course which would be pursued, I will, with the Committee's indulgence, address most of my remarks to those features of S. 1991, which you are thus being urged to reinstate. I am opposed to S. 1991 and all that it represents because it is wrong in principle. The unemployment compensation system of the State of Connecticut is the product of many years of constant study by the legislature of our state of the state's problems in industry, employment and unemployment. These are problems which differ, I am sure, from those experienced in other states and which are naturally unfamiliar to your committee or to the Congress. |