ences come from organized labor or on all fields for increased benefits, they are not paying it; that is the important thing.

Mr. KARSTEN. Developing that a little further, who administers your program in Massachusetts?

Mr. CONNELLY. We have a department of employment security which administers the unemployment compensation system. It may be that because of constitutional reasons that technically that department is under the department of industry and labor.

Mr. KARSTEN. You just told me that you did not have it under your labor department.

Mr. CONNELLY. I said it may be. I am not certain on that point, but if it is, it contains this phrasz, “Under, but not subject to the Department of Labor.” So, for practical purposes, our departmentMr. KARSTEN. Practically the same, however, they are.

Mr. CONNELLY. May I clarify that observation of yours, of my statement, Mr. Congressman? The important point is whether or not independent we are technically in the operation of Government, whether or not the Department of Labor that we have in the Commonwealth has any influence or direction whatsoever in the operation of the State unemployment compensation system, and I say, "No.'

Mr. KARSTEN. You answered my question. Thank you. Mr. CONNELLY. So, therefore, that is the position we have, that all experience tells us. It is obvious on the face of things that the United States Department of Labor is a partisan organization.

The CHAIRMAN. Just a moment, sir. You told us that before, and I think that is a matter of common knowledge. Everybody knows the Department of Labor was created and continues in existence as a special agency for the labor movement. There is no question about that.

Mr. CONNELLY. So, therefore, that is the basis of our position, because of the fact that the powers that would come to the agency that would have the administrative control over the Bureau of Employment Security are very great if the agency wishes to use those powers.

I am not going into detail under the statutory laws to indicate how broad might be those powers. They are contained in the statement which I have submitted to you, but I will say to you it is my on opinion that if I were in the Department of Labor and I wanted to enforce upon the States a completely partisan point of view, with reference to the philosophy of unemployment compensation, it would be possible under the powers that we have of certain rules and regulations to effect that purpose.

We have no experience because the Department of Labor has never had anything to do with the Bureau of Employment Security. We do not know what they would do.

Mr. MANASCO. Do you think the able Senators and Representatives from the State of Massachusetts would sit by and let that happen?

Mr. CONNELLY. Mr. Representative, it has happened in the past despite the able Senators and Representatives from Massachusetts.

I have said that the Bureau of Employment Security or that the United States Department of Labor and the Employment Service agencies are really just the tail. The important thing is the operations of the various State unemployment compensation systems. In


the very nature of the operation of those systems even though you did not have the United States Employment Service, in the very nature of the operation of those systems it would be absolutely necessary for the proper administration of the State unemployment compensation laws that you have job-finding opportunities and job-find

methods connected with the operation of the State system. I want to say this, that if you eliminated completely the United States Employment Service as a Federal function, the task of securing jobs for people would still go on.' The States would still continue to do it; because of the very nature of their law they have to do it.

I would say this, too, that the basic purpose of the United States Department of Labor is to provide facilities or to attain the highest possible referrals to jobs that can be sought. I think that if this United States Employment Service is left in the Department of Labor, and if the Bureau of Employment Security is transferred to the Department of Labor, the net result might be the defeat of that purpose as has been pointed out here today; that public employment service cannot exist unless the employers place in those offices their job orders. We in Massachusetts are interested in that.

There has been and still remains in Massachusetts some and probably a great deal of resistance to the placing of orders with the public employment offices. The Associated Industries of Massachusetts want to develop the placing of orders with the public employment officers and its representatives throughout the State advising and counseling with employers to do so.

Now, if the United States Employment Service and the Bureau of Employment Security come to rest in the United States Department of Labor, in view of the powers that they would have to advance a partisan point of view, the very objective of the United States Department of Labor. might be defeated.

That is all I have to say.
The CHAIRMAN. Thank you very much.
Mr. HARVEY. Do you recommend that Congress abolish USES?
Mr. CONNELLY. I don't recommend that Congress abolish USES,
The CHAIRMAN. Mr. Jacobi.



Mr. JACOBI. Gentlemen, my name is Seward Jacobi. I am a member of the social security committee of the New Jersey State Chamber of Commerce and am appearing before you today on behalf of that organization.

I speak as a representative of the business, professional, and agriculture enterprises of the State of New Jersey, and what we deem to be in the best interest of every segment of society in the State. We wish to officially go on record in favor of House Concurrent Resolution 131, submitted by Mr. Hoffman in the House of Representatives January 20, 1948. Favoring this resolution places us on record against the Presidential Reorganization Plan No. 1 of 1948.

We believe in government of the people, by the people, and for the people, but feel that this administrative use of power is government of the people by administrative edict for the temporary advantage of a few and to the detriment in the long run, of our free-enterprise system which has made this country great and given to us a standard of living which is the envy of all the world. Our governing officials have a trust to carry out to all the people who elect them. We feel that the arbitrary use of power as presented in this Reorganization Plan No. 1 of 1948 is a violation of that trust and should not be put into force without a clearer edict from the majority of the citizens of this country.

In addition to these broad economic and generalized reasons, we wish to point out a number of more specific reasons why this transfer of Federal unemployment compensation activities and the United States Employment Service should not be made to the Department of Labor. We all know that the Labor Department is designed to serve the interest of just one group. It is admittedly a militant champion of organized. labor. Two of the Assistant Secretaries are selected from the AFL and the CIO, and the Secretary himself must be acceptable to organized labor. There is no one in the Labor Department directly representing the millions of unorganized employees.

Unemployment Compensation and the Employment Service are as much the concern of the general public and employers as they are of organized labor. We deem it wholly unwise, therefore, and unfair to the great majority of our people to place the administration of these two agencies in the hands of a prejudiced minority group. The only logical place for the administration of these governmental functions is in the hands of a neutral agency set up to impartially administer them with the best interest of all segments of the public uppermost in mind. Neither the special interest of the worker nor the special interest of the employer should be placed in a position paramount to that of the public.

Should this transfer be made, employers would be reduced to mere taxpayers with no voice in the administration of the eight-billion-dollar trust fund available for unemployment benefits, built up primarily by taxes from employers. We are familiar with the philosophy of the proponents of this program—that unemployment compensation is labor's program and employers should have nothing to say about jobs or benefits (except to pay the bills)—that we should have a federalized system of employment offices and—the unemployment reserve fund should be used to support union policies rather than public policy.

We refuse to believe that it is in the best interest of the economic system of this country for the Labor Department to be the sole judge of what constitutes "suitable work," thereby being in the position to use the $8,000,000,000 in unemployment compensation funds to subsidize all unemployment resulting from refusals to accept work which does not measure up to organized labor's view of what constitutes 'suitability.”

The director of social insurance activities of one of the powerful labor unions has already expounded the theory that “unemployment compensation should be used to retard flooding the labor market and upsetting labor standards during periods of high unemployment. In other words, the funds which employers have paid in to the unemployment compensation fund in good faith expecting it to be used to compensate workers for involuntary unemployment, could used to control labor supply as a primary objective, with the incidental

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function of tiding over the unemployed worker until he has secured another job.

In closing, I would like to leave this final thought: The wise men who formulated our Constitution and gave us the established checks and balances in our Government, made it possible for conflicting interests in our society to sit down and work out suitable compromises to the best interest of all. I think this principle of the best interest of all should be uppermost in mind when the final decision is made on this important question.

I wish to thank you gentlemen for the courtesy you have extended in making it possible for me to appear before you on behalf of the New Jersey State Chamber of Commerce.

The CHAIRMAN. Mr. Wilson?

Mr. Wilson. What do you think about Congress sending both of these services back to the States, administering them from the State level, let the State collect the money and pay it out? What is your idea about that?

Mr. JACOBI. Well, my personal observation on that is that we would be in favor of it, sir.

Mr. Wilson. You think it would work just as well, if not better? Mr. Jacobi. Yes, sir.

Mr. Wilson. But you are opposed to transferring it to the Labor Department?

Mr. JACOBI. That is correct.
Mr. WILSON. That is all.

The CHAIRMAN. Mr. Harvey? Mr. Manasco? Anyone else?
Apparently not. Thank you very much.
Mr. JACOBI. Thank you very much.
The CHAIRMAN. Mr. Kirkpatrick.



Mr KIRKPATRICK. Chairman Hoffman asked me if I would care to appear before your committee at this time and present for the record a summary of my views and observations on the meeting of the InterAmerican Committee on Social Security, held recently in Rio de Janeiro.

I realized that this subject concerns a facet of the over-all socialsecurity problem differing somewhat from the issue now before your committee—that is, the President's Reorganization Plan No. 1 of 1948. However, I thought that if you gentlemen are interested in some of the rather peculiar aspects of the Rio meeting, I would be only too glad to give you the benefit of such information as I have been able to gather.

First, however, let me present to you as succinctly as I can the position of the Chanber of Commerce of the United States, and the major reasons in support of this position, on the issue now before your committee.


The chamber of commerce supports House Concurrent Resolution 131. Our opposition to Reorganization Plan No. 1 is based on a declaration of policy adopted by the membership at its 1947 annual meeting, a copy of which is attached to this statement.

Our reasons for opposing Reorganization Plan No. 1 are as follows:

1. Impartial administration of the social security program is essential.

2. All phases of social security should be unified in a single agency.

3. The Reorganization Plan, as presented, makes no showing of any economy to be effected.

4. Any executive reorganization should await the report of the Hoover Commission.

5. Administration of the employment service should be such as to attract the support of employers.


The chief reason why the President's plan should be rejected is that social security--a program which concerns all of the Nation's citizens-should be administered impartially. The Department of Labor, while no doubt doing valuable work in various respects, is not an impartial' agency. It was created as the voice of Labor in the Federal Government and functions largely as the voice of organized labor. The Department should not have responsibility for a program which ought to be administered with due regard for the interests not only of labor but also of other groups in the national community. As the unemployment reserves of nearly $8,000,000,000 have been accumulated almost entirely from taxes paid by employers, it would be incongruous, to say the least, to turn Federal responsibility over to a governmental arm representing another group affected by the program.

Moreover, if Federal employment service and unemployment compensation laws are to be considered “labor legislation,” then there is little reason why all other social-security laws should not likewise be considered labor legislation. Ultimately, all social-security activities might be included in the Department of Labor-a proposal rejected by Congress in 1935—with all phases of social security being regarded as “labor” programs, to the exclusion of the interests of employers, of taxpayers, of citizens and beneficiaries generally.


Of course, the administration of all Federal functions relating to social secrity should be coordinated and unified. This is a second reason for rejecting the President's plan, which would splinter off two important parts of the Federal social-security structure from the activities now centralized in the Federal Security Agency.

Certainly, the Agency's Social Security Administration cannot be accused of having a hostile attitude toward organized labor. More important, however, is that the Social Security Administration has conscientiously attempted to see the problems of social security in their entirety. Efforts have continually been made by this Federal branch to coordinate the various components of the over-all social security program,

Incidentally, in this connection the inconsistency between the President's reorganization plan and his recommendations to Congress that the Federal Security Agency be constituted a Cabinet Department of


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