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TABLE 1.—Railroad A, service months by wage groups, distribution of employees in 1987 by service months and total earnings for year

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Mr. LATIMER. Table No. 2 presents the same material for a typical western railroad, or railroad "B."

(Table 2 is as follows:)

TABLE 2.-Railroad B, service months by wage groups, distribution of employees in 1937 by service months and total earnings for year

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Mr. LATIMER. Table 3 is based on the typical western railroad B, which had a somewhat higher rate of unemployment than on the eastern railroad. On the basis of the tabulations, it was estimated that the percentage distribution of persons becoming unemployed by number of service months would be as shown in the bottom line of table 3. The percentages pertaining to each service month were broken down according to total earnings.

(Table 3 is as follows:)

TABLE 3.-Proportion of men eligible to receive benefits, by wage groups and number of months of service in 1937, Railroad B

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Mr. LATIMER. Table 4 is a distribution showing the duration of unemployment based on a radix of 10,000 employees, on the basis of the report of the Federal Coordinator of Transportation. (Table 4 is as follows:)

TABLE 4.-Estimated number of railroad employees remaining unemployed at the end of various weeks, out of an original group of 10,000 becoming unemployed (based on data for 1930-32, 7 railroads)1

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Mr. LATIMER. On the basis of the figures in the first column of table 3, the average daily benefit rate per person becoming unemployed, including those not eligible, was found to be $1.58. That is not the average benefit of those entitled to receive benefits, but it is the average daily benefit of all persons becoming unemployed. From Table 4 it was determined that the average number of days of benefit per person becoming unemployed was 43 days. Since 40 persons out of each 100 become unemployed, since each one will draw a benefit for an average of 43 days, and since the average benefit is found to be $1.58, one multiplies 40 by $1.58 by 43 which gives $2,717.60 as the probable amount of benefits, payable for each 40 persons becoming unemployed. $2,717.60 will be paid in each year to each 100 persons employed.

The total earnings of those 100 employees, according to the average data we have compiled, would be in a calendar year about $115,000. Since 40 cases of unemployment can be expected for each 100 individuals employed at some time or other during the year, the $2,717.60 should be divided by $115,000, giving 2.36 percent of the pay roll as the net cost of benefits for total employment beginning in any calendar year. By this method, it is not necessary to consider unemployment beginning in the previous calendar year and extending into the current year. The benefits to be paid would, therefore, be 2.36 percent of the pay roll, and that pay roll, I should add, is based on compensation not to exceed $300 in any one month. The Coordinator's estimate made, substantially, an allowance of one-tenth of 1 percent for the cost of compensating partial unemployment. Since this bill provides benefits only with respect to days of total unemployment, and then only with respect to those days of unemployment in excess of 7 during any period of 15 consecutive days, no such allowance is necessary in the present estimate. Nevertheless, an allowance of 0.30 percent of pay roll was added to provide a margin of safety for contingencies. Also, we have made some allowances for any possible omissions in the Coordinator's figures, without being able to lay our fingers on them; these figures having been compiled to estimate costs for a plan which provided benefits for partial unemployment. Adding the 2.36 percent and 0.30 percent gives a total of 2.66 percent as the net cost of benefits, excluding administration expenses. If we assume that administration expense will absorb 10 percent of the total income, the total cost would be 2.96 percent of the pay roll.

I think that some reservation is bound to be made about such figures as these. Nevertheless, I found great satisfaction in the corroboration of these estimates that has been made here by the exhibits that Mr. Lawler submitted. Mr. Lawler found that in the States of Louisiana, Mississippi, Tennessee, and Minnesota the benefits which would have been paid under the proposed bill would have been 147.70 percent of those which have been actually awarded under the State plans. It took some time for our actuary to calculate what would be the cost of the payment under the proposed unemployment-insurance legislation as compared with what would be paid under the average State plan, and on yesterday he gave me the figure of 147.22 percent. The actual difference between the 147.70 and the 147.22 is somewhat less than one-third of 1 percent. A part of this close correspondence is determined by the terms of the State laws themselves, which are largely uniform and which of course were followed by our actuary.

Mr. MARTIN. You consider that a satisfactory approximation? Mr. LATIMER. I never saw one that was closer, but, as I say, a part of that closeness is due to the fact that part of this correspondence is determined by the laws themselves. It does confirm our estimate as to the distribution by durations and wage classes into which each group of employees falls. Our figure is based on the estimated actual duration, and we do not run the amount up to the maximum duration, which, I judge, is the basis of Mr. Lawler's table. After making all due allowance for those necessarily common factors in both estimates, it seems to me that the result is sufficiently close to indicate that our figures have not been as lacking in substance as it has been indicated they· might be.

Now, I would like to say something about the cost of administration of a railroad unemployment insurance system. The Railroad Retirement Board has given some study to this matter, although, of course, it has not been possible for us because it would be outside of our jurisdiction, to go into great detal in making up any large-scale estimate.

The administrative machinery to be set up must include provision for the maintenance of wage records, for the filing of claims, for the registration of unemployed workers, for the adjustment of disputes, for determining coverage, for making rules and regulations, for answering general queries, and for the thousand and one routine tasks involved in the maintenance of any relatively large-scale organization. Many of the functions which would have to be performed are being carried on now by the Railroad Retirement Board in connection with the administration of the Railroad Retirement Act. Our legal staff has already made many determinations as to many of the problems of coverage which arise under the Unemployment Compensation Act. It has determined a great many cases under that act as to those who are or who are not employees, and as to those who are or who are not employers, and those determinations would have a direct bearing on corresponding determinations under unemploymentinsurance legislation, where the definitions of coverage, employees, compensation, and some other matters are identical.

The wage records which would form the basis for determinations of eligibility for their amount of benefits are already set up. They have already been collected and are being collected by the Board. Some expansion of this activity would be required, of course, in order to secure information currently rather than once in the lifetime of the individual, as is now the case. I have seen nothing in the proposed legislation which, so far as wage records are concerned, would make any change in the present practice. The actuarial studies to be made under the proposed unemployment-insurance act would have a good many points in common with those involved in connection with our other work, although some additional studies in connection with unemployment compensation would be required. The studies of our economic staff, particularly those conducted with the funds provided by the W. P. A., would have a direct bearing on the studies which would be prescribed by this proposed legislation. The greatest amount of cost involved would be the part which would be entailed by the receipt of claims, and in connection with the registration and placement functions, which are a necessary and integral part of any system of unemployment insurance.

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