thing. But if the "insurance principle" is intended to provide “adequate family support," that is another thing-and a far cry from the original purpose of the Unemployment Compensation Act.

Incidentally, in New York State the relative ratio of the weekly benefit amount to average factory wages has been kept fairly constant. We started out with a benefit span of $7 to $15-and this at a time when the average factory wage for the State was in the vicinity of $28. We have gradually increased that amount. In 1942 we went to $18, raising the minimum to $10. In 1945 to 1948 we paid $10 to $20. In 1948 to 1951 we paid $10 to $26. In 1951 to 1955 we paid $30. In 1955 to 1957 we paid $10 to $36 and for the 1957 benefit year (1958 payments) our weekly benefit amount was increased to $45.

FEDERAL STANDARDS WILL NOT WIPE OUT DISPARITIES

There are great disparities between State laws, but the question to be answered by Congress is whether or not Federal standards will wipe out these disparities in benefits, etc.

The only possible answer is that they will not; because so much is involved here in the type of work performed, the skills applied thereto, and the total labor costs. They certainly cannot wipe out the disparity in labor and costs. Actually, Federal standards will only freeze these great disparities or inequities if they are that. Labor costs (and wage rates) of New York State industry are going to remain high. They reflect the high skills and productivity of New Yorkers.

FEDERAL STANDARDS WILL HARM NEW YORK COMPETITIVELY

Let us face the issue squarely. Rather than helping States like New York, Federal standards would serve to give these industrial States like New York a still further adverse position in interstate competition. It is not generally understood that the average unemployment insurance tax rates in the so-called low-cost States and the so-called high-cost States average out about equal. The percentage of average employer tax rates in the so-called low-cost States run 1.2 percent. For the so-called high-cost States which represent most of the industrial States the average is 1.25 percent.

But under the Kennedy-Karsten bill a State like New York would be required to increase its maximum benefit leaving the so-called laggard States still far, far behind. The effect would be to force New York State to adopt an unemployment high benefit maximum that would still be far ahead of the so-called laggard States. And, incidentally, these laggered States according to testimony given to this committee have not been as "laggard" as they have been painted. The trend everywhere has been to bring standards up to more realistic levels. Great progress has been made. Such States should be encouraged to come up to reasonable comparison with other States, and should not be compelled to do so via Federal standards with all of their dangers.

Let's give a concrete example.

In Arkansas weekly benefit amount has been increased by $4 to $30 and the duration by 8 to 26 weeks. Qualifying wages go from $210 to $300, with a requirement in two quarters.

The average factory wage in Arkansas is about $60. In New York State the average is about $90. It is estimated that in Arkansas application of the bill before you would, if passed, result in a weekly benefit amount of $39, this amounting to two-thirds of the average weekly wage of the State. In New York State, where a maximum of $45 has been paid since 1958, we estimate that application of this provision would give us a weekly benefit maximum of $61. The present New York average weekly benefit amount is one of the highest in the Nation. Benefits might be further improved without higher tax costs if we were to courageously take these steps necessary to withhold benefits for those people whose own voluntary action or misconduct has resulted in their being unemployed, or are actually either casually attached to the labor market or, like pensioners, show no real attachment to the labor market.

New York State has a strong experience rating system. Without question this has been a strong incentive to job stabilization across the length and breadth of our State.

NEW YORK DOES NOT NEED FEDERAL STANDARDS

As the representative of New York employers, let me state without equivocation that our system is a general system as it now stands. We do not need Federal

standards nor should the employers of New York State in effect subsidize ether employers in other States of the country which would result if these bills were to be enacted.

NEW YORK'S UNEMPLOYMENT INSURANCE FUND NOW STRONG

H.R. 3547 would penalize New York State for having built up a strong unemployment insurance fund.

In 1936 employer payments into the New York State fund amounted to $25,830,009 and with interest included we closed the first year with a fund of $26,029,545. Employer payments under our experience rating system now equal monthly about the total payment made in 1936. In 1958 employer payments were $230,518,393. In 1958 New York State paid out $502,477,293, but still leaving our fund in a strong position with a balance of $1,121,588,210. In February the fund amounted to $1,067,244,791.

Experience rating was introduced in New York State in 1951. It has reinforced the sound principles of our financing system under our law, as has been demonstrated since with full employer cooperation.

PROTECTING NEW YORK'S FUND

The New York State unemployment insurance system has successfully weathered every recession storm. It is to protect the strong position of our own fund that New York State this year set up the machinery to begin now the repayment of the $89 million Federal loan made a year ago in connection with the temporary unemployment compensation program.

When the bill is due, the money will be ready. It will have been charged to employers responsible for the employment and our fund will be as strong as ever.

NEW YORK UNDERSTANDS WEAKNESSES OF UNIFORM DURATION

The bill before this committee would permanently extend the duration of unemployment insurance benefits to 39 weeks.

What this means is simply that the principle of uniform duration would be extended to all of the States, over and above the extension of this uniform duration to 39 weeks, which is bad as I will explain later. Let me point out please that New York is one of those States which has experimented with uniform duration—and our experience is not too satisfying. We find that we are supporting people with no attachment to the labor market. New York State's own analysis shows that in January 1959, 20 percent of those receiving temporary unemployment compensation benefits were age 60 and over. Thirteen percent of the total were age 65 and over, showing that we are providing TUC benefits to many people, such as pensioners, who are certainly not attached to the labor market. When you break this down further you find that 14 percent of regular recipients are age 60 and over with 8 percent of the total being age 65 and over. At the other end of the age column you find that 15 percent of regular recipients are under age 25 with 5 percent being under age 20. And-interestingly enough-13 percent of TUC recipients are under age 25 with 9 percent under age 20. The TUC figures for males on a statewide basis are more startling still. Twenty-five percent of males are age 60 or over and 17 percent of the total are age 65 or over. We do have in New York State an age discrimination law, but the figures remain rather dramatic all by themselves.

TWENTY-SIX WEEKS LONG ENOUGH

It so happens that employers across the country are now committed to a willing acceptance of the unemployment insurance principle-that is, to the principle as it now applies. Unemployment insurance to date has been based on the principle that the employer who lays off an employee has an obligation to provide support during a reasonable period of time while the employee seeks a new job. It has worked this way in New York State, and employees out of work through no fault of their own have thus been supported while they were seeking new work. The New York Legislature and New York employers believe that the 26-week period is clearly sufficient time for any worker to thoroughly explore job opportunities available to him and make his decision as to what kind of job he is going to take in order to get back to work.

ABUSES DRAIN FUNDS

New York employers have frequently criticized our own system, principally on the ground that we pay benefits (after a waiting period it is true) for voluntary quits; that we pay benefits to strikers, for people discharged because of misconduct, for seasonal workers, for pregnant women, and have actually paid benefits for workers drawing vacation pay-a process which still continues. But these are criticisms of detail-and New York State employers are convinced beyond any shadow of a doubt that our New York system is a fundamentally good system.

OPEN DOOR TO COMPLETE FEDERALIZATION?

I repeat that legislation establishing Federal benefit standards would open the door to complete federalization of the unemployment insurance system, and mandate standards for all States, including the Empire State. It would be destructive of our job stabilizing merit rating system. When we introduced merit rating into the New York system in 1951, the employers of the State themselve urged that in order to establish a fund that would be sound for a rainy day that we should maintain the maximum tax for 2 years, which we did. Again, the way we have come through the economic storms in 1954 and again in 1958 ought to be assurance to Congress that the States can take care of themselves. New York is a good example that they can-and that no Federal standards are needed.

NEW YORK BELIEVES IN INSURANCE PRINCIPLE

But our concept in New York State, to repeat, is based on the fact that this is an insurance program. Under the bills before you with the 39 weeks set as a standard, we are talking about something else. We are talking about a program under which the full responsibility for and the full cost of economic storms of long duration is placed on only one segment of the population-the employer. And by any standard that is not only inequitable but destructive of the principle of justice that is at the root of historic Anglo-Saxon tax policies.

The financing of unemployment insurance has been geared to short-term liability. In New York State we consider the 26-week duration as plenty of time for a worker to find a new job, and if the unemployment period goes beyond this, then a new factor has been introduced. It is here that possibly Government should step in and the burden should be assumed by the whole public. Certainly it should not be assumed by the employers alone, even if you concede that the cost is eventually passed on to the consumer which it often is. That type of approach incidentally is morally dishonest.

NEW YORK PROTESTS SUBSIDIES FOR COMPETITORS

In New York State we already as employers subsidize many marginal or seasonal employers as part of our experience rating system. H.R. 3547 provides for a reinsurance grant that would mean inevitably that New York State employers, accounting at the present time for 13 percent of covered workers, would be subsidizing competing employers in other States of the Union! This feature alone could encourage wasteful State practices!

The financing provisions of H.R. 3547 are unrealistic and would bind Federal taxpayers everywhere to a new liability that could run literally into billions of dollars-akin to the sad story of agricultural subsidies-and equally destructive of equity in democratic principles in the long run. Your committee already has received information showing how administrative grants to States by themselves involve gross inequities. For example, it costs three times as much to run Alaska's employment security program at the present time as employers in that State paid in Federal unemployment taxes. But many industrial States pay much more by far than they receive in administrative allowances.

NEW YORK INDUSTRY URGES DEFEAT OF FEDERAL STANDARDS

In conclusion, please let me point out anew that employers freely acknowledge their responsibility for employment caused by their own decisions. But Federal standards of any type and particularly of the type proposed in the legislation before your committee will encourage waste. It will increase the number of chronically unemployed because increasing benefits and prolonging duration of payment, it reduces incentives to find new work. It will, therefore, encourage

rather than reduce long idleness with all the consequent social and economic damage to the community. It will not minimize competition between the States, because it will merely establish a new floor. And it will force employers in States like New York to subsidize competing employers in other States.

It will, as I have said, invade States rights and it will be destructive of morale and initiative at the State level while imposing a heavy potential of cost and grief upon all Federal taxpayers. Therefore, I respectfully urge on behalf of New York State industry that these bills be defeated.

The CHAIRMAN. Mr. Shaw, we thank you, sir, for coming to the committee and giving us the views of yourself and the Associated Industries of New York. We appreciate your fine statement in support of those views.

Thank you, sir, for coming.

The committee will have to recess for a little while in order that we may go to the floor and vote on a bill under consideration.

Monsignor O'Grady, it may be a few minutes before 3 o'clock before we return. We will be here, though, by 3.

(The committee took a recess.)

The CHAIRMAN. The committee will please be in order.

We are very pleased to have as our next witness the Right Reverend Monsignor John O'Grady, who for a number of years was secretary of the National Conference of Catholic Charities. Over that period of time, he has been a friend of the committee and particularly I have always thought of him in terms of being a very dear friend of mine. Mr. MASON. May we say adviser of the committee, also?

The CHAIRMAN. He has certainly been an adviser to the committee. Out of his many years of experience he always brings to us a great deal of assistance in the way of suggestions that are good. We are pleased to have him with us today. And I know good and well that Father O'Grady cannot say what he wants to say in 10 minutes. And just disregard that 10 minutes, Father O'Grady. And you are recognized.

We want you to have a full discussion with us of your thinking on what we should do about this particular problem.

STATEMENT OF RIGHT REV. MSGR. JOHN O'GRADY, SECRETARY, NATIONAL CONFERENCE OF CATHOLIC CHARITIES

Monsignor O'GRADY. Well, in many ways, I am very much discouraged from what I hear in the testimony. It looks as if we were in a sort of a dilemma. We are told that the States in one breath-we are told the States have done everything that could be expected of them now. And if the Federal Government can't do anything about it, I don't know who can do anything about it all.

Because, I have been around a good deal in States. I have spent days and days in the lines of the employment offices. And, you know, I thought I knew something about the basic concepts underlying this system.

And I have been learning some new things today. I was told by a gentleman from New York State about what the original purpose of the system was. Having worked with the President's Committee on Social Security, I thought that I knew something about what the original purpose of the system was. Because I was in many debates, both here and overseas, as to what this method that we devised of keeping

the industrial army in proper condition, I thought I knew something about it.

Having worked on workmen's compensation way back in 1913 and 1914 and 1915, I thought we had thrown out many of the original concepts of common law, of fellow servant assumed risk and contributory negligence. And now we have in workmen's compensation-we had a definite system of protection against the hazards of industrial actions. And that a definite and fixed premium was judged on industry. It is a part of the cost of production. At least that is what I learned way back as a student in the University of Chicago and as a collaborator with some State legislatures, including the Legislature of Ohio, with which I had worked in 1919-20.

And I thought I knew a little bit about it. But as I hear, for instance, all these statements, I am wondering am I deceived or is somebody else deceived about the original purposes of this system?

At least I sat in with all the experts at that time. I know we did get another brand of experts developed in a later period. They are all around this town and they are around the State legislatures. And they are telling the State legislatures how they can save money.

At least they are telling the employers how they can get this down to a minimum, cut it down, more and more disqualifications.

And maybe they take on a few more weeks of duration and maybe a few more weeks and then a few more dollars. And then if you study the experience of the State legislatures you will find they have tacked on more disqualifications; the disqualifications become tighter all the time.

So it became very, very difficult for this man, for this worker, whom I have seen along the lines to get his compensation. And he is held out. And he doesn't have, of course, the advantages that the employer has. I know many of them personally. Maybe they are good men. They think they have made some money, you see, and they have become rich.

And then I noticed an assumption running through all this discussion that we are prosperous; we have nothing to worry about. And, well, I have been through most of the State of Pennsylvania in the past couple of months. I have been through the coal regions. I have been in many of these industrial towns like Altoona, Johnstown, all around in the coal region. Of course, anthracite is gone. I have known anthracite for years and years from the days of John Mitchell. And I have seen it go, you see, which I think is a sad picture for that whole area.

I have had some meetings with some of the Congressmen from West Virginia over the lunch hour. And I got to talking to them about the conditions in their State. And we asked them what they were doing, and they have arranged to have some more conferences with us to see what they would propose in their State.

I have got a few ideas about it. I am not sure that I know all about it. But I think that the situation in the various States now, in many States, in the States with large industrial concentrations, is very bad. I think the situation in Ohio is distinctly bad. The situation in Cleveland is bad. The situation in all Pennsylvania is very bad.

The situation in Massachusetts is bad, and in Rhode Island it is bad, and in some areas of Connecticut and New Jersey and in Illinois it is bad.