It is $55 in Michigan but it will likely go to $57 in the current legislature. They must determine how to permit the individual to meet his living costs, whatever they are, and at the same time offer an inducement to seek new work.

The fifth point I would like to stress is that in our judgment the bills would not equalize the cost of doing business in different States. It has been suggested by proponents of the measure that Federal standards would somehow equalize the tax burdens of companies doing business in the high-benefit, high-tax States like Michigan. Actually I would suggest it would work the other way around, because to provide the same level of benefits would cost a great deal more in Michigan than in South Carolina, for example, or some of the other States in the South with lower benefits and lower tax rates, because of two reasons:

First of all, Michigan's high-wage levels would tend inevitably to keep the cost high in Michigan, and, secondly a high percentage of unemployment is an inevitable feature of Michigan's automotive industry.

Professor Haber, of the University of Michigan, estimated last year that even when so-called full employment is again attained, we must expect about 175,000 persons to be unemployed in Michigan because of the apparently inherent nature of operations there.

The sixth point which I should like particularly to stress is that in our judgment the pending bills would tend to destroy the State unemployment compensation programs. I realize that the hour is late and that especially my time is running out, and I shall, if I may, Mr. Chairman, summarize the balance of my statement in the briefest possible terms.

There are five ways in which, as I view it, enactment of the pending bills would carry a threat to destroy the integrity of State unemployment compensation programs. I discuss them in some detail in the written statement. May I just mention the five points with perhaps one or two examples as I go along?

First of all, it seems to me the threat exists in that the States would be deprived in large measure of the right to fix eligibility qualifications. Secondly, it appears to me that provisions for uniform duration would produce inequities, as the chairman was observing a few moments ago. I would like to pick up the suggestion as it applies to Michigan. Under the Michigan law, for example, a uniform 39 weeks duration would mean that a housewife who works 14 weeks during the summer, perhaps washing vegetables in a canning factory or making beds in a resort hotel, would be entitled, upon the close of the season, around Labor Day, to draw unemployment benefits for the next 9 months.

Our Michigan Legislature has adhered to the philosophy that long duration of benefits should be reserved for those who are normally employed all through the year.

The third respect in which it seems to me there is a threat of destruction of the State unemployment compensation programs is that the States would, in large measure, be deprived of the right to fix disqualifications.

Fourth, as has been suggested, the bills are destructive of the meritrating principle because they offer such an inducement to the abandon

ment of merit rating. What would be the result of changing over from merit ratings to a flat-rate tax? As I mentioned before, it would tend to endanger the employment stabilization program, but there is a second and, to me, an even more important consequence.

The flat tax rate would have the effect of destroying the policing of administration of the fund on the part of employers. Our experience in Michigan during the last year with temporary unemployment compensation benefits may throw just a little light on that.

When the bill was passed, the Michigan Employment Security Commission, after careful examination and surveys, estimated that the total temporary unemployment compensation claims in Michigan would amount to $30 or $31 million. In actual experience, temporary unemployment compensation payments have totaled some $73 million in Michigan, more than twice what was expected, which seems to me is an illustration of the principle that when employers have no right or no incentive to police the allowance of claims, the amount of benefits may tend to soar to high levels.

The fifth point which I should like to mention is that Federal grants contemplated in the pending bills might provide an incentive to giveaway programs. It seems to me that the pending bills constitute an invitation to State legislatures to cast prudence to the winds and to raise benefits to higher levels than the economy of the State could afford, secure in the knowledge that a large part of the cost, that is three-fourths of the cost in excess of 2 percent of taxable payrolls, could be passed on to the Federal Government.

In conclusion, may I say, if the committee please, during the last 2 years Michigan has faced an unemployment problem which is perhaps the gravest that has been faced by any State since the depression of 1932.

We think that Michigan has passed this test pretty well. The average benefit check in Michigan in 1958 was $36.54. The highest of any industrial State in the Nation. It was exceeded by only one State, the State of Nevada. The total cost to Michigan of its program last year was $325 million. This expenditure, it is true, did strain Michigan's funds.

In fact, the State borrowed $113 million from the Reed fund. But the State was, in fact, able to pay all of the claims under the State plan with its own funds, and without actually using the borrowed

money.

It may well be that under the Michigan program, many Michigan employers will have to pay a higher tax rate than they would be assessed if the pending bills were enacted and the Michigan law amended to conform thereto.

It is expected that the Michigan tax will average 2.8 percent in 1959, and perhaps go higher in 1960. But despite any possible short-term savings in taxes, Michigan employers are opposed to any proposal that looks toward federalizing the unemployment compensation system by providing prescribed standards to which the State legislatures would be compelled to conform.

Further, we believe that the unemployment insurance program which the State legislature has provided better serves the general public interest of Michigan than would the proposed Federal standards. Thank you.

The CHAIRMAN. Thank you very much.

Are there any questions? Mr. Machrowicz.

Mr. MACHROWIcz. I know the hour is late, and I don't want to prolong this any longer than necessary. You and I have discussed some of these questions previously, and we have very divergent views on some of the questions that you raise.

I just want to understand you correctly. You feel, do you not, Mr. Cooper, that these matters should rather be taken care of by the State legislature than by the Federal Government; is that right?

Mr. COOPER. It is our feeling that it is proper to permit the States to conduct experiments in this field, and we think that so far as Michigan is concerned it has done very well and has ended up with a program which serves the interests of the unemployed as well as the general interest of the State; yes, sir.

Mr. MACHROWICZ. What I was driving at is that I think we have a very typical example of what can happen in what is going on in Michigan now. There is now pending in the Legislature of Michigan, is there not, a bill for the acceptance of the extension of the TUC? Mr. COOPER. Yes, sir.

Mr. MACHROWICZ. What is the position of your assoication in connection with that, with that mere, small extension of the TUC? The legislature has not yet accepted it; is that right?

Mr. COOPER. That is correct. The bill which is before the legislature encompasses that point and some other points respecting provisions of the law, and our association is for that bill; yes, sir.

Mr. MACHROWICZ. I should preface my remarks by saying we have a situation in Michigan where the Governor is of one party and the legislature is of the other party. Is it not true that in order to accept this extension of the TUC, your association has been lobbying, and is lobbying, for a bill which is now pending in that legislature, which would strengthen the eligibility qualifications and place quite a few other restrictions as a condition to accepting these 6 weeks extra temporary employment compensation? Is that right?

Mr. COOPER. Congressman Machrowicz, that is not my understanding of the legislative situation in Michigan. My understanding, based upon information that comes to me, is that the pending bill, as State bills frequently do, is concerned with certain problems which are peculiar and important to the State, and that the bill, as it stands before a conference committee, would provide a definition of the term "establishment" which would restore to the Michigan law a definition of establishment that has been followed by the courts and administrative agencies from 1941 until 1958 when it was recently reversed by the Michigan Supreme Court, that it is a bill which covers two points, the definition of establishment and the matter of extension of TUC payments.

I understand that some members of the legislature have asked that the bill be severed, and that a part of it be enacted.

Mr. MACHROWICZ. And your position was against it?

Mr. COOPER. Our position is that the whole bill is a good bill and that it should all be passed; yes, sir.

Mr. MACHROWICZ. Is it not the case that, because of the recent Supreme Court decision in the Ford Motor case, you want the legis lature to reverse the Supreme Court as a price for accepting the extension of temporary unemployment compensation?

Mr. COOPER. I would not state it that way, Congressman. There are two points, and there are two important ones. I understand that while the conference committee has not reached an agreement, as I read in the newspapers, according to the Senator who I believe is the chairman of the conference committee, he has gone down to Washington to make sure that of the deliberations of the conference committee in this matter, and the fact that they have not reached an agreement up to this day will not possibly prejudice the rights of the employees of Michigan to receive TUC payments retroactively, and that he has been assured that such retroactive payments are possible, and that therefore there is no danger of any worker being cut out from a continuation of TUC payments while the members of the conference committee are undertaking to reach an agreement on the matter of the bill.

How it will come out, I don't know. I might say, to further answer the question, Congressman Machrowicz, the Michigan Manufacturers' Association has not been asked to testify on that bill. It is a matter before the conference committee, in which, as I understand the rules of the Michigan Legislature, witnesses are not permitted to come and express their viewpoints.

There are two matters in the bill and how the committee will resolve them, I do not know.

Mr. MACHROWICZ. I did not want to go into the mechanics. I just wanted to demonstrate the fact that while you are here arguing the fact that the States are doing a good job and to let them go ahead with it, actually in the State legislature your association is taking the position of trying to go backwards as far as unemployment benefits are concerned.

Mr. COOPER. Congressman Machrowicz, the record will speak for itself. May I say, sir, that my interpretation would not concur with

yours.

The employers of Michigan are urging an extension of benefits from the present maximum of $55 a week to a maximum of $57 a week. That is one of the matters in the bill.

It is our position that the definition of establishment, that the definition which has always been followed until the recent decision of the Supreme Court, is a good one. On the third one, the extension of temporary unemployment compensation, we are in favor of that. We are in favor of the whole bill.

Mr. MACHROWICZ (presiding). Mr. Cooper, you stated that there is a serious confusion in the minds of the authors or proponents of these bills as to what the unemployment compensation is supposed to accomplish or else as to how to reach the objective. You say the bills do not relate benefit levels to living costs.

Is it your impression that the benefit level should relate to living costs rather than to wages?

Mr. COOPER. Congressman, we think that the principle as stated in the Michigan bill is a proper one. It takes into consideration, under a complicated formula, both wages and also living costs. I sketch it out in some detail in the statement which I have filed. As wages go up, so likewise do the amount of benefits go up.

The Michigan Legislature recognizes that there should be a relation between the amount of the benefits and the amount of earnings,

but that also there should be a relationship between the costs of meeting the necessities of life, in view of the particular family class in which the claimant falls, so that both factors are taken into consideration under the Michigan formula, which we think has worked pretty well.

Mr. MACHROWICZ. Yesterday, the representative of the National Manufacturers Association testified before us, and at least as I understood his testimony, and I think I am not wrong in that, he concurred. I thought we had all come to that agreement with some hesitancy, that the proper relationship between benefits is that with wages rather than cost of living. Do you agree with that or do you not?

Evidently the report of the committee in 1939, referred to by the chairman a half hour ago, stated the same thing.

Mr. COOPER. It seems to me as I view the matter, working just in our own little bailiwick of Michigan, where I have worked on it since 1939 as a representative of employers, that there are two philosophies, one, that of replacing of wage losses; and the other, that of enabling the worker to meet the cost of buying the necessities of life.

Our Michigan Legislature has been struggling to reconcile these two principles, and it thinks it has found a fair working compromise in the variable maximum which we have in the Michigan law, in which benefits are related simultaneously to wages and also to the family class in which the claimant falls.

Mr. MACHROWICZ. I do not want to belabor that point too long, but you also stated that the Michigan statute has what might be called a built-in escalator, establishing a basis for increases in weekly benefits rates as the cost of living goes up. Is it not true that that law simply provides that the agency must report if the costs go up, but does not provide an automatic increase or adjustments, and that actually adjustments have not been made as they should have been when the reports were made?

Mr. COOPER. I think I have the provision of the law in front of me, Congressman Machrowicz. I always hesitate to answer what is in a bill without looking at it to make sure that my recollection is correct. The bill, and I am referring to section 27 of the Michigan law, provides that if in any calendar year the U.S. Department of Labor Consumer Price Index for the preceding December has increased or decreased as compared to the base month, the Commission shall determine the percentage of such increase or such decrease.

The Commission shall then multiply the maximum weekly benefit rate for each family class by this percentage. If the product thus obtained is $1 or more, the Commission shall forthwith report such fact to the Governor, the legislature, and the Michigan Employment Security Advisory Council.

I think, to correctly summarize it, it is essentially a matter of reporting. I do not know, Congressman Machrowicz, of any year since this provision in the Michigan law was established, when an increase in living costs was not followed by an increase in weekly benefit rates.

If the Congressman has information that it has been skipped some year, the records could be checked. I do know this, Congressman Machrowicz, that the maximum weekly benefits rate has been in