REORGANIZATION PLAN NO. 2 OF 1949--TRANSFERRING THE BUREAU OF EMPLOYMENT SECURITY TUESDAY, JULY 26, 1949 UNITED STATES SENATE, Washington, D. C. The committee met at 10 a. m., pursuant to recess, in room 357, Senate Office Building, Senator John L. McClellan (chairman) presiding. Present: Senators McClellan, Long, McCarthy, Ives, and Smith. Present also: Walter L. Reynolds, chief clerk. The CHAIRMAN. The committee will come to order. We will resume hearings this morning on the President's Reorganization Plan No. 2. We have about nine witnesses scheduled to testify. We have from now until 12 o'clock. I will ask the witnesses to be as brief as they can, and if they have long prepared statements it would be well, I think, for them to file them and let them be made a part of the record, and then testify as to the high points in them. The first witness is Mr. Walter J. Mackey. Will you come up, Mr. Mackey? Do you have a prepared statement? Mr. MACKEY. I have, sir, and I have already distributed it to the clerk. The CHAIRMAN. The statement may be printed in full in the record unless you prefer to read it. Mr. MACKEY. Following your suggestion, Senator, I will not read the statement, but will possibly quote a few excerpts from it which I would like to high light. The CHAIRMAN. The only reason the committee is suggesting that is in the hope that we can accommodate all of you. Our time is crowded these days in the closing hours of this Congress. So we want to give everyone an opportunity. If we take up too much time with two or three witnesses we cannot hear the others today. You may proceed, Mr. Mackey. STATEMENT OF WALTER J. MACKEY, REPRESENTING THE OHIO MANUFACTURERS' ASSOCIATION, COLUMBUS, OHIO Mr. MACKEY. My name is Walter Mackey, and I am here today representing the Ohio Manufacturers' Association, of Columbus, Ohio, in opposition to Reorganization Plan No. 2. I might further say by way of qualification that I was appointed by the Governor of our State in 1936 as a member of the first unem ployment compensation commission and served for about 5 years on that commission and the board of review. We are opposing Reorganization Plan No. 2 today chiefly for the following reasons: When the original Social Security Act was passed by Congress, the Social Security Board was established as an independent Federal agency. The program should continue to be so administered. We are convinced that if this transfer is allowed to take place, there will be an ever-increasing effort to completely federalize our State unemployment compensation programs by those here in Washington who have tried so hard in the past, although unsuccessfully, to bring about this result. It will be remembered that so far as unemployment compensation is concerned, all of the money used to pay unemployment benefits comes from a tax upon employers exclusively. This is true in my State as well as in every other State, I believe, with the exceptions of Alabama and New Jersey. To permit the control of the administration of these laws nationally, to be exercised exclusively by the United States Department of Labor is not only unsound from an administrative point of view, in our judg ment, but is a breach of faith with the States which have accepted this program on the basis that it would be a plan impartially administered here in Washington by a Federal agency dominated neither by organized labor nor by employer groups. Although there have been many things lacking, possibly, in the relationship between the present Federal Security Agency and the State administrative agencies, these difficulties we believe would be multiplied if the administration were to be lodged with the Labor Department. It has been previously pointed out before this committee that the purpose of the Department of Labor is to foster, promote, and develop the welfare of the wage earners of the United States, to improve their working conditions, and to advance their opportunities for profitable employment. This is a laudable purpose for any agency which is devoted to the interest of labor exclusively. It is, no doubt, the same purpose upon which the several Nation-wide labor organizations were founded, that is, to promote the interest of labor, and while we have no quarrel with these proper objectives of labor organizations, we believe that the United States Labor Department should not have the tremendous power and authority which is potentially contained in the administration of this far-flung system of unemployment service. Take the State of Ohio as a typical example. The unemployment compensation program is made up of two principal divisions: The employment service and the unemployment compensation division. The function of one is to try to find a job for the unemployed individual and fit him to the job for which he is most capable. The function of the other is to pay benefits to those for whom jobs cannot be found. One of the important problems of the State agency is to secure the cooperation and confidence of the employers in the employment service in order to have them list their job opportunities with this agency and cooperate in the filling of these jobs. Let us be realistic. If both of these agencies were administered under the authority of the United States Department of Labor, largely dominated and controlled by the national leaders of organized labor, the inevitable result will be that the State agency will have greater difficulty in convincing the employers of its impartiality and be further handicapped in securing employer cooperation with the local employment offices. I believe that it is well known that the national organized labor groups are still exerting their influence to federalize our whole system of unemployment compensation. To now place the administration of these programs in the Labor Department, whose policies are largely determined by these groups, would be a far step in the direction of federalization. We submit that this is contrary to the best interest of those affected by the unemployment-compensation program. To permit administration of this broad insurance program by a Federal agency dominated entirely by representatives of the beneficiaries of these funds is not sound governmental procedure. If it were proposed to place the administration of this insurance program nationally in the Commerce Department, which would probably be just as logical, we would expect objections from the labor group. It has also been pointed out here that these same labor groups are opposed to merit rating, which is a fundamental part of practically every State law today. This is the feature of the State laws which permits the allocation of the cost of unemployment compensation to industries in proportion to the amount of unemployment, which encourages employers to stabilize their employment, thus preventing unemployment, and which sustains the interest of the employers in the quality of administration. As one of those who was charged with a share of the responsibility of administering the unemployment-compensation program in Ohio, I have become convinced that, without the employers' interest in how this law is administered, no program of this kind can be operated without opening the door to abuses of many kinds. For example, the unemployment agency must rely upon the employer to furnish wage data, as well as other information necessary to determine a claimant's eligibility for benefits such as reason for separation, number of weeks worked, and so forth. Without some employer interest in this program, difficulties would increase in obtaining this vital information. The destruction of merit rating would also destroy this interest. A program of this kind needs the sustaining influence of the labor groups on the one hand, the employer groups on the other, and an impartial administrative agency such as the State legislature or Congress in establishing general rules and policies. It has also been called to your attention before this committee that the so-called task force, an agency working under the Brookings Institution retained by the Hoover Commission to make a study of these departments, could find no facts justifying this proposed transfer. Instead, it stated that -A decision must be arrived at on the basis of judgment, and in the last analysis this judgment must be exercised by the duly elected representatives of the people. We know what that judgment has been in the past by those who are the duly elected representatives of the people, namely, Congress. There has been a consistent record of retaining these services under the jurisdiction of an impartial agency which is not subordinated either to interests of a Labor Department or to any employer-dominated agency. It has been suggested that possibly one reason for this proposal was out of sympathy to a Labor Department whose authority and functions have been decreased during the last few years. Congress surely had some very good reasons for its action taking away certain functions from this Department. Does mere sympathy for a Labor Department which has not conducted itself so as to hold this public interest justify this reward? While we are on the subject of task forces, the New York HeraldTribune carried an article under date of July 9, 1949, written by Mr. James E. Warren, in which was discussed a part of the task-force report which recommended the repeal of the Federal unemployment tax and part of the social-security law so that the various States would have complete control over unemployment compensation. For some reason this part of the task-force report apparently has not as yet been released, but it might be well if this program is to be reexamined in line with suggestions which were made here yesterday, that recommendations of this kind be considered. I believe this would also be in line with the recommendations of a committee headed by Senator Bricker known as the Committee on Coordination of Federal and State Taxes. As I understand, this committee is composed of 15 State governors, 10 Congressmen, and some 6 Senators, which met, and made a recommendation similar to the one suggested by the task force of the Hoover Commission. In conclusion, if this proposed transfer is justified now, then President Roosevelt was wrong when he gave these responsibilities to an independent and impartial agency, and Congress was wrong in ac cepting this action at that time. If this proposed transfer is right now, then Congress was wrong in 1947 in deciding to retain this independent status. If this proposed transfer is right now, then again both Houses of Congress were wrong in 1948 in rejecting a similar proposed transfer. If this proposed transfer is right now, then all of those who have testified that the best interests of employees, employers, and the public can be served by continuing the administration of these services under an impartial agency, have been wrong and lacking in good judgment. We believe that no such errors have been committed in the past and that the proposal today has no more merit now than it had then. May I say before I close that Ohio industry favors the greater part of the recommendations of the Hoover Commission, but we believe that the proposed transfer of unemployment and employment services to the Labor Department is out of harmony and inconsistent with the other parts of this report which deal with practical recommendations for economy, efficiency, and elimination of duplications of Government operations. For these reasons, Ohio industry, through the Ohio Manufacturers' Association, registers its objection to the proposed transfer of unemployment and employment services to the United States Labor Depart ment. I thank you. The CHAIRMAN. Mr. Mackey, it simply amounts to this, does it not? You just do not trust the Labor Department to administer the law fairly. Is that what it amounts to? Mr. MACKEY. I suppose it could be put in those words. I have tried to use words that were a little less blunt. The CHAIRMAN. I think we ought to be frank about it when we are trying to develop the facts. That is the impression I get-that there is simply a feeling that the Labor Department is biased; that it wants to take over complete control and management of this service; and that business-large business, all business generally-feels that the Labor Department would not give this service the same impartial and fair administration as an independent agency or the State would give it. Mr. MACKEY. And we feel, Senator, that the record in the past would indicate just that. The CHAIRMAN. I would like to inquire about this. You say an example of the principles of those who advocate the domination of this program by the Labor Department is found in the Thirteenth Annual Conference of Labor Officials here in Washington in 1946. Who composed that conference of labor officials? Mr. MACKEY. I don't know whether I have the exact membership here. I will try to furnish it, if it is available.. The CHAIRMAN. Was that labor conference composed of Department of Labor officials or organized labor officials, or both? Mr. MACKEY. It was sponsored by the United States Labor Department and the Department invites the various State and local labor officials, such as the various State directors of the departments of labor-industrial relations department, we call it in Ohio-as well as the leaders of the national labor organizations. The CHAIRMAN. Was it held under the auspices of the Labor Department? Mr. MACKEY. That is my understanding. The CHAIRMAN. I notice that it was recommended by that conference that in testing an unemployed worker's availability for work, no general requirement for "actively seeking work" outside of registration in a public-employment office be incorporated in any State law. In other words, there is no duty-no obligation-on someone out of work to seek work. The obligation rests upon this service to provide unemployment compensation, whether he seeks work or not. Mr. MACKEY. That is right, Your Honor. The CHAIRMAN. Is that the effect of this recommendation? Mr. MACKEY. That would be the effect. In Ohio it would have the very practical effect of allowing a person merely to register and not look for work further. It is a matter of record that only 10 percent of the jobs that are filled in Ohio are filled through the public-employment service. When we restrict his availability to merely filing at a public-employment office, we are really restricting his availability to 10 percent, because only 10 percent of the openings are so filled. The CHAIRMAN. That is what you are apprehensive about. Mr. MACKEY. That is right. The CHAIRMAN. That situation will be established if this Service is put under the Department of Labor, and that is one illustration that you give. |