1 323 ECONOMIC ACT SECURITY is also placed in the record a letter received from Dr. There being certain Witte, to the Report of supplemental transmitting statements to on Economic Security. the Committee the Advisory Council SECURITY, ON COMMITTEE ECONOMIC 6, 1956. Feb~ua~y Washington, PAT Hon. HARRISON, Committee, United States Senate Chai~man Finance Seattle, C. D. Washington, HARRISON: While testifying on the pending economic security DEAR SENATOR studies was file a list of the principal to and reports prepared for or I asked bill, the report on Economic Security; also, the to of the Advi- presented Committee on Security. Council sor Economic a list this 1 with submitting herewith instruction, of the prin- Amplying am studies and reports prepared for or presented cipal our committee. All of to these available only in typewritten or mimeographed form but if any of them are desired by committee, we will be glad to submit the same. are your report has the Advisory Council general already been filed with the of The your committee. In addition, three supplemental, statements presenting of clerk views of various members of the Council were submitted subsequent to the the filing the general report. These supplemental statements are also sent you of together another copy of the general report. herewith, with this time we also submit the two reports At by the other principal advisory filed group our committee, the to board on economic security. technical If other reports prepared for or presented to the Committee on Economic Security are we will be glad to have you so advise us. desired, truly yours, Very COMMITTEE ECONOMIC SECURITY, ON E. WITTE, Executive Di~ecto~. EDWIN GENERAL on Economic Security: General Report, with three supple- Advisory Council by mentary members of the Council. statements various Board Economic Security: Preliminary Report. Social Security. Technical on President Roosevelt and others. By addresses National the (Principal at on Economic Security.) Conference BACKGROUND FACTUAL editorial committee. the By the of staff Need Security. Economic for The (Charts.) to Security Afford Measures to Individuals. Economic for Additional The Need Edwin By Witte. E. OLD-AGE SECURITY Age Security: Old report, by the Old Age Security Staff. Final British Old Age Pensions and Old Age Insurance. By Olga S. Halsey. Government Annuities Canada. in By Walter Eade. F.. is Old Age Revolving Why Plan the Impossible. By Edwin Townsend Pension Witte. E. COMPENSATlON UNEMPLOYMENT Insurance. Unemployment Bryce M. Stewart and staff. By S. 0. Powell and Alan of Unemployment Administration Funds. By Reserve R. Sweezy. Unemployment Insurance Estimates. By the actuarial and statistical staff of the Economic Security. on Committee in Support of the Economic and Legal Basis of Compulsory unemployment Brief By James Harrington Boyd. Insurance. By Edwin E. Witte. Compensation. Major Issues in Unemployment By Edwin E. Witte. Limitation Value of Unemployment Insurance. and The Stabilization of Employment and Unemployment Compensation. By Constance A. Kiehel.

2 324 ECONOMIC ACT SEC,URITY Dismissal Wage. G. Reginald Crosby. The By Unemployment of Great Britain. By Maud B. Insurance Administration in Patten. in By Jeanne C. Barber. Insurance Unemploylnent Germany. Switzerland. By Wilbur Unemployment Insurance in J. Cohen. traveling separation from home and heavy Employment. Suitability Involvillg of Olga Halsey. By expenses. S. Olga By Act in American Proposals. British the in Procedure Appeal and Halsey. Miscoliceptions Some Regarding Popular Alex- Unemployment Insurance. By of the technical ander Holtzoff, member board. CHILDREN BYOR SECURITY Children. By Katharine F. Ler~root and Dr. Security Eliot of the for Martha S. Bureau, in cooperation with the Advisory Committee on Children's U. Child Welfare. ECONOMIC RISKS ARISING OUT OF ILLNESS to Eco~tomic Security Arising out of Illness. By Edgar L. Sydenstricker Risks and Dr. S. Falk. I. By Edgar L. Syden- of Costs of Illness. the Loss and Medical Estimates Wage Dr. S. Falk. and I. stricker EMPLOYMENT ASSURANCE AND RELIEF for the Extension of Employme~lt Opportui~ity and Eco Planr~ed Opportnnitg y B. G~vens. Meredith Security. nomic Ross. Relief. Permanent Employment and for By E~ner~on Program A Public Are the Unemployed? By Gladys L. Palmer. Who Sig~iificant Phases Foreign Experience. By Eveline M. Burns. of of Governmet for the Unemployed: An Appraisal of Philadel- A Program Work By Ewau Clague. phia Experience. SOCIAL INSURANCE, GENERAL AND MISCELLANEOUS Security for Farmers and Economic Lahorers. By Dr. Louis H. Agricultural Bean associates. U. S. Department of Agriculture. and American European Provisions for Survivors. and By Olga S. Halsep. Halsey. 8. American and Experience. By Olga Insurance: Invalidity British of Analysis Showing Invalidity Below American Data Olga 65. S. By Halsey. of S. U. Statistics. Bureau Labor Kjaer, By Compensation. Workmen's S. of a Unified System of Insurance Against The of Earnings. Possibilities Loss Mrs. Nachtrieb Armstrong. By Barbara Security. Program Econon~ic a gf Relationships to Relation Federal-State in By Jane Perry Clark. TO THE REPORT OF THE ADVISORY TO SUPPLEMENTAL COUN~II, STATEMENTS COMMITTEE ECONOMIC SECURITY THE ON C., D. WASHINGTON, 1.5, 19.94. December PERKINS, . Hon. FRANCES Labor, Washington, D. C. of Xccretary MADAM SECRETARY: 111 accordance with your invitation DEAR at the given opening the Advisory Col~ncil on Econonlic Security, indicating that you of by would to consider views expressed glad a minority or individuals, we be desire to submit the following: Our sympathy the objective expressed by the President concerning greater for from and of fear of unemployment removal the worker's mind social security the us to the belief that certain of the recommendations of the Advisory moves should emphasized: Council be encouraged The that should be objective is stabilization of employment, 1. first assurance or emplovment, and this is along the line of the President's pro- of nouncement that, if th"is could be accomplished, the worker would be able to look annual forward least a minimum amount for an at wage on which to plan his to family's support. This should produce better work at lower cost, reflected in consumption lower and a consequent increase in prices on the part of the selling stabilization No one knows how much can be done along the line of community.

3 ECONOMIC SECURITY 325 ACT eniployrnent, and every effort should be made to encourage esperi- of therefore this merits individua,l con~panies, who will give adequate indem- direction in by that shape bonds or otherwise to see Government their guarantees the nities in of employment will be carried out. To show that much more of minimum annual of along line, we quote from an article in the New Republic this can be done Dyyember entitled "Security for Americans", by Elizabeth Brandeis: 5, do riot begin generally under the Although until reserves have benefits law 1 year, 70 compailies have already guaranteed their 3,000 for built been up 42 two-thirds work and wages for at least full-time weeks of' worker Wisconsin of now year. workers are employed on a year's salary the c~~rrei~t Mauy other a direct as of the act, even before it is fully operative." coiltract, resuIt is given these 3,000 Wisconsin workers to equivalent to almost Tlie assurar~ce percent of normal annual work or pay. If this is the result after t,hc Wisconsin 54 law has in effect for only a few months and in one State, surely there must been a great opportunity stabilization of employment and assurance of a large be for law an throughout the Unit'ed States. The wage t'hat should be df part annual recognize this as a desirable result of the legislation and should enacted should greatest extent such efforts of individual companies. the stimulate to mentioned would your attention We the second principal objective call 2. to first page of the Council's report: or~,:he plan should serve as an incentive to ernployers t'o provide The work steady and prevent unemployment." to feel that progress can he mado toward this objective if com- We considerable t'he industries or to set up separate accounts, with are safeguard panies permitted in the Council's report,. provided a plant or industry can If unemployment, after a certain reserve has reduce been up, their contribution to the reserve becomes less, which means their built price cost is less and that the selling production to the public may be reduced. of Ma~lagement will be encouraged to strive for greater efficiency in plant operation, and the of the less regular industries will be borne by such industries, which cost in is the philosophy of the workmen's compensation acts generally line with more this that the cost of the i. e., hazardous or less efficiently in country; adopted is reflected in the cost of nlaiiaged and therefore in higher industries production prices the public, and these increased costs to not borne hv tile indue- selling are community the If hazardous more efficiently managed. less are which t,ries or the products of such more hazardous or less efficiently managed industries, needs Brandeis, by the community. Miss increased should be borne thereof the cost the article previously referred to, says: in a pooled unemployment-insurance fund (as in Europe) this subsidy "Under in competitors part from comes who operate more steadily; namely, ot'lier large in industries same industry or other concerns t'hat compete for the consuincr's the while For coal mines run irregularly, instance, oil refineries or water- dollar. power plants employ their workers more nearly the year round. Now, if idle coal miners supported in part by insurance oontribut,ions froin oil refineries were water-power plants, anyone tell which is really the cheapest fuel? and could the shoe or automobile plant which runs the year round had to subsidize Jf factory competing factory or plant which the not, there would arise a species of does unfair that might even forc,e out of business the truly lorn--cost competition concern." In where a pooled plan has Ohio, recommerlded, differences in hazards been are recognized and varyii~g rates map in time be det'ermined for t'he different industries. 3. there is such a wide difference of opinion and so little actual ex- Because widest we endorse the cordially view that there should be the President's perience, for experimentation and encouragement opportunity be given to companies should and industries, whether intrastate or interstate, to experime~it with standards a governmental administrative body. approved by favorable not than those less Resl~ectflilly yours, M. H. Fo~solu. M. LEEDS. E. S. LEWISOIIN. MOLEY. R.~T~$OND GERAED SWOPE. R. C. TEAGLE.

4 326 SECURITY ECONOMIC ACT C., WASHINGTON, 1964. December D. 16, FRANCES Hon. PERKINS, Secretary of Washinglon, Labor, C. D. record MADAM has gone on The as not DEAR SECRETARY: Advisory Council employee contributions. We feel very strongly on this approving in principle beg subject, to submit this, our position, to you for your and therefore leave consideration. of effect in every system in unemployment insur- Employee are contributions Europe, with ance single exception of Russia. Experts and actuaries in the worked this problem and many have made recommendations through have on commissions for contributions. To mention only a few, employee various State recommended commission Minnesota the from the enlployee and 50 50 percent the employer;.in Ohio, two-thirds from the employer and one-third percent from this 3 percent, although in instance the actuary recom- employee the from (total 50 percent from the employer and 50 percent from the employee, 2 per- mended cent in New Hampshire, each); and from 2% and 1 percent the percent employer can With employee. the total fund employee be in- the from contributions, that provided merely by employer contributions, creased therefore over which the and lengthens the period of benefits; and, even more amount increases im- employee contributions provide more effective administration and a portant, conception on the part of workers of their responsibilities as self-respect- clearer his citizens, then regarding the plan as partly worker own to which he has ing the and not looking upon it as something given to him as a gratuity. contributed, the in In discussion many held that, while unemployment insur- the,Council, was the that should be rightly carried by ance employer alone, old-age a burden that pensions properly a burden on industry, but not old age is an incident were in everyone's life. The Council voted, however, that the burden of old-age pensions should equally by employer and employee, not because it be borne scientifically principally or just, but either because this was the was correct of accomplishing the results. Therefore, possibly by combining simplest way insurance and old-age pensions something can be done to meet unemployment a larger diver and which will give views fund for unemployment insur- ent these than &at recommended by the Council and make both plans effective at ance Council earlier than the recommendations of the date call for. In the recom- an 1956 of the Council, both plans will be in full force and effect in mendations Enclosed is and a chart which will bring both plans into full force and a table in effect will give a larger amount for unemployment insurance, and will 1952, employer the of the burden on the make more gradual and easier to imposition bear without unduly increasing the burden on the employee. In considering course, this chart, we appreciate, of and that different combinations can table be made as to rates and time when such rates become effective. Respectfully yours, M. B. FOLSOM. S. LEWISOHN. RAYMOND MOLEY. GERARD SWOPE. W. C. TEAGLE. UNEBIPLOYMENT INSURANCE IEmployer Employee Totsl ---- Percent Percent Percent 1 (1 year) --.-...-.-...---.--...---...--.---..-----.-------.---.. 1 1936-3i ---------- . . (1 19.37-38 .-..-.--...-..----..----...--..---..---------..---.-.----. year) 1% 1 1 year) ...---.-.-----.-.-..--------------.-------.-------..-. 2 1938-39 year) .--...-.-...---.-.---.------.----.-------.-.--------.--.. 1 103940 ;% g ;% 3 years) ... 194&43 I (3 years) ... 3 1943-40 E $2 3 ..-..-..-.--..--..-----.-.------.-.--..-------.---------- 1946-493ye'rs) '"a I. . ;- 3 vears) 104+5!2 3 ... --..-.-.-...-..-------------.--..--.----.--.---.---..--.--.-.--.----.- 1952 3 3% @ PENSIONS 1936-40 4 yearb) ... W 1 1H4M3 {3 years) ...-.---...----.------.------..--..---. .--.-..---.---.. 1% (3 years) .--..-.-.--.-----------.-.---...---.--..---.-------.----- 1943-46 1 1% 2% 1046-49 (3 years) ... 1% 2 2 1949-52(3);oars) ...-.-.------.---.-.----.---.--..---------------.----. 1952 _-...--..-...-.-.--..------.------------.-.-----.---------.---.--- 2 3 6

5 ECONOMIC SECURITY 327 ACT TOTALS Employee Total Employer I-___- I Percent Percent Percent 2 year) 1 1936-37 ----.-.-..-...-------------.------------------------------. 1% % 1 2 .--..---...----------------------.-.---.-..--------------- 1937-38 year) 2% % 1 year) .---.---..-.----------------.--.---------.---------------- 1 1938-38 I (1 year) ;% 1 :% 1939-40 ..--..----.-.---------------------------------------------- years) 194W3 ---.---.--.-.-------------------------..-------.---------. (3 3% ; 4 ;% (3 194346 years 7 (3 1946-49 years]::::::::::::::::::::::::::::::::~:~:::~::::~:~::::::::~::: ;% fM --- - .-.------ (3 1949-62 .-.-.--.-...---------------- ---------------- years) .- -- -- -- --- - -- - -- ---- - - - - - - -- - - - - - - - -- - - - -- -- -- - -- - - 1952 5 ..------ .- ---. ---- :?4 3% THE ON REZORT OF TECEINICAI, TO COMMITTEE BO~RD PRELIMINARY THE SECURITY ECONOMIC study time to a detailed We of the preliminary have considerable devoted the staff and find this report very illuminating. report of congratulate We studies. progress staff upon Mr. the of the and Witte the feel, however, We is recjuired further the staff and ourselves by before we can make any that study or final recommendations. definite preliminary recommendations submit the following observations: 4s we rate final the program, as well as the of at uhich it can be The scope 1. be formulated in the adopted, of business and fiscal conditions. The must light program economic security outlined in the for report, comprehensive preliminary cost between would and 4 billion dollars per year and even more, depending on 3 scope public the the employment provided. The parts of the program financed of or mainly contributions of (taxes on) the employers and employees exclusively by the approximately following percentages of the included pay rolls will involve as liberal benefits as outlined (assuming the preliminary report): IJnemploy- in ment 4% percent; contributory old-age insurance, 4 percent; health insurance, scope). 3 sub- percent (depending upon the to The parts invol~ ing 5 insurance, sidies from the Treasury would cost the folloning annual estimated totals per year: Noncontributory pensions, $100,000,000; mothers' pensions, $50,- old-age contributory old-age $500,000,000, for 35 to 40 000,000-$75,000,000; insurance, these some for the first two of however, subsidies, in reduced (with years offset, These costs must be borne in mind in all considerations of this relief costs). particularly its program, timing. and in of 9,000,000 persons unemployed, neighborhood above FO With the 2. percent 4,000,000 families and 700,000 individuals who are dependex~t lipon of the public for support on relief list because of the unemr~lovment unemplovment, now-constitutes most acute economic insecurity and'it must be recoinized chi it is to remain a serious problem for some time to come. Under likely that economic the necessary measure for most security is the circumstances, these of provision for relief to continuance full extent that is financially possible. the 3. comprehensive program affording economic security to the individual in A cannot all contains many features which hazards possibly be put into major effect for several years, but the place of each in the program and the complete matter of should be set forth in the final report of the com- important priorities be if also in the legislation to possible, recommended to the next mittee and, The legislation recommended should Congress. an administrative set-up include under not only will there be a continuing study of all phases of the prob- which the economic parts of a unified several security program may be brought but lem into operation when conditions permit, without necessity of extensive further legislation. comprehensive, long-time program for economic security should probably A 4. as major elements: include its COMPULSORY UNEMPLOYMENT INSUIIAXCE A. (subject this On present trend of thought subject to change) of the Board the runs along the following lines: mensure ((1) is an essential insurance for the economic secur- \:nemployment ity of the most stable part of our industrial populations, but is not a complete, all-sufficient solution of the problem.

6 328 ECONOMIC ACT SECURITY b) Unemployment should be strictly contractual, divorced from auy I ii~surai~ce means test. not be used for should or ally insurance flunds relief Unemployn~e~lt than purposes of ordinary benefits. other the other payment sliould supported by ~orit~ributior~s from the insurance Unemployment (c) be also from the employees. employers and probably no There should be public contributions. in at the outset All pooled should a single fund but there (d) contributions be further exploration of tlie advisability of permitting should out" be "contracting separate and house funds under restrictions adequately safeguarding by industrial employees. the period paid in cash for a limited should only, in proportion to (e) be Benefits period of employment, and should be sufficient to support the the claimant's being while family paid. constitutional, nationally administered systeni of unelnploymerit If a (f) to be insurance to a State system, but the committee should be is preferred that a nationally daministered system is satisfied before commit- constitutional ments favor of such a system are made to the public. in If unemployment is to be developed under a system of State (g) insurance if ad~ninistration house funds are permitted, or industrial or all of portion 3, be set aside in a national contributions fund to guarantee sliould reinsurance of col~tractual benefits from the the funds. payment separate OLD-AGE SECURITY C. we now see the problem of the aged, a long-time program for econo~nic As should security include: State-administered noncontributory old-age pensions based on a revised (a) test, with subsidies conditioned upon compliance with standards means Federal of liberalize restrictive-resident and other provisions existing the the will which State laws. A contributory old-age insurance system which (6) if at all possible, should, be by the Federal Government. This system should he based on administered for principles, should grant a limited credit but workers who reach retire- reserve ment age before enough of a reserve has been created to give them a reasonable penslon. The Government should assume the liability for this credit, Federal the cost be spread over a considerable period of time. No pensions but should for paid the system has been in operation after at least five years. be until should should be compulsory for all employed The some exceptions) system workers (with optional other classes of the population. The benefits for be computed and should a basis which will on self-sustaining from the contributions of employers be and employees from the accrued credits to present employees now of middle aside or older. age

7 ECONOMIC SECURITY ACT ACCIDENT INSUHAXCE F. insurance accident thought: it is the 011 present should Worknlen's function, but the Federal remain compensation a State (a) interest in securing actively uniformity in the greater itself Government should their standards. raising and St,ate laws resulting from (b) accidents can best be met as a Economic loss nonindustrial health invalidity insurance. part of and INSURANCE SURVIVORS G. connection made in must with old-age i~isurance necessarily Some provision be widows in the older age for of pensioilers who die after their surv~ving groups rights matured. A more general form of survivore insurance niay insurance have but cannot considered immediately feasible. be he desirable, INSURANCE INVALIDITY H. risks of invalidity should be covered through a social insurance Ideally the should for gathered Statistics the computation of costs but it now be system. a complete seems be the last part of this social insurance system to be that should into operation. put I. RELIEF will There a residual group for whom relief muat be provided, on a always be the Plus there is a large roblem in this, care of the tradi- test meanb basis and defective" classes. &re of these classes should be re- tionally "debendent as a State local responsibility, as should be relief, exccpt in prriods of garded and emergencied. great THE TECHNICAL ON THE MAJOR OF FOR THE BOARD PLANS REPORT ALTERNATIVE UNEMPLOYMENT OF INSURANCE ADMINISTRATION to the Committee on Econonlic Security, Nov. 9, 1934) (Prese~ited Three major plans for the administration of unemployment I. alternative worthy consideration: are insurance of exclusively Federal An such a system the Federal Govern- (1) system.-Under would levy a tax on employers ment possibly also on employees, the proceeds and of would be appropriated for unemployment insurance purposes. which this 111 it would set up a complete act for the administration of unemployment system insurance specifying all conditions for benefits. The Federal Government would directly administer benefits through the Employment Service and Federal these offices, which probably be set up on a regional basis. record would plan.-Under cooperative on the sbusidy system sucli a A (2) Federal-State Federal Government would, likewise, levy and collect a pay-roll tax system the and employers also on employees. It would provide further for possibly on which enact unemployment insura~lce laws satisfying stand- to States subsidies specified in the Federal act. These subsidies wo111d be a stated percentage ards the of actually collected from the respective States, which would be set up tax A specified account Reserve banks to the the of the State. a credit Federal in as Federal 20 percent) might be appropriated to the supervisory (say, percentage used to finance the Employment Service, to create a reinsurance department and employees and/or for payment of benefits to fund who lose their jobs soon a fund after the have migrated into a new State after still having unused credits in another &ate. this system the StBtes would likewise have to pass unem- Under the insurance would have to satisfy which standards prescribed by ployment laws law, but might vary ill other respects from the laws of other States. Federal funds be All held at all times by the Federal Government but the benefits would the would by the States, presumably through administered employment offices be and central record offices. (3) A cooperative Federal-Slate system on the Wagner-Lewis principle.-Under this system Federal Governme~lt would impose an excise tax on employers the (up which would be allowed as a credit against to the full amount of the there tax or any stated percentage thereof) the amounts paid by such employers into unemployment or reserve funds established pursuant to State laws insuranbe meeting standards prescribed in the Federal law. The cooperating States would if collect contributions from employers (and, the they so determined also from

8 330 . SECURITY ACT ECONOMIC and deposit in the Federal Reserve banks to be held to their employees) these to be and liquidated under regulations to be made by the credit and invested subsidy Under as well as under the plan, plan, a Board. Federal Reserve this amounts collected by the States might be withheld by the percentage of the be as to a reinsurance fund. The administration of Federal Government used plan responsibility, be a State this but could be controlled benefits would under a limited) extent by Federal legislation. (probably to some of these three plans should be adopted should be decided primarily 11. Which considerations, rather than on the issue of practical policy and on fundamental three constitutionality. proposals are new and some arguments can of All these of in and opposed to the constitutionality both each of them. made be favor Supreme Court might hold is largely conjecture and is likely to depend What the detailed upon of these respective plans. Among the people the development seems that be a quite general impression there the Federal-State consulted to overthrown is least likely to be plan on constitutional grounds, but subsidy the are some uncertainties even as to this plan, depending upon how there is worked it in detail. out a decision in plans is the question of the desirable betwen Fundamental these control system this field. The exclusively national national would extent of in contributions the not only with regard to throughout insure uniformity country, benefits. also but ignore State lines and, thus, It it a relatively would make matter protect the benefit rights of employees when they move from simple to State. to State also make possible a pooled fund for the entire country It would automatically meet the problem presented by unusual unemploy- thereby and in particular industries and States, without necessity for any ment reinsurance fund. would also the advantage of whatever degree of increased efficiency It have be administration. Federal as compared with State may there in be would put It more quickly than any into plan and would come into operation Federal-State &ecb one and the same time throughout the entire &t country. The considerations on the other side concern the same fundamental major control. of extent of national desirable An exclusively national question the necessitate decisions at the very outset system would all points which could on not left to administrative discretion, be as employee contributions, indus- such trial and plant funds, incentives to regularization, etc. Even among the people who strongly in unemployment insurance and who have given the most believe to this there are wide differences of opinion on many of the most thought subject arising in preparation of an actual bill. Under a fundamental questions the would experimentation a relatively small scale on be possible system national no made initially would have much more serious consequences than and mistakes State system. "all the eggs would be in one basket", with the under Moreover, no if the law that be held unconstitutional, there would be national result should unemployment insurance laws which remained intact. State As between a Federal-State system on a subsidy plan and a Federal-State 111. along system lines of the Wagner-Lewis bill, the only absolutely necessary the is that the former all taxes (contributions) levied on industry difference under under be the Federal Government, while by the latter the con- would collected under the State unemployment insurance laws would be collected by tributions States. practice, however, the In seems almost certain that a greater degree of it control the be developed under the former than in national latter system. will contribu- subsidy The a simpler method for the collection of system provides tions (pay-roll taxes) than the Wagner-Lewis device. It would have at least some tendency toward standards of administration-a most important matter. higher probably would the setting up of reinsurance and transfer funds. It facilitate the it has advantage of being a brand-new the of expediency point view From of Clearly it is superior to the Wagner-Lewis plan if extensive national proposal. is time this control in unemployment insurance. desired at subsidy Wagner-Lewis the advantage over the has plan that it will The plan it unnecessary to reach decisions contro- the Federal act on the most under make questions in connection versial unemployment insurance: Whether plant with funds shall be permitted and whether employees shall be required to contribute. It may that these questions could be left to the decisions of the States even be the as but certainly not under easily as under the Wagner-Lewis subsidy plan plan Another consideration is that under this device. there would be important no pressure on Congress to use sources of revenue other than contributions for unemployment insurance which is likely to become very strong under purposes, subsidy both national and (Federal-State) straight plans. Finally, under the the Wagner-Lewis bill, many States would doubtless pass unemployment insurance event In the Federal tax became effective before could be litigtaed. laws the and

9 ECONOMIC SECURITY ACT the Federal should then be held unconstitutional, the State laws would that law operate. Under subsidy plan, in contrast, while the States would continue to the no to their laws would include legislation, revenue-raising required also be pass they would become inoperative if the Federal act should for any features, so that invalid if the held Federal appropriation is discontinued. reason be or consideration alternative these three major extended plans for IV. After of unemployment insurance, the executive committee board administration the of it is divided regarding which of these systems is to be preferred. The finds that committee insurance the technical board, as well as the execu- unemployment of believe tive exclusively national system should be definitely that director, the other the of the staff, on the members hand, favor a national rejected. Many of system. insurance committee also holds the view that The the two unemployment of cooperative systems the Wagner-Lewis plan is distinctly alternative Federal-State the system. to subsidy preferable of the differences of opinion In the respective merits of the three major view on systems alternative administration, a decision between these systems must be of made the Committee on Economic Security. An early decieion is not only by to the of the staff but to the entire development of unemployment vital work in country. At this time unemployment insurance legislation insurance this are functioning in nine states, charged with the duty of making study commissions this on to the incoming legislatures. In several other recommendations subject the unemployment was pledged in legislation platform of the States insurance which won the recent election or has been promised by the succeesful party for And candidate not only in these but many other States there is Governor. interest in insurance legislation with good prospects wide-spread unemployment State enactment the its winter, when 43 in legislatures will be in ses- f?r coming In all States, however, there is at slon. great uncertainty as to what present the Government is going to do, which is holding up all plans for Federal State legislation. the Committee on Economic Whether believes that an exclusively Security national system is or is not desirable, announcement of its decision upon this point at forthcoming national conference on economic security would be the appropriate and valuable. States would then know whether they are most The In in and could make their plans accordingly. picture view of the near be the to the sessions of Congress and the State legislatures, an ea~ly decision approach of issue on an exclueively national vereus a cooperative State-Federal system the of imperative. seem would regarding the type of A Federal-State system which is decision a cooperative (if such a system is preferred over an exclusively desired system) is less national urgent. the committee, has decided preferences ae between the If however, staff and Wagner-Lewis plan, it will plan the work of the the subsidy facilitate the technical board if this question also is promptly decided. and Submitted behalf of the executive committee. in EDWIN WITTE, Ezecutive Director. E. STATEMENT SUPPLEMENTARY THE ADVISORY ON ECONOMIC COUNCIL SECURITY OF the Honorable To PERKINS, FRANCES Chairman President's Committee'on Economic Security, Washinglon, D. C. We voted with the majority of the Advisory Council for a 3-percent pay-roll tax on but we regard the revenue therefrom to be thoroughly inade- employers; as the for benefits under the proposed Federal-State quate foundation of stem 6 donomic actuaries of unemployment Committee on compensation. The your set before us the standards which they Security as possibleunder such estimated - a worker pay-roll are: First, after These is laid off, a 4 weeks, a %percent tax. period waiting benefit; then 15 weeksJ benefits at 50 percent of normal without wages (but in no case more than $15); thereafter, except for long-time employees, nothing. Our should not be regarded as recommending such meagre cover- vote age. Rather, to the benefits, a considerable minority of the Advisory Council increase group for voted on pay rolls; and a larger a 5-percent tied the vote at tax 4 per- cent. As no benefits, under the proposed scheme, are to accrue until 3 years on from do not, of course, bear they the present mass unemployment. Our now, contention is that these standards fall short of any reasonable protection of un- 116807-35-22

10 ECONOMIC SECURITY ACT wage earners i~or~r~al times, wl~icli ia the limited objective of the employed in proposed legislation. of coverage is the length of time for which benefits run. com- simplest The test seek length ghou-s men and women timeexperience work before the pared wit6 of it. At our request the technical staff of the Committee on Economic they can find 1922-30 calculations this point up duration tables for from Security drew on Committee's a system as a basis for projecting the of un- prepared by actuaries "good These show that even in to times " coinpensa$ion. erriploymerit went of the unemployed wage-earners 54 fall outside the benefit eriod percent would by base; provided a 3-percent because 26 fall in the prol?mged they percent would of 28 they would have been out because a job for and percent period, waiting months. 111 Illore times" the proportion who would fall outside than 4 "bad 80 perce~it; in average times, 60 percent. benefit the would be as high as period statistical with their known limitations, were brought down to These estimates, cited, realities, of a field survey were results carried out in everyday the for the Senate 1928 on Labor, Senator Couzens chair~nar~. This was Committee 20 workers let go 750 12 months preceding from the study of a unique case of industries Chicago, Baltimore, and Worcester, Mass. It was groups in of Dr. now Chief of the Bureau Lubin, Labor Shatistics of the by directed Isador Department of Labor. With prosperity at its height, United States 42 percent of had secured jobs, slid those who of the who hadn't at percent hirrie 55 those were were unelnployed for more than 4 months. they interviewed, another angle, the adequacy of the niajority proposal was challenged, by From tables staff by the techr~ical offering. of the Committee on Economic prepared Thiene rompared protectibr~ proposed under a,3-percent plan. for ~e6tiri.t.i: *the years States that affordcd throughout recent United by the standard the and of the British system of unemployment insurance which has a combined benefits base. or $2 a day 456-percent its equivalent, either American or British Earning out would $208 in wages if out of work worker 4 months. It was pointed lose for that, eligil,le, under the proposed Federal if the American worker would be act colnpensation. s total of $80 in urlemploynient assured The worker, if British worild fare as well; but if married, with 3 children, the family man single, about 1130 would sairle period; and if allowance were made for relative pur- in get tlle would he chasing power, get American the against $156 $80. In the higher wage Anlerican would come off favorable with the British as long l)rttckcts, his the as The lasts, brlt in ally case that is only part of the picture. compensatio~~ general weeks, America11 of be cut short at 14 or 15 benefits while the British run would benefits begin after standard week's waiting 1 (against the 4 proposed for period the S. A.) and r~in up to 26 weeks (against 15). U. employee with work record in America might qualify for half a year; An a long for a full year. in Erigland, swing that British contend could if the such a coverage throughout We people post-war depressioi~. and are now liberalizing it, the pcoplc of the United the States at least do as well in setting up a system of security in this might of period anticipatd when no benefith- are to recovery, to unemployed workers accrue . ~ until i938-3 years -off. According to estinlates submitted by the technical staff of the Com- actuarial on Economic if mittee Security, were to the 3 pcrcent proposed, percent added 1 double the it of the benefits. Most of us who advocated longer would length on bringing tax pay-roll 1 perrent by employers the this for wcrc benefits finding us 5 percent). Some of Mragner-Lewib bill it was to (in the original up 4 percent on the Federal Government to contribute it. calli~~g \yere All of us broke with for the propositio6 that a worker, u-110 qualifies under our new system and whose savings are shall find himself thrown up011 l~ublir relief at the end of exhausted, or of wceks 14 unemploymnit compensation. 15 too feel strongly We such benefits cover so short a period that, while we tl~at signed the report as a whole, we wish to make our position altogether clear to the belicve Committee Security. Moreover, we Economic, it a disservice to the on President for us not to point out their inadequacy. PAUL I~ELLOGG. FRANK P. GRAHAM.' WILLIAM GREEN.] HELEN HALL.' HENRY OHL, .Jr.l 1 Signatures received 1)s' wire and n~sil.

11 ECONOMIC SECURITY ACT lo as ur~employed falling within 4 weeks' toailing I.-Calculations of percent TABLE and period weeks' benejit period 15 tables-with their known limitations-yet show sorne [The duration rlatn] OF UNEMPT,OYEY. 1022-30 DISTRIBUTION TIiE 7-11 pq- per- 3-7 11-20 per- 30-43 per pet 2C-30 cent un- cent un. cent UP rent un- centun: employ- employ- employ- employ- employ- ment ment ment ment ment D E Percent 11nde.r ... 4 weeks. to 19 weeks ... 4 19 weeks ... Over 28 beneflt times" (A and B) roughly half of unemployed within "good period; one-fourth within waiting In one-fourth beyond geriod; period. benefit be. percent C1 (E) 22 percent within benefit period; 17 percent within wailing period; times" "bad In benefit gond period. In all studies percent within bencflt period; 20 percent within waiting period; 40 percent 40 beyond 'beneAt period. would for periods for each corrections cumulative probably reduce perrentaxe in wailing individunl period, Increase percentage beyond benefits, and not much 'hang0 in beneflt percentage. staff, Source: members of the technical by committee on Economlc Security. Sopplied TABLE 11.-Unemployment history of 754 discharged uiorkers Industry [From Ahsorption of the Unemployed by American the by Isndor Lubin; Brookings Institution Pamphlet Series, vol. July 1, no. 3, p. 5; pnblished 1, 1921)J 1. WIIO FOUND JOBS TIIOSE Classifled by period Cumulated of unemployment - Length of time nnenlployed PeiEt- Percent- Number age -- --- Under 1 ...?... month- 11.5 47 66 16.1 ... 1 2 months. to 66 16.1 3 ,2 months to ... 14.6 60 ... to.4 ponthXI,- 3 ... 43 10.5 4 to5manth 6 5 ... 30 7. 3 to months 6 7 mooths ... 28 6.8 to to 7 months ... 23 5. 6 8 18 months ... 8 to 4.4 9 10 2. 4 to months ... 9 10 7 10 months- ... to 11 1. 7 3 .7 to 12 months- ... I1 12 or over. ... months 6 1. 5 Not stated.. ... 3 .7 100.0 410 ... Total.: THOSE ST1I.L WHEN INTEHVIEWED 2. UNEMPLOYEL) month.. 1 Cnder ... 1 to 2 months.. ... to 3 months. 2 ... 3 4 months.. ... to to ... months 4 5 ... St06montb --. . to imonths ... 6 71.9 to8months 7 ... RO. 9 months ... 51 tn 9 RG. 4 9 to ... 10 months.. 11 months ... 10 to to I2 months.. ...-.-------- 11 months over. 12 ... or stated Xot ... - - -- - -- -. ... ... ... *I) IOO.O/ 1 l..~ Total.

12 334 ACT SECURITY ECONOMIC 111.-Comparisons of $2 and $4 wage levels of benefits under standard, TABLE unemployment insurance British the proposed American scheme, based on and benefit weeks' lax, 4 weeks' waiting period and 11 period pay-roll %percent [Drawn from tables prepared by the technical staffpl the Committee on Economlc Security. All benet stated dollars] In 1. MARRIED MAN WITH THREE CHILDREN A. Assuming that 81 equals $5 -- - 1 I I 1 British Proposed American Recent Per- Unemployed I $2 warn ner 1 dav: \ I 1 1 1 1 7- . =-- -0- --. .-...---.---..------------- month 1 $2 $50 months ---.-----...------------- 4 6months ----.---..-.--------------- wages per day: $4 month. ..----.~..-..--...-.-..--. 1 624 I I 2. SINGLE MAN - - wage day: $2 per -----.--...----.------------ month I $14.17 73 $37.83 $52 96 $2 $52 $50 months --------..----------------- 4 138.57 68.43 208 67 208 128 82 80 312 100.27 205.73 -...----.--.--------------- Bmonths 66 228 312 84 73 $4 wages per day: month. -...-.-.-.-.--.-.-------- I 14.17 89.83 104 86 4 100 104 96 416 69.43 346.57 months &3 .-.-..--..----------------- 4 416 160 256 62 6 months .-.-.--..---.-------------- 624 83 106.27 517.73 624 168 456 73 ! I I I I WITH THREE CHILDREN MAN 1. MARRIED the B. to be equivalent to $6 on basis of living costs, using wholesale prlce indices Assuming 8 weges per day: $2 month -.-----..---.-------------- I $32.00 $20.00 $52 06 2 4 ...----..------------------ 208 months E 156.80 51.20 : 6, % 240.00 72.00 228 84 312 6 months .-.-.-..--.---------------- 312 23 73 day: wage $4 per 72.00 104 104 69 100 4 .------...--.-----..--..--- month 32.00 1 9& 416 62 ----.--..------.-------.--- 4 months 156.80 416 160 266 259.20 62 6 months .--..-.-..--.-------------- 284.00 624 240.00 62 624 188 466 73 SINGLE MAN 2. wage day: per $2 month. .-----...-.--------------- I $17.00 $35.00 $52 4 .-----..----.-------------- months 83.30 124.70 208 w; 5;; '$58" Q$ months 6 84 228 .--.-...-..---------------- 312 121.50 184.50 59 312 73 $4 per day: wage 96 100 104 87.00 17.00 4 84 104 -.--.--..---.-------------- lmonth 416 160 266 416 .---.--.--.-.-------------- 332.70 months 80 4 62 E3.30 496.50 73 456 80 624 ..----..-.--.-------------- 6!24 6 127.50 months 188

13 ECONOMIC SECURITY 335 ACT ESTIMATES OF PERIODS FOR WHICH UNEMPLOYMENT INSURANCPI ACTUARIAL THE BE BENEFITS VARYING CONTRIBUTION RATES PAID CAN AT by Memorandum "Major 18, in Unemployment Compensation", 4176, Edwin E. [~rom p. Issues Witte : Committee on Economic Secutiry] Executive Director, are All on the assumption that benefits will be one-half the estimates based and wage exceeding $25 per week not that the unemployment insur- weekly but fund should be ance self-sustaining. All calculations, further, are based entirely on insurance system, with a Nation-wide year of before benefits 1 contribution of The on payable. left-hand side estimates the table given below become the based on the experience of 1922-30 and those are the right-hand side on the on ,experience 1922-33, the assumption being that by the end of these periods the of entire fund would be exhausted. TABLE of year of benejt based upon using 1 additional periods 1V.-Varying contribution Experience I Experience 1922-33 1822-30 Benefit Contribu- Beneflt Waiting period period tion rnte, period, percent weeks) weeks --- 3 11 15 weeks - -- - - --- -- -- A-. .. - -.-. - - -- -- -. -. - - - - ------- ...--.--. ---- -- -- - 30 4 16 52 19 52 23 -. --. . -.-. .. . . . . . -- --- -- - - -- - - - - - - - - -. -- -. - - - weeks -. -- -. - - .---. 13 3 -. 10 - 4 23 16 37 18 g34 52 21 3 - - ----- ---- -----. ---- ---- .--.- ---- --- - - ---- - - - ...- .--. .. .-- .. weeks 12 9 19 14 4 28 16 :% 43 19 President Frank P. Graham, chairman, Advisory Council By (Not an analysis or comparison, but a summary of some of the larger aspects -of the plan supported by the majority as interpreted by one of grant-in-aid them.) The the Advisory Council on Economic Security by a vote of majority of 9 7 grant-in-aid type of Federal-State the plan for unemploy- to favor cooperative A number of the ma'ority are ment an outright national compensation. for as meri- less any against type would wagner-Lewis the favor strongly plan. All plan. All would present a united front against those who would oppose. torious delay this "of winter. Yet the majority are clearly for the grant-in-aid legislation plan. is upheld by the majority position that the grants-in-aid The fundamental is more adaptable to our economic life and to the needs of both industry plan the workers. American economic society is national in nature. and is It not according to geographical or political subdivisions. organized reach Industries across States, sections, and even the continent. In this economic society labor is mobile. move from to industry, from State to State, from Workers industry in in industry to the same industry one another State, and from an an State in one State to a different industry in another State. industry a society of In fluid migratory industries, shifting labor markets, seasonal, technological, capital, cyclical our unemployment is a social hazard of and dynamic industrial life. forces, and Unemployment a problem of industry thus, the Nation. is, Its economic and other causes and its social and other incidence involve our whole industrial order. Any cooperative plan for unemployment compensation Federal-State therefore, should, recognize, far as practicable and wise, our national as economic structure. Cooperative Federal-State legislation and administration should rec- ognize the spheres and values of the Federal and State governments, but the and States not be required to attempt to meet situations should serve purposes not in accordance with their situation and nature.

14 336 ECONOMIC SRCIJRITY ACT of The cooperation is to stimulate a more intelligent the purpose Federal-State and the provide more security for industry workers. stabilization of to The both grant-in-aid plan are the Federal-State plans Wagner-Lewis plan and these two ends, directed more emphasis on the State approach in toward with fornier with more emphasis on thc national nat~lre of unemploymetlt in the and plan The hold that the grant-in-aid majority can more adequately the latter. the needs of American industries and workers with their uneuiployment meet national and interstate industries (2) mobile labor, (1) created by problems transfers, and records, interstate employment the for Federal reinsur- (3) need (4) for national minimum standards. Under the grant-in-aid plan the ance, Federal-State ean more effectively guard the integrity of tlie administration the workers of industry, and the best interests of the stabilization as parts f~ii~d, of national dynamic society. our Federal collection the The by the of Government required by the grant-in- tax aid plan affords a clearer basis for the deposit of the money in the Federal Re- There no under this plan; be can, basis for pressure on Congress serve banks. banks. political) States monev to be deposited in local (and in some the to allow The value of the Gationally wise use of the funds by the Federal Reserve as an jeopardized aid stabilization cannot then be to by either financial short circuits - - or misuses. political the graut-in-aid be separate from the tax law. Coilgress Furthermore would Congress on geographically uniform excise tax this pay rolls. to power levy has power to appropriat'e money as also to States for a puhlic has rants-in-aid on.ter~ns down by Congress. laid compensation aiitl tlie purpose 8nemployment of industrial stabilization and social security promotion a clear public constitute In Wagner-Lewis plan the tax the the appropriation are joined and purpose. carrying the Under the strain of act. sufficient national minimunl in same and other regulations required by the standards and ilational iiat~ire iuterstate of and unemployment, such a joint act industry seriously raises the questio~a more of constitutio~lality. The grant,-in-aid plan appears not only the stronger constitutionally, but is also a variation development of Federal grants-in-aid which are an historically and part establifihed Federal-State structure. This plan also more nearly of our insurance with proposed plans to promote other against destitution in fits some more readily help to unify the collection of the funds involved in a Illore and could of security. program comprehensive social States purpose early legislation by the securing for this progress, the For of fii a time limit as a condition for a valid acceptance by the States. could Congress involved, it workers million 16 is and industry interests the with Moreover, of that Congress ever fail to continue the appropriations. iiicouceivable would plan, Federal-State t,o us, can rovide for grant-in-aid cooperatioll, The it seems the more The needs of ingustry and is yet workers in our national and adaptable. societv can secure and economic Nation-wide minimum standards maintain without validly raising the question of constitutionality, and provides for as ~II It interests of stabilization. the leaves open to the States experimentation experimentation the lines of pooled along plant accounts, or a combi- insurance, nation of the two. The plan can also provide a clearer basis for experimentation experi~nents, along even national lines. On the basis of all these interstate and State, may the best plan, whether mainly toward mainly Federal, or we develop national. wholly we believe that the grant-in-aid plan can better provide for essential Finally, standards the the interests of minimum fund, the e~nployers, and the employees. in standards in all the States Minimum such a Federal-cooperative plan would for be the below which there must furnish no chiseling or exploitation and bottom above which there can be wide experimentation by the States and industries for the purpose stabilization, increased employment, and more security for the of of workers America. first witness t,his morning is Miss Katharine F. The Chief Lenroot, of tho Children's Bureau, United Stat,es Depart,lnent of Labor. Just go ahead in own n-oy, Aliss Lenroot-'; tell us \+--hat posi- your tion you hold and what position you have held. Give us the back- then ground the record, and for proceed in your own way.

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