reducing the rate of general revenue contributions and employer taxes when the balance in the account, including Federal contributions not transferred to the account, equals or exceeds $850 million or 0.35 percent of wages taxable under State laws. The $850 million-which is about 0.35 percent of taxable wages-represents the estimate of the amount the fund would need to meet its obligations in a year of heavy unemployment. Because dollar figures become outdated by growth of the labor force and increases in taxable wages, the ratio is included as an alternative. Payment of FUA benefits begins in July 1966. The tax accrues on wages after that date, but taxpayments are not due until January 1967. In order to get the program started, as well as to cover future contingencies in which costs might outrun collections at a particular time, the bill provides for repayable advances from general funds to the adjustment account. Such advances are to be repaid without interest, as were the advances for the 1961 temporary extended benefits program, whenever the balance in the adjustment account is adequate for the purpose.

RESEARCH AND TRAINING

By an amendment to title IX of the Social Security Act, the Secretary of Labor would be given explicit directions to conduct research in the field of unemployment compensation and related areas, and to provide for training State unemployment insurance staff. Appropriations for these purposes are specifically authorized.

Research. While a reporting program developed under title III provides significant data about unemployment compensation, there are a number of areas in which exploration of the successes and defects of the program is hampered by a lack of data on experience. In the absence of a specific congressional mandate to conduct research, such as was given for TEUC, it has been impossible to establish and maintain an effective research program. Under this bill, a continuing and comprehensive research program would be required; the research could be conducted by the Labor Department directly, or through grants or contracts. Although the Secretary is given wide latitude in the kinds of studies as well as the method to be used, certain areas of special interest are noted-including such topics as the role of unemployment compensation under varying patterns of unemployment, the relationship between unemployment compensation and other social insurance programs, the effect of various eligibility and disqualification provisions, the personal characteristics, family and employment background of claimants, and exploration of the need for, and ways to achieve, coverage for groups not within the system. To provide for the widest possible use of the research results, the bill specifies that such results are to be made generally available.

Facts gained from the research will provide a basis for evaluation of the program areas which are criticized to determine whether the criticisms were based on statutory deficiencies, administrative weaknesses, or misunderstanding of the program's goals. Proper remedial action could then be developed.

Training of staff.-Even now, it is clear that one type of remedial action is improved staff training and that is being proposed. For example, one of the most common criticisms of the program is that benefits are paid to individuals who do not want to work, and who are not, in fact, in the labor force during the period for which benefits

are claimed. Payment to such individuals is contrary to the express provisions of every State unemployment insurance law.

All the unemployment compensation laws specify that benefits are payable only for a week with respect to which the individual is able to work and available for work. That is, "ready, willing, and able” to work. An individual demonstrates his availability by doing what a reasonable individual, in his circumstances, would do to find a suitable job. Determinations of whether an individual is available for work in the week for which he is claiming benefits are complex, involving a large element of judgment.

If benefits are paid to those who are not available for work, what is needed is not additional statutory prohibitions, but better administrative application of existing provisions. The best way to do this is to expand the number of well-trained specialists who interview claimants and adjudicate claims. The bill calls for steps to increase the supply of such trained personnel, and to improve the training of those now engaged in claims determination and appeals.

TITLE II OF S. 1991

AMENDMENTS TO THE FEDERAL UNEMPLOYMENT TAX ACT IN THE INTERNAL REVENUE CODE OF 1954

The changes in coverage, employer taxes, and the conditions which State laws must meet if employers are to receive tax credit, in whole or in part, are made by amendments to the Federal Unemployment Tax Act.

COVERAGE

The unemployment insurance program should protect, insofar as feasible, all those who work for others and thus face the risk of unemployment. While about 48.4 million jobs are now protected (including Federal employees, exservicemen and railroad workers), about 15 million jobs are still not covered. Consequently, some individuals are completely outside the system, while others can use only part of their past work experience as a basis for benefits. These exclusions exist because States have, for the most part, followed the pattern established by the Federal act. While States are free to go beyond Federal coverage, and a number of them do cover some services not subject to the Federal law, reliance on individual State action is, at best, a slow process. For almost 7 million noncovered jobs, however, State action must be relied on, because they are in State and local governments.

Of the remaining 8 million excluded jobs, almost 5 million would be brought within the system as of January 1, 1967. Another 2 million jobs now covered only by State laws would also become subject to the Federal unemployment tax.

Employers of one or more

About 1.8 million jobs would be brought into the system by extension of the FUTA to all employers who have anyone performing services in "employment" as defined. This is the same coverage provided by the Federal Insurance Contributions Act (OASDI) since 1935. Coverage would be achieved by deleting the definition of

"employer" from section 3306 of the Federal Unemployment Tax Act and by making appropriate deletions from section 3301 and other sections of such act.

At present, the Federal Unemployment Tax Act applies only to employers who have at least four workers in at least 20 weeks in a calendar year. There are 27 State unemployment insurance laws with similar restrictions. Michigan just amended its law, effective in 1966, to move from this category to the one in 20 weeks' category. The other 24 States already cover about 1.4 million jobs excluded from Federal coverage by the size-of-firm limitation.

Experience under OASDI and under the State unemployment insurance laws which cover employers of one worker at any time has demonstrated that such coverage is feasible to administer.

Experience has also demonstrated that the workers in these small firms need the protection of unemployment insurance. In general, in the States which cover firms with fewer than four workers, the proportion of workers from small firms who receive benefits is greater than the proportion from larger firms. At the same time, State experience indicates that coverage does not impose an unreasonable financial burden on these small employers.

There have been indications that the size-of-firm provisions tend to discourage employers from adding another worker where such action would result in liability for unemployment insurance taxes on the wages of all workers.

If the workers in small firms are to be protected equitably, the Federal Government, which was responsible for their exclusion in the first place, must act. The number of States which cover some employers of one worker has increased by only four in the 20 years since December 1945. Moreover, extension by individual State action gives the employer with three workers a tax advantage over his competitor with four workers. The small employer's workers receive full unemployment compensation protection, including protection under Federal programs providing extended benefits-yet he does not pay the Federal unemployment tax for the program's operation, or for the extended benefits.

Nonprofit organizations

The bill would extend the protection of the unemployment insurance system to about 1.7 million employees of nonprofit religious, charitable, educational and humane organizations. The proposal would not cover ministers or members of religious orders in the exercise of their ministry, the handicapped in sheltered workshops, those performing part-time services for religious organizations for less than $15 a week, those working in work-relief or work-training programs assisted or financed by a Government agency, certain students and interns, and others performing services for nonprofit organizations if the remuneration is less than $50 in a calendar quarter.

The workers who would be given protection are engaged in a wide variety of activities, most of which are comparable to jobs in covered businesses. They are elevator operators, scrubwomen, building maintenance workers, typists, clerks, switchboad operators, laborers, waitresses, dishwashers, cooks, as well as teachers, nurses, and social workers. Almost half of them are employed by hospitals; about 40 percent of these hospital workers are food, maintenance, and cus

todial workers. Another one-third are employed by educational institutions and only a small percentage by religious and charitable institutions supported by donations.

While some of the professional groups in the nonprofit field may have the protection of tenure, the same could be said for professional groups of presently covered workers. Furthermore, tenure does not always mean stable employment. Other employees of nonprofit organizations, particularly in the nonprofessional occupations, have a high rate of turnover and relatively short tenure on their present jobs, factors which generally indicate that there is unemployment. The amount of potentially compensable unemployment experience by any noncovered group is difficult to determine. Such evidence as is available indicates that nonprofit employees have a very real risk of unemployment, generally low wages, and therefore, need insurance against the risk.

In recognition of the special tax status traditionally allowed to nonprofit organizations, and the possibility that they may have less than the average amount of unemployment, the bill provides that a nonprofit organization covered by an approved State law could receive full credit. against its Federal tax whether it paid a State tax or not, so long as its workers are covered under the State law. The State could permit nonprofit organizations to reimburse the fund for benefits paid to their workers, could establish a uniform low rate for such organizations without relating it to their past experience, could rate these employers by a different schedule than that applicable to other employers, could finance these benefits by an appropriation from general State revenue, or could adopt any other method or combination of methods chosen by the State legislature to finance benefits to nonprofit workers, without endangering either the tax credit of nonprofit employers or the additional credit of all employers in the State.

The exceptions from nonprofit coverage are for types of services which are not characterized by customary employer-employee relationships. The difference in the case of ministers and members of religious orders is clear. It is also clear with respect to the "client" of a sheltered workshop, who is unable to compete for regular employment.

The exclusion of part-time services for a religious organization, with nominal weekly remuneration, is intended to exclude activities, such as singing in the church choir, performed as an expression of the individual's devotion to religious duties, rather than being the activity from which the individual derives his livelihood.

Services as part of Government assisted or financed work-relief or work-training programs, such as those under titles I-B and II of the Economic Opportunity Act, also represent a special kind of employment relationship, where the work is not related to normal economic considerations. The bill would not delete the present exclusion of services performed by a student for the school he is attending or of services for a nonprofit organization where the remuneration is less than $50 a quarter. These exclusions also appear in OASI.

Agricultural workers on large farms

The bill would apply the Federal unemployment tax to employers using 300 or more man-days of hired farm labor during any quarter.

This would cover only about 2 percent of all farms, but 42 percent of the hired workers, and 67 percent of the man-days of hired farm labor used in a peak quarter. That is, it would cover about 78,000 farms and about 700,000 workers in an average month.

Agricultural labor has been excluded from the FUTA since its enactment. It was originally excluded also by all State laws except that of urban District of Columbia. Today, Hawaii covers employment on very large farms (with 20 or more workers in 20 weeks) and Puerto Rico covers agricultural employment in the sugar industry. Since farmworkers do experience unemployment, they should be given the protection of the system. It seems appropriate, however, to approach their coverage on a gradual basis, as was done for nonfarm employment, and begin with large employers.

The proposed test of 300 man-days in a quarter is roughly equivalent to four or five full-time workers throughout the quarter. Under this test, the problems of reporting and recordkeeping for unemployment compensation purposes would be limited to a very small group of farms, yet a substantial proportion of workers and employment would be covered. Such a test has advantages over the tests that have been used in covering nonfarm employers under the unemployment insurance laws. It is easier to administer than a test based on number of workers in 20 weeks. It also avoids the difficulties of a test based on payroll in a quarter. It would be very difficult to develop a payroll figure that would, when applied nationwide, restrict coverage to large farms and apply with reasonable comparability in all areas of the country.

Other coverage changes

About 450,000 other workers would be given unemployment insurance protection by adopting, for FUTA purposes, the OASDI definitions of "agricultural labor" and "employee.'

Agricultural labor.-About 200,000 workers perform services in activities which are now defined as "agricultural labor" for Federal unemployment tax purposes, but are not "agricultural labor" under OASDI. In this category are activities such as processing of maple sap into maple syrup or maple sugar, off-the-farm raising or harvesting mushrooms and hatching poultry, operating and maintaining ditches, etc., for supplying and storing water for farming, if done for profit, and handling, planting, drying, packing, processing, freezing, grading, storing, or delivering to storage or to market any agricultural or horticultural commodity in its unmanufactured stage, when done in the employ of someone other than the farm operator who produced more than half the product.

Such activities are essentially industrial in nature and do not come within the general concept of farmwork. Workers excluded from unemployment insurance as agricultural, although they are nonagricultural under OASDI, include stationary engineers, box assemblers and lidders, receiving and billing clerks, grader and conveyor tenders, as well as those who hatch poultry in city lofts. Approximately 20,000 additional jobs in similar categories, now covered by State unemployment insurance laws, will also be covered by the FUTA. "Employee."-The present FUTA definition of "employee" is restricted to officers of corporations and persons who would be employees under common law. The FICA definition includes also