should be repealed so that these workers will again be protected under all State laws.

3. Federal civilian employees.-Employees of the Federal Government and its instrumentalities should receive unemployment benefits through the State unemployment insurance agencies in accordance with the provisions of the State unemployment insurance laws. The States should be reimbursed for the amounts actually paid in benefits based on Federal employment. If there is employment under both the State system and for the Federal Government during the base period, the wage credits should be combined and the States should be reimbursed in the proportion which the amount of Federal employ. ment or wages in the base period bears to the total employment or wages in the base period. The special provisions for federally employed maritime workers should be extended until this recommendation for covering all Federal employees becomes effective.

4. Members of the armed forces.- Members of the armed forces who do not come under the servicemen's readjustment allowance program should be protected by unemployment insurance.

5. Borderline agricultural workers. To afford protection to certain workers excluded by the 1939 amendments to the Federal Unemployment Tax Act, defining agricultural labor, coverage of that act should be extended to services rendered in handling, packing, packaging, and other forms of processing agricultural and horticultural products, unless such services are performed for the owner or tenant of the farm on which the products are raised and he does not employ five or more persons in such activities in each of four calendar weeks during the year. Coverage should also be extended to services now defined as agricultural labor by section 1607 (1) (3) of the Unemployment Tax Act.

6. Inclusion of tips in the definition of wages. The definition of wages contained in section 1607 (b) of the Federal Unemployment Tax Act should be amended to specify that such wages shall include all tips or gratuities customarily received by an employee from a customer of an employer.

7. Contributory principle.-To extend to unemployment insurance the contributory principle now recognized in old-age and survivors insurance, a Federal unemployment tax should be paid by employees as well as employers. Employee contributions to a State unemployment-insurance fund should be allowed to offset the Federal employee tax in the same manner as employer contributions are allowed to of set the Federal tax on employers. The employee tax would be collected by employers and paid by them when they pay their own unemployment tax.

8. Maximum wage base. To take account of increased wage levels and costs of living, and to provide the same wage base for contributions and benefits as that recommended for old-age and survivors insurance, the upper limit on earnings subject to the Federal unemployment tax should be raised from $3,000 to $4,200.

9. Minimum contribution rate.-The Federal unemployment tas should be 0.75 percent of covered wages payable by employers and 0.75 percent payable by employees. The taxpayer should be allowed


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to credit against the Federal tax the amount of contributions paid into a State unemployment fund, but this credit should not exceed 80 percent of the Federal tax. Since no additional credit against the Federal tax should be allowed for experience rating, the States would, in effect, be required to establish a minimum rate of 0.6 percent on employers and 0.6 percent on employees.

10. Loan fund. The Federal Government should provide loans to a State for the payment of unemployment-insurance benefits when a State is in danger of exhausting its reserves and covered unemployment in the State is heavy. The loan should be for a 5-year period and should carry interest at the average yield of all interest-bearing obligations of the Federal Government.

11. Standards on experience rating.-If a State has an experience rating plan, the Federal act should require that the plan provide: (1) a minimum employer contribution rate of 0.6 percent; (2) an employee rate no higher than the lowest rate payable by an employer in the State; and (3) a rate for newly covered and newly formed firms for the first 3 years under the program which does not exceed the average rate for all employers in the State.

12. Combining wage credits earned in more than one State and processing interstate claims.-The Social Security Administration should be empowered to establish standard procedures for combining unemployment-insurance wage credits earned in more than one State and for processing interstate claims. These procedures should be worked out in consultation with the administrators of the State programs and should provide for the combination of wage credits not only when eligibility is affected but also when such combination would substantially affect benefit amount or duration. All States should be required to follow the prescribed procedures as a condition of receiving administrative grants. Similar procedures should be worked out, in cooperation with the Railroad Retirement Board, for combining wage credits earned under the State systems and under the railroad system.

13. Financing administrative costs.-Income from the Federal Unemployment Tax Act should be dedicated to unemployment-insurance purposes. One-half of any surplus over expenses incurred in the collection of the tax and the administration of unemployment insurance and the employment service should be appropriated to the Fed

eral loan fund, and one-half of the surplus should be proportionately als assigned to the States for administration or benefit purposes. A con

tingency item should be added to the regular congressional appropriaution for the administration of the employment-security programs. IT The administrative standards in the Social Security Act should be

applicable to the expenditure of the surplus funds as well as to ex-
penditures of the funds originally appropriated.
14. Clarification of Federal interest in the proper payment of

claims. The Social Security Act should be amended to clarify the The interest of the Federal Government not only in the full payment of

benefits when due, but also in the prevention of improper payments.

15. Standards for disqualifications.-A Federal standard on disqualifications should be adopted prohibiting the States from (1) re

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ducing or canceling benefit rights as the result of disqualification except for fraud or misrepresentation, (2) disqualifying those who are discharged because of inability to do the work, and (3) postponing benefits for more than 6 weeks as the result of a disqualification except for fraud or misrepresentation.

16. Study of supplementary plans.—The Congress should direct the Federal Security Agency to study in detail the comparative merits in times of severe unemployment of (a) unemployment assistance, (b) extended unemployment-insurance benefits, (c) work relief, (d) other income-maintenance devices for the unemployed, including public works. This study should be conducted in consultation with the Social Security Administration's Advisory Council on Employment Security, the Council of Economic Advisers, and the State employment security agencies, and should make specific proposals for Federal measures to provide economic security for workers who do not have private or public employment during a depression and who are not adequately protected by unemployment insurance. Plan of the Report

The Council's proposed remedies for the five major deficiencies of the present program are summarized in this section, which also includes a discussion of the need for a broad informational program. The section which follows presents the 16 specific recommendations in more detail. The report proper concludes with a discussion of temporary. disability insurance. The appendixes include cost estimates for unemployment insurance, material on the proper payment of benefits, dissents, and statistical information on the operation of the programs. Goal of Universal Coverage

At present about 7 out of 10 jobs in American industry are covered by unemployment-insurance laws. It would obviously be desirable, if practicable, to have all jobs covered. In unemployment insurance,

, however, universal coverage would entail more difficult administrative problems than would be met in old-age and survivors insurance. The Council, therefore, does not recommend that the Federal Unemplorment Tax Act be extended now to include the two groups which would present the greatest administrative difficulty-farm workers and domestic workers-and, in view of constitutional limitations, the corerage of employees of State and local governments will have to be left to the States.?

The Council favors the immediate extension of the Federal Unemployment Tax Act to the areas of employment that present no overwhelming administrative or legal difficulties--namely, to employment by small firms, by nonprofit organizations, by the Federal Government (both civil

and military), and to certain borderline agricultural employments. Such extension might increase coverage in an average week by over 7 million or to about 85 percent of the total number of individuals employed by others.

2 Extension of compulsory coverage to workers engaged in the “proprietary” functions e government-as opposed to regular governmental functions—18, in all probability, cez:

In a State-Federal program, however, the Council believes that it would be better for States to provide for covering all governmental employees under one plas rather than, in effect, to force the coverage through Federal law of those governmental werkers engaged in "proprietary' activities.


1938 1939 1940 1941. 1942 1943

Covered workers

30.0 28.4 30. 2 32. 2 32. 6

In absolute terms, the number of individuals in employment covered by the State unemployment-insurance laws has increased markedly in the past 10 years. This increase is shown in the following table: TABLE A.--Average monthly covered employment, 1938–48

[In millions]

19.9 1944
21.4 1945
23. 1 1946
26.8 1947
29.3 1948 (June)-

30.8 Much of this increase has resulted from the increase in the active labor force of the United States. In considerable measure, however, the increase also reflects changes in the size of firm covered by State laws. The original laws of 33 States limited coverage to commercial and industrial workers in firms with 8 or more employees in at least 20 weeks in a calendar year. In 1948, 17 States covered employees in firms with 1 or more persons, although only 6 of the laws applied without restriction as to the number of workers, length of employment, or size of pay roll; and only 22 States still excluded from coverage employees of firms with less than 8 persons (table 2, appendix IV-E). The laws of 29 States contain provisions which will automatically extend coverage to smaller firms to the extent that the Federal sizeof-firm restriction is reduced.

While progress has been made in extending coverage to smaller firms, maritime services represent the only type of work originally excluded to which coverage has been extended on a general scale. Effective July 1, 1946, Congress extended the Federal unemployment tax to services in private maritime employment and the States with maritime firms amended their laws accordingly. As early as 1944, a few States had already extended coverage to maritime workers following a Supreme Court decision that the Constitution did not pro

hibit such coverage under State laws. In addition, the War Mobilizaition and Reconversion Act of 1944 provided reconversion benefits for

federally employed seamen. The Federal Unemployment Tax Act now excludes agricultural labor; domestic service in a private home; service of an individual for his son, daughter, or spouse, or of a minor child for a parent; services for Federal, Staté, or local governments, or for foreign governments; services for nonprofit, religious, charitable, educational, scientific, or humane organizations; casual labor not in the course of the employer's business; and miscellaneous services such as services as a student nurse or interne, service for employees' beneficial associations, domestic service for college clubs, and services for organizations exempt from Federal income tax if the remuneration is not more than $45 in a calendar quarter. Railroad employment, which was originally covered, is now under a separate Federal unemployment insurance system.

The occupational exclusions in State laws are in most cases the same as those in the Federal act, but several States have provided for broader coverage. New York from the outset has covered domestici workers in a home with four or more domestics, and in 1947 New York 2 provided protection for State employees. Wisconsin has covered some State and local government employees from the beginning. Hawaii in 1945 and Tennessee in 1947 extended coverage to nonprofit organizam tions, excluding ministers, members of religious orders, and, in Tennessee, executives and members of the teaching staffs of educationale institutions. A few additional States cover some employment by non-site profit organizations. Many States have contemplated coverage extension and would automatically cover additional occupations if and suz when the Federal act is extended.

In an average week during the year ended June 30, 1948, the total u labor force contained 62 million persons, of whom 2.1 million were ou unemployed and 59.9 million were employed. The employed labor force comprised 12.8 million self-employed persons and unpaid famulon ily workers and 47.1 million employees. About 70 percent of the writine employees, or 32.9 million of the 47.1 million, were covered by some addi unemployment insurance program. About 14.2 million employees, or it! 30 percent of those employed by others, were in employments which bren carried no form of unemployment insurance protection. The fol. im lowing table shows the distribution of the total labor force by cor- istill

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TABLE B.-Total labor force by coverage status in an average week of year ended June 30, 1948

Persons in

millions Total labor force_

62.0 Unemployed

2.1 Employed, total_


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Small firms..

Employees of nonprofit organizations.
Federal employees.-
Armed forces--
Agricultural workers.--
Domestic workers in private homes.

Employees of State and local governments-
• Data on labor force, unemployed and total employed, from Monthly Report on the Labor
Force, Bureau of the Census ; employment covered by unemployment insurance, estimated
by the Bureau of Employment Security ; employment not covered by unemployment insur
ance, from Bureau of the Census, adjusted by Bureaus of old-Age and Survivors Insurance
and Employment Security.

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