For that reason we suggest that the subparagraph labeled (ii) on page 5 of the bill be supplemented by the insertion of a proviso at the end and immediately preceding the tabulation, which would read something like this [reading]:

Provided, That for the fiscal year beginning July 1, 1940, and ending June 30, 1941, the rate shall not be less than 2 percent.

I think that what I say is sufficient to explain that; but I do want to call attention to the proposition that this large sum, estimated now at about $102,000,000, which will come over into the railroad unemployment insurance account from the Social Security Act and various State acts, is not money that is being put in there through some gift or appropriation. It is just as much money that has come in as a result of railroad taxes as the other parts of the fund. The railroads have been paying taxes on their pay rolls under the Social Security Act since it went into effect in 1936. It is money that has come over from that source, and is just as much a part of the railroad unemployment insurance account as it would have been had we started out in 1936 with a railroad unemployment insurance law and applied the applicable tax rates during this time, assuming that the disbursements would have been the same under the Railroad Act as they have been under these State acts; so that is railroad money, regardless of its source, and we think we should be given every benefit of it for the purposes of this sliding scale of taxes.

Our concession of limiting the reduction in the tax to 2 percent for the coming year is not based on any thought that that is money that has just come from somewhere that we will never get again, because it is going to continue to accumulate from the 3-percent tax in the same way that it has in the past, so long as we have as favorable conditions of employment as we have had. It is because of uncertainty as to what those conditions of employment may be in the immediate future, added to our proposal to increase the benefits that will be paid out of the fund, that leads us to suggest the safeguarding of the matter of the tax for at least the first year following this new plan. That is all that I have to present, Mr. Chairman.

Senator MINTON (presiding). Thank you, Mr. Souby.

Is there anyone else on the part of the Association of Railroads who desires to be heard, Mr. Souby?

Mr. SOUBY. No. That completes our presentation.

Senator MINTON. Is there anyone else in opposition to the bill who wishes to be heard? (No response.)

Mr. Farquharson, I believe you wanted to speak.

Mr. FARQUHARSON. Yes, Mr. Chairman.

STATEMENT OF J. A. FARQUHARSON, NATIONAL LEGISLATIVE REPRESENTATIVE OF THE BROTHERHOOD OF RAILROAD TRAINMEN, WASHINGTON, D. C.

Mr. FARQUHARSON. Mr. Chairman and gentlemen of the sub-committee, my name is J. A. Farquharson. I am the national legislative representative of the Brotherhood of Railroad Trainmen, and my offices are located at 10 Independence Avenue SW., Washington, D. C. The Brotherhood of Railroad Trainmen is an organization made up of approximately 140,000 trainmen and yard service men. As an organization we concur in the position of the other organizations as

presented by Judge Hay. We do not believe that it would be proper to reduce the tax. On the other hand, we believe that the benefits should be increased so that those who are unemployed can be better and more properly taken care of.

That is all that I have to say.

Senator MINTON (presiding). Mr. Hay, do you have anything further to submit in rebuttal?

Mr. HAY. I should prefer to wait until after Mr. Latimer has presented his statement. It may cover matters that I would cover also, if I were to make my statement at this time.

Senator MINTON. Are you ready, Mr. Latimer?

Mr. LATIMER. Yes, sir.

STATEMENT OF MURRAY W. LATIMER, CHAIRMAN OF THE RAILROAD RETIREMENT BOARD, WASHINGTON, D. C.

Mr. LATIMER. Mr. Chairman and gentlemen of the subcommittee, my name is Murray W. Latimer. I am Chairman of the Railroad Retirement Board.

Perhaps I should preface my statement, Mr. Chairman, by saying that these bills on which we have been asked to make a report were introduced last week. We have been working on a report to submit at the request of the chairman of the committee. We are intending to make a fairly complete report, but because of the brief time available we have not been able to clear this with the Bureau of the Budget, and hence what I say here today has not been checked with the Bureau of the Budget.

I should like to begin my statement, Mr. Chairman, by dealing, first of all, with the present situation under the existing railroad unemployment insurance system, and I should like, first, to deal with the part of the unemployment insurance system which relates to the rate of benefits.

The benefits which are now payable under the Railroad Unemployment Insurance Act are low by whatever standard they may be measured. During the month ending with May 3 last the average rate of benefit on an equivalent weekly basis was a little under $7. Only in 1 week since last July has the rate of benefit on an equivalent weekly basis for all payments been as high as $7. That is the average of all payments whether they covered only one in excess of 7 or 8 days in excess of 7. Taking only those payments for periods of 15 days of continuous unemployment, the payments have been as high as an average of $8.63 a week last September, and they dropped down to as low as $8.22 in the week ended December 29; for the month of December they averaged $8.24; and they are approximately at that level today.

It does not need any elaboration on my part to make it evident that a grave question arises as to the worthwhileness of any system of unemployment insurance which, in an industry having a wage level like that of the railroads, produces benefits of such low amounts. The benefits do not compare well with the benefits under the State systems. It is difficult to get a figure which is exactly comparable; if we take all the States together, we mix systems which pay with systems which do not pay partial benefits; and among those that do pay partial benefits the conditions for the payment of such benefits are widely variable. Because of that factor we get some situations where a

liberalization of the law might greatly decrease the average weekly benefit because of the fact that it brings in a fairly sizable number of small payments. With these qualifications, however, it is interesting to notice that the average of $7 a week payable under the Railroad Unemployment Insurance Act compares with between $10 and $11 under the State systems; and that the average of $8.24 a week for total unemployment under the Railroad Unemployment Insurance Act compares with a figure of between $11 and $12 for total unemployment under the State systems.

There, again, the comparison with the railroad system is decidedly unfavorable to the latter and, again, so far as the question of wages is concerned, probably the level of railroad wages is somewhat above the level of State wages on which these benefits have been paid. No exact figures are available, and an exact comparison is impossible; but that is a reasonable surmise on the basis of the data which we have. To go back to the relationships of benefits to wages, we have attempted to work out a comparison of the amount of the benefits per working day with the daily wage in the various wage classes. The present Railroad Unemployment Insurance Act provides benefits for each day of unemployment in excess of 7 within any 15-consecutiveday period, and the daily rates are based on earnings in the base year. The base year is the calendar year ended not less than 6 months and not more than 18 months prior to the first day of the benefit year.

The wage classes run from $150 to $200, $200 to $475, and up to $1,300 and over; and we have taken from our wage tabulations the amount of wages in each one of those classes and have attempted to work out what is an approximate daily wage. Since we did not have the number of days worked, that is an approximation, but it is one which we think is not substantially in error. It has been made after very careful study of the distribution, by months, of employment. For the class drawing from $150 to $200, the average daily wage, according to our calculations, is $2.33.

The benefit per working day to persons who have been in that category is $1.08, or 46 percent of the daily wage.

In the class from $200 to $475 the daily wage is $2.96. The benefit per working day is $1.23, and the percentage of the benefit to the daily wage is 42.

In the class from $475 to $750 the benefit is 37 percent of the daily wage.

In the class of $750 to $1,025 the benefit is 34 percent of the daily wage. At $1,025 to $1,300 the percentage is 31 percent; and for persons receiving $1,300 a year the percentage is 32.

It has been the aim of unemployment insurance systems in this country generally to provide a scale of benefits which will roughly equal one-half of the daily wage or one-half of the full-time weekly wage. That ideal, which has, I think, been fairly well adhered to by the majority of the States-not by all-is far from realized by the present railroad unemployment insurance system.

I think perhaps Judge Hay in his testimony yesterday gave some comparisons with several States on that point. Taking all the States. as a unit we have found that the weekly benefit amount in some 75 percent of the sample of several thousand cases we took is larger in the States of residence of those particular persons who are included in our sample than under the railroad Unemployment Insurance Act.

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So much for the ratio of weekly and daily payments to wages and to State levels. I think it can fairly be said that the benefit rates are lower than they ought to be; that they are lower than those of the States, and that the ratio of benefits to wages is much smaller than is ordinarily aimed at by unemployment insurance systems.

It seems to us that it is imperative to increase the rates of benefits under the Railroad Unemployment Insurance Act. I think that is generally agreed upon. So that the question is not whether to increase the benefits, but how much shall the increase be; and I have given the figures by way of introduction in order to indicate somewhat the extent of the deficiency.

There are several ways, of course, in which benefits under an act set up like the Railroad Unemployment Insurance Act can be in creased. You can increase the daily rate without touching the number of days within any registration period, or you can increase the number of days of unemployment in the registration period for which benefits may be paid.

The number of days for which payment is not now made is 7 in a 15-day period. That number can be reduced without touching the daily rates themselves. The actual income of the individuals can be increased.

The third way, of course, would be to leave the daily rate and the days unchanged and simply increase the period over which the payments are made. The limitation contained in the present act is 80 days and since the number of days within each period is limited to 8 it means a total duration of approximately 5 months.

So there are two questions to be dealt with when you come to raising benefits: First, there is the question of how much in general do you want to raise them and, secondly, which one of these threepossible methods is the most desirable one to be followed?

I think we can dispose of the last possibility first; that is, simply to increase the duration without touching the daily rates or the number of days per period in which compensation is to be paid, will not, in fact, result in any appreciable increase in benefits. That is because, at least under current conditions, only 15 percent of those who became unemployed during the past year have been unemployed for as long as 5 months within the year and have drawn the maximum benefits, so that merely to extend the period of duration will benefit to some extent only 15 percent at most, and will leave the remaining part of the problem untouched.

Probably some of those 15 percent would not get much more benefits, because if there were an appreciable increase in duration they, too, would become reemployed before the end of the extended duration, in periods like the present.

In a period of fairly drastic decline of course the extension of the duration will have an appreciable effect on the costs.

The method of approach to the question of how much and how to increase benefits is one which need not be answered on the basis of any theory. It is a problem of putting down various kinds of rates and various methods and looking at them and seeing how they work out and raising what objections you may to the scale at particular points.

I think on that score it might be well to compare the provisions of S. 3920 and S. 3925 to see just how they might work out; to measure them by what amounts of weekly benefits they produce, how they

compare with wages and State benefits, and how they sound and what they mean in terms of actual income to persons who become unemployed.

Reference was made yesterday to the fact that the scale of benefits in S. 3925 was a scale which had been suggested by the Board in a letter addressed to the Association of Railway Labor Executives with copies to the Association of American Railroads, on March 28, last.

We did suggest that particular schedule, but it was accompanied by a number of other changes which are left out of S. 3925 and which present a rather different picture so far as income to employees is concerned, and so far as, it seems to me, equitable treatment as between different classes of employees is concerned.

Moreover, at that time we did not intend to attach any finality to our suggestions, because we were still engaged in studying the situation, and our own minds were not crystallized as to what the best method of approach was.

My own feeling at the moment is that the suggestion as originally made had some perhaps unfortunate instances of apparent reductions in rates which might have been embarrassing if they were actually adopted.

The daily benefit rates as proposed in S. 3920 are the same up to, I believe, the $1,000 level. They are increased somewhat above the $1,000 base-year level; that is to say, for persons who received $1,000 or more in the base year, the benefits provided in S. 3920 per day are larger than they are in the present Railroad Unemployment Insurance Act. That, I think, follows from what has been indicated about the relationship between the benefit and the daily wage which we have found to exist in the present system; that is, the upper-wage groups. Where the base-year wages are $1,000 or more the benefits have been far lower, relative to wages, than the lower-wage groups.

It is desirable, everyone will grant, to provide a larger percentage of pay as a social insurance benefit at the lower-wage levels than is provided at the top. That is done under the Railroad Retirement Act; it is done under title II of the Social Security Act. By one means or another it is done under a great many State laws; or at least I might say that up to a level of perhaps $1,500, and in some cases higher. At least the higher-paid employees do not particularly suffer a reduction in the ratio between benefits and wages.

So that S. 3920 attempts, without reducing any daily rate, to increase the daily rate at the higher levels.

S. 3925, on the other hand, reduces the daily rate at three points. Between $150 and $199.99 the daily rate is reduced 25 cents. At the wage level $200 to $399 for base-year wages the daily rate is reduced 50 cents, and in the wage group $475 to $699 base-year wages the benefits are reduced 25 cents per day.

The daily rate, of course, is only one factor in determining what the actual weekly income shall be. The other factors are the number of days for which compensation is paid, first, within a week and, secondly, a longer period, say the period of the benefit year.

S. 3920 increases both the number of days per period, and the number of days throughout the year for which benefits may be paid. S. 3925 increases only the number of days per period for which benefits may be paid. It does not increase the number of days for which payments may be made during the course of a benefit year.