separate from the State employment agencies now in existencewould be effective in placing sufficient men in railway or other jobs to be worth the cost of their establishment.

Throughout my statement I have confined myself to fundamental objections to the enactment of the pending bill. I have shown the lack of precedent for all of the important provisions of the proposal; the unsound premises on which it is based; the inequitable manner in which it would work, both in regard to the carriers and their employees; and the heavy cost it would impose.

Concerning the lack of precedent, I have shown that the bill rejects the fundamental principles on which the system of unemployment compensation existing in the United States is based.

Under the terms of the bill, the building up of adequate reserves with which to care for the depression unemployed would be impossible. No provision is made for merit rating, with its concomitant incentive for stabilization of employment.

The benefit formula and scale does anything but maintain an exact or even reasonable ratio between work and benefits.

Decrease in the degree of employment is in no way necessary for the receipt of partial benefits; in fact, an employee may earn over $100 a month, or more than double the benefit rate for total unemployment, and still be entitled to receipt of partial benefits.

No effective provision is made for putting the former railway worker in contact with new sources of employment.

I have shown that the benefits payable under this bill, in the lower earnings brackets, would be up to 51⁄2 times as liberal as those payable under the State laws, and that the benefits payable to the great majority of applicants would be no less than twice as liberal as they would receiver under the State laws. Accentuating the inequality of this situation is the further fact that this great majority of applicants constitute the casual, irregular, or intermittent workers who have no permanent attachment to the industry. Thus the bill says, in effect, that because an individual finds a limited amount of railroad employment in a specified period he is entitled to several times as much in unemployment benefits as if that employment had been in some other industry. Furthermore, a worker would be entitled to the regular receipt of partial benefits, even though he would not be entitled to the receipt of any benefits under State laws.

The corollary to the liberal treatment which would be accorded the casual, irregular, and intermittent railway worker could but be discrimination against the more regular railway worker when and if he becomes unemployed. This raises the vital question as to whether this liberal treatment would be offset by loss of working opportunities in other industries; in short, whether the railway worker himself would gain by being set apart from other workers in the manner contemplated by this bill.

In regard to cost, I have presented evidence to support my opinion that the cost of this bill would be far in excess of 3 percent of the railroad pay roll. Far stronger substantiation of this opinion is provided by the sequence of facts which I have presented. Each of the fundamental principles in the present system provides a check on cost; to disregard these principles can but eliminate a check and lead to excessive cost. This potentially excessive cost becomes a certainty when it is considered that railroad unemployment is centered among

the casual, irregular, and intermittent railway workers who are not permanently attached to the industry; that these same workers would constitute the great majority of applicants under the bill; and that the benefits payable to them would be relatively more than twice as liberal as those they would receive under state laws. The cost would be further inflated because of, first, the lack of restrictions on payment of these liberal benefits to seasonal employees; second, the failure to disqualify for self-employment; and, third, the fact that former railway employees would be handicapped in their search for new sources of employment, thus increasing the probability that they would be unemployed long enough to receive the maximum amount of benefits. I have demonstrated that the pending bill neither constitutes nor suggests an acceptable pattern of unemployment compensation. The bill, in effect, attempts to straddle the fence between unemployment compensation and unemployment relief, resulting in a mixture that retains the fundamental principles of neither. It is not unemployment compensation, because there is no reasonable relation between work and benefits; it is not relief, because the payment of benefits is not predicated on need, nor denied because of self-employment.

In conclusion, Mr. Chairman, I urge that because of these very fundamental comments which we have made on this bill the committee consider with great care all of these great differences and unusual factors in the bill and reject the bill in its entirety.

I thank you for your attention.

Senator TRUMAN (presiding). Thank you.

Who is the next witness?

STATEMENT OF ANDREW E. LAWLER, CHICAGO, ILL., GENERAL AUDITOR, ILLINOIS CENTRAL RAILROAD, REPRESENTING ASSOCIATION OF AMERICAN RAILROADS

Senator TRUMAN (presiding). Will you give your full name, please, sir?

Mr. LAWLER. My name is Andrew E. Lawler; residence, Chicago, Ill.; employed as general auditor for the Illinois Central Railroad, and I appear here for the Association of American Railroads.

Senator TRUMAN. Proceed.

Mr. LAWLER. Since the inception of the social-security program I have had considerable interest in the matter of administration and other matters pertaining to the State laws. Our company has major operations in eight States, where we make reports, and we have had frequent contacts with the administrators of those States with a view to working out simplifications.

I have served on a committee of the Association of American Railroads which cooperated with the committee of the National Conference of Unemployment Administrative Agencies, with a view to simplifying State procedures and making suggestions.

I have also spent considerable time as a member of a committee representing the Association of American Railroads in discussing a bill similar to this with a committee representing labor.

(At this point Senator Burton K. Wheeler, chairman of the committee, entered the room.)

Mr. LAWLER. It is my purpose to discuss S. 3772 in some or its practical aspects in light of an intimate acquaintance with railroad

pay rolls, records, and procedure extending over a period of nearly one-third of a century.

Any discussion of the bill will necessarily involve frequent references to the Board. The definition given in the act is that the term "Board" means the Railroad Retirement Board. This word appears in the bill something like 165 times with respect to what the Board shall do and what the Board may or can do.

One of the reasons that has been advanced in favor of the bill is that it will save the railroads vast sums of money by eliminating accounting detail and reporting to States. This saving I have heard variously stated at from $3,000,000 to $6,000,000 per year. Surprise has been expressed that the railroads have not accepted the prospect of such an immediate saving, with the inference that railroads are not interested in saving such substantial amounts. As a matter of fact, railroads are eagerly interested in any real saving, regardless of amount, be it measured in millions, thousands, or hundreds of dollars-even the ordinary 2-bit piece is not despised. Instead of the bill offering the immediate prospect of very substantial savings, we do not believe that any saving would be accomplished, but, on the other hand, additional expenses would be incurred.

A great deal has been said about the expensive reports to the various State commissions which would be entirely eliminated if one central agency were established which could use the same reports that are now made to the Railroad Retirement Board. We believe this to be an assumption premised on a fallacy. So much has been accomplished within the last few months toward simplification of State requirements that the expense involved has been greatly reduced as compared with the initial procedure. In many cases the wage statistics furnished to the States are simply a carbon copy of wage statistics furnished quarterly to the Railroad Retirement Board in connection with the Railroad Retirement Act. It is true that some States require a different kind of report which involves some expense. This may be due to the provision of their laws or the scheme adopted, but these conditions are rapidly disappearing as a result of arrangements that have been worked out through the cooperative efforts of the roganization known as the Interstate Conference of Unemployment Compensation Agencies, and we confidently expect that this particular difficulty will eventually disappear.

With respect to costs incurred by the railroads in connection with reporting to States, I will attempt to show that these present-day costs do not aggregate anything like the vast sums that have been variously estimated by proponents.

The most recent figures quoted indicate that there are now about 913,000 railroad workers in the country actively employed. The Illinois Central system has approximately 27,000 employees which is about 3 percent of the total class I railroad employees.

We on the Illinois Central have the work, incident to reporting to the Railroad Retirement Board and to the various State commissions, entirely separated from all other accounting work, and therefore know the costs. A careful survey of our work shows that if we should at this time discontinue making any reports whatever to States, and only make reports that are now made to the Railroad Retirement Board, we would only be able to eliminate about $400 per month, or $4,800 per annum, which is the only additional expense that we incur on

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account of making reports to States. When all States begin paying total and partial benefits, this amount will be increased to about $600 per month, or $7,200 per year. On the basis of $4,800 representing the cost of reporting to States for 3 percent of the railroad employees, the total cost to all railroads would aggregate $160,000 per annum. When all States begin paying total and partial benefits, the total annual cost to railroads for various reporting may reach a figure of about $250,000 per year. It is true that this ratio may vary upward or downward on different railroads according to their organization and so forth, but it is obvious that if the railroads only spend about $250,000 per year for reporting to States, they cannot save up to $6,000,000 out of that amount unless they obtain dividends from some unknown sources. Of course, if railroads did not have to make returns to the Railroad Retirement Board and the returns to States had to be independently prepared, the cost would be very much greater. But as the records and reports made for the Railroad Retirement Board are utilized for reports to States, the cost for the latter may be stated as only the cost incurred, in addition to the cost of reports to the Railroad Retirement Board.

What has been said with respect to the saving of approximately $1,200,000 in taxes on account of excluding amounts of wages and salaries in excess of $300 per month is based on the pay rolls for the year 1937, but to get this saving we must give up the merit rating now included in 39 State acts. On the basis of 1937 pay rolls, if merit rating permitted even a reduction, say, of from 3 percent to 2 percent, it would mean a saving of $20,000,000.

Before considering any saving to be effected we must take into consideration the additional expenses that will be incurred.

In considering the possible cost to railroads to be incurred under the proposed scheme, we must examine some of the provisions of the bill:

1. It is provided that employers shall file with the Board, in such manner and form and at such times as the Board by regulations may prescribe, returns under oath of monthly compensation of employees, and, if the Board shall so require. shall furnish employees with statements of their monthly compensation as reported to the Board.

This latter provision alone, if enforced by the Board, would cost the railroads several times more than any saving that could be realized from discontinuing making reports to the States; because reports to States, as a general proposition, are on list forms, often copies of reports to the Railroad Retirement Board. When reports are on slip forms, the aggregate of 3 months' earnings is reported to the States and all reports for employees of a given State are filed together, requiring only one mailing. The burden of mailing out individual reports to employees monthly, or even quarterly, would be very expensive.

2. It is also provided that the Board shall prescribe a procedure for registration of unemployed employees at employment offices with a view of affording substantial evidence of the days of unemployment of the employees who register. The regulations of the Board may provide for group registration and reporting, through employers, and need not be uniform with respect to different classes of employees

In the first place, it is self-evident that the Board is empowered, without restriction, to place a very considerable burden on employers in the matter of registration.

What is meant by group registration is certainly a matter of conjecture, but, of course, this would be a matter for determination of the Board and the exercise of their good judgment.

It is the declared purpose of registration that it shall afford substantial evidence of the days of unemployment of the employees who register. It is difficult to see where this would be of any value whatsoever, unless the employee personally registered and that this registration should be made on each and every day of unemployment in order to determine whether or not the employee may be entitled to benefits, in light of the various disqualifying conditions imposed under section 4 of this bill.

Here is injected the feature of negative timekeeping or the recording of days when employees did not work and the reasons therefor, so that it may be determined whether the reasons qualify the employee for benefits or disqualify him from receiving them. This is essentially a very expensive procedure, with respect to accepting registrations, recording, and reporting them. Apparently, from all that can be determined from the bill, this will be an obligation and an expense of the railroads which will more than offset any saving that they might enjoy through the escape from the State systems.

Taking into consideration the additional cost to the railroads that appear to be inevitable, one cannot help but conclude that the expenses to be borne by the railroads will exceed many times the costs that they now incur in handling under the State systems.

In contemplating the cost of an unemployment compensation scheme, both with respect to administrative features and compensation, it is important to take into consideration the effects of placing too easy a premium on indifferent workers. In the part of the country with which I am best acquainted there are a large number of certain groups of workers who are satisfied to exist on a very little money, particularly if they do not have to work for it. It is the experience of years that it is difficult to get these workers to follow employment so long as they have any money whatever.

If they work in a factory where they are paid on Saturday night, many of them do not return to employment in the next week until all of their money is gone. It is readily conceivable that under the operation of an unemployment compensation scheme such as provided in this bill, where earnings of $150 during 1 year would guarantee unemployment compensation benefits of $140 during the next year, and so on, the incentive to malinger will be much more than ever before, and much more than under State unemployment compensation laws, the most liberal of which provide for total benefits of $25 on a similar amount of earnings.

The CHAIRMAN. You do not find malingering among the employees, do you?

Mr. LAWLER. Senator, not at work, but the employees to whom I refer are down in the section of the country where I live and work, myself, and they are very much inclined to have a little pastime as long as they have a little money, and when the money is gone then it is time to go back to work.

The CHAIRMAN. What class of employee is that? Your section of the country seems to be a little different from the rest.