UNIFORM DURATION

Actually, I consider paragraph 8 of section 2 far more important than paragraph 6. Paragraph 8 requires uniform duration of 39 weeks.

Our varying pattern of State unemployment compensation laws has many features some good and some bad. I believe paragraph 8 would substitute for this varying State pattern a uniformly bad national pattern.

Uniform duration can be justified only if the law restricts benefits to people who have been dependent upon wages for a living over a substantial period. Where an applicant for benefits has had substantial unemployment, we can assume that wages have been his source of livelihood.

But the State laws admit to eligibility many people who have not earned enough wages in their entire lifetimes to justify this assumption at all. Of all of the laws of the United States the longest period of employment required anywhere is 20 weeks. Most of the laws require much less than this for eligibility.

It does not seem unreasonable to me to require as a qualification for benefits that an individual have worked at least some time in his life as long as the benefit period.

Apparently the States have extended themselves in an effort to bring into the unemployment pattern as many of the working people as possible. This is apparent if you look at their eligibility requirements. Most of the States do not require any work period at all for benefits. This is another arrangement in which bookkeeping simplification has resulted in illogical laws. Six States require an applicant to be eligible to have worked during from 14 to 20 weeks in his base year. But the rest of the States have no time requirement at all. They require only a certain amount of earnings. These could be all in 1 day or, in some States, spread throughout the year, except for the fact that some of the States require a certain amount of earnings (from $112 to $300) within a single calendar quarter, and some of the States require that there be earnings in two different calendar quarters.

The States require that the applicant have earned some minimum amount in the base year in order to qualify. In 2 States this is less than $150; in 5 States less than $200; in 35 States the amount required is less than $400 a year.

It does not seem illogical to me that benefits based on such low qualifying requirements should be balanced at the other side of the scale by relating benefit duration to the time worked. If you look at the figures on benefit exhaustions you will see that in many of the States a great many people have exhausted their benefits before reaching the maximum duration. This should not be surprising. It simply indicates that these people have had so little attachment to the labor market, they have not accumulated eligibility for full duration. The provisions of these unemployment compensation laws are very closely interrelated. State legislatures have spent weeks, months, and years in getting them into what they view as a correct balance. The bill before you would overlook completely the low qualifying requirements of these States and simply say to the States, "If you give a man any benefit at all, you have to give him 39 weeks."

To make matters worse, the bill then limits the qualifying requirements, presumably to prevent the States from adopting rules more in keeping with a 39-week benefit duration.

I believe uniform duration is bad in principle, but if a State wants to provide for uniform duration then it should confine benefits to people who have had substantial employment. This bill almost makes this impossible because there are only 52 weeks in a year, and this only leaves 13 weeks in which to earn wages.

Some of you might feel that under this bill the case of an applicant with a very short work experience getting the full 39 weeks of benefits would be an exceptional case. I can assure you it would not. There are many seasonal industries in which work doesn't last more than about a quarter of the year, and in these industries we would have a regular pattern of one-fourth of work and three-fourths of benefits. But I am not thinking only of seasonal industries. I am thinking also of occasional workers-people in and out of the labor market. There are a great many of these and some of the cases are extreme. I have recently been told by an administrator of a case in which a single individual exhausted his benefits 17 times in a single benefit year.

EMPLOYMENT INCENTIVES

We look upon the unemployment compensation system as an incentive program. We believe firmly in the principle of experience rating, not only because we believe that the cost of unemployment insurance should be borne by the industries where the unemployment occurs, but because we believe this system should create the maximum incentive for employment stabilization.

We believe the system has had such an effect. When the unemployment laws were passed in the 1930's there was a widespread acceleration throughout industry of interest in employment stabilization. Many in business who had assumed that irregularity was something unavoidable began to wonder if it really was, and many found out it wasn't. Then came the war, and for a period of years only production was important. After the war intense interest in stabilization was resumed. This was reflected in other ways by the tremendous attendance of manufacturers at meetings on this subject.

For several years the National Association of Manufacturers conducted an extensive series of employment stabilization clinics throughout the United States. These clinics were held in one industrial area or another almost every day. The results have been something to be proud of. But now let me caution you again that there is little, if anything, in employment stabilization that affects the business cycle. This was clearly recognized in the beginning. By employment stabilization I don't mean any kind of a program like that can prevent a recession.

And I want to emphasize the fact that the bills before you are not concerned with the current economic situation. Labor Department estimates indicate that by fall unemployment will be down below the 5 percent that is usually considered "frictional unemployment" and the bills would not become effective that soon even if passed today.

I believe the unemployment compensation program should serve in normal times the purposes for which it was designed: To replace part of the wages lost through involuntary unemployment while people are looking for jobs and to allocate this cost to the employments where the unemployment occurs.

If you try to redesign this program to provide the kind of relief that would be necessary if we should have another 1932, you will find you have destroyed public confidence in unemployment compensation and will have wrecked the system that the Congress inaugurated in 1935 and that the States have carried on through the past quarter century.

For these reasons and many others, the National Association of Manufacturers opposes the federalization of unemployment compensation and the assumption by Congress of responsibility for fixing unemployment benefit standards.

The CHAIRMAN. Our next witness is Dr. Fernós. We are pleased to have the Delegate from Puerto Rico and you are recognized.

STATEMENT OF DR. ANTONIO FERNÓS-ISERN, RESIDENT
COMMISSIONER OF PUERTO RICO

Dr. FERNÓS-ISERN. Thank you, Mr. Mills.

Mr. Chairman, my name is Dr. Antonio Fernós-Isern, and I am the Resident Commissioner of Puerto Rico.

I thank the committee for the opportunity to appear and express my views on H.R. 2872, which contains provisions of importance to Puerto Rico. The U.S. Department of Labor has consistently recommended the enactment of legislation to extend the unemployment compensation program to Puerto Rico along the lines of H.R. 2872. The Department has said that such legislation, which has also been recommended by the President, is a part of the legislative program of the U.S. Department of Labor.

It should be noted that the enactment of H.R. 2872 would complete the Federal-State system of unemployment security in Puerto Rico. The Wagner-Peyser Act was extended to the Commonwealth of

Puerto Rico in 1950 within that objective. H.R. 2872 would also complete the extension of all the social security programs to Puerto Rico.

The maternal- and child-welfare program was extended in 1940. The program for old-age assistance, aid to dependent children, aid to the blind, and aid to the permanently disabled were extended in 1950. In 1951 the Old Age and Survivors Insurance Act was extended to Puerto Rico.

The U.S. Employment Service also operates in Puerto Rico. There is also a program of unemployment compensation which covers Federal employees in the island. It is to be noted that the Commonwealth government has enacted its own unemployment insurance law and that the machinery for implementing the extension of the Federal program is currently available.

Under the Commonwealth law, deductions are made for unemployment insurance, and unemployment payments under the local law commenced in January of this year. The extension of the Federal program is needed to supplement the local program.

For instance, unless the unemployment compensation system of Puerto Rico is incorporated into the Federal system, Puerto Rico will continue to be ineligible to receive the benefit of the emergency extension of unemployment benefits recently made available to the States as an antirecession measure.

It is to be noted that until very recently Puerto Rico had traditionally been an agricultural community. Moreover, it had been a one-crop economy with the main crop being sugar. Because of the seasonal character of employment in these agricultural pursuits, the small size of the island, and its dense population, a very serious chronic unemployment situation developed.

In order to create employment, Puerto Rico embarked upon what has been termed "Operation Bootstrap," a program of self-help which has resulted in the establishment of new industries in Puerto Rico. These industries have resulted in the creation of many jobs and it is hoped that more industries may be opened in Puerto Rico to give greater employment security to more and more people and promote higher levels of living.

You may be sure the Commonwealth is making every effort within its means and abilities to provide greater employment security. It is felt, however, that the fullest measure of protection for the workers can be derived if the Commonwealth program of unemployment insurance is incorporated into the Federal system.

A very important consideration concerning the desirability of incorporating the Federal and Commonwealth plans is the great number of Puerto Rican workers who travel between Puerto Rico and the mainland during the period of their eligibility.

In Puerto Rico they are now eligible for benefits under the Commonwealth law, but not under the Federal. In the mainland they are eligible for the Federal benefits, but their connection with the Commonwealth system is lost. By integrating the Puerto Rico system to the Federal, such undesirable situations would be taken care of.

In summary, the desirability and feasibility of meeting serious social problems in Puerto Rico has long been recognized by Congress and is reflected in its inclusion in a number of remedial statutes, such

as the Wagner-Peyser Act and the various titles of the Social Security Act.

Unemployment is a problem in Puerto Rico and the unemployed should have protection through an overall nationwide insurancce program.

The unemployment insurance program in Puerto Rico was started after careful study and preparation in which officials of the Commonwealth had frequent conferences with the staff members of the Department of Labor in their efforts to develop a financially sound and acceptable plan.

As with the States, this program could be made more effective by welding it to the Federal program of unemployment insurance. Thank you, Mr. Chairman.

The CHAIRMAN. Doctor, we appreciate your coming to the committee and discussing again your desire to have the unemployment compensation program extended to Puerto Rico. It is our understanding that your local legislature has already placed into operation a program of unemployment compensation and you are now ready to be taken into the Federal-State system.

Dr. FERNÓS-ISERN. That is correct, Mr. Chairman.

The CHAIRMAN. Thank you, sir. We appreciate your coming to the committee.

Mr. Baker.

Mr. BAKER. Do you know what benefits and duration you have in Puerto Rico?

Dr. FERNÓS-ISERN. That in detail I am not familiar with, but I can get it.

The CHAIRMAN. If you will put it in the record at this point, it will be helpful.

Dr. FERNÓS-ISERN. I will do that.

The CHAIRMAN. Without objection, that material will be included in the record.

(Information referred to follows:)

Mr. LEO IRWIN,

CONGRESS OF THE UNITED STATES,

HOUSE OF REPRESENTATIVES, Washington, D.C., April 20, 1959.

Chief Clerk, House Committee on Ways and Means,
House of Representatives, Washington, D.C.

DEAR MR. IRWIN: In connection with my testimony on H.R. 2872, the committee indicated its desire to have more information on the operation of the unemployment compensation program of the Commonwealth of Puerto Rico. I have received from Mr. Fernando Sierra Berdecía, Secretary of Labor of the Commonwealth of Puerto Rico, information along these lines which I hope will serve the needs of the committee. If more information is desired, I should be happy to furnish it.

Under the Puerto Rico unemployment compensation program, the tax rate is 3 percent on wages up to $3,000 per calendar year, of which 2.7 percent is for benefits and 0.3 percent is for administration.

As of December 31, 1958, the balance in the trust fund was $13,800,000 for benefits. The total balance as of March 31, 1959, was $15,800,000. Benefits paid during January 1959 were $23,017; in February $149,426; and in March $169,854.

Initial claims in January 1959 were 7,438; in February 5,342; and in March 2,536.

The number of weeks claimed in January 1959, were 7,617; in February 25,330; and in March 20,382.

The estimated insured employment rate in February 1959, was 2.6 percent and in March 1.9 percent.

The estimated number of workers covered is 240,000. The estimated number of employers is 6,128.

The benefit rate during the first quarter of 1959, based on the fourth quarter of the 1958 taxable payroll, was 0.5 percent.

Sincerely,

Dr. FERNÓS-ISERN. Thank you very much.

A. FERNÓS-ISERN, Resident Commissioner.

The CHAIRMAN. Our next witness is Judge Waxter.

Judge Waxter, we are pleased to have you before the committee again. For the purposes of this record, will you identify yourself?

STATEMENT OF THOMAS J. S. WAXTER, REPRESENTING THE AMERICAN PUBLIC WELFARE ASSOCIATION

Mr. WAXTER. My name is Thomas J. S. Waxter. I am the Director of the Maryland State Department of Public Welfare. I am also chairman of the National Council of State Public Welfare Administrators and a member of the board of directors of the American Public Welfare Association, which is the organization I am representing here today.

I appreciate the opportunity to appear before your committee to present certain observations concerning proposals for Federal legislation dealing with unemployment.

The American Public Welfare Association is the national organization of local and State public welfare departments and of individuals engaged in public welfare at all levels of government. Its membership includes State and local welfare administrators, board members, and welfare workers from every jurisdiction.

Within our association are a number of national councils, including a council representing all of the State administrators of public welfare. We have five committees on a national basis concerned with the problems of aging, medical care, services to children, social-work education, and personnel and welfare policy on which our membership is represented and through which we are able to obtain a cross section of views on how public welfare is operating to meet the needs of people in their home communities.

We have six regional conferences each year and a nationwide meeting in alternate years at which we discuss current issues in social security and obtain the views of our members throughout the country. As a result of the discussions in these groups, our board of directors of 27 persons, representing all parts of the country, adopts official policy positions on issues of current significance. In testifying today, I am presenting to you the views embodied in our policy statements approved by our board of directors.

The agencies and individuals making up the membership of the American Public Welfare Association are charged with the responsibility for administering the various assistance and service programs in public welfare under titles I, IV, V, X, and XIV of the Social Security Act. In our membership are the people who have the responsibility for day-to-day administration of the programs for the