In my own State of Indiana, the employment-security program is now and always has been administered by an independent agency of the State government, in which great care has been taken to maintain an even balance between employee and employer interests. For example, the top policy-making board, under whose supervision the unemployment compensation and employment service functions are administered, is composed of two representatives of labor, two representatives of employers, and one representative of the general public. This board and the director appointed by the governor are directly responsible to the governor. Similarly, the review board of the State division, which is the body hearing final appeals in disputed benefit cases before they go to the State appellate court, is an independent arm of the State agency composed of one representative of labor, one of management, and one of the public. This system works. It has worked through all the years since this division was set up. I am sure that the Indiana Legislature, based on my service there, will have it no other way, so long as the legislature retains jurisdiction over the State program. Quite properly, neither labor nor employer groups get everything they want. But both groups recognize that the Indiana employment security program is administered impartially and fairly. Most people in the State of Indiana want to keep it on that basis. It is true, as indicated by the Hoover Commission report, that in some States the employment security agencies are identified with the State labor departments. I am informed, however, that in many of such States, the employment security agencies are in the labor departments in name only, but actually have a wholly independent status from the operating standpoint. At this point, I should like to refer to the task force report, on page 441, paragraph 3, in which it makes the statement that: An independent employment security or unemployment compensation commission exists in 30 States or approximately two-thirds. That seems to me to be rather weighty evidence of the wisdom of the years through which this process has evolved. Such is the case, in other words, with our industrial commission, or industrial board in Indiana, it is nominally under the labor department, but it is an entirely separate division which has no administrative contact with the labor department as such. We feel that the Hoover Commission might well have made this point clear. The question could well be asked as to what effect the transfer of the Federal Bureau of Employment Security to the United States Labor Department would have on the operation of the Indiana program, since in most of its details it is administered under State law. To anyone able and willing to do a realistic job of research and reading between the lines, the answers are obvious. With organized labor officials in control of the Labor Department (that is, the Federal Department), they would be in a position to bring to bear the full force of broad Federal rule-making power, of Federal purse-string controls over State programs, and have Federal legislative persuasion to accomplish their well-known and oft-repeated objectives. In the first place, I am confident that one immediate result would be to damage the effectiveness of the employment-service program. It is significant that the Federal Government has almost unbridled rule-making power over the operation of the employment service offices, even though technically they are operated by the States. This power undoubtedly would be used to enforce organized labor's viewpoint that, among other things, a new job would have to meet strict union rules as to suitability before it could be offered to an unemployed worker. But regardless of whether such rule-making power were used, the facts remains that many employers distrust the Labor Department-I mentioned that yesterday from my own observations in Indiana-and for that reason would cease to use the employment service in placing job orders. Such a result would be to the detriment of everyone, particularly unemployed workers looking for jobs. After that, however, would come the long-rang campaign to do with the unemployment-benefit systems the things that national labor union officials have wanted to do for a long time. They always have wanted to kill experience rating, which is the mechanism by which employment stabilization is encouraged by gearing the employers' tax rate to his record for stable employment. The better the employment record, the lower the tax, and conversely, higher taxes if stability of employment declines. Employers and at least a majority of the public as represented by State legislatures throughout the country are convinced that experience rating is sound for a number of reasons. Yet the Labor Department immediately could review and revise the many Federal administrative rules and standards developed in the last 13 years to such an extent as to throw experience rating in Indiana and other States into confusion and probably to make it virtually inoperative. Many national labor union officials want to make benefits payable to strikers. They want to eliminate or render meaningless the benefit disqualifications which serve as the only means of preventing the squandering of unemployment benefits on nondeserving claimants who would rather draw the benefits than hold a job. They want, with a single sweep, to incrase benefit amounts to such high levels that, in the belief of many people, they would encourage mass idleness and make the program so costly that it would defeat its own purpose. Finally, they want to federalize completely the entire unemployment-insurance system, with themselves in control of the national system. Some, not all, of these things could be accomplished within the framework of the existing Federal legislation, through rule-making authority and the persuasiveness of purse-string control over State programs. But with Federal administration in the Labor Department, those who have such objectives also would be in a much better position than they now are to promote the Federal law changes that would establish new Federal standards and eventually federalize the program. It is recognized that the Federal Security Agency for a number of years has itself been friendly to many of organized labor objectives which I have outlined. However, its deviations from an impartial course have been reflections of temporary administrative policy, insofar as we have been able to discern, and not destructive of its basically independent status. Furthermore, the Federal Security Agency largely has been bound by its own rules and precedents established in the early years of the program. The Labor Department, in accepting new jurisdiction over the employment-security program, would not be so bound. I would like to emphasize that point in view of some of the questions raised yesterday. Under the provisions of the Wagner-Peyser Act, as I understand them, the administrative agency almost has carte blanche to establish rules and regulations. The Federal Security Agency, with their friendliness which has been indicated, nevertheless has been restrained to some degree at least, to considerable degree, by the precedents of their rules and regulations which have been set up over the years that it has been in their jurisdiction, and that itself we feel is a considerable restraint as against transferring this administration to a department which would have a clean towel from which to establish new rules and regulations without respect necessarily to the Federal Security Agency. For the reasons here outlined, your committee respectfully is requested to recommend rejection of Reorganization Plan No. 2. I thank you. The CHAIRMAN. Thank you very much, Mr. Kerr. Are there any questions, Senator Ives, Senator Smith, Senator Schoeppel? Senator SCHOEPPEL. I would like to make this one statement to you, Mr. Kerr, that I think your statement about the experience rating is fundamentally sound from the experience angle, and that seems to reflect almost, I would say, 99 percent of the opinion from men in my State that I have a lot of confidence in. I will say they reflect that very same sentiment. Mr. KERR. I might make a comment. I am the president of a small concern. We make building products. For many years we had offseason lay-offs. Ten or 12 years ago, I came up from the ranks myself, we made an effort to try to diversify our products and level out our sales so that we could eliminate these lay-offs, not because we would save taxes because this was done before, but as a result of that program we have had no unemployment compensation to any of our people in 13 years. If this administration were transferred and that rule were changed so far as experience rating would be eliminated, we would have to pay the 3 percent regardless of this record that we have established, and it would just be that much more of a tax load, which we think would be unjustified, also that we should have to help pay for somebody else's lack of diligence to try to establish stabilized employment. The CHAIRMAN. Senator Ives? Senator IVES. Mr. Kerr, did I understand you to say that organized labor is opposed to experience rating? Mr. KERR. In Indiana; yes, sir. Senator IVES. I do not know about Indiana, but I would like to point out for the record that the experience-rating system in the State of New York was established with the cooperation of both the AFL and the CIO, so I do not believe we ought to have it on the record that organized labor always has been universally opposed. A group of us, a group representing the manufacturers in the State of New York, the associated industries of the State of New York, representatives of the Federation of Labor and the CIO, and representatives of the legis lature worked out the present system in the State of New York and agreed finally unanimously on a program. I think that is something that should be noted because I am inclined to believe that while organized labor probably doesn't go out wholeheartedly in favor of experience rating, nevertheless I think in all fairness we must grant that they recognize the inherent justice in a sound basic form of experience rating, at least in some sections of the country. That may not be true, generally speaking, in the Nation. Mr. KERR. I am glad to hear that. The CHAIRMAN. All right, Mr. Kerr, thank you very much. STATEMENT OF HERSCHEL ATKINSON, EXECUTIVE VICE PRESI- The CHAIRMAN. Mr. Atkinson, will you come forward, please? Do you have a prepared statement? Mr. ATKINSON. Yes; there is a prepared statement which I have turned over to the secretary of the committee. However, I am going to comment. I am not going to follow the prepared manuscript. The CHAIRMAN. All right, your statement may be printed in full in the record. Mr. ATKINSON. The statement may be published in full. I am going to try to comment on some of the testimony of yesterday, so I have made notes, and therefore will speak from notes. The CHAIRMAN. All right. You may proceed. STATEMENT OF HERSCHEL ATKINSON, CHAIRMAN, SOCIAL SECURITY COMMITTEE, My name is Herschel Atkinson. I am executive vice president of the Ohio Chamber of Commerce of Columbus, Ohio, and I am chairman of the socialsecurity committee of the Council of State Chambers of Commerce. I am appearing both on behalf of the Ohio chamber and as the representative of the council, representing 33 State and regional chambers of commerce throughout the country. These organizations have an aggregate membership of over 40,000 business and professional concerns of all classifications and sizes, with the small-business view predominant. It is, in my estimate, thoroughly representative of this Nation's business. By way of qualification as a witness, with some intimate personal experience with unemployment compensation and the Employment Service, I mention that I served for 5 years (between 1939 and 1944) as administrator of the Ohio Bureau of Unemployment Compensation. I propose to be brief. I am acquainted, in a general way, with the presentations already made here by those opposing plan No. 2, and want to avoid being repetitious. TASK FORCE VIEW CORRECT In my estimate, the Hover task force is entirely correct in forming the conclusion that the proper location of unemployment compensation and Employment Service is not a matter to be determined by factual information and data but is, in the last analysis, a matter of judgment to be determined by the elected representatives of the people: in short, you gentlemen. For this is essentially a matter of judgment involving qualitative, not quantitative consideration. My approach is this: If we were to consider where unemployment compensation functions should be located federally, aside from the administrative relationship that it bears with Employment Service, there isn't anyone, I suppose, who wouldn't agree that it would be in the Federal Security Agency, because of its very distinct relations with other phases of the Nation's social-insurance program. Conversely, I suppose we would all agree that the Employment Service, not considered in any relation to unemployment compensation, should be in the Department of Labor. However, the complication is introduced by the necessary recognition that these two programs are more closely related to each other in their operations than either of them are to the other functions of the Federal Security Agency and of the Department of Labor. Fortunately, also, there is general agreement that the two programs must be operated together. The problem, then, resolves itself into determining in which agency the consolidated functions should be placed, realizing that whatever the decision may be we are removing one function from a department that might more properly house it, if this interrelationship I have mentioned did not exist. Applying this approach, it seems pertinent to point out how the Employment Service came into being, and particularly how it originally operated before unemployment compensation entered the picture. FEW OFFICES IN EARLY SYSTEM The United States Employment Service was established by the Wagner-Peyser Act in June 1933. Under this Federal-State coperative program, a public labor market place was established. Employers were free to use it as they saw fit. Employees had the same discretion. It was originally established, I think the record will make clear, as a regulative influence or as an alternative, if you please, to the functioning of private employing offices. Prior to the advent of unemployment compensation, the operations of FederalState free employment offices were quite insignificant. Only some 22 States had seen fit to establish offices pursuant to the cooperative arrangement. In my own State of Ohio, there were only some six or seven offices, and these only in the metropolitan centers. It would be interesting for you to obtain the figures and discover just how negligible the number of offices were throughout the country. There is no question in my mind that, at this stage of its operations, the Employment Service should have been located in the Department of Labor. Certainly a properly operated public labor market does serve the interests of labor. It certainly is designed to promote the interests of labor, and therefore lies within the mandate of the Labor Department. Under these original circumstances, no question of bias or prejudice in administration is attached, for employers and employees were both perfectly free to use it. There were no compulsions attached. BOOST COMES FROM UNEMPLOYMENT LAW However, this picture was altered radically with the advent of unemployment compensation in 1935. The Federal act, as you know, requires that an approved State unemployment-compensation system pay benefits through public employment offices. And one of the first rulings of the Social Security Board was the provision that these public employment offices which the States had set up in connection with their unemployment compensation administration had to be established under the provisions of the Wagner-Peyser Act. This gave a tremendous overnight impetus to the Employment Service. Where only a few offices existed before, overnight employment offices were established in all the cities, and even in the villages and hamlets throughout the Nation. In Ohio, six or seven offices grew to a hundred. So, it can be said that the development and growth of Employment Service as we now know it were entirely based on its current relationship to unemployment compensation. In my period as Ohio administrator, 87 percent, as I recall, of the individuals who came to the employment office and registered for work did so because they were desirous of getting benefits, and they had to register for work in order to claim benefits. Mind you, only 13 percent came solely because they were seeking work, and were not concerned with seeking benefits. This conclusively points up to me the fact that it is the unemployment-benefit claimant-not the person seeking work without reference to benefits-who is a controlling consideration in the problem of judgment as I have posed it. |