Mr. HARDY. I think your contention is that a department of the Government working primarily with a particular economic segment has a special responsibility for promoting the welfare of that economic segment. As a consequence, you feel that these functions should be administered by an impartial agency that is not too closely related to either employers or employees.

Mr. KRAWCZYK. That is right, so they can look at it from an objective, impartial viewpoint, as our Industrial Commission of Wisconsin does.

Mr. HARDY. I have just one other question.

We have talked about the Hoover Commission reports and I am certainly in general accord with the Hoover Commission reports and I believe that the organizations you represent are in accord with them. This does not necessarily imply full and complete agreement with every detailed recommendation. Is that correct?

Mr. KRAWCZYK. Yes.

Mr. HARDY. Just as we might sometimes approve in general a particular bill that is pending and yet we will seek to amend it and perfect it before we pass it. So it is your idea that the passage of this Reorganization Plan would not make the greatest contribution to economy in Government as contemplated generally by the Hoover Commission?

Mr. KRAWCZYK. That is right.

Mr. HARDY. That is all, Mr. Chairman.

Mr. KARSTEN. Mr. Chairman, I have one other question.

You mentioned a figure when we were discussing the Bureau of Labor statistics. Can you tell me the figure?

Mr. KRAWCZYK. What was that?

Mr. KARSTEN. $3,300 something.

Mr. KRAWCZYK. $3,317.

Mr. KARSTEN. Is that for the individual or for the family? Mr. KRAWCZYK. That is for a family of wife and four children in Wisconsin.

Mr. KARSTEN. You feel that salary is much too high for a family of six?

Mr. RIEHLMAN. He did not make that statement.

Mr. KRAWCZYK. I did not make that statement. I said I disagreed with some of the items. For instance, on taxes they allocate something over $300 for taxes. A man earning $3,317, gentlemen, does not pay Federal or State taxes in that amount unless they are also figuring

in that item indirect taxes.

Mr. TAURIELLO. Do you have a sales tax in that State?

Mr. KARSTEN. What do you figure a family of six should have?

Mr. KRAWCZYK. I cannot judge that.

Mr. KARSTEN. You disagree with the figure of $3,317.

Mr. KRAWCZYK. I want to make this plain, that in respect to the other items the Bureau may be right. I am handling taxes, and so forth.

Mr. KARSTEN. In answer to my question you said they are prejudiced. I would not say that if I were you.

Mr. KRAWCZYK. I am talking about the tax aspect of this thing. Mr. KARSTEN. I would not quote them if I felt they were prejudiced.. I would not refer to them.

Mr. HOLIFIELD. Mr. Krawczyk, in your statement one of your important points was that the Department of Labor did not have regional offices in places where Social Security has offices.

Mr. KRAWCZYK. They did at one time.

Mr. HOLIFIELD. Secretary Tobin appeared before our committee yesterday and on page 154 of the transcript he gave the following testimony:

With respect to the present field offices and regional staffs of the Federal Security Agency now assisting the administration of the Bureau of Employment Security, I wish to point out that the Departmen of Labor now maintains regional offices in all except one of the cities where regional offices of the Federal Security Agency exists. For this reason I believe that, with minor adjustments, the Department of Labor can operate as efficiently and effectively in the field as the Federal Security Agency does at the present time.

I might say that we have a regional office in another city, so that we both have 12 regional offices. We differ in one respect. In 11 instances the regional offices of the Federal Security coincide with the regional offices of the Department of Labor.

I just point out that testimony as being in direct contradiction of your testimony and let the record stand.

Mr. KRAWCZYK. I should like to reply to that.

The Secretary of Labor testified similarly before the Senate committee. I differed with the Secretary at that time. I testified as follows:

The Secretary of Labor testified on Monday morning that the transfer of these two services should not require the establishment of additional regional offices. I believe, however, that this must have been the result of misinformation given to the Secretary, because I am sure that he would not say so if he knew the facts. It is true that the Labor Department has a staff of field representatives in the various cities throughout the country which aid in the administration of the Wage and Hour Act, the apprenticeship program, and the Women's Bureau. Prior to July 1, 1948, when the Employment Service was still under the control of the Labor Department, the Labor Department had established 12 regional offices throughout the country to administer the employment service program only. After July 1, 1948, when Congress did not appropriate any money for the Labor Department to continue these regional offices, the Labor Department physically closed down all 12 regional offices. Shortly thereafter the Federal Security Agency, which must maintain regional offices to administer the 14 other FederalState grant-in-aid programs, continued its regional offices and also absorbed the employment office functions in the same regional offices. Shortly after, the Federal Security Agency reduced the number of regional offices from 12 to 10, which is still the case.

My point is that the Federal Security Agency must maintain regional offices for the purpose of administering its 14 Federal-State grant-in-aid programs, and the Labor Department, if this transfer is made, will have to establish duplicate regional offices to carry out its functions, under the President's Reorganization Plan No. 2.

My only reason for dwelling on this last item of my remarks is to show that while the Labor Department has a staff of field representatives in various cities throughout the country, these are not regional offices as we understand them. Regional offices are offices established by the Federal agency to act as a liaison between the Federal and State agencies. For example, a State agency must channel all its communications to the Federal agency through the regional offices and vice versa.

Mr. HOLIFIELD. The testimony of the Secretary of Labor and your testimony are in direct contradiction and the committee will be able to judge.

Mr. KRAWCZYK. I think you can obtain the facts.

Mr. HOLIFIELD. Thank, you Mr. Krawczyk.

Mr. KRAWCZYK. Thank you, Mr. Chairman, for this opportunity to appear before you.

Mr. HOLIFIELD. We now have Mr. Lawton, Assistant Director of the Bureau of the Budget.

STATEMENT OF FREDERICK J. LAWTON, ASSISTANT DIRECTOR, BUREAU OF THE BUDGET

Mr. LAWTON. Reorganization plan No. 2 of 1949 does two principal things. First, it transfers the Bureau of Employment Security from the Federal Security Agency to the Department of Labor, and with the Bureau its Federal Advisory Council. Second, it abolishes the Veterans' Placement Service Board and transfers its functions and those of its chairman to the Secretary of Labor. I should like briefly to explain each of these changes and indicate the reasons why they are desirable.

TRANSFER OF BUREAU OF EMPLOYMENT SECURITY

The President has long believed that the Bureau of Employment Security properly belonged in the Department of Labor. The Cominission on Organization of the Executive Branch has unanimously recommended that the Bureau be transferred to the Labor Department. And the Secretary of Labor and the Federal Security Administrator have both concurred in that recommendation.

Since the question of the proper location of this Bureau has been before the Congress for some time, you are no doubt generally familiar with the agency and the issues involved in its transfer. The Bureau of Employment Security administers the functions of the Federal Government relating to employment service and unemployment compensation, or unemployment service as it is coming to be called. These are both Federal-State programs. Actual operations are handled by the States, but the cost of administration is borne entirely by the Federal Government. The Federal role consists mainly of the review and approval of State plans of operation, the administration of grantsin-aid, the conduct of research and developmental activities, and the provision of technical advice and assistance to the States. In the case of employment service, it also involves provision for the interstate clearance of labor and the maintenance of special supervisory and coordinating machinery with respect to the placement of veterans and farm workers.

Employment service and unemployment compensation are companion programs. The first aids workers in obtaining jobs and employers in securing labor, while the second provides cash benefits when suitable employment cannot be obtained. Though both programs are important, the fundamental concern is to get the unemployed worker a job. In consequence, the efficiency of the public employment service should be the dominant consideration in determining the location of the Bureau of Employment Security in the executive branch. This is true even from the standpoint of the unemployment compensation program, for whatever speeds up the placement of workers in jobs reduces the drain upon the compensation funds and lightens the burden of unemployment compensation levies upon employers.

The Labor Department undoubtedly affords a much more favorable environment for the development of employment service than does the Federal Security Agency. The latter by the nature of its pro

grams is naturally more deeply interested in social insurance than in employment service. On the other hand, the Department of Labor has the specialized services and personnel needed to aid the Bureau. of Employment Service in improving employment service.

Every bureau of the Department of Labor has something to contribute to the effectiveness of public employment service. Much of the work of the Bureau of Labor Statistics in particular bears directly on employment-service problems. Its occupational outlook program produces vocational counseling materials used in employment service. Further, its studies and statistical materials on wages, hours, and employment provide valuable guides for employment service officials. The Bureau of Labor Standards is the source of needed information on labor standards and working conditions. The Women's Bureau and the Wage and Hour Division have specialists on employment problems of women, learners, and some other special groups. The Bureau of Veterans' Reemployment Rights assists in returning veterans to their former jobs, and the Bureau of Apprenticeship cooperates with the employment offices with respect to recruiting and placing apprentices. Conversely, the various agencies of the Department of Labor need the assistance of the employment service in performing their functions. With their numerous day-to-day contacts with employers and workers throughout the country the public employment offices are an invaluable source of current information on labor market problems.

In opposition to the transfer of the Bureau of Employment Security the claim has been made that the Department of Labor is biased in favor of the worker and cannot be trusted to deal fairly with the interests of employers in administering the functions of the Federal Government with respect to employment service and unemployment compensation. This claim ignores the fact that the Department of Labor is just as much a public agency as is the Federal Security Agency. Both are controlled by the policies prescribed by the Congress. Both are headed by officers selected from outside the labor movement. Both are subject to the same supervision by the President. However, the real answer to this charge is to be found in experience. The Department of Labor has administered for years a number of programs, such as the wage-and-hour program, the Walsh-Healey Act, and the labor statistics program, which require absolute integrity and equitable treatment of both management and labor. Had these programs not been fairly administered by the Department, a strong demand for their transfer would long since have arisen. Furthermore, it should not be forgotten that from 1933 to 1939 and from 1945 to 1948 the United States Employment Service was administered by the Labor Department and that the volume of employment service placements reached its peak during the latter of those periods. Again, had the Labor Department been unfair to management in its administration of its employment service functions during those years, it is obvious that employers would have withheld their patronage and placements would have fallen. Since placements rose sharply instead, it is obvious that the employer patronage increased and that the charges of bias and unfairness were not substantiated by experience. In this connection it also is worth noting that in many States employment service and unemployment compensation are, and for more than a dozen years have been, administered by labor departments. Among

these are several of the major industrial States, including New York, Pennsylvania, Illinois, and Massachusetts. Together these States have been 40 and 50 percent of the personnel engaged in these programs. Had administration by labor departments proved detrimental to the interests of management or to the effectiveness of the employment service and unemployment compensation programs, it is certain that an insistent demand for removal from those departments would long since have arisen. The lack of efforts to effect such changes is strong evidence of the absence of substance to the principal objections to this reorganization plan.

VETERANS' PLACEMENT SERVICE BOARD

Now let me explain the provisions of the plan with respect to the Veterans' Placement Service Board. The United States Employment Service is required by the act which created it and by the Servicemen's Readjustment Act of 1944 to maintain a Veterans' Employment Service. This service is operated through the regular State employment offices with veterans' placement representatives from the Bureau of Employment Security exercising special supervision over the work. The reorganization plan does not abolish or alter the operation of the Veterans' Employment Service. Rather it simplifies the machinery for the administration of the Service.

The function of the Veterans' Placement Service Board has been to determine the policies of the Veterans' Employment Service, which by law is administered by the United States Employment Service within the Bureau of Employment Security. The chairman of the Board has had the additional function of appointing the chief of the Veterans' Employment Service. The Board has consisted of the Administrator of Veterans Affairs as chairman, the Director of the Selective Service System, and the head of the department or agency in charge of the United States Employment Service (now the Federal Security Administrator). Thus, the policies and the selection of the chief of the Veterans' Employment Service have been controlled by officers other than the head of the agency by which it is administered.

The abolition of the Board will concentrate responsibility for the policies of the Veterans' Employment Service in the officer who will be responsible for supervising its administration after the transfer of the Bureau of Employment Security, namely, the Secretary of Labor. This will eliminate what the Commission on Organization of the Executive Branch of the Government referred to as an "anomalous administrative arrangement" needing correction. More important, it will make for better service to veterans by fixing responsibility and assuring proper working relations between the Veterans' Employment Service and the general employment service.

The Department of Labor was intended to be the central agency of the Government for the administration of labor functions, but in recent years these functions have been scattered about the executive branch. In the judgment of the President and the Commission on Organization of the Executive Branch the time has come to reverse this process and bring about a more orderly and efficient organization of Federal activities relating to labor problems. This plan is an important step toward the accomplishment of that objective. Mr. HOLIFIELD. Are there any questions?