as is pointed out in my statement there, it was unfortunate that the Employment Service had to be used as an instrument of compulsion during the war years. The workers had to have their certifications of availability to get their jobs and employers had to have priorities to get the workers. They had to clear them through the employment office. The employers in essential industries were not provided with labor. There was a disruption there of service that had to be restored. There was the thinking of people employed in the Employment Service that had to be changed. For instance, in the directive matter, you will have what is known as a predesignated referral. In principle, it is fine. That is what was supposed to happen-that every job order that came in, that every applicant that was capable and qualified, was to be exposed to it. But predesignation as set out by the regulation says that if an employer had hired John Jones and calls your office because John Jones is an applicant, and says, "I want to give you an order for John Jones," you are supposed to explain to him, "Well, we can't take an order for John Jones." But, you see, the Missouri law provides that an applicant for benefits can be offered work directly by the employer or through the Employment Service, which in itself is a predesignated referral. You see, there is conflict there between the impact of regulative and directive matter on the Federal level and even what is direct State law.

Senator MURRAY. Well, the fact is, however, that there has been very severe criticism of the administration of this service under the State jurisdiction, hasn't there, in your State?

Mr. CARROLL. No; I don't think so. I think the criticism has been isolated, and some of it has been engendered from those who were involved in the controversy on the return of the Employment Service, which was not employers, I assure you.

Senator MURRAY. Well, haven't some of the reputable newspapers in your State criticized it, and the papers that couldn't be charged with being instigators?

Mr. CARROLL. Oh, I can charge the paper with instigation-the one you have reference to-the Kansas City Star. I can even relate a case, if you would want it, that would illustrate their position, which I feel is a decidedly prejudicial one.

Senator MURRAY. Well, the Kansas City Star is a reputable newspaper.

Mr. CARROLL. What do you call reputable? Do you call a monopolistic press in an area where nobody has a voice reputable?

Senator MURRAY. I don't know anything about it myself. I am not from Missouri. I am from Montana, and I know that in our State, we haven't any independent press at all. We haven't any newspapers at all there that are not owned and operated by the corporations, with a few exceptions. So you may be in the same situation in Missouri, for all I know. I am just asking you the question— if the Kansas City Star is a well-known newspaper.

Mr. CARROLL. You are asking me for an opinion. I am giving you facts.

Senator MURRAY. I just want to find out if it isn't a well-known newspaper in your State.

Mr. CARROLL. I think when it was under William Nelson, it received its eminence. I have a doubt in my own mind which may or

may not be prevailing among all people. I talk to people in Kansas City, and they will say, "We wish we had another paper, because we don't get a lot of the stuff that we know is published in other papers.

Senator MURRAY. In order to shorten up the record here-it is an existing newspaper in your State, is it not?

Mr. CARROLL. That is correct.

Senator MURRAY. I offer this editorial in the record, Mr. Chairman, that is all.

Senator BALL. It is an editorial from the Kansas City Star of February 13.

(The editorial submitted by Senator Murray is as follows:)

[From the Kansas City Star, February 13, 1948]

UNEMPLOYMENT PAY SCANDAL

The tens of millions of Missouri unemployment compensation funds are supposed to be the protection of Missouri workers against a period of real unemployment. Yet these funds have been depleted through the last 2 years of the highest employment in history. Waste and chiseling are eating up the State's reserves for a rainy day.

During these same years Missouri employers have been required to continue heavy payments in the full knowledge that a large part of what they pay is being frittered away. Missouri unemployment compensation is an emergency to challenge this legislature and the State administration.

Most other States have conserved their funds and added to them during the last 2 years of record employment. A check by a St. Louis manufacturing concern shows that in the first quarter of last year Ohio was paying out only 41 percent of the money that employers paid into the fund the same 3 months. Minnesota paid out only 37.5 percent of current income, Wisconsin 40 percent, and Iowa slightly less than 40 percent. That is the way it should be. A period of high employment is the time to conserve the fund and build it up against the time of need.

Yet in that same period of last year the report shows Missouri paying out to the "unemployed" 20 percent more money than was being poured into the fund by the State's employers. When a State eats into its unemployment reserves in such a period what kind of protection does it offer for the future? It is a reckless improvidence.

Missouri employers are making high payments into the fund. The same comparison with other States shows that Missouri's collections virtually equalled those of industrial Ohio, which has nearly twice as many contributing employers and far more wage earners covered by unemployment compensation. Missouri has been paying for appalling waste and mismanagement. It is like pounding sand in a rat hole.

Since the first half of 1947 Missouri's situation has shown some improvement, although we don't know that it has improved in comparison with other States. It is still failing to use this period of record employment to protect the future of its workers.

This shocking situation comes both from the law and its administration. The legislature now has a bill to stop some of the worst leaks. It should be emergency business to be pushed through without any weakening amendments.

The administration is primarily the responsibility of the Governor. If the employers had been on their toes, they would have seen what was happening more than a year ago. The division of employment security, under the Governor, showed its hand when it set out to wreck the State employment service the day control passed from the Federal Government back to the State.

The employment service is the foundation of the unemployment compensation set-up. Under the law, it is the one agency required to try to find an unemployed person a job before he can become eligible for unemployment compensation. Without a good employment service the door to claims is wide open.

The division of employment security reduced the employment service to an ineffective organization and that is what it is to this day. That action alone should have told Missouri employers what kind of administration they had to

handle the whole business of unemployment compensation. Now they have found out and they have paid millions for the lesson.

In addition to doing its own job of amending the law the legislature is obligated to give the public a full report on administration.

Mr. CARROLL. I don't have available that particular editorial, but I would also like to cite for the benefit of the committee, if they would give me the opportunity, editorials from the St. Louis Post Dispatch, which in my estimation is the best newspaper in the State of Missouri, and articles to the contrary.

Senator MURRAY. I will concede that that paper is a very reputable newspaper, and if you have editorials which you wish to insert in the record, we will be very glad to have them.

(Subsequently the following material was submitted by Mr. Carroll:)

[From the St. Louis Post Dispatch, September 14, 1947]

JOBLESS FUND IS $161,947,430; EMPLOYER RATE CUT SUGGESTED

RESERVE IS EIGHT TIMES THE HIGHEST AMOUNT PAID OUT IN ANY YEAR COLLECTIONS ARE DOUBLE THE OUTGO

By Boyd F. Carroll, Jefferson City Correspondent of the Post-Dispatch JEFFERSON CITY, September 13.-Despite the drain of increased postwar payment of State unemployment benefits to eligible jobless persons in Missouri, the balance in the State's unemployment-compensation fund, derived from pay-roll taxes collected from employers, now totals $161,947,430.

This huge reserve is nearly eight times the record $20,967,593 in unemployment benefits paid during 1946 to unemployed individuals subject to the State jobless insurance law. Payments last year were more than double the benefits in any other year since Missouri adopted a compensation act in 1937.

The fact that the balance in the fund has held its present level near the alltime peak, of about $164,000,000 in 1945, notwithstanding postwar reconversion demands, has raised some question whether the present schedule of tax or "contribution" rates for employers should be modified. Employees covered by the act make no contributions to the fund.

$218,892,989 IN CONTRIBUTIONS

Missouri employers have paid $218,892,989 in contributions to the State fund from 1937 to the end of 1946, according to the Division of Employment Security of the State Department of Labor and Industrial Relations. Benefit payments for unemployment, which began in 1939, totaled $61,102,260 at the close of 1946.

These figures cover only nonveteran benefits under the State law. The division of employment security cooperates with the Federal Government in approval and certification of claims by war veterans for Federal unemployment compensation (a maximum of $20 a week for 52 weeks), but the payments are made from Federal funds.

Payments to jobless veterans in Missouri totaled $47,616,000 in 1946, compared to State payments of $20,967,593 to nonveteran unemployed.

Michael J. Carroll, director of the division of employment security, said today there had been suggestions from employer groups for some modification of the present employer experience rating classifications, which scale down the rate for favorable employment records, or for changes in the reserve requirements on which these classifications are based.

MORE CLASSIFICATIONS SUGGESTED

He said it might be desirable to create more rate classifications or brackets, providing more graduated rates for employers with favorable employment experience. Carroll said he did not know whether any proposed amendments of the act would be submitted to the legislature, which reconvenes in January.

These rates range from 2.7 percent of the employer's annual pay roll down to zero, based on the excess of his contributions to the State fund over the unemployment benefits charged to his account. The intermediate rate brackets are

1.8 percent and .9 of 1 percent. Reclassifications are made annually, based on the experience of the individual employer. Where benefit payments exceed contributions the employer's rate moves up to 3.6 percent.

Of the 10,119 employers now granted these classifications, 1,882 currently pay no contributions, 5,200 pay .9 of 1 percent, 2,341 pay 1.8 percent, and 597 pay 2.7 percent of their pay rolls. Ninety-nine employers pay the top rate of 3.6 percent. In addition the Federal Government collects .3 of 1 percent annually from the employers, based on their pay rolls. Part of this tax is returned to the State for unemployment-compensation administration and the major portion is retained by the Federal Government.

Missouri is one of five States, Carroll said, which grant a zero rate to employers with the most favorable record of unemployment.

He said the balance of $161,947,430 in the fund was not excessive, based on possible requirements. Although the State act has been in effect for 10 years, Carroll said, there had been only 8 years of experience in paying benefits. This period included a war and abnormal conditions, and as a consequence complete experience was not available on rates, he said.

"With a graduated rate, including a zero classification, the fund can't get too large," Carroll said, "as it does in some other States which require payments whether the employer has benefits charged against him or not."

SAFE RESERVE ESTIMATE

He said an estimated safe reserve would be double the possible maximum unemployment claims for a year. Carroll said that when the act became effective in the late thirties it was estimated there might be 250,000 unemployed at one time. "We have an expanded employment condition," he said, "and have a potential unemployment risk of 300,000 or more, based on the 740,000 employees covered by the act."

The maximum State benefit is $20 a week for 20 weeks in 1 year. An unemployment risk of 300,000 would involve a possible liability of about $120,000,000, it was said.

Annual benefit payments have varied from $1,584,577 in 1944, when wartime employment was heavy, up to $9,920,816 in 1945 and $20,967,593 last year. Contributions in the 1943-45 period ranged from $19,167,000 to $27,490,000 a year. Contributions in 1946 dropped to $16,777,080.

The Division of Employment Security reported the first half of 1947 was a period of relative employment stability, with the supply of and demand for labor in closer balance than at any time in 1946 or 1947. Benefits paid amounted to about $10,000,000 for the first 6 months of 1947. Little change was anticipated in the third quarter. "Uncertainties as to the price structure and consumer make long-range predictions very difficult," it was said.

The compensation law applies to employers with eight or more employees. About 740,000 workers are subject to the act. Exempted occupations include agricultural workers, domestic service in private homes, maritime workers, employees of the State or its political subdivisions, and employees of nonprofit religious, charitable, scientific, literary, or educational organizations.

Maximum benefits are $20 a week for 20 weeks. Prior to February 1, 1946, the maximum was $18 a week for 16 weeks. The benefits are based on wages earned in a base period of employment. Payments averaged $16.26 a week in the second quarter of this year.

Employers pay their fund contributions to the Division of Employment Security, which transmits the money to the Federal Social Security Administration in Washington. The Missouri fund is held as a trust fund in the United States Treasury. Requisitions are issued on the fund by the State for benefit payments. The Federal Government pays interest on the fund at prevailing rates which it fixes. The present rate is 1.94 percent. The interest is added to the fund credited to the State. The interest paid amounted to $3,036,967 in 1946 and has totaled $15,909,475 since 1939.

The practice of the Federal Government in retaining part of the proceeds of the tax of three-tenths of 1 percent it collects on the annual pay roll of employers con [sic] been criticized by some of the States and in Congress.

The Federal law places an unemployment-compensation tax of 3 percent on pay rolls, but permits an employer to take credit for any unemployment compensa

tion tax paid to a State, up to 90 percent of the Federal levy, or 2.7 percent. The employer thus pays 2.7 percent to the State and three-tenths of 1 percent to the Federal Government, which pays virtually all of the administrative expense of the State agency handling jobless insurance.

For the period from 1937 through 1945 the Federal Government collected $22,737,484 from Missouri employers through the three-tenths-of-1-percent levy. Of this amount $8,964,022 was returned to the State for administration expense for unemployment compensation and the allied State Employment Service. The other $13,773,462 was retained by the Federal Government, it was said.

[Reprinted from the editorial page, St. Louis Post-Dispatch, September 15, 1947]

CUT UNEMPLOYMENT TAXES?

Missouri's unemployment fund is nearly $162,000,000, almost eight times the greatest recorded annual disbursement. In consequence, some employers want the contribution rates reduced. Reducing them at this time would be most unwise. 1. Though the record outlay for 1946 was less than $21,000,000, demands on the fund would go up by leaps and bounds in a serious recession. It is better to err on the side of too large a fund than on the side of too small a one.

2. Present unemployment-tax rates are not a great burden on business, which is booming. Employers whose operations leave the most unemployment contribute only 3.6 percent of their pay rolls. Those with the most stable employment pay nothing. The minimum is irreducible; reducing the maximum would weaken the incentive to schedule operations in a way to avoid unemployment.

3. It would be far better to increase benefits than decrease taxes. Under present law, the unemployed Missourian can draw no more than $20 a week, for a maximum period of 20 weeks. Twenty dollars does not meet bare subsistence today. And, depending on their previous earnings, many of the unemployed get even less than $20.

In these circumstances, there is every reason for the legislature to make prudent use of unemployment reserves and no reason to make barren reductions.

NINETY MILLION SAVED BY EMPLOYERS ON JOBLESS AID TAX

AMOUNT, UNDER GRADUATED CUTS, EXCEEDS TOTAL BENEFITS PAID OUT IN MISSOURI (By Boyd F. Carroll, Jefferson City correspondent of the Post-Dispatch) JEFFERSON CITY, October 11.-Graduated reductions in State unemployment compensation tax rates, based on favorable employment records, have saved Missouri employers more in tax contributions than the total benefits paid to jobless persons, records compiled by the State division of employment security show. Benefits paid to jobless individuals covered by the State law totaled $71,352,248 from 1939, when payments began under the Missouri unemployment compensation insurance law, to last July 1.

Against this total paid to jobless, the savings through merit tax ratings to employers with favorable records totaled $90,316,757. The merit, or experience rating, reductions in tax rates on annual pay rolls of employers became effective in 1942

$230,304,254 IN CONTRIBUTIONS

Contributions to the State unemployment compensation fund since the State law became effective in 1937 have totaled $230,304,524. This includes the taxes paid by employers on their annual pay rolls and about $13,600,000 in interest paid by the Federal Government on balances in the fund, which are kept in the Federal Treasury. The balance in the Missouri fund now is about $161,000,000.

Suggestions that the number of graduated tax brackets for unemployment compensation insurance be increased to level off the unemployment compensation insurance costs to employers, and to some extent reduce their tax load, have been made to a special House committee which has been investigating operation of the law and its administration. The committee is in recess until November.