each State assigns a contribution rate to each employer which is based on his actual experience under the State law. That system of individual rate variation, based on experience, is dependent on certain Federal tax credits. Those tax credits turn on Federal statutory language, setting certain broad standards which every State experience-rating system must meet. That Federal language is very broad indeed; so it leaves a great deal of discretion in the hands of the Federal Administrator, whoever he may be.

Every State experience-rating plan, and every State amendment to any such plan, must be approved by the Federal Administrator. The statutory Federal language is only a few lines long, but the administrative interpretations have been emboded in 61 pages of regulations. That may help to suggest that a hostile administrator could modify his interpretations, and thereby seriously hamper experience-rating under State laws, or even eliminate it entirely. Accordingly, all those who believe in State experience-rating systems oppose giving this power to the United States Labor Department, not because of any. lack of confidence in the present Secretary of Labor, but because it is a matter of record that the national labor groups are opposed to experience-rating under State laws, and their influence would in time be sure to carry substantial weight.

Fourth, the national labor organizations favor the imposition of more Federal standards and controls over State laws and State administration. I believe that position is shortsighted even from labor's viewpoint, quite apart from its implications for democracy and back-home government. Increased Federal controls would kill off State initiative and experimentation, and put an end to such marked improvements as have been effected by purely State action during the past decade. Yet national labor favors more Federal controls over State laws and operations: and would be in a far more strategic position to push such controls if the Federal employment security functions were transferred to labor's statutory protagonist, the Labor Department.

Fifth, for the long pull the national labor organizations are opposed to maintaining State employment security programs at all. They insist that the present system of State laws and State administration be scrapped, in favor of a single national law with flat uniform contribution rates. That would mean a tremendous centralizing change, away from our present Federal-State form of democratic government. It should therefore be easy to understand why those who advocate State control, rather than control from Washington, and who favor differential contribution rates in proportion to individual risks, are concerned with the pending proposal to transfer Federal administration to a department which is at least sympathetic with the labor viewpoint, if not actually dominated by it.

In conclusion, the primary issue raised by Reorganization Plan No. 2 is whether the Federal employment security functions shall be handled by a neutral Federal agency, with the public interest paramount. That's what we favor.

We oppose turning over these Federal functions to the Department of Labor, which represents by law only one of the special interest groups involved, and which cannot therefore command the full cooperation either of employer groups or of the general public.

STATEMENT BY PAUL SIFTON FOR THE CONGRESS OF INDUSTRIAL ORGANIZATIONS

The Congress of Industrial Organizations appears here in support of the President's Reorganization Plans No. 1 and No. 2.

We favor Reorganization Plan No. 1 because the efficient administration of the responsibilities assigned to the Federal Security Agency, affecting as they do most of the people of the United States, requires the Cabinet status and the unified internal authority of a Federal Department of Welfare.

We favor plan No. 2 which would transfer the Bureau of Employment security to the Department of Labor because we believe it belong in the Department of Labor. For 9 of the 16 years of its operation, the United States Employment Service was administered in the United States Department of Labor. As a part of that Department, the Employment Service was able to establish itself in the confidence of workers and employers alike and contribut d increasingly to the economic well-being of this country. This was due, in a large measure, to the fact that in the Department of Labor the Employment Service was able to use the services of other bureaus in the Department which contribute to maximizing and stabilizing employment. The location of the United States Employment Service in the Department of Labor is necessary to assure that the most effective

service will be provided to employers, workers, veterans, handicapped workers, and the general public.

The Federal functions and activities of the Employment Service and unemployment insurance are interrelated and should be indivisible.

A basic objective of our economy is the creation of employment opportunities and the placement of workers in jobs. The necessity for payment of unemployment benefits arises from the failure to achieve this objective. Coordination of these functions is essential and should be carried out through the Government department most directly concerned with this objective.

Since its creation in 1913, the United States Department of Labor has been most intimately concerned with providing services to employers and workers so as best to promote opportunities and profitable employment, and in this connection has developed resources and facilities concerning labor-market conditions, labor turn-over, and other problems affecting employment and working conditions. It is, therefore, especially important that these two programs, dealt with in Reorganization Plan No. 2, be coordinated federally in the Department of Labor. In contrast, we do not believe that these two programs can be similarly advanced in an agency such as the Federal Security Agency or Department of Welfare which is concerned primarily with welfare, health, and education programs.

Let us examine some of the statements made by those who oppose the location of the Bureau of Employment Security in the Labor Department. These statements appear to fall under these principal headings:

1. Fear that the United States Department of Labor, created in 1913 by a Republican Congress and President to promote the welfare of wage earners, cannot be trusted with the interrelated and indivisible functions of administering the United States Employment Service and unemployment insurance.

2. Fear that the unemployment insurance benefit trust funds will be depleted if the plan becomes effective.

3 Fear that "merit rating" reductions in tax rates paid by some employers will be wiped out if nlan No. 2 becomes effective.

4. Fear that eligibility and amount and duration of benefits would be changed to make eligibility broader. amounts greater, and duration longer.

5. Fear that the provisions of the Unemployment Insurance Tax Act and of State Unemployment Insurance Acts protecting unemployed workers against being referred to unsuitable jobs or jobs vacant because of a labor dispute would be changed in the workers' favor.

Let us examine each of these points.

First. it should be noted that all the objections cited have one thing in commonfear. Reorganization Plan No. 2 is being fought with scare propaganda not based on facts.

The first objection, that because its statutory functions include the promotion of the welfare of labor, the Department of Labor cannot be trusted with the job of finding jobs for unemployed wage earners and with paying them earned benefits related to past wages while they are unemployed, seems to us to be the most serious and disturbing objection.

We feel that the Employment Service and unemployment insurance are functionally two hands of the same body and that if either is to function as it was intended to function, they must be operated together in a single agency and that the Labor Department is the natural location.

In all the talks of neutrality, we are disturbed by the unsupported charges of bias against the Labor Department. Employer confidence in the Labor Department is demonstrated by the fact that USES placements have risen from 12 percent, prewar, to 18 percent of all placements. Emplover confidence is demonstrated by the general acceptance and use of Bureau of Labor Statistics findings in collective bargaining and, I believe, in making industrial, business, and market decisions.

The charge that, because of alleged bias the Labor Department is unsuited for this, that, or the other function has become a common argument against this and other legislative proposals. It is one that labor challenges, as applied to this plan and generally.

Inderlying this expressed attitude toward the Labor Department is an apparent assumption that there is an inevitable and irreconcilable class struggle or class conflict, and that promotion of the welfare of labor, the responsibility assigned to the Labor Department, can only be achieved at the expense and to the hurt of other segments of our economy and our society. This assumption appears to rule out the possibility that promotion of the welfare of the wage earners is consistent with and can promote the welfare of other groups and the

welfare of the Nation as a whole. It appears to deny the fact that our national welfare largely depends upon protecting and promoting the welfare of wage earners who with their families constitute the great majority of our population. This novel ideological approach, actually unrelated to facts and experience in Employment Service placements and Employment Service unemploymentinsurance experience in 16 States where both are located within the State labor departments, is made more disturbing because it is applied only against the Labor Department.

It has not been applied against the Department of Agriculture. A farmer has usually headed that Department and when a nominee is up for confirmation that is one of the principal qualifications cited in his behalf. As compared with the very small Labor Department budget which for the current year amounts to less than $17,000,000, the Department of Agriculture-charged with promoting the welfare of farmers-administers about $1,000,000,000 a year, including Soil Conservation, Commodity Credit Corporation, Farm Credit, Crop Insurance, the Farmers Home Corporation, the Agricultural Exension Service, the Bureau of Home Economics and Human Nutrition, and many others. And we have yet to hear charges of bias and lack of confidence in the Department of Agriculture. It has not been charged that, because the Department was charged by statute with promoting the welfare of farmers, it could not be trusted wth any or all of these programs.

Similarly, the Department of Commerce is usually headed by a businessman, to promote the welfare of business and to give service to businessmen. And that has not been called biased.

The Treasury Department, under both parties, has been headed by bankers, financiers, capitalists. And there has not been a charge of bias there.

In the case of the Department of the Interior, it has been urged that it should be staffed by people who know and are sympathetic with the problems dealt with by the Bureaus of Reclamation, Grazing, Irrigation, Mines, etc. Whenever this custom has been breached, an uproar has resulted.

In contrast to this attitude toward these Departments, it is now contended that the Labor Department, whose last wo Secretaries of Labor were not even drawn from the ranks of labor, is not qualified to handle a job which is, if anything is, a proper job for the Labor Department. This is alleged despite the fact that similar functions have been entrusted to other departments where, from top to bottom, they have been administered by persons drawn from the phases of our economic activities which they deal.

It is argued that unemployment insurance is a form of insurance and that as such its Federal administration is not a proper function of the Labor Department. Our position is that unemployment insurance is one phase; that the Employment Service and the payment of benefits are two parts of the same function and that if it is in the Labor Department workers are likely to get jobs with a smaller interval of time than would occur under another administrative agency where less emphasis might be placed upon placement and more on claims taking and benefit payments.

Located in the Labor Department, the emphasis will be on getting workers back in productive jobs on a 100 percent weekly take-home pay basis, rather than letting them stagnate in unemployment drawing less than 50 percent of their regular wage in benefits. The result of this would be to protect and conserve the unemployment-benefit trust funds and, in promoting the welfare of wage earners by getting them back to work as quickly as possible, the Nation's purchasing power, markets, and welfare would be protected and promoted.

If the assumption that promotion of the welfare of labor is inimical to the welfare of other segments were correct-and we say it is not correct-then not only should the Congress disapprove this plan, but perhaps it should consider the repeal of the act creating the Labor Department and the abolition of that Department, not only to prevent further wastage of public funds, but to stop an activity which, if that assumption were correct, would be a threat to the public welfare.

A proposal for outright abolition of the Department of Labor would get the basic issue involved in this discussion before the American people.

This question of the attitude of Congress toward the Department of Labor, in terms of functions and appropriations, is broader and deeper and more important than the instance before you in the consideration of this plan. But the decision on this plan will be an indication, one way or another, of attitude on the broad and fundamental question of whether or not we are to have an agency that is more than a Department of Labor in name only.

The other points of opposition can be dealt with briefly.

The fear that the unemployment-insurance trust funds will be depleted if this plan becomes effective in artificial and unreal. These funds are held in the Treasury, and belong to the States. Only the States can draw up them. State laws and administration are not affected by the plan; the Federal agency must operate under title III of the Social Security Act, the Unemployment Tax Act, and such amendments as the Congress may enact.

Fear that merit rating will be wiped out is another bogeyman. Only the States can change merit-rating provisions that now exist or adopt new ones. Federal standards can be changed, but only by act of Congress.

Similarly, eligibility qualifications and the amount and duration of benefits could be changed only by State action.

The fear that the protection of unemployed workers against being referred to unsuitable jobs or jobs vacant because of a labor dispute would be changed appears to mask a fear that the present standards in the Unemployment Insurance Tax Act and in State laws will be adhered to, making referrals to jobs vacant because of labor disputes different or impossible.

We are determined that these statutory standards shall be enforced and adhered to. To the extent they are departed from, or weakened, unemployment insurance is transformed from a protection to unemployed workers, as an earned right, into a device for coercing unemployed workers into taking unsuitable or scab jobs and the cooperating Employment Service becomes a labor-sweating, strike-breaking agency.

Finally, a word about the proprietary attitude taken by some employers toward the tax payments under the Unemployment Insurance Tax Act. They call these payments contributions. They claim that, because they make contributions, they have a special interest. As a matter of fact, employers are the tax-collecting agents; the tax is added to the cost of production and is included in the price. The price is paid by the consumer. The wage earners covered by unemployment insurance are most of the consumers; therefore, the wage earners themselves finally pay most of this tax.

We submit that the Labor Department is best equipped, by statutory assignment of functions, by knowledge of employment conditions and the assistance that can be given by other bureaus and divisions to administer a unified unemployment insurance-Employment Service operation in ways that will not only promote the welfare of labor, but equally, and because it does so, also promote the welfare of employers and the public. We urge the committee to allow Reorganization Plan No. 2 to become effective.

A STATEMENT BY THE COMMITTEE ON INDUSTRIAL PROBLEMS AND RELATIONS OF THE CHAMBER OF COMMERCE OF THE STATE OF NEW YORK

The Chamber of Commerce of the State of New York was among the first organizations to endorse the recommendations of the Hoover Commission. In a resolution adopted unanimously at the regular monthly meeting on April 7, 1949, the chamber pledged to the President and the Congress its support in the task of reorganizing the executive branch of the Government at the earliest possible date, and it urged that the President be granted authority to institute reorganization plans, as recommended by the Hoover Commission, subject to congressional disapproval.

In its report on the work and recommendations of the Hoover Commission, the chamber recognized that in so great a task there were undoubtedly proposals that should be reconsidered in the light of experience and in the public interest. It urged that such changes in the Commission's recommendations as may be desirable must be achieved without impeding progress toward the goal of greater economy and efficiency in the administration of the executive branch through the adoption of the large majority of the Hoover recommendations. Certainly no task is more important in our time than to make the executive branch of our Federal Government a more efficient and economical structure. We applaud the significant service that has been rendered to the Nation by the Hoover Commission. We believe that the overwhelming number of its recommendations are sound and in the public's best interest. It is a matter of regret, therefore, that we cannot lend our endorsement to Reorganization Plan No. 2, which would transfer the Bureau of Employment Security, the Veteranss' Placement Service Board, and the Federal Advisory Council from the Federal Security Agency to the Department of Labor.

The administration of the Nation's complex Federal-State system of social security is one which must be handled with the greatest possible degree of objectivity, and in the interests of all the people. It would be unfortunate if this important function were to be directed for the special benefit of a particular segment of our society, or administered with possibly partisan political motives. This principle was recognized in the original social security legislation, in 1935, when it was determined that the social-security program that was then established should be administered by a wholly new and independent agency. The original bills provided that the Department of Labor should undertake the direction of the program. But Congress, wisely, we think, decreed that the public interest would best be served by the creation of an independent Social Security Board to supervise the program, in order to avoid the possibility of special favoritism to any particular group. It was insistence on this same principle that led the Seventy-ninth and Eightieth Congresses to disapprove earlier reorganization proposals that would place the administration of some of the socialsecurity programs in the Department of Labor.

It is a matter of general knowledge that the Department of Labor has, almost since its inception, been viewed primarily as "labor's voice in the Cabinet." Under the law the Department is directed to "* * * foster, promote, and develop the interests of the wage earners." It has been our observation that the Department has rather consistently followed its statutory mandate, sometimes, we think, to an extreme position. We believe, therefore, that the Department of Labor, perhaps to a greater extent than any other executive agency, is a "special-group interest" agency. As such we believe that it would be a step backward now to add to its responsibilities the administration of the unemployment compensation and employment service programs that are of such important and immediate concern, not only to the wage earners but to our society as a whole.

Members of Congress are aware of the campaign that has been, and is being, relentlessly pursued by the spokesmen for certain national labor organizations, calling for the complete nationalization of the unemployment-compensation and employment-service programs. We have consistently opposed transfer of these programs from the States to the National Government. We believe that the widely varying conditions existing among the States make it desirable that each State retain the power to establish its own program to meet its specific requirements. For example, the requirements of an effective unemployment-compensation program in a heavily industrialized State like New York vary substantially from the requirements of a State having a predominantly agricultural economy. The present system permits, therefore, a degree of flexibility which, we think, is indispensable to the over-all success of our Federal-State system of unemployment compensation.

If the transfers contemplated in Reorganization plan No. 2 were to be made, we believe that the administration of the Federal Government's responsibilities in the unemployment-compensation and employment-service programs would be directed toward the complete nationalization of these programs. The present Secretary of Labor has frequently expressed his support of the nationalization objective, and so have other spokesmen for the Department. With his new powers, should Reorganization Plan No. 2 be approved, the Secretary would have great leverage, through his budget-approval, rule-making, and supervisory functions, to further substantially the cause of nationalization. This, we think, would be most unfortunate, and not in the interests of the general public. Certainly it would not be in the interests of the employer who, in nearly all States, pays the bill for unemployment compensation. Added to this is the threat of repeal of all merit-rating provisions, now part of all State unemployment-compensation laws.

The second fault we find with Reorganization Plan No. 2. is that it would increase substantially the Federal Government's cost of administering its part of the unemployment-compensation, employment-security programs. This plan, therefore, runs counter to the Hoover Commission's primary objective of securing greater economy in the executive branch.

Experience has indicated that it is necessary to have a regional-office organization adequately to carry out the social-security program (including unemployment compensation and the employment service). At the present time the Federal Security Agency administers these programs through their regional organization.

If the transfer is made it will be necessary for the Labor Department to establish its own field organization, including offices, key personnel, et cetera, to perform these added functions. It is an inescapable conclusion that this will require