support. It also contains a number of provisions about which we have some reservations. However, it is a carefully balanced proposal which, if enacted in its present form would make necessary improvements in the federal unemployment compensation law and would be in the public interest. We support: 1. The provision for federal court review of the decisions of the U.S. Secretary of Labor concerning question of state conformity to federal statutes. 2. The provisions for extended benefits during periods of higher than normal unemployment. 3. The exclusion of major federal standards which would prohibit the individual states from developing and adapting state laws suitable for their own needs and circumstances. 4. The exclusion of provisions which would jeopardize individual company experience rating. We would oppose: 1. Legislation which would establish federal benefit and eligibility standards and which would otherwise deny states discretion in adapting their state unemployment compensation laws to meet their own circumstances and needs. STATEMENT Honeywell is vitally interested in the unemployment compensation system, its financing, its benefits and its administration. We have some employees in every state and jurisdiction in the United States, and pay unemployment taxes in all of these jurisdictions. We believe that the unemployment compensation program serves a most useful function in our industrial society and that the program needs to be reviewed from time to time in order to assure that it meets the needs for which it was established. We believe that in most of the states, the laws are more than meeting the objectives of the unemployment compensation program as it was originally conceived. Benefits today are generally much more liberal in both absolute and relative terms than those provided by standards originally established. Our broad experience with unemployment compensation also indicates the clear need for states to retain discretion in establishing benefits, qualification and financing standards. The diversity of conditions between states, and even within states, clearly shows that federal standards will not be equitable or workable in terms of a sound system of unemployment compensation. IMPROVEMENTS PROPOSED IN BILL H.R. 15119 The provision for federal court review of state conformity decision of the U.S. Secretary of Labor has been urgently needed for many years. This will give states some avenue for appealing decisions striking down state provisions which the states have deemed necessary to sound fair and equitable administration of their unemployment benefit systems. The resolution of such conflicts between the states and the Secretary through the federal courts should increase respect for the unemployment benefit system and help increase public acceptance and respect for the system. Past experience during recessionary periods has shown the desirability of developing a permanent system of extended benefits for recessionary periods of high unemployment. The provisions establishing this system of extended benefits also appear to be flexible enough to allow some experimentation by states in seeking a system of extended benefits which is fair and equitable and will meet the needs of those persons to whom very long term unemployment is a problem. We believe that H.R. 15119 has sufficient merit that it ought to be enacted even though there are numerous provisions about which we feel some reservations. We recognize that H.R. 15119 is a finely balanced proposal arrived at after long and careful study by the House Ways and Means Committee, the Interstate Conference of Employment Security Administrators. In total H.R. 15119 will improve the unemployment benefit program. In its present for it balances the interests of all groups and is in the public interest. Amendments are likely to destroy the careful balancing of interests which has been achieved in H.R. 15119 and ought to be avoided. STATEMENT OF IRA H. NUNN, WASHINGTON COUNSEL, NATIONAL RESTAURANT ASSOCIATION Mr. Chairman and Members of the Committee: My name is Ira H. Nunn. I am the Washington Counsel of the National Restaurant Association. I appear today on behalf of the National Restaurant Association to present the objections of the food service industry to S. 1991 and to H.R. 15119. The National Restaurant Association is the trade association of the food service industry. With almost 12,000 direct members and through affiliation with 135 state and local restaurant associations, my association speaks for over 110,000 food service establishments in every state in the union. STATEMENT OF POSITION The food service industry is opposed to both S. 1991 and to H.R. 15119 and recommends against the enactment of either bill. A bill identical to S. 1991 was the subject of extensive analysis by those who earlier have appeared before this Committee and before the House Ways and Means Committee. Its ramifications both technical and practical have been made clear. The bill reflects the philosophy of the current Administration that only increased federal control and expanded welfare benefits at the national level can solve the Nation's problems. This legislative proposal was rejected by the House Ways and Means Committee. Further analysis is not needed for us to state categorically that we disagree with both the philosophy underlying the bill, S. 1991, and the approach to the problem of unemployment made by this bill. This bill is complex and offers several far reaching projects but its fundamental defect to us is that it does nothing to solve the problem of unemployment. It does not seek to relieve or reduce unemployment. It seeks only to soften the blow of unemployment. This is a laudable goal, but S. 1991 would achieve it at such a high price to employers as to militate against the creation of new jobs and this is the only real answer to the unemployment problem. Several points of objection have already been made with which we agree. I believe they are worthy of brief repetition. We do not support the use of "average weekly wage" as a criterion for measuring adequate benefits. Such an average is deceptive because it includes the weekly pay of executives who rarely are unemployed. Although all averages are somewhat deceptive, we believe a fairer measure would be average weekly wages of claimants. We believe that reducing the disqualification period and severaly limiting reasons for disqualification can only serve to encourage some workers to leave the work force for purposes of collecting unemployment benefits. We can see no reasonable justification for so rigidly restraining the states' ability to deal with qualification for benefits. We believe that providing unemployment compensation to trainees is wrong. Those preparing for work should be compensated-in cases where compensation is justified or desirable out of funds set aside exactly and solely for that purpose. Such trainees are not of an unemployed group the Unemployment Compensation Act was designed to handle. S. 1991 IS NOT NEEDED Many valid objections have been raised to the various provisions of S. 1991 as well as to its original House counterpart, H.R. 8282, but foremost and fundamentally S. 1991 is objectionable because it is not needed. The President has based his case on a claimed need. He said simply, "The system has not kept pace with the times. No major improvements have been made since its original enactment 30 years ago." The implication is that changes are needed because changes have not been made recently. To us, the case has not been made; the issue has not been proved. Certainly, there has been considerable evidence offered by those who claim there is no current need for this legislation. Witness the remarks of Father Joseph M. Becker, S.J., "The states have experienced reasonable success in conducting their own programs, while increasing the real protection afforded the unemployed by about 100 per cent. As compared with those who received benefits in 1938, the first year in which benefits were paid, the beneficiary in 1960 received his benefits sooner, for a longer time and could buy more real goods with what he received." S. 1991 VIOLATES THE PHILOSOPHY OF THE ORIGINAL ACT The purpose of the Unemployment Compensation Act of 1935 was to provide a base, a minimum standard beneath which the states could not go in establishing unemployment benefits, tax rates and qualifying conditions and retain 90 per cent of the federal tax to be assessed. The federal power to levy and collect taxes was used and it was used sparingly. This tax is a tax on employment levied only on employers. It is a cost of doing business but more accurately, a price to be paid in order to do business. S. 1991 would raise that tax to an intolerable level by raising the tax rate and drastically raising the taxable wage base. S. 1991 would no longer permit the federal act to serve as a base or guideline to the states. Its requirements are too stringent for this. It would impose federal requirements almost completely and would leave the states almost no latitude. The states could impose only more rigorous or more costly requirements than the already overly burdensome requirements of S. 1991. THE ERROR OF UPSETTING EXPERIENCE RATINGS Federal law now permits and the states have adopted a provision which taxes at a lower rate employers whose workers have not been subjected to high or normal unemployment. It is true that S. 1991 would not directly affect this "experience rating" practice but it is also true, in our opinion, that the failure to require the states to adopt an "experience ratings" requirement as is the case with S. 1991, will result in the abandonment of "experience ratings" by the states. The unions oppose "experience ratings" in our opinion because the desire to protect a good rating leads many employers to challenge claims for compensation. Employers who do not benefit by the reduced rate because of a poor rating show little zeal for preserving experience ratings. The likelihood then is that the states will be pressured to abandon experience ratings for a one-rate-for-all system of taxation or a tax rate established on an industry basis. The latter plan would be quite harmful to many restaurant operators. Ours is an industry with a considerable labor turnover. The liberalizing aspects of other provisions of S. 1991 would cause many restaurant employees who leave their employment to qualify for benefits. On this point, consider the experience of one major restaurant chain, one by the way whose experience rating is excellent in states where it operates. Of those who left work and filed claims, 86 per cent were not qualified for immediate benefits. 23 percent had been discharged for misconduct and 63 percent had quit voluntarily. Only 14 percent of its claims were justifiable. Thus, the nature of our industry, it being one with an especially high percentage of unskilled workers, is such that it might not qualify for a favorable unemployment tax rate if judged on an industry basis. Yet this would be unfair to many of our large chain operations, which through use of such fringe benefits as profit sharing and pension plans, have been able to develop a very stable work force. These chains stand to suffer most. They have the most employees and often the best experience ratings. Lumping them on either an industry or a statewide basis is unfair. The experience ratings system is a good one. It should be preserved and it can only be preserved by the federal statute. HIGH TAXES DISCOURAGE EMPLOYMENT S. 1991 provides a tax on employment. Whatever social need is filled thereby, the fact remains that this tax is going to be a high one. When coupled with the new high tax rates adopted to finance the Medicare law, we find that employers will be paying up to $537.90 per employee per year in payroll taxes. And this assumes no further increase in Social Security taxes. We are faced with a per employee charge of $10 per week, a charge from which the employer derives no benefit. This $10 per week charge can only be controlled by not hiring new workers. Instead, the employer who provides overtime pay to current employees is able to avoid these extra taxes. When the other benefits employees receive are taken into consideration, it becomes profitable to provide overtime. The answer is not to add to the penalty rate for overtime. The answer is not to add further to the cost of hiring employees. Such legislation as this and the proposal to extend and raise the minimum wage can only operate to accelerate the trend to automation. The answer is to permit business a reasonable amount of freedom to deal with the problem of unemployment by itself without further encumbering business with higher taxes or penalty pay rates. OUR OPPOSITION TO H.R. 15119 It must be conceded that many of the objections which can be raised to S. 1991 do not apply to H.R. 15119. To the extent that this is true, H.R. 15119 is a better bill but, we believe it is still not good legislation. We oppose the enactment of H.R. 15119 as well. S. 1991 would lead to the elimination of experience ratings and H.R. 15119 is better, but no law is needed to preserve experience ratings. S. 1991 would impose federal standards with respect to eligibility for benefits, amount and duration of benefits, as well as limiting the rights of the states to disqualify claimants. H.R. 15119 largely eliminates the federal standards requirements but again, this merely preserves the status quo and no new law is needed to do this. Also, H.R. 15119 does not interfere with the rights of the states to control requirements for disqualification from benefits. The extended benefits provisions of H.R. 15119 are far superior to S. 1991. The "trigger" based either on a national or state recession is a good and a fair one and the principle of using such a trigger is especially sound. However, these provisions do not justify new legislation at this time, because we recently experienced a new law in unemployment and our economy is continuing in a prosperity of unprecedented length. We may one day need such recession benefits, though we hope we do not. In any event, there is no need for recession benefits at this time, so this provision of H.R. 15119 doe not justify new legislation. A desirable feature of H.R. 15119 not contained in S. 1991 is that providing for judicial review of determinations of non-conformity of state laws by the Secretary of Labor. We recognize the desirability of such a provision but it is not of such importance as to overcome the other undesirable features of H.R. 15119. S. 1991 would extend coverage to virtually every employer in the country. H.R. 15119, too, would extend coverage. While the extension of coverage under H.R. 15119 would be great, it would not be as broad as S. 1991. But extended coverage is not sufficient justification for new legislation. Half of our jurisdictions now cover more employers than required by the federal law. In our testimony before the House Committee on Ways and Means, we argued that H.R. 8282 was not needed because the states had responded on their own initiative to meet changing needs in the field of unemployment compensation. All fifty one jurisdictions have at least doubled their maximum weekly benefits payments. Thirty of them made changes in 1965 alone. The states have not abandoned their responsibility in this area. They each have acted to meet the special needs of their people. Since the states are doing what is necessary, there is no need for the federal government to interfere either through S. 1991 or through H.R. 15119. SUMMARY By approving H.R. 15119 by a vote of 374-10, the House overwhelmingly rejected an increased federalization of the field of unemployment compensation. We urge the Senate Finance Committee and the Senate itself to reject any further federalization of the field. Further, we ask the Senate Finance Committee to recommend that the Senate do nothing in the field of unemployment compensation at this time. The advantages of H.R. 15119 are not sufficient to justify its enactment at this time. Further, it must be recognized that while H.R. 15119 would not be as costly to employers as S. 1991, it would still be expensive. At present, the maximum tax under the federal law is $93 per worker per year. Under H.R. 15119, it would be $138.60. This is significantly below the maximum tax of $214.50 which would be required under S. 1991, but the maximum per employee tax under H.R. 15119 is still fifty per cent above that required by existing law. Neither S. 1991 or H.R. 15119 is needed. Both are expensive to employers. We respectfully request the Senate Finance Committee to recommend to the Senate that neither be enacted into law. Hon. RUSSELL B. LONG, AMERICAN FEDERATION OF LABOR AND Chairman of the U.S. Senate Committee on Finance, Mr. Chairman and members of your Committee, as Director of the Agriculture Workers Organizing Committee, AFL-CIO, I urge you to support an amendment to include farm workers under the Unemployment Insurance System. Governor Brown on numerous occasions has asked the California State Legislature to extend coverage to farm workers under the Unemployment Insurance laws of the State of California. Unfortunately, the State Legislature has failed to enact legislation incorporating the Governor's recommendations. Many reasons are set forth by agribusiness and the commercial and industrial interests in California why agribusiness should be excluded from coverage in the Unemployment Insurance program. Primarily, however, two reasons are given more often than others: the first is that if agricultural labor is covered, it would place the State's agricultural industry in a disadvantageous, competitive position with the agricultural industry in other states. The second reason given is that the non-farming industries in California would have to help underwrite the program for the farming industry, and they would thereby be placed in a disadvantageous, competitive position with the non-farming industries in other states. We believe the inclusion of farm labor as proposed by President Johnson in HR 8282 would fully answer the competitive issue faced by California farmers. And secondly, we believe the provision in the President's proposal for federal reimbursement of excessive benefits costs would lessen, if not totally wipe out, the fear of non-agricultural employers that sharing the cost of insuring agribusiness in California would result in a loss of business to competitors in other states. No segment of the working force is more deprived. Farm labor is poorly paid and as Secretary Wirtz found out, if he did not already know, poorly housed. In spite of the fact that farm labor produces the food for the best fed nation in the world, they are still economically the least secure in our nation's work force. Unemployment insurance as a system to protect the unemployed against the disasters of unemployment, has proved itself. Both political parties, the Federal government and all State governments recognize that unemployment insurance is here to stay. Because it has proved favorable in support of the nation's economy, we ask that the thousands of farm workers be included within its scope. We urge it not only because farm workers, as a matter of right merit the protection, but we believe as a counterpart business in the farming communities especially, and the nation as a whole, would benefit from a more stabilized purchasing power. Therefore, Mr. Chairman, on behalf of our members and all who work on farms, we urge you to include farm labor within the Unemployment Insurance System. Very truly yours, Hon. RUSSELL B. LONG, Chairman, Committee on Finance, C. AL GREEN, Director. ALABAMA LABOR COUNCIL, AFL-CIO. DEAR SENATOR LONG: We sincerely hope you and your committee will report out and recommend a strong unemployment compensation bill along the lines of the McCarthy bill, containing uniform federal standards for the amount of benefits and length of benefits plus a maximum of 26 weeks of extended federal unemployment compensation benefits. The unemployed worker in Alabama is far worse off under the law than he was 28 years ago. In 1938 an unemployed worker could draw maximum benefits up to 92% of the state's average weekly wage. But in 1965 an unemployed worker drawing maximum benefits was entitled to only 42% of the state's average weekly wage. |