In our State of Kentucky alone merit rating has saved employers some $55,000,000 since the enactment of the first unemployment insurance law in 1936. Notwithstanding this fact, Kentucky has at each session of her general assembly liberalized benefits to unemployed workers. The present law provides maximum benefits of $20 per week for 20 weeks. The average benefit amount paid to Kentucky's unemployed workers is approximately $16 per week. This compares favorably with the national average.

Kentucky is one of five States in the Nation whose fund is adequate to pay all benefits if all the workers in Kentucky were simultaneously unemployed and remained unemployed for 1 year.

We in Kentucky are proud of the administration of the unemployment insurance law. Its administration by the personnel of the present Kentucky commission has met with the approval of employee, employer, and the public. Kentucky's administration has been one of the most economical in the land. For these reasons the people of Kentucky, who are most intimately concerned with unemployment insurance, thoroughly oppose any step which will will take away from Kentucky its right to administer according to its own laws a program of unemployment insurance.

Once, however, employer merit rating is eliminated then the interest of the employer in the program ceases. If an employer receives no advantage by reason of stabilizing his mployment, it matters little to him whether the program is administered by the State or by the Federal Government.

Thus with the transfer to the Department of Labor first accomplished and next the elimination of employer merit rating, it becomes a fairly simple matter to federalize the whole program.

Some of the proponents of the transfer now advocate that the weekly benefit amount for unemployment should vary with the number of dependents the unemployed worker has. Some State laws now so provide. For example in one State an unemployed worker is entitled to draw an additional 10 percent of his weekly benefit for every dependent child up to four. That means that John Jones whose wages are $27.01 per week and who has no children would draw an unemployment benefit of $18 per week; while John Smith who is employed at the same wage but who has four children would draw $26 per week.

This, to my mind, constitutes a complete departure from the insurance principle. It is changing the program from one of insurance to one of public assist. ance. Such a plan in effect defeats its own purpose. If you were an employer in that State and that State had merit rating, I venture to say that of two equally qualified men seeking employment you would employ the man who had no children because you realize that in the event he becomes unemployed, out of your reserve you must pay him $18 per week while if he has four children you must pay him $26 per week. This definitely places the man with children at a com- . petitive disadvantage in the labor market. Yet, he is the one who more vitally needs employment.

Yet, this is the plan advocated by at least one of the great labor organizations who now urge the transfer to the Department of Labor.

Those of us who have followed the program since its inception have, in the main, proceeded on the assumption that it was what President Roosevelt so aptly described as "practicable aid and incentive toward the larger purpose of employment stabilization."

As I stated at the outset, unemployment insurance and its blood brother, em- . ployment service, is a mutual and cooperative undertaking of the employer, the employee, and the public. Of these three the interest of the public is probably paramount. That is the reason this program was originally placed in an inde pendent agency. That is the reason that Congress has refused in the past to transfer the program from that independent agency.

Conflicts between the views of the employer and the views of the employee are inevitable. The public sits as the referee or umpire of these disputes. The umpire must be fair and impartial.

There are two executive departments of the Federal Government which are created by Congress as special interest departments. One of these is the Department of Labor whose purpose is "to foster, promote, and develop the welfare of the wage earners * * *, to improve their working conditions, and to advance their opportunities for profitable employment."

The other is the Department of Commerce whose statutory duty is (11 U. S. C. sec. 591) "to foster, promote, and develop the foreign and domestic commerce, the mining, manufacturing, shipping, and fishing industries, and the transportation facilities of the United States."

As an individual and a believer in the unemployment-insurance program, I would oppose just as strongly the transfer of that program to the Department of Commerce as I now oppose its transfer to the Department of Labor.

Senator MCCARTHY. After listening to this testimony, it appears to me that we have rather a potentially vicious situation, regardless of whether this is left in FSA or transferred to the Labor Department. When you have a condition in which the administrator can interpret a law as he sees fit, with no right whatsoever on the part of the State to appeal, does that not seem to be a dangerous situation, regardless of who is administering the law?

Mr. HATTON. Yes, sir; I do think it is a dangerous proposition. However, it is very difficult for Congress to write a program which would leave no discretion on the part of the administering head. I think Congress might limit his discretion slightly more than it has presently done, because now the administrator has almost complete discretion.

Senator MCCARTHY. What would you think about the wisdom of changing the law providing for an appeal, an appeal from the decision of an administrator, whether it is the head of the Labor Department, or FSA, so as to have an appeal to a court?

Mr. HATTON. I think by all means, sir, that should be granted. In Kentucky we have had disputes with the Social Security Board, and the Federal Security Agency, and we have been unable to get these disputes before a court in any way. I have at times threatened to go into court, but did not know on what grounds I could do it. I would like very much to see review provided for.

Senator LONG. I would like to suggest to you that this committee is a pretty good appeal board so far as those agencies are concerned when they get arbitrary. I have suggested on occasion that we should look into some of the arbitrary decisions of some of the administrators.

Senator MCCARTHY. This committee has absolutely no right to reverse such a decision. The administrator can make any arbitrary decision he cares to, and there really is no appeal.

Senator LONG. Of course, this committee could sponsor legislation, which has been known to have a certain effect.

The CHAIRMAN. We will now recess until tomorrow at 10 o'clock, and hearings will be resumed on Reorganization Plan No. 2 at that time.

(Whereupon, at 12: 10 p. m., the committee recessed, to reconvene at 10 a. m., Wednesday, July 27, 1949.)

REORGANIZATION PLAN NO. 2 OF 1949-TRANSFERRING THE BUREAU OF EMPLOYMENT SECURITY

WEDNESDAY, JULY 27, 1949

UNITED STATES SENATE, COMMITTEE ON EXPENDITURES IN. THE EXECUTIVE DEPARTMENTS, Washington, D. C. The committee met at 10 a. m., pursuant to recess, in room 357, Senate Office Building, Senator John F. McClellan (chairman) presiding.

Present: Senators McClellan (chairman), Hoey, Mundt, and Smith. Present also: Walter L. Reynolds, chief clerk.

The CHAIRMAN. The committee will resume hearings on Reorganization Plan No. 2.

Mr. Horton?

Mr. HORTON. Yes, sir.

STATEMENT OF DWIGHT HORTON, MEMBER, TEXAS
EMPLOYMENT COMMISSION

The CHAIRMAN. Do you wish to testify or do you merely wish to have your statement filed?

Mr. HORTON. I don't think it is necessary unless the committee wishes to ask some questions. I will just file the statement.

Mr. CHAIRMAN. I have not had an opportunity to read your statement. Do you appear in favor of the plan?

Mr. HORTON. No, sir.

The CHAIRMAN. In opposition to it.

Mr. HORTON. Yes, sir.

The CHAIRMAN. The statement then may be filed and made a part of the hearing, and if there is any further statement you wish to make we will be glad to hear you.

Mr. HORTON. Thank you, Senator. I think that covers it fairly well unless you want to get involved in the details of the matter.

The CHAIRMAN. You have definitely stated your reasons for opposing the plan?

Mr. HORTON. Yes, sir.

The CHAIRMAN. Thank you very much, sir.

(The statement of Mr. Horton follows:)

STATEMENT OF DWIGHT HORTON, MEMBER OF THE TEXAS EMPLOYMENT COMMISSION PROTESTING THE ADOPTION OF REORGANIZATION PLAN No. 2 OF 1949

I am appearing before you today representing Hon. Allen Shivers, Governor of Texas, the many thousands of covered employers of Texas, and the Texas Employment Commission, of which I am a member. I have been requested by them

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to appear before your honorable committee to protest the adoption of the Presidential Reorganization Plan No. 2 of 1949 and to respectfully request that the Employment Service and the Bureau of Employment Security be not moved until a thorough study can be made by the Congress as to where these two agencies really belong.

We do not believe that they belong in any biased agency such as the Department of Commerce, set up to promote and protect industry; the Department of Labor, set up to promote, protect, and advance the interests of labor; or a Department of Public Welfare, recommended to be set up to care for old age, public health, education, etc.; but should be lodged under a Commission or Commissioner whose duty would be

(1) To undertake to place in employment all persons who really want to work;

(2) To pay unemployment benefits to those persons actually in the labor market who are unemployed through no fault of their own.

Unemployment insurance compensation is not charity, such as public welfare, but an insurance earned by the worker when he has demonstrated by his past earnings that he is in an actual labor market and would work if he had the opportunity.

A covered employer pays all the cost of this insurance through a pay-roll tax and does it cheerfully when he is assured and satisfied that the funds so created will be used only for benefits to those entitled to them, and not used as a dole to any and every person who wants to take a vacation or is too lazy to work.

The Employment Service and the Bureau of Employment Security have been whipping boys ever since their inception. First in the separate departments (1) in the Department of Labor, and (2) in the social security set-up.. They have operated separately or together under four or five different heads in the past 10 years. Finally, they were lodged under one head a couple of years ago, whereby the two Departments of Employment and Employment Insurance, being essentially inseparable, began to function in an efficient manner. But they have been upset each year by reorganization recommendations, which, in each instance, has been vetoed by Congress.

So, we again plead with you to let us alone where we now are. Then you can decide where we should where we should be permanently located but, by all means, make that an unbiased agency, such as a Commission which has the interests of the employee, the employer, and the general public at heart, and which has the authority to properly administer the two functions-not in a welfare department, nor labor, nor industry.

We do not believe that to move us to another department now would be a move for economy. If the States should report direct to Washington headquarters, it will probably cost no more to operate than at present; but, if regional offices are to be set up in a new department, as they are planned at present, then it seems that the total administrative costs would be greater than they are now. There is no question but that there would be a duplication of efforts. Each time a change is made in the administrative head of either of these activities, it means revising methods and forms of reporting, all of which disrupts operations for varying lengths of times and, in some instances, requires complete change in operating methods. All this means loss of confidence by the general public-which confidence is essential to the successful operation of these agencies.

A transfer of this kind would not create a saving in administrative costs. It is extremely difficult to see why such a recommendation was made, unless same is sponsored by certain interested groups who hoped that this would be an entering wedge toward complete federalization of the present State-Federal system, and possibly believing that this would give them easy access to the huge unemployment trust fund built up by the employers of the Nation for the benefit of all qualified unemployed workers who are unemployed through no fault of their own.

In conclusion, let me again urge you to veto this recommendation and make a thorough study of the activities of these two functions-employment, and unemployment compensation-and then, in the wisdom of the Congress, place these agencies under a Commission or Commissioner who is equally interested in the employee, the employer, and the general public. Give him authority to administer the State-Federal set-up as intended by the Congress and the States. Thank you.

The CHAIRMAN. Is Mr. Krawczyk here?

Mr. KRAWCZYK. Yes, sir.