Mr. HAKE. Yes, we had a single budget, but prepared separately and brought into one.

Senator BALL. Completely intermingled?

Mr. HAKE. Yes. The funds were intermingled, and we hope to get to that again. It seems logical-instead of $50,000, a mere saving bagatelle of that amount-I certainly thought another zero belonged on that. We are not concerned with telling the Congress how much you ought to save on the Federal set-up in dollars and cents, but we are very much concerned about the way it operates.

Rather irritating things would come up; I mean by people on both sides of the program. There seems to be a great deal of fear as to who is going to take over whom, or something like that. I get that as I hear the testimony.

It is a simple matter, as far as the State administrator is concerned, if you put the Employment Service over onto the Bureau, it happens that salaries are the same, the Director of the Bureau is the same as the one set up in this reorganization plan. You would have UC and ES under the Bureau just the same as we have in the State. We have a UC director and an ES director.

I want to touch this point. There has been indication there was fear subordination. Now having been in this program from every angle of it, I can't possibly see where there is fear of that because they admitted in the testimony, and the record shows that placements have largely increased up to 18 percent since the return of the Employment Service to the State, and those placements have not been made by the United States Employment Service. Every one of them has been made by the State organizations since November 16, 1946, and they are doing a good job, but the United States Employment Service has not placed one of them.

That is not their function now since it has come back to the States. It is our job, and we are proud that industry is resorting to our offices. Our public-relations program has stimulated that to a great extent, and I am very happy that that is true in all the States.

Senator BALL. The fact that the Federal end of the Employment Service was in the Department of Labor apparently did not hurt that placement service, at least. You don't want to give it any credit.

Mr. HAKE. That is a matter of conjecture. Maybe we would be placing 36 percent instead of 18. It is working all right in that respect, as far as the placement is concerned. If we didn't have an unemployment-compensation program at the moment, I would say leave the United States Employment Service with the Department of Labor.

Senator BALL. Don't you think in the long run it is a lot more important to get a man a job than to pay him unemployment compensation?

Mr. HAKE. That is the first thing we do. Do you know in the State that it is almost a religion with us to try to get that fellow back on the pay roll so he regains his self-respect and dignity. That can be done and should be done in a neutral agency as well as anywhere else. That is what they are charged to do, no matter where they are located on the Federal level. That is their business. They could go anywhere and still do that business.

Senator BALL. That is the main job. It certainly has not hurt it any to have the employment service in the Department of Labor. I fail to see the point in all this.

Mr. HAKE. Well, as I said, I will agree the employment service could be, but now that everybody has agreed they should be together, I can't go along with the theory

Senator BALL. As a matter of fact, I thought you said getting a job for a man was the most important part of the two programs. Now you are saying that the payment of benefits is more important.

Mr. HAKE. Oh no; I don't mean that. I'm sorry. I mean that when we get to the point where we do have to pay them benefits, that becomes very important because it involves money, and I think industry—and I hold no brief for them-certainly is interested, and I don't think they are interested in a biased way because they have indicated they do not want this in the Department of Commerce. They would like to have it lodging in as nearly a neutral agency as possible because it involves the payment of money on any insurance program.

I would agree with everybody else who has testified that we want a more closely knitted and integrated program on the Washington level because we are disturbed by the number of people that come into our agency, and they are bound to be at cross purposes when they come into our agency.

We are trying to do a job for people. I can't see the duplicated services now being maintained both in the Washington level and in the regional offices. It seems to be utterly indefensible, and I hope that Congress will address itself to that so we will have more of an opportunity to do the job down there than to take up so much time. Senator, I believe that is about all I have.

Senator MURRAY. Your principal fear is that the Labor Department, which is set up to look out for the interests of labor, might be biased in favor of labor in the administration of this service?

Mr. HAKE. I don't think it might be. I think that they should be, and I don't mean biased in any nasty sense, you understand, Senator. Senator MURRAY. They would be biased in favor of doing everything possible to find a job for a man who is out of employment?

Mr. HAKE. Well, that is the business of the Employment Service, not the Department of Labor.

Senator MURRAY. I mean if it is in the Department of Labor, then they would be biased in operating that so as to make every possible effort to find a job for the man who is out of work.

Mr. HAKE. That would be a very healthy bias, and I think that is proper wherever it is done.

Senator MURRAY. Yes. Can you name any bias, then, that has been exhibited by the Labor Department which would be ulterior? Mr. HAKE. Not on the question of placement.

Senator MURRAY. Well, on any other matter that would come in connection with this plan.

Mr. HAKE. Well, you would have to wait and see. Only time would tell.

Senator MURRAY. In other words, you are suspicious of the Labor Department and you haven't any confidence in the Labor Department. You haven't any confidence in the men that operate it.

Mr. HAKE. I want the record to show that I am not suspicious of the Labor Department one bit more than I am of any other Federal department, and I have the utmost confidence in the personnel in the Labor Department, and especially in the USES, because I know them and they are personal friends and I respect them highly. That isn't my reason. I am not suspicious.

Senator MURRAY. You are not suspicious?

Mr. HAKE. No, sir.

Senator MURRAY. Well, then, I don't understand how you take the attitude that you can't trust the Labor Department in handling this program.

Mr. HAKE. I didn't say I couldn't trust them. I think that, charged as they are to do the things they should for the workers, they would necessarily be obliged to go further than should a neutral agency that handles an insurance program.

Senator MURRAY. Could you give an illustration of what they might do which it would not be proper for them to do?

Mr. HAKE. Well, after the unemployment compensation gets over there is what, of course, you have reference to. It would be pretty presumptuous on my part to try to say what they will do when they get over there. I just know that when a program involving $8,000,000,000 is taken from any neutral agency and put into any that is not neutral by its very creation, it just doesn't look like good administra

tion to me.

Senator MURRAY.. Well, the men in the Labor Department that would have to do this matter all disavow any thought or idea of doing anything that would be unjust or improper. I can't see why the Labor Department can't operate this service just as well as it could be operated under the Federal Security Administration.

Mr. HAKE. Well, that is a difference of opinion. I think that it belongs in a neutral agency, an independent agency, and that is where it has always been, and I am fearful that it might not be run for the best interests of both the employer and the employee, and also the public, when you get it away from what we regard as a neutral agency, although I don't think they are always neutral. I think the Social Security Board has leaned toward the worker more than they have toward industry, in the last 10 years.

Senator MURRAY. They might be guilty of some biased conduct, then, in administering it.

Mr. HAKE. I can say that they probably have been, but in the 10 years we have sort of gotten that thing straightened out, and we don't want to go through another 10 years. We get along pretty well with them now.

Senator MURRAY. That's all.

Senator BALL. Thank you, Mr. Hake.

(Mr. Hake submitted the following brief:)

STATEMENT OF W. O. HAKE, COMMISSIONER OF THE TENNESSEE DEPARTMENT OF EMPLOYMENT SECURITY, BEFORE THE COMMITTEE ON LABOR AND PUBLIC WELFARE, UNITED STATES SENATE

As administrator of the department of employment security in Tennessee, I am speaking for and in behalf of Gov. Jim McCord, a former Member of Congress. In the President's Reorganization Plan No. 1 of 1948, the Congress is directed

to determine the final location of the United States Employment Service and the Bureau of Employment Security at the Federal level. Tennessee is opposed to the plan. Let us briefly review the history of these two Federal agencies.

In 1933 the Congress passed the Wagner-Peyser Act, which created the United States Employment Service in the Department of Labor. The function of the United States Employment Service was then, and is chiefly now, the placement of unemployed workers. It may be granted that so long as that was its function and so long as this function was not related to anything else, the United States Employment Service could properly remain in the Department of Labor. However, in 1935 Congress passed the Social Security Act, in which it set up unemployment compensation as an auxiliary to the placement function.

In the inception of the Social Security Act, the Committee on Economic Security considered at length the desirability of placing this function in the Department of Labor, but finally, because it was regarded as an insurance program involving the expenditure of money for benefits in which both the employee and the employer were interested, it was placed in an independent agency, the Social Security Board.

Unemployment compensation benefits began in the various States on January 1, 1938. It soon became obvious that the two functions-namely, placement and benefits-were so inseparably allied that President Roosevelt in 1939 transferred the United States Employment Service to the Bureau of Employment Security under the Social Security Board. The reasoning by the President at that time, with which you are all familiar, is just as valid today as it was then.

It is now proposed by the President to transfer both of these agencies to the Department of Labor. The United States Department of Labor is by its very creation a protagonist or advocate of the worker. It is charged with the responsibility to "foster, promote, and develop" the interests of the worker. By taking the parlance of the courtroom, the Department of Labor occupies very much the same position toward the worker as a lawyer does toward his client. A lawyer must foster and promote the interest of his client or he may be disbarred.

Let us not forget that during the 10 years that unemployed workers have been paid benefits, this part of the program has always been in an independent or neutral agency, the Social Security Board-at the present time the Federal Security Agency. It is agreed by all that the two functions of placement and paying benefits should be lodged in one Federal agency in order to assure more efficiency and economy and to avoid duplication and frustration of effort. But to me it is inimical to place these two functions in the Department of Labor.

There are now approximately $8,000,000,000 in the national trust fund paid by industry and probably passed on to the consumer public, for the purpose of paying benefits to unemployed workers in the United States. As an advocate of labor, it is not a question of whether the Department of Labor could be impartial. To the contrary, it would be the duty and responsibility of the Department of Labor to favor more liberal payments of benefits and less restrictions on qualifications for the receipt of such benefits. A lawyer has the responsibility of advancing, with all his ability, the interest of his client at the bar. But he finally has no jurisdiction over the decision of the case. That decision is determined and arrived at by an independent and impartial tribunal, the court. Congress should make certain that the same principle is followed in the program in question.

Remember, the Department of Labor cannot create jobs; neither can be USES. The Employment Service by itself can only render service to the unemployed. That it can do wherever it is located; but by combining with it unemployment compensation benefits in an employment security program, we have brought into the picture a monetary consideration-billions of dollars-and we have immediately arrayed two opposing forces; namely, the worker and industry, who of necessity have conflicting interests. Knowing that where conflicting interests exist neutrality must prevail, Congress recently divorced the Wage and Hour Division and the Conciliation Service from the Department of Labor. If it was wise to do this, it is equally or more important to place the program of employment security-both the United States Employment Service and the Bureau of Employment Security-in a neutral agency, not the Department of Labor.

Industry (for which I hold no brief) is not advocating that this program be placed in the Department of Commerce but in an independent agency. Likewise, the question might well be asked: Why does organized labor object to having the program administered by a neutral agency? In Tennessee the program is administered by an independent, neutral agency because we feel that this social insurance program should be administered without bias toward either the employer or the employee, and finally in the interest of the public.

STATEMENT OF ROBERT E. MARSHALL, DIRECTOR, DIVISION OF EMPLOYMENT SECURITY, THE COMMONWEALTH OF MASSACHU

SETTS

Senator BALL. Our next witness is Robert E. Marshall, director of the division of employment security, Boston, Mass.

Mr. MARSHALL. Mr. Chairman and Senator, my name is Robert E. Marshall, director of division of employment security, Boston, Mass. I have filed a statement with the committee, and I would like to have it incorporated in the record.

Senator BALL. Very well. It will follow your testimony.

Mr. MARSHALL. I have filed the statement, so I shall merely summarize and try to point out the salient points that I think are pertinent to the particular issue that is before the committee.

I would like at this point to state that the Division of Employment Security of the Commonwealth of Massachusetts is only technically within the department of labor. It is provided by law that the department of labor shall exercise no control. I am responsible only to the Governor and the general court.

Massachusetts law provides that the division shall be administered in a neutral and nonpolitical manner, and it is so operated and administered.

My concern in this particular matter is from the standpoint of an administrator or director of a division of employment security who is charged with administering the affairs of that division in such a way that it will be most efficiently operated and to serve both employers and employees, and in my statement I have dealt with it from that standpoint.

The two basic issues, as I see it, are stated on the first page of my statement, and that is first, shall the employment-security program be administered at the Federal level by a department of the Federal Government, which by law is charged with prolabor responsibilities, and rightly so, or by a department which is not so charged by law, and. therefore may be regarded as a neutral agency.

The second issue is whether the employment-security program shall be administered at the Federal level by a department which on the record has advocated the administration of the employment service and the unemployment-compensation functions of the program as two separate programs on a coordinated or cooperative basis, or by a department which has advocated and actually administered the two functions as part of one program on an integrated basis.

Now as to the first issue, I have pointed out that job orders are an absolutely essential part of both the employment-service function and the unemployment-compensation function; that they are the very life blood of the employment service; that those job orders come from employers.

We are rendering a service to the employer as well as to the employee. The employer will not use the employment service unless he feels that he gets some service out of it. I have pointed out that it is from the employers, and the employers alone, that we get the job orders. The employers, if they fail to place job orders in the employment service or in the Division of Employment Security of Massachusetts, will render it impossible to run an employment service, and, on the