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of these Federal-State agencies and activities which were designed and estab lished to serve the joint interests of the public, industry, and labor;

6. Such transfer would not be in the interest either of efficiency or economy: Now, therefore, be it

Resolved by the Kentucky Unemployment Insurance Commission, That the said proposed transfer of the unemployment-compensation and employment-service programs from the Federal Security Agency to the Department of Labor is thoroughly disapproved of as being contrary to an efficient and impartial administration of such services, and as being potentially destructive of the entire present programs of Federal-State cooperation in the work of such agencies and activities; and be it further

Resolved, That the Congress of the United States be, and the same is hereby. respectfully petitioned to reject the said proposed transfer under Reorganization Plan No. 2 of the Proseident of the United States; and be it further

Resolved, That copies of this resolution be forwarded to the President and to the Vice President of the United States and that copies be forwarded to the United States Senators and Members of Congress from Kentucky, and to Hon. Earle C. Clements, Governor of this Commonwealth, and to the unemploymentinsurance commissions of the several States, urging their support and assistance in bringing about the rejection of said proposed transfer.

This resolution adopted at the offices of the commission, Frankfort, Ky., this the 20th day of July 1949.

V. E. BARNES,

Executive Director. JESSEE ULDYO, Associate Director. OMES C. STUBBS, Associate Director.

RESOLUTION OF THE KENTUCKY UNEMPLOYMENT INSURANCE ADVISORY COUNCIL

Whereas the President of the United States by Executive order proposed the transfer from the Federal Security Agency to the Department of Labor of unemployment insurance and employment service; and

Whereas this transfer will become effective unless action to the contrary is taken by the Congress of the United States, the Kentucky Unemployment Insurance Advisory Council, Commonwealth of Kentucky, composed of representatives representing the public, management, and labor have this day opposed the transfer for the following reasons:

1. The unemployment insurance and employment service are now being efficiently and impartially administered by the Federal Security Agency.

2. This council is not of the opinion that the transfer would be in the interest of efficiency or economy.

3. The Federal Security Agency is an agency dedicated to the welfare of the public in general and is not responsible to any particular segment of our public life: Be it further

Resolved, That the chairman of the Kentucky Unemployment Insurance Advisory Council be directed to forward a copy of this resolution to the Kentucky representatives in the Congress of the United States, to the chairman of the respective committees of the Senate and the House of Representatives of the United States, and to the Kentucky Unemployment Insurance Commission.

The persons to whom this resolution is forwarded should be advised that the action of the Kentucky Unemployment Insurance Advisory Council was not unanimous; that the employee representatives dissented for the following reasons:

1. The transfer was recommended by President Harry S. Truman and Vice President Alben W. Barkley upon the recommendation of a commission commonly known as the Hoover Commission, which after much study recommended the change be made in the interest of greater efficiency and economy. Public representatives: Mrs. G. B. Scott, E. G. Trimble.

Employer representatives: Robert E. Hatton, Fred Hosley, Herman Heller.
Employee representatives dissenting: Al Whitehouse, W. A. Conway.
JULY 20, 1949.

Mr. HATTON. Both the Kentucky Advisory Council and the Kentucky commission have adopted resolutions opposing the transfer of

unemployment insurance and employment service to the Department of Labor. This position of the Kentucky commission, I think, is highly significant, because Kentucky's commission is the only commission, I believe, whose personnel are now exactly the same as when originally appointed, back in 1937. In other words, these same three men, representing labor, management, and the public, were appointed as the first commission, and they are now the present commission, having served under four governors. And they take the position that the transfer is not in the interest of the public. The Kentucky Advisory Council takes the same position.

I, speaking as an individual, was the first director of the Kentucky Unemployment Compensation Commission. I have served in an advisory capacity ever since that time. I am now chairman of the advisory council. And I am convinced that in the administration of any unemployment program that disputes between labor on the one hand and industry on the other are inevitable. Conflicts in the law are inevitable. And in order to have efficient administration, you must have an umpire. That is the reason that the Congress of the United States, back in 1935 or 1936, did not accept the recommendation of President Roosevelt when he recommended that this program be placed then in the Department of Labor. It was the feeling of Congress then, and has been the feeling of Congress since, that there must be an impartial agency to administer these programs. That is the reason we have the Federal Security Agency today.

This transfer to the Labor Department plan has long been advocated by both great national labor organizations. The Congress of Industrial Organizations and the American Federation of Labor have advocated the transfer of unemployment insurance to the Labor Department. They are doing so as a part of a campaign which, if successful, will lead to the ultimate federalization of unemployment insurance, and the abolishment of merit rating for employees.

It has been stated publicy by spokesmen for the CIO and spokesmen for the A. F. of L. that it would be easier to effect their final purpose of federalizing the program, if the administration were placed in the Department of Labor. The Secretary of Labor yesterday made the statement that it is now time for a reevaluation of the whole program. I think that is quite true. But his emphasis was on a reevaluation of merit rating, and he gave as his justification for the reevaluation the fact that now benefits are getting perilously close to collections. I think it is high time that we reevaluated the program. But merit rating should not be changed, in my opinion. The answer to the reevaluation should be in terms of benefit formulae.

Some States are now paying benefits based upon the number of dependents that the unemployed worker has. For example, in the State of Michigan, a worker whose average wage is $27 to $28.50 per week, if he has no children, would get $18 a week for being unemployed, and if he has four children would get $26 a week for being unemployed. That wage bracket was $27, the minimum.

Now, I cannot conceive how a program dedicated to the insurance principle could pay benefits based upon the number of dependents. If such a program were generally followed the worker with children would find himself at a competitive disadvantage in the labor market of today because an employer would not normally employ the worker with children although he is the one who most vitally needs employ

ment. It is in that State and other States like it that collections do not equal benefits paid out.

Kentucky is one of five States in the land whose fund is so solvent that if every single worker in Kentucky became unemployed tomorrow, and remained unemployed for one full year, and then remained unemployed for 6 months of the following year, full benefits could be paid to all of them. Kentucky's fund is sound. Kentucky believes in merit rating. By merit rating, we have saved Kentucky employers $55,000,000 since the enactment of the law. Yet Kentucky's average benefit compares favorably with the average benefit throughout the land.

Senator LONG. What is your average benefit in Kentucky?

Mr. HATTON. About $16 is the average benefit; $20 for 20 weeks is the maximum. It will average $16.13, I believe.

Now, to conclude my remarks, I would oppose, as an individual believer in this system, just as much the transfer of this program to the Department of Commerce, which is a special-interest group, as I do now oppose its transfer to the Department of Labor. It must be administered by a public-interest group.

Thank you.

The CHAIRMAN. You believe, then, that it is against the public interest to permit this transfer.

Mr. HATTON. I certainly do, sir.

The CHAIRMAN. Kentucky has a remarkable record if it has accumulated sufficient reserves to meet the contingency that you have referred to here. And you feel that the transfer to the Labor Department, and the policies that you fear it would pursue, would affect adversely a State like Kentucky, that has tried to be conservative and yet build up its reserve for the protection of the worker.

Mr. HATTON. Yes, sir; we do. And that is the reason that the Kentucky commission, that has dealt with the Federal agency in the past, has taken that position in their resolution, which the committee will have; and it is a very strong resolution, opposing the plan.

The CHAIRMAN. Senator Long?

Senator LONG. It always seems to me that people come here to oppose things a lot faster than to be in favor of them. It is my impression that the people in my State would like to see this plan go into effect. I would like to reserve further questions on the attitude of these State commissions until I have sounded a few more out. I think if all of them feel the same way you do, we should consider setting aside the plan, but I am under the impression that a lot of State departments may be in favor of this plan going into effect.

Mr. HATTON. If the Senator will permit me, I will say that when the State administrators are appointed from the ranks of the employment service you will generally find that those commissions favor the transfer. On the other hand, if the State administrator is not a former employee in the employment service, those States generally will oppose the transfer. That is because traditionally the employment service has been in the Department of Labor. And I think if you took a cross section of the viewpoint of the interstate conference for example, which is the association of the administrators, you would find that those appointed from the employment service favor the transfer, and those not appointed from it are against it. In Kentucky, none of the commission is appointed from the employment service.

Senator LONG. In other words, you think it would depend on what a man's background is as to how he will view this question.

Mr. HATTON. That is right. And I think that in getting the background of a purely impartial group such as we have in Kentucky, one man representing labor, one man representing the employer, and one man representing the public, none of whom has been steeped in either the traditions of the Department of Labor or otherwise, you get a true viewpoint.

Senator LONG. It occurs to me, you understand, that when we get a witness here from the National Association of Manufacturers and he says that the Labor Department is prejudiced, you cannot exactly call him an impartial witness, either.

Mr. HATTON. That is right, sir.

Senator LONG. And it is a little difficult to get at just exactly what the facts of the situation are from an impartial standpoint.

Mr. HATTON. That is right.

The CHAIRMAN. Would you care to have your entire prepared statement placed in the record, or do you think you have covered it sufficiently?

Mr. HATTON. I should like to have it placed in the record, if you please, sir.

The CHAIRMAN. Very well.

(The prepared statement of Mr. Hatton is as follows:)

STATEMENT OF ROBERT E. HATTON, LOUISVILLE, KY., CHAIRMAN, KENTUCKY UNEMPLOYMENT INSURANCE ADVISORY COUNCIL

Mr. Chairman, lady, and gentlemen of the committee, my name is Robert E. Hatton, I am a practicing lawyer in Louisville, Ky.

Today, I am speaking before you, first as chairman of the Kentucky Unemployment Insurance Advisory Council and, secondly, as an individual who has long been interested in the unemployment insurance program. I have also been directed by the Kentucky Unemployment Insurance Commission to present to you a resolution of that commission opposing the transfer of unemployment insurance and employment service to the Department of Labor.

Kentucky's advisory council, like that of the other States, is composed of representatives of the public, the employee and the employer. All serve without compensation.

At a council meeting on last Monday a resolution was adopted which, with your indulgence, I shall read. A copy has already been forwarded to your chairman. After the action of the advisory council the Kentucky Unemployment Commission considered the question. Kentucky's commission, like those of other States, consists of the chairman, representing the public, V. E. Barnes; an employee representative, Omer Stubbs; and an employer representative, John C. C. Mayo. Kentucky's commission is unique in at least one respect. It is, I believe, the only commissions in the Nation, whose present personnel is identical with that of the original commission. Except for a 4-year period, 1944-48, these same members, V. E. Barnes, Omer Stubbs, and John C. C. Mayo, have served continuously, under four governors, since their appointment in 1937.

For that reason, if for no other, their resolution is entitled to particular weight. Again, with your permission, I shall read that resolution and file a copy with the clerk of the committee.

Now, having presented for your consideration the formal action of Kentucky's advisory council and Kentucky's commission, I am going to take the liberty of speaking to you as an individual who is deeply interested in the unemployment insurance program.

In 1936 the General Assembly of Kentucky passed its first unemployment compensation law which I drafted at the request of Gov. A. B. Chandler.

I was appointed as first executive director of Kentucky's Unemployment Compensation Commission. This office I continued to hold until my successor, V. E. Barnes, was appointed.

I served as general counsel of the commission until 1939.

From 1939 to early 1942 I maintained my close contact with the commission by serving in an advisory capacity without compensation.

In 1948, after having returned from the armed services, I was appointed a public representative on the advisory council and in 1949 was, as an employer representative, elected chairman of the council, which position I now occupy. These personal references are given to justify my presence here as an impartial witness.

As an individual, I appear today in opposition to the transfer of Unemployment Insurance and Employment Service to the Department of Labor.

In taking that position, I wish to emphasize at the start that I mean to cast no reflection upon the very able, efficient and public spirited gentleman from Massachusetts who now graces the office of Secretary of Labor. Nor do I intend by my views to reflect upon the judgment of the members of the Hoover Commission nor upon that great Democratic statesman from Missouri, the President of the United States.

Late in 1934 the Committee on Economic Security recommended to President Roosevelt the broad outlines of the original Social Security Act, proposing to place its administration in the Department of Labor. This recommendation the President adopted in his message to Congress on January 11, 1935, in which he stated:

"An unemployment compensation system should be constructed in such a way as to afford every practicable aid and incentive toward the larger purpose of employment stabilization * in order to encourage the stabilization

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of private employment. Federal legislation should not foreclose the States from establishing means for inducing industries to afford an even greater stabilization of employment."

Congress refused to place this new program in the Department of Labor and in its stead created the Social Security Board as an independent agency to administer the act. The record of the committee hearings back in 1935 reveal quite clearly the reasons for this action.

The statute creating the Department of Labor provides (11 U. S. C. 611): "The purpose of the Department of Labor shall be to foster, promote, and develop the welfare of the wage earners of the United States, to improve their working conditions and to advance their opportunities for profitable employment."

This mandate of Congress has been faithfully carried out. As the Brookings Institution (which was the task force appointed by the Hoover Commission on the subject of the transfer) pointed out in its report:

"Over the years since the Department was established, the Secretaries have been drawn from the ranks of organized labor or from persons reasonably acceptable to labor. At the time of the recent debates on the location of the Employment Service and unemployment compensation, the Department had one assistant secretary from the American Federation of Labor, one from the Congress of Industrial Organizations, and one from an independent labor organization. Each was primarily responsible for the relationships between the Department and the groups with which he was affiliated."

The Brookings Institution did not recommend the transfer.

As was to be expected the Labor Department has constantly reflected the thinking of the leaders of organized labor. This, it may be argued, is consistent with its mandate from Congress, but it is true nevertheless.

The two great national labor organizations have gone on record as favoring the complete federalization of the unemployment insurance program and the abolishment of merit rating whereby employers with stable employment receive lower rates of tax.

Reflecting this view, spokesmen for the Department of Labor have advocated the same objectives.

This transfer is regarded, at least by some of its supporters among organized labor, as the first step in achieving these two goals. Once transferred to a Department whose avowed policies so nearly coincide with the demands of organized labor, it is only reasonable to expect that you Members of the Congress will soon be presented with departmental proposals to eliminate employer merit rating.

If employer merit rating is eliminated, then you have removed from the program any incentive toward stabilized employment. You will have departed from President Roosevelt's recommendation to the Congress in 1935.

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