Surely, Senator, there are far-reaching needs for federal standards which would include a modern type of financing. Thank you and the members of your committee in advance for your kind consideration of this statement which I am hopeful will be made a part of the record. Very truly yours, S. FRANK RAFTERY, General President. PRINCETON UNIVERSITY, INDUSTRIAL RELATIONS SECTION, Princeton, N.J., July 13, 1966. Hon. RUSSELL B. LONG, Chairman, Senate Finance Committee, U.S. Senate, Washington, D.C. DEAR SENATOR LONG: Enclosed is a statement signed by 38 academic specialists in the field of social insurance and labor markets with respect to policies they recommend in connection with revision of the Federal-State program of unemployment insurance. This statement was developed by a group here at Princeton with the assistance of colleagues at other institutions last July. It was prepared in anticipation of legislation during this session of the Congress. A total of 42 persons were invited to sign the statement. Replies were received from 39, of whom 38 signed and one declined to sign because of disagreement with some parts of the statement. On behalf of the group I am requesting that the statement with the list of signers be inserted in the current Hearings being held by the Senate Finance Committee with respect to revision of the Social Security Act as it relates to unemployment compensation. Sincerely yours, RICHARD A. LESTER, STATEMENT OF ACADEMIC SPECIALISTS IN SOCIAL INSURANCE AND LABOR MARKETS WITH RESPECT TO UNEMPLOYMENT INSURANCE The Federal-State program of unemployment insurance was initiated 30 years ago with the passage of the Social Security Act. Since then significant changes have occurred in the composition of the labor force, in the character of unemployment, in wages and working conditions, and in the structure and technology of the economy. The unemployment insurance program, however, has not been properly adjusted to meet the present and prospective needs and problems in its field. It has steadily decreased in effectiveness as a means of stabilizing the economy and compensating jobless workers for part of their wage losses. Congressional hearings are scheduled on bills aimed at revision of those parts of the Social Security Act dealing with unemployment insurance, so as to correct significant weaknesses revealed by experience. This statement indicates the kinds of changes that are needed in order to meet today's unemployment problem without upsetting the Federal-State structure of the program. The undersigned make the statement as individuals who have studied the role of unemployment in our economy and not in support of the detailed provisions of particular bills under consideration. If the unemployment insurance program is to serve its intended purposes, at least four improvements in the law are needed. First, employment under the Federal Tax Act should be expanded to include many sections of the nation's labor force already covered by the Federal OldAge, Survivors' and Disability Insurance program. This means at least the inclusion of firms with one or more workers and many of the industries now exempt from unemployment insurance coverage. Second, one or more standards with respect to State unemployment benefit levels should be included in the Social Security Act. Individual States need an indication of Congressional intent with respect to jobless benefit levels and also some protection against the competition of other States for industry in terms of depressingly low benefit levels. Since 1935, the average weekly earnings of workers have increased fivefold, yet the weekly benefit maximums or ceilings in State laws have, on the average, risen only threefold. The result is that the ceilings curtail the benefits of about half of all insured claimants; whereas in 1939 only 2 States had a maximum weekly benefit amounting to less than half the State's average weekly wage, that unfortunate condition applied to 38 States in 1964. In the case of States where a Federal benefit standard or standards would result in especially heavy unemployment insurance costs for a period of time, arrangements for Federal sharing of such extraordinary burdens would serve to support the achievement and continued maintenance of adequate State benefit levels. Third, advances in the economy since the 1930's have made the wage base for the Federal Unemployment Tax obsolete. From 1936 to 1939 the tax base was the total yearly earnings of the person, but in 1939 it was restricted to the first $3,000 in order to conform to the tax base under Federal Old-Age and Survivors' Insurance. Since 1939 the Old-Age and Survivors' tax base has been raised four times, and pending legislation would make it apply next year to the first $5,600 a person earns per annum. Even a $5,600 base would be a smaller fraction of total covered payroll now than $3,000 was in 1939. Clearly the wage base for financing unemployment insurance should be adjusted to take account of the great increase in weekly earnings since 1939. Failure to make such adjustment has meant a growing separation between the benefit base and the tax base and has had some unfortunate consequences for the program as well as the general economy. Fourth, a means must be provided to supply cash incomes for persons with long attachment to the labor force who suffer a long period of unemployment. Such persons are often victims of technological change, occupational obsolescence, or geographical shifts of industry, and their number has grown large. There is need for a limited additional period of compensation beyond the normal State maximum of 26 weeks while determination is being made of such jobless worker's need to shift his occupation, his residence, or the general character of the work he should seek, and while he is being counseled or is actually making necessary adjustments. Such longer-term provision of income seems logically to be a national responsibility, related to training, transfer, early retirement, and other national programs. The Federal-State unemployment insurance program was designed to compensate for short-term joblessness under insurance benefits provided as a matter of right. The program of longer-term provision should be planned and administered on a continuing basis so that individual workers can make definite plans and the program can serve its intended objectives. In addition to these four improvements in the Social Security Act, the unemployment compensation program needs to increase the effectiveness of its operations. In general, the program suffers from high staff turnover, insufficient analysis and research, and an inability to attract and hold capable persons with professional aims and interests. Recent experience has clearly shown the need for more staff training, more attractive promotion possibilities, and more research to improve both the substantive effectiveness and the administrative efficiency of the program. Remedial action along the lines we recommend has been long overdo. Failure to adopt these measures earlier has already had serious consequencies. Given the lag between Federal enactment and full results at the State and local levels, further delay would be most unfortunate. Signed: Leonard P. Adams, Professor and Director of Research and Publications, New York State School of Industrial and Labor Relations, Cornell University. Charles W. Anrod, Professor of Economics, Loyola University. E. Wight Bakke, Professor of Economics, Yale University. Monroe Berkowitz, Professor of Economics, Rutgers-The State University. Philip Booth, Lecturer in Social Work, School of Social Work, University of Michigan. Douglass V. Brown, Professor of Industrial Management, Massachusetts Institute of Technology. J. Douglas Brown, Professor of Economics and Dean of the Faculty, Princeton University. Everett J. Burtt, Jr., Professor of Economics, Boston University. John J. Corson, Professor of Public and International Affairs, Princeton University. Frank T. de Vyver, Professor of Economics and Vice Provost, Duke University. John T. Dunlop, Professor of Economics, Harvard University. F. F. Fauri, Dean, School of Social Work, University of Michigan. Margaret S. Gordon, Associate Director, Institute of Industrial Relations, William Harber, Professor of Economics and Dean of College of Literature, Science and Arts, University of Michigan. Frederick H. Harbison, Professor of Economics and Director of Industrial Relations Section, Princeton University. Seymour E. Harris, Professor of Economics, University of California, San Jacob J. Kaufman, Professor of Economics and Director of Institute for William H. Miernyk, Professor of Economics and Director of the Bureau of Signed Continued Charles A. Myers, Professor of Industrial Relations and Director of Indus- Fred Slavick, Associate Professor, New York State School of Industrial and Herman M. Somers, Professor of Politics and Public Affairs, Princeton Sidney C. Sufrin, Professor of Economics, Syracuse University. John G. Turnbull, Professor of Economics and Associate Dean of the College of Liberal Arts, University of Minnesota. Lloyd Ulman, Professor of Economics and Director of Institute of Industrial Relations, University of California, Berkeley. Dale Yoder, Professor of Industrial Relations and Director of Division of Industrial Relations, Graduate School of Business, Stanford University. Neil W. Chamberlain, Professor of Economics, Yale University.1 Edwin Young, Dean, College of Letters and Science, University of Wisconsin.1 STATEMENT OF THE GIRL SCOUTS OF THE UNITED STATES OF AMERICA, PRESENTED BY MRS. HOLTON R. PRICE, JR., PRESIDENT RECOMMENDATIONS Girl Scouts of the United States of America recognizes the social and economie objectives of H.R. 15119 in regard to extending unemployment insurance to employees of non-profit organizations. We appreciate the consideration given by the House Ways and Means Committee to the recommendations made by this and other non-profit organizations. Section 104 of H.R. 15119 will make it possible for an organization like ours to fulfill its responsibilties as an employer in respect to unemployment insurance but in a manner that would not draw unnecessarily upon the funds and resources which have been contributed to Girl Scouting to carry out its program. We hope that the Senate Finance Committee will retain Section 104 of the bill in its present form. We particularly recommend retention of the following provisions made available to nonprofit organizations by H.R. 15119: 1. That non-profit organizations be allowed the option of either reimbursing the State for unemployment compensation attributable to service for them or paying the State unemployment insurance contributions. 2. That non-profit organizations not be required to pay the Federal portion of the unemployment tax. FACTS SUPPORTING RECOMMENDATIONS Our organization has three reasons for supporting optional statewide reimbursable financing rather than a payroll tax. We believe these same reasons justify exemption from the Federal portion of the unemployment tax: 1. Increased costs Our organization, like other non-profit organizations, cannot readily pass on tax burdens to either its members or the donors who contribute to its financial support. 1 Signatures received after statement was released to press on July 26, 1965. We estimate that for the calendar year 1967 a 3.3 percent payroll tax on a $3,900 base rate would cost the 499 local Girl Scout Councils $550,000; the National Organization would have to pay $116,500. The resulting added expense of $666,500 represents almost two percent of operating budgets. This high per centage is accounted for by the fact that in a service organization such as ours salaries are the major expense item on the budget. These payroll tax contributions would be significantly in excess of the claimant requirements for our employees and would add considerably to the difficulties of financing a nonprofit organization. 2. Few claimants Unemploment insurance payments on a tax basis would impose upon the Girl Scout National Organization and Girl Scout councils throughout the country, as well as many other organizations like them, an inequitable share of total insurance cost. According to 1961 Bureau of Employment Security figures, nonprofit organizations are responsible for only 1 percent of total unemployment. This is the lowest percentage of any covered or non-covered industry. The relationship of low turnover and low claimant benefits to tax payments by non-profit organizations is illustrated by experiences in Washington, D.C., Colorado, and Hawaii. According to recent Bureau of Employment Security figures, the contribution of non-profit organizations to insurance funds far exceeds the payments made to claimants. For example, in 1964, Washington, D.C. charged non-profit organizations $676,000 and paid claimants $268,000. Also in 1964, Colorado collected $461,000 from non-profit organizations and paid $181,000 to non-profit organization claimants. In 1960, payments by non-profit organizations to the insurance fund of Hawaii were $76,000, while claimants from these organizations were paid $53,000. 3. Nature of organization Girl Scout employees are providing service designed, like public service, to assist in promoting the general welfare. Their specific objective is to help prepare girls for their citizenship responsibilities. The United States Government has acknowledged, by its recent actions and public statements, that organizations such as ours are necessary partners if the total potential resources of the nation are to be brought to bear upon its social needs. It would seem, therefore, that Federal tax exemptions applicable for State and local governments could properly be extended to non-profit organizations, and that methods similar to Federal reimbursement of the states could be made available to them for their claimants. SUMMARY Our presentation to this Committee is based upon our desire to meet the proposed bill's objective of extending unemployment protection to more employees who need it but, at the same time, to insure as fully as possible that the maximum amount of contributed funds and resources can be directed to serving the youth of our nation. STATEMENT OF RUSSELL W. LAXSON, TREASURER FOR HONEYWELL INC., MINNEAPOLIS, MINNESOTA This statement by Honeywell Inc., Minneapolis, Minnesota, is submitted in support of H.R. 15119. SUMMARY Careful weighing of the provisions of H.R. 15119 leads us to the conclusion that it is the most reasonable proposal possible. H.R. 15119 provides for several necessary changes in the Federal unemployment compensation law which we |