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Mr. QUINN. Your theory as to the desirability of a Federal agency to handle railroad unemployment insurance is the same as it would be for any other interstate business?
Mr. BROWN. I feel, sir, that there are long traditions separating out the railroads and while I do not hold any definite long-run brief in principle as to just where that delimitation comes, say in the border line of interstate busses or trucks, I do feel, as of this ne, that we do have pretty definitely earmarked the railroad industry and railroad employees, so that it would probably be a very reasonable line of delimitation to make this, as it is, a railroad bill.
Mr. CROSSER. Thank you, Doctor.
Mr. CASHEN. Mr. Chairman, on behalf of our committee, we desire to rest our case at this time. I see that we have about an hour and 10 minutes remaining. I should like to rest with the understanding that we may use that time later in rebuttal to statements by the opponents of the bill, if it becomes necessary.
Mr. CROSSER. I think that will be satisfactory.
STATEMENT OF C. D. YOUNG, REPRESENTING THE
ASSOCIATION OF AMERICAN RAILWAYS
Mr. Young. Mr. Chairman and gentlemen of the committee, I am here testifying on behalf of the Association of American Railways. My personal representation here is brought about through the fact that a year or so ago the association selected me among others to represent them in negotiations with labor, to try to bring forward to you gentlemen a retirement act.
That made it necessary for me to become posted on such matters as social security for old age. As a companion to that study, I found unemployment insurance. We touched upon this matter occasionally in our discussion of the Retirement Act and its necessities for railway employees. We were approached by the railway labor executives to discuss with them the matter of unemployment insurance, and I was selected to be a member of the subcommittee of the committee of the association.
I am an employee at the present time, and vice president of the Pennsylvania Railroad, and among other items in my portfolio is insurance. I do not come here as an expert, but rather as an administrator of insurance matters.
The subject of this bill is that of unemployment-insurance benefit for employees of carriers, through a Federal act, the cost of which is to be borne by the employers, versus the present 51 Territorial acts in which the carriers' employees are included with other occupational groups; and it proposes to lift all carriers' employees out of the provisions of the State acts and isolate them in a Federal act for this industry.
I come to this hearing with an open mind regarding the ultimate wisdom of a Federal unemployment-insurance act for railroad employees. I am here because I am opposed to making a change at this
time from the system now in effect in the States before the States have had time to make their present acts fully effective and without having had sufficient experience through the State acts—with due regard to the welfare of all other employees in each of the States—to enable one to determine what should be the ultimate plan for the best interest of the railway employees.
I am against this proposed bill, gentlemen, for nine reasons:
1. The plan is not what it is purported to be-insurance against unemployment. It is, rather, unemployment insecurity for the employees longest in the railroad service.
2. It is not a measure for stabilizing employment, in fact it has a tendency to invite the men with shortest service in the railroad industry to become unemployed.
3. It offers no encouragement to the employer to minimize unemployment.
4. The fund may be inadequate to pay benefits to railroaders with the longest service if they do become unemployed.
5. It assumes one of two things: Either the State laws are too restrictive as to benefit payments or the State tax rate is higher than need be to meet the requirements.
6. The contemplated cost of administration is unnecessarily excessive.
7. It assumes that insurance is a grant at the expense of the State or the employer.
8. In many respects it does not follow the draft bill recommended by the Social Security Board to the States as a guide for their laws.
9. This bill is inequitable, unduly benefiting short-service men at the expense of long-service railroaders under the guise of meeting the complexity created by the crossing of State lines in interstate employment which, however, affects less than one-fourth of railway employees; whereas there should be no preference by the Federal Government for one group of men within an industry.
May I elaborate on the several points I have just mentioned?
If we visualize the insurance benefits contemplated in this bill for unemployed workers of the railroad industry, it will be a disappointment. The last men to become unemployed are, according to seniority practice, the older ones in the service and when their time comes to be paid benefits the fund is likely to have become depleted to the extent that it will be insufficient because the money will have been given to the men with shorter periods of service.
The form this bill takes is substantially different for men of less than 1 year's service from that of a great many of the State acts, a difference which it is not my purpose to discuss in detail since other testimony will be presented upon this subject, and I will illustrate with charts later. I do point out at this time that it goes beyond the total benefits provided in most of the State acts for men with a short period of service. Under this bill the short service employees receive benefits during the same period (5 months) as the longer service employees. May I illustrate?
A messenger boy receiving $50 per month for 3 months would earn a total of $150. Under the proposed act he would be paid a total of $140 if unemployed, whereas under the provisions of many State acts he would be paid $25.
Let us take this boy further: He could during unemployment from railroad service be shortly or immediately employed by some other industry, say, the Western Union at the same rate of pay and after 9 months become unemployed again. He would, according to many of the State acts, receive State unemployment benefits of $75. He would not receive his benefit of $140 upon becoming unemployed from the railroad, but after having collected his $75 from the State due to his unemployment from the Western Unoin, he could then make application to the Railroad Unemployment Administration and receive his $140. I have no objection to the messenger boy being properly protected, but this bill makes it possible for him to receive payments from two sources while not working.
Again, a trackman earning $85 a month for 3 months will earn $255; under the provisions of this bill he would be paid $160 if he became unemployed, so for the 3 months' work on the railroad he would get $415. This man, as is frequently the case, is either a farmer or a farm hand doing off-seasonal work on the railroad. I can visualize the difficulty his farmer employer would have in getting him to come back to the farm until he has spent his $415. Does this not raise the question of pausing to consider a Federal act until we know how the State acts have worked out and have ascertained the effect upon the yearly contribution of each individual to the country's labor requirements in the States if benefits are to be paid railroad workers to the extent provided in this bill?
In view of these differences between the proposed bill and the State acts-assuming that the Social Security Board's "draft” bill is an acceptable master pattern, which assumption experience alone will prove—the liberal benefits proposed in the Federal bill would quickly exhaust the funds in a period of unemployment if it were to continue at the present rate.
For me to state this actuarially is impossible—there has not been sufficient experience, either by the States individually or by all of them collectively; nor can we be guided entirely by experience of foreign countries for the reason that in the United States our cycles of business depression causing unemployment are more severe than are those in foreign countries and these severe fluctuations inevitably strike the casual and short-term employees first. To illustrate the greater fluctuation of our cycles as compared with those elsewhere, I have had this chart prepared.
This chart has been prepared from Government statistics of different countries represented; the United States, from the Federal Reserve Board; the United Kingdom, from the Economist; France, General Statistics of France; Germany, the Research Institute of the Government; and Italy, Governmental Figures.
On the black line you see the trend of business in the United States. Now, the trend of business, generally speaking, definitely is a measure of employment and unemployment. As business picks up, the employment picks up, and vice versa.
(The chart above referred to is on file with the committee.) Mr. MARTIN. How many years does that cover?
Mr. Young. This starts in 1930 and goes up to the present date. This indicating] is the years 1930, 1931, 1932, 1933, 1934 1935, 1936, and 1937. These are prepared on the basis of a percentage ordinate in order to make them comparable.
You will see from this chart that the fluctuations in the United States, in the matter of industrial production, is much more severe than in any other country.
You will notice that Germany has had some severe shocks and France slightly less.
Mr. Hay. Which is that top line?
Mr. Young. The blue line is France, the red line is Germany, the black line is the United States, and the United Kingdom is the purple line.
Mr. REECE. What accounts for the greater fluctuations in the United States and Germany than in any other countries? Is it because Germany and the United States are more industrial?
Mr. Young. I believe that is so. To definitely state that I could not, but as you regiment your employment into corporation industry, the tendency is to have your total employment vary more greatly than in agricultural countries. In other words, your employment in agriculture, generally speaking, is more stable because it is individual employment and not affected by anything except broad markets. I would not like to definitely say why there is a difference between countries. But I believe, as you recognize, that where you are subject to local industrial markets for your outlet and there is a decline in business and then a pick-up in business, you have an increase in industrial production.
Mr. REECE. The railroads are the servants and not the masters of business.
Mr. YOUNG. That is a very important point. The railroads are service corporations. They do not create the business conditions under which they must solicit their business. It comes to them through the service to the consumer and to the manufacturer.
YEARS OF SERVICE OF UNEMPLOYED
The study by the Coordinator of Transportation shows that 65 percent of railroad unemployment occurs with men who have less than 10 years' railroad service. can hardly be said that the men with so little experience as 10 years are the strength and backbone of the army of railroad men which renders the efficient and superior service now given to the public, and, as will be admitted by observers, surpasses anything of this kind in the world.
I would like to show you this second chart, which is a picture made up from Coordinator Eastman's sample study, while he was coordinator, of the unemployment situation on the carriers which he selected to make his study.
The abscissa has the number of years of service the employee is with the railway which is, in this first block, up to 4 years; then 5 to 9 years; 10 to 14 years; 15 to 19 years; 20 to 24 years; 25 to 29 years; and 30 years and over.
The vertical line, the ordinate, is the percent of unemployment of the various groups.
The blue color in this chart represents the percent of those with 4 years of service and under that are unemployed in the railway industry. You will note that is about 37 percent. The percentage that this group represents of total employed in the railroad business is shown by this line, 1874 percent. In other words, 18; percent of the total employees are 37 percent of the unemployed.
The same thing is illustrated by the next 5-year block.
Mr. MARTIN. Before you go from that, does that first column break the percentage down into numbers?
Mr. Young. No, sir. This is the study made by the coordinator only in these 5-year increments.
Mr. MARTIN. What does the percentage in the first column, the 4-year column, indicate; what percentage of the unemployed?
Mr. Young. The first 5 years of service accounts for 37 percent of the unemployment.
Mr. MARTIN. Have you got any figures that will show what that number of men is out of the total?
Mr. Young. The total employed?
Mr. Young. Yes. That is 18% percent. That is this line here, the hatched line.
Mr. Martin. The first 4 years constitute 18%2 percent of the total employees?
Nr. Young. That is right, of the total employed, 18%2 percent are affected by unemployment, to the extent of 37 percent of all unemployed. The next increment is 28 percent of the unemployment and they constitute about 24 percent of the total employees.
The next 5-year increment represents about the same percentage of the total employees, and is 20 percent of all unemployed.
The purpose of showing you this chart, gentlemen, after I have given you an explanation of what it is and its source, is to indicate to you how clearly unemployment compensation is affected by the short service men of the railroad. In other words, the first 10 to 15 years has the majority of the unemployment problem. If we could have broken down this first 5-year period I think it would have indicated that unemployment was exceedingly high with employees of 1 or 2 years of service.
Mr. Martin. Before you leave that chart, what percentage of unemployment is shown in the seventh column, the short red column?
Mr. Young. That is for men who have had more than 30 years of service. The unemployment problem with them is 1/4 percent, whereas they represent almost 7 percent of the total employees in the industry.
Mr. MARTIN. What percent?
Mr. Young. Almost 7 percent. In other words, 7 percent have less than 2 percent of the unemployment problem. That is largely due to their experience in their craft, or their occupation, and seniority rating.
Mr. MARTIN. Take the sixth column.
Mr. Young. That is for those with 25 to 30 years of service. They have 1.6 percent. Mr. MARTIN. 1.6 percent of unemployment?
Mr. Young. Yes; and they represent 6 percent of the total employees.
Mr. MARTIN. Take the fifth column.