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The hatchery building and incubators, in many instances, are located within the city limits, convenient to a greater flow of traffic. The breeding farm, for obvious reasons, is outside the city limits where land is cheaper. Ordinances also are a factor.

The average employee may spend several days a week, or several hours a day, on the farmland or in the hatchery. Where is the employer going to draw the line on the application of the Federal unemployment tax as applied in H. R. 8857?

We further feel that it would be extremely unfair to impose the Federal unemployment tax on an industry which is so seasonal in character. Flock replacement hatcheries * * * those firms producing chicks destined for laying flocks * * * seldom hatch, chicks for longer than 5 months of the year. In the case of turkey hatcheries, the season is shorter. Such seasonal industries would be called on to pay a heavy tax * * * in fact * * * that maximum tax, all of which must be passed aiong to the purchaser of chicks and poults. Here again the hatchery located within the city limits would find himself at a competitive disadvantage.

The hatchery qualifying as a farm operation within the meaning of H. R. 8857 would have a distinct advantage over the hatchery which fails to qualify.

We feel, therefore, that the industry is of such a nature that its continued exemption from the Federal unemployment act is warranted. Sincerely,

Don M. TURNBULL, Executive Secretary. (Whereupon, at 11:55 a. m., the committee recessed, subject to call of the Chair.)

UNEMPLOYMENT INSURANCE

FRIDAY, JUNE 11, 1954

HOUSE OF REPRESENTATIVES,
COMMITTEE ON WAYS AND MEANS,

Washington, D. C. The committee met at 9:30 a. m. pursuant to recess, in the hearing room of the Committee on Ways and Means, New House Office Building, Hon. Daniel A. Reed (chairman), presiding.

The CHAIRMAN. The committee will come to order. Mr. McCurry, if you will give your name and the capacity in which you appear for the record you may proceed.

STATEMENT OF JOHN C. McCURRY, GENERAL MANAGER OF THE

MICHIGAN MANUFACTURERS ASSOCIATION, REPRESENTING THE CONFERENCE OF STATE MANUFACTURERS ASSOCIATIONS

Mr. McCURRY. My name is John C. McCurry. I am general manager of the Michigan Manufacturers Association, Detroit. I am appearing here today on behalf of the Michigan Manufacturers Association and the Conference of State Manufacturers Associations, which organization includes the following statewide manufacturers associations:

Associated Industries of Alabama: Associated Industries of Arkansas, Inc.; California Manufacturers Association; Manufacturers Association of Colorado; Manufacturers Association of Connecticut, Inc.; Association Industries of Florida; Illinois Manfuacturers Association; Indiana Manufacturers Association; Iowa Manufacturers Association; Associated Industries. of Kentucky; Louisiana Manufacturers Association; Associated Industries of Maine; Associated Industries

Massachusetts; Michigan Manufacturers Association; Minnesota Employers Association; Associated Industries of Missouri; Associated Industries of Nebraska; New Hampshire Manufacturers Association; New Jersey Manufacturers Association; Ohio Manufacturers Association; Associated Industries of Oklahoma; Columbia Empire Industries, Inc. (Oregon); Pennsylvania Manufacturers Association; Associated Industries of Rhode Island, Tennessee Manufacturers Association; Texas Manufacturers Association; Utah Manufacturers Association; Associated Industries of Vermont; Virginia Manufacturers Association; West Virginia Manufacturers Association; and Wisconsin Manufacturers Association.

The number of companies represented by the Conference of State Manufacturers Associations is more than 52,000.

My testimony today will deal with H. R. 8857, H. R. 6537, H. R. 6539, H. R. 7054, and H. R. 8585. All of the associations for whom I am appearing are extremely interested in every aspect of unemploy

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ment compensation. However, they have agreed to consolidate their testimony in the interest of conserving the time of your committee, and they are grateful for this opportunity to express their views.

First, I would like to comment upon the extension of coverage of the Federal Unemployment Act contemplated by H. R. 8857.

We believe that this bill must be considered in the proper setting. This requires that we give some attention to the situation when the original Social Security Act was passed in 1935. In the early 1930's this country was faced with widespread mass unemployment, particularly in mass-production industries. The Congress of the United States as well as the State legislatures were seeking means of alleviating this unemployment, and after a good many years of more or less academic debate the legislatures had begun to enact unemployment compensation laws.

By 1935, five State legislatures had passed unemployment compensation acts. There can be little doubt that, without any Federal legislation, most States would have had such laws within a few years. The development would probably have been similar to that which has taken place throughout the United States in workmen's compensation.

But there was an earnest desire on the part of the Congress to speed this movement by enacting Federal legislation.

Your committee issued its original report on the first social security bill on April 5, 1935. In that report-Report No. 613, 74th Congress, 1st session—the committee stated that,

The failure of the States to enact unemployment insurance laws is due largely to the fact that to do so would handicap their industries in competition with the industries of other States.

The States have been unwilling to place this extra financial burden upon their industries. A uniform nationwide tax upon industry, thus removing the principal obstacles in the way of unemployment insurance, is necessary before the States can go ahead.

The Senate Finance Committee on the same point reported: except for a few standards which are necessary to render certain that the State unemployment compensation laws are genuine unemployment compensation acts and not merely relief acts, the States are left free to set up any unemployment compensation system they wish without dictation from Washington.

The original Federal law has unquestionably accomplished the purpose for which it was intended. Quickly after the enactment of that legislation, all States without unemployment compensation laws enacted such measures. All States have such laws on the statute books today, and these are "genuine unemployment compensation acts” and not “merely relief acts.'

The Congress wisely left to the States wide latitude for experimentation, adjustment, and revision of their laws. Every student of unemployment compensation knows that over the years these laws have been repeatedly amended to meet changing conditions and that the universal trend has been toward liberalization of benefits and toward extension of coverage. It is our position that within the framework originally set up by Congress, the States are perfectly competent to decide, according to their own circumstances and wishes, not only the level of taxes that need be imposed in order to support their programs but the level of benefits to be established and the extent of coverage.

There are a few areas in which we believe additional Federal legislation is necessary. In particular, we feel that the States should have a great deal more latitude in administering their laws.

In other Federal-State cooperative programs, ordinarily the Federal Government pays half of the cost. Under the original employmentsecurity program the Federal Government, under the Wagner-Peyser Employment Service Act, paid part of the cost of operating employment services and all the cost of administering employment benefits.

Since the federalization of the Employment Service during World War II and the return of the service to the States, the Federal Government has adopted the practice of supplying all funds through unemployment compensation grants on a 100-percent basis and the matching grant under the Wagner-Peyser Employment Act has been discontinued.

Thus the State programs have become wholly dependent upon Federal grants for administrative funds. In many cases these restrictions have prevented improvement of State systems. For example, there are a number of States in which the State administrations feel that more forceful fraud investigation and better enforcement of the laws is necessary—but it has been impossible to do this because of lack of sufficient money under Federal grants.

We favor the utmost economy in Federal appropriations and expenditures but in light of the fact that this system has been more than supported by special employer taxes designed for this particular purpose, we feel that in many cases the appropriations for State grants should be higher.

We believe, further, that the State legislatures should bear at least part of the responsibility for financing the program and for that reason we have given strong support to the bill, H. R. 5173, previously reported by this committee and passed by the House of Representatives.

The foregoing observations bear directly upon the bill, H. R. 8857, which is now before you.

The most important provision of this bill is the extension of the Federal unemployment tax to employers employing one or more people at any time.

Obviously the purpose of this proposal is not to raise additional revenue, but to induce—almost to compel-State legislatures to extend State unemployment-compensation laws to the very smallest employers.

By passing that measure the Federal Government would undertake to make for the States a decision that has hitherto been left to their discretion to make the decision as to what employers and employees should be covered by their unemployment compensation laws. In our opinion the State legislatures are perfectly competent to make this decision for themselves.

The trend has been toward broader coverage.

The problem approached by this bill involves administration expenses, expediency, and need—but even more, it involves the whole question of Federal versus State responsibility.

In the original bill reported by your committee in 1935, coverage was limited to employers of 10 or more. The Senate Finance Committee recommended coverage of employers of four or more. The figure was finally compromised at eight or more.

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The exact figure agreed upon at that time possibly made little difference as far as the basic objective was concerned, but to have required the States to levy a tax on every last employer of one or more at any time would have imposed an administrative burden far out of balance with the benefits to have been derived from such broad extension.

We believe the same is true in some States today. The bill before you would require every State to find everyone who employs a single individual in any occupation not exempt from the law and to levy a tax on that employer even though the individual be employed for only 1 week, 1 day, or 1 hour.

Such a law would be practically unenforceable and would invite evasion of State as well as Federal taxes.

Possibly these administrative difficulties apply also in Federal old-age and survivors' insurance. But here, there are some compensating reasons for this broad extension. The old-age system seeks to build a lifetime employment record upon which old-age pensions are based; and therefore there is more reason from the standpoint of each individual to seek to cover his whole lifetime record of earnings.

Unemployment compensation, on the other hand, is essentially temporary: It seeks to compensate people for temporary unemployment and benefits are based upon very brief work periods.

Furthermore, unemployment compensation is especially designed for people who are genuinely attached, as employers or employees, to the job market. A storekeeper with no regular employees, who may some Saturday morning ask a boy with a bike to deliver some merchandise to Mrs. Jones around the corner does not thereby became a factor in the larbor market. Nor is there any practical reason for thereupon starting an unemployment compensation account for the delivery boy.

At what point this merchant becomes a real factor in the job market, whether it is when he has employed the delivery boy every Saturday for 20 weeks, or whether it is when he has 2 employees, 4 employees or 8 employees, is a matter of judgment which can best be exercised by State legislatures.

Up to the present time 29 States have extended coverage to employers of less than 8; of these 17 States have extended coverage to employers of 1 or more. But only five of the latter have extended coverage to “employers of one or more at any time.”

I seriously doubt that with the funds available the administrators of the laws of these five States have been able to enforce this tax against all of the countless temporary employers who are legally subject to it.

This extension goes back to two major points that I have made in my previous remarks. First I referred to the purpose of the tax offset features of the original act, and I called your attention to the fact that in this law the Congress primarily was seeking to eliminate the argument of interstate competitive disadvantage as an obstacle to initial passage of State laws.

Is there any evidence before you at the present time to indicate that the reason some States are reluctant to extend this tax to employers of less than eight is that they fear interstate competition against these small employers or that they feel that these small

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