all this has changed, so that many unions appear more powerful than the Government itself. Recognizing that this Department is heavily a spokesman for organized labor Dr. Taylor asks: Is this Department to be developed as the representative of organized labor in the Government or is it to become a sort of ministry of labor charged with impartial administration of labor legislation in the public interest? Again he says: On the basis of experience it would appear that the Department of Labor cannot be a vital agency as long as it is expected, in various quarters, to be an advocate of labor interests in conformance with its legislative charter, and at the same time an impartial administrator of the national labor policy in the public interest. He advised the Hoover Commission not to make a recommendation on rebuilding and reorganizing the Department until a thorough study had been made which would determine whether we are to have a special interest Labor Department or a Department capable of taking a broad national outlook in terms of the citizens' interest. Such a study was not made by the Hoover Commission. We would like to commend for your study the closest analysis of the memorandum prepared by Dr. Taylor. You will then see that the Chamber of Commerce of the United States is not taking any narrow partisan view of the problems associated with Reorganization Plan No. 2. We believe your decision will be sound if that memorandum is carefully reviewed. Unemployment compensation and the employment services are for the direct benefit of workers. But employers pay the costs. They and the citizens generally have a profound and fundamental interest in the effective utilization of our productive machinery and manpower, so that more people will have more goods at lower prices. The consumer's interest is no less direct than that of the worker. Successive congressional committees and the Congress as a whole have on repeated occasions recognized this approach. We hope that you will continue to give weight. to the same considerations which motivated the Congress on previous occasions. That is all the points that I want to bring out, Mr. Chairman, and members of the committee. I particularly wanted to make that point and emphasize Dr. Taylor's remarks in that connection. The CHAIRMAN. Thank you, Mr. Argo. Are there any questions? Senator SMITH. In looking over the testimony of Mr. Argo, I am particularly interested in the fact that on page 7 he refers to efficiency and economy as referred to by the Hoover Commission. It seems to me that in the Hoover report on page 12 it very specifically states that it is desirable to integrate fiscal and administrative review of the two State programs under the supervision of the same Federal department. That would indicate they expected some efficiency, and through efficiency we get economy, do we not? Mr. ARGO. Naturally I have to agree with you, Senator, that through efficiency we naturally would get economy, but I do not believe, in fact from all the information that we can gather, this certainly is not an economy move because of the dupliction of offices that would have to be set up over the country that now under the Federal Security Agency we already have. Senator SMITH. I also note that reference has been made to the Hoover Commission recommendation-this has been referred to sev eral times, Mr. Chairman—and you do agree that the Hoover Commission does recommend the transfer, do you not? Mr. ARGO. The Hoover Commission recommend the transfer, but the records that I find and from all that I could hear the task force of the Hoover Commission did not make that recommendation to the Commission. Senator SMITH. That is what I was leading up to because there seems to be some disagreement here in the task force report, appendix P. That has been quoted for the record before, Mr. Chairman, where they say that this should be left to the duly elected representatives of the people. Yet on page 440, in referring to the proper location of the United States Employment Service and Bureau of Employment Security, Item 5 reads: The Employment Service (together with unemployment compensation) is a vital and necessary segment of the functions of any agency charged with administering Federal policies with respect to the labor market, working conditions, and labor-management relations. Mr. Chairman, I would like to have that whole part put into the record. I do not want to take the time of the committee to talk about it now. I wanted to call that to your attenion and I wish very much, Mr. Argo, you would refer to that when you have time in thinking about your recommendations. The CHAIRMAN. Will you identify for the information of the reporter just what part you wish to have incorporated in the record? Senator SMITH. In the first instance the Task Force Report on Public Welfare, appendix P, under "Employment Service and Unemployment Compensation," the last paragraph, which goes on to page 20; and on page 440, under "Proper Location of the United States Employment Service and Bureau of Employment Security," that whole statement, including five points, with emphasis on the fifth point, which I am calling to Mr. Argo's attention because it seems to be not exactly as you see it in your testimony on page 7. I thank you, Mr. Chairman. (The matter referred to follows:) EMPLOYMENT SERVICE AND UNEMPLOYMENT COMPENSATION The nature of this issue regarding the proper location of the Federal agency adminstering the Employment Service and unemployment compensation precludes its settlement on a purely factual basis. A decision must be arrived at on the basis of judgment, and in last analysis this judgment must be exercised by the duly elected representatives of the people. The Brookings Institution is not submitting any formal recommendations on the subject because detailed facts alone do not determine the issue. PROPER LOCATION OF THE UNITED STATES EMPLOYMENT SERVICE AND BUREAU OF EMPLOYMENT SECURITY Apart from the issue of administrative financing, the principal source of FederalState friction in employment security lies in the relation between unemployment compensation and employment service functions at the Federal level. It is now generally agreed by both Federal and State officials that it is desirable to integrate fiscal and administrative review of the two State programs under the supervision of the same Federal department. It is also generally understood by Federal and State officials that placement operations should not be subordinated or neglected in favor of paying unemployment compensation claims, and that certain employment service functions (notably occupational analysis, testing, reporting, counseling, and placement standards and procedures) should not be merged with unemployment compensation work. These points of agreement emerged clearly during the hearings and debates over President Truman's Reorganization Plan No. 2 in 1947 and Plan No. 1 of 1948. The organizational issue is therefore primarily a question of location and coordination. The main points of controversy were (1) whether employment security should be administered in connection with other labor and employment relations, functions, rather than in connection with other social security, educational, and public health functions; (2) whether the Secretary of Labor should be entrusted with administering the certification and administrative functions under title III of the Social Security Act when he is charged with "fostering and promoting the welfare of wage earners and their opportunities for profitable employment." With respect to the first point: 1. Employment offices and unemployment compensation are more closely related to each other than to other social security, educational, or public-health programs. Both are Federal-State programs dealing with problems of employers and employees, hiring and lay-off, job stabilization, personnel, and labor-management relations. Neither has any comparable relation to public assistance or grants to States for education and public health. Old-age and survivors insurance is a completely Federal program, with different coverage and different administrative procedures from unemployment compensation. Insofar as old-age insurance might be merged with unemployment compensation as to coverage, it would have a closer administrative relation to wage experience and conditions of employment than to education, public health, or public assistance. 2. Employment security has close operating relationships with other employment and labor functions: in research with the Bureau of Labor Statistics and the Women's Bureau, in training with the Apprentice Training Service, in conditions of employment with the Wage and Hour Division and the Bureau of Labor Standards. 3. In the States, the employment security agency is not located in the State welfare, health, or education department, but is either located in the State industrial commission or labor department (15 States), in a department with other labor functions (6 States), or in an independent employment security or unemployment compensation commission (30 States). The States thus either consider employment security as an employment function requiring coordination with other such functions, or give it a separate status. They do not merge it with public assistance, health, or education. 4. Personnel engaged in employment service and unemployment compensation problems acquire the same basic training, familiarity, and experience with labor and employee relations problems, and do not develop professional interest of concern with problems and techniques of public health, education, or welfare administration. Neither employers or employees with public policies concerning their interests to be administered from a professional social-worker viewpoint. 5. The employment service (together with unemployment compensation) is a vital and necessary segment of the functions of any agency charged with administering Federal policies with respect to the labor market, working conditions, and labor-management relations. (Staff memorandum No. 81-1-82 of the Senate Committee on Expenditures in the Executive Departments of July 25, 1949, follows:) SENATE COMMITTEE ON EXPENDITURES IN THE Staff Memorandum No. 81-1-82. (From Hoover Report No. 13, Department of Labor, pp. 11-14) BUREAU OF EMPLOYMENT SECURITY This Bureau administers the employment service and unemployment compensation. It employs some 1,030 persons and spends about $6,000,000 per annum in administration. Unemployment insurance is collected by the Treasury from employers and is available, under certain laws, to the States who administer the funds under varying State requirements. The unemployment tax is gen erally 3 percent, of which money the Treasury retains for the account of the Federal Government up to 10 percent, or roughly 0.3 percent of the total taxable pay rolls. The totals collected by the Treasury for the account of the Federal Government were $207,920,000 for the fiscal year 1948. From the money so collected for the account of the Federal Government, the Bureau pays its administrative expenses and remits certain money to the States for administrative purposes. The amounts so remitted to the States for the fiscal year 1948 were approximately $130,000,000. The accumulated amount held in trust in the Treasury now amounts to more than $6,000,000,000 for all the States in the aggregate. The Wagner-Peyser Act of 1933 authorized Federal grants for the operation of public employment offices by the States. Originally, Wagner-Peyser funds were made available on a 50-50 matching basis. Under title III of the Social Security Act, tax offsets and administrative grants for unemployment compensation are made to the States for administration of unemployment compensation through public employment offices. The employment service and unem-> ployment compensation were placed within the Federal Security Agency in order to avoid two systems of financing, two sets of conditional requirements, and two different supervisory agencies at the national level. Operationally, the two programs are closely linked through the same facility-State employment offices. It is now generally agreed by both Federal and State officials that it is desirable to integrate fiscal and administrative review of the two State programs under the supervision of the same Federal department. The placement operations are the primary objectives of this dual arrangement. The paying of unemployment compensation claims is a temporary expedient until the eligible worker can be brought back into the productive labor force. Occupational analysis, testing, reporting, counseling, and placement standards and procedures are the principal functions involved. These are employment functions. Employmet offices and unemployment compensation are more closely related to each other than to retirement or old-age assistance or educational programs. Both are Federal-State programs dealing with labor force conditions and labormanagement relations. These programs have close operating relationships with other employment and labor functions in the Department of Labor-with the Bureau of Labor Statistics, Women's Bureau, the Bureau of Apprenticeship, Wage and Hour Division, the Bureau of Labor Standards, and the Bureau of Veterans' Reemployment Rights. Personnel for these functions all acquire the same basic training in labor and employee relations problems. The States themselves either place employment security in an industrial commission or labor department, in a department with other labor functions, or organize them independently. In no State are they merged with health, education, or welfare. In addition, more and more States are rewarding employers. with good "experience" ratings in providing stable employment. This type of activity ties in directly with the kind of research and planning performed by › the State labor agencies and by the Department of Labor, particularly that of its Bureau of Labor Statistics. The only real relationship between unemployment compensation and other functions in the Federal Security Agency is that it is a social insurance. This is only a theoretical relationship. Pay-roll deductions for unemployment compensation and old-age and survivors insurance are enforced by the Bureau of Internal Revenue. Beyond the collection of pay-roll taxes there is no common point of administration. Old-age and survivors insurance is Federal, unemployment compensation is State. The employment function, and with it the administration of unemployment compensation, is part of the complex of functions dealing with the labor force. Recommendation The Commission recommends the transfer of the Bureau of Employment Security to the Department of Labor. MILES SCULL, Jr., Staff Member. The CHAIRMAN. Thank you very much, Mr. Argo. Mr. ARGO. Thank you very much, Mr. Chairman. It is certainly a pleasure and an honor to be before you. The CHAIRMAN. Mr. Rowe, we are very glad to have you here before us to give us the benefit of your views on this issue." STATEMENT OF JAMES H. ROWE, JR., ATTORNEY AT LAW, CORCORAN, YOUNGMAN & ROWE, WASHINGTON, D. C.; MEMBER, COMMISSION ON ORGANIZATION OF THE EXECUTIVE BRANCH OF THE GOVERNMENT Mr. Rowe. It is a pleasure to be here, sir. Mr. Chairman, I have a three-page statement. I think, if the committee agrees, I can read it in about 7 minutes. The CHAIRMAN. That will be satisfactory. Go right ahead. Mr. RowE. My name is James Rowe, Jr. I was a member of the Commission on Organization of the Executive Branch of the Government, more familiary known as the Hoover Commission. The committee has already had considerable testimony on Reorganization Plan No. 2. It is not my purpose to cover ground which has already had thorough discussion. I should like instead to emphasize to you the over-all reasons of sound administration which led the Hoover Commission to recommend the transfer of the Bureau of Employment Security from the Federal Security Agency to the Department of Labor, which recommendation the President has accepted in his plan No. 2. As you may know, the 12 members of the Commission were in complete agreement on the over-all principles of good administration which should be applied throughout the executive branch. When the Commission in its discussions reached the stage below what might be called the departmental level there were, not unnaturally, some disagreements among us as to the precise application of these principles to the numerous bureaus and various functions of the Government. It is worth emphasizing here, I think, that as to this particular recommendation, which is carried out in plan No. 2, the Commission was unanimous in its feeling that the Bureau of Employment Security belonged in the Department of Labor. I think I should pause here and say also, as you of course know, Mr. Chairman, some of the legislative members of the Commission quite properly made a general reservation as to all recommendations of the Commission, including this one, because of their dual role as commissioners and also as legislators whose duties would require them to consider the recommendations of the Commission. The CHAIRMAN. I pointed out yesterday, I believe, that we had made that reservation and we have further to consider it in the light of their testimony. Mr. Rowe. I said some. I think, as a matter of fact, all legislative members made it. I don't think Senator Aiken made it formally, but I think he made it informally. The over-all principles of administration which the Commission felt should apply to the executive branch were set out in its first report called General Management of the Executive Branch. There are two recommendations which I believe to be pertinent here. They are: Recommendation No. 12: The numerous agencies of the executive branch must be grouped into departments as nearly as possible by major purposes in order to give a coherent mission to each department. Recommendation No. 17: Therefore, we recommend that these various agencies be consolidated into about one-third of the present number. |