1954 when President Eisenhower in his economic report to Congress recommended that level of compensation. Weekly benefits for family heads with dependents are especially low. These low benefit levels most severely harm those who are most firmly attached to the labor force. The present level of benefits is too low. Too low because the beneficiary cannot maintain his minimal financial obligations during unemployment and therefore cannot maintain any social stability. The benefit level must be raised because at the present level the effect of Unemployment Compensation as an economic stabilizer is too diluted to be effective. The level must be raised in order to strengthen the potential stabilizing effect of our Unemployment Compensation Program and to create a greater degree of economic security for the involuntarily unemployed. TAX REVISIONS In order to adequately fund FUTA programs now and in the future (especially extended benefit programs), additional revenue is needed. To raise this needed revenue, and raise it fairly-that is, to properly distribute the costs the taxing policies proposed by Secretary of Labor George P. Schultz in his testimony should be adopted. The present $3,000 wage tax base is grossly inadequate and obsolete when considered in the light of Federal Administrative cost and state benefit costs. Not only is it inadequate, it is unfair. Under the $3,000 wage base, low-wage light industry states pay a greater portion of their payrolls in FUTA taxes than do high-wage, heavy industry states. And yet the high-wage, heavy-industry state creates the greatest drain on Unemployment Compensation funds during a recessionary economic period. IN SUMMARY Again, let me thank you on behalf of the International Brotherhood of Teamsters for your consideration and attention. We endorse H.R. 14705 and urge its prompt passage insofar as it promotes the well being of working Americans. However, we feel that it is inadequate to pass H.R. 14705 as it now stands; therefore, H.R. 14705 should be amended so as to increase its coverage, establish realistic benefits and adopt the tax provision proposed by the Department of Labor. The amendments proposed by this testimony are offered as positive steps to achieve justice and efficiency in our Unemployment Compensation Program. Thank you. Senator ANDERSON. Thank you. Questions? Senator HARRIS. No questions. Senator ANDERSON. Thank you very much. Senator BENNETT. Mr. Chairman, I suggest that you remind the witnesses again they have a 10-minute limit. The last two witnesses have run substantially over and we are not going to get through all nine unless the witnesses stay within their time. Senator ANDERSON. The next witness, Mr. Kilbride. STATEMENT OF R. T. KILBRIDE, AMERICAN RETAIL FEDERATION Mr. KILBRIDE. Mr. Chairman, members of the Committee on Finance, I am R. T. Kilbride, corporate Federal and payroll tax manager, Montgomery Ward and Company, and appear here in behalf of the 29 national retail associations and 50 statewide associations of retailers comprising the American Retail Federation. Through its association membership, the federation represents approximately 800,000 retail establishments of all types and sizes. The federation supports the need for constant review of our FederalState system. We are glad that the administration and the Department of Labor recognize this. Your committee has before it H.R. 14705, which represents the action taken by the House of Representatives on the administration's recommendation for changes in Federal unemployment insurance statutes. While we prefer a bill more nearly approaching the bill which was considered by this committee in 1966 (H.R. 15119), following House passage, H.R. 14705 will on the whole, maintain the Federal-State relationship as it now exists. Although H.R. 14705 would be more preferable if certain provisions, particularly Federal standards, were eliminated, we recognize that legislation is a creature of compromise and we can support H.R. 14705 as a sound and reasonable compromise of conflicting views. However, we believe the bill could be improved if all of the following changes were adopted: COVERAGE The retail industry approves an extension of coverage of the Federal law to employers of one or more, as many States have already done. This extension of coverage should be done on a reasonable basis. The bill contains a provision extending coverage to employers of one or more employees in 20 weeks in a calendar year or with a quarterly payroll of $800. The federation suggests that a more realistic provision would cover an employer who employed one or more in 20 weeks, or who had a payroll of $1,500 a quarter. This coverage test would be more meaningful, since it would apply to employers who provide some measure of substantial employment and it would make it more likely that the tax on the wages paid could be returned as benefits to those whose wages were used as a measure of the tax. Nonetheless, the coverage extensions proposed by H.R. 14705 go far enough. Additional employment should not be covered. FEDERAL STANDARDS H.R. 14705 does contain five Federal eligibility standards which State laws must meet if their tax-paying employers are to have the benefit of the offset tax credit. While the federation supports H.R. 14705, it must emphasize that no overriding necessity has been shown for the adoption of these five Federal standards. The Federal-State system was designed to establish unemployment compensation systems in the States, giving to those States as much discretion and leeway as possible in order that they might best meet the problems pertaining to their individual States. Thus, while all of the proposed additional Federal standards represent laudable objectives, we do not believe that they should be included in the Federal law. Here are the five standards and brief reasons why their adoption is unnecessary: 1. Prohibition of the "double dip."-Thirty-two States now effectively prohibit an individual from receiving compensation and filing again in his next benefit year without having worked in between. In those States which still permit this, the amount and duration of the second round of benefits is generally much lower and the number of claimants is not great. The trend in the States is to abolish the "double dip" and we believe that, with encouragement from the Labor Department, it can be abolished without the necessity of creating a new mandatory Federal standard. 2. Prohibition against denying benefits to trainees. When the Ways and Means Committee put a similar provision in H.R. 15119 in 1966, only 22 States had a corresponding provision in their laws. Since that time, seven more States have adopted it. The trend is toward further legislation in this field. In addition, many training courses now provide allowances at least equal to unemployment compensation benefits. Many other courses are for the benefit of the hardcore unemployed, who undoubtedly would not be able to qualify for any meaningful benefit. Adoption of the prohibition against denying benefits to trainees by all States would be most desirable, but retailing does not consider it to be a national problem requiring Federal legislation. 3. Prohibition against denial or reduction of benefits because an individual resides in another State.-H.R. 15119 contained a similar provision. At that time, three States, Ohio, Alaska, and Wyoming reduced benefits when the claimant filed from, or resided in another State. Ohio has since eliminated this practice, leaving only two States with 0.2 percent of the total work force, still continuing it. This again is Te not a serious or a national problem justifying Federal legislative interference. 4. Requirement that all States participate in arrangements for combining wages. We do not believe that there is any problem here at all. From the beginning, the States have been concerned about the rights of employees who moved from State to State, and have worked assiduously to protect the benefit rights of these workers. A basic plan for interstate payments has voluntarily been agreed to by every State, and more flexible and more liberal plans have also been voluntarily adopted by a very substantial majority of States. 5. Prohibition against cancelling wage credits or benefit rights for causes other than misconduct, fraud, or disqualifying income. The two principal causes, aside from misconduct connected with work, fraud in connection with a claim, or receipt of disqualifying income, are voluntary quits and refusal of suitable work. At present, 18 States have provisions for cancellation or reduction in the case of voluntary quits and 15 for refusal to accept suitable work. However, it should be noted that of the 18 States having provisions for voluntary quits, only five require total cancellation and of the 15 States having provisions for refusal to accept suitable work, only four require total cancellation. In the others, the penalty is flexible and applied according to the facts of the individual case. As the States have improved and increased their benefits, they have also tended to tighten up on the penalties to those who have deliberately contributed to their unemployment. We see nothing wrong in this. On the contrary, we believe that it is salutory. The intent of the system is to assist the individual who loses his employment through no fault of his own. Lastly, but most important, H.R. 14705 does not contain a Federal benefits standard, and the administration has not sought such a standard now. We oppose Federal benefit standards because their adoption would lead to the complete destruction of the Federal-State system as we now know it and its replacement by a completely federalized program. We support H.R. 14705, but we stress the absence of any compelling reason to intrude five Federal eligibility standards into the unemployment compensation system. EXTENDED BENEFITS It is most essential that a system of extended benefits be written into law. Past experience shows that the temporary extended benefit provisions enacted by Congress during two recession periods were not entirely adequate or effective. They came too late and lasted too long. The system devised in H.R. 14705 proposes a system triggered in either on a State-by-State basis, or on a national basis, and triggered out in the same manner. This system is to be financed by the States and Federal Government on a 50-50 basis. We believe that this system recognizes that recessions do not strike the entire country overnight. Their incidence is spotty, and often begins in widely separated States. A national trigger could begin extended benefit payments in some States long after they were needed. Conversely, the national trigger could continue extended benefit payments in States for a longer period than the State unemployment situation would warrant. Although the cost of financing extended benefits would presumably be the same whether financed solely by the Federal Government or financed equally between the Federal Government and the States, we prefer the latter system. It would conform more closely with the present concept of a Federal-State system. In addition, it would give the States some flexibility in operation. They could levy the necessary tax increase on an experience rating basis if they so chose, or could supply the funds from general revenues if they found that preferable. One provision of H.R. 15119 should certainly be included in an extended benefit program. This provision gave the States some leeway in the matter of eligibility for extended benefits, allowing them to require more attachment to the labor force than they would do in he case of regular benefits. Specifically, it would have permitted States to require 26 weeks of covered employment in a claimant's base period to make him eligible for the extended benefits. This provision would have allowed States to exclude, if they chose to do so, chronic exhaustees and seasonal workers who happened to exhaust benefits at the time the extended benefit program triggered in. FINANCING In his testimony before this committee, Secretary of Labor George P. Schultz proposed an increase in the amount of the taxable wages, or in other words, the tax base, to $4,800 in 1972 and to $6,000 in 1975. To retailing, this is an unwarrantable increase. We oppose it for two reasons. First, because we believe that it would bring in far more revenue than needed, and second and more important, because it would upset the unemployment compensation revenue raising systems of the States. Each State-with the sole exception of Alaska-would be forced to make substantial increases in its tax base, by 100 percent in the case of 27 States and the District of Columbia. The financing of administrative expenses, and the financing of the Federal share of the extended benefit program (particularly if this be borne equally by the State and the Federal Government), should not be done at the expense of the individual State financing plans. The States have been given the freedom to adjust their tax rates and their bases so as to meet their own individual problems. If they need more revenue for benefits, they can adjust their tax bases upwards at any time they see fit, and 22 States have already done so. H.R. 14705 would increase the taxable wage base to $4,200 in 1972. While this still represents a large increase, we think that it is more equitable than the administration's proposal. CONCLUSIONS The federation supports H.R. 14705 as a reasonable and workable compromise, although we would prefer to have certain provisions altered or deleted. The coverage provisions of the bill are very desirable, but they should not be extended. We strongly endorse a provision for a system of extended benefits. However, we oppose raising the taxable wage base higher than the $4,200 amount provided for in H.R. 14705. Most important, we emphasize our continued opposition to Federal benefit standards. Thank you very much for the opportunity to present retailings' views to you. I think I covered it in 10 minutes. Senator BENNETT. Nine. Senator ANDERSON, Senator Harris? Senator HARRIS. No questions, Mr. Chairman. Senator BENNETT, No questions. Senator ANDERSON. Thank you very much. Thank you for being on time. Mr. KILBRIDE. Thank you very much. Senator ANDERSON. Mr. Gulan. STATEMENT OF JEROME R. GULAN, LEGISLATIVE DIRECTOR, NATIONAL FEDERATION OF INDEPENDENT BUSINESS Mr. GULAN. Thank you, Mr. Chairman. I am sure I can proceed under the 10-minute rule here. Our testimony today will be limited to that portion of this unemployment compensation bill which would replace the present four employees in 20 weeks in any calendar year test for coverage by a test of $300 or more in payroll quarterly. It is so limited because this is the only area in which we have a clear mandate from our members. By substituting for the current coverage test of four employees in 20 weeks a new test of $300 or more in payroll in any quarter, it would blanket into the unemployment system an additional estimated 1,600,000 employees of small business. |