Most unemployment today is beyond the control of the individual. While we believe that the extent of unemployment can and should be controlled much more effectively than it is today, even in the most stable and prosperous economy, if it is a free economy as we know it, there will be a certain irreducible level of unemployment at all times. In a free, dynamic, growing economy, there will be continuous change in consumer tastes and needs, there will be a continuous development of new products or services which may render old products or services obsolete, there will be a steady influx of new business enterprises accompanied by a weeding out of inefficiently managed firms, there will be continuous changes in markets and in sources of raw materials or power, there will be a thousand and one forces which will cause some business enterprises to decline, to reduce their working force temporarily or permanently, or even to close their doors. In many cases, as we have found already under the impact of automation, and as we shall find to an even greater extent with the further development of industrial atomic energy and eventually solar energy, there have been and will continue to be large-scale shifts of industry from one location to another.

These changes are inescapable features of our economy. It is essential to the economic well-being of each one of us that our economy should respond to changes in consumer needs, that existing products should be replaced by new and better ones, that inefficient companies should give way to efficient ones. that industries should be located in those areas where they can best fulfill their economic function. All of these things should help to contribute to a general higher standard of living. But all of them involve at least temporary unemployment of workers, and in some cases there may be unemployment over relatively long periods before new employment opportunities open up for all the workers affected.

For all of us, economic change and dynamism produces benefits in which we share. For some of us, however, at any given time, it produces unemployment. In the absence of an adequate unemployment insurance system, the cost of obtaining the benefits of economic change fall with crushing force on the families of those whose jobs are eliminated in the process. It is not only illogical that the costs should fall with crushing weight on those haphazardly selected by blind economic forces, while the benefits are shared by all-it is immoral.

It is a grievous injustice to an unemployed worker, when we are benefiting from the forces that caused his unemployment, to require him to accept unemployment compensation insufficient to maintain a desirable living standard for himself and his family, to limit such compensation to periods that actual experience has proved to be too short in a substantial proportion of cases, or to refuse him protection altogether because he has failed to comply with some technical provision of the law or has worked in employment not covered by the law. Yet at this very moment, some millions of Americans, living in every State of the Union, men and women who have contributed their sweat and toil to the building of our country and the creation of our standard of living, are suffering from such injustice.

The establishment of adequate minimum standards of unemployment compensation throughout the country is not only a matter of justice, but of economic commonsense. One of the most frequent subjects of comment with respect to the current recession, both by businessmen and economists alike, is the cushioning effect of various social security measures. Unemployment compen

sation in particular, by helping to maintain some purchasing power in the hands of unemployed workers, slowed down the rate of decline in the economy and speeded up the rate of recovery. In round figures, it is estimated that even our present inadequate unemployment compensation system contributed some $4 billion in much-needed purchasing power during the 12-month period from October 1957 to October 1958.

An adequate unemployment compensation system is one of the most effective of antirecession devices. It has been referred to by President Eisenhower as "our first line of defense." If it is financed with sufficient reserves it is doubly countercyclical-it not only puts dollars into the pockets of consumers when they need them most, and when the economy most needs their added spending, but it draws those dollars off and puts them into the reserves for the most part in periods of buoyancy when they can best be spared.

Our present unemployment compensation system, however, is only doing a part of the job it should do in adding strength and stability to the economy, because

it provides nothing at all to far too many jobless workers, not enough to most of the rest of them, and frequently for too short a time. Simply from the point of view of assisting recovery from a recession, it is the height of absurdity to allow people who are not working because they are unable to find jobs to be deprived of their purchasing power. It is equally absurd to limit that needed buying power to workers in certain arbitrarily determined categories of employment, to subject it to unreasonable eligibility requirements, or to establish it at levels far below the amount required to maintain the jobless and their families in health and decency. Such so-called economies are not made at the expense of the unemployed and their families alone, but at the expense of the whole community and the Nation, whose restoration to economic health depends in considerable part on the extent to which these families retain the ability to continue to purchase goods and services.

When we consider the consequences of those policies which we adopt today, we must not confine our view to our own country. Hunger and want such as far too many American families are suffering today are in themselves proper subjects of deep concern for us, but our concern must be sharpened by the fact that they are also material for headlines, not only in Moscow and Peiping, not only in Warsaw and Bucharest and Prague, but in New Delhi, Jakarta, and Accra-in all the uncommitted nations of the world-and for that matter in the newspapers of London, Paris, Rome, and all the other cities of our friends.

America's moral leadership in the world is only as strong as our ability to translate the human values for which we stand into practical fulfillment. America's moral leadership is weakened every time we fail to meet our moral obligations, to our own people or to others. Communist propagandists have already convinced many of their own people, behind the Iron Curtain, that America is a land of misery, where masses of downtrodden people today live the sort of lives that too many of them actually did live in the hungry thirties. They are making every possible effort to spread the same false and poisoned picture of America among still free peoples whom they hope to subvert, and especially among those who are still just emerging from the long night of colonialism. Every true case of hunger, want, misery, and economic insecurity that we permit to exist, provides a potential example for their anti-American propaganda. The one sure way in which we can convince the uncommitted peoples that our system really can provide security and decency and dignity for everyone is to make it so. We have not yet fully succeeded. But the legislation we are supporting here today, by insuring more nearly adequate levels of security for unemployed workers and their families across our country, will help us to take another long step in that direstion.

The basic issue before this committee and the Congress is whether the Federal interest in the unemployment compensation program is sufficient to warrant the Federal Government having some responsibility for the determination of policies regarding the amount, duration, and eligibility for benefits.

I believe that it is.

Unemployment compensation in this country was the direct result of Federal action. It was the passage of the Social Security Act of 1935 by the Congress that resulted in the enactment of State unemployment compensation laws. In passing the Social Security Act, it is clear that the Congress intended to accomplish more than the enactment of mere token unemployment compensation laws. While standards regarding the benefit amount and duration were not set forth in the original act, Congress was clearly thinking of unemployment compensation as a program to pay reasonable benefits to the unemployed. It ceded to the States access to a 2.7 percent payroll tax. In return, it expected a system that would give relief to the unemployed.

This was recognized by the Supreme Court of the United States in upholding the constitutionality of the unemployment compensation provisions of the Social Security Act. The Court held that the basis of the law and the test of its validity was the public purpose of relieving unemployment. At the same time. it recognized that the mere enactment of legislative language by a State was not sufficient to accomplish this purpose. The Court, through Justice Cardozo stated: "An unemployment law framed in such a way that the unemployed which look to it will be deprived of reasonable protection is one in name and nothing more."

At one and the same time, this recession proves the value of an unemployment compensation system in general and the failure of the one we have in particular to meet our individual and social needs. Our unemployment insurance program

was intended to be an effective weapon for meeting basic human needs, stabilizing our economy, and enabling us to meet the economic challenge of the 20th century. It is not meeting our needs today because it is inadequate in terms of benefit amounts, duration, and coverage and it is inadequate in terms of qualification provisions for those who are covered. It will become adequate, however, only if the Congress exercise its responsibility and provides the necessary stimulus for expanding coverage, raising benefits, increasing duration, and making other improvements.

1. Weekly benefits are inadequate

With regard to the amount of benefits there are a whole battery of tests which expose the inadequacy of our present laws. A recent study by the Department of Labor "Adequacy of Benefits Under Unemployment Insurance," a staff report prepared for the Steering Committee of the Federal Advisory Council, October 1958, indicates that there is substantial agreement that, at the minimum, benefits should "replace enough of the current wage loss of unemployed workers who meet the program's requirements so that most such workers do not have to turn to other programs for aid, under normal or recession conditions." Our present system in a long way from meeting this standard. The average benefit for the Nation as a whole in December 1958, was $30.50. Even in Virginia, where penny pinching relief allowances are the rule, the Arlington general relief budget for a family of four is $44 a week. No wonder a substantial number of the unemployed who were able to meet the requirements of State unemployment compensation laws have had to depend for additional assistance upon local relief agencies and the Federal surplus food program.

General relief roles of local governments increased 30 percent from October 1957 to October 1958 and in December of 1958, over 5 million people were receiving butter, flour, and other staples from the Federal Government. In every State of the Union, surplus foods are an important part of the diet of tens of thousands of families and in Detroit alone, it is estimated that a thousand people a day line up at the welfare department's surplus commodities division to wait for their food allotment.

Another general standard of adequacy which is widely accepted calls for benefits high enough to permit workers "to maintain a reasonably high reservation price while seeking other work or waiting for reemployment at their old job." The Department of Labor study referred to above, says, "The objective of the employment security program is not to secure the speediest possible reemployment of workers at whatever wages and whatever skills they can find jobs. One of the functions of unemployment insurance is to give workers short-run carrying power so that they may be able to preserve, to the best of their ability, their skills and their earning power. This is to the advantage not only of the worker and his family, but of the Nation's productivity as well." (P. 11.)

Does our present system of unemployment compensation meet this standard? An article in the New York Times of March 17, which presented a study of the unemployed, contains the answer. Says the Times: "Confronted with the necessity for going on relief, most workers will grab a job at half or less than the standard they used to enjoy. And there are plenty of employers ready to capitalize on the preference for staying independent of a Government handout. In small machine shops, dry goods warehouses and other small businesses, the calls are for work at only a few cents above the legal minimum of $1 an hour. Only in the large standardized industries and those under stringent union policing is there no move to pull down pay scales or trim fringe benefits."

When the adequacy of our present system is tested by still another standard, it is again found wanting.

Unemployment compensation laws when originally enacted, were intended to provide an unemployed worker with 50 percent of the wage loss he suffered during a week of total unemployment. A weekly benefit of this amount was assumed by the Committee on Economic Security in 1935. It was the intent of the original unemployment compensation laws enacted by the States. It has been repeatedly endorsed by President Eisenhower. It is the weekly benefit which would be produced by the benefit formula in most State laws today if it were not for the limitation imposed by the low maximum weekly benefit amounts. For example a State law may provide a weekly benefit equivalent to one-half of a worker's prior weekly wage with a maximum weekly benefit of $30. Under such a law all workers earning up to $60 would qualify for a weekly benefit of one-half of their prior wages. A worker with a prior weekly wage of $60 would qualify for a weekly benefit of $30 or 50 percent of his weekly wage. An individual worker

with a prior weekly wage of $85-which was about the average weekly wage of the workers covered by all the State unemployment compensation laws in 1957would likewise be entitled to a bentfit of $30 but in his case the weekly benefit amount would equal only 35 percent of his prior weekly wage.

While the imposition of a maximum weekly benefit may be justified on the ground that, in the absence of a maximum, the highest paid workers would draw an undue proportion of unemployment funds, it has also been argued during these hearings that higher maximums than those fixed by State legislatures will make unemployment too attractive. In 1946, a report entitled "Issues in Social Security," which was made to the House Ways and Means Committee by the committee's social security technical staff, considered this argument and concluded that it was "open to serious question." It was pointed out in the report (p. 389), that it was illogical to assume that a worker who received less than 50 percent of his weekly wage because of the fixed dollar maximum would have his "will to work" dulled by a weekly benefit of one-half of his weekly wage while the low-paid worker who now receives one-half of his weekly wage is not so affected. Stated another way, Is the worker whose weekly wage is $90 and who would when receiving a benefit of $45 still suffer a wage loss of $45, be less likely to seek to recover such lost wages than the worker whose weekly wage is $50 and who suffers a wage loss of only $25 when unemployed?

When one takes into account that an unemployed worker loses in addition to his cash wage, his pension credits, his sickness and accident, health and life insurance coverage, even a benefit of 50 percent of his cash wage loss will not compensate him or 51 percent of his weekly earnings as an employee.

Just what the weekly maximum should be is, of course, a matter of judgment. There are no criteria which permit precise determination of what the maximum benefit should be. Yet there are certain reasonable yardsticks which can be applied. The 1946 report stated several: First, that the maximum benefit must be high enough so as not to require undue reductions in the living standards of those subject to it. Second, that it be adjusted to the rise and fall in wage rates. Finally, that it not be so low as to produce a flat or uniform weekly benefit for a substantial number of unemployed workers.

President Eisenhower stated these same criteria another way. Beginning with his Economic Report of 1954 and in each succeeding Economic Report, he urged the States to increase their maximum weekly benefits so that the great majority of covered workers would be able to receive 50 percent of their gross weekly wage when unemployed.

Measured against these yardsticks, the maximum benefits under State unemployment compensation laws are too low. State law maximums have steadily deteriorated since 1939, when unemployment compensation benefits were first payable. In every single State the maximum weekly benefit on January 1, 1959, was a smaller percentage of the average weekly wages in such State than it was in 1939.

In 1939, in no State (except Alaska) was the maximum benefit less than 50 percent of the average weekly wage. On January 1, 1959, the maximum weekly benefit was less than 50 percent of the average weekly wage in 45 of the 50 States and the District of Columbia. In 1939, in 34 States the maximum was more than 60 percent of the average weekly wage. Today in not one single State does the maximum equal that percentage.

As a result of the failure of the 1939 maximums to keep pace with the rising wage levels in the States, more and more unemployed workers are drawing the maximum weekly benefits and fewer and fewer are receiving benefits of 50 percent of their weekly wages when unemployed.

In the period from January to September 1958, 53 percent of the unemployed workers who established a benefit year were eligible for the maximum basic weekly benefit amount. In 11 of the States more than two-thirds of the unemployed workers received the maximum weekly benefits; and almost all of these who received the maximum benefit received less than 50 percent of their weekly wages when unemployed. Yet a benefit of 50 percent was the standard set in 1935. It was the benefit level which the President has repeatedly urged on the States since 1954.

To accomplish this goal of providing benefits of 50 percent, the maximum weekly benefit must be substantially higher than 50 percent of the average weekly wage. This is necessary, since in a normal distribution of wages there are likely to be 50 percent of the workers earning more than the average weekly wage. It was for this reason that the Secretary of Labor and the Federal Advisory Council

on Employment Security have recommended that the maximum weekly benefit in a State should be raised to from 60 to 66% percent of the average weekly wage in the State in order that the great majority of workers be eligible for a weekly benefit of at least 50 percent of their own weekly wage. HR. 3547 and the other bills pending before this committee would accomplish this objective. It should be clearly understood that fixing the maximum weekly benefit at 66% percent of the average weekly wage does not mean that any claimant will receive 66% percent of his own weekly wage. No one need receive more than 50 percent of his own weekly wage.

The effect of the higher maximum is merely to let the State benefit formulaof 50 percent of claimant's weekly wage-operate over a wider range. For example if the new maximum weekly benefit is $50, the only unemployed who will receive the new weekly maximum benefit are those earning more than $100 a week. A maximum weekly benefit of 66% percent of the average weekly wage will merely assure that the unemployment-compensation program is once again a wage-related program rather than the fixed-benefit program which has resulted from the low maximum benefits in so many States.

Further, the provisions of H.R. 3547 and similar bills state the maximum benefit as a percentage of the State's average weekly wage rather than as a fixed dollar amount. This will result in automatic increases or decreases as prevailing wage levels change in each State. It will eliminate for the future the deterioration in benefit levels which has taken place since 1939 because of the failure of maximum weekly benefits to keep pace with rising wages.

Moreover, the gearing of a particular State's maximum weekly benefit to the average weekly wage in that State eliminates the bug-a-boo of uniformity that has been injected into every discussion by the opponents of Federal action in the field of unemployment compensation. H.R. 3547 completely recognizes the differences between State economies without permitting the States to accentuate these differences through the threat of substandard unemployment compensation payments.

The inadequacy of weekly benefit amounts paid under State laws is borne out by several State studies which have been made of the income and expenditure of unemployment compensation claimants. The average weekly benefit paid to the unemployed head of a four-person family in these studies represented only 37.5 to 47.5 percent of weekly expenditures during unemployment. In fact, the unemployment benefits covered only between 60 to 78 percent of the weekly expenditures for the basic essentials of food, shelter, utilities, and medical carewithout taking into account such other necessary expenses as household operation and transportation. Yet 75 percent or more of these claimants were entitled to the maximum weekly benefits provided under the State law.

The findings of these surveys are borne out by a more recent study entitled "Significant Findings on the Impact of the 1957-58 Recession in Relation to Unemployment Insurance," by William Haber, Fedele F. Fauri, and Wilbur J. Cohen, of the University of Michigan. These findings, which are based on a nationwide sampling basis conducted by the Survey Research Center of the University of Michigan, showed that unemployment insurance provided insufficient income to 85 percent of those families whose head received unemployment insurance during the entire period of his unemployment.

The seriousness of these inadequacies is emphasized by the study's finding that 18 percent of all families in the Nation had one or more family members unemployed during the 12-month period prior to October 1958. And 38 percent of all families reported either unemployment, shorter hours, or some other setback to their financial situation. Yet inadequate as the weekly benefits were, about 36 percent of all unemployed individuals did not receive any unemployment benefits.

As a result of all these factors, this study found that "unemployment insurance benefits replaced only about 20 to 25 percent of the wage loss incurred by unemployed persons during the recession."

2. Benefits are paid for too short a period

The inadequacy of the duration of benefits is also clear. In many States some unemployed workers may draw no more than 10 or 12 weeks of benefits. For some the period may be as low as 5 or 6 weeks. As a result, in 1958 more than 2 million workers exhausted their State unemployment compensation benefits-after an average duration of 20 weeksand were still out of work. Even in 1956 and 1957, which are considered to