The most apparent inconsistency in the administration of the present program is the fact that while there are numerous local labor markets which cross State lines, the local offices for unemployment insurance and employment service are organized and operated in accordance with the fortuitous State boundaries. Although various techniques have been tried to assure a more effective operation in labormarket areas crossing State lines, the effort has been largely ineffective because of the natural insistence of governors, State legislatures, and State and local directors to think in terms of State sovereignty and responsibility.

There are nearly 50 natural labor-market areas in the United States which cut across State lines. In these areas the number of individuals in the labor force represent a substantial proportion of the total labor force of the entire country. Among the outstanding examples of markets which cross State lines are the following: St. Louis, Mo., and East St. Louis, Ill.; Kansas City, Mo., and Kansas City, Kans.; Philadelphia, Pa., and Camden, N. J.; Duluth, Minn., and Superior, Wis.; Washington, D. C., and adjacent Maryland and Virginia; New York City and adjacent Connecticut and New Jersey. Only a service organized and administered day-by-day on the principle of a Nationwide service can break down the psychological and political separatism which now permeates the system.

DISCRIMINATION AMONG EMPLOYERS

Under the existing State-by-State systems, employers are required to submit different forms, comply with different procedures, and pay different contribution rates in accordance with varying State laws. An employer operating on a Nation-wide basis is required to submit quarterly wage reports on individual employees in some States but must submit separation reports on individual employees in others. The forms for many reports differ among the States.

Some progress has been made in the States, under the pressure of action for a Federal system, to simplify the forms and eliminate the haphazard variations which still exist. However, in view of the fact that the Federal Government already collects wage reports from employers for the Federal old-age and survivors insurance program, the cost of administration could be greatly reduced and employers relieved of part of the present bookkeeping burden and inequities by utilizing one report to the Federal Government for all social-insurance contributions.

There is no uniform definition of the terms "employment" or "employee" under the State laws nor even a uniform interpretation among those States which have identical provisions. The result is that employers are sometimes required, without sound justification, to comply with several different State laws. Nation-wide employers who have isolated representatives in many different States have a legitimate. complaint about the unnecessary burden which is placed upon them by the necessity of complying with a multiplicity of varying State laws and varying reporting requirements.

DISCRIMINATION AMONG EMPLOYEES

Under the existing State-by-State system, the amount and duration of benefits as well as most other conditions relating to eligibility and disqualification for benefits are determined exclusively by State law and State interpretation. Although in Nation-wide industries—such as automobiles, steel, coal, shipping, and textiles-wages, hours, and working conditions, as well as prices, are determined on a Nation-wide basis, unemployment insurance benefits are determined on a State-byState basis. Thus, though two individuals receive the same wages and work the same period in the aircraft industry, for example, one, if he had worked in the State of Washington upon becoming unemployed could be eligible to receive $25 per week for 26 weeks or a total of $650; while the other, if he had worked in the State of Arizona could receive $20 per week for 12 weeks or $240.

The discrimination which also exists in such matters as eligibility conditions, waiting period, disqualification provisions, determination of suitable work, minimum amounts, appeals procedures, methods of computing the average wage of the unemployed individual, and other factors is very marked.

The case for a Federal system of unemployment insurance and employment service offices does not rest entirely on the inadequacies, discriminations, and inequities of the present State-by-State system. There is no doubt that much could be done to improve the present Stateby-State system if greater authority were given to the Federal Government to set minimum standards. But even with such authority the present system would be inappropriate to deal with the employment and unemployment problem on a national basis in accordance with the economic and social requirements of our economy.

ECONOMIC FACTORS

The variations in benefits and contributions mentioned previously are discriminatory as between individuals. No principle of equity or justice can be advanced for such variations. In addition, such variations are a hindrance to developing a Nation-wide policy designed to assure maximum employment and productivity. States with low benefits and high reserves and restrictive disqualifying requirements may be adhering to policies which thwart national policy. In brief, there is no assurance that the State programs based on State laws and State regulations will reinforce national policy aimed at meeting the needs of a national economy. Since most State legislatures meet biennially, they are often unable to make the necessary changes promptly to adjust to a national emergency involving millions of our citizens. In fact. during the war and the reconversion period policies of particular States were frequently out of accord with rapidly changing national

needs.

Under a State-by-State system, the total amount of reserves must necessarily be greater than under a single Federal system. In order to safeguard each State program separately, there must be accumulated reserves which for all the States together must aggregate a far larger amount than that equally safe for a single Federal system. There is therefore, under a State system need to levy higher contributions and build up reserves larger than would be necessary under a Federal plan.

Instead of the present $7,000,000,000 of reserves isolated in water-tight compartments under the State-by-State system, not more than $2,000,000,000 to $3,000,000,000 of reserves would be necessary under a Federal system. The comparable advantages of centralized reserves in our banking system have been recognized for 35 years.

LACK OF UNIFORM TREATMENT

One of the major defects of the State-by-State system is that, even when uniform terms and provisions are included in State laws, there is lack of uniformity in the interpretation and application of such uniform decisions. Thus, the various State agencies and the courts have rendered dissimilar decisions on such important matters affecting the benefit rights of employees as who is an "employee," what is "suitable work," "voluntary leaving," "stoppage" of work, "available for work," and "good cause" for refusing suitable work. No basic improvement can be made in this situation without materially increasing the authority of the Federal Government. Only a Federal system can provide for a uniform and equitable interpretation of uniform statutory provisions.

LACK OF ENCOURAGEMENT FOR MOBILITY OF LABOR

A valuable element in the American economic system is the incentive given to the maximum utilization of individual skills in the changing need for labor. As new plants are built in new communities, new labor is required which must be drawn from other communities. This situation permits individuals to climb the economic ladder to utilize their greater skills, earn higher cash rewards, and thereby to increase national production and consumption. The various eligibility conditions of the State laws and the restrictive interpretations given of "voluntarily leaving" work, and the heavy penalties placed on "voluntary leaving" when not "attributable to the employer," all act as bars to the effective geographic and economic mobility of labor. A typical case illustrates the way in which this barrier works. An individual "voluntarily leaves" his employer to take a better paying job at a higher skill. After he works for a short period of time for his new employer, the plant burns down, the employer goes bankrupt or, for some other reason, the employee becomes unemployed due to no fault of his own. Under nearly half of the State laws this involuntarily unemployed individual will be denied benefits during all or part of this period of unemployment.

Another facet of this same problem is the unwillingness of a State legislature to increase the benefits under its law because of the competitive disadvantage which the employers in the State will face as against employers in other States with lower benefits and lower employer contributions. The recommendations in the body of the report will result in considerable improvement in this situation but will not entirely eliminate it. The only way in which unemployment insurance benefits can come to have a neutral effect on labor mobility is by providing a uniform national system with eligibility, amount and duration of benefits, disqualifications, and related matters on a common basis throughout the Nation.

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RECIPROCAL ARRANGEMENTS AMONG STATES

One of the serious shortcomings of the State-by-State system has been the failure, after nearly 15 years of effort, to work out a simple and effective system of reciprocal arrangements among all States as to both coverage and benefits. The present situation is costly for employers, employees, and the State agencies alike. The failure, after so many years, to achieve satisfactory administrative arrangements is an indication of the great obstacles faced by a State-by-State system in dealing with this important problem. It appears that the major reason why interstate claims are paid after a longer delay than intrastate claims is the fact that the provisions of the State laws are so complicated and diverse that speedy settlement is difficult.

PUBLIC UNDERSTANDING

The Council, in an earlier report on old-age and survivors insurance, unanimously recommended the development of a broad informational program. The Council said then:

No social-security program can be effective unless those who are entitled to participate know their rights and obligations.

This principle is equally applicable to other areas of social insurance. In some respects it is even more applicable to unemployment insurance since unemployment is a current and recurring risk. There is ample evidence that the many complicated and technical provisions of State unemployment insurance laws have made it extremely difficult for individuals to know their benefit rights. A Federal program could greatly reduce the baffling complexities of the many State laws and thereby make it possible for both employers and employees to know their rights and duties under the law, irrespective of State-byState variations.

NATIONAL DEFENSE

An additional justification for the operation of a Federal employment service is the necessity for having an effective manpower program in case of a national emergency. Federalization of the employment service in time of a national emergency and subsequent return of the service to the States is not a satisfactory procedure. Such a procedure does not assure an effective Federal system during an emergency. It is disruptive of staff morale when the service is returned to the States. It is disruptive of the tenure of office, compensation, and retirement rights of the employees involved. Only a permanent Federal employment service can give assurance that there will be the most effective service available in an emergency.

ADMINISTRATION

Although the Federal Government now pays all the costs of State administration, each State pays its employees in the employment security program on a State salary scale under State provisions with respect to tenure of office, retirement, leave, and other conditions of work. One of the chief advantages of a Federal system over a State-by-State system is that under the Federal civil service and the Federal civil

service retirement system, better qualified staff could be recruited and could improve services to everyone.

While each form of social insurance has its characteristic administrative problems, all involve the process of determining the eligibility of claimants for benefits and all in this connection draw upon a basic skill in human relations and in the application of law and policy to individual circumstances. A unified program with one local office for all types of benefits would facilitate the kind of training of personnel that would increase the possibility of an interchange of personnel in relation to fluctuations in the staff requirements of the different parts of the system. The result would be a more efficiently administered program with greater service to employers, employees, and the public. The Federal old-age and survivors insurance program already offers the administrative and financial basis for simplifying and improving our unemployment insurance program. One wage report from each employer can be received for all social insurance purposes. One wage record can be maintained for all benefits. One local office with suitable specialists for each of the different programs could be established. There could be one Federal agency with a single set of regional, area, and local offices. Such an organization would assure simplified administration for employees, employers, and the public, lower administrative costs, more efficient administration, and greater consistency in the application of the law to all persons in similar circumstances.