favor of the Department of Labor. Then, too, in all of these deliberations the Department of Labor relied on A. F. of L. and CIO attorneys to advance its arguments.

In Illinois, businessmen might not fare too badly under even this arrangement and this is because we in business are right on the ground where we can watch our interests very closely. When the scene shifts to Washington, the Illinois employer becomes more fearful of what can happen beyond his immediate knowledge. He is quite reluctant to turn to Federal agencies which propose elimination of the things he believes in, as important safeguards in the unemployment compensation laws.

It is a matter of common knowledge that spokesmen for organized labor advocate:

1. Elimination of State administration of unemployment compensation in favor of Federal control.

2. Elimination of experience rating.

3. Opening the way to favor benefits to individuals unemployed and engaged in a labor dispute, and to individuals unwilling to work or who are manifestly not a part of the labor market.

Businessmen generally believe that these goals I have enumerated are neither in the employer, employee or public interest. In our estimation, experience rating under the United States Department of Labor's jurisdiction, might be crippled or eliminated. The very power to write job referral standards could erase present qualifying provisions which keep benefits from becoming a dole. Finally, the power and control over the purse strings of the States could by the setting of minimum standards, give complete domination over State operation. Would not the Department of Labor be obligated to promote such policies when such policies are so strongly advocated by spokesmen for the special group that the Department represents?

Because of the dangers inherent in this proposal to transfer these services to the Department of Labor, Illinois businessmen are demonstrating an unprec edented concern. They do not want this move.

To summarize:

1. It is not proper that departments of Government be set up to promote the welfare of special groups.

2. The public interest is best served when these important phases of social security are administerd by an agency which is neither labor- nor employerdominated.

We, therefore, recommend defeat of Reorganization Plan No. 2 of 1949.

Mr. MARTIN. My name is Robert B. Martin, and I am treasurer of the Kable News Co., national magazine distributors in Mount Morris, Ill. I have filed a statement in opposition to Reorganization Plan No. 2 on behalf of the Illinois State Chamber of Commerce. For over

3

years I have been a member of this group's social-security committee of 45 businessmen who have concerned themselves actively with problems in this field. I would like to comment briefly on some of the points in the statement I have filed.

In this statement, mention was made that business feared placing in the hands of an acknowledged partisan agency the adminstration of an activity which concerns itself so intimately with business operations. In these hearings this point has been much discussed. We feel that we have some basis for this fear. In our State the division of unemployment compensation is a part of the department of labor. In no sense of the word do I wish to indicate that the administration in Illinois attempts to be anything but fair. However, on many occasions, it finds itself in an embarassing position because of this set-up. For instance, in the session of the Illinois General Assembly just concluded, very controversial amendments to the Illinois Unemployment Compensation Act were introduced. Among other things, Illinois businessmen proposed the words "actively seeking employment," mentioned in yesterday's hearings as an eligibility requirement for benefits. Of course, this provision was vigorously opposed by labor

ཎྞཾ

organizations, including the one of which the State director of labor is a member. The commissioner of unemployment compensation was placed in a position where he had to oppose this recommendation both in negotiations of labor and employer groups and in committee hearings. As a result, he was criticized not only by businessmen but by the Illinois legislators, who openly accused him of a partisan attitude. Although representatives of labor and employer organizations had agreed on provisions of another bill, one which both groups felt was very much in the public interest, this bill was amended by the general assembly to eliminate its essential feature, apparently only on the basis that it would provide our commissioner of unemployment with more administrative responsibility and power.

Here a bill recognized as desirable by the director of labor, employer and employee groups, was defeated because, justifiably or not, the commissioner of unemployment was criticized for his activities on this and other unemployment-compensation legislation, a situation which arose because of his employment relationship with the State department of labor.

Situations such this create an unhealthy relationship between business and the administration of this important activity. It becomes under such conditions increasingly difficult to obtain employer cooperation with the administration.

The Illinois State chamber has encouraged this cooperation which is essential to the efficient operation of an employment-security program. It was mentioned at yesterday's hearing that, even though there is no justification for this expressed fear, the very fact that the vast majority of employers have this concern should in itself create doubt as to the wisdom of handing the administration of these two acctivities to a partisan agency. Certainly it should not be done just to give the agency more to do. If it is done, there is every indication, at least from Illinois experience, that employers' reluctance to furnish job openings and other information to the administration will be that much harder, if not impossible, to overcome. The effectiveness of an employment-security program would be minimized greatly if employer cooperation were further discouraged. As a matter of fact, there must be greater public acceptance as well as employer acceptance of this program. Employer associations are continuously striving for this employer cooperation. I know the Illinois State chamber will continue in this great effort regardless of the outcome of this issue; but, if this transfer is made, we necessarily must take a rather dim view as to the success of that part of our endeavors.

It has been pointed out that the administrative agency issues the rules and regulations essential to the operation of this program. As you know, in instances they are rather voluminous. Again the fear has been expressed that through these rules and regulations a partisan agency might incorporate many provisions imposed by one group and sponsored by another. It seems apparent that even in an attempt at complete fairness when controversial issues arise a partisan agency could not issue completely unbiased regulations.

For example, what regulations should be used to determine suitability of work? Should a plasterer whose previous earnings were $80 a week be denied benefits if he refuses work at $60 a week in a: job which he can perform but which is beneath his skill as a plasterer?.

There is room for much disagreement here and in other regulations relating to availability and eligibility for benefits. These arguments are resolved through rules and regulations. No law can cover all situations. We feel that the umpire and the individuals who write. the rules of the game should be as far as possible completely objective, with no special group interest. It is only under such conditions that public interest can be truly served.

In closing, we oppose Reorganization Plan No. 2 on the grounds that, first, employer cooperation and public acceptance of the employment-security program which is essential if this program is to operate successfully will become most difficult if not impossible to obtain if the transfer is made, and second, the public interest is best served when this program is administered by an agency that is neither employer- nor employee-dominated.

I thank you.

The CHAIRMAN. Thank you very much, Mr. Martin.

Are there any questions?

Mr. MARTIN. Thank you.

The CHAIRMAN. Mr. Argo, will you come around, please? Do you have a prepared statement?

STATEMENT OF R. K. ARGO, MEMBER, COMMITTEE ON SOCIAL SECURITY, CHAMBER OF COMMERCE OF THE UNITED STATES; PERSONNEL DIRECTOR, ALABAMA MILLS, INC., BIRMINGHAM, ALA.

Mr. ARGO. Yes, sir. I should like to submit my statement for the record to be sure it is included in the record.

The CHAIRMAN. All right, it may be placed in the record, and you may summarize it for us.

(Mr. Argo's prepared statement follows:)

STATEMENT BY R. K. ARGO, BIRMINGHAM, ALA., ON BEHALF OF THE CHAMBER OF COMMERCE OF THE UNITED STATES

My name is R. K. Argo. I am personnel director of the Alabama Mills, Inc., Birmingham, Ala. I appear before you today as a member of the committee on social security of the Chamber of Commerce of the United States in opposition to Reorganization Plan No. 2, relating to the transfer of the Bureau of Employment Security from the Federal Security Agency to the Department of Labor.

The Chamber of Commerce of the United States is a federation of more than 3,000 regional, State, and local chambers of commerce and trade associations with a membership of more than 1,300,000 businessmen.

These organizations have adopted a policy which says:

"All Federal activities in the social-security field should be centralized in one Federal agency or department (which might also deal with others matters). This agency should be unbiased-not devoted to advancing the interests of any particular group in our national life

* * *

"Employment-service and unemployment-compensation activities are organically related to each other, employment services thus forming an integral part of social security. Accordingly, all Federal employment-service activity should be conducted in the same unbiased Federal agency which should house all other social-security activities."

A NEUTRAL AGENCY

Why does the chamber emphasize the importance of a neutral agency? If employers are to make full use of the employment services, they must have full confidence in these services at both the local and Federal levels.

The statute creating the Department of Labor specifically orders it to "foster, promote, and develop the interests of wage earners." The Secretary of Labor is by custom selected only after consultation with labor leaders. Two Assistant Secretaries are in effect nominated by the two major competing labor federations. Perhaps this is just as it should be. Workers should not only have a voice in Government but they should have available to them essential governmental services which could not otherwise be provided. This, however, calls for a clear judgment on the part of Congress as to what are strictly labor functions and services and what functions and services are of significance and importance to other sectors of the economy.

We have been repeatedly told that it is of importance to rebuild the Labor Department. Perhaps this is important from certain viewpoints. But the Labor Department in the long run can build prestige and a solid foundation as it develops a reputation for integrity, forthrightness, and objectivity. The Bureau of Labor Statistics has over the years developed a reputation for such objectivity, and its findings are generally accepted by management, by labor, and by other groups. It has gone out of its way to consult outside impartial experts to test its performance.

With respect to some other phases of the Department of Labor's work, successive Federal administrations and Congresses apparently have not felt completely content to put numerous services into the Department of Labor or keep them there.

In other words, your committee in this concern with rebuilding the Department of Labor cannot ignore the facts and forces that caused this Department to shrink in the past decade or so. It must ask itself, "Why did this happen?"

SOCIAL SECURITY AND THE LABOR DEPARTMENT

In 1933 the original Wagner-Peyser Act created a new United States Employment Service as a separate Buerau of the Department of Labor.

The President's Economic Security Committee, in its report prior to the passage of the Social Security Act of 1935, recommended that the social-security program be placed in the Department of Labor, where the small but growing United States Employment Service was already housed.

The Congress decided against this, and we think, correctly.

From 1935 to 1939 the Federal Government's activities under unemployment compensation were lodged in the Social Security Board, while the United States Employment Service was still in the Department of Labor. It became increasingly clear that the Federal activities relating to job placement and unemploymentbenefit payments should be coordinated in a single unit. Work with full wages is better than half pay for the unemployed.

The separation of these two functions at the Federal level created much confusion; nearly everyone agreed that they ought to be coordinated even though the Federal Government did not actually run local employment offices or pay the unemployment benefits. President Roosevelt in his message transmitting his 1939 plan on Government reorganization said:

"I find it necessary and desirable to group in a Federal security agency those agencies of the Government, the major purposes of which are to promote social and economic security * * * in order that their similar and related functions of social and economic security may be placed under a single head and their internal operations simplified and integrated."

President Roosevelt was not concerned only with tying USES and UC together but with a broader grouping of all social-security activities of the Federal Government.

Much of the present confusion in this respect grows out of the wartime abolition of State employment services and the complete Federal control and operation of the United States Employment Service from Washington. Although this transfer from the 48 States was requested by the President as a wartime emergency "loan," persistent and vigorous efforts were made to convert the loan into a kind of confiscation-"finders, keepers." The Congress, by large majorities, felt that this constituted a serious breaking of the faith with the people in the States and their governors.

Without going into the numerous hearings and details of 1945 through 1947, it should be pointed out that in the latter year the President's Reorganization Plan No. 2 would have continued separation of the United States Employment Service in the Department of Labor and unemployment-compensation matters in 94651-49-17

the Federal Security Agency-successor to the Federal Social Security Board.1 This was proposed in spite of almost universal agreement that the two agencies ought to be combined. This Presidential reorganization failed of adoption in the Congress, for good and valid reasons.

Last year (1948), Presidential Reorganization Plan No. 1 again proposed that both unemployment compensation and United States Employment Service be transferred to the Department of Labor. After extensive hearings by the House Committee on Expenditures and the Senate Committee on Labor and Public Welfare, the Congress once again decided against what is now proposed to be done under the 1949 Presidential Plan No. 2.

This record is recounted to demonstrate that after 15 years of uncertainty and confusion, as of this date it has been the continuing conviction of the Congress that Federal activities relating to the Employment Service and Unemployment Compensation ought not to be lodged in a Federal agency that is by law and custom specifically designed to serve only one sector of our economy. We would like to suggest, as you reconsider this matter now, that you fully appraise the reasons for the positions previously taken by a considerable number of congressional committees as well as the whole body. If you do this, we believe your decision will be sound.

EWING FAVORED INTEGRATED SOCIAL SECURITY

That all phases of social security should be housed in a single Federal agency was the firm opinion of Oscar R. Ewing, Social Security Administrator, in a letter dated December 5, 1947, to the Director of the Bureau of the Budget. Part of his letter is worth quoting:

66* * * Because of certain comments that appear regarding proposals to transfer elsewhere certain units of this Agency, particularly the Bureau of Employment Security, it might be well to emphasize again the relationship of this program to other programs of this Agency and likewise to point out again why it would be desirable to arrange for the return of the Employment Service to this Agency at the earliest possible date.

"The Bureau of Employment Security is an integral part of the Federal Security Agency. It is part of a program designed to protect the homes of the Nation through provision of the minimum income essential for the maintenance of these homes during periods of unemployment. Coverage of old-age and survivors insurance and unemployment insurance is largely the same, and changes should be in the direction of uniformity of coverage for both programs. Because of the close administrative relationships existing between these two insurance programs, and in order to assure the exchange of information between the two, it is essential that present administrative relationships be continued. Today State agencies are making extensive use of identical wage reports under both programs. To remove unemployment insurance from the agency ad. ministering old-age and survivors insurance would result in the need for developing new administrative channels to assure an adequate interchange of information. Such a separation would be detrimental to economical and efficient operations.

* * *

"A further reason for integrated administration is the movement in the States to broaden unemployment-insurance laws to include payment of benefits during periods of temporary disability. This trend presents problems which would be extremely difficult to overcome with divided control of insurance activities. Congressional committees have held extensive hearings on the need for expanding old-age and survivors insurance to include permanent-disability insurance. If the Congress should decide to provide for such benefits, it is essential that the two programs be jointly administered because there would be tens of thousands of cases in which citizens may first become entitled to temporary benefits under one program and may of necessity, because of inability to return to active employment, be transferred to a permanent-disability roll of the other programs. Because of this, temporary disability insurance provisions must necessarily be coordinated with any steps taken to develop permanent disability insurance protection as a part of the old-age and survivors insurance program. Such coordination would be extremely difficult unless the insurance programs have common

1 For a brief political history of USES and Federal aspects of UC, see Issues in Social Security, report of House Ways and Means Committee, 1946, p. 681; American Economic Security, published periodically by the Chamber of Commerce of the United States of America, particularly issues of June 1946, p. 3, and of June 1947, p. 24.