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Mr. ARGO. Yes, sir; that is correct, sir.
The CHAIRMAN. Mr. Wilson.
Mr. Wilson. No questions.
The CHAIRMAN. Mr. Hardy? Mr. Karsten? Mr. Lanham?

Mr. LANHAM. The Reemployment Service is now in the Department of Labor, is it not?

Mr. ARGO. That is correct.

Mr. LANHAM. Do you have any concrete examples to base your fears upon?

Mr. Argo. No definite examples; no, sir; but we do have that fear and we are not organized. We have stated our position. We do not want to get into the operation with any agency that we might think that we might have a tendency to be controlled by such organization.

Mr. LANHAM. Well, have they ever tried to control you or control your State organization?

Mr. ARGO. No, sir.
Mr. Lanham. Then, you have no ground for your fears?
Mr. HARNESS. I think that is a matter of conclusion.
Mr. LANHAM. Well, I say he knows of none.

Mr. Manasco. In case of a lot of unemployment an employer would not necessarily use the services of the Unemployment Service, would he?

Mr. ARGO. No, sir.

Mr. MANASCO. You would just let the man come up to the office and hire him right there without going to the Employment Service?

Mr. ARGO. Well, no, sir. We have used the Employment Service in the past. They have courted our friendship. In fact, in the State of Alabama because the employers in that State will not use the Employment Service, actually they are closing some of the offices, because they are not making enough placements to keep the office open.

Mr. MANASCO. As a matter of fact, at the present time there is a shortage of labor in Alabama, is there not?

Mr. Argo. Not in our case; no, sir. It is plentiful.

Mr. MANASCO. If you have no shortage of labor, nobody out of a job, there would be very few people making applications to the Employment Service.

Mr. Arro. No, sir. We have more people making applications there than we have in years. We turn them away every day.

Mr. MANASCO. Are they coming to the Employment Service?
Mr. Argo. No, sir; they are coming direct to our office.

Mr. Manasco. That being the case, since you have more people looking for jobs now than you have places for them, as far as you are concerned you do not need the Employment Service. The only person that would be benefited by the Employment Service under those circumstances would be an employee seeking employment.

Mr. ARGO. I will grant you that is correct.

Mr. MANASCO. You do think it does serve a useful purpose for the employee to try to find a job when he is out of work, rather than pay unemployment compensation?

Mr. ARGO. That is the purpose.

Mr. MANASCO. You think that is better for the general public than to start paying him unemployment compensation. He will be a

better citizen if he has a job than if you pay him $20 a week for a few weeks.

Mr. ARGO. Definitely a better citizen, a more satisfied citizen, if he is working and making his own living.

Mr. HARNESS. Mr. Argo, what would be your recommendation to the committee, to the Congress, about sending back these activities to the States?

Mr. ARGO. Speaking just as a layman and on the principle with which I definitely believe, I think that it should come back to the States, and the Government is as much decentralized as possible, particularly on unemployment compensation.

Mr. HARNESS. I think the witness preceding you testified that about $60,000,000 in the Treasury was earmarked for Alabama. You would recommend that the control over those funds be turned back to the State?

Mr. ARGO. Yes, sir.

Mr. JUDD. Do you have any suggestions as to why workers, the large majority of workers, are coming to you directly rather than going to the Employment Service?

Mr. ARGO. Well, because in the past we have not used the Employment Service as much as a lot of other employers have. We do use Employment Service when they send somebody.

Mr. JUDD. When you have vacancies you do not notify the Employment Service that you need so many this and so many that?

Mr. ARGO. No, sir.
Mr. JUDD. Why?
Mr. Argo. For the exact reason I stated before,

Mr. MANASCO. I have one more question, Mr. Chairman. I believe you have fears of the Department of Labor and do not have any fears of the Federal Security Agency, or your fears are less?

Mr. Argo. We will say it is less toward the Security Agency.

Mr. Manasco. What would be your position if an agency started advocating the levy of a pay-roll tax on all of your employees, 5 or 6 percent for the health program? Would you have any fears of that agency? Mr. ARGO. Certainly.

Mr. MANASCO. You better watch out for that Federal Security Agency. That is their program. Mr. HARDY. Will the gentleman yield on that? Mr. MANASCO. I yield.

Mr. HARDY. If that should happen, would you feel at liberty to take it up with your Congressman and ask him to get that situation changed?

Mr. ARGO. That is correct. That would be the natural recourse.

Mr. CHENOWETH. I just want to ask Mr. Argo if I am correct. I get from his testimony it is your opinion you could get along without the USES in Alabama?

Mr. Argo. Absolutely. I mean as far as purely just employment service is concerned.

Mr. CHENOWETH. Do you have any benefit from that service at all?
Mr. Argo. I cannot say we have never received benefit from it.
Mr. CHENOWETH. I mean right now.
Mr. ARGO. Not now, no, sir.

Mr. CHENOWETH. Is that the general situation?

Mr. ARGO. I cannot speak for all industries in Alabama on that particular point.

Mr. CHENOWETH. You made some point there wasn't enough money to keep the office busy.

Mr. Argo. The statement I made was we have plenty of applicants.

Mr. CHENOWETH. The USES office did not have enough work to keep them busy. You made some statement relative to that. I did not get it.

Mr. ARGO. No, sir.

Mr. CHENOWETH. Are they busy all of the time processing the applicants, the workers?

Mr. ARGO. Well, I could not speak for the Employment Office whether they are busy or not, but I would say that primarily most of their working is purely taking the unemployment-compensation claims.

Mr. CHENOWETH. Rather than placement?
Mr. ARGO. Rather than placements.
Mr. CHENOWETH. I see. Thank you very much.

Mr. MANASCO. Of course, the reason for the establishment of the Unemployment Service is not primarily to benefit the employer but to benefit the employee, the man out of a job, instead of having to pay him unemployment compensation.

Mr. HOLIFIELD. Those are all State employees, you know. There are no USES employees down there.

Mr. CHENOWETH. We had better be careful or we will create some unemployment here.

The CHAIRMAN. Thank you very much.
You have filed a statement?

Mr. Patty. I have a statement. I have not filed it; no, sir. I have a very short statement. It will take about 3 minutes.

The CHAIRMAN. You testified last year.
Mr. Patty. Yes, sir.
The CHAIRMAN. Identify yourself.

Mr. Patty. My name is Kenneth C. Patty, assistant attorney general of Virginia and counsel for the Virginia Unemployment Compensation Commission.

I had the privilege of testifying before this committee last May in opposition to Reorganization Plan No. 1 of 1947.

The CHAIRMAN. Have you changed your views at all from the testimony you gave us last year, and if you have, in what particulars?

Mr. PATTY. I have not changed them at all. The CHAIRMAN. I think in executive session we may avail ourselves of your testimony given last year.

Mr. Patty. You may. There is a slightly different issue involved at this time.

Mr. MANASCO. Mr. Patty's statement is on page 84 of the hearing of last year, in case any member is interested.

Mr. Patty. I would like for my full statement to go into the record, but in order not to take up too much time, I will just emphasize two or three points orally here and let the full statement go into the record if it is all right with the chairman.

The CHAIRMAN. Yes.

STATEMENT OF KENNETH C. PATTY, ASSISTANT ATTORNEY

GENERAL OF VIRGINIA AND GENERAL COUNSEL FOR THE UNEMPLOYMENT COMPENSATION COMMISSION OF VIRGINIA

I had the privilege of testifying before this committee last May in opposition to Reorganization Plan No. 1 of 1947. At that time emphasis was placed upon the proposition that the unemployment compensation and employment service programs should be operated by a single agency at the Federal level. The Congress agreed and the Federal Employment Service will revert to the Federal Security Agency in due time unless the Reorganization Plan No. 1 of 1948 becomes effective. I appear in opposition to this most recent proposal. I think I express the viewpoint of the overwhelming majority of Virginians.

The administration of the dual system of assisting individuals in finding suitable jobs and paying benefits to unemployed individuals when they are unable to find employment should be removed as far as possible from the influence of the pressure groups, whether such groups represent the employers or the workers; therefore, such administration, at all levels, should be by a neutral agency. I would oppose any plan that would transfer the system to the Department of Commerce just as strongly as I oppose a transfer to the Department of Labor. The unemployment compensation system is, or should be, operated as an insurance business on a sound economic basis. It should be operated on the principle that those who receive unemployment compensation are willing and eager applicants for reasonable, suitable work. The applicant's viewpoint with respect to wages, hours, and other standards should not always be controlling in determining what work is suitable. The policies of both services finding jobs and paying benefits must be in the interest of the public as well as the individual, independent of the pressure of any particular group.

All policies with respect to this program should be designed to strike a balance between the tendency of capitalistic trends and the laudable desires of labor. This can be effected only by administration through an agency uncontrolled either by capital or lăbor.

In the administration of the Employment Service, it is necessary, it efficiency is to be obtained, to have the cooperation of the employers. It is our experience that the employers are hesitant to use the facilities of the Employment Service when it is dominated by labor influences. If the Service is completely and permanently separated from the Department of Labor, the employer reaction will be more favorable and his interest in the agency will increase.

This program which is designed to assist workers to obtain jobs and to pay benefits to those involuntarily unemployed is financed by a tax on pay rolls. It is not a welfare program, but it is an insurance program, and the employers pay the insurance premiums. I do not contend that the program should be administered by the persons who contribute the money to the fund, but I do contend that it should not be administered by the individuals who seek to withdraw money from the fund. The agency which administers this particular fund should be removed as far as possible from either group. It should act as an impartial arbiter so as to provide a measure of financial assistance to the worthy without disturbing the economy of the country. Strict neutrality between the taxpayer and the worker is essential.

That, I think, is all the statement that I desire to make in which I merely emphasize the fact that we think it should be administered by a neutral agency.

Mr. CHAIRMAN. Mr. Wilson?
Mr. Wilson. No questions.
The CHAIRMAN. Mr. Hardy?

Mr. HARDY. Mr. Patty, do you have any real basis for believing that the Department of Labor would not administer the two programs impartially?

Mr. Patty. Well, of course, the Department of Labor is primarily a labor assistance department as distinguished from an economic department-an economic assistance department. We feel that if the operations of these two departments, two functions, are placed permanently in the Department of Labor, but under the power they have with respect to the issuance of rules and regulations and the enforcement of them, they will not be as cautious as they are at the present time while the matter is in a state of uncertainty, and they will seek to require the States, by some mandate, and in the absence of carrying out the mandate withhold Federal grants, to use policies and follow policies in connection with the referral of applicants to work that they do not do at this time.

They do have one regulation which I do not have with me with respect to the referral of applicants for unemployment compensation benefits to jobs that are in any way vacant on account of some labor difficulties.

There may not be a lock-out and there may not be technically a strike, but there may be some labor differences between management and employees or the union in connection with it as to certain particular things such as wages or working conditions, and we are not permitted under the present regulations, under those conditions, to refer a man to a job that is vacant on that account.

It occurs to me that if an employer is willing to hire an individual and the individual is willing to work for him, there should not be any restriction on our part as to going into the details of the matter and offering the man the opportunity to apply for the job if he desires to.

Mr. HARDY. Do I understand you to interpret that policy as being an activity on the part of the Department of Labor or to further the interests of the unions?

Mr. Patty. Oh, unquestionably, sir.
Mr. HOLIFIELD. Now, will you yield there?
Mr. HARDY. Yes.

Mr. HOLIFIELD. Is it not true that is in accord with the Federal Unemployment Tax Act?

Mr. PATTY. I do not think that the regulation that has been issued by the Department of Labor follows strictly the limits of the Federal Unemployment Compensation Tax Act.

Mr. HOLIFIELD. I call attention to section 1603, the Internal Revenue Code. You will find certain protective standards are set up and you will find those standards are in that act.

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