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UNITED STATES EMPLOYMENT SERVICE

FRIDAY, NOVEMBER 16, 1945

UNITED STATES SENATE,

SUBCOMMITTEE OF THE COMMITTEE ON EDUCATION AND LABOR, Washington, D. C. The subcommittee met, pursuant to adjournment, at 10 a. m., in room 324, Senate Office Building, Senator James M. Tunnell presiding. Present: Senators Tunell and Ellender.

Senator TUNNELL. You may proceed, Mr. Altmeyer.

STATEMENT OF HON. ARTHUR J. ALTMEYER, CHAIRMAN, SOCIAL SECURITY BOARD, WASHINGTON, D. C.

Mr. ALTMEYER. Gentlemen, I am here to testify in favor of bills S. 1456 and 1510.

These bills are not in conflict with the amendment to H. R. 4407, the pending appropriation bill which returns the United States Employment Service to the States within a period of not more than 120 days.

I say that because these two bills have three important features that are necessary for the permanent establishment of the United States Employment Service on a sound Federal-State basis.

First, they outline more specifically the standards and conditions under which the State would be required to operate as a condition for receiving Federal grants.

The Wagner-Peyser Act, which is now the statutory basis for the Federal-State system of employment offices is very general in its terms. It is probable that the Secretary of Labor, under his rulemaking power, could prescribe all of the standards and conditions that are spelled out in these bills.

However, in my judgment, it is always better to have the legislative body, if it is possible to do so, spell out basic standards and conditions so that administrators don't have to argue about them.

The second feature of these two bills is that the method of financing under the Wagner-Peyser Act of 1933 is changed. As you know, there is a 50-50 grant to the States for operating public-employment offices.

But in 1935 when the Social Security Act was passed, it was found necessary to greatly expand the system of public-employment offices in order to make certain that unemployed workers who had made applications for benefits would have an opportunity to obtain available jobs through an efficient public-employment office system.

Therefore, the Social Security Board supplemented the funds that were provided under the Wagner-Peyser Act more and more until by the time the United States Employment Service was transferred to Federal operation, between 85 and 90 percent of the cost was being financed by the Federal Government through the Social Security Board under title III of the Social Security Act, which provides for 100-percent grant for the administration of unemployment compensation.

Senator TUNNELL. That would not be changed under these bills, would it?

Mr. ALTMEYER. Yes.

Senator TUNNELL. All right. We will get at that later.

Mr. ALTMEYER. Under these two bills, the old matching provisions of the Wagner-Peyser Act are repealed, and there is substituted therefor a 100 percent Federal grant to the States, so that it is no longer material, from a financial standpoint, whether the States receive a grant under the revised Wagner-Peyser Act or whether they receive a grant directly from the Social Security Board under title III of the Social Security Act, because both would be 100 percent Federal grant. I think it is very important to place both on the same basis. It will simplify greatly administrative relations at the Federal level and at the State level, as well, and avoid the temptation that there always is of going to one Federal agency instead of another if they can get more money from one Federal agency than they can from another.

The third feature of these two bills that I believe is important is this: That if the States do not meet the standards and conditions laid down, the Secretary of Labor through the United States Employment Service would have authority to operate the employment offices in that State directly.

That, it seems to me, is a very important authority to be given to the Secretary of Labor.

Under the Social Security Act, if the State fails to meet the standards and conditions laid down, the only recourse that the Federal Government has is to withdraw the funds. That really is committing suicide. It is punishing the beneficiaries of the act rather than the administrative officials who may be derelict or unresponsive.

It seems to me a much more realistic plan is to provide for Federal operation if the State does not meet the standards and conditions. The cost to the Federal Government would be the same. If the State administrator does not fulfill his duties, the Federal Government should have the responsibility of doing so.

We have in the past had several situations where we were obliged to withdraw grants. Fortunately one of them occurred after there was a provision in an annual appropriation act enabling the Social Security Board to operate a State employment service that failed to meet the standards. So we did operate that State service.

The other situation was finally resolved after 2 or 3 weeks of stalemate. In that second situation, the Governor of the State insisted in turning the relief offices into public employment offices. He did not see any necessity for having public employment offices separate and apart from relief offices.

The Social Security Board took the position that that perverted the idea of public employment offices; that to have the relief offices serve

as public employment offices would discourage self-supporting people from patronizing them and discourage employers from using them. The need for more specific standards and the condition arises out of the following circumstances:

First, we now have a situation where the National Government has a far stronger interest in the effective operation of a Nation-wide employment service than it ever did.

We have at the present time about 7,500,000 workers who have moved from their home States to take jobs in war industries.

We have, of course, the regular interstate migration of farm hands, seamen, building construction labor, summer hotels, and railroad labor, and we have about 70 local interstate market areas such as New York, Chicago, Philadelphia, St. Louis, Kansas City, and Cincinnati.

About 20,000,000 people live in those local interstate market areas. It is very essential that the employment offices in those labor market areas function as a unit.

Many times the State line is determined by a river. The people living across the river live in another State, but they work in the same industries. It is very necessary in such an area that there be full opportunity on the one hand for the workers to get a chance at the best job opportunities, whether they exist on one side or on the other side of the river, and that employers get a chance at the best workers whether they live on one side or the other side of the river.

The need for a Nation-wide system of employment service with an outlook such as I have just described, so that workers on the one hand would have an opportunity at the best jobs available and employers on the other hand should have an opportunity at the best workers available, regardless of State lines, was the most important reason for federalizing the operation of the employment service at the end of 1941.

It is perfectly natural for local people to feel that the local labor market should be an entirely localized thing. The employers, on the one hand, are not averse to having a full labor supply locally, and they are not particularly concerned about finding jobs for such workers in a labor-shortage area.

In a labor-shortage area, labor is not particularly averse to having a relative scarcity of workers because it keeps up wage rates. That is perfectly natural on the part of both employees and employers.

And local citizens feel that local jobs ought to be filled by local people, or at least by State citizens.

Now, in one of these local interstate areas, the Governor of the State refused to have a working arrangement established between the employment offices on each side of the river to pool the job information and the employer orders.

Even though there was a very great shortage of workers for war industries in his State, he refused to pool the employment office information and preferred to attempt to recruit people from the distant ends of the State rather than from just across the river where they lived and could come to work easily, because they were within easy commuting distance.

That sort of thing cannot serve the best interests of the employer, employees, or the citizens. And certainly, in an employment service

that is financed 100 percent by the Federal Government, in my opinion, it is something that ought to be overcome by proper standards being laid down in the act under which the Federal grants are made. Senator TUNNELL. If neither 1456 nor 1510 is passed, who will pay the expense, and in what proportion?

Mr. ALTMEYER. It would then depend upon annual appropriation

acts.

Under the pending appropriations act the expense would be paid 100 percent by the Federal Government, because no appropriation has been made to implement the Wagner-Peyser Act of 1943, which provided for a 50-50 match.

That is why I say these two bills should be enacted to establish a permanent system of financing.

Senator TUNNELL. You think they both should be?

Mr. ALTMEYER. No; they both are pretty much the same. I will explain what I think about the differences between the two.

But both provide for 100 percent Federal grants.

Senator TUNNELL. It costs the State nothing.
Mr. ALTMEYER. It costs the State nothing.

Senator TUNNELL. And it is under State management.
Mr. ALTMEYER. That is right.

But, of course, this has to be borne in mind: We have a Federal unemployment tax act amounting to 3 percent, State-Federal act. But under that act employers are entitled to take credit up to 90 percent of their Federal tax liability for contributions made under State unemployment laws.

So the Federal Government only has a net of 10 percent of the 3 percent tax which goes into the Federal Treasury. But that is more than sufficient to finance the administration of unemployment compensation in this country.

At the present time there is a surplus of about $65,000,000 of tax receipts under the Federal Unemployment Tax Act over and above what it has been necessary for the Federal Government to make in grants to the States where the operation of the State compensation laws include the administration of these employment offices that we are talking about today.

So under the present tax arrangement I think it is logical for the Federal Government to pay 100 percent of the expense. However, I don't think any 100-percent Federal grant is good. I think, when the Congress comes to consider amendments to the Social Security Act, it might well consider a different arrangement, because under a 100percent grant you have the anamoly of the Federal Government being responsible for the financing and the State responsible for the administration: you have the unit of Government not responsible in any way for financing having the authority to spend the money.

Senator ELLENDER. But that money must be spent under conditions stipulated in the law.

Mr. ALTMEYER. That is right.

Senator ELLENDER. And those rules and regulations are issued from Washington?

Mr. ALTMEYER. That is right. Nevertheless, it is, in my opinion, contrary to sound principles not to have the disbursing agency responsible in some degree for raising funds which are to be disbursed.

Putting it concretely, I think it would be better if the State legislatures had some responsibility for the financing rather than to be entirely dependent on the Federal Government.

Where you have 100 percent Federal grants, of necessity, you must have much more detailed rules and regulations laid down for the expenditure of that money.

Senator ELLENDER. That leads more to centralized government? Mr. ALTMEYER. Yes.

Now, these standards and conditions that I have mentioned from time to time are more specifically mentioned in S. 1456 than they are in S. 1510.

I would recommend that if S. 1510 is taken as the basis for any legislation, that the more specific standards and conditions contained in S. 1456 be incorporated therein.

And another difference between the two bills, S. 1456 and S. 1510, is that S. 1510 is more specific in protecting the status of these Federal employees who are being returned to State operations.

I think that is desirable. I think it is desirable that the provisions of S. 1510 be observed.

However, I go along with the provisions inserted in the amendment to the pending appropriation bill (H. R. 4407), so that if that bill goes through, it is not so essential that this protective language in title III of S. 1510 be retained.

It would do no harm to retain it, but I am pointing out that would be largely taken care of by the rescission bill now before Congress. Senator ELLENDER. What do you mean when you say Federal employees are protected better under S. 1510 than S. 1456?

Mr. ALTMEYER. In S. 1510 you will find title III deals with the conditions under which Federal employees will be transferred back to State pay rolls. It provides that they go back en bloc.

Senator ELLENDER. You mean employees of agencies?

Mr. ALTMEYER. Employees of the United States Employment Service.

I think it is desirable for those conditions to be laid down because it would be quite unfair for 23,000 employees and quite bad for the State to break up a going concern.

This provides for the transfer to the State. Then they go ahead under the State merit systems to effect an orderly rearrangement of their status, classification, and duties.

The standards in S. 1456, which I believe ought to be written into. S. 1510. will be found in section IV, on page 4 of S. 1456.

Some language in section 3 (a) is pertinent because section 3 provides what shall be the duty of the United States Employment Service. Automatically, if the operation of the United States Employment Service is turned over to the States, the provisions of section 3 (a) should also be applicable.

I want to mention these standards as most important, in my opinion. On page 4 there is this language:

It shall be the duty of the United States Employment Service assist in better utilization and distribution of manpower as between different areas by maintaining an effective national clearing system enabling workers in labor surplus areas to obtain employment in labor shortage areas.

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