drains on the reserve. So it was concerned that these new men, several hundred thousand a year of maybe several million, coming into the labor market be given equal status along with men who are unemployed.

Do you find that in your dealings with the Federal Government, or on the State level for that matter, there is a tendency to discriminate against the new worker in relation to the old worker now unemployed? Mr. MARSHALL. In Massachusetts we do not, and from what I know of what is done in the other States they do not.

Tha fallacy in that particular thinking is you do not deal with it in terms of one man. You may have a job order. You do not send the particular man to the employer. You may refer four or five individuals to the employer. All we do is a referral job. It is the employer who hires. When four or five appear, as we refer in most of the cases if we have them registered in our office, then the employer makes his own selection. He decides who he is going to hire.

Now, he may really hire from the standpoint of his own personal interest the individual if he is qualified and he is a workman on the unemployment compensation law.

Now, many of the people that come into the office have a job, but they want a better job, and frankly the question is presented as to whether or not you shall give preference to the man who has no job at all. It is all in the proposition that we do not refer the particular man to the job, but we refer a labor supply to the employer, and he makes his selection.

Mr. JUDD. Do you give any consideration to a man's family. For instance, here is a man, a single man; there is another man with four children drawing unemployment compensation. Does he get more unemployment compensation if he has a bigger family and more. dependents, or does he get the same?

Mr. MARSHALL. In Massachusetts we have the dependency allowances, and he gets more unemployment compensation for that. In the referral we do not take it into consideration because referrals are made solely on the qualifications of the individual.

Mr. JUDD. I understand that, but I just want to make sure whether in your actual operations there is a tendency to give priority first to the man with more dependents because he is drawing more out of your unemployment-compensation reserves.

Mr. MARSHALL. We did not do that, sir, because we believe our obligations are, as I say, again of a neutral agency. We are neither prolabor nor proemployer. We are servers of the public, and the law sets the policy and the law is my boss.

Mr. JUDD. Then, to make it clear, you are sure both functions ought to be together.

Mr. MARSHALL. Very definitely, and in my judgment should be integrated.

Mr. JUDD. Should they be together in the Labor Department or in the Federal Security Agency?

Mr. MARSHALL. In the Federal Security Agency.

Mr. JUDD. Do you think they ought to be under the Social Security Board or a separate agency within the Federal Security Administration responsible directly to the Federal Security Administrator?

Mr. MARSHALL. I am perfectly satisfied to have them in the Social Security Administration. We have lived with them all of these years

and prior to 1939 up until the time we loaned our employment services to the Federal Government we were able to get along and they fostered integration.

I say it ought to have the same single budget, single grant, all of those things that on the record the Department of Labor hasn't up to this point had agreement on.

Mr. HARDY. Did I understand you to say, Mr. Marshall, that in computing the rates of payment of unemployment compensation you took into account the number of dependents of the individual?

Mr. MARSHALL. In Massachusetts over a year ago, the legislature added to the unemployment compensation system dependency allowances paying $2 to each dependent. Awhile ago you

Mr. HARDY. I do not care about the details of it. made a rather fine distinction and said that this was purely a security program.

Mr. MARSHALL. Yes, sir.

Mr. HARDY. An insurance program as contrasted to the welfare program. It seems to me if you are getting into that sort of a proposition you are drawing close to a welfare operation, aren't you?

Mr. MARSHALL. That is one of the steps. It is the first step in Massachusetts away from the so-called insurance concept over to the welfare. It has been opposed, and opposed upon that particular ground, but it was a matter of political expediency that it was done. Mr. HARDY. You will admit, then, that in your own State you have a combination of an insurance program and a welfare program, is that right?

Mr. MARSHALL. To a slight degree.

Mr. HARDY (interposing). To a slight degree. You do have a combination, don't you, of a welfare and an insurance program?

Mr. MARSHALL. To that extent; yes.

Mr. HARDY. Thank you.

The CHAIRMAN. Are there any more questions?
We thank you very much.

Mr. MARSHALL. Thank you, sir.

The CHAIRMAN. Is Mr. William Zucker here?

Mr. ZUCKER. Mr. Chairman, I am here as a representative of the Commerce and Industry Association of New York. My name is William Zucker, administrative assistant, Commerce and Industry Association. That is an association representing approximately 4,000 business firms in the New York metropolitan area. The association has in its membership a representative cross section of business life in that area, both from the point of view of diversity of industries and the size of firms.

I would like to point out just some of the points in the statement in opposition to the reorganization plan. The principal point which we would like to point out is the need for impartial administration.

STATEMENT OF THE COMMERCE AND INDUSTRY ASSOCIATION OF NEW YORK, INC., PRESENTED BY M. WILLIAM ZUCKER, ADMINISTRATIVE ASSISTANT

The Commerce and Industry Association of New York, Inc., represents approximately 4,000 business firms in the New York metropolitan area. The association has in its membership a represent

ative cross section of business life in this area, both from the point of view of diversity of industries and size of firms.

The Commerce and Industry Association is firmly opposed to the President's Reorganization Plan No. 1, proposing to transfer the United States Employment Service and the Bureau of Employment Security to the Department of Labor.

The implications of this plan have been studied carefully by the association through its committee on social security This committee is composed of a group of employers in New York who are specialists in the field of social security and in their business life devote the greater part of their time to these matters.

The association believes that the transfer of these Federal responsibilities would be detrimental to the public interest. The Committee on Expenditures in the Executive Departments is urged to oppose it for the following reasons:

1. NEED FOR IMPARTIAL ADMINISTRATION

Since public interest is paramount, these two services should not be administered by any agency which has as a statutory responsibility the advancement of the interests of either the employee or the employer. It is the statutory responsibility of the Department of Labor "to foster, promote, and develop the welfare" of the employee.

2. RELATIONSHIP OF FUNCTIONS TO SOCIAL-SECURITY PROGRAM

In an address at the twelfth annual meeting of the Interstate Conference of Employment Security Agencies on September 30, 1947, Mr. Arthur J. Altmeyer, Commissioner for Social Security of the Federal Security Agency emphasized the need for unbiased administration of these two programs and desirability of keeping them in the Federal Security Agency. He said:

In discussing the actual and innate relationships between the employment security programs and other parts of the social-security_programs, we, of course cannot overlook the intimate relationship between the Employment Service and unemployment insurance. They really are one program; for the functions of each are so closely interlocked that as far as the public, the employer, and the worker are concerned both programs serve the same ends-to help a worker find a suitable job when he is unemployed and, only when he is unable to find such a job, to pay him benefits which help him bridge the gap in income between jobs. Both programs are part of a single plan, with the separate functions of one supplementing and strengthening the functions of the other. The job-finding operation of the Employment Service is a necessary prerequisite to the determination of eligibility for unemployment insurance. On the other hand, unemployment insurance strengthens the Employment Service by channeling workers through the Employment Service, thus providing a central place where employers can look for workers. The Social Security Administration has always emphasized the importance of the Employment Service, not only as regards the unemployment insurance program but for itself-because a strong national employment service is necessary for the economic security of workers and the economic well-being of the country * * * Neither the Social Security Board nor the States ever subordinated the employment service to the unemployment insurance function.

3. LACK OF SAVINGS SHOWN

An essential of any reorganization plan is that it must effect an actual saving. Merely transferring these two functions from one agency to another can effect no saving of any kind, for certainly the

Department of Labor can take no action to effect savings which cannot be accomplished with equal effectiveness in the Federal Security Agency.

4. ATTEMPT IS MADE TO FEDERALIZE THESE PROGRAMS

Support of the proposal comes chiefly from the United States Department of Labor and the national labor unions, whose interests have as their objective the complete federalization of both the Employment Service and the unemployment compensation program. The national labor organizations' support of this proposed transfer to the Department of Labor is based on their obvious conclusion that the Department will adopt policies and procedures which ultimately will bring about practical federalization to the greatest extent possible. The business community is opposed to federalization of either activity, and Congress consistently has defeated attempts to accomplish such an objective.

5. EFFECTS OF FEDERALIZATION

It is interesting to note that when the Employment Service was under Federal control, employers lacked confidence in its operation and were most insistent that the Service be returned to the States. We believe that if these two services were transferred to the Department of Labor, employers again would have the feeling, well-founded or not, that partisan administration of these programs would result. In consequence, there would not be the same use made of the Employment Service as there should be, thus reducing its effectiveness. In New York State, figures on the number of job orders placed by employers with the Employment Service show:

In October 1946, a month before the Employment Service was returned to the States, there were 83,910 job orders placed by employers with that agency throughout New York State.

In October 1947, after almost a year's operation under State control, there were 93,704 job orders.

6. ESTABLISHMENT OF A CABINET POST OF SOCIAL WELFARE VERSUS THE PROPOSED TRANSFER

President Truman on several occasions has advocated establishment of a new Department of Social Welfare to embrace health, education, and social security. America's elder statesman, Mr. Bernard Baruch, has endorsed this suggestion and urged it be done in the public interest. If such new department were to be created, within it rightfully would belong the Employment Service and the Bureau of Employment Security. Unless and until such time as a Department of Social Welfare is established, those two bureaus should be in the Federal Security Agency.

President Truman's insistence upon their transfer to the Department of Labor, while at the same time he advocates establishment of a Department of Social Welfare, where they naturally belong, is inconsistent, to say the least.

For these reasons, the Commerce and Industry Association urges that this committee recommend defeat of Reorganization Plan No. 1 to transfer the United States Employment Service and the Bureau of Employment Security to the Department of Labor.

The CHAIRMAN. Well, have you covered that in your written statement?

Mr. ZUCKER. Well, I would like to point out just these two. In the impartial administration of the program, we would like to point out that the most important point is in the interpretations which might be given by the Department of Labor in the rules and regulations issued, particularly through the standards of efficiency which would be binding on the State in the referral of workers.

Under such a circumstance these standards would be so binding as to place the Secretary of Labor in the position of certifying which State's program under the Social Security Act should qualify for the payment of moneys from the Treasury.

Mr. HOLIFIELD. Now, let me ask the witness this. You have stated that you fear such a thing will happen.

Mr. ZUCKER. That is right, sir.

Mr. HOLIFIELD. Now, as a matter of record, has such a thing happened during the time this has been under the Department of Labor?

Mr. ZUCKER. Well, I believe, sir, that

Mr. HOLIFIELD (interposing). If so, I want you to point out a specific instance where your Secretary of Labor made any regulation or requirement of your State which is not in compliance with either the Federal Security Act or the Social Security Act, title III.

Mr. ZUCKER. I believe that that is a fear which most employers are quite concerned over.

Mr. HOLIFIELD. But we are afraid of a lot of things; and I want you to point out something to base your fear on something that has happened in the past.

Mr. ZUCKER. Offhand, I cannot think of it without referring to some material that I might have in the office, but I say that that is a fear which incidentally, sir, has shown to foster a lack of confidence by employers in the employment service and in the administration of the unemployment compensation law which did not foster the full use of those two services.

Mr. HOLIFIELD. You can see the weakness of your testimony if you do not substantiate your fears and prejudices and beliefs and so forth with something specific. and I ask you if you have any specific instances to submit them later for the record. If you don't have them this morning for your testimony, submit them later.

The CHAIRMAN. And I might add there, if it is going to embarrass you in any way following the course of the executive heads of the various departments, why, you can claim your privilege if you wish. I can readily understand, Mr. Holifield, why a man at the State level is not going to criticize his boss. It would be like the pupil telling the teacher she was wrong about something.

Mr. BUSBEY. Mr. Zucker was testifying to a fear. He was not testifying to a fact, and when one of the members of the committee asked him to produce facts, it was not in accordance with his testimoney. He was testifying to a fear. Mr. Zucker, I agree with you that there is this fear or there wouldn't be so many people down here testifying on this thing.

Mr. ZUCKER. I agree with you.

Mr. BUSBEY. But the mere fact that you cannot put your finger on a specific instance, and you have not been testifying to a fact does

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