Mr. JOHNSON. Yes; but I understand that a number of employer groups have supported that bill.

The CHAIRMAN. We will have to suspend for a moment. There is a gentleman who has been sitting here all afternoon, and he has a 5 o'clock reservation on an airplane.

Mr. JOHNSON. All right, Mr. Chairman. I would be glad to accommodate.

The CHAIRMAN. Mr. Martin, do you have a statement you wish to make?

STATEMENT OF THE ILLINOIS STATE CHAMBER OF COMMERCE, PRESENTED BY ROBERT B. MARTIN, MEMBER SOCIAL SECURITY COMMITTEE

Mr. MARTIN. Mr. Chairman and gentlemen, I am Robert B. Martin, treasurer of Kable News Co., Mount Morris, Ill. My appearance here is on behalf of the Illinois State Chamber of Commerce. My firm is a member of that organization, and I am a member of its social-security committee.

The Illinois Chamber of Commerce is a commercial organization composed of approximately 7,000 members representing practically all fields of business and industry in 240 towns and cities throughout the State of Illinois. A major part of the work of the chamber is carried out by committees of its members; the social-security committee is one of these groups. That committee is concerned with problems in the field of unemployment compensation, employment service, old-age and survivors insurance, and other activities relating to our social-security laws, both State and Federal. The State chamber has long been interested in the development of social security on a sound basis.

Since President Truman's announced intention in December of 1947 to permanently transfer the Employment Service and the Bureau of Employment Security to the Department of Labor, the chamber's social-security committee has been studying this matter. As a result of this study, it is the best judgment of this committee that Reorganization plan No. 1 of 1948, if put into effect, would impair sound development and administration of the Nation's social-security

program.

Unemployment compensation and the Employment Service are integral parts of the entire social-security program. Only through coordination under one agency can proper relationships be maintained between these two functions, and other social-security activities. The cost of any part of the social-security program should be weighted and related to the other aspects of that program. For example, proposals for changes in benefits and coverage under old-age and survivors insurance, old-age assistance, aid to dependent children, inclusion of permanent-disability benefits under old-age and survivors insurance, and temporary-disability benefits under unemployment compensation, must each be considered as a part of one program. In addition, coverage under old-age and survivors insurance and unemployment insurance are largely the same for both employees and employers. This calls for close administrative relationships. Wage records for one type of insurance should be used for relating benefits, coverage, and taxes for the other types.

What is still more important, is that the social-security program cannot be developed on a sound basis if its administration is especially representative of an interested group, as for example, the Department of Labor or Department of Commerce. It is recognized that the Department of Labor was created for the purpose of fostering, promoting, and developing the welfare of wage earners. Inefficient and biased administration is possible in any Government agency. Even though this is so, we believe the point cannot lightly be dismissed that being created to serve the welfare of labor, the Department of Labor may well find itself obligated to abandon the interest of the general welfare and instead to promote certain basic philosophies of some spokesmen for organized labor.

Some of these philosophies which, if put into effect, we feel would undermine the basic concepts of sound social-security administration,

are:

ABOLITION OF EXPERIENCE RATING

Experience or merit rating provides for variable unemployment compensation tax rates based on individual employers' employment experience.. It provides an incentive for employers to maintain employment and thus lessens the employee's risk of unemployment. Good management has recognized the desirability of stable operations and with the added incentive of merit rating, advances in this respect have been and are being made in many businesses, particularly those subject to wide fluctuations because of seasonable demands.

PAYMENT OF BENEFITS TO UNEMPLOYED PERSONS ENGAGED IN A LABOR DISPUTE

In all but four States, the employer pays the entire unemployment compensation tax. Payment of benefits to individuals engaged in a labor dispute would be of direct concern to employers who, in effect, would thus be financing disputes against themselves. Furthermore, the Government, through payment of these benefits, would aid in encouraging labor strife.

LIBERALIZATION OF THE DEFINITION OF "SUITABLE WORK"

The definition of what is "suitable work" is of primary importance in determining whether an individual should accept offered work or receive benefits. It is recognized that by far the majority of workers desire jobs and not benefits. Liberalization of this definition, however, would provide added incentive for workers to accept benefits and refuse employment in productive labor.

COMPLETE FEDERALIZATION OF OUR SOCIAL SECURITY SYSTEM

Complete centralization of our social security system in the Federal Government might well undermine our basic economic system. It could provide a tremendous concentration of power over the life of every citizen. Conditions of employment and business vary from State to State and local government can best determine its own needs and provisions for unemployment protection.

Businessmen would object to any program that would seek to make such philosophies effective. Because of the organic nature of the

Department of Labor, created to promote the welfare of labor, and thus to not a small extent representing organized labor's viewpoints and opinions, employers objecting to promotion of such philosophies by that Department would find themselves in conflict with their own employee organizations rather than in disagreement with a department of Government not primarily concerned with the interests of a special group. Thus, harmonious employer-employee relations might well be permanently jeopardized by the enactment of the proposal to transfer the United States Employment Service and the Bureau of Employment Security to the Department of Labor.

To adequately serve the needs of workers, these services must have the support and respect of employers in the local community. At the Federal level, impartial, effective administration of these activities can best be achieved when coordinated with all parts of the socialsecurity program under the Federal Security Agency.

We, therefore, recommend passage of Concurrent Resolution 131 which would reject Reorganization Plan No. 1 of 1948.

The CHAIRMAN. Do you have anything to add, Mr. Martin?

Mr. MARTIN. No, Mr. Chairman. That is all I have.

The CHAIRMAN. Thank you, Mr. Martin.

Mr. Johnson, would you care to continue with your statement? Mr. JOHNSON. Yes, Mr. Chairman.

The CHAIRMAN. Mr. Snyder?

Mr. SNYDER. I was interested in the information which Mr. Busbey was asking for. As I understand the situation, we have a Federal plan of unemployment compensation.

Mr. JOHNSON. Federal unemployment compensation law.

Mr. SNYDER. Yes; I think it is generally accepted as a part of the national picture and national program. I do not know the attitude of the National Manufacturers' Association on that, and I am not particularly concerned with that phase of it, but I think it is generally favored.

As I see it, the Federal control and the thing that interests me is the administrative fund of three-tenths of 1 percent.

Mr. JOHNSON. That is what I understand it is, three-tenths of 1 percent.

Mr. SNYDER. You have that Federal control and you have that stability whether it is in the hands of the administration of that fund, or whether it is in the hands of the Labor Department or the Federal Security Agency?

Mr. JOHNSON. That is right.

Mr. SNYDER. The program is not endangered, regardless of which of these agencies is adopted, is it? We do not endanger the program by putting it in the Federal Security Agency and keeping it there any more than if we turned it over to the Labor Department; is that not true? I am honestly seeking information on that.

Mr. JOHNSON. I would say it is probably true. I am not an authority on it.

Mr. SNYDER. That was my general impression.

Mr. BUSBEY. What I was trying to get at was, what bearing that part of his statement had on what we have under consideration here. I do not see where it is involved in the question at all.

Mr. JOHNSON. The only thing I have to say was that when you provide a 100-percent credit for contributions to the State unemploy

ment fund, then the money would be going to the States rather than coming into the Federal Government and then the States would not have to comply with the standards.

Mr. BUSBEY. I grant you that, but we have nothing like that under consideration before this committee. I do not know of any committee that has anything like that under consideration. There may be a fear on your part, but it does not affect the bill regardless of whether this function is going to be placed in the Federal Security Agency or the Department of Labor.

Mr. KARSTEN. I would like to call your attention to H. R. 4800. Mr. BUSBEY. It is not in the reorganization plan that we have under consideration.

Mr. KARSTEN. It would be the next logical step.

Mr. BUSBEY. If it went to the Department of Labor, there is nothing to prevent it from being considered, or introduced.

Mr. SNYDER. I would like to clear up that point. Would there be any difference in the consideration of that bill as to whether it were under the Federal Security Agency or the Department of Labor?

Mr. KARSTEN. Could we return to the question of the States, as to whether it is under the Federal Security Agency or in the Labor Department. There would be more of a tendency, however, if it is an independent office

Mr. JOHNSON. Mr. Smith of the Michigan Manufacturers Bureau of Unemployment Compensation said that he thought it would lead to federalization. He raised the question of merit ratings and incentives. That was the only reason we brought it up here.

Mr. BUSBEY. Of course, there were a lot of things that I did not get because some Member of Congress, or perhaps somebody in Michigan, may have wanted it.

The CHAIRMAN. Is the gentleman from the American Federation of Labor ready to proceed?

STATEMENT OF NELSON H. CRUIKSHANK, DIRECTOR OF SOCIAL INSURANCE ACTIVITIES OF THE AMERICAN FEDERATION OF LABOR

Mr. CRUIKSHANK. Mr. Chairman, my name is Nelson H. Cruikshank and I am director of social insurance activities for the American Federation of Labor.

I wish, at the outset, to thank the committee for permitting me the opportunity to present the views of the American Federation of Labor on the President's Reorganization Plan No. 1, which provides for the permanent retention of the United States Employment Service in and the transfer of the unemployment compensation functions of the Bureau of Employment Security to the Department of Labor.

May I respectfully call to your attention, Mr. Chairman, and to the attention of the members of this committee who are members of the majority that in 1944 their party pledged itself to build a strong Department of Labor. The platform that year contained the following statement:

The Department of Labor has been emasculated by the New Deal. Labor bureaus, agencies, and committees are scattered far and wide, in Washington and throughout the country, and have no semblance of systematic or responsible organization. All governmental labor activities must be placed under the direct authority and responsibility of the Secretary of Labor.

As an indication of how thoroughly the American Federation of Labor is in agreement with the objective of this promise of the present majority party platform I quote the following resolution which was introduced by the committee on resolutions and unanimously passed by the Sixty-sixth Convention of the American Federation of Labor in San Francisco on October 16, 1947:

Resolved, That this convention emphatically endorses the statement of President Truman that the Eightieth Congress has torn down the United States Department of Labor until it no longer can function to properly carry out the purposes for which the Department was founded and contained in the act passed by the Congress which created it; and be it further

Resolved, That the Department be restored to its proper and intended status, so that it can fulfill its responsibilities as required by the act which created it (p. 683, Official Proceedings, Sixty-sixth Convention, American Federation of Labor).

The last convention of the American Federation of Labor also took action which is more specifically directed to the issue which your committee is now considering. The declaration on social insurance, unanimously adopted by the convention on October 15, includes the following section:

We have repeatedly called for the administration of the United States Employment Service to be placed within the United States Department of Labor. In view of the close tie between unemployment compensation and the employment services, we recommend that legislation be introduced providing for the transfer of both the United States Employment Service and the Bureau of Employment Security from the Federal Security Administration to the United States Department of Labor (p. 609, Official Proceedings, Sixty-sixth Convention, American Federation of Labor).

It was to achieve this objective that President Truman in September 1945 undertook a program to bring together into the Department of Labor all major labor functions. The transfer of the United States Employment Service and other labor functions to the Department of Labor in that month was the initial step in consummation of that program. Since Executive Order 9617 under which that transfer was effected was issued under authority of the First War Powers Act, the transfer was essentially temporary in nature. In order to retain that bureau in the Department on a permanent basis, the President, last year, submitted Reorganization Plan No. 2 which was rejected by the Senate by one vote. A basic objection to that plan was the fact that the employment-service and unemployment-compensation programs would be administered in separate agencies. The plan which the committee is now considering meets this objection by placing both the employment-service and unemployment-compensation programs in the same department.

Mr. Chairman, I cannot adequately portray to you the astonishment and dismay with which the American workingman has viewed the congressional and Executive action in almost completely emasculating the Department of Labor by stripping it of almost all of its major functions. The Department of Labor today is a department in name only. The Children's Bureau, the Conciliation Service, and the Immigration and Naturalization Service have been removed from its jurisdiction. For the current fiscal year its appropriation has been cut almost 25 percent. The funds of the Wage and Hour Division have been cut so drastically that its capacity to carry out its responsibilities in connection with the Fair Labor Standards Act has been seriously impaired.