The CHAIRMAN. Should not the men in the lower brackets, as a matter of fact, who gets the lesser income, receive greater benefits because of the fact that they are less able to stand unemployment? After all, if a man is working and drawing $300 a month or over, as some of them do, and he is put out of employment, he can stand the unemployment better than the man who draws only $75 a month. Mr. YOUNG. It is not so much the rate of pay in this bill as it is the short service.

The CHAIRMAN. Short service, however, means the cheaper pay.
Mr. YOUNG. Generally speaking, yes.

The CHAIRMAN. It always does, except in some instances.
Mr. YOUNG. Well, generally speaking; yes, sir.

The CHAIRMAN. And that person is less able to stand the strain of unemployment as the man who has the higher wage.

Mr. YOUNG. That is right, but, on the other hand, if he has had only 3 months' service in this industry, he probably has had some service in some other industry, and perhaps that industry should take care of that man until he becomes more thoroughly seasoned in this industry. Mr. FLETCHER. I arose to remark that there are certain sheets that might be put into the record.

The CHAIRMAN. They may all go into the record. (The documents referred to are as follows:)

Items considered in establishing industrial production index in various countries and index weight for each item

6. 00

1. 20

.20

17.00

8.00

2.00

1.00

Items considered in establishing industrial production index in various countries and index weight for each item-Continued

FRANCE-Continued

Mines_
Coal..

Iron ore...

Potash.

Building

Leather

Paper..

Rubber...

GERMANY-continued

8. 00 Consumers' goods_-.
Elastic demands_
Textiles___

Household articles_.
Boots and shoes___
Porcelain___.

40.00

25.00

12. 30

8. 10

2. 20

.70

Source of data: 1936-37 Statistical Year Book of the League of Nations.

CHART A-1.-Comparison of benefits payable under the proposed Railroad Unemployment Insurance Act with those payable under the acts of Colorado, Illinois, Maryland, New Jersey, North Carolina, and Tennessee, after periods of continuous employment of 3 months, 6 months, and 1 year

EXHIBIT B.-Annual average percent of railroad employees unemployed for varying periods by length of service, July 1, 1929, to Dec. 31, 1933 (7 railroads)

Compiled from table 16, p. 85, of the Report of the Federal Coordinator of Transportation on Unemploy⚫ ment Compensation for Transportation Employees, Mar. 24, 1936.

Senator SCHWARTZ. Chart A-X, which has been supplied to us is not identical with the chart which has been illustrated.

Mr. YOUNG. Pardon me?

Senator SCHWARTZ. Chart A-X is not identical with the one you have shown us, the larger chart, with respect to Italy, for instance. In this chart it is green.

Mr. YOUNG. Yes.

Senator SCHWARTZ. In this chart it shows that in 1936 Italy dropped down to 78 percent, while in that chart it is up above 100.

Mr. YOUNG. The smaller chart which I have given you is the correct That was due to the labor disturbance. I will have those charts

one.

changed.

Mr. FLETCHER. May it be understood, then, that the witness states that the chart which is introduced in the record and made a part of the record is correct, and if those charts vary somewhat with the chart which he has illustrated, the incorrection is in the chart that was displayed and not in the one introduced in the record.

The CHAIRMAN. Very well.

Mr. YOUNG. May I continue with my statement?

The CHAIRMAN. Yes.

Mr. YOUNG. This bill does not recognize merit rating for individual employers, a principle which is almost universally recognized in insurance practice in all forms of larger coverage, and which is specifically incorporated in State laws for workmen's disability compensation. Merit rating is for the purpose of encouraging the stabilization of employment by the employer and thus reducing unemployment and should be incorporated in this bill. It is a plan under which an employer receives reduction of his percentage of pay-roll contribution to the fund in relation to his credit in the fund due to the excess of his contributions over the benefits paid his employees who become unemployed. As an example, in Illinois an individual employer's reserve or merit rating credit is created when his contributions in dollars exceed the benefit payments to his employees, and when this reserve is equal to 71⁄2 percent of his pay roll, his pay-roll contribution rate is reduced from 2.7 percent to 1.8 percent; now, if his reserve equals 10 percent his contribution rate is reduced from 1.8 percent to 0.9 percent. Conversely, if the benefits paid his employees exceed his contributions

a merit rating debit is created and the rate will be increased from 2.7 percent to a maximum of 3.6 percent.

No employer's rate to be less than 1.8 percent unless assets of the State fund are twice the amount of the total benefits paid in last preceding year, or less than 2.7 percent unless assets exceed benefits paid in the last preceding year. This latter, of course, is to protect the State reserve.

Forty States have similar merit-rating provisions and nine others provide for a study of the subject by State commissions with the object of incorporating such provision if experience in stabilizing employment warrants such amendments.

The principal object sought is the elimination of unemployment by stabilization of employment, and this incentive should not be omitted from any act in some form, be it merit rating or some other system of employer reward for reducing employment fluctuations.

Section 11 of the bill provides for earmarking 10 percent of the tax for administration, and based upon a 2-billion-dollar pay roll of the railroads this would amount to $6,000,000 a year. It is not clear how a budget can be set at this time fixing definitely how the administrative officers of this plan would need to spend $6,000,000 a year.

The CHAIRMAN. What is your view as to what should be set aside? Mr. YOUNG. I believe, as is in the Retirement Act, Senator, that the administrative officer should come to the Congress and make his budget and have appropriated to him the proper amount of money to handle properly this unemployment problem, but no fixed sum should be set aside from the contribution for the purpose of unemployment as an open fund to be spent at the discretion of the administrative officer. In other words, I believe that it is perfectly proper and sound that a Federal act of this character should be administered by the present Railroad Retirement Board. They are thoroughly competent to do the work. It lies in their field. Their statistical information is parallel in a great many respects. They could work on unemployment along with retirement.

I do not believe they should be given a blank check to administer this fund, but, rather, they should conduct the affairs of administration as required in the present Retirement Act.

The CHAIRMAN. What have you to say about that, Mr. Hay?

Mr. HAY. Pardon me. I was looking at the copy and I did not hear what was being said.

The CHAIRMAN. Mr. Young said that you should not set aside 10 percent or $6,000,000 a year for administrative purposes.

Mr. HAY. They object to that as being probably too large?

The CHAIRMAN. Yes.

Mr. YOUNG. It might be too large in some years and not in others. Mr. HAY. We make provision in this bill that in the event there is a saving out of the account which is set apart for administrative purposes, the surplus from time to time may be turned over to the account out of which the funds are to be paid.

The CHAIRMAN. The difficulty with that is that if you give power to one of these departments to set aside $6,000,000 or to set aside $50,000,000, they are going to use the $6,000,000 or the $50,000,000. There never will be any surplus.

Mr. HAY. This is based, if you will recall, upon the same theory as the original Retirement Act, in that in that act there was a similar