pational-training problems. At the same time the various agencies of the Labor Department need the detailed current information on labor problems and the condition of the labor market which the United States Employment Service possesses.

Experience has demonstrated that unemployment insurance must be administered in close relationship with employment service and other employment programs. In many of our industrial States, and in most foreign countries, unemployment insurance is administered by the agency responsible for labor functions. Furthermore, the unemployment-insurance system has a vital stake in the effectiveness of the program for employment services, for what benefits the employment service also benefits the unemployment-insurance program.

The transfer of the Bureau of Employment Security, including the United States Employment Service and the Unemployment Insurance Service, together with the functions thereof, will give assurance that primary emphasis will be placed on the improvement of the employment services and that maximum effort will be made to provide jobs in lieu of cash benefits.

The plan also transfers to the Department of Labor the Federal Advisory Council created by the act establishing the United States Employment Service. This Council consists of outstanding representatives of labor, management, and the public who are especially familiar with employment problems.

VETERANS' PLACEMENT SERVICE BOARD

Although the Veterans' Employment Service operates through the regular employment office system, its policies are determined by the Veterans' Placement Service Board created by the Servicemen's Readjustment Act of 1944. This Board consists of the heads of three Federal agencies, only one of which administers employment services. Furthermore, the full-time director of the Service is appointed by the Chairman of this Board, who is not otherwise engaged in employment-service activity, rather than by the head of the agency within which the agency within which the service is administered. Such an arrangement is cumbersome and results in an undue division of authority and responsibility.

In order to simplify the administration of the Veterans' Employment Service. and assure the fullest cooperation between it and the general employment service, the plan eliminates the Veterans' Placement Service Board and transfers its functions and those of its Chairman to the Secretary of Labor. By thus concentrating responsibility for the success of the Service, the plan will make for better service to the veteran seeking employment or vocational counseling. The plan is a major step in the rebuilding and strengthening of the Department of Labor, which I am convinced is essential to the sound and efficient organization of the executive branch of the Government.

THE WHITE HOUSE, June 20, 1949.

HARRY S. TRUMAN.

REORGANIZATION PLAN No. 2 OF 1949

Prepared by the President and transmitted to the Senate and the House of Representatives in Congress assembled, June 20, 1949, pursuant to the provisions of the Reorganization Act of 1949, approved June 20, 1949

DEPARTMENT OF LABOR

SECTION 1. Bureau of Employment Security.—The Bureau of Employment Security of the Federal Security Agency, including the United States Employment Service and the Unemployment Insurance Service, together with the functions thereof, is transferred as an organizational entity to the Department of Labor. The functions of the Federal Security Administrator with respect to employment services, unemployment compensation, and the Bureau of Employment Security, together with his functions under the Federal Unemployment Tax Act (as amended, and as affected by the provisions of Reorganization Plan No. 2 of 1946, 60 Stat. 1095, 26 U. S. C. 1600-11), are transferred to the Secretary of Labor. The functions transferred by the provisions of this section shall be performed by the Secretary of Labor or, subject to his direction and control, by such officers, agencies, and employees of the Department of Labor as he shall designate.

SEC. 2. Veterans' Placement Service Board.-The functions of the Veterans' Placement Service Board under title IV of the Servicemen's Readjustment Act of 1944 (58 Stat. 284, as amended; 38 U. S. C. 695-695f) are transferred to and shall be performed by the Secretary of Labor. The functions of the Chairman of the said Veterans' Placement Service Board are transferred to the Secretary of Labor and shall be performed by the Secretary or, subject to his direction and control, by the Chief of the Veterans' Employment Service. The Veterans' Placement Service Board is abolished.

SEC. 3. Federal Advisory Council.—The Federal Advisory Council established pursuant to section 11 (a) of the Act of June 6, 1933 (48 Stat. 116, as amended, 29 U. S. C. 49j (a), is hereby transferred to the Department of Labor and shall, in addition to its duties under the aforesaid Act, advise the Secretary of Labor and the Director of the Bureau of Employment Security with respect to the administration and coordination of the functions transferred by the provisions of this reorganization plan.

SEC. 4. Personal, records, property, and funds.-There are transferred to the Department of Labor, for use in connection with the functions transferred by the provisions of this reorganization plan, the personnel, property, records and unexpended balances of appropriations, allocations, and other funds (available or to be made available) of the Bureau of Employment Security, together with so much as the Director of the Bureau of the Budget shall determine of other personnel, property, records and unexpended balances of appropriations, allocations, and funds (available or to be made available) of the Federal Security Agency which relate to functions transferred by the provisions of this reorganization plan.

The CHAIRMAN. You may proceed, Mr. Pace.

STATEMENT OF FRANK PACE, JR., DIRECTOR OF THE BUREAU OF THE BUDGET, WASHINGTON, D. C.

Mr. PACE. Reorganization Plan No. 2 of 1949 transfers the Bureau of Employment Security and its Federal Advisory Council from the Federal Security Agency to the Department of Labor. In addition, it transfers the functions of the Veterans' Placement Service Board and those of its Chairman to the Secretary of Labor and abolishes the Board.

As you know, the Bureau of Employment Security administers the functions of the Federal Government with respect to employment service and unemployment compensation, or unemployment insurance as it is now frequently called. Both of these are Federal-State programs, with the States in charge of actual operations. In each case the role of the Federal agency is mainly the review and approval of State plans of operation, the administration of grants-in-aid, the conduct of research and developmental activities, and the provision of technical advice and assistance to the State agencies.

Since the location of these programs in the Federal Government has been before the Congress on several occasions, you are no doubt generally familiar with the problem. The President has long believed that these programs can best be administered by the Department of Labor. The Commission on Organization of the Executive Branch of the Government has unanimously concurred in this view and has recommended that the Bureau of Employment Security be transferred to the Labor Department.

Insofar as the Employment Service program is concerned, there can be no question that the Labor Department is the proper location. Employment service is a labor function. This was recognized by the Congress in the organic act creating the Labor Department, which includes among the basic purposes of the department that of advanc

ing the opportunities of wage earners for profitable employment. The Congress further recognized the Labor Department as the appropriate location when it created the Wagner-Peyser Act creating the United States Employment Service.

As a practical matter of everyday administration, the Bureau of Employment Security needs the assistance of many of the agencies of the Department of Labor in performing its Employment Service functions. Much of the work of the Bureau of Labor Statistics in particular bears directly on Employment Service problems. Its "occupational outlook" program produces vocational-counseling materials used in employment service. Further, its studies and statistical materials on wages, hours, and employment provide valuable guides for Employment Service officials. The Bureau of Labor Standards is the source of needed information on labor standards and working conditions. The Women's Bureau and the Wage and Hour Division have specialists on employment problems of women, learners, and some other special groups. The work of the Bureau of Apprenticeship and the Bureau of Veterans' Reemployment Rights also ties in with the Employment Service. Thus, every major unit of the Department of Labor has something to contribute to effective employment service. Conversely, the employment-office system should be a valuable source of up-to-date information on labor problems for the various agencies of the Department.

While unemployment compensation, the other program of the Bureau of Employment Security, is a form of social insurance, it is much more vitally related to employment service than to any of the socialsecurity programs administered by the Federal Security Agency. It has very few dealings with old-age and survivors' insurance or with the public-assistance programs. In the States, employment service and unemployment compensation are necessarily administered by the same agencies and in part by the same personnel. In consequence, it is very difficult to separate the two programs in the budgets upon which Federal grants are based. To avoid impairing Federal-State relations, Federal policies and actions with respect to the two programs must be highly coordinated. Experience has demonstrated that this calls for administration by the same Federal department or agency. Though the Employment Service and unemployment-compensation programs could be administered together either in Labor or in the Federal Security Agency, the Labor Department affords the more favorable environment for the development of the Employment Service, which is the more basic program. By the nature of its functions, the Federal Security Agency inevitably is more interested in social insurance than in employment service. But, as the President stated in his message transmitting the plan, "The primary concern is employment." Unemployment compensation at most is only a means of tiding the worker and his family over limited periods when suitable jobs cannot be obtained. Even from the standpoint of the unemploymentcompensation system, it is essential that first emphasis be placed on improving the effectiveness of the Employment Service, for that is the means of minimizing the drain upon the compensation fund.

It is also worth noting that in many States, including such major industrial States as New York, Pennsylvania, Illinois, and Massachusetts, employment service and unemployment compensation are administered by the labor department of the State.

Now a few comments on the provision abolishing the Veterans' Placement Service Board. The United States Employment Service is required by the act which created it and by the Servicemen's Readjustment Act of 1944 to maintain a Veterans' Employment Service. This service is operated through the regular State employment offices with veterans' placement representatives from the Bureau of Employment Security exercising special supervision over the work.

This plan does not abolish or alter the operation of the Veterans' Employment Service. What it does is to fix responsibility for the service in the head of the department by which the service will be administered: namely, the Secretary of Labor.

The function of the Veterans' Placement Service Board has been to determine the policies of the Veterans' Employment Service, which by law is administered by the United States Employment Service within the Bureau of Employment Security. The Chairman of the Board has the additional function of appointing the Chief of the Veterans' Employment Service. The Board consists of the Administrator of Veterans' Affairs as Chairman, the Director of the Selective Service System, and the head of the department or agency in charge of the United States Employment Service, currently the Federal Security Administrator.

At the time the Board was created, responsibility for assisting veterans to obtain employment was divided by law between the United States Employment Service and the Selective Service System. Since then, however, these functions of the Selective Service System have been transferred to the Department of Labor and are being carried on by the Bureau of Veterans' Reemployment Rights. The abolition of the Board will concentrate responsibility for the policies of the Veterans' Employment Service in the officer responsible for supervising its administration. This will eliminate what the Commission on Organization of the Executive Branch of the Government referred to as an "anomalous administrative arrangement" needing correction. More important, it will make for better service to veterans by fixing responsibility and assuring proper working relations between the Veterans' Employment Service and the General Employment Service. This plan will constitute a major step in the reconstruction of the Department of Labor, which in recent years has been stripped of so many of its functions as to endanger its status as an executive department. When it was created the Department was made responsible for the administration of substantially all the labor programs of the Government. Unfortunately, these functions have since been scattered about the executive branch. This plan starts the process of rebuilding the Department and restoring a sound organization of Federal labor programs.

That concludes my testimony, Mr. Chairman.

The CHAIRMAN. This plan emphasizes what we have been discussing awhile ago with reference to plan No. 1, because this plan actually transfers out of the Social Security Administration, or out of the Department of Welfare if it becomes established, and into the Department of Labor, certain agencies and functions now being performed by the Federal Security Administration. Is that correct?

Mr. PACE. That is correct; yes, sir.

The CHAIRMAN. This plan follows plan No. 1; but where plan No. 1 transfers all of the functions into the new department, this

plan transfers some of the functions and agencies out of that new department into the Department of Labor.

Mr. PACE. That is correct, sir.

The CHAIRMAN. One other thing that may be significant and that I think we should make some observation about is this transferring of the USES to the Department of Labor. That has been before the Congress some two or three different times, as I recall, at least, and the Congress has always rejected the idea. Is that correct? Mr. PACE. That is correct; yes.

The CHAIRMAN. And yet this plan reemphasizes it; and, unless a resolution of disapproval is passed by one House of Congress by the prescribed majority, this plan will go into effect, notwithstanding the previous actions of the Congress in disapproving it.

Mr. PACE. That is correct; yes, sir.

The CHAIRMAN. Any questions, Senator Long?

Senator LONG. My recollection is that in my State, unless I am badly mistaken, the United States Employment Service is administered by our State department of labor, as far as the grants are concerned. Mr. PACE. I think that is correct, sir.

Senator LONG. That seems to be the logical way to do it. There has been some complaint made by employers that a man could quit and be drawing unemployment compensation, when actually there was a job available to him, and that that would discourage people from wanting to go out and work, especially the kind that would be likely to be indolent anyway. At least this would have the advantage that the agency seeking to place a man would have the opportunity of knowing what the other agency was doing, rather than to have to work through two separate departments.

Mr. PACE. That is a major advantage of the plan: that it provides an intelligent coordination of functions in an area where the responsibility should normally lie for placing people. In other words, the real question is: Is this something that is set up primarily as an insurance feature against unemployment, or is it something that is based on the primary desire to place people in jobs that may be available?

Senator LONG. I had a complaint from an employer awhile back that he had a man working for him in a good job who had been working there for several years, and that the man quit his job in order to accept unemployment compensation for awhile. Now, of course, that would be against the regulations, for a man to just voluntarily quit and go on unemployment compensation. By putting these functions in one department and in the same agency, you make it easier to catch the people who are actually not entitled to that type of compensation. Is that right?

Mr. PACE. That is correct, I think; and I will ask my staff to check me if I am incorrect. I think that it is provided that those who seek unemployment compensation must first make application before the USES; and consequently the coordination of those two in the Labor Department would eliminate generally the possibility that any such thing as you describe might occur.

Senator LONG. And, furthermore, if a man is unemployed, as I understand it, he is not entitled to unemployment compensation if he refuses to accept decent employment. Is that not the effect of the regulation as it stands today?