was the central controversy at the time the program was initiated, and it has been kept alive by periodic attempts, such as the present one, to increase the extent of Federal influence. The principal attempts have taken the form of proposals for either Federal standards-like the McCormack bill of 1940-or Federal supplements, and have usually been made on the occasion of some abnormal situation either a transition to or from war or, as now, a period of economic recession. Senator Kennedy has offered a Federal standards bill regularly since 1954 and has been picking up support for it. The 1958 Kennedy bill had 16 cosponsors; the 1959 model has 30.

To come to a decision on the Kennedy-Karsten measure two questions must be answered: (1) Are the proposed standards desirable in themselves? (2) If so, should the Federal Government impose them on the State programs? These are distinct questions, susceptible of different answers.

In order to answer the first question intelligently, it is necessary to make an assumption with regard to another issue in unemployment compensation which is logically prior to any decision on the issue of Federal standards. It is necessary to assume that there will or will not be available an auxiliary program— something along the lines of the present temporary unemployment compensation program—to supplement the regular program during periods of recession. What is assumed on this point determines the task to be performed by the regular program and therefore determines what standards are proper for the regular program. I assume here that an auxiliary program will be available. I make this assumption because such a program (1) already exists in TUC, (2) is being considered favorably by a number of State legislatures now in session, and (3) is logically demanded by the different characteristics of normal and abnormal periods of unemployment, as I argued in the April 1959 issue of Social Order.

ARE THE STANDARDS DESIRABLE?

The answer to this question depends on how well the proposed standards serve the major purposes of unemployment compensation, which are two: to meet the needs of the unemployed individual and to strengthen the total economy. These purposes serve as norms by which to judge the proposed standards on benefit amount and benefit duration.

Meeting individual need.-There is little controversy over the stipulation that below the maximum the benefit amount should equal at least 50 percent of a claimant's wages. (There is disagreement only over whether "wages" should be understood as gross or net, that is, before or after taxes.) Practically all the State laws provide at least this high a proportion of lost wages at all benefit levels below the maximum.

The proposal that the maximum benefit equal at least two-thirds of average wages in the State is more controversial. The maximum benefit serves the purpose of limiting the number of claimants who will receive the stipulated 50 percent of their weekly wage; those who are stopped by the maximum will usually receive something less than this. Currently, perhaps 45 percent of all claimants are prevented by the maximum from receiving half of their gross weekly wage. The proposed maximum would lower this proportion to perhaps 15 or 20 percent, that is, would allow 80 to 85 percent of all claimants to receive at least half of their gross weekly wage.

Everyone is in agreement that some maximum should be set on the assumption that workers who have higher wages have more resources and hence lesser need for unemployment benefits. There is little agreement as to just what the maximum ought to be, but there is a fair consensus that nondeferrable expenses constitute a proper norm for determining the maximum. The maximum should not be so low as to prevent a claimant from meeting his nondeferrable expenses. There is some disagreement over the proper definition of nondeferrable expenses, but practically everyone would accept a minimal definition that includes only the items of food, shelter, utilities and medical care. This was the definition used by the Bureau of Employment Security in six State studies of benefit adequacy, covering various periods during 1951-57. These studies indicate that the average claimant who was single received enough in unemployment benefits to cover nondeferrable expenses but that the claimant who was the head of a family received a weekly benefit which was on the average $12 short of meeting such expenses. Since the average benefit of these latter claimants was $30, it can be argued that their average benefit needed to be raised by 40 percent in order to meet the norm of nondeferrable expenses.

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The difference between the single claimants and those who were heads of families was the result primarily of the operation of the maximum; this is clearly evident from the fact that the average wage of the claimants who were heads of families was 50 percent greater than the average wage of the single claimants. The conclusion would seem to follow that some increase in the maximum was necessary.

This difference in the experience of "singles" and of "heads" leads to the further conclusion that the necesary increase in the maximum will be smaller and will achieve its objective more surely if benefits are calculated on the basis of net rather than gross wages or if the State law includes a provision for dependents' allowances.

To sum up, the proposed standard to regulate the benefit amount although (1) higher than can be justified by any norm which has general support and (2) higher than it would need to be if it were linked with provisions which differentiate between claimants who do and do not have dependents, is not so high as to be clearly incorrect. On the contrary, the standard has a solid basis in the available data relating to nondeferrable expenses.

On the second standard, which regulates duration, there is general agreement that the duration of unemployment benefits should be limited. For one reason, limited duration is an important aid to administrators in weeding out nonworking violators, claimants who are not genuinely in the labor force; for another, unemployment benefits ought eventually to yield to more effective remedies, such as pensions or allowances for retraining and relocation.

The proposed standard sets the limit of duration at 39 weeks, which is about 15 weeks longer than the average claimant is currently eligible for. Under current duration provisions, about 1 million claimants annually exhaust their benefit rights in periods of normal unemployment. (This number more than doubles in abnormal periods, but in such periods, according to our assumption, there is available an auxiliary program to pick up the exhaustees of the regular program.) These million exhaustees each year represent about 3 percent of the covered labor force and about 20 percent of all claimants.

Are 1 million exhaustees too many? Is an exhaustion ratio of 20 percent too high? The data do not of themselves supply the answer: they have to be evaluated by some norm. In the case of the benefit amount there was available a norm which could claim wide support-nondeferrable expenses. There is no comparable norm in the case of benefit duration. Some direction, however, can be obtained from a study of the characteristics of those for whom the current duration provisions have proved insufficient and who are the ones most likely to benefit from an extension of duration.

Seventeen States have conducted studies of exhaustees. All but two of the studies covered periods of normally high employment (between 1954 and 1956) and therefore are relevant for our purpose. The studies showed that, as compared with all claimants, exhaustees tended to be older and to belong to lower wage groups; a considerable number were female. Thus they tended to belong to the fringe rather than the core of the labor force. Nevertheless, about half of the exhaustees were male, and of these about half were under 45 years of age. (Males under 45 generally belong to the core of the labor force.)

The studies also showed that 2 months after exhaustion over 85 percent of the former exhaustees were still in the labor force, and over one-third of these had found employment. This is evidence that they genuinely belonged to the labor force. The evidence must be balanced, however, by the observation that the data consists of answers given by the exhaustees themselves in response to mailed questionnaires. What little information we have on nonworking violators indicates that while they are not likely to constitute more than 3 percent of all beneficiaries, they can constitute as high as 25 percent of the beneficiaries who draw benefits for extended periods.

It is relevant to the problem of setting a standard of duration to note that to make benefits available does not necessarily mean that they will be used. New Hampshire and Florida illustrate the point. During 6 years, 1952-57, New Hampshire offered claimants an average potential duration of 26 weeks; Florida, an average potential duration of 14 weeks. During the same period. New Hampshire claimants had an average actual duration of 11.1 weeks; Florida claimants, an average actual duration of 9.4 weeks. A 12-week difference in potential duration resulted in only a 1.7 weeks' difference in actual duration. To sum up the evidence relating to duration: Even in normal periods, the protection currently provided (about 24 weeks) is inadequate for substantial numbers of claimants who seem to be genuine members of the labor force.

Moreover, since in normal periods relatively little of the increased potential duration is actually used, a great deal of added protection can be purchased at relatively low cost. On the other hand, there are certainly more nonworking violators among these exhaustees than among other claimants, and there are many exhaustees who, although genuinely in the labor force, need a form of assistance different from unemployment benefits. If the regular program is to be kept as a program for short run unemployment during normal periods, 26 weeks of benefits is about the maximum it ought to provide-always assuming that another program is available for situations (either places or times) in which unemployment is abnormal. A Congressman ruminating on the evidence might conclude that a good case can be made for and against the proposed standard but that on the whole 39 weeks of duration is excessive for the regular program (yet it is inadequate for periods of depression).

Strengthening the total economy.-The second major norm for judging whether the proposed standards are desirable in themselves is their impact on the economy. Unemployment benefits can have both favorable and unfavorable effects on the demand for labor and the supply of it. Unemployment benefits can improve the demand for labor by replacing lost consumer purchasing power (in the local community or in the Nation) and by putting employers under financial pressure (through experience rating) to stabilize their hiring policies. Benefits can improve the supply of labor by preventing the dispersal or the downgrading of skilled workers during temporary layoffs.

These favorable effects may be offset to some extent by other effects. The impact of benefits on demand may be undesirable during times of inflation insofar as benefits constitute added purchasing power to which there corresponds no production. Unemployment benefits may have an undesirable effect on the supply of labor insofar as they either prevent unemployment from performing its natural function of restraining exorbitant wage demands or influence potential workers to prefer unemployment to employment.

All these effects are produced by unemployment insurance at all times, but the relative importance of each varies with periods of prosperity and recession. During periods of recession the favorable effects undoubtedly outweigh the unfavorable, and for such periods the proposed standards are certainly not too high; indeed they probably are not high enough. During normal periods the net effect of the proposed standards would probably be favorable in the case of the benefit amount but might easily be unfavorable in the case of duration, especially since the proposal is to make this duration uniform for all claimants.

IS FEDERAL INTERVENTION DESIRABLE?

Even on the assumption that the proposed standards are desirable in themselves in terms of their effects on the individual and on the economy-there remains a further question: Should the Federal Government impose the standards on the States? I see two principal arguments for Federal intervention and two against it.

For Federal standards.-The first argument in favor of Federal intervention is that the State legislatures do not fairly represent urban, and therefore labor, interests. Most of the States have refused to obey their own constitutions, which provide for periodic apportionment. As a result, although 64 percent of the population live in cities, they elect only about 25 percent of the State legislators. Since unemployment insurance is of interest primarily to industry and therefore to urban centers, this rural imbalance can constitute a serious obstacle to liberalization of the unemployment insurance system.

The argument has considerable force. It is modified, however, by the obvious fact that in the States where labor is most numerous labor has succeeded in obtaining the most liberal unemployment compensation provisions. Real economic power overleaps the confinements of political forms. Lately, moreover, a trend has appeared among the large industrial States to obey their constitutions and to reapportion their legislatures. This trend is likely to continue.

The second argument in favor of Federal intervention derives from the need to offset interstate competition. The money for unemployment benefits comes from a tax on employers. If a State raises its benefits, and therefore its taxes, it may put its employers at a disadvantage in competition with employers in other States. Although interstate competition may be desirable in strictly economic areas-so the argument runs-it is not desirable in the areas covered by programs of social welfare.

The undoubted force of this argument is modified by two facts. First, the States have continually liberalized their programs (see below), especially the large industrial States where the great majority of workers live. Second, of all the social welfare programs, unemployment compensation is most closely geared to the economic process, and to a much greater extent than other welfare programs it is properly tied to the competitive struggle.

Against Federal standards.-The first argument against Federal intervention is that the States themselves have done a fairly good job thus far. The basic protection provided by the program has not decreased, as is often charged, but has increased. A comparison of 1939 with 1957 reveals that the program has been liberalized under the States in three important respects. First of all, the weekly benefit has increased faster than the cost of living, so that the average weekly benefit of today will buy about 40 percent more goods than its 1939 counterpart. Second, duration of benefits has increased greatly, and this increase, combined with the increase in the real value of benefits, has about doubled the total real protection provided by the program-an increase of 100 percent. In the large industrial States, the increase has been even greater. Third, the waiting period has been steadily shortened. In 1939 a 3-week waiting period was common; now no State requires more than 1 week and five States require no waiting period at all. Thus the claimant today as compared with the claimant in 1939 starts receiving his benefits sooner, receives them for a longer time, and can buy more real goods with them.

The States make a somewhat poorer showing when measured by the ratio of benefits to wages, but here we must distinguish between gross and net wages, and in the latter case between the single claimant and the claimant with dependents. Benefits have not risen as fast as gross wages. In 1939 the average weekly benefit represented about 42 percent of gross average weekly wages; by 1957 the ratio had dropped to about 35 percent. This relationship has significance chiefly when judged by the norm of the effect of benefits on the economy; the replacement of a larger proportion of gross wages would help, especially in times of recession, to maintain the balance between purchasing power and productive capacity. The relationship has less significance when judged by the norm of individual need; here the relationship of benefits to net or spendable wages is more significant. The ratio of benefits to net wages was higher in 1958 than in 1939 for single claimants and was about the same in both periods for claimants with dependents up to four. The explanation for these differences is to be found, of course, in the Federal income tax, which affects many more persons now than it did in 1939 and takes toll from practically all wage

earners.

The second argument against the imposition of Federal benefit standards is as important as it is uncertain. According to this argument, to admit any Federal benefit standard, no matter how reasonable, is to invite a steady flow of standards that will be introduced one by one, year after year, and will eventually result in a complete federalization of the program. Up to the present the line between Federal and State action has been clearcut: the Federal Government did not impose benefit standards. This line of demarcation has acquired something of the force of a principle. But once admit in this area a single Federal standard, no matter how reasonable, and the line will no longer be clear cut; the principle will have been abandoned and the door will have been opened to a flood of federally imposed standards.

The final vote of the typical Congressman will be determined in large part by the respective weights that he assigns to these four arguments. What will de termine the weights that he assigns to the arguments? To some extent, his technical understanding of unemployment insurance; to a greater extent probably, his general social philosophy and political coloration. The same will probably hold for most of his constituents-and for you, dear reader.

The CHAIRMAN. Without objection, the Chair will call the representatives of the Actors Equity Association as the next witnesses.

Mr. Alfred Harding? Mr. Harding, if you will identify yourself for the record, please, sir.

STATEMENTS OF MISS TALLULAH BANKHEAD; ALFRED HARDING, ASSISTANT TO THE PRESIDENT, ACTORS EQUITY ASSOCIATION; MISS PEGGY CASS, MEMBER, GOVERNING BOARD, AND EDWARD WESTON, MEMBER, EQUITY COUNCIL, ACTORS EQUITY ASSOCIATION

Mr. HARDING. Mr. Chairman and gentlemen, my name is Alfred Harding. I am assistant to the president of the Actors Equity Association.

It is my privilege to present to you this morning, two of the distinguished actresses of the American theater, Miss Tallulah Bankhead and Miss Peggy Cass.

To recite Miss Bankhead's credits, I think, would take as much time as we had to contribute.

Miss BANKHEAD. Filibuster.

Mr. HARDING. Miss Bankhead is one of the authentic great persons of the American theater today. She will present the statement of the Actors Equity Association for whom she speaks.

Miss Bankhead.

Miss BANKHEAD. Thank you so much.

The CHAIRMAN. Miss Bankhead, we are pleased to have you. Miss BANKHEAD. Mr. Honorable Chairman and the other honorable members of the committee, I am very happy to know you and, ladies and gentlemen, the same goes for you.

First, I am going to begin by saying that I was up at 5 this morning because they said I had to be here at 10 o'clock, so I think for that reason alone this bill should be passed.

I have a very charming escort on my immediate right.

I sprained an ankle two days ago. That is why I had to be slightly assisted up here in case you think otherwise.

I certainly would not say anything derogatory to this special, precious committee, but I did not hear a bloody word you said, so I do not know whether you are for us or against us; but I have a little prepared short thing here and a few names written down that I cannot remember and if I do I will probably pronounce them wrong even if I have them written down.

This is a prepared statement not by me, because I cannot pronounce any of the words. I am a Mrs. Malaprop and the queen of non sequitur, you know, but some of you gentlemen may know that I have been here since I was a child.

My grandfather was in Congress and the Senate for 38 years and my father was in Congress for 24 years and was the Speaker, and then my uncle, John, his brother, was in the Senate for 12 years. They all died in office. And this was 63 years that there was a Bankhead voting in both Houses.

I sound all ghostly, don't I, but it was also the first time up to now in the history of America that father and son served in both Houses at the same time, so I do not know why you all should make me so nervous. I have sat on everybody's knee up here since I was 2 years old.

I had better get to the important thing.

We are grateful for the opportunity to appear before you today and to call your attention to what we feel is an inadvertent gap in