Increases and decreases in cost of living for classified foreign-service posts June 1945-February 1946-Continued

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SUMMARY OF CLASSIFIED POSTS WITH NO CHANGE AND OF POSTS WITH ZERO CLASSIFICATIONS (THOSE NOT ENTITLED TO COST OF LIVING ALLOWANCES) Number of posts with no change in classification for cost of living from June 1945 to February 1946.... 76 Number of posts with zero (0) classification for cost of living as of February 1946..

68

1 Two types of emergency allowance program on a nonclassified basis have been applied this year, one in the liberated areas, and the other in the occupied areas. These emergency joint quarters and cost of living allowances have been granted because conditions at posts in these areas have not been sufficiently settled to permit accurate measurement of cost differences, while the unusual and difficult living conditions faced by the individual have, on a very uneven basis, subjected him to unpredictable and often extremely high costs. Posts in these categories have not been included in the above summary. This program is being terminated as rapidly as conditiors permit and posts are being brought into the classification system. In a third area, in part of China, it was necessary to establish a third type of emergency allowance.

2 Indicates those posts at which ir crease is due to the elimination of the currency appreciation program. Application of the currency appreciation factor only in part offsets other factors bringing about this

change.

Mr. HARE. Supplementing an inquiry that was made just a few moments ago, I think the record should show the difference between pay-adjustment service and the personnel allowance. There is a difference between personnel allowance and pay adjustment which I think should be shown in the record.

Dr. AYRES. Do you mean the fact that costs are less under present program?

Mr. HARE. No. I want the difference between allowances for the cost of living and this appropriation for pay adjustment. They are not on the same basis and they are not for the same reason.

Dr. AYRES. For the future they are going to be. We are doing away with pay adjustment entirely.

Mr. HARE. Then pay adjustment will be combined with the costof-living allowance?

Dr. AYRES. Yes. There will be no pay adjustment, as such. Whatever adjustment is made, at posts formerly getting a pay adjustment, will be handled on an identical basis with all other posts and will be taken care of as part of the cost-of-living allowance.

CHANGE IN COMPENSATION IN COUNTRIES AFFECTED BY ELIMINATION OF CURRENCY APPRECIATION PROGRAM

Mr. HARE. Then I think it ought to be made clear in the record what these pay adjustments heretofore were. I do not think that is a difficult matter to explain, but it was not explained in answer to Mr. Stefan's inquiries.

(The information is as follows:)

Change per annum in total compensation of selected officers and other employees stationed in countries affected by the elimination of the currency appreciation program, by individual countries i

These changes assume that currency appreciation was actually paid on total salary. This assumption is not wholly justified, as the officer or other employee often allots salary and makes purchases in the United States from salary on which there is no currency appreciation payment.

2 Reflects reclassification of post for cost of living allowances, as well as elimination of the currency appre ciation program.

Locally employed.

Mr. TENNEY. The pay adjustment was in each case a percentage increase which was measured by the depreciation of the United States dollar in terms of other currencies. The previous cost of living allowances at these posts were reduced to the extent that the sum of the allowance plus currency appreciation on the allowance was equiva

lent to the allowance still needed after the appreciation on salary had been paid. Now we will measure the allowance entirely, including the element on which the item pay adjustment had been granted. But we are eliminating that.

Mr. HARE. The difference in the valuation of the currency is taken into consideration or will be in the allowance made hereafter?

Mr. TENNEY. Yes, sir. It simply puts these five countries in exactly the same basket as all the other countries of the world.

DIFFERENCE IN COST OF LIVING ALLOWANCES IN VARIOUS CITIES IN SWITZERLAND

Mr. STEFAN. Dr. Ayres, when you extend your remarks in the record, will you state the difference in amount that is paid at these posts in Switzerland as between Bern and the other cities?

Dr. AYRES. Yes, sir. It comes to about a hundred dollars per year per clerk and averages $125 to $150 per officer per annum.

Mr. STEFAN. From $100 to $125 for an individual?

Dr. AYRES. That is the average for the average officer. That is not a very large difference per person, per year.

Mr. STEFAN. You will provide that information for me in dollars and cents?

Dr. AYRES. Yes, sir.

(The information follows:)

Sample annual differences in per capita cost-of-living allowances payable in Bern compared with Zurich, Geneva, and Basel, Switzerland, as of Oct. 1, 1945, and Jan. 1, 1946, according to base salary and dependency status of officer or other employee

Mr. RABAUT. Your next item is "Increase for readjustment of allowance schedule," $458,547.

Dr. AYRES. That is a move, sir, I believe, directly in line with your suggestion made the other day. It is a move to change the table so that the allowance is based on standardized and set proportion of the salary; so that at a post at which cost of living is 10 percent above Washington the table is related in a realistic way to the application of that 10 percent to the salary. The way in which that table is drawn up is on the basis of studies of American savings and tax patterns, so that the 10 percent or whatever percent it is, is applied only to that part of the salary estimated to be spent abroad and not to

that part of the salary which is left in this country for savings, for taxes, for that part of clothing and similar purchases made in this country.

Mr. RABAUT. What does it apply to?

Dr. AYRES. This applies to the cost-of-living portion only. The representation allowance is given in terms of the political importance of the post and the duties of the officer.

Mr. RABAUT. Does this have any effect on increasing or raising the classification of the post?

Dr. AYRES. No, sir. The problem of increase or decrease in classification of posts is related to such problems as changes in inflation and exchange. This table provides the basis of payment to the individual after the post is classified. This new table has been derived on the basis of a study of that part of the salary which is spent abroad.

Mr. RABAUT. But, practically speaking, it is over and above the classification of the post?

Dr. AYRES. No, sir. I want very much to be sure that we get this straight, because I think it is very important and I know you are in a hurry and I do not know how to do it in three sentences.

But the situation is this: We were paying cost-of-living allowances on a basis which represented the full salary of the clerks and down to less than one-third of the ambassador's salary, and on a sliding scale between the two.

We took the material of the studies which have been made by the domestic parts of the Government on the American pattern of savings and taxes; and we applied those studies to the salary levels of persons in the foreign service. We then said that that part of the salary which is not expended for taxes and for savings, and that part which is not expended in the United States because, as an American citizen a person will continue to buy certain of his items here-in other words, that part which is spent abroad, with reference to that we built a table which would apply the cost-of-living allowance to the salary on a regularized basis, based on a study of that part of the salary which is spent abroad. This table is the result. It still means that we are paying the ambassador on a basis which makes the adjustment in less than 50 percent of his salary and I am sure that that is a very overconservative move.

Mr. RABAUT. What about the cost-of-living allowance, then?

Dr. AYRES. This is the table on which the cost-of-living allowances are paid. The problem of making this relationship clear is one which is very basic to this whole question of allowances. Suppose you have a post where the finding in regard to classification is that this part is 10 percent above Washington. To what are you going to apply the 10 percent?

Mr. RABAUT. To the amount of money that he spends abroad, according to your explanation.

Dr. AYRES. That is just what I have been trying to say. Now, the determination as to whether it is 10 percent or 15 percent above Washington, or the same as Washington, or below Washington, is separate from the application of this finding to a realistic table for the payment of the individual.

REASON FOR INCREASES REQUESTED FOR LIVING ALLOWANCES FOR 1947

Mr. HARE. I want to ask a question here to see if I understand this set-up. My understanding is that the increases requested for 1947 for living allowances, and so forth, are based solely upon the increased personnel in the foreign service?

Mr. TENNEY. Not entirely; no, sir. The second item is based entirely on the increase in personnel.

Mr. HARE. Then the first item is the continuation of personnel that was employed part time in 1946; is that right?

Mr. TENNEY. That is correct.

Mr. HARE. Then in effect it becomes for 1947 allowances on increased personnel, since the last appropriation bill was made, 1945. Mr. TENNEY. Since 1945; that is correct.

Mr. HARE. Item No. 4, "Increase for readjustment of allowance schedule," is that the readjustment of allowances made on the personnel provided in the items 1 and 2?

Mr. TENNEY. That readjustment is based on adjustments that need to be made for all the personnel in 1947; the people who are on the rolls now and those additional persons who will be on the rolls in

1947.

Mr. HARE. It does not apply, then, except to new personnel?

Mr. TENNEY. Not entirely; no, sir.

Mr. HARE. Will that readjustment apply to cost of living allowances or will it be confined exclusively to representation allowances? Mr. TENNEY. No, sir. We have confined this exclusively to cost of living. Representation does not enter into this at all.

Mr. HARE. The question in my mind is why this item, No. 4, could not have been included in the three items above? In other words, you estimated what would be necessary for readjustment but you could not estimate in the beginning what would be the amount required for these various allowances?

Mr. TENNEY. We could have run all of these four items into one, but in order to show you exactly how we are arriving at the individual amounts needed, we felt that it was advisable to break it down into these four different bases for calculation.

DISCUSSION OF POSSIBILITY OF CONSOLIDATING APPROPRIATIONS UNDER FOREIGN SERVICE

Mr. HARE. I can understand why the readjustment allowance schedule could have been worked out definitely with reference to these new employees, but the question in my mind is why this cost-of-living allowance in the foreign service could not be carried as one of the breakdowns in the estimate for salaries, and so forth.

Mr. TENNEY. This cost-of-living allowance is not paid at all posts; only at a certain number of our foreign service posts. So obviously, if we tied it to salaries, we would have to take it right out again at those posts where no cost-of-living allowance is payable, or those posts that are less expensive than Washington.

Mr. HARE. Here is the advantage that I see for the committee. The committee would have before it the various allowances and the number of employees in the various activities and it would then have in mind some definite idea as to the volume of work, the work load. But it is