remarkable. For it must be realized that the improvements in safety conditions under the workmen's compensation laws have come about over a period of 30 years or more. I would like to emphasize that point because in improving safety conditions the employer is faced with not much more than some capital outlay for equipment and also an educational program for workmen. In the case of stabilization of employment it often extends to trying to change the buying habits of the public, obviously a much more difficult proposition. One of the most dramatic examples of stabilization is that of General Motors Corp. when it changed over to 1949 models at the Cadillac, Buick, and Oldsmobile plants. The average loss in days of work at the three plants was only a little over three per employee. In other words, if there were 10,000 employees, there were 30,000 days lost in the model change-over. In 1941, the most recent comparable year, the average loss was over 17 days per employee. The corporation does not claim that this improvement was due solely to the experience rating provisions of the Michigan Unemployment Compensation Act but it does state that those provisions, which furnished an incentive to earn reduced contribution rates, contributed heavily in the corporation's planning to speed up the model conversion change-over. Management does not deny that such improvements in employment stabilization are profitable for the company. But aren't they also profitable to the employees? The thousands of General Motors employees involved in the 1949 model changeover enjoyed 14 days more of well-paid work which they did not enjoy in 1941. I just wished to make that point in partial answer to the statements I have heard so many times, mostly in State legislatures, that experience rating has not achieved the purpose for which it was originally intended. I thank you. The CHAIRMAN. Senator Smith? Senator Mundt? Senator MUNDT. This question occurs to me, Mr. Smith. We may be confronted with the choice of having the agency in the Department of Labor or having it in the Department of Welfare headed by one Oscar Ewing. I am just wondering if the Michigan manufacturers are quite sure they are going to be perfectly happy to have this agency operated by Oscar Ewing? Mr. SMITH. I could read one paragraph which is in the middle of page 8 that makes some comment on that point, Senator Mundt. [Reading:] The reason we prefer administration of these functions by the Federal Security Agency is that the latter is officially neutral, and we are hopeful that at some future date it may become actually neutral. In other words, it is a choice of the lesser of two evils. The CHAIRMAN. Thank you very much, Mr. Smith. Mr. SMITH. Thank you, sir. The CHAIRMAN. Mr. Williamson? Will you come forward, please? STATEMENT OF ALAN WILLIAMSON, COMMISSIONER AND COUNSEL, EMPLOYMENT SECURITY DEPARTMENT, STATE OF SOUTH DAKOTA Mr. WILLIAMSON. Mr. Chairman, I have filed a statement. I shall read from it in the interest of time. It is brief. My name is Alan Williamson. I am the Commisisoner of and Counsel for the Employment Security Department of South Dakota. After clearance with and approval of the Honorable George T. Michaelson, Governor of South Dakota, I am appearing in the interests of the public, in opposition to Reorganization Plan No. 2. The transfer of the Bureau of Employment Security to the Department of Labor is not an economy move. In my opinion, the transfer is purely political because both major political parties are on record to strengthen the Department of Labor. It is noteworthy that the Hoover task force made no recommendation with reference to a transfer of the Bureau. I won't touch further on that because Senator Smith has called attention to the language of the task force as it appeared in appendix P, page 19. If the transfer takes place, it will necessitate the openinig and staffing of a number of regional offices. The Federal Security Agency now has 10 regional offices fully staffed to administer the employment-security program on the Federal level. Any further establishment of regional offices would be a duplication of expense and personnel which could only be justified by increased efficiency. There has been no claim by the proponents of the transfer that efficiency would be increased by the transfer. There has been some evidence before this committee that the employment-security program is for the benefit of labor, and should. logically be administered in the Department of Labor. It is true that labor receives the initial and direct benefit, but I call attention to the fact that when this program was first enacted it was done so because public interest required it. As evidence of that fact, I call the committee's attention to the declaration of policy which was a part of every State law enacted to carry out this program. That declaration of policy is as follows: As a guide to the interpretation and application of this act, the public policy of this State is declared to be as follows: Economic insecurity due to unemployment is a serious menace to the health, morals, and welfare. Economic insecurity due to unemployment is, therefore, a subject of general interest and concern which requires appropriate action by the legislature to prevent its spread and to lighten its burdens. This can be provided by encouraging employers to provide more stable employment and by the systematic accumulation of funds during periods of employment to provide benefits for periods of unemployment, thus maintaining purchasing power and limiting the serious social consequences of poor-relief assistance. The legislature, therefore, declares that in its considered judgment the public good and the general welfare of the citizens of this State will be promoted by providing, under the police powers of the State, for the compulsory setting aside of unemployment reserves to be used for the benefit of persons unemployed through no fault of their own. I think that answers the question as to whose ultimate interests were considered when this program was enacted. If it is logical that the Bureau of Employment Security be transferred to the Department of Labor because the employee is the interested person, then it is just as logical to say that the Bureau of Old-Age and Survivors Insurance should be transferred to the Department of Labor, because the employee is the one who directly benefits from that program. There has been some testimony before the committee in regard to the power that the Federal administering agency has over the States on the conformity question in relation to "experience rating." Section 1602 of the Federal Employment Tax Act lays down certain broad limitations for the enactment of "experience rating" provisions by States. Our legislature enacted an “experience rating" provision remarkable. For it must be realized that the improvements in safety conditions under the workmen's compensation laws have come about over a period of 30 years or more. I would like to emphasize that point because in improving safety conditions the employer is faced with not much more than some capital outlay for equipment and also an educational program for workmen. In the case of stabilization of employment it often extends to trying to change the buying habits of the public, obviously a much more difficult proposition. One of the most dramatic examples of stabilization is that of General Motors Corp. when it changed over to 1949 models at the Cadillac, Buick, and Oldsmobile plants. The average loss in days of work at the three plants was only a little over three per employee. In other words, if there were 10,000 employees, there were 30,000 days lost in the model change-over. In 1941, the most recent comparable year, the average loss was over 17 days per employee. The corporation does not claim that this improvement was due solely to the experience rating provisions of the Michigan Unemployment Compensation Act but it does state that those provisions, which furnished an incentive to earn reduced contribution rates, contributed heavily in the corporation's planning to speed up the model conversion change-over. Management does not deny that such improvements in employment stabilization are profitable for the company. But aren't they also profitable to the employees? The thousands of General Motors employees involved in the 1949 model changeover enjoyed 14 days more of well-paid work which they did not enjoy in 1941. I just wished to make that point in partial answer to the statements I have heard so many times, mostly in State legislatures, that experience rating has not achieved the purpose for which it was originally intended. I thank you. The CHAIRMAN. Senator Smith? Senator Mundt? Senator MUNDT. This question occurs to me, Mr. Smith. We may be confronted with the choice of having the agency in the Department of Labor or having it in the Department of Welfare headed by one Oscar Ewing. I am just wondering if the Michigan manufacturers are quite sure they are going to be perfectly happy to have this agency operated by Oscar Ewing? Mr. SMITH. I could read one paragraph which is in the middle of page 8 that makes some comment on that point, Senator Mundt. [Reading:] The reason we prefer administration of these functions by the Federal Security Agency is that the latter is officially neutral, and we are hopeful that at some future date it may become actually neutral. In other words, it is a choice of the lesser of two evils. The CHAIRMAN. Thank you very much, Mr. Smith. Mr. SMITH. Thank you, sir. The CHAIRMAN. Mr. Williamson? Will you come forward, please? STATEMENT OF ALAN WILLIAMSON, COMMISSIONER AND COUNSEL, EMPLOYMENT SECURITY DEPARTMENT, STATE OF SOUTH DAKOTA Mr. WILLIAMSON. Mr. Chairman, I have filed a statement. I shall read from it in the interest of time. It is brief. My name is Alan Williamson. I am the Commisisoner of and Counsel for the Employment Security Department of South Dakota. After clearance with and approval of the Honorable George T. Michaelson, Governor of South Dakota, I am appearing in the interests of the public, in opposition to Reorganization Plan No. 2. The transfer of the Bureau of Employment Security to the Department of Labor is not an economy move. In my opinion, the transfer is purely political because both major political parties are on record to strengthen the Department of Labor. It is noteworthy that the Hoover task force made no recommendation with reference to a transfer of the Bureau. I won't touch further on that because Senator Smith has called attention to the language of the task force as it appeared in appendix P, page 19. If the transfer takes place, it will necessitate the openinig and staffing of a number of regional offices. The Federal Security Agency now has 10 regional offices fully staffed to administer the employment-security program on the Federal level. Any further establishment of regional offices would be a duplication of expense and personnel which could only be justified by increased efficiency. There has been no claim by the proponents of the transfer that efficiency would be increased by the transfer. There has been some evidence before this committee that the employment-security program is for the benefit of labor, and should. logically be administered in the Department of Labor. It is true that labor receives the initial and direct benefit, but I call attention to the fact that when this program was first enacted it was done so because public interest required it. As evidence of that fact, I call the committee's attention to the declaration of policy which was a part of every State law enacted to carry out this program. That declaration of policy is as follows: As a guide to the interpretation and application of this act, the public policy of this State is declared to be as follows: Economic insecurity due to unemployment is a serious menace to the health, morals, and welfare. Economic insecurity due to unemployment is, therefore, a subject of general interest and concern which requires appropriate action by the legislature to prevent its spread and to lighten its burdens. This can be provided by encouraging employers to provide more stable employment and by the systematic accumulation of funds during periods of employment to provide benefits for periods of unemployment, thus maintaining purchasing power and limiting the serious social consequences of poor-relief assistance. The legislature, therefore, declares that in its considered judgment the public good and the general welfare of the citizens of this State will be promoted by providing, under the police powers of the State, for the compulsory setting aside of unemployment reserves to be used for the benefit of persons unemployed through no fault of their own. I think that answers the question as to whose ultimate interests were considered when this program was enacted. If it is logical that the Bureau of Employment Security be transferred to the Department of Labor because the employee is the interested person, then it is just as logical to say that the Bureau of Old-Age and Survivors Insurance should be transferred to the Department of Labor, because the employee is the one who directly benefits from that program. There has been some testimony before the committee in regard to the power that the Federal administering agency has over the States on the conformity question in relation to "experience rating." Section 1602 of the Federal Employment Tax Act lays down certain broad limitations for the enactment of "experience rating" provisions by States. Our legislature enacted an “experience rating" provision which was clearly within those limitations. After consultation with some of the best legal talent of our States, I, as administrator, adopted an "experience rating" rule which, as a lawyer, I was satisfied fell within the limits of both the Federal and State acts. The Federal officials, after a written presentation and oral argument, and in accordance with the 61 pages of regulations, advised us that the rule was not in conformity and that if we operated under it our administration funds would be cut off. There being no appeal or review, we bowed to the dictates of the Bureau and adopted a rule which was approved. The CHAIRMAN. May I inquire, they did not maintain that it was not in conformity with the statute? Mr. WILLIAMSON. Yes; that was it: That the rule was not in conformity with the statute. The CHAIRMAN. I was trying to determine whether it was not in conformity with the statute or if it was not in conformity with some of their 61 pages of rules. Mr. WILLIAMSON. It was the 61 pages of regulations by which they interpreted the statute as it appears in the Federal Tax Act. According to their interpretation of it, it was not in conformity and we could not operate under it. The CHAIRMAN. Let me ask you, Mr. Williamson, how can that be avoided? How can the Congress enact a statute and say that, if States conform to it, the services will be made available, and not give some discretion to some authority to make a final interpretation? Mr. WILLIAMSON. I think the Congress will have to enact a more specific provision of law, as I see it, in which there isn't so much discretion. The CHAIRMAN. You think the statute needs to be revised so as to spell out more fully just what Congress means? Mr. WILLIAMSON. That is correct. For instance, there are 45 States, as I recall it, that determine their "experience rating" by some method of benefit charge against the employers. 1602 (a) (1) is as follows: No reduced rate of contributions to a pooled fund or to a partially pooled account is permitted to a person or group of persons having individuals in his or their employ except on the basis of his or their experience with respect to unemployment or other factors bearing a direct relation to unemployment risks during not less than the three consecutive years immediately preceding the computation date. With that language there, unemployment or other factors, the administering ng agency on the Federal level by a stroke of the pen could just say, "Benefits have nothing to do with unemployment; so you can't use those to determine what your 'experience rating' law will be." By that method they could wipe out 45 "experience rating" laws in the States. The CHAIRMAN. All right. You may proceed with your statement. I know that question come up quite often, and maybe we could spell it all out in the act itself. Mr. WILLIAMSON. That would be the only way that I know it could be done. Secretary Tobin notwithstanding, the Federal administering agency under present law has the power to nullify the "experience rating" provisions of the Federal act. |