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H. R. 8857 will be presented by Mr. Andrew Biemiller, also a member of the national legislative committee.

The CHAIRMAN. I was just going to say we are very happy to have Mr. Biemiller, a former colleague of ours, here with us this morning.

Mr. CRUIKSHANK. May I ask, Mr. Chairman, that he present his statement with respect to H. R. 6539 and H. R. 6537 at this time?

The CHAIRMAN. Mr. Biemiller is recognized.

Mr. BIEMILLER. As Mr. Cruikshank has stated, this statement was prepared by Mr. George D. Riley, a member of the National Legislative Committee of the A. F. of L., who is our specialist on legislation affecting Government employees. We are appearing in support of the Mason bill and the Forand bill which would provide unemployment insurance for Federal civilian employees.

The American Federation of Labor has supported this proposal for years and now hopes that during the present Congress the purposes of these bills will become law.

The President this year in his budget message said:

I strongly recommend extension of the unemployment compensation system to give Federal employees the same benefits as are now provided to most workers in private employment.

In his Economic Report, the President this year also said:

A worker laid off by a Government agency gets no insurance benefits despite the fact that in many types of Federal jobs he is as vulnerable to layoff or dismissal as the factory worker.

It is recommended that Congress include in the insurance system the 2.5 million Federal civilian employees under conditions set by the States in which they last worked, and that it provide for Federal reimbursement to the States of the amount of the cost.

Again, this year, the Chairman of the Civil Service Commission testified on unemployment compensation for Government employees.

All of this support is welcomed by the American Federation of Labor for a proposal which has been in the Congress for several sessions, dating as recently as 1951 when H. R. 5118 was introduced. Inasmuch as the administration is supporting the proposals in these bills, it can be assumed they are in the class of "must" legislation and for this reason we have even more hope that your committee will report this bill.

Government employment has a fashion of coming in waves brought about by economy provisions and economic letdowns and generally such layoffs are concurrent with low employment outside Government. Thus a dismissed Government employee is thrown into collision and in competition with non-Government employees for available jobs, except that the Government employee generally has been in a specialized type of work often peculiar to Government service and, therefore, is placed at a disadvantage in such competition. This, in our opinion, is added reason for enactment of this legislation.

With minor exeptions, these bills provide for Government employment insurance coverage of all Federal civilian employees in the continental limits of the United States and Puerto Rico, the Virgin Islands and citizens of the United States elsewhere.

The legislation provides that employee rights to benefits would be determined usually under the unemployment insurance law of the State in which he becomes officially stationed at the time he becomes unemployed, or, if he has been working outside the country, the State in which he is located when he files his claim.

We are well aware of the wide range of amounts of benefits under State laws but believe it necessary first to establish the principles in favor of Government employees after which steps can be taken toward improvement.

În the meanwhile, the Congress will have done its part to see that the Government employee is a participant, at least in some system, until such time as improvement and uniformity can be effected.

I have not dwelt upon the technical features and application of the bills but have left this to our union representatives who will wish to speak of it more fully.

Thus, I confine my remarks to the desire of the American Federation of Labor along with its affiliated unions to see recognition for this principle of unemployment insurance for Government employees. The CHAIRMAN. We thank you, Mr. Biemiller.

Are there any questions?

Mr. FORAND. Were copies of that statement available?
Mr. BIEMILLER. They were given to the clerk.

Mr. FORAND. I think we ought to make it a rule that we get all of these statements early in the morning.

The CHAIRMAN. Some of them are not handed to us until later. Mr. Cruikshank, you may proceed.

Mr. CRUIKSHANK. With your permission, Mr. Chairman, I should like to present the views of the A. F. of L. with respect to H. R. 8857, and H. R. 8585.

The American Federation of Labor fully supports the provisions of H. R. 8857 extending coverage of the State unemployment insurance programs to all employees regardless of the size of the firm in which they are employed. The original exemption contained in the Social Security Act of 1935 was based largely on administrative considerations.

Many small employers, at that time, did not keep the records necessary for participation in the unemployment insurance program. Also there was a lack of experience in State agencies with administering a program of this complexity in the field of tax collection. With the experience of nearly universal coverage under title II of the Social Security Act and with the recordkeeping requirements of even the smallest transactions, now having been in effect for several years in connection with other governmental activities, these considerations no longer hold. The social purpose of the program designed to meet the needs of workers who lose their jobs becomes the overriding consideration.

We are also in favor of the purpose of section 3 of this bill which would make the tax reductions available under State employer experience rating provisions available to newly established enterprises.

Members of this committee are acquainted with the fact that existing Federal standards permitting tax-offset credits for reduced rates under experience rating require that the reduced rate be based on the individual employer's experience with unemployment during a period of not less than 3 years. This means that employers must be charged the full 3-percent rate-2.7 plus 0.3—during at least the first 3 years of their coverage under the program. In many instances, in accordance with some State provisions, the period exceeds 3 years.

Over the years, this provision has given rise to many problems which have become even more acute in the last few years as contribu

tion rates of most established employers continued to drop to relatively low levels in many States. This drop in tax rates of employers eligible for rate reductions bas been due, for the most part, to increasing reserve funds.

These in turn have resulted partly from very favorable economic conditions coupled with the higher average tax rates in effect in the earlier years, but also in a good many instances, from the high tax yields contributed by employers not eligible for rate reductions. The widening gap between the low average tax rates of the rated employers and relatively high tax rates of the unrated ones has sharpened the problem.

Let no member of this committee think that in supporting this proposal the American Federation of Labor is, for one moment, yielding its long-standing opposition to employer experience rating. Nothing could be further from the fact, for it is out of this fantastic illusion that individual employers can be lured by a tax reduction to control forces over which they have no significant control that spring all the evil distortions of a program originally designed to meet a grave social and economic need.

No; we only recognize that stripped of all the unrealistic arguments and rationalizations brought forward in support of employer experience rating it is, in fact, nothing but a device to reduce the rate of the unemployment tax levied against some employers. In simple justice, such tax reductions should not be delayed so that there is discrimination against new enterprises. The development of such new enterprises should be encouraged in a dynamic, free economy, rather than impeded by a discriminatory tax rate.

The argument that it is necessary to have a period long enough to establish experience” relative to the employer's efforts at stabilizing his employment has practically no meaning, since experience rating itself has little, if any, meaning with respect to efforts at stabilization. The fact is that the inducement to the employer to stabilize his employment, which is ascribed to the tax reduction arising from experience rating, has in most cases stimulated his ingenuity in inventing ways to keep his laid-off employees from collecting benefits, rather than spurred him into any fruitless tilts with the windmills of the economic forces which actually determine his employment pattern.

Permit me now to comment briefly on the proposal in H. R. 8585, a bill introduced by a distinguished member of this committee, Representative Baker.

We are pleased to note that this bill not only recognizes that tariff and trade policies have an impact on employment, but proposes to do something about the matter. While we welcome the spirit in which the remedy was undoubtedly offered, we do not believe it is one which meets the real problem.

Actually, the problem in but a very few States is not one of shortage of funds. Most of the State funds are perfectly solvent-in fact, almost too solvent. The difficulty with this program in many places is to get the abundant funds released for the purpose of paying benefits to workers who have been laid off.

Moreover, the real needs of workers displaced by the effect of any change in tariff or trade policy go beyond what is contemplated in an unemployment-insurance program, which is designed to cover a portion of the wage loss for a limited period of time.

These needs include, in many instances retraining in new skills, moving himself and family to a new locality, possibly even recovering some of the lost equity in home purchase, where property values are depleted in cases where an industry or community is affected by the policy. We feel it entirely appropriate that these matters should be taken into account in consideration of tariff and trade policies, but the consideration will need to be far more inclusive than that suggested by H. R. 8585.

Unemployment is not, at this time, a theoretical threat. It is a real and present danger. Approximately 8.5 percent of the labor force is now out of work. In fact, the chairman of the Economic Advisors to the President just since this statement was drafted, Mr. Chairman, indicated that the present level of unemployment was one which the economy in this country could not continue to carry without threat to the whole operation of our economy.

In view of this grave situation, we respectfully urge this committee and the entire Congress to devote its attention to the necessit for developing better Federal standards universally and equally applicable to all the States, designed to strengthen and improve the

system. We submit that the present situation demands that Congress amend the Social Security Act so as to provide additional standards for all the States to meet the following objectives:

(1) Benefits: The maximum primary benefit payable under State laws shall not be less than two-thirds of the average weekly wage of covered employment within the State. Subject to this maximum, each individual's primary benefit shall not be less than two-thirds of his average weekly earnings. These provisions of the two-thirds of the maximum rate are also in Congressman Baker's bill, but applied to only certain types of workers unemployed, because of one specii.c cause rather than all causes which cause unemployment.

(2) Duration: Benefits shall be payable to all eligible unemployed persons for a period of not less than 26 weeks. I note that Mr. Baker's bill extends to 39 and a bill of which I will speak in a moment also extends that to 39, but 26 represents the best prevailing State practice in any State. It could be and should be raised to 39.

(3) Disqualifications: The States should be required to limit their disqualifying provisions to those actually designed to prevent payment of benefits to any workers who are not genuinely involuntarily unemployed. The period of disqualification should be limited to such duration as corresponds to the period of time during which the individual's unemployment can properly be considered a result of his disqualifying act. We suggest that 4 weeks represents a realistic period.

(4) Coverage: Coverage should be made coextensive with the coverage of the Federal old-age and survivors' program. In addition, protection should be immediately be extended to the employees of the Federal Government, as indicated in the bills to which we are giving support in the earlier comments by Mr. Biemiller.

The act should further be amended to provide means whereby States would be permitted to provide for uniform rate reductions to all employers, as well as individual experience-rated reductions. Furthere changes in the financing of the program should provide that proceeds of the Federal Unemployment Tax Act would be earmarked in a Federal unemployment account in the Federal Treasury, such ac

count to be used for paying the Federal and State administrative expenses including the establishment of a contingency fund-and reinsurance grants to those States which are in financial difficulty because of high rates of unemployment.

These are the genuine needs of an adequate unemployment program, which could be developed within the framework of the present Federal-State program. Anything short of such action will leave the Nation still without the basic protection of adequate unemployment insurance. These essential changes are all contained in H. R. 9430, introduced last week by Representative Aime J. Forand, and some 80 cosponsors in the House and Senate including 4 other distinguished members of this committee.

The American Federation of Labor supports this measure as offering by far the most genuinely constructive approach to the problem of developing an adequate defense against unemployment that has been put before this Congress. We earnestly urge this committee to approach this serious problem of unemployment in the bold, constructive, and comprehensive manner indicated by H. R. 9430.

The CHAIRMAN. We thank you very much.
Mr. KEAN. Mr. Chairman.
The CHAIRMAN. Mr. Kean will inquire.

Mr. KEAN. Mr. Cruikshank, I want to go to this next-to-the-last paragraph on the first page where you discuss the question of an experience rating, and you say that it grows “out of this fantastic illusion that individual employers can be lured by a tax reduction to control forces over which they have no significant control.” Of course, I agree with that proposition, but I have always felt that the justification for the experience rating was based on the fact that the firms which have a record of good employment should not have to bear the burden for those who have poor employment records.

As the latter's employees get more of the benefit, they also ought to pay more of the tax. I have an entirely different conception from what you have of the reason for it. Am I wrong in my conception?

Mr. CRUIKSHANK. I do not think that has generally been the reason that has been put forward.

Mr. KEAN. I have always felt that was the reason.

Mr. CRUIKSHANK. I do not feel that has generally been the reason that has been put forward for the experience rating and I would have to say respectfully that I would not agree with your position for a basis for it, because the reason that some firms have a better employment experience than others, even granting that experience rating relates to that, which often it does not-and I would like to speak to that in a moment, if I may—those with the more favorable employment experience are very often firms that are not at all responsible for that more favorable employment experience.

Take utilities, for example, that have the protection of a franchise that gives them a monopoly situation, which is a grant from the State or the municipality. The fact that they have a favorable employment experience rating is really no credit to them. Actually, I would reverse your argument just the other way, that companies like the telephone company and the utilities, which in all States have the lowest turnover should, by the very fact that they have been granted a special provision and special protection by law, in turn carry a larger portion of the cost of unemployment which is a result of basic economic forces than they now do.

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