ployer will have a vacation; he will have a 1-week vacation in which he pays the people double pay. Then he will have a week layoff, and they draw unemployment insurance. I know of a case of a very responsible company in Boston where, when executives retire, they are called in by the comptroller of the company and told, "Now, when you retire and you go on a pension, we want you to go down and draw your unemployment benefits." There is a lot of skullduggery in this program from both sides. I have some figures here some place of the net balances in New York State and they run into $40, $50 million a year. That is why employers throughout the United States in many States have urged and insisted on higher tax rates. We have 17 States now I believe where the tax rates run above 2.7 percent. As I said before, I had something to do with the original legislation in Missouri, and we started out with a 3.6 percent top rate in Missouri when most of the States were taking 2.7 percent as required by the Federal Government. Missouri has now a law in which they will go to 412 percent. Generally, employers believe that the trouble with most laws is that they do not allow enough elbow room for experience rating to operate. I said most laws. I am not trying to say in any State that they ought to change their law. There may be States in which 0 to 2.7 or 0.1 to 2.7 is an adequate range, but in a lot of places that is not an adequate range to me of the real experience needed for an experience rating. By contrast there are businesses where workmen's compensation rates have gone as high as 50 percent of payroll. That is really experience rating. Whenever you pay a man a dollar of wages and you pay a half-dollar in insurance against accident, that is experience rating. I am not advocating that. Mr. ALGER. I realize this is a lengthy subject, but those colleagues that did not read this statement I think would be very interested in your statement, on pages 15 and 16, in which you show the fault is equally placed between employees in many instances and employers. There is nobody pure in the deal. Both employees and employers without incentive rating take advantage of the system, and the present bill proposed before us will kill experience rating. I think that this would be an area of study for us, these employee and employer malpractices, whether it be red balance or these other things you speak of. You have done something in this statement that I do not believe anyone else has done yet, Mr. Compton, and I want to refer to it briefly. On the top of page 15 you define for us the measure of worker incentive. We have been talking about employer incentive and experience rating. Now you come along with something, I think, while we have touched on, has not been said quite so well. Here is what you said: The measure of the work incentive is not the wage offered; it is the difference between the unemployment benefit and the take-home pay after taxes, payroll deductions, and other costs of employment. And under present laws this difference is mighty small in many cases. The point that I think you make correct me if I am wrong-is that when a man's unemployment compensation comes so close to his takehome wages, he loses any incentive to go to work. So he may not make himself available or will do what he can to dodge work, if he is getting almost as much money for not working. Mr. COMPTON. Yes, sir. Mr. ALGER. I certainly appreciate that, and I think again this committee would do well to look into that practice. I want to ask you something else. On this same page of your testimony, you relate to something Mr. Meany said. I will go back to his transcript and I want to read what Mr. Meany said. I am relating this now to page 15 of your statement when you say: Now, Mr. Meany has told you how some employers, to save a little on their tax rates, will oppose all claims. I will freely admit that some employers have been guilty of every kind of skulduggery. We cannot blame you for being honest about it in your statement. Now, this is what Mr. Meany said: This one State, Ohio, employers have specially organized the business of challenging the workers' rights to benefits. Employers hire outside "service" firms to contest all claims. These firms charge a fee based on their success in defeating employee appeals. That is a pretty damaging statement against employers. Would you care to comment on that? Mr. COMPTON. I don't know about those organizations. I never heard of them before. However, I would comment this way: Any time you appeal an unemployment compensation claim, you go to the administrator and he decides it, and bear in mind I believe most of these laws provide that they shall be interpreted liberally in favor of the employee. At least they used to in the old days. I think that is the general trend of interpretation. You may go to an appeal board if one party or the other takes an appeal. I think it is also normal in these laws that once you have gone to the appeal board and they have decided in favor of the employee they pay benefits during the time you appeal the case to court-I am not sure about that, but I think that is the normal practice. There is no employer who can deny anybody benefits under these plans, and they are all adjudicated by the administrators and I think it is perfectly safe to say that the administration throughout the United States generally favors the employees in these cases. Mr. ALGER. Would you say that was an excessive statement on Mr. Meany's part? Mr. COMPTON. There may be such an organization out there. I can't speak for all employers, but I am sure that most employers, when they have a layoff, want their people to get the benefits. There is no question about that. There may be employers, as I said before, whose only claims are voluntary quits. I have seen figures of big plants that have gone for a year and 2 years where the only claims made are voluntary quits, with the exception of a scattering of discharges and a few people who retire on pensions. Mr. ALGER. Thank you, Mr. Compton. The CHAIRMAN. Mr. Forand will inquire, Mr. Compton. Mr. FORAND. Mr. Compton, at the outset of your statement you said that you were speaking for the National Association of Manufacturers and then that you were speaking on your own. Was I correct in understanding that? Mr. COMPTON. Yes, sir. I said some of the things that I say will inevitably be my own opinions because the association hasn't formally gone into all these details. Mr. FORAND. I thought I understood that proposal, but the point I would like to have you clear up for me is something that you said to the chairman, and you have repeated it in talking with the other members, relative to the many abuses that exist under the system. Your organization is opposed to the Federal standards applying to remedy such abuses. Was that your own statement, or is that the position of your organization? Mr. COMPTON. That is the position of our organization. We are opposed to Federal standards on principle. The CHAIRMAN. Mr. Mason. Mr. MASON. Just one question. In connection with your statement that you feel that today beneficiaries are getting about 50 percent of their take-home pay, I imagine that statement is based upon the fact that back in 1935, when exemptions of $1,000 for single men and $2,500 for married men were in effect, 95 percent or more of the unemployed paid no Federal tax. Nowadays they have gone up in wages four times and we have lowered the exemptions to $600 for a single man or $1,200 for a married man, and now taxes amount to something like 20 percent, and unemployment benefits are not taxed, but their wages are, and so their take-home pay is lowered by about 20 per cent. Is that the basis of your statement? Mr. COMPTON. That is right. I don't know whether it would be a full 20 percent or not. If you care to go into it, you will find in the Monthly Labor Review of March 1959, page 346-I am not a statistician but somebody gave me this table C-2, which gives the average weekly earnings, gross and net spendable of production workers in manufacturing industries-it shows the 1957 figure of gross average weekly earnings in current dollars is $82.74 and the average net spendable earnings is $67.85 for a worker with no dependents, and $75.26 for a worker with three dependents. Mr. MASON. I was just interested in the basis of the statement. Mr. MASON. That is all. The CHAIRMAN. Are there any further questions of Mr. Compton? Mr. COMPTON. Mr. Chairman, there is one other thing. I hesitate to bring this up, but Mr. Meany questioned the NAM's record in the field of safety and I have taken the trouble to look up the record. I have a copy of it here which I would be glad either to give you or drop in the record, as you wish. The CHAIRMAN. Without objection, that will be made a part of the record at this point. (The information referred to follows :) SOME EARLY ACTIVITIES OF NAM IN INDUSTRIAL SAFETY AND WORKMEN'S COMPENSATION "In the United States the National Association of Manufacturers was one of the early sponsors of workmen's compensation legislation and advocated it as the exclusive procedure in the case of industrial accidents before the American Federation of Labor took such action."-The American Individual Enterprise System, vol. I, McGraw-Hill, 1946. "There has also been a very great reduction in industrial accidents. This trend also was attributed to employers (particularly the National Association of Manufacturers, the National Metal Trades Association, and the National Founders Association) by the U.S. Industrial Relations Commission which reported in 1915."-Ibid. In 1909 the NAM established a special committee to explore the whole problem of industrial accidents and safety. The NAM surveyed more than 25,000 employers and met with State commissioners, legislators, lawyers, insurance officials, and other experts, both here and abroad, in preparation for launching nationwide campaign to reduce and prevent occupational injuries in the plant. In 1912 the NAM advanced programs for workmen's compensation, group health, life insurance, and private security plans, likewise sought legislation for the enforcement of recommended plans. Note: Advocacy of such laws preceded AFL action by 2 years. In 1912 the NAM provided members with accident prevention programs spearheaded by the now famous "Safety First" slogan. In 1913 a National Association of Manufacturers Committee on Accident Prevention and Workmen's Compensation declared in part: "Only by strong and vigorous action (on the part of all employers) can we hope to attain the advanced position which we have taken in the movement of safeguarding toilers' lives and limbs and compensating equitably those workers who are injured in the pursuit of their duty without their fault." There was national recognition of NAM's leadership on this score, as evidenced by the fact that in 1915 President Wilson's Committee on Industrial Relations reported: "Three great private organizations are doing as much, or more, for safety than all the State and Federal Governments combined." The National Association of Manufacturers was one of these. Intensely interested in pushing forward constructive work in the field of industrial safety, the National Association of Manufacturers was one of the organizations instrumental in the establishment of the National Safety Council, cooperating in its activities and working closely to attain the objective of greater safety and improved working conditions for American men and women. The CHAIRMAN. Mr. Compton, we thank you, sir, for coming to the committee, and, as I have said earlier, I have always considered you among those most eminently qualified in this field. We appreciate your very frank discussion and your answers to our questions as well as your opening statement. Mr. COMPTON. I certainly thank you for the privilege of being with SUPPLEMENTARY STATEMENT OF R. T. COMPTON FOR NATIONAL ASSOCIATION OF MANUFACTURERS The principal policy statement of the National Association of Manufacturers on this subject is as follows:) Any approach to the problems of temporary, involuntary, job-connected unemployment should aim to remove its causes rather than simply to allay its symptoms. There is clear evidence of the need for much closer adherence to the objectives for which the unemployment compensation plan originally was conceived. The National Association of Manufacturers believes that these principles must be followed if any unemployment compensation plan is to work successfully in the free economy: 1. The unemployment compensation program must operate in the public interest, and not in behalf of any special group, and it must be so interpreted and administered. It must be continuously reappraised in the public interest; 2. Payments made under the program must be limited strictly to compensation for periods of temporary involuntary job-connected unemployment. Unemployment of a longer duration is outside the scope of a program to be paid for from reserves accumulated by current charges to the cost of business operations; 3. The program will fail to promote economic progress and become a mere palliative unless it has as a primary purpose the stabilization of employment. The program should support employers in their efforts to stabilize employment; 4. The program should be designed to facilitate maximum employer interest and participation in its economical and efficient administration. This cannot be accomplished without effective employer cooperation with administrative agencies to provide information necessary for the proper determination of claims; 5. The program should achieve equitable allocation of the costs of temporary unemployment. The cost of such unemployment benefits should be treated as a cost of those products and services, the production of which involves such unemployment; 6. All benefits should be related to earnings and service resulting from previous employment and constitute a partial indemnity for loss of wages. Adjusting the amount of benefits on the basis of presumed or established "needs" is inconsistent with the purposes and philosophy of the program and must not be permitted. Benefits should be limited to a basic minimum layer of protection and must not become an incentive to remain unemployed or to remain away from areas where jobs are available. Only those individuals genuinely part of the labor force should be eligible to receive benefits. Unemployment resulting from non-job-connected causes should not be compensated under this program. 7. The program should be soundly financed using the experience-rating provisions most applicable to the needs and circumstances of each individual State. The purposes of sound experience rating are to distribute costs fairly and equitably, to provide incentives for employment stabilization and to facilitate the necessary active interest of employers in the program. Experience rating must be the basis for any unemployment compensation tax policy. The objective should be for the States to have control over all money paid by employers as payroll taxes. Such taxation should be levied solely for the purpose of securing the objectives of this program. While it is the responsibility of each State to finance its own system on a sound basis, nevertheless temporary emergencies may arise in State unemployment insurance systems, and it may be desirable to provide a pooled catastrohpe reserve fund of limited size from which an individual State could borrow during a temporary emergency, in which case specific provisions should be made for the repayment of such loans under definite terms which would encourage the State to place its own system on a sound financial basis as soon as possible. 8. The administration of the program should be equitable, unbiased, and efficient. Regulations governing the program must be formulated, interpreted, and operated in an objective and impartial manner. The purpose should be the prompt and full payment of benefits to claimants and the payment only to those who qualify according to the purpose and the letter of the law; 9. The program should emphasize the employee's responsibility to remain at productive work and if unemployed, to actively seek and accept work; 10. The program must place full reliance upon the States for determination and administration of all features of their respective programs. Federal legislative and administrative action already has exceeded in some areas the proper scope of Federal action; further Federal encroachment in unemployment compensation will jeopardize any hope of developing a sound system. Experimentation in the development of sound systems can be carried out at the State level, which experimentation would be neither possible nor desirable at the Federal level. Nothing should be done which will result in increased control over employees or employers by the Central Government under the guise of unemployment compensation; neither should the Central Government be permitted or encouraged through the program to preempt jurisdiction of State or local government functions. In February 1958, our board of directors approved the following additional statement with respect to job-stabilization financing: State-administered unemployment compensation systems should provide incentives to reduce unemployment. They should be financed using experience |