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At the same time, it has benefited our economy by providing these workers with purchasing power during periods of unemployment. This concern has been expressed as recently as July 7 of this year when the executive board of the industrial union department met in Washington.

At this meeting it adopted several resolutions. One that dealt with the whole problem of income maintenance, and in this resolution it took a strong position on unemployment compensation and the provisions of H.R. 15119 as passed by the House.

I refer to the statement action in my statement. But, if I may, I would like to read a few sentences from that since it sets forth the position of the industrial union department. I quote:

Insofar as our unemployment compensation program is concerned, the provisions of H.R. 15119, the bill enacted by the House of Representatives and now pending before the Senate Finance Committee are inadequate. This bill, as passed by the House, failed to enact Federal standards to assure that unemployed workers receive at least 50 percent of their weekly wage; failed to permit benefits to be paid for a sufficient period of time; and failed to eliminate the most harsh and restrictive disqualifying provisions of State laws, all of which were contained in H.R. 8282 and S. 1991, the bill proposed by the administration and supported by the labor movement.

On the contrary, enactment of H.R. 15119, in its present form, eliminates even existing pressures on States to improve their own laws. H.R. 15119 is worse than no bill at all.

Unless it is substantially improved in the Senate we urge its defeat by the Congress or, if necessary, its veto by the President.

Mr. Chairman, in taking this position, the executive board was quite conscious of what it was doing. After the entire resolution was read, the president, President Reuther, called specific attention to the position set forth on unemployment compensation before calling for a vote on the entire resolution. The resolution was adopted unanimously.

As we indicate in the resolution, we are concerned not only with the shortcomings of H.R. 15119, its failure to enact benefit standards governing the amount of the weekly benefit, the period for which benefits are paid, and also the conditions under which benefits are paid.

We are also concerned, and equally concerned, with the harm which we believe this H.R. 15119 will do to existing programs in stifling all hope for future improvement.

I would like to examine this point for a moment.

H.R. 15119 provides for a permanent program of extended benefits. In this respect or in this area, it is also similar to S. 1991. S. 1991, however, provides for benefits when the State responsibility ends, and it establishes a State responsibility and makes clear this responsibility must be met before the Federal Government will assume an obligation.

H.R. 15119, however, says that whenever the State duration period ends, and regardless of how short the State duration period is, it, the Federal Government, will pay for one-half the cost of additional benefits.

The effect of this program in H.R. 15119 which, as I indicated, provides for the Federal Government paying 50 percent of the cost of the benefits whenever State duration ends, regardless of how short it is, is clear. Why should the State extend its duration if there is on the

books legislation which says, "Whenever your duration expires the Federal Government will come along, pay an additional period of weeks, and pay for 50 percent of the cost of the weeks, of these additional benefits."

Why should a State extend its duration under its own law and pay 100 percent of the cost when the Federal Government has a program which says, "Whenever times get a little bad, whenever a trigger indicates that there is fairly heavy unemployment in the State or in the National, we will extend benefits to your people, and we will pay for 50 percent of the cost of this extension."

We believe, therefore, that if a program of extended benefits is to work, and if it is not to adversely affect the State laws, provisions similar to those contained in S. 1991 are necessary.

There are several elements which I would like to point out. First, it is necessary that the Congress establish the period of State responsibility, and 26 weeks have generally been accepted as this period.

At that point, Federal benefits should become payable. In other words, Federal benefits should be payable with the 27th week of unemployment, leaving it to the State to provide benefits financed by its own taxpayers for the first 26 weeks.

Second, we believe that it is necessary to assure that the State meets its responsibility and provides benefits for the first 26 weeks for people who are eligible. S. 1991 contains such provisions.

Finally, we are concerned about the triggers which are contained in H.R. 15119. We are concerned because the individual who is unemployed through no fault of his, because of the lack of a suitable job, who is unable to find a suitable job for 27, 28, or 29 weeks, suffers the same hardships as a worker who is in that position at a time when 4 or 6 percent of the workers are unemployed.

In fact, the worker who is unable to find a job for more than 26 weeks in good times may be much worse off than the worker who is unable to find a job when many of the workers with whom he associated are in the same position.

I recall during the depression of the thirties people went out of their way to help the unemployed. They were conscious that this was a commonly accepted thing.

Today, the unemployed person in good times has a much more difficult time and we believe that if the program is properly administered, a person who is unemployed for more than 26 weeks will be unemployed not because of his own desire but because of the lack of any suitable job for him.

If the Employment Service is doing the job and exposing him to suitable jobs, then there will be a job for him. If they are unable to place him he will be unemployed because of lack of work.

If he is malingering, there are provisions, and S. 1991 does not change these provisions which permit a State to deny him benefits if he leaves a job, if he is unavailable for work, if he refuses a suitable job without good cause.

So we would suggest that an extended benefit program contained in three items of State responsibility for the first 26 weeks, Federal responsibility for the period beginning with the 27th week of unemployment, and we would suggest that either the trigger be eliminated or that for persons who have long-term attachment to the labor mar

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ket, an additional program be available for them which will be operative regardless of whether or not unemployment reaches specified percentages.

I would like to talk just briefly now, Mr. Chairman, with respect to the provisions in S. 1991 with respect to the weekly benefit amount and disqualifications. In these areas H.R. 15119 is completely deficient. I do not want to go into the record and the facts and the figures as to what has happened to the State weekly benefit amount. Secretary Wirtz, Mr. Meany and other persons testified before this committee, have made clear that today in every State the maximum benefit is a lower percentage of the average wage in the State than it was in 1939 when benefits first became payable. These facts are clear. The tables in the material prepared by your staff point this out. There has been a steady deterioration in the maximums in every State in this country.

I would like to discuss for a moment the reason why we think this has occurred. We believe that the reasons for the States to act on weekly benefit amounts are the same reasons which resulted in the failure of the States to enact unemployment compensation laws in 1935. When the original Social Security Act was reported by the House of Representatives in 1935, it stated in its committee report, and I would like to quote a few sentences:

The failure of the States to enact unemployment insurance laws is due largely to the fact that to do so would handicap their industries in competition with the industries of other States. The States have been unwilling to place this extra financial burden upon their industries.

Mr. Chairman, we believe that the same factors of interstate competition are the primary reasons why States have failed to increase their maximums to keep pace with the rising wages in the States.

If a State, if one State, were to increase its benefits, obviously this would result in an increased cost to its employers, and until other States are willing to do this, the continual argument is made this will increase costs, employers will have to pay more, increased taxes may result in industry removing itself from the State.

Those of us who have worked with State legislatures in trying to get them to improve benefits, those of us who have served on State advisory councils, have met this argument time and time again. We, therefore, believe that if the Federal Government is to be assured that the reasons for the enactment of the original unemployment compensation program ought to be fulfilled that the enactment of Federal standards similar to those contained in S. 1991 are essential.

I would like to point out that the standards which are contained in S. 1991 are not extreme. A maximum equal to two-thirds of the average wage in the State will only assure more workers of receiving 50 percent of their own weekly wage, raising the maximum to 60 percent or 66% percent or 75 percent, will not give one worker more than 50 percent of his own weekly wage. It just seems that more workers will receive 50 percent of their own weekly wage.

This goal of the 50 percent of an individual's weekly wage was recognized as the goal in 1935, it has been recognized as the goal of every commission that has ever been established. It was recognized by Presi

dent Roosevelt, by President Truman, President Eisenhower, President Kennedy, and President Johnson.

In every one of his economic reports, President Eisenhower urged the States to provide a benefit of at least 50 percent of their weekly wage, and he specifically said to do so it is necessary to raise the maximum benefits in the States so that the great majority of covered workers can receive at least 50 percent of their weekly wage.

The Federal Advisory Council reported to his Secretary of Labor that to do so would require a maximum of from 60 to 66% percent of the average weekly wage in the State.

Finally, Mr. Chairman, I would like to point out that if there is any criticism of S. 1991 in terms of the benefits standards we would criticize it in that it takes too long, the staging over 2-year periods before the 66% percent becomes effective is too long a wait. We would urge that it is not necessary to wait the 6-year period before the maximum assures a benefit of 50 percent to the great majority of workers.

The CHAIRMAN. Let me ask you one question that does concern me about this.

Mr. LESSER. Sure.

The CHAIRMAN. An unemployment compensation benefit is not taxable.

Mr. LESSER. No, it is not, Mr. Chairman.

The CHAIRMAN. If a worker is making a substantial income, up near the maximum amount that would be covered, and he is paying income tax on it, that tax, I assume might run 14 percent of what he is making.

Now, if you subtract the tax he is paying from $100 salary, let us say, you would be looking at 6623 percent against $86 rather than against $100. So that his unemployed income after taxes would be more than 66 percent of what his actual take-home pay is.

Mr. LESSER. Well, let me say, first, Mr. Chairman, the individual under S. 1991 would not receive $66. He would only, if he earned $100, he would only, the maximum, receive $50. In other words, S. 1991 only provides that his benefit will be 50 percent of his own wage.

Now, if the average wage in the State is $100—

The CHAIRMAN. How about this second and third step we are talking about?

Mr. LESSER. I was going to get into that, too. If the average wage in the State were $100 the maximum would be $66 but the individual earning $100 would only receive $50.

Now, it is true that his after-tax pay might be $86 rather than $100, but it is important to recognize that when an individual is unemployed he not only loses his cash wage, he also loses many fringe benefits which are not computed in the cash wage. He will lose pension rights, he will lose his Blue Cross, Blue Shield, or other hospital and medical coverage; he will lose life insurance coverage while unemployed, all of which the employer may be paying all or a substantial part of.

Now, that is not taken into account when you compute his $100. We have made estimates and I believe the chamber of commerce has made estimates, that fringe benefits are running over 20 percent of an individual's cash wage. So this individual who earns and gets a cash wage of $100 will not only lose $100 but will be losing $20 or more in fringe benefits.

I might say, Mr. Chairman, that the question of gross wage versus after-tax wage has been a long debated subject, and every commission has come up with this conclusion of loss of fringe benefits and the use of the gross wage as being more equitable.

If I may make one final point with respect to S. 1991, I would like to comment briefly on the provisions in that bill providing for judicial review of the Secretary's determination of nonconformity.

As we point out in our statement, we do not object to the principle of judicial review of decisions of nonconformity. We do object, however, to the specific provisions of H.R. 15119, which would substitute for the usual rule of substantial evidence a weight of evidence rule by which courts will determine whether or not to sustain the Secretary's determination.

I might point out in this connection that the Senate, at the end of June of this year, passed a bill, S. 2974, which made decisions subject to judicial review. These were decisions of the Secretary of Labor with respect to whether or not the employment service program which is corollary and part and parcel of the unemployment insurance program was in conformity. The Senate provided that the Secretary of Labor's decisions with respect to conformity of the Employment Service program was subject to judicial review, but provided that the findings of the Secretary, if supported by substantial evidence, shall be conclusive.

This is in contrast to the weight of evidence in H.R. 15119.

We would urge if there are to be provisions for judicial review, they be similar to those contained in S. 2974 which governed the Secretary of Labor and his relationship to the Employment Service, as well as those provisions which are common in all judicial review provisions governing most Federal, governing all Federal administrative agencies.

One final point on judicial review. As pointed out in the Secretary of Labor's testimony, when the Senate enacted the so-called Knowland amendment, they did so as a stopgap provision, extended the period for administrative review of State decisions, and now to tack judicial review on top of that without reviewing it, and trying to shorten the period would only result in an extensive, long period before action could be taken to correct nonconformity problems.

Mr. Chairman, I would like to conclude by saying we appreciate this opportunity to appear before this committee. We urge the committee to take action to bring our unemployment compensation program into line with the realities of today and tomorrow.

Unless such action is taken, our unemployment compensation program will continue to deteriorate and will not fulfill its purpose of helping workers and their families when unemployed, and shoring up their purchasing power for the benefit of the entire economy.

We urge the Senate Finance Committee to look at S. 1991. We believe its provisions serve the ends for which the unemployment compensation program was fashioned. Thank you, Mr. Chairman. (The prepared statement of Mr. Lesser follows:)

STATEMENT OF LEONARD LESSER, ASSISTANT TO THE PRESIDENT AND GENERAL COUNSEL OF THE INDUSTRIAL UNION DEPARTMENT, AFL-CIO

My name is Leonard Lesser. I am Assistant to the President and General Counsel of the Industrial Union Department. I am accompanied by Jack Beidler,

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