by any administrative body. All the State laws that I am acquainted with on unemployment compensation administer their laws according to rules and regulations. The rules and regulations may not be contrary to the law and either Congress or the State legislatures make the laws.

The responsibility for expenditures must of a necessity be with the Department of Labor is the program is to be carried out successfully. We feel that the employer representatives are attempting to raise undue alarm and cry "wolf” when nothing has been shown to indicate that the employers will have no participation in the fund as it now stands or that they may have no participation in the future. They raise the cry that the incentive to stabilize employment might be taken from them affecting their merit or experience rating. Nothing has been shown to indicate this would happen as the contribution rates are controlled by the various laws.

Merit rating has not stabilized employment and I am not aware of proof to the contrary. For example, Briggs Manufacturing Co. builds bodies for Chrysler Corp. and when Chrysler does not need bodies Briggs Manufacturing Co. does not continue to build bodies to protect their merit rating.

Merit rating is used by employers to rape the unemploymentcompensation laws and no better example exists than that which happened to the Michigan unemployment-compensation law during the 1947 session of the legislature when the law was amended making eligibility conditions about the toughest in the country and putting in death-sentence disqualifications for voluntary leaving, discharge for misconduct, and refusal of work. Under such disqualifications the declaration of policy calling for the payment of benefits to those unemployed through no fault of his own cannot be carried out. Because, can it be said that the individual is unemployed after a few weeks due to the act? No; the reason he is unemployed is because he is unable to get a job. The employers opposed an increase in the weekly Benefit rate on the grounds the fund would not remain solvent but did sponsor an amendment reducing minimum contributions from 1 percent to four tenths of 1 percent, and then they come here and say they believe in unemployment compensation. Further, the amounts paid by employers for unemployment compensation are a part of the cost of production which is passed on to the consumer. Workers are the largest segment of the consuming public so we ultimately pay most of the cost. Again, merit rating does not give an incentive for stabilization of employment, but, for greater profits.

It is said that labor opposes merit rating because it believes it causes employers to take an active interest in the protesting and denial of benefits in improper claims. This statement is incorrect as we have no opposition to the employer interesting himself in whether or not improper claims are paid, but rather feel it is his duty, just as we do not condone the payment of improper claims. We do protest, however, when merit rating is used to nullify unemployment-compensation laws by making conditions of eligibility such that fewer and fewer people may qualify.

The Employment Service has operated satisfactorily under the Department of Labor and during the war handled a very great problem in conjunction with the War Manpower Commission. The Department as a whole has not been discriminatory in the placing of workers


on jobs. Employers evidently do not like this but do like the psychological effect of line-up of people at their employment offices seeking work, has on their employees as they do not cooperate with the Employment Service to the fullest extent. An unemployed individual must register with the Employment Service. We say, that the employer should list all his available job openings with the Employment Service. This would guarantee that an unemployed individual would then come in contact with the suitable job openings and would stop many of the bitter arguments which arise over availability and the suitability of work.

The position of the employers in wanting all employment security put with the Federal Security Agency can only lead us to one conclusion and that is that within a short time, by amending the Federal Unemployment Tax Act to provide a 100-percent credit for contributions to State unemployment funds they may even get out from under the few standards as set up by the Federal Security Agency

I would like to add to my statement that we support the reorganization program, and that it is startling to us to find the attitude of some of the employers toward the Department of Labor. We have believed that it operated in its proper functions in Government. The Department is established to promote the welfare of the workers and to take care of their problems.

What greater problem can a worker have than when he is unemployed? We feel that the proper place is for the program under discussion to be in the Department of Labor.

As to the question of the Secretary of Labor operating under certain rules and regulations, that is nothing more than is done by any administrative agency.

The State laws on unemployment insurance that I have come in contact with practically all operate under rules and regulations, and all have rules and regulations which may not be contrary to the law. We endorse the position of Colonel Horton, of Texas, that Federal standards should be applied to the unemployment-compensation laws, and to the Employment Service, and that it should remain within the Federal agency. We do not agree with him as to the agency. We believe that it should be one of the functions of or one of the departments of the Department of Labor.

The question has been raised by some of the employer representatives as to whether the unemployment compensation and Employment Service should be put in the Department of Labor, and whether it will take away any incentive to stabilize employment. We do not believe that the merit rating has ever stabilized employment, because, for an example, the Briggs Manufacturing Co. in Detroit, Mich., manufactures automobile bodies for the Chrysler Corp. When the Chrysler Corp. has no use for their automobile bodies, Briggs Manufacturing

Mr. HARNESS. That is something beside the issue here; is it not? Mr. JOHNSON. Yes.

Mr. HARNESS. Do you support this plan because you think the Labor Department, if they got it, might change that merit system, the rules and regulations which would change the system?

Mr. Johnson. No, I do not, Mr. Congressman. There is nothing in this plan that gives the Labor Department any authority to change its plans.

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Mr. HARNESS. The merit system that prevails in many of the States, and perhaps all of them, is the one to which you refer?

Mr. JOHNSON. That is right. It is set by the State laws. Our disagreement is with the State legislature.

Mr. HARNES. It has nothing to do with that?
Mr. Johnson. That is right.

Mr. HARNESS. In April of 1939 when the late President Roosevelt submitted to Congress Reorganization Plan No. 1, establishing the Federal Security Agency, he placed the United States Employment Service with that agency and consolidated it with the unemploymentcompensation functions?


Mr. HARNESS. In his message he said that he was placing these functions there, and this is the substance of his remarks, because these particular services are bound up with the public assistance activities, and would produce a more efficient and economical administration at the Federal level by such grouping and consolidation. Also, the transfer would be to the advantage of the administration of the State social-security programs. Of course, President Truman takes a completely opposite view in making this recommendation.

Do you think that President Roosevelt was wrong when he did that in 1939?

Mr. JOHNSON. I would say at that time that there was no experience as to what was going to happen. I think that as time goes on many of us have to change our minds regarding certain things. I could not say for sure whether or not he was wrong at that time, or not. There was no experience at that time concerning it.

Mr. CHENOWETH. Are you opposed to this merit rating? I see that you criticize it in your statement.

Mr. JOHNSON. We do not like merit ratings,
Mr. CHENOWETH. What is your opposition to the merit rating?

Mr. Johnson. In our working with it, or what we have found to happen under the merit rating, is that it is used by the employers to nullify any State unemployment-compensation laws.

Mr. CHENOWETH. Will you explain that?

Mr. JOHNSON. I think that what happened in the Michigan Legislature in the last session was a very good example of that.

Mr. CHENOWETH. What is your conception of the merit-rating plan? What is it supposed to accomplish?

Mr. JOHNSON. The theory of it is very good but it does not work out that way. The theory of it is that it is supposed to give an incentive to the employers to stabilize employment. Just as I mentioned in the case of the Briggs Manufacturing Co. and the Chrysler Corp., when Chrysler Corp. cannot use automobile bodies the Briggs Manufacturing Co. does not continue to build bodies to protect their help. The cost of unemployment insurance is a part of production, which is passed on to the consumer.

We feel that as workers of the larger segment of the consuming public, therefore, in the end we pay most of the tax.

Mr. CHENOWETH. Do you not think that a company that now maintains full employment would have some regard for maintaining that status and should not there be some compensation involved?

Mr. JOHNSON. I think there should be something worked out as to a pay-roll tax on it.

Mr. CHENOWETH. With reference to your previous remark about the legislature, what benefits do you get in Michigan now?

Mr. JOHNSON. $20; that is a primary benefit plus a dependence allowance, not to exceed $28.

Mr. CHENOWETH. Do you suppose that we ought to turn it all back to the States and let Michigan handle all of the problems in the State government? Would not that be better for you?

Mr. Johnson. I would not like to see it happen.

Mr. JOHNSON. Because I think the Federal Government should set standards regarding it.

Mr: CHENOWETH. Why does not the State of Michigan set certain standards?

Mr. JOHNSON. We have too many changes of administration where the project is completely changed. We have had it happen in just the last yeai' and a half.

Mr. CHENOWETH. The people of your legislature reflect the sentiments of the people, the same as we reflect the sentiments of the people of the country. This is just a question of representation on a larger scale.

Mr. JOHNSON. I think we had a very complete change in Michigan that. I have mentioned.

Mr. CHENOWETH. I do not know anything about the Michigan situation.

Mr. Johnson. It is very upsetting. Fortunately, things worked out all right. I will agree that there were some things not right, but it was not necessary to go into the extreme changes that they did.

Mr. CHENOWETH. Thank you, Mr. Johnson.
The CHAIRMAN. Mr. Snyder?

Mr. SNYDER. Mr. Johnson, it occurs to me that this reorganization proposal may be premature. Perhaps it should be in the Labor Department, I don't know, but the Congress has appointed a commission. They have a commission studying the reorganization of the administrative and executive branches. They are now working on it and they are on their way to making a study of a recommendation as to what should be done, which will probably be about the first of next year. They are going into the matter of the proper consolidation and implemention of overlapping and duplicating functions.

It seems to me a question to be considered in this broad program that is under way rather than for immediate consideration by this session of Congress.

Do you have any comment on that, or reaction as to that?

Mr. JOHNSON. That might be true, but we feel that the Department of Labor is the place for these functions. Why should it be put off?

My SNYDER. Of course, as usual, there are two viewpoints expressed. Some think not, and some think otherwise, but they are going into the mechanics of the thing. The Department of Labor would possibly get it; I don't know.

Mr. MANASCO. Being a member of that Commission, I do not have the highest hopes of ever getting any of the recommendations through because in all probability our Commission will recommend stepping on the toes of at least a hundred agencies, since we cannot get through one single reorganization, and we will never get any reorganization at all, perhaps.

Mr. SNYDER. Does the gentleman think that the Congress will not have enough courage to carry out the benefits which may be derived from an over-all investigation?

Mr. ManasCO. They have not done so in the last 100 years. We have had an over-all study in 1936, and it was turned down.

Mr. SNYDER. You can only deteriorate to a certain extent.

Mr. Mannsco. In 1936 we had a very definite commission to make a study on the reorganization of the Government, and I never heard of such fights on that reorganization plan which never came into being. It is not very encouraging when you start to reorganize the Government and get some of the results you do.

Mr. SNYDER. I thank you very much, Mr. Johnson.
The CHAIRMAN. Mr. Busbey?
Mr. BUSBEY. The last paragraph of your statement is as follows:

The position of the employers in wanting all employment security put up with the Federal Security Agency can only lead us to one conclusion. That is that within a short time, by amending the Federal Unemployment Tax Act to provide a 100-percent credit for contributions to State unemployment funds, they may even get out from under the few standards as set up by the Federal Security Agency.

What do you mean by that?

Mr. JOHNSON. I mean, Mr. Congressman, that at the present time under the Federal Security Agency there are certain standards set up. If this money is to be returned to the States, the Social or the Federal Security Agency would be in no position to enforce those standards of some of the State agencies. It has happened that some State laws have passed amendments, or have by regulations or rules as set up, they have passed certain resolutions contrary to the standards established by the Federal Security Agency. Benefits and administration money have been withheld.

I think that that has happened a couple of times in Ohio.

Mr. Bussey. Does Reorganization Plan No. 1 that we have under consideration, provide for putting 100 percent of these moneys back into the States?

Mr. JOHNSON. No; but our conclusion is that this, tied with the drive that is put on by the National Manufacturers Association for the 100 percent offset, would accomplish what they are after to get out from even under the standards of the Federal Security Agency.

In other words, they will not have to abide by any of the standards because all of the money would be within the States.

Mr. BUSBEY. That is enlightening, because I feel slighted that the National Association of Manufacturers have not contacted me in any way, shape, manner, or form since I have been a Member of Congress. Should I have made a complaint to them to find out what was going on in their office so I would not be held in ignorance? That is, as to what the program could do to accomplish that?

Mr. JOHNSON. I understand that there is a bill introduced in Congress now for a 100 percent offset.

Mr. BUSBEY. What bill is that?
Mr. JOHNSON. The Reeves bill, I understand.
Mr. BUSBEY. Is that Mr. Reeves, of Missouri?

Mr. BUSBEY. You know that there are a lot of bills on which no action is taken?

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