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"Because the floor of security to the individual has been built primarily upon welfare considerations, its contribution to the economic progress of the United States has not been adequately appreciated * * * Unemployment insurance is a valuable first line of defense against economic recession.”
Further to support this generally changed attitude toward the philosophy of this program, it is also interesting to note that in the administration's testimony presented before this committee on June 8, 1954, by the Under Secretary of Labor, it was said:
“I need hardly point out that unemployment benefits are now universally accepted as a means of slowing up the forces that go to make a depression in periods of falling employment of workers. The community benefits because such protection increases the effectiveness of the unemployment insurance program in providing a cushion against declining purchasing power.'
Since, then, there is now mutual agreement by both political parties regarding the importance to the national economy of the unemployment insurance program there remains only the need to examine, with equal impartiality, whether the program as it now stands is adequate to accomplish the dual purposes for which this legislation was originally enacted.
These dual purposes were, of course, to maintain a reasonably stable purchasing power within the community and to provide our workers and their families with a sense of security and a measure of protection--or insurance-against the hazards of economic downturns with the inevitably attendant misery and hardship of involuntary joblessness.
If we accept as valid the original intent of the supporters of the Social Security Act of 1935 and of State laws enacted in conformity therewith-which was to provide unemployment compensation payments equal to at least 50 percent of fulltime weekly wages, up to a maximum of two-thirds of such wages-a comparison between average weekly benefits and average weekly wages today offers convincing proof that the current unemployment insurance program is on the whole woefully inadequate. It is neither sufficient to sustain the average wage earner's family over a period of joblessness--nor is it adequate to maintain within the community the consumer purchasing power which is essential to bolster its economy over a period of economic recession.
In support of these statements, I offer for this committee's consideration the following facts:
In the year 1939, 48 of the States and Territories provided a maximum payment in excess of 50 percent of average weekly wages. Today, only 3 States pay over 50 percent, the remaining 45 having benefits ranging from 20 to 49 percent of weekly wages. But during this same period, average wages increased from an index of 100 to 164.2, while average weekly unemployment benefits rose to only 121.2.
In the month of April 1954 the national average weekly benefit for total unemployment was $24.79 (inclusive of dependents' allowances in the 11 States which have a provision for such allowances in their unemployment insurance programs). This represents 33 percent of the national average weekly wage.
In West Virginia, where unemployment for the week ending June 5, 1954, stood at 12.9 percent of total insured employment, the average weekly benefit was $23.48, representing approximately 34 percent of the average weekly wage in the State.
Meanwhile, the number of claimants who have exhausted their benefit rights during the first quarter of 1954 were up 64 percent from the total for the comparable period in 1953. This, however, represents only those workers whose unemployment began in the June-July period of 1953, when employment figures were still soaring. In March 1954 the national total was 96 percent above the March 1953 figure. But, again, these claimants represent those who lost their jobs between September and October of 1953 and before what I hope will be the peak of our current unemployment period was reached.
In West Virginia there was a total of 2,519 exhaustions in the month of May 1954 as compared with 907 for the corresponding month in 1953.
These facts and figures, it would seem to me, offer clear and incontrovertible proof that immediate legislative action is urgently needed to increase both the benefit payments and the duration of the period of payment in order that the unemployment insurance program may realistically carry out the intent and purpose for which this legislation was originally enacted. It is, therefore, my most earnest hope that this committee will give full and favorable consideration to H. R. 9430, the bill introduced by our distinguished colleague, Mr. Forand, which I have been most pleased to cosponsor and which encompasses the improvements so greatly needed in our Social Security Act.
STATEMENT OF Hon. CARL D. PERKINS, OF KENTUCKY, ON FEDERAL STANDARDS
FOR UNEMPLOYMENT INSURANCE The readjustment of the national economy following the end of the shooting war in Korea was expected to displace a number of workers. The current situation appears to have gone beyond that stage. The most recent report of the Department of Labor has raised a number of labor market areas classified as group IV, or critical unemployment areas, to 123, including 51 of the 149 major industrial areas. Seven of these major areas and 31 of the smaller areas have an unemployment rate of more than 12 percent. This in itself is a serious situation, but the fact that manufacturing employment continues to decrease is even more serious.
The drop in factory employment for the months of March and April is in excess of a quarter of a million, and the hiring rate for April was the lowest April rate recorded since the Bureau of Labor Statistics started keeping records on this phase of the employment program. This trend continued through the month of May. The seasonal increase in the construction industry and farm activities is the only bright spot in the whole economic picture. The retail industry showed a pickup in employment during the Easter period, but that appears to have been strictly seasonal.
The payment of unemployment insurance claims continues at a record peak for April and May despite the fact that a substantial number of unemployed workers have exhausted their benefit rights which are limited to 6 months or less. During the first 5 months of the year more than a million initial claims were filed each month, and almost 40 percent of this group are represented in the 274 million claimants that are receiving payments each week. These payments cannot continue indefinitely, and there are probably a million of these unemployed workers who face the exhaustion of their benefit rights within the next few weeks.
In those areas where unemployment is greatest, money has become tight and there is nothing to indicate an early establishmentof new industries to absorb this army of unemployed or an increased demand that would cause a former employer to recall them to their old jobs. An unemployment claim load in excess of 2 million normally indicates a total unemployment figure in excess of 4 million. A seasonal decline in employment, or conversely, the seasonal increase in unemployment normally begins in July, but the real impact is not felt until farm activi ties slow up in August and September.
The current trend of unemployment is very similar to that of 1949, but the volume is somewhat higher. The Census Bureau estimated the national unemployment total in excess of 4,700,000 in the early part of 1950. Every sound indication is that the unemployment total will cross 6 million in the latter part of this year or the early part of 1955. That would mean 1 worker our of every 10 in this country would be unemployed and seeking work during the coming winter.
This country has faced no unemployment problem of this magnitude since the early thirties. We must prepare to meet this problem and not allow it to engulf us as it did in 1933. We must not fail to act in the face of this emergency. It is the duty of this Congress to establish a foundation or a program to meet this foreseeable problem. This committee has the responsibility of initiating such action. I urge you to follow the old maxim that an ounce of prevention is worth a pound of cure. The preventive work should begin today and be carried on along side such activities that will alleviate the current situation. When more than 1 out of 3 of our great industrial centers are classified as areas of critical unemployment, the time has arrived when we must admit the fact that unemployment is a serious national problem and cease condemning those as calamity howlers who call these facts to your attention.
The first line of economic defense is unemployment insurance. It must be strengthened. The maximum duration of benefits in most States is 26 weeks. In at least 1 State it is as low as 16 weeks, while the minimum duration is sometimes as low as 6 weeks, but more often 10 weeks. The maximum weekly amount, which is theoretically one-half the amount of the weekly average wage, is generally below $25 per week. In a few States it is as high as $28 or $30. These maximums no longer represent one-half the weekly wage and should be substantially increased. In fact, the average payment is nearer $20 per week than it is to the maximum.
The maximum duration of 16, or even 26, weeks is entirely inadequate for periods of high unemployment. Every State has a substantial surplus, and collections are now running high except where the rate has been drastically lowered by the workings of the so-called experience-rating provisions. There is no sound argument against an increase in the maximum period of duration to 39 weeks per year. A requirement in the Federal act that State laws must provide for maximum duration of 39 weeks will not cause real hardship on any State and will add an additional cushion to our economic system by increasing the purchasing power of the unemployed and preventing actual suffering among these workers.
The original maximum weekly payments were established during the depression period of the thirties. A number of States have made substantial increases in these maximums but in no case have they increased in accordance with the increased cost of living, even on a subsistence scale. Some provision should also be included in the Federal act that will require the States to increase these maximum weekly amounts so long as the experience-rating provisions of their law are in effect. H. R. 9430 will accomplish these essential changes.
I urge this committee to make a favorable report on this bill and give the membership an opportunity to strengthen this program.
STATEMENT OF HON. JOHN J. ROONEY, A REPRESENTATIVE IN CONGRESS FROM
THE STATE OF NEW YORK Mr. Chairman, distinguished members of the great House Committee on Ways and Means:
I am indeed grateful for this opportunity to express my views before your committee in support of the pending bill, H. R. 9430, introduced by my friend and colleague, the Honorable Aime J. Forand of Rhode Island, of which I am a cosponsor.
Large scale unemployment has long been recognized as a national problem. The ravages of recession and depression know no State boundaries. * Federal leadership and initiative are necessary to combat unemployment and to develop an effective unemployment compensation system to alleviate hardship.
Competition among the several States makes it necessary that minimum standards for unemployment compensation be provided by the Federal Government. The 1935 Social Security Act established minimum standards for payment of unemployment insurance. A basic intent of the act was to provide the unemployed with at least 50 percent of their regular weekly wages up to a maximum of two-thirds of such wages. But, in spite of unprecedented prosperity, these standards were allowed to deteriorate with the rise of cost of living.
Furthermore, the recent increase in unemployment, temporary la and decline in weekly take-home pay have reduced or completely eliminated any savings that workers may have accumulated during the prosperous years and make the need for adequate unemployment insurance more vital and urgent.
Federal legislation is necessary to strengthen the unemployment compensation system. I therefore urge the adoption of the unemployment compensation standard bill of 1954, H. R. 9430, introduced by your colleague, Mr. Forand.
Briefly, this bill would require that States establish decent minimum unemployment compensation payments and that these benefits be payable for a reasonable duration to allow the unemployed sufficient time to find new employment. Some States still provide for a maximum of only $20 a week and 16-week duration,
In my own Empire State the maximum benefit is only 40.4 percent of the average weekly wages. Nevertheless, Gov. Thomas E. Dewey and the Republican legislature recently rejected the President's proposal to liberalize unemployment compensation.
Left to themselves, there is little hope that the States will act voluntarily on the President's recommendations to improve and liberalize their unemployment compensation system.
Congress must face the responsibility and act now.
The proposed legislation would require that the maximum weekly benefits be not less than two-thirds of the average weekly wage of the State with each individual's primary benefit not less than 50 percent of his weekly wages. The minimum duration of these benefits would last for 39 weeks.
The unemployment compensation system was intended as a bulwark against recession and depression. I urge the adoption of Congressman Forand's unemployment compensation standards bill as a modest effort to alleviate the suffering of millions of persons who lost their means of livelihood due to no fault of their
By helping these people we would also help to strengthen our economy and revive prosperity and plenty.
(Thereupon, the hearing recessed at 11 a. m., Friday, June 11, 1954, subject to the call of the Chair.)