The impact on state unemployment compensation systems of covering agricultural workers is uncertain but the best evidence available is that it would be extremely costly and could not carry itself. Not the least troublesome by any means is a precise and workable definition of who is an agriculture worker, as well as the migratory nature of many of them. A state-by-state analysis of the consequences of a provision to cover farm workers has not been accomplished. An estimate is possible based upon the evidence available and it tends to indicate that the cost of covering farmers would exceed 10% to 15% of their taxable payrolls. If this is valid evidence, farmers would not even closely approximate paying for such benefit costs in unemployment compensation taxes. This would require other covered employers to make up the deficit. North Dakota has had experience under a special provision of law covering non-seasonal farmers on a voluntary basis and even though the most stable farmers tended to be covered the cost experience has been virtually twice the state's top tax rate of 7%. It is suggested that states should not be forced to cover farmers faster than they are able to solve the basic problems associated with farm coverage such as financing and benefit rights. This should be accomplished by each state on its own initiative before Congress undertakes to impose coverage of a group of workers on the states when such action is likely to have detrimental consequences on the unemployment compensation system. It was with a great deal of satisfaction that we noted that H.R. 14705, as passed by the House of Representatives, did not contain federal benefit standards and we urge that they be not included by the Senate. Although H.R. 14705, as passed by the House of Representatives, is not letter perfect so far as our industry is concerned we recognize the virtues of the measure and urge its passage without amendment. Mr. Chairman and gentlemen, I wish to thank you for the privilege of presenting this testimony to you. STATEMENT OF PETER FOSCO, GENERAL PRESIDENT, LABORERS' INTERNATIONAL Mr. Chairman, members of the Committee, my name is Peter Fosco. I am General President of the Laborers' International Union of North America, AFL-CIO, representing approximately 50,000 members employed in the construction industry and in the Federal and public service. I appreciate this opportunity to present the views of my organization concerning H.R. 14705, a bill to extend and improve the Federal-State Unemployment Compensation System. The Laborers' International Union considers this to be one of the most important issues to be decided by this Congress. The state of the unemployment compensation system means literally the difference between dignity and despair for millions of Americans when they find themselves temporarily unemployed through no fault of their own. And each year during the prosperous decade of the 1960's, over 11 million American workers found themselves in just that position-unfortunately, the majority of them received no relief at all from unemployment compensation. Mr. Chairman, the system needs drastic extension, and it needs dramatic mprovement. We feel H.R. 14705, as it is presently written, promises neither. It is somewhat ironic that these hearings are scheduled at a time when a calculated rise in unemployment is becoming visible. Anymore, Administration pokesmen are barely attempting to camouflage the fact that their antidote or the current economic inflation is a mini-recession. Will the thousands of Americans who will be forced to sacrifice their jobs "for the good of the economy" eceive adequate compensation? The statistical probability is that most will eceive no benefits at all, the three out of 10 who do will have to make do on bout one-third their normal income. When the system was established in 1939, its obvious intent was to guarantee he great majority of the unemployed a substantial portion of their average wage ntil they found work. Initially, the maximum weekly benefit fell below 50 ercent of the average weekly wage in only two states-the maximum for most ates was 65 percent of the average wage at that time. Unemployment compensation was considered a great social reform, the product I a socially enlightened period in our history. It was based on the concept at workers contribute to the collective wealth of the nation, thus earning the ght to draw adequate compensation when they are prevented from working e to economic downturns beyond their control. Since all workers contribute the nation's wealth, obviously the greatest number possible should be eligible r protection under the system. Over the years the system has steadily deteriorated. It has been systematically oded until today it is but a caricature of its original intent. D N RESS Ten years ago, about six out of 10 unemployed workers received benefits from e program. The ratio was down to four out of ten by 1965, and today we are proaching the point where only about three out of ten draw any benefits at all. d while the program originally provided from one-half to two-thirds of a rker's average wage under covered employment, the average benefit amount d to claimants in 1968 ($43) represented about 34 per cent of their average ekly wage. Эн Rather than maintain the family of an unemployed workman in some semblance 41-184-70-25 (365) эн RESS 9 N ESS turn favored the employers at the expense of America's working men and women, for whose benefit, after all, it was designed. The basic weakness in the system lies in the fact that it is nearly devoid of Federal guidance. It is left to the states to administer their own programs, raise the money, determine qualifying standards, benefit amounts and duration of benefits. The chief reason the systems benefit so few workers and to such a small degree can be summed up in two words: industrial competition. Each state seeks to encourage industrial development within its own borders. Each wants to offer business the best deal. Since unemployment compensation primarily is paid from a tax levied on employers by the states, each state attempts to keep the drain on its unemployment insurance fund at a minimum so that it can offer the lowest possible tax rate as an incentive to industry. One obvious result is that states have been most reluctant to increase the benefit amounts; in relation to soaring prices and wages over the years, unemployment benefits have inched up all but imperceptibly. Another way the states cut corners is by imposing strict eligibility requirements on workers. Every worker covered by unemployment compensation does not necessarily qualify for benefits when he is out of a job. Covered workers must meet minimum requirements on earnings or length of service or both in every state in order to qualify. While it is necessary to have some standard for limiting coverage to regular members of the labor force, the lack of any established Federal standard makes it tempting for states arbitrarily to stiffen eligibility requirements to exclude more workers rather than raise the employers' ante. It is more than coincidental that 16 states which increased benefit payments during the last five years imposed stricter standards at the same time. Jobless workers in these states are receiving better benefits, but there are fewer of them dipping into the pot-thus no increased burden on industry. And so it goes: the system which was established for the benefit of the workers is being operated today for the convenience of the businessmen, and at the expense of the growing number of employees receiving no relief when they are between jobs. While a few states apply reasonable standards and qualify 90 to 95 per cent of new claimants, many deny benefits to 25 to 30 per cent of new claimants covered by unemployment insurance. The number of claimants who fail to qualify for benefits combined with those who are excluded entirely from the system (about one out of every four workers) make up the better than 65 per cent of the unemployed receiving no benefits at all. Qualifying requirements also are used to govern the length of time eligible unemployed are able to receive benefits. While all states provide for a potential maximum duration of 26 weeks, duration depends on the amount of past earning or length of employment; again there is no uniform standard, so states are free to determine these standards at will. By no means do all claimants who are out of work for the maximum period receive benefits for the maximum duration. During 1967, 11 states granted 50 per cent of all eligible claimants the full 26-week duration of benefits. In 34 states from 53 to 91 per cent received the potential maximum. Only seven states granted the 26-week duration to all eligible claimants who were unemployed for at least that length of time. Also in 1967, better than 50 per cent of the eligible claimants in 20 states exhausted their benefits in less than 20 weeks. Only six states had no claimants exhausting benefits in less than 20 weeks. The states are able to juggle these various elements of the jobless pay system and offer businessmen bargain tax rates primarily because of the "experience rating" device which has allowed states to emasculate the system. Originally, employers were exempted from paying 90 per cent of the 3 per cent Federal unemployment insurance tax because it was anticipated that they would pay something close to the remaining 2.7 per cent into their state fund. As each state built up substantial reserves in its own fund, it naturally saw the opportunity to lure industry by charging a lower tax rate according to the company's experience with unemployment. The practice not only has depleted the states' unemployment compensation reserves but has tempted many employers to fire workers unjustly so as not to jeopardize their own experience ratings. Clearly, unemployment compensation is fast losing its relevance for American workers. It has become for each state a political chess piece with which to vie for industrial advantage. If the system is ever again to perform the role for which it was designed, then it must be reformed in a number of areas. We feel it is vital to the well-being of the millions of American workers and their families that the following points be incorporated into H. R. 14705: TAXABLE WAGE BASE If the taxable wage base used for financing the program had kept pace with rising wage levels, it would now be approaching $15,000. But as the original figure established parity with the wage base used for social security, the wage base for unemployment compensation should today at least be equal to that used presently for Old-Age and Survivors Insurance ($7,800). This is not only reasonable and logical, it is essential for proper financing of the system. MINIMUM FEDERAL BENEFIT STANDARDS Past experience makes absolute the necessity for establishing a minimum Federal benefit standard. Fifteen years ago President Eisenhower called for states to voluntarily increase benefits to provide two-thirds regular income to the majority of claimants. Every President since then has made the same plea, Including President Nixon in his message of July 8, 1969. But on December 1, 1969, the maximum weekly benefits under 30 state programs was still below 50 Der cent of the statewide average weekly wage. By now it is plainly absurd to think the states can be moved by mere rhetoric to raise their benefit amounts to a significant level. We urge Congress to impose Federal standards requiring states to provide weekly benefits for the great najority of claimants equal to 66% per cent of the statewide average weekly vage with minimum standards no lower than 50 per cent of the average weekly vage. These figures should be computed semi-annually, with ratios applying to ross earning during the weeks in the base year when wages were highest: DURATION-ELIGIBILITY-EXTENSION OF BENEFITS Current practice permits states to set the length of benefit duration arbitrarily, egardless of the needs of the claimant. Federal standards should be set providing uniform 26-week benefit duration period and prohibiting states from imposing ligibility requirements beyond 20 weeks of work or its equivalent for entitlement o the full duration. Extended benefits paid from a Federally-financed program should be available o any claimant who is unable to find suitable work within the 26-week period. he present extended benefit program triggered by national and state recessions unrealistic. The 1969 Economic Report of the President documents this point: Even in the height of prosperity during 1968, two million workers were out I work for a period of 15 weeks or longer. About a million workers spent at least alf the year fruitlessly looking for work." The causes of long-term unemployent-seasonality, movement of industry, shifts in consumer demand-are with = constantly, not merely in time of recession. EXPERIENCE RATING Experience rating, which encourages manipulation by the states of unemployent compensation financing, should be eliminated or at least brought within rtain bounds through minimum and maximum tax rates set by Federal law. any event, no employer should be allowed to avoid paying any tax at all. EXTENDED COVERAGE The logical intent of unemployment compensation is to protect as many rkers as possible. While we applaud the liberalizations already included in R. 14705, we feel coverage should include all agricultural workers, all state d local government employees as well as domestic workers. ESS PENALITY DISQUALIFICATIONS Disqualifications of claimants should be determined in a reasonable fashion and their duration should be limited to a fixed period. We feel the maximum penality for justifiable disqualification should be equal to the average length of unemployment in a normal labor market: six weeks. Periods of unemployment lasting longer should be attributed to the slackness of the labor market, over which the worker has no control. After six weeks, the worker should then be eligible for financial relief under the system. Mr. Chairman, we feel very strongly that firm Federal guidance is essential at this time if this important social program is to be revitalized. We hope the Committee will recommend a bill which will bring the initial promise of unemployment compensation to fulfillment at last. Once again, I want to express my appreciation for the opportunity to express the views of the Laborers' International Union of North America on this matter. |