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readjustments on the part of claimants. We have observed evidence where this strict interpretation has been used in New Jersey to keep benefit claimants from securing jobs which they would have preferred in place of drawing unemployment benefits. This was accomplished in a typical case, of which we have specific knowledge, by deliberately withholding the knowledge of a job opening from an applicant in order to carry out the interpretation of suitable work as defined by Labor Department officials during their period of control.

6. Can past experience shed any light on what might happen to this program should the plan No. 2 be approved? We can quote from the Manual of Operation of the Employment Service when that Service was temporarily under the Labor Department.

(a) It listed the objective of the Employment Service as one to assist "employers to improve personnel management technique." This concept could very well lead to efforts to force employers to change their personnel policies and management methods to conform with the views of the Labor Department.

(b) Paragraph 0300 of the manual sets forth as a policy of the USES the following:

"To recruit no workers for employment if the wages, hours, or other conditions of work offered are substantially less favorable to the individual than those prevailing for similar work in the locality." While in principle, this policy is perhaps a desirable objective, its exercise was widely abused under Labor Department supervision of the Employment Service. During a survey of the Employment Service we observed a girl out of work who asked an employment interviewer for a job. He told her he had absolutely none, though we knew he had available many that she could do. When we questioned the interviewer later he said that the girl had had 3 years' experience and that the jobs he had on file paid less than the amount he considered appropriate for 3 years' experience. The girl was not permitted to decide whether or not she would prefer one of the available jobs instead of useless and unproductive inactivity.

(c) Under paragraph 0306, the stated policy of the USES is "to make definite and continuous effort with employers with whom relationships are established, to the end that their hiring specifications are based exclusively on job-performance factors." Apparently, whether or not a job applicant was a chronic alcoholic was, under that expressed policy, not permitted to be any concern of the employer regardless of the effect of his alcoholism on the safety of his coworkers. The Congress of the United States has not considered it desirable to pass a law strait-jacketing employers to such an extent in their employment practices, but the United States Employment Service, by an arbitrary administrative standard promulgated while the Service was under the Labor Department, considered it could do so.

(d) Under the hading "Follow-up" (in the manual) for counseling, the USES says it provides an opportunity to check actual employer practices in reference to employee assignments, promotions, etc. In other words, is the Employment Service to be used as a Labor Department tool to control management policy? (e) In paragraph 8390 (pt. II) the USES Manual, in its directions in dealing with handicapped workers, says:

* * *

"The Employment Service should not attempt to place him (the handicapped worker) in private industry at a wage lower than that paid for normal production. This would undermine wage standards for all workers." Besides being extremely unfair to the handicapped worker, it demonstrates the Labor Department's aim to sustain wage standards at the expense of handicapped workers, and the principle of individual productivity as the basis for wages. For example, take the case of an extremely handicapped worker who at the best could only turn out 50 percent as much productive work in a day as a totally well individual. That type of ruling would usually prevent this handicapped worker from securing employment.

7. Does it not seem reasonable that if regulations such as these just cited were put into effect for the Employment Service by the Labor Department, equally obnoxious and unreasonable regulations would be promulgated for unemployment compensation if it were placed under the Labor Department?

8. In the face of no recommendations from the task force, why did the Hoover Commission recommend that the Employment Service and the Federal Unemployment Compensation functions be transferred to the Labor Department? No "rebuilding" of the Labor Department can remove the statutory responsibility of that Department to foster and promote the interests and views of labor. This Department must remain committed to that obligation, and the New Jersey State Chamber of Commerce believes that that obligation disqualifies the Department of Labor from meeting the requirement of impartial administration of the services which plan No. 2 proposes to transfer.

Mr. Chairman and gentlemen of the committee, as before, we again earnestly urge that you reject the proposal in the Presidential Reorganization Plan No. 2 to place the Employment Service and Federal unemployment compensation functions in the Labor Department. These programs are of such great importance in our national economy and of such interest to employers, the general public, and employees alike that they deserve to be administered by an independent agency dedicated to no special-interest group, but to the welfare of all our citizenry.

JULY 22, 1949.

Mr. RUSSELL. Rather than take the time of this committee merely to read a rather long statement, I feel that there is only one reason for my speaking today, and that is to urge an emphasis upon the one principle which to us seems to be cardinal in this whole issue; that is, the principle of impartial justice. In New Jersey when our unemployment compensation law was set up even though the unemployment administration was in the hands of a neutral or balanced group, nevertheless it was deemed wise that the final appeal should rest with a court of law. The traditions of our courts as to impartiality are well known and long established. Whenever a judge faces an issue in which his own background might be indicative of possible partiality, he tends to disqualify himself from judging the issue. That traditional practice is one of the guaranties of justice. We face something of that problem today in the issue under discussion.

Certainly the Department of Labor as set up and established under the law of this country was expected to be partial. It was properly charged to foster the interests of labor and labor's viewpoints. Now the proposal is to place in those same hands, properly prejudiced, the obligation to apply an absolutely impartial viewpoint in setting the policies and guiding the administration of this extremely important function of unemployment compensation and the associated employment services.

Are we apprehensive without reason? I would like to point out very briefly that our apprehensions are not a matter of just imagination or theory. There was a period during which the Department of Labor had full control of the Employment Service, and I would point your attention particularly as you review the filed material that we are quoting from what actually was established as active policy for the guidance of State employment agencies during the period of the Department of Labor's control. I will only mention a few of the emphases which grew out of that properly biased viewpoint, but which were improperly applied in a function such as the Employment Service.

One had to do with the urging of the Employment Service in the States to "assist employers to improve personnel management techniques." Another had to do with maintaining wages, hours, and other conditions of work offered so that no workers would be recruited unless certain concepts of wage maintenance and other standards, as set by the Department of Labor, were met. A grand objective if carried over into an organized relationship with the States by control of an employment service, can jeopardize and has jeopardized the opportunities of workers to have a free choice. They have actually in New Jersey been denied access to jobs, even though they might have wanted them, just because the offered job did not pay quite up to the job previously held. Those are facts.

Another of the recommendations and policy objectives stated by the Department of Labor for the States during that period: To make definite and continuous effort to the end that hiring specifications are based exclusively on job performance factors. Again, they may have been trying to eliminate certain prejudicial practices of employers, but by narrowing down this issue that hiring should be determined exclusively on job performance factors, might mean this: Suppose an applicant is known to be an alcoholic, under this policy he could not properly be turned down by an employer, and yet every one dealing with industry knows that the instability of an alcoholic may mean injury or death to a coworker. This policy, if carried throughand it could well be carried through under the proposal that we are now discussing-could also mean that employers might be denied the cooperation of the Employment Service entirely if they followed their frequent practice of having medical examinations for new applicants. The matter of the physical condition, the diseases that some people have, is not a part of job performance factors.

Are we going to face such a situation if these responsibilities are now transferred to the Department of Labor where employers might be denied the privilege of selecting employees with due regard to the safety and health of the grand workers we already have?

The CHAIRMAN. Why do you say that it may occur? Have you any reason for that?

Mr. RUSSELL. This is what did occur during the period of Department of Labor control. That was the stated policy in the manual which the Department of Labor imposed on the State USES administrations, to make "definite and continuous effort with employers to the end that their hiring specifications are based exclusively on job performance factors." This isn't theory. It is fact. It happened. That is why we are concerned.

Congress never saw fit to put that kind of strait-jacket on employers and impede the natural and normal relationships between an employer and possible new employees. But during that period the Department of Labor didn't hesitate to set up that kind of coercive standards.

Another requirement in that same manual, the Employment Service should not attempt to place applicants and that has to do with handicapped workers to place handicapped workers in private industry "at a wage lower than that paid for normal production." We all know that since the war there are some grand fellows who have a right to work, but are under some physical handicaps. Those handicaps have been partly indemnified by the Federal allowances, in the expectation that their wages might not be up to that of a fully productive worker. Yet under the Department of Labor one of their objectives was to deny handicapped workers employment and referral through the Employment Service unless those handicapped workers received full wage.

The result of USES policy was: That handicapped workers weren't referred because in all honesty industry in general sets its wage standards on the basis of individual productivity. I believe there is little argument with that principle in this country. Yet in effect the handicapped worker, unless he could get full wages, was going to be denied referral. That is fact, not apprehension.

Doesn't it seem reasonable that that kind of policy, perfectly proper as the normal attitude of those charged to defend and foster the rights of labor, becomes improper if carried over into the impartial administrative responsibilities of a function, such as Employment Service and Unemployment Compensation. Actual fact in the past shows that the temptation to carry those prejudices through was actually embodied in a manual for the guidance of the State administrations. Do you see any probability that those same compulsions and convictions of a labor department could be set aside in trying to fulfill the requirement of impartial administration of an activity like unemployment compensation? It doesn't quite seem to be fair to ask any man or group of

men

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to try to live true to two opposing sets of principles, and I T thinking of the people who would have to live in such a conflict. There has been mentioned by the previous speaker one matter that is of great concern to those of us who have worked with State administrations. If the transfer proposed by plan No. 2 were to be effective, the complete control of allocation of administrative funds for State administration would be in the hands of the Secretary of Labor. With this conflict of loyalties, that same group would also have complete control over the administrative expenses-the money for administrative expenses in every one of our States-and we feel that the potential coercive power inherent in that control represents a danger which could easily weaken, if not sterilize, the effectiveness and standards of a State administration.

It is for those reasons, together with the more detailed reasons in the statement that has been filed with your committee, that the New Jersey State Chamber of Commerce feels strongly that the proposal to transfer the Employment Service and Unemployment Compensation functions to the Department of Labor should be defeated, and we strongly urge that your committee give very serious thought to the points that we raise in arriving at your recommendations.

The CHAIRMAN. Thank you, Mr. Russell.

Senator Hoey, any questions? Senator Mundt? Senator Smith? Thank you very much, Mr. Russell. Mr. RUSSELL. Thank you.

The CHAIRMAN. Mr. Martin, come around, please.

STATEMENT OF ROBERT B. MARTIN, SOCIAL SECURITY COMMITTEE, ILLINOIS STATE CHAMBER OF COMMERCE, CHICAGO, ILL.; TREASURER, KABLE NEWS CO., MOUNT MORRIS, ILL.

Mr. MARTIN. Mr. Chairman and members of the committee, I have already filed my statement with you but I would like to make a few further comments.

The CHAIRMAN. The statement may be printed in the record, and you may proceed.

Mr. MARTIN. Thank you, sir.

(Mr. Martin's prepared statement follows:)

STATEMENT OF ROBERT B. MARTIN, REPRESENTING THE ILLINOIS STATE
CHAMBER OF COMMERCE

Mr. Chairman and gentlemen, my name is Robert B. Martin, and I am treasurer of Kable News Co., national magazine distributors, in Mount Morris, Ill. I speak today on behalf of the Illinois State Chamber of Commerce, and particularly on behalf of the social-security committee of our organization. The Illinois State chamber is a State-wide civil association made up of 8,700 businessmen from all types of enterprise, in 241 Illinois communities. The work of the chamber is largely carried out by committees of businessmen, and the social-security committee is one of these groups. Our committee is concerned with problems in the field of unemployment compensation, employment service, old-age and survivors insurance, and other activities relating to our social-security laws, both State and Federal. The State chamber has long been interested in the development of social security on a sound basis.

I would like to make two points at the beginning:

1. Our opposition to the current proposal in Reorganization Plan No. 2 to permanently transfer unemployment compensation and employment service activities to the United States Department of Labor, is not new. We have consistently opposed such a move, and so presented our views in hearings on the President's Reorganization Plan No. 1 of 1948.

2. We in the Illinois State chamber are thoroughly sold on most of the Hoover Commission recommendations, and have devoted much time during the past few months to publicizing these recommendations throughout the State of Illinois. Because the Commission's work in most particulars has been so outstanding, we deeply regret the necessity of disagreeing with the Commission in the one recommendation now before us.

While making reference to this phase of the subject, let me say that we do not believe the general excellence of the Commission's work justifies blind acceptance of all recommendations. We feel that each Commission proposal should be judged by its merits and by facts developed by the Commission task forces. In the case of most Hoover Commission recommendations, ample facts have been presented to substantiate them. In the case of the proposed transfer, there is an unusual lack of supporting facts. The Commission's main argument is that many of the Labor Department's former functions have been taken away from it and, therefore, the Department should be rebuilt. This clearly does not take account of the fact that many of these functions were taken away because the Department was unable to administer them on an unbiased basis.

We have said in previous testimonies that the businessman feared placing in the hands of a partisan agency the administration of an activity which concerned him and his business so intimately. In the past those who have favored this proposed transfer have scoffed at these fears and have pointed as evidence that such worries are unfounded, to the various States where the State department of labor administers unemployment compensation.

Our social-security committee has worked for 3 years on proposals for the improvement of our Illinois unemployment compensation law. We have felt it needed overhauling and, especially, tightening up. Workers not truly unemployed were receiving benefits in a fasion which was continuously receiving public criticism.

Now, in Illinois the Commissioner of Unemployment Compensation has been for some time an appointee of the director of labor who, himself, is traditionally either a CIO leader or an A. F. or L. administrator. The State chamber has long disagreed with this arrangement and has forthrightly insisted that the Unemployment Compensation Division and the Employment Service should be an independent agency.

The members of our committee have always felt that the Unemployment Compensation Division of the Illinois Department of Labor is a highly competent and cooperative unit of our State government. Nevertheless, we have been forced to recognize the partisan nature of its administration. Frankly, it was with hesitancy that we decided to take to Springfield, our State capitol, a bill designed to tighten up disqualification provisions of our unemployment compensation law. No such reluctance would have existed had the division been an independent agency.

But the situation is that the Illinois Department of Labor openly represents organized labor which openly fosters a program designed to extend benefits to beneficiaries, some of whom are truly not in the labor market. In promoting such programs, labor leaders in Illinois are in harmony with the national programs of organized labor. However, we proceeded with our plans and introduced a bill which embodied constructive recommendations of the Illinois State chamber. Throughout all of the deliberations of this bill the Illinois Commissioner of Unemployment Compensation sat on the labor side of the table. Apparently, he was not at all expected to assume a neutral position but rather to support the labor position. In all fairness we must say that he tried earnesly to assume a detached attitude but it was an impossible task when his very job was dependent upon the

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