Through the Apprentice Training Service it promotes the development of needed skills. I consider it necessary and desirable that these facilities of the Department of Labor should now be augmented by the other major operating agencies in the field of employment-the United States Employment Service and the Bureau of Employment Security. These agencies are concerned, as is the Department of Labor, with the full and proper employment of American workers.

The results achieved by the Employment Service after more than 2 years of operation within the Department of Labor strongly justify the decision to place these functions permanently within that Department. More employers are now using the facilities of the public employment offices than ever before in the history of the peacetime Employment Service. More services are being furnished employers by the public employment offices than ever before. Today the public employment office has become the central labor exchange in the community and the primary source of information on employment opportunities and immediate labor market trends.

The Bureau of Employment Security in the Federal Security Agency administers the Federal activities relating to the Nation-wide unemployment compensation system. As a practical matter these functions have proved to be intimately related to those of the United States Employment Service. Under existing State laws, claimants for unemployment compensation must register with the Employment Service before they may become eligible for benefits. In consequence nearly all States have assigned the administration of these two programs to the same agency.

Both the Employment Service and the unemployment compensation system are concerned with the worker as a member of the labor force. Both are concerned with shortening the periods of unemployment and with promoting continuity of employment. When the worker becomes unemployed, the alternatives are either to assist him in obtaining new employment or to pay him benefits.

The proper emphasis is on employment rather than on benefit payments. This emphasis can best be achieved by having the two programs administered in the agency most concerned with the employment process—the Labor Department.

By reason of the reorganizations made by this plan, I find that the responsibilities and duties of the Secretary of Labor will be of such nature as to require the inclusion in the plan of provisions for the appointment and compensation of a Commissioner of Employment to coordinate the employment service and unemployment insurance activities within the Department. The plan also provides that the Federal Advisory Council,

a group representative of labor, management, and the public, authorized by the Wagner-Peyser Act, shall advise the Secretary and the Commissioner on the operation of both the unemployment compensation system and the United States Employment Service.





SECTION 1. United States Employment Service. - The United States Employment Service is transferred to the Department of Labor and the functions of the Federal Security Administrator with respect to the United States Employment Service are transferred to the Secretary of Labor.

Sec. 2. Bureau of Employment Security:—The Bureau of Employment Security of the Federal Security Agency is transferred to the Department of Labor and the functions of the Federal Security Administrator with respect to unemployment compensation, together with his functions under the Federal Unemployment Tax Act (as amended, and as affected by the provisions of Reorganization Plan Numbered 2 of 1946, 60 Stat. 1095 (26 U. S. C. 1600–1611)), are transferred to the Secretary of Labor.

Sec. 3. Performance of transferred functions.—The functions transferred by the provisions of sections 1 and 2 of this plan (a) shall be performed by the Secretary or, subject to his direction and control, by such officers (including the Commissioner of Employment hereinafter provided for) and agencies of the Department of Labor as the Secretary may designate and (b) shall be performed subject to such rules and regulations as the Secretary may prescribe.

SĖc. 4. Commissioner of Employment.—There shall be in the Department of Labor a Commissioner of Employment, who shall be appointed under the classified civil service by the Secretary of Labor, receive compensation at the rate of $10,000 per annum, and perform such of the functions transferred by the provisions of this plan as the Secretary shall designate.

SEC. 5. Coordination of transferred functions. In order to coordinate more fully the administration of grant-in-aid programs under the functions transferred by the provisions of this plan the Secretary of Labor shall, insofar as practicable, establish or cause to be established uniform standards and procedures relating to fiscal, personnel, and other requirements common to both such programs and provide for a single Federal review with respect to such requirements.

SEC. 6. Federal Advisory Council.—The Federal Advisory Council established pursuant to section 11 (a) of the Act of June 6, 1933, as amended (48 Stat. 116, 29 U. S. C. 49J(a)), shall, in addition to its duties under the aforesaid Act, advise the Secretary of Labor and the Commissioner of Employment with respect to the administration and coordination of the functions transferred by the provisions of this plan.

Sec. 7. Personnel, records, property, and funds.There are transferred to the Department of Labor, for use in connection with the functions transferred by the provisions of this plan, the personnel, property, records, and unexpended balances of appropriations, allocations, and other funds (available or to be made available) of the United States Employment Service and of the Bureau of Employment Security, together with so much as the Director of the Bureau of the Budget shall determine of other personnel, property, records, and unexpended balances of appropriations, allocations, and funds (available or to be made available) of the Federal Security Agency which relate to functions transferred by the provisions of this plan.

[H. Con. Res. 131, 80th Cong, 2d sess.]

CONCURRENT RESOLUTION Resolved by the House of Representatives (the Senate concurring), That the Congress does not favor the Reorganization Plan Numbered 1 of January 19, 1948, transmitted to Congress by the President on the 19th day of January 1948.

Mr. Secretary, we are ready to hear your statement.

Unless there is some vigorous objection, we will assume that the members have read your statement, and if you desire to supplement that with an oral statement we will be glad to hear that. The reason is that we have so many statements which have been sent in that we will be here an undue length of time if all of the statements are read.

Mr. KARSTEN. I have never seen this statement.

The CHAIRMAN. We have had this issue before us at least once, and I think twice.

I know that the Secretary is fully qualified to summarize that very briefly.

Mr. WILSON. As far as the Secretary is concerned, I think we should let him read his statement. I do not think all of them should read their statements.

The CHAIRMAN. You have department heads for these other agencies. I will abide, of coursė, by the will of the committee. As I understood the President's message, there was to be no discrimination.

Mr. WADSWORTH. I think we should let the Secretary read his statement.

The CHAIRMAN. I call your attention to the fact that what you get in the record will be a double printing of the argument each time.

Go ahead and read your statement slowly and carefully, Mr. Secretary



Mr. SCHWELLENBACH. Mr. Chairman, members of the committee, I wish to thank you for the opportunity to present my views on Reorganization Plan No. 1, 1948, which is before you for consideration. That plan permanently places the United States Employment Service in the United States Department of Labor where it is now located and also transfers to that Department the Bureau of Employment Security of the Federal Security Agency with all of its unemployment-compensation functions.

In transmitting this reorganization plan to Congress, the President states thatthis plan will place the administration of the Employment Service and'unempioyment compensation functions of the Federal Government in the most appropriate location within the executive establishment and will provide for their proper coordination.

The President further states that the purpose of the reorganization plan is(1) to group, coordinate, and consolidate agencies and functions of the Government according to major purposes; (2) to increase the efficiency of the operations of the Government; and (3) to promote economy to the fullest extent consistent with the efficient operation of the Government.

I am in hearty agreement with the views expressed by the President. There is no area in which there is a greater need for achieving the objectives of governmental reorganization than in those activities which deal with the intricate human relationships growing out of our complex industrial society.

Centralization of all important Federal labor functions in one department is desirable. The complicated problems affecting both employers and employees in their day-to-day relationship and which are so vital to our national economy, and indeed our form of government, can best be dealt with by those possessing specialized skills and training in this field. Matters relating to the employment of workers; the location, character, and volume of employment opportunities; and employer labor requirements; the nature of our labor supply, and bringing jobs and workers together are all essentially labor functions. They are also the very essence of public employment service activities.


The United States Employment Service was created in 1933 as a bureau in the Department of Labor to carry out the Federal responsibilities of our Federal-State system of public employment offices. It is responsible for assisting in establishing and maintaining systems of public employment offices in the several Sttaes, and for coordinating the public employment offices throughout the country. It is also required to increase the usefulness of these employment offices by developing and prescribing minimum standards of efficiency and by assisting them in meeting problems peculiar to their localities. It promotes uniformity in administrative and statistical procedures, and furnishes and publishes information as to opportunities for employment. The United States Employment Service, in cooperation with the States' employment services maintains a system of transferring labor between the several States and also works closely with the States in the development of recruitment and placement programs for farm labor. The responsibilities of the United States Employment Service to maintain a veterans' placement service, as set forth in the original act, were reemphasized and expanded by the Servicemen's Readjustment Act of 1944. These local offices of the public employment service are supervised by State agencies in accordance with policies and standards established by the Department of Labor and set forth in the individual State plans of operation. It is responsible for reviewing the estimates of funds requested by she States for the operation of the employment service; makes recommendations to Congress concerning the amount of funds needed; apportions the funds appropriated among the States; audits expenditures; evaluates operating performance; and determines that the funds are spent properly for economical and efficient operation of the employment offices.

The program of the United States Employment Service, carried out by the local offices, provides for (1) an effective placement service; (2) employment counseling for veterans and other workers faced with vocational adjustment problems; (3) special services to veterans in priority of job referrals; (4) industrial services to assist employers in selection, assignment, and transfer of workers; (5) labor market information for employers, workers, and community groups to assist in resolving employment problems; and (6) community participation in the development of local plans for maintaining high levels of stable employment.


The emergence of legislation and systems of unemployment compensation was the direct result of the distress suffered by our working population as a result of widespread unemployment during the depression. It became perfectly apparent that the States acting independently were incapable of dealing with the problems arising out of unemployment and it was necessary for the Federal Government to inaugurate a number of emergency programs which involved expenditures of billions of dollars.

Congress provided through the Social Security Act of 1935 for dealing with reoccurring problems of unemployment on a continuing basis. This legislation encouraged the States to establish unemployment-compensation systems which would provide income to individuals who customarily depend on wages from covered employment, but who, because of lack of work, are unemployed. The funds for unemployment-compensation payments are credited to the State accounts in the Unemployment Trust Fund and can be used for no other purpose than the payment of unemployment-compensation benefits in accordance with State unemployment-compensation laws. These laws govern the amount and duration of unemployment benefits and the conditions under which these benefits are to be paid.

The Federal agency is responsible for determining that State unemployment-compensation laws are in compliance with the Federal act and that the unemployment-compensation program is administered in such a manner as to pay benefits promptly when due. The costs of administration are financed by the Federal Government and funds appropriated for this purpose are apportioned among the States in accordance with their needs. The Bureau of Employment Security audits the expenditures and determines that they are properly spent for economical and efficient operation of the unemployment-compensation program.

Mr. HARNESS. I wonder if I might interrupt the witness.
The CHAIRMAN. All right.

Mr. HARNESS. Referring to the sentenceThe costs of administration are financed by the Federal Government and funds appropriated for this purpose are apportioned among the States in accordance with their needs isn't that fund made up of payments by employers of the States?

Mr. SCHWELLENBACH. Yes, that is true.

Mr. HARNESS. Then, it is not Federal funds. It is a fund that the State employers pay to the Federal Government for the benefit of the States.

Mr. SCHWELLENBACH. It is appropriated out of the general fund of the Treasury.

Mr. HARNESS. But the money is paid in by the employer in the States and then in turn given back to the States for administrative purposes?

Mr. SCHWELLENBACH. I would like to answer that by stating one of the finest statements on this very controversial question that I ever heard—it was made by Senator Bailey of North Carolina. It was made several years ago. He said:

We in North Carolina do not contend that we are entitled to all of the tax money raised by the sale of cigarettes and tobacco. The people of the entire Nation smoke our cigarettes. We want the people in the farthest part of the Nation to smoke our cigarettes. To that extent, we are simply the collectors for the people of the entire Nation of a fund to be used.

It is true that money comes from one particular State. Any time the people as a whole are called upon to pay a tax which comes from a particular State, it does not mean that because of that fact they become State funds. They are funds which go into the General Treasury. Take, for instance, the corporations in the State of New York.

Mr. HARNESS. All the people of New York do not pay this tax. It is only the employers who pay the tax. A certain amount is allocated back to the States for administrative purposes. It is not contributed by all the people in the State.

Mr. SCHWELLENBACH. To the extent that people are employed who are covered by the act, it is paid by all the people in the State.

You raised a very basic question which has been debated for about 150 years, as to whether or not collection of taxes

Mr. HARNESS. Thank you.

Mr. SCHWELLENBACH. In order to be eligible in connection with the payment of benefits, unemployment-compensation-benefit claimants must be registered with the local employment offices as evidence that they are in fact involuntarily unemployed and able and willing to work. The local employment office serves unemployment compensation through the administration of the work test and the supplying of information so that a determination of eligibility for benefit payments can be made by the unemployment-compensation authorities.

Mr. BENDER. In connection with the question raised by Mr. Harness, I think it ought to be emphasized that this money was paid in by the employees and employers, and is not a general tax that is

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