We feel also that since this is primarily a State program these programs should be in those agencies where the State administrators have the greatest amount of confidence, as well as where the employers themselves who have to use these agencies have the greatest amount of confidence. I think that that has been evidenced here by the State administrators appearing in favor of maintaining these two agencies in the Federal Security Agency. They have been working with the Federal Security Administration and know what the regulations have been in the past and what they would continue to be in the future. What they may be in the Department of Labor is anyone's guess.

The expression has been used "The honeymoon is over" if it goes in the Department of Labor. I think it is one that can be reiterated over and over again, for the Employment Service in the Department of Labor was there on a temporary basis.

One thing that I don't believe has been shown by this reorganization plan has been what savings might accrue if the reorganization plan went into effect. We have the feeling that rather than any savings it would merely mean more jobs in Washington, in the field, larger pay rolls-and this is not a time for such a bureaucracy to be built up. I don't think that I have to point out to you gentlemen what has occurred in the past in the development of a bureaucratic government here in Washington in the way of pay rolls having been piled on pay rolls. I can see that from my own limited experience as a former Government employee. I know what happens when a new agency is set up or a new program is put into effect. New employees are hired first and then the program is looked after.

Our organization also feels that the Employment Service should be given the greatest cooperation, and indeed has. We have emphasized with employers the necessity for the use of the Employment Service, and I believe in New York State that has occurred. In the last year more job orders have been placed with the New York State Employment Service. We have a feeling, however, that if the Employment Service were not in the Department of Labor that perhaps even more job orders would be placed.

With regard to this attitude of our organization in putting these programs in an independent or nonbiased organization, I would like to state that our own organization has advocated that in New York State a separate and distinct department in New York State be established-a department of employment stabilization or department of social insurance, whatever the name might be—to take in the present division of placement unemployment insurance, the workmen's compensation agency, and such other agencies which are concerned with employment stabilization and social insurance.

Incidentally, you may be interested to know that the State CIO in 1945 adopted a resolution supporting the establishment of such a new department in the State government, and here in Washington such an agency is already in existence-the Federal Security Agency. There is no need for a duplication of their efforts with the Department of Labor, and certainly all the functions should be integrated in one particular agency.

Finally, I feel that the same reasons which prompted Congress to adopt Reorganization Plan No. 1 of 1939, placing the Employment

Service in the Federal Security Agency, or Social Security Board, hold now as they did then.

Senator BALL. Thank you very much.

(Mr. Zucker submitted the following brief :)

STATEMENT OF THE COMMERCE AND INDUSTRY ASSOCIATION OF NEW YORK, INC., PRESENTED BY M. WILLIAM ZUCKER, ADMINISTRATIVE ASSISTANT, BEFORE THE SUBCOMMITTEE OF THE SENATE ON LABOR AND PUBLIC WELFARE IN OPPOSITION TO REORGANIZATION PLAN No. 1

The Commerce and Industry Association of New York, Inc., represents approximately 4,000 business firms in the New York metropolitan area. The association has in its membership a representative cross section of business life in this area, both from the point of view of diversity of industries, and size of firms.

The Commerce and Industry Association is firmly opposed to the President's Reorganization Plan No. 1, proposing to transfer the United States Employment Service and the Bureau of Employment Security to the Department of Labor.

The implications of this plan have been studied carefully by the association through its committee on social security. This committee is composed of a group of employers in New York who are specialists in the field of social security and in their business life devote the greater part of their time to these matters.

The association believes that the transfer of these Federal responsibilities would be detrimental to the public interest. The Senate Subcommittee on Labor and Public Welfare is urged to oppose it for the following reasons:

1. Need for impartial administration

Since public interest is paramount, these two services should not be administered by any agency which has as a statutory responsibility the advancement of the interests of either the employee or the employer. It is the statutory responsibility of the Department of Labor "to foster, promote, and develop the welfare of the employee.

2. Relationship of functions to social security program

In an address at the twelfth annual meeting of the Interstate Conference of Employment Security Agencies on September 30, 1947, Mr. Arthur J. Altmeyer, Commissioner for Social Security of the Federal Security Agency emphasized the need for unbiased administration of these two programs and desirability of keeping them in the Federal Security Agency. He said:

"In discussing the actual and innate relationships between the employment security programs and other parts of the social security programs, we, of course, cannot overlook the intimate relationship between the employment service and unemployment insurance. They really are one program; for the functions of each are so closely interlocked that as far as the public, the employer, and the worker are concerned both programs serve the same ends-to help a worker find a suitable job when he is unemployed and, only when he is unable to find such a job, to pay him benefits which help him bridge the gap in income between jobs. Both programs are part of a single plan, with the separate functions of one supplementing and strengthening the functions of the other. The job-finding operation of the employment service is a necessary prerequisite to the determination of eligibility for unemployment insurance. On the other hand, unemployment insurance strengthens the employment service by channeling workers through the employment service, thus providing a central place where employers can look for workers. The Social Security Administration has always emphasized the importance of the employment service, not only as regards the unemployment insurance program but for itself-because a strong national employment service is necessary for the economic security of workers and the economic well-being of the country. * Neither the Social Security Administration nor the States ever subordinated the employment service to the unemployment insurance function."

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3. Lack of savings shown

An essential of any reorganization plan is that it must effect an actual saving. Merely transferring these two functions from one agency to another can effect no saving of any kind, for certainly the Department of Labor can take no action to effect savings which cannot be accomplished with equal effectiveness in the Federal Security Agency.

4. Attempt is made to federalize these programs

Support of the proposal comes chiefly from the United States Department of Labor and the national labor unions, whose interests have as their objective the complete federalization of both the Employment Service and the unemployment compensation program. The national labor organizations' support of this proposed transfer to the Department of Labor is based on their obvious conclusion that the Department will adopt policies and procedures which ultimately will bring about practical federalization to the greatest extent possible. The business community is opposed to federalization of either activity, and Congress consistently has defeated attempts to accomplish such an objective.

5. Effects of federalization

It is interesting to note that when the Employment Service was under Federal control, employers lacked confidence in its operation and were most insistent that the Service be returned to the States. We believe that if these two services were transferred to the Department of Labor, employers again would have the feeling, well founded or not, that partisan administration of these programs would result. In consequence, there would not be the same use made of the Employment Service as there should be, thus reducing its effectiveness. In New York State, figures on the number of job orders placed by employers with the Employment Service show:

In October 1946, a month before the Employment Service was returned to the States, there were 83,910 job orders placed by employers with that agency throughout New York State.

In October 1947, after almost a year's operation under State control, there were 93,704 job orders.

6. Establishment of a Cabinet post of social welfare versus the proposed transfer President Truman on several occasions has advocated establishment of a new Department of Social Welfare to embrace health, education, and social security. America's elder statesman, Mr. Bernard Baruch, has endorsed this suggestion and urged it be done in the public interest. If such new department were to be created, within it rightfully would belong the Employment Service and the Bureau of Employment Security. Unless and until such time as a Department of Social Welfare is established those two bureaus should be in the Federal Security Agency.

President Truman's insistence upon their transfer to the Department of Labor, while at the same time he advocates establishment of a Department of Social Welfare, where they naturally belong is inconsistent, to say the least.

For these reasons, the Commerce and Industry Association urges that this committee recommend defeat of Reorganization Plan No. 1 to transfer the United States Employment Service and the Bureau of Employment Security to the Department of Labor.

Senator BALL. The next witness is Herschel C. Atkinson, chairman, Social Security Committee, National Association of State Chambers of Commerce.

STATEMENT OF HERSCHEL C. ATKINSON, CHAIRMAN, SOCIAL SECURITY COMMITTEE, NATIONAL ASSOCIATION OF STATE CHAMBERS OF COMMERCE, COLUMBUS, OHIO

Mr. ATKINSON. Mr. Chairman, I would like to submit my prepared statement.

Senator BALL. Very well. It will be received to follow your testimony.

Mr. ATKINSON. I note that the committee is making an effort to hurry the hearings. For that reason, I am not going to comment particularly upon statements that are made in my formal statement, but to comment rather upon the general subject.

It seems to me in the part of this hearing that I have heard and in a review of the record of discussion in the House this week that there

has been not enough attention called to the history and functioning and services of the employment service. It was not until the unemployment insurance operation became a part of an integrated system that the employment services of the States handled other than a volume of casual labor, day labor, house males and similar placements in the lowest grade of skill, shall we say, or abilities. The employment service began to reach other classes of workers only when men and women filed claims for unemployment compensation benefits. The laws required referrals to other jobs before paying benefits. As an example of what that meant in the various States, there were 17 public-employment offices located in the larger cities of the State of Ohio. But when the unemployment-insurance offices were set up, this was first expanded to 60 offices from 17, and now there are 100 offices operating in that State. It indicates a difference in the volume and of a contact with the labor market that the employment service did not previously have.

There was testimony made here by administrators that I think is competent that during the war, the Labor Department of the War Manpower Commission not only was required under the circumstances to handle labor placements in such a way that they created some resentments that have been commented upon, but I believe the record of this discussion also shows that there were specific attempts to impose certain social concepts in the instructions or regulations for the handling of referrals and placements. That was rather significant to employers, because, first, it had the power of the Government back of it and it had the penalty power to refuse to give workers to persons with war contracts unless they followed the dictates. They had the power to take away from persons with war contracts the labor supply and divert it unless they followed those concepts.

Speaking about the fear of employers, there is a very great remembrance of the things that were required of them under the power of the United States Government during the war that had nothing to do with winning the war.

Since the dissolution of the War Manpower Commission, in Ohio at least, and the greater emphasis on State direction of the employment service, there has been a tendency to restore to employers confidence in the employment service. Employer associations-and the Ohio Chamber of Commerce is an employer association; it is financed by employers and represents that viewpoint-both at city and at State levels in Ohio, my State, certainly, are urging closer cooperation with the employment service today. It has been brought out in testimony. It meant our return to jobs, rather than paid benefits. Then the employer's tax will be kept lower. Socially, which means the public welfare, it surely is better that a man be reemployed at his old job, be employed with his old company on a different job or go to a different job at a different location, than merely to go on benefits.

I think there is agreement everywhere in the Congress and this committee-all witnesses-that the first objective is to get a man a job. We who are hired by and who work for employers must tell you as a committee of the Congress, or a subcommittee of the larger committee, that it is difficult to get as cooperative an attitude from employers, that is will be more difficult to get a cooperative attitude from

employers if the Labor Department supervision is exercised over unemployment compensation operations, than it is, under the present circumstances, which we do not regard as ideal.

Old resistances and old resentments are slow to heal, and there is a direct body of resistance and resentment against practices and policies of the Labor Department. There is a tendency to misunderstand the volume of the accomplishments of the employment service. The great volume of employment in this country, as I think has been brought out in previous testimony, does not clear through the employment service. A very small fragment or fraction of total employment clears through the public employment services. Most workers get their jobs only through the employer-employee contact or through the union contract, where seniority operates, and as has been testified just before, the seniority takes precedence over handling through an employment service. As a matter of fact, the employment service, it may surprise some people, does not handle any placements for the Federal or State Government. The Civil Service Commission is one of the principal reasons why this is so. The number of jobs really secured is almost negligible in the total volume of employment in this country, and I think that is the biggest misconception that occurs in this Congress, a misunderstanding of the small volume of jobs actually handled or secured legitimately and realistically through the employment service. It would interest the Congress to get analyses of how much it cost the taxpayer for every person they place through the employment service. No matter who operates it, the cost is terrific per placement-the amount of money spent, the number of Government workers employed in these bureaus servicing the employment service. Statistics very easily obscure the facts. The fact is that the United States Employment Service-the Federal Division or Supervision agency gives no jobs. It can't claim credit for a job. That isn't where Jobs are given. Certainly it doesn't place jobs in the Federal Government.

Another fact is that the State employment service handles only a small fraction of the employment contacts between workers and employers.

Another fact is that in the States some progress has been made in the repair of relations that were impaired during the war and are just now beginning to be rebuilt. The administrators testified on that.

In the State-operated or locally operated-that is, in cities and communities-those operating offices get their job openings to which to refer people for employment. They don't come from Washington. Is this Congress going to compel employers to follow a dictate that they must use a Labor Department supervised agency, or is this Congress going to urge employers to use the employment service to a maximum? And it can do this by avoiding a prolabor agency whose every action is open to suspicion and doubt, for the past record of its own activities and own documentary evidence is available.

Job openings to offer the unemployed is the essence of the success or the failure of this whole system. We all admit we don't want it to become a dole system, a benefit system. We want a man first to get a job, and they have got to have jobs offered them before they can prevent paying them benefits by that policing division. Employers ask this