Major automobile and agricultural implement producing centers, such as Detroit, Toledo, South Bend, Kenosha, Racine, Evansville, Peoria, and Davenport-Rock Island-Moline-East Moline, the Quad-Cities of Illinois-Iowa, are classified as areas of substantial labor surplus by the Bureau of Employment Security. Out of 17 Michigan labor market areas classified by the Bureau, 12 are in the substantial labor surplus category as of the latest report, practically all of them being so classified because of declining employment in the automobile industry. Increases in the weekly amount and duration of unemployment compensation can do much to alleviate the hardships and suffering of the unemployed worker. But it is not only the unemployed worker who is benefited by a strong and adequate unemployment compensation system. Retail businessmen, landlords, doctors, and others who furnish goods and services to the worker are all dependent on the continued ability of the worker to maintain a reasonable level of expenditure. Recognition of the role of unemployment compensation in strengthening the whole economy is not a labor-inspired idea. As stated by President Eisenhower in his economic report to the Congress, "Unemployment insurance is a valuable first line of defense against economic recession." The President pointed out that when unemployment compensation benefits are "set at appropriate levels, they can sustain to some degree the earner's way of life as well as his demand for commodities." In order that unemployment compensation fulfill its function, the President specifically recommended that the States 1aise maximum benefits "so that the payments to the great majority of the beneficiaries may equal at least half their regular earnings. He also called for a uniform duration of 26 weeks of benefits to all unemployed workers who qualify for unemployment compensation. In line with the President's recommendations with respect to benefits the Federal Advisory Council on Employment Security, composed of representatives of the public, management, and labor, recommended that "as expeditiously as possible, the maximum weekly benefit ceiling in each State be raised to an amount not less than three-fifths to two-thirds of average weekly earnings in covered employment.' These recommendations were further supported by the United States Department of Labor, the National Conference on State Labor Legislation, a conference which is convened by the Federal Government and which consists of delegates appointed by both Democratic and Republic governors of 41 States and Territories, and by the Joint Congressional Committee on the Economic Report. Despite the overwhelming support which these recommendations received, today, 5 months after the President's economic report was released, not one State has taken action meeting the President's specific recommendations. In the State of Michigan, enactment of the President's recommendations was specifically urged on the legislature by a Democratic governor in a special message, by the Michigan Employment Security Commission composed of labor and management representatives, and by resolutions from the governing bodies of local communities representing a majority of the State's total population. Despite this bipartisan support, the amendments passed by the legislature fall far short of the President's recommendations. The recommendations of the President as implemented by the Federal Advisory Council on Employment Security called for maximum weekly benefits of not less than 60 to 67 percent of average weekly earnings in covered employment. Under the Michigan amendments maximum weekly benefits range from 34 percent of the State's average weekly wage in the case of an individual with no dependents to 47.7 percent of the State's average weekly wage for an individual with 4 dependent children. In no case do the maximums approach the 60 to 67 percent recommended. While the Michigan Legislature extended the possible duration of unemployment benefits for some workers to 26 weeks, less than 50 percent of those persons who exhausted their benefits in 1953 would have been eligible for 26 weeks. State legislative action to pay fewer than 50 percent of the workers 26 weeks of benefits does not meet the President's recommendation that all eligible workers be provided 26 weeks of benefits. Moreover, even these slight increases must be balanced against additional restrictive eligibility requirements, additional road blocks in the form of disqualifications to the payment of benefits, and by a revised tax system of merit rating offering millions of dollars of savings to the large employers. The failure of the Michigan Legislature to specifically meet the President's recommendations cannot be discounted as the failure of a single legislature to meet desired goals. The pattern of activity which developed during the course of the legislative session indicates what will be the pattern in the forty-some State legislatures which meet in the calendar year 1954. Opposition in Michigan to the President's recommendations was spearheaded by General Motors and the other large corporations. Despite the President's recommendation, the legislative proposal which was supported by these corporations provided only for an increase in the maximum weekly benefit payable to the worker with four or more children. No increase in the maximum benefit was proposed for the single worker or the worker with less than four children. The proposed maximum of $37 payable to the worker with 4 or more children represented only 42 percent of the State's average weekly ware or from 18 to 25 percent less than the 60 to 67 percent maximum recommended. In addition the President's recommendations, as forwarded to the State by the United States Secretary of Labor, were actively opposed by the chairman of the State Republican committee. It is clear that these persons, so active in their support of the President during the 1952 campaign, will continue their attempts to torpedo the President's legislative recommendations in the legislative halls. The reproduction of the letter attached to this statement which was circulated by the Indiana State Chamber of Commerce on the letterhead of the General Motors Corp. and over the signature of a vice president of this corporation only confirms this fact. It is apparent, therefore, that if the administration is serious in recognizing the need for improvement of State unemployment compensation laws that such improvement can only be achieved by Federal legislative action. The unemployed people of America, their families and the businessmen who are dependent on their ability to purchase goods and services look for action and not words or pious suggestions to State legislatures. If this committee seriously believes that the substance of the President's legislative program should be enacted it will recommend the passage of Federal legislation establishing Federal standards to assure that State unemployment compensation laws meet the standards incorporated in H. R. 9430. In coming before this committee and urging the enactment of H. R. 9430, we recognize, of course, that an adequate unemployment compensation program is not the whole answer to the problem of providing economic security. But unemployment compensation is an important part of the job of maintaining the health, welfare, and dignity of the people and the productive strength which America will need in the fight now being carried on in the world. We want to emphasize that we do not consider this a substitute for other necessary positive steps to insure full production and full employment. The record of the UAW-CIO and of the CIO in urging action to implement the Employment Act of 1946 and bring about full employment makes this abundantly clear. No one will be more delighted than our members if the executive branch and the Congress move into high gear and take action that will bring about full production and employment and thereby result in a decline in the number of workers receiving unemployment compensation. We can say honestly, that we have done all within our power to secure an adequate unemployment compensation program through State legislation action. The failure of the States having been demonstrated, we urge the Congress to enact into legislation Federal standards to assure that State unemployment compensation laws at least meet the provisions incorporated in H. R. 9430. [Blank.] ALLISON DIVISION, Demands of minority groups that will be made at the next session of the Indiana Legislature would increase Indiana's tax costs by many millions of dollars. Your taxes, both in the form of payroll taxes for unemployment compensation and of general taxes, definitely would go sharply higher. Issues and the amounts involved in such fields as social security, personnel and labor relations, public welfare, education, and other phases of Government are so great and often so complex that the facts must be presented to the public forcibly and understandably to help assure the wisest possible decisions. For example, in the field of social security, demands from labor unions already have been made calling for the revision of Indiana's unemployment compensation law to boost benefits from the present maximum of $27 a week for 20 weeks, to more than $65 a week for as long as 6 months. This should be a matter of vital concern to every businessman, since unions are acquiring more skill and know-how in gaining public as well as the legislators' favor in such matters. Should labor be successful in this program, it would not be long before experience-rating for most businesses would become meaningless and unemployment compensation would be turned into "rocking-chair benefits " Indiana businessmen must prep are now to meet these new attacks that will be made against them. Because most of your time and efforts must be spent on your business affairs, it is fortunate that in Indiana there are the facilities and trained staff of the Indiana State Chamber of Commerce to tackle these statewide problems that vitally affect your business. I think you will agree that the work being done by the State chamber could not be accomplished by any one company or individual. This is the only organization which represents and works for all types of business from all sections of the State. We would appreciate your cooperation in this work of the State chamber for all business either through membership or an underwriting of this legislative program in the suggested amount of $25. Should your decision be favorable to this suggestion, you may send your support to my office or direct to the Indiana State Chamber of Commerce, Board of Trade Building, Indianapolis, Ind. Sincerely yours, E. B. NEWILL, President, Indiana State Chamber of Commerce. Mr. CAREY. We would like to, if we may, supply more of that for the record. Mr. KEAN. Yes; if you will supply it before the 17th of June. (The information referred to follows:) STATEMENT BY JAMES B. CAREY IN ANSWER TO QUESTION OF CONGRESSMAN CURTIS IN REGARD TO EXPERIENCE RATING Congressman Curtis asked that I give further information on the following two sentences: "The present Federal clause permits States to reduce taxes below the 2.7 percent rate only on the basis of individual experience. This has led to most disastrous forms of rate reduction, lowering employers' taxes not because they have actually stabilized employment, but because they have successfully kept former employees from receiving benefits." The subject of experience rating and its_evil consequences deserves far more attention than it has generally received or I can give at this time. Many authorities on unemployment insurance agree with labor in our opposition to experience rating as it has operated. Arthur J. Altmeyer, who was in charge of the program for many years, summarizes the matter as follows, in a pamphlet entitled "Your Stake in Social Security," published by the Public Affairs Committee in April 1954: "But the present basis of experience rating has proved worse than illogical. It has given employers a reason to resist payment of benefits to their workers, since every claim paid cuts down their chance to get a reduction in their contribution rate." (For a longer quotation from Mr. Altmeyer, see exhibit 1.) There are five main types of experience rating plans in use in the States. They are described as follows in the December 1953 issue of the Labor Market and Employment Security, published by the United States Bureau of Employment Security: "TYPES OF EXPERIENCE-RATING PLANS "Reserve ratio.-An employer's unemployment experience is measured by the ratio of his reserves (the difference between cumulative contributions and benefits) to his taxable wages for a base period. A high reserve ratio indicates favorable experience with unemployment and qualifies an employer for a lower tax rate. "Benefit ratio.-Under this formula, benefits alone are the indicator of an employer's experience which is measured by his benefit ratio (ratio of benefits to taxable wages). A low benefit ratio is indicative of good experience and leads to a lower tax rate. "Benefit-wage ratio.-Each separation of a worker which results in benefit payments is weighted by the wages paid to the worker in his base period (benefit wages). An employer's experience is measured by the ratio of the benefit wages charged to him to his total taxable wages. In the determination of rates under this plan, a State factor is also used. This is the ratio of statewide total benefits to statewide total benefit wages over a period of years (usually the last 3). An employer's tax rate is determined by multiplying his experience factor by the State factor. Employers with the lowest benefit-wage ratio receive the most favorable tax rate. "Payroll variation. An employer's experience is measured by percentage declines in his total payroll, either from year to year or from quarter to quarter, or both. If an employer's payroll shows no decrease or only a small percentage decrease over a given period, he is eligible for the lowest tax rate. "Compensable separation.-An employer's experience with unemployment is measured by dividing his aggregate 3-year payroll by the number of worker separations weighted by their weekly benefit amounts.' As Mr. Altmeyer summarizes the situation, "All but six States measure such experience by adding up the unemployment benefits paid to former employees. Employers, with the prospect of securing tax reductions, seek to change the provisions of State laws so as to reduce the number of workers who will be entitled to benefits. A bewildering maze of complicated rules and regulations have been established as a result, which are especially bewildering to the worker who moves from State to State. Experience rating on an individual basis has increased the pressure by employers for such provisions as requiring workers, "to actively seek work," not merely to register at the public employment office as originally contemplated by the law. The general trend in the States has been toward ever more severe disqualification provisions, many based on the concept held by some employers that benefits should be paid from the employer's account only because of unemployment attributable to him. Our unions have been successful in defeating some of these undesirable disqualification provisions, but too often such provisions have been the price paid. for whatever improvements in maximums or duration could be obtained. Some idea of the legislative trend is given by the summary article on, State unemployment insurance legislation, 1953, published in the Social Security Bulle-tin, December 1953, pages 19 to 20. The subject of disqualifications was dealt with in a report approved by the Federal Advisory Council on Economic Security. This report and various staff materials prepared on this subject are available from the United States Bureau of Employment Security. I would suggest that you also may be interested in the Bureau's analyses of experience rating provisions that have appeared from time to time. The limitations which employers have sought to write into State laws to cut down the number of workers who can actually receive benefits, deal with far more technical disqualifications. To illustrate the types of amendments which our unions contend against in the States, I am appending as exhibit 2 a portion of a CIO document entitled, "Facts on Pending Unemployment Compensation in Michigan." This particular portion deals with some of the undesirable features of a bill introduced in the 1954 legislative session by State Senator James M. Teahen, who was at the same time representing the Redmond Co., Inc., in an unemployment compensation case. The objections outlined in this portion of the statement by no means cover all undesirable phases of the bill. After complicated legal provisions had been enacted, limiting workers' rights and setting up restrictive procedures, many employers have sought to keep former workers from qualifying for benefits, and charge that they have viclated these complicated rules. In Michigan, for example, at the referee and appeal board level, all large companies are represented by competent compensation attorneys. At each of the referee hearings workers are subjected to grueling cross-examinations in order that they may be disqualified under some technicality of the law which they do not understand. For example, workers are asked questions where they sought work in certain weeks, months prior to the date of the examination. It they are not able to answer, they generally find themselves ruled unavailable for work for the period involved. Sometimes company representatives are not merely hard-boiled, but actually misr present the situation. The supreme court of Michigan found that Walter Upthegrove, representative of the Packard Motor Co., made false statements knowing them to be false, with intent to defraud in order to prevent payment of benefits to a claimant named Arnold Jones. The same Senator Teahen who sponsored the bill in Michigan, demanded at least four adjustments in a case involving a Myrtle B. Ordway, and this case had been in the mill for at least 4 months by the end of April, even though the Senator's appeal was not timely and the referee was without jursidiction. Such delaying actions tend to intimidate workers as well as delaying their benefits. Another case involved the Chrysler Corporation v. Emil Bunjac. A referee's decision was issued on October 19, 1953, holding the claimant, Emil M. Bunjac, was entitled to benefits. Chrysler Corp., through its attorney, Karl Erickson, was responsible for at least 4 or 5 additional hearings before the referee and the appeal board, and it was not until April 13, 1954, that a final decision was rendered. The amount of benefits involved was only $29. Such cases could be duplicated from many other States. In addition, there have been actions by companies which have resulted in disqualifying a large number of employees from receiving benefits. This has been done, for example, during slack periods by deliberately creating incidents which provoked walkouts among the employees, resulting in denial of unemployment compensation benefits to which workers are entitled. EXHIBIT No. 1 UNEMPLOYMENT INSURANCE Most of our troubles in unemployment insurance arise from the arrangements for financing it. The Federal Unemployment Tax Account permits employers to deduct from the Federal tax not only what they have paid under State unemployment insurance laws but also the amounts which they have been excused from paying by the employer experience-rating provisions of those laws. When times are good and State reserves in the unemployment trust fund are large, it is natural that States should want to reduce the tax on employers. The only way the Federal act permits them to do so is on the basis of the individual employer's past experience with unemployment. All but six States measure such experience by adding up the unemployment benefits paid to former employees. This is an illogical basis, because the likelihood of a laid-off worker's being obliged to claim benefits is not affected so much by his employer as by conditions in the labor market. A sensible way to measure the employer's experience would be the number of workers laid off or the decline in the payroll, not the amount of benefits paid to former employees. But the present basis of experience rating has proved worse than illogical. It has given employers a reason to resist payment of benefits to their workers, since every claim paid cuts down their chance to get a reduction in their contribution rate. Even though the benefits are paid out of a State fund, a claim for benefits is likely to be regarded as a contest between the employer and his former employee. When the Social Security Act was passed, we had no experience to tell us what unemployment insurance was likely to cost. The Social Security Board was therefore very conservative in recommending to the States what benefit amounts and duration should be. It was intended that benefits should average at least 50 percent of wages. As wages and living costs have risen, however, the States have failed to make a corresponding increase in the top benefit. Benefits averaged 41 percent of wage loss in 1939 but have fallen to 33 percent. Most States have increased the length of time during which benefits may b paid, but from 1946 through 1950 between 1 and 2 million beneficiaries reached the end of this period every year without finding work. It is easy to imagine what would happen in a period of severe and general unemployment. There has also been a steady increase in the amount of wages and length of time a worker must have worked to be eligible for benefits. And harsh conditions have been added that may disqualify a claimant. Unemployment insurance is intended to compensate for involuntary unemployment. Therefore a worker should be disqualified who has quit his job voluntarily without good cause, has been discharged for misconduct, or has refused suitable work. Twenty States, however, go beyond this and require that quitting must have been for good cause attributable to the employer. These States disqualify a worker who has left his job because working conditions were undermining his health or because he was obliged to move to another locality or because he was offered a better job that did not materialize. States also have become increasingly strict in denying benefits to workers on the ground that they have refused suitable work. Often skilled workers are required to accept unskilled jobs. The general Federal tax on payrolls was intended to keep down unfair competition between employers in States that had unemployment insurance laws and those that did not. Actually, the effect of experience rating has caused an opposite situation. States are discouraged from trying to improve their program lest they put the State's employers at a competitive disadvantage. |