any benefits. If his earnings fell to $10 per week, he would be entitled to $2 in partial benefits; if his earnings fell to $8 per week, he would be entitled to $4 in partial benefits per week.

An employee will be limited to 1 week of benefits for each 4 weeks of employment in the preceding 3 years up to a maximum of 26 weeks of benefits in a year. In addition, if he has been steadily employed without drawing benefits for more than 2 years, he will be eligible for an additional week of benefits for each 20 weeks of employment in the third, fourth, fifth, and sixth years preceding his unemployment, so that if he has been steadily employed for 6 years he can receive approximately 11 additional weeks of benefits.

În order to be eligible for benefits an employee must have worked at least 13 weeks in the preceding year, must be able to work and available for work, must have served a waiting period of 3 weeks of unemployment before benefits commence, and must not be engaged in a strike or jurisdictional labor dispute. If he voluntarily quit without good cause or was discharged for misconduct, he will be disqualified from benefits for from 1 to 6 weeks. If he refuses to accept suitable employment offered him, he will be disqualified from benefits for 4 weeks. Provision is made for a fair hearing of claims for benefits. If an employee is denied benefits he may appeal to a local committee with employer and employee representatives sitting on it and, finally, to the administrative board. He will have access to the courts on points of law.

The act would be administered by the Social Security Board appointed by the President to administer the Federal act (H. R. 7260). However, a commission of three members, representing employers, employees, and the public, and appointed by the Commissioners of the District of Columbia, must be consulted by the Board before it selects a director, makes regulations, or determines policies. This commission will also have authority to study the operation of the act and make recommendations for changes in the law, which must be submitted to the Congress by the Social Security Board. Claims for benefits will be filed and paid through the public employment offices in the District.

The Board is authorized to enter into arrangements with the surrounding States whereby employees moving from the District can carry their benefit rights with them to the unemployment compensation fund of another State and vice versa.

The bill authorizes an appropriation of $750,000 for the contributions of the District during the fiscal year ending 1936 and directs the Commissioners of the District to submit annual estimates as to needed future appropriations.

SPECIAL FEATURES OF THE PLAN

MANAGEMENT OF THE FUND

One of the problems in connection with unemployment compensation is to handle the reserves so that their investment and liquidation will not have an adverse effect on the credit situation. Unemployment reserves will be built up during prosperous times, and, if added to the funds available for investment, they might encourage an overexpansion of credit. During depressions, if the securities in which

unemployment reserves are invested are thrown on the open market, this would serve to aggravate further the deflation of credit.

The Social Security bill, H. R. 7260, aims to prevent such situa tions through requiring all unemployment reserves of the States, including the District of Columbia, to be deposited in an unemployment trust fund, to be established in the United States Treasury, so that these funds may be used to assist in controlling the credit situation instead of being utilized at cross-purposes with the credit policies of the Federal Government. During periods of overexpansion of credit the Treasury will be empowered to invest the fund in Treasury obligations, which would serve as a curb on inflation; during periods of deflation, when the obligations of the Treasury held by the unemployment trust fund must be liquidated in order to pay unemployment benefits, the Treasury will pay over cash to the trust fund for these obligations, thus expanding currency in circulation. The District unemployment compensation funds will be placed in this unemployment trust fund so that they can be properly utilized by the Treasury in its control of credit.

WHO CONTRIBUTES

The bill provides that the employers and the government of the District of Columbia shall contribute. The major contribution is placed on employers so that unemployment compensation will become one of the costs of production. The employers will in most cases be able to pass this cost on in the prices of their products. Since unemployment benefits will materially reduce the relief burden on the community, it is considered that part of the cost of unemployment benefits should be levied on the entire community through taxation. Representatives of employers appearing at the hearings argued for requiring contributions from employees as well as from employers and the District. This committee, however, concluded that such contributions should not be required since the employee in effect contributes much more than the employer toward the loss occasioned by unemployment. To begin with, the employee must wait 3 weeks before he receives any unemployment benefits, so that he thereby contributes 3 weeks of his wages. In addition, when he receives his benefits, if he is a single man, he only gets 40 percent of his wages, and he thereby contributes 60 percent of his wages. Even if he is a married man with 3 children, he still contributes 35 percent of his wages. Finally, he contributes as a consumer in purchasing goods carrying higher prices, since the employer will in most cases, pass on his contribution in higher costs of products.

THE STANDARD OF BENEFITS

Benefits may be paid at a flat rate with the design of maintaining the worker at a subsistence level, or benefits may be paid as a percentage of his normal earnings so that he may, to some extent, be able to maintain his former standard of living. This bill is a compromise between these alternatives. Benefits are based on normal earnings but at a very low rate for the single man, which may be supplemented if an employee is married or has dependents.

MERIT RATING OF EMPLOYER CONTRIBUTIONS

The representatives of employers appearing at the hearings all argued for varying the rates of contribution by employers in relation to the degree that they stabilize their employment. It was considered by the committee that their plea had merit. The problem was how to reward the employer for giving steady employment and at the same time to protect adequately the workers in firms that did not give regular employment.

An extreme form of rewarding the employer for giving steady employment is embodied in the Wisconsin unemployment reserves law. This law allows each employer to have a separate reserve account, out of which benefits are paid only to his own former employers. This account may be kept in the State fund, or an employer may have his own trust fund or merely maintain a bookkeeping reserve. When an employer's reserve reaches an average of $50 per employee, his contribution may be reduced; and when it reaches an average of $75 per employee, the contribution may entirely cease. If the employer is compelled to shut down his factory entirely, the reserve would be wholly inadequate to pay the benefits promised to his employees. Furthermore, if he only maintains a bookkeeping reserve and becomes bankrupt, his employees will receive little or nothing in benefits.

The committee considered that instead of using the Wisconsin plan, the principle of pooling the risks of unemployment should be retained so as to make this genuine insurance measure. Since unemployment is largely an economic problem beyond the control of the individual employer, and since the policies of one industry often cause unemployment in another, it was considered that to some extent the employers should be required to "share one another's burden." Recognizing, however, that unemployment is also due to the policies of the individual employer and that to some extent he can stabilize his employment, the bill provides for a variation in contributions within certain limits. It is provided that after 4 years an employer's contributions may be lowered to a minimum of 11⁄2 percent if he shows a favorable employment experience or may be raised to 5 percent if he shows a high unemployment rate. The average rate for all employments, however, is to be maintained at 3 percent, so as to provide sufficient funds to maintain the scheme on a sound actuarial basis.

PREVENTIVES OF MALINGERING

One of the fears voiced by opponents to unemployment insurance is that it will encourage malingering so that workers will prefer to draw benefits instead of working. The experience in foreign countries belies this fear, however; repeatedly, investigations of charges that there was malingering have resulted in producing little evidence of it.

It is probable that some persons will abuse unemployment compensation, just as they now abuse fire or accident insurance. The bill, however, establishes many safeguards against any misuse of unemployment benefits. In the first place, the rate of benefits provided is so modest that few persons would prefer the benefits to the much higher amounts they could earn through employment.

H. Repts., 74–1, vol. 2- 45

More specifically, the bill requires each person receiving benefits to register regularly at a public-employment office and to apply for and accept any suitable employment offered him. Although, during times of unemployment, the employment office will be unable to offer jobs to all recipients of benefits, it will have sufficient jobs at its command to offer to those whom it suspects are "work-shy." The worker will also be ineligible for benefits for a number of weeks if he quits without good cause or is discharged for cause.

WHEN SHOULD THE SYSTEM START?

Because of the large increase in the number of Federal employees, the District of Columbia is in a much more prosperous condition than other parts of the country. The employers in the District can well afford to have the system go into full operation by the first of next year. If H. R. 7260 (the Federal social security bill) passes in this session of Congress, this bill should be passed so as to enable the employers in the District of Columbia to secure credits against the payroll tax imposed by that bill and keep their pay-roll contributions available for the payment of unemployment compensation to their employees. It is considered, however, that the gradual stepping up of the tax as proposed in the social security bill is not necessary for the District because of its favorable economic situation, so that without regard to the passage of the Federal economic security bill, this bill should be passed. Since most of the employers in the District serve local business, the disadvantage at which it might place them in interstate competition would be negligible.

ACTUARIAL BASIS FOR THE BILL'

With the exception of the State of Wisconsin, no State has had actual experience with unemployment compensation in this country, and the Wisconsin act has been in effect too short a time to yield any actuarial experience. In lieu of such experience, it is necessary to estimate the benefits which could be paid in the District of Columbia in the future under the provisions of the bill. The best method of arriving at such an estimate of possible future benefits would be to assume that an unemployment-insurance plan, on the order of that proposed in the bill, had been in effect in the District for a period of years, construct estimated experience tables for such a plan, and then study the behavior of such hypothetical experience as a guide to the future. Unfortunately, the dearth of statistics for the District of Columbia pertinent to the unemployment problem makes such calculations for the District very difficult. The only recourse when District statistics are wholly inadequate is to estimate behavior in the District in terms of United States figures. Such estimates have been worked out by the actuarial staff of the Committee on Economics Security and have been adjusted as well as may be to the particular situation in the District of Columbia.

The District unemployment compensation bill provides that 1 year elapse between the initiation of collections of contributions and the initial payment of the benefits. Employment records will, of course,

This section is a partial reproduction of the actuarial memorandum prepared by the Committee on Econoinic Security as a basis for this bill (hearings, pp. 45-48).

have to be instituted for administrative purposes when the plan goes into effect, and these records will furnish some data which should be analyzed before benefit payments get under way, since the estimates presented herein are of dubious value due to the present paucity of statistics pertinent to unemployment compensation. Such analysis would probably indicate that corrections should be made in the estimates included herein.

EMPLOYMENT AND UNEMPLOYMENT STATISTICS

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In constructing statistics for the use of the District, a survey of all available statistics on unemployment and employment has been made. Virtually no data on unemployment for the District is available except those in the United States Census of Unemployment of April 1930.

The compilation of employment statistics prior to 1930 was very limited. No indexes of general employment are known for these

years.

During the last 4 or 5 years more complete and reliable employment statistics have been gathered. The United States Bureau of Labor Statistics has been compiling national employment indexes, month by month, since 1929, for the following industrial groups: Manufacturing, wholesale trade, retail trade, mining, transportation, telephone and telegraph, light and power, and hotels. In 1933 the scope of the field covered was enlarged by the addition of real estate, banking, insurance, and canning and preserving industries. Since 1932 these indexes have been broken down by political divisions resulting in the first monthly indicators of employment for the District of Columbia.

Utilizing the Bureau of Labor Statistics indexes, the United States Censuses of Occupation and Unemployment of April 1930, the actuarial staff of the Committee on Economic Security made estimates of yearly average employment and unemployment for the District for each year, 1930 through 1933, the results of which are shown in table VI.

TABLE VI.-Estimated average, nonagricultural employment, and unemployment in the District of Columbia, 1930–33

The dependability of these estimates is subject to question, at least for part of the period, because of the inadequacy of the data upon which they were based, and also because of the unrefined statistical methods by which they were treated due to the limited time available for study. Several checks with other information indicate, however, that these estimates are at least fair approximations of what probably existed. They, therefore, may be used as a guide in the absence of better data.