Committee on Economic Security (CES)
Volume VIII. Committee Activities
D. ADVISORY COUNCIL
Minutes of Meetings
ADVISORY COUNCIL ON ECONOMIC SECURITY
Unemployment Insurance Section
Minutes of Meetings
Time and place: November 15, 1934, Forenoon Session, 10:30 a.m.; Executive Committee Room, American Red Cross Headquarters.
Members present: Frank P. Graham, Chairman; Belle Sherwin; Grace Abbott; Josephine Roche; Helen Hall; Mary Dewson; Gerald Swope; Morris E. Leeds; Sam Lewisohn; Marion B. Folsom; William Green; Paul Scharrenberg; Henry Ohl; Paul Kellogg; George H. Nordlin; George Berry; Gov. J.G. Winant; Walter Teagle; Joel D. Hunter; Rev. John A. Ryan.
Other persons present: Hon. Frances Perkins, Secretary of Labor and Chairman of the Committee on Economic Security; Dr. A.J. Altmeyer, Chairman of the Technical Board on Economic Security; Alex Holtzoff, Technical Board, representing the Attorney-General; Thos. H. Eliot, Counsel of the Committee on Economic Security; Edwin E. Witte, Executive Director of the Committee on Economic Security.
After being called to order by the Chairman, the Council was addressed by Hon. Frances Perkins, who outlined briefly the purpose of the organization of the Advisory Council. Miss Perkins explained that the function of the Council is to advise the President's Committee on Economic Security on all matters which are included in its program. The Council is not expected to make any formal report, but the Committee desires the advice of the members of the Council both collectively and individually. The Committee will have representatives at all sessions of the Council, and reports will be given upon the Council's deliberation. The Committee hopes that on most matters it will be possible for the Council to reach unanimous decisions, but in the event of disagreement it will be glad to have the views of the individual members. All proceedings of the Council are within its own control, and no question is barred from consideration. The Committee, however, requests that no publicity be given to any of the Council's deliberations and that all information regarding proposals the Committee has under consideration be treated as strictly confidential.
After this address by the Chairman of the President's Committee on Economic Security, the Council elected Mr. Paul Kellogg as its Vice-Chairman, and Edwin E. Witte, Executive Director of the Committee on Economic Security as its Secretary. It was decided that no stenographic record shall be kept of the discussions in the meetings of the Council, but that the Secretary shall prepare minutes summarizing these discussion, which shall be presented to the members for correction.
Mr. Witte then presented some "Suggestions for a Long Time and an Immediate Program for Economic Security," with a list of some of the major questions arising in connection with this program. Copies of these suggestions and questions were furnished each member of the Council. These suggestions, it was explained, were thrown out merely to form a basis for discussion and did not represent the definite conclusion of anyone. After a reading and explanation of the suggestions presented by the Executive Director, the Council entered into a discussion of the considerations which led the President and the Committee on Economic Security to declare in favor of a cooperative federal-state program for unemployment insurance as against an exclusively national system. Discussion developed that considerations of constitutionality are secondary in this connection, as both the national and any cooperative state-federal system present novel issues on which there can only be conjecture to what the Supreme Court is likely to decide. From a practical point of view an exclusively national system has much to recommend it, particularly in equalizing competitive conditions and in according uniform protection to employees in all parts of the nation. On the other hand, an exclusively national system necessitates immediate decisions on all controversial points. Without any extensive experience with unemployment insurance or unemployment reserves in this country, there is no basis for deciding what is best under all of the widely differing conditions existing in this country. Consequently, it is impossible at this stage to frame any uniform law which will be reasonably satisfactory to all people who believe in unemployment insurance. In the event that the federal law should be held unconstitutional, there would be no unemployment insurance legislation whatsoever, if an exclusively national system were adopted. Such a national system, moreover, would concentrate on Washington all discontent over minor imperfections and might result in the complete repeal of the legislation.
Desired uniformity with reference to competitive costs can be obtained under a cooperative federal-state system as well as under an exclusively national system. Under a cooperative federal-state system, moreover, there can be varying experiments in different states, and there is far less likelihood that nothing at all will be accomplished. If the federal law should be held unconstitutional, the state laws, under a plan such as the Wagner-Lewis Bill presented at the last session of Congress, would still remain in full effect. While under such a plan there are difficulties regarding interstate transfers of employees and it cannot be guaranteed that all states will in the near future adopt any unemployment insurance legislation, it is nevertheless the plan most likely to insure some real progress.
Initially some members of the Council expressed a preference for an exclusively national system. After discussion of the subject it was the consensus of opinion, however, that the President and the Committee on Economic Security were entirely warranted in favoring a cooperative federal-state system of unemployment insurance, instead of an exclusively national system.
The Council recessed at 1:15 p.m.
The Council convened after recess at 2:30 p.m. with all members present who attended the morning session, with the exception of Mr. Swope, who had to attend a meeting of the Business Advisory and Planning Council, of which Mr. Leeds and Mr. Teagle are also members. It was necessary for these three members to divide their time between these two meetings. Also present, in addition to persons attending the morning session, was Mr. Merrill G. Murray, of the staff of the Committee on Economic Security, engaged in the study of unemployment insurance.
The Chairman presented a telegram received from Rabbi Edward Israel of Baltimore, Chairman of the Maryland Employment Stabilization Commission. In this telegram Rabbi Israel urged that a prompt decision be reached on the federal unemployment insurance bill and that every effort be made to get the Congress to pass this bill immediately after the opening of the session, in order that the state legislatures might still take action on unemployment insurance during their regular sessions during the coming winter.
The Council then considered the respective merits of a federal cooperative unemployment insurance plan based on the subsidy system and a cooperative federal-state plan developed along the lines of the Wagner-Lewis Bill, with some modifications. In behalf of the subsidy plan it was urged that under that plan there could be more national control than under the Wagner-Lewis Bill. It was also developed that under that plan it would probably be easier to establish industrial funds operating on a nation-wide basis, exempted from state laws upon compliance with at least as high standards as those prevailing in any state in which the fund operated. Under the subsidy plan, moreover, it would be appreciably easier to increase the measure of national control in subsequent years if that be deemed desirable. The method of collecting the tax under that plan is considerably less complicated, as it does not require collection of any contributions by the states, unless they wish to provide increased contributions.
On the question of constitutionality, Mr. Eliot, the Counsel of the Committee, explained that a subsidy for unemployment insurance has a good prospect of being sustained by the courts, but that no one can be certain upon this point, as it is a different kind of subsidy than has ever before been tried. Mr. Eliot also feels that the Wagner-Lewis Bill, if not encumbered with too many regulatory standards, is very probably constitutional, but that there is considerable doubt regarding the constitutionality of such a bill if many standards were written into the law.
In support of the Wagner-Lewis plan, it was urged that a subsidy law can very easily be repealed; moreover, while under the subsidy plan as well as the Wagner-Lewis plan, state legislation is necessary as well as federal legislation, the state laws under such a plan will not contain any money-raising features, and consequently will not remain operative should the federal law be held unconstitutional or be repealed.
The Council then passed on to a discussion of the question whether a reinsurance and interstate transfer fund should be established. It was the general consensus of opinion that interstate transfer fund is desirable, but difference of opinion developed over reinsurance. Some members felt that reinsurance was vital to a successful federal-state plan of unemployment insurance, others that it would be preferable to conserve the available reserve funds which can be built up through reasonable contributions for times of depression instead of using them, in part, to bolster insufficient state or industrial funds in more normal times.
The question of the timing of the coming into effect of the federal unemployment insurance legislation was briefly discussed, and there seemed to be agreement that a timing provision with some reference to the index of production is reasonable. In any event, unemployment insurance benefits cannot possibly be paid for a considerable time after enactment of the federal law. Some time must be allowed for the passage of state legislation, and then reserve funds must be accumulated for at least a year, and preferably two years, before benefits are paid. The view was expressed that the unemployment insurance tax should be collected at more frequent intervals than annually, particularly if the Wagner-Lewis plan is followed.
The question of standards in the federal act was considered at some length. Some members felt that more detailed standards than those suggested by the Executive Director of the Committee are desirable, while other members expressed the view that this would endanger the constitutionality of the measure and also increase the difficulties of passage. The suggestion was offered that the standards might be developed in connection with the reinsurance factors of the law, which would probably eliminate constitutional difficulties.
No decisions were reached on any of the matters discussed, it being deemed advisable to first get expressions of opinion upon the major issues which arise in connection with unemployment insurance before attempting to reach any definite decisions.
The Council adjourned at 5:45 p.m. to meet again November 16 at 9:30 a.m.
Time and place: November 16, 1934, Forenoon Session, 9:30 a.m.; Executive Committee Room, American Red Cross Headquarters.
Members present: Frank P. Graham, Chairman; Belle Sherwin; Grace Abbott; Josephine Roche; Helen Hall; Mary Dewson; Morris E. Leeds; Sam Lewison; Marion B. Folsom; William Green; Paul Scharrenberg; Henry Ohl; Paul Kellogg; George H. Nordlin; George Berry; Governor J.G. Winant; Walter Teagle; Joel D. Hunter; Rev. John A. Ryan.
Other persons present: Edwin E. Witte, Secretary; Merrill G. Murray; W.R. Williamson of the staff of the Committee on Economic Security.
After an informal discussion of the program to be followed at this and subsequent meetings of the Council, a motion was offered by Mr. Leeds, and was unanimously adopted, instructing the staff of the Committee to prepare for the consideration of the Council at its next meeting two alternative federal unemployment insurance bills for a cooperative federal-state unemployment insurance system developed, respectively, on the subsidy and Wagner-Lewis plans.
Mr. Murray then presented to the Council a report of the meeting of the persons in attendance at the National Conference on Economic Security who were invited by the members of the staff working in the field of unemployment insurance to confer with them in an executive session held at the Hotel Mayflower on November 15. From this report it appeared that a majority of the persons who attended this conference favored a national system of unemployment insurance and preferred the subsidy device for a federal-state cooperative unemployment insurance system to the Wagner-Lewis proposal.
The Secretary reported that the Unemployment Insurance and Executive Committees of the Technical Board on Economic Security, after weeks of consideration, dropped the idea of a national plan when it became apparent that no agreement could be reached on many fundamental questions which would have to be decided before a national plan could be formulated. He also reported that, as between the two methods for setting up a cooperative federal-state system, the majority of the members of the Unemployment Insurance and Executive Committee of the Technical Board strongly favored the Wagner-Lewis plan, as did the President's Committee after a two hour consideration of this question.
Mr. Williamson presented the computation made by the actuarial staff of the Committee on the benefits which might be paid with varying rates of contributions. These calculations indicate that if the unemployment insurance system had been in operation on a nation-wide basis during the period from 1922 to 1933 with a four weeks' waiting period, and the benefits of 50 per cent of wages and a maximum of $25 per week, such a system, to have remained solvent throughout this period, could have paid benefits for only six weeks at a 2 per cent rate of contribution, ten weeks at a 3 per cent rate, and 22 weeks at a 5 per cent rate. Discussion developed general agreement among the members of the Council that an unemployment insurance system should not be set up on the basis that it should have remained actuarially sound throughout such a severe depression as has prevailed during the last four years. At the suggestion of Mr. Folsom, the actuaries were instructed to compute what benefits might have been given on the assumption that the fund would have been entirely exhausted by the end of 1930.
The Council then discussed rates and sources of contributions to unemployment reserve funds. There appeared to be general agreement that the rate which industry should be asked to contribute, particularly at this time, must be a relatively low one, probably not exceeding 3 per cent. Several members indicated that they favored contributions by the government, particularly for extended benefits beyond the normal benefit period, while other members felt that there should be no governmental contributions toward the unemployment insurance fund. On the question of employee contributions there was a wide divergence of opinion. In behalf of employee contributions it was urged that they would make possible larger benefits, and that if the employees contributed they would themselves prevent chiseling. Against employee contributions, it was urged that employees, unlike employers, could not pass their contributions on to the consumer, and that as consumers they have to pay a part of the employer contribution, even when they do not contribute directly. The suggestions was also made that employee contributions are necessary in every insurance and that, hence, the most practical solution of the problem might be that employees be not required to contribute toward unemployment insurance, but be required to bear a considerable part of old-age insurance.
The Committee next considered the advisability of establishing a reinsurance fund, to be administered by the federal government, for the purpose of underwriting state and industry funds which may become exhausted by an unusual high rate of unemployment. There was quite general agreement that such a reinsurance fund is desirable both to give maximum protection to the workers and to make possible a considerable degree of national control. The suggestion was offered by Mr. Teagle that if the federal payroll tax rate is fixed at 3 per cent, 1 per cent be collected in all cases for the benefit of the reinsurance fund, and a credit allowed for payments under state unemployment insurance acts only up to 2 per cent.
The Council recessed at 1:15 p.m.
November 16, 1934.
The Committee convened at 2:30 p.m. with the same members present as during the morning session, except Mr. William Green and Mr. Leeds, who had other scheduled meetings. In addition to other persons present during the morning session, Dr. Arthur J. Altmeyer, Chairman of the Technical Board, was also in attendance.
The Council adopted a motion offered by Governor Winant that a subcommittee on unemployment insurance be created which would convene in the first part of the week beginning November 26 to prepare a report for the consideration of the entire Council, the meetings of which would be held on November 30 and December 1. This committee should consist of two representatives of the public, in addition to the Chairman of the Council, who is also to be chairman of the subcommittee, (with the understanding that the Vice-Chairman may act in his place). The Chairman appointed as such committee, Messrs. Leeds, Folsom, Green, Scharrenberg, Winant, and Kellogg.
Mr. Nordlin suggested that the constitutions of many states require payment of all taxes into the general fund of these states. This provision may present an obstacle to the development of a cooperative federal-state plan on the Wagner-Lewis model. The staff of the Committee was instructed to make a study of these constitutional provisions, to determine whether in effect, they will prevent the adoption of the Wagner-Lewis device.
The question of the administration of federal machinery necessary for setting up unemployment insurance systems was briefly discussed. Two alternative possibilities were considered: The establishment of a corporation, also within the Department of Labor, and the establishment of a corporation, also within the Department of Labor, which will have rotating members in order to insure continuity of management. It was also suggested that a full-time board of, say, five directors of a corporation acting with the Secretary of Labor and the Secretary of Commerce as ex-officio members could be vested with the duty of continuously studying and developing possibilities for preventing unemployment. In opposition to the suggested corporation, the view was expressed that such an administration would be somewhat more costly, and that the value of such an administration would be somewhat more costly, and that the value of such an organization depends upon whether or not a large reinsurance fund were set up by the federal government.
The issue concerning whether or not industry and house funds should be permitted was then discussed at considerable length. House, and to a lesser extent also, industry funds were objected to on the score that these funds would often be exhausted and employees thus deprived of protection. On the other hand it was argued that pooled funds may also become exhausted, and that in such an event the employees in industries and plants in which there is very little unemployment might be deprived of benefits because other plants and industries has a much larger volume of unemployment. It was also argued that should plant and industry funds be permitted, employers will be much more inclined to distribute work. On this side it was also claimed that plant and industry funds tend toward stabilization of employment. This was regarded as an argument having little force by the opponents of the house funds. There was general agreement that house funds should not be permitted in very small plants or in industries in which there is very little likelihood that any substantial reserve funds will ever be built up.
The Council again discussed the question of extended benefits and governmental contributions toward unemployment insurance costs. The majority of the members appeared to be of the opinion that governmental contributions toward unemployment reserve funds are not desirable and that insurance and public assistance should be kept as nearly distinct as possible. It was urged that unemployment insurance must not be regarded as a complete measure of economic security, but must necessarily be accompanied by other measures, such as public assistance and public employment, which will afford protection to the large percentage of the population which cannot be brought under unemployment insurance immediately, and also to insured workers whose benefits are exhausted.
The Council adjourned at 4:30 p.m. with the understanding that the subcommittee on unemployment insurance will convene on November 26 and that the Council will hold its next meeting on Friday, November 30 and Saturday, December 1.
Edwin E. Witte, Secretary.
Time and place: December 6, 1934, 10:00 a.m.;
2062 Commerce Building.
Members present: Frank P. Graham, Chairman; Grace Abbott; Mary Dewson; Helen Hall; Elizabeth Morrissy; Belle Sherwin; Marion B. Folsom; William Green; George M. Harrison; Joel D. Hunter; Paul Kellogg; Morris E. Leeds; George H. Nordlin; Sam Lewisohn; Rev. John A. Ryan; Henry Ohl; Gerard Swope; and Walter Teagle.
Other persons present: Edwin E. Witte, Secretary of the Advisory Council
Thomas H. Eliot, Counsel of the Committee on Economic Security, and Messrs. Harris, Murray, and Stewart of the staff of the Committee on Economic Security.
The Chairman announced that the President had appointed Miss Elizabeth Morrissy of the College of Notre Dame, Baltimore, Maryland, as a member of the Advisory Council, to succeed Miss Josephine Roche, who resigned from the Council because she has been appointed to federal office and has been made a member of the Technical Board on Economic Security.
The minutes of the meetings of the Advisory Council on November 15 and 16 were corrected to show that Miss Abbott was named a member of the sub-committee on unemployment insurance instead of Mr. Kellogg, as indicated in the minutes originally distributed .
The Secretary distributed the agenda for this meeting and the following list of documents:
I. Unemployment Insurance
1. "Major Issues in Unemployment Compensation, " by Edwin E, Witte.
2. "Outline of the Wagner-Lewis Bill, " by Thomas H. Eliot.
3. "A Comparison of the Respective Merits of the Wagner-Lewis Bill and the Subsidy Plan," by Thomas H. Eliot.
4. A brief, "Why Industries and Large Employers, Operating in Several States, should not be Allowed Special Federal Treatment," by Thomas H. Eliot.
5. "Proposed Federal Unemployment Compensation Bill," (on the subsidy plan) by Bryce M. Stewart and Merrill G. Murray.
6. "Proposed Model Bill for State Unemployment Compensation," by Bryce M. Stewart and Merrill G. Murray.
7. "Argument in Support of the Subsidy Plan, " by Bryce M. Stewart.
II. Employment and Relief.
"Report of the Advisory Committee on Employment and Relief."
III. Old-Age Security
"Preliminary Recommendations on Old-Age Security, " by Edwin E. Witte.
IV. Risks to Economic Security Arising Out of Ill Health," by the staff of the Committee.
V. Security for Children
1. "Outline of Recommendations," by Edwin E. Witte.
2. "Security for Children," summary by Edwin E. Witte of recommendations of the U.S. Children's Bureau, prepared in cooperation with the Advisory Committee on Child Welfare.
The Council proceeded to a consideration of the subject of unemployment insurance. The Secretary advised the Council that he had been instructed by the Committee on Economic Security that its recommendations on unemployment insurance should be presented to the President at the earliest date possible, and further, that the Committee has planned a meeting to consider this subject, to be held at noon on Friday, December 7, and hoped that the Advisory Council would be able to give it advice on the major issues of unemployment compensation by that time. It further requested that the Advisory Council designate a committee to represent it at this scheduled meeting to lay before the Committee the recommendation of the Council on this subject.
The Council then proceeded with a consideration of the major issues in unemployment compensation as outlined by its Secretary, on the basis of the deliberation of the Council's committee on unemployment insurance, in its sessions held November 26 to December 1. Under each major subject the questions raised in the outline were discussed and action taken thereon as indicated below.
In the consideration of these several questions, the Council assumed a cooperative federal-state system, in which the federal government would levy a uniform tax on industry to induce action by the states, and the states would be responsible for the actual administration of benefits. It also assumed the desirability of allowing wide latitude for experimentation by the several states, subject, however, to the condition that all reserve funds should be deposited in the Federal Reserve Banks and invested and liquidated under rules and regulations to be made by the same agency which is responsible for the credit policies of the government.
It was decided to recommend compulsory coverage of all employers with six or more employees, including those engaged in agriculture and domestic service, but excluding interstate carriers if a special system for unemployment compensation to the employees of such interstate carriers established. Public construction work done by contractors should be included within the compulsory coverage on the same basis as other work carried on by private employers. Educational, charitable, and religious institutions should likewise be included. The inclusion of the employees of state and local governments, as well as of federal employees, however, was left for later consideration. Only the first $50 of the weekly pay of employees included under the act is to be subject to the federal excise tax.
The Council decided to recommend, concerning contributions, that the federal law impose a payroll tax of 3 per cent on employers subject to the act, beginning with the year 1936, but with the understanding that timing provisions may be permitted under which the full rate of tax would not become effective if business recovery does not reach an agreed index figure. (Before arriving at this rate of payroll tax the Council rejected a proposed rate of 5 per cent by a vote of 7 to 10, and a proposed rate of 4 per cent by a tie vote of 9 to 9; after which the rate of 3 per cent was agreed upon by a vote of 15 to 3). No contributions should be required from employees if they so desire. No contributions should be required from general federal revenues. It is suggested, however, that in the report of the Committee, as well as in connection with any model bill which may be recommended attention be called to the fact that more adequate benefits could be paid if contributions were increased, without specifying whether these increased contributions should come from employers, employees, or the government.
In the determination of benefits the principle to be followed should be that unemployment compensation should not attempt to create a fund which will remain entirely self-supporting and solvent during a period of as severe and prolonged a depression as that through which we have passed. Unemployment compensation should not be made to carry the entire load of depressional unemployment, but rather should be directed toward the unemployment of more normal times. The benefits to be recommended in the model bill and in all actuarial calculations made public should be based on the experience of the period 1922-1930, rather than of the period from 1922-1933. The standard maximum length of benefits should be fixed in accordance with the calculations of the actuaries, but provisions should be included under which a longer period of benefits would be allowed to employees who have a long employment record during which they had not drawn upon the unemployment insurance funds. Wide latitude, however, should be allowed to the states, subject to the minimum standards prescribed in the federal law, to make some variations as to waiting periods, rates of benefit, ratio of number of weeks of benefit to weeks of employment, and other features regarding benefits.
A. Industrial and house funds within a single state. States should be permitted freedom to establish either exclusive pooled unemployment insurance funds or to permit industrial and house funds. Industrial and house funds, however, should be permitted only on condition that the state law provides either (1) that the companies exempt from the contributions to the pooled state fund must guarantee payment of the full benefits to which employees may become entitled under the law, without any reduction should their reserve accounts run low, and that they establish to the satisfaction of the state authorities that they have sufficient liquid assets, not less than 15 per cent of their annual payroll actually to guarantee benefits, or (2) that such companies contribute at least 1 per cent of their payrolls to the state fund, with a right to share in this fund in the event that their own reserve accounts run low, and they establish financial responsibility to the satisfaction of the state authorities.
B. Interstate, industrial and company funds. The question of whether or not such funds should be permitted was discussed at some length, but a decision on the subject was deferred until the next meeting.
C. Reinsurance equalization fund. It was decided that it is not practical at this time to set up any federal reinsurance fund, but that this subject should be studied by the federal administrative agency.
D. Interstate transfers of employees. The principle that employees who have unused benefit credits should not lose these credits because they change their employment from one state, industry, or house fund to another, was recognized, but was felt that no plan to carry out this principle can be worked out quickly. It is recommended that the federal administrative agency be instructed to study this problem and adopt rules for carrying out this policy prior to the time when benefits actually become payable.
E. State administration. The federal law is to require that states must accept the provisions of the Wagner-Peyser Act and provide for the administration of unemployment compensation through the public employment offices. All personnel connected with the administration of unemployment compensation should be selected on a merit basis, under rules and regulations to be prescribed by the federal administrative agency. It should also be provided in the federal act that the state administrations must furnish what statistics and reports the federal agency may require.
F. Federal administration. The question of whether an independent federal agency should be set up for the administration of unemployment compensation, or whether the administration should be vested in the Department of Labor with an independent policy and rule-making board appointed by the President, was considered, but no final action taken thereon.
The Council adjourned at 6:00 p.m. To meet again December 7 at 9:00 a.m.
Time and place: December 7, 1934, Forenoon Session, 9:30 a.m.; 2062 Commerce Building.
Members present: Frank Graham, Chairman; Grace Abbott; Mary Dewson; Helen Hall; Marion B. Folsom; William Green; Joel T. Hunter, Paul Kellogg, Morris E. Leeds; Sam Lewisohn; Elizabeth Morrissy; George H. Nordlin; Henry Ohl; Rev. John A. Ryan; Belle Sherwin; Gerard Swope; and Walter Teagle.
Other persons present: Edwin E. Witte, Secretary of the Advisory Council, Thomas H. Eliot, Counsel of the Committee on Economic Security; and Messrs. Harris, Murray and Stewart of the staff of the Committee on Economic Security.
The minutes of the meeting of December 6 were presented to the members and with minor corrections suggested were adopted as the basis for the report to be presented by the Advisory Council to the Committee on Economic Security, as embodying the conclusions reached on the particular aspects of unemployment compensation dealt within these minutes.
The Council considered what representation it should have at the meeting of the Cabinet Committee on Economic Security, called to meet at 12:00 noon today, to which meeting the Cabinet Committee has invited the Advisory Council to send representatives to present the recommendations of the Council on unemployment compensation. Upon motion, it was decided that the Council should be represented at this meeting by its sub-committee on unemployment insurance consisting of Frank Graham, chairman; Grace Abbott; Marion B. Folsom; William Green; Paul Kellogg; and Morris E. Leeds.
The Council then proceeded with the consideration of unemployment compensation and reached the following conclusions:
Time federal tax measure should be effective. The recommendation of the subcommittee on unemployment insurance was adopted. This recommendation suggests that the federal tax measure take effect January 1, 1936, with a proviso that if in the year of 1935 the index of production of the Federal Reserve Board should be less than 90 per cent of 1926, the tax to be collected for the year 1936 shall be only 1 per cent (but thereafter the rate is to be 3 per cent regardless of any index of production).
Interstate industrial and company funds (Accounts). It was decided that interstate industrial and company funds be permitted, subject to the following conditions: (1) only industries and employers who have a substantial number of employees in each of two or more states, shall be permitted to establish interstate funds; (2) interstate industrial and company funds must make a contribution of 1 per cent of their payroll to the pooled state funds of states which they operate having such funds; (3) interstate industrial and company funds must give as liberal benefits in each state in which they operate as required by the law of that state; (4) interstate industrial and company funds shall be exempt from other requirements of the laws of the states in which they operate only with the approval of the state unemployment compensation authority; and (5) interstate industrial and company funds may be set up only with the approval of the federal administrative agency.
Type of federal law (Wagner-Lewis versus Subsidy Plan). The Council began the discussion of the subject of the type of federal law to be recommended and heard various members of the staff on this subject, but reached no conclusions.
Monsignor Ryan explained to the Council that he would be unable to attend the afternoon session but, on the basis of discussion to this point, desired to state he preferred the subsidy plan to the Wagner-Lewis type of legislation.
The Council recessed at 12:50 p.m until 2:30 p.m. to permit its sub-committee on unemployment insurance to report to the Cabinet Committee on Economic Security.
Mr. Leeds made a report in behalf of the sub-committee on unemployment insurance regarding the discussion of the Council's recommendations at the meeting of the Cabinet Committee on Economic Security. Mr. Leeds reported that the discussions at the Cabinet Committee meeting developed that at least some if the members of the sub-committee did not understand that the action of the Council in the conditions on which industrial and house funds was exactly that set forth in the minutes of yesterday. On motion of Mr. Leeds a sub-committee was appointed to prepare a statement setting forth more completely the position of the Council on industrial and house funds and the conditions on which they would be permitted. The chairman named Messrs. Kellogg, Folsom, Leeds, and Nordlin as such sub-committee.
Mr. Leeds also reported that sentiment was expressed at the Cabinet meeting that limitation of coverage recommended was too great, particularly as it excludes the majority of employees in agricultural and domestic service. After discussion it was decided to let the recommendation on coverage stand as agreed upon at yesterday's Meeting by to include also a recommendation that the federal administrative authority be required by law to develop a plan for a wider coverage for presentation to Congress when a feasible plan had been worked out.
It was also reported to the Council that at least one member of the Cabinet Committee strongly expressed himself in favor of requiring deposit of all unemployment insurance funds in the federal treasury rather than in the Federal Reserve Banks. No action was taken to change to recommendation made by the Council that the funds be deposited in the Federal Reserve Banks. The Committee then continued the consideration of the type of the federal law to be recommended. After extended discussion the Council adopted the following resolution by a vote of 9 to 7, with Professor Moley not voting:
"RESOLVED, the Advisory Council recommended the adoption of a combination of a federal tax and grant-in-aid to the states for unemployment insurance, provided (if legally possible) that no grants or credits shall accrue to any state or to plant systems within the state, until a state law is in effect providing for unemployment insurance, and provided further that the federal law shall be fortified by any other feasible provision designed to speed the enactment of state laws."
The Council adjourned at 5:00 p.m., to meet again at 9:00 a.m., December 8.
Time and place: December 8, 1934, Forenoon Session, 9:30 a.m.; 2062 Commerce Building.
Members present: Frank P. Graham, Chairman; Grace Abbott; Mary Dewson; Helen Hall; Elizabeth Morrissy; William Green; Joel D. Hunter; Paul Kellogg; Morris E. Leeds; Sam Lewisohn; George H. Nordlin; Henry Ohl, Rev. John A. Ryan, Louis J. Taber; Walter Teagle; and Gerard Swope.
Other persons present: Edwin E. Witte, Secretary; and Messrs. Boyd, Harris, Murray, and Stewart of the staff of the Committee on Economic Security.
The minutes of the meeting of December 7 were distributed and members noting any statements requiring correction were requested to advise the Secretary.
The Council referred to the staff for report at a later meeting consideration of a new type of federal unemployment compensation bill, which would incorporate the following features: (1) provisions for an excise tax on industry; (2) provisions for the return of the proceeds of this excise tax to the states from which collected if they pass approved unemployment compensation measurers; (3) provisions to the effect that if any state passes an act for the collection of an excise tax on industry for unemployment compensation purposes, and at the same time enacts an unemployment compensation law which will satisfy the federal requirements, instead of the subsidy provided under (2) the employers in such state shall receive a credit against the federal tax equal to the tax paid by them under the state law.
The Council then considered the outline of a federal bill in the subsidy type prepared by Messrs. Stewart and Murray. After extended discussion, a motion was adopted that no bill be submitted to the Committee on Economic Security by the Advisory Council, but that the standards in the bill considered which were accepted by the Council and which have not been incorporated in the minutes if the meetings of the Council of the two preceding days be inclined in the report of the Advisory Council to the Committee. Major matters dealt with in consideration of the outline of the federal bill which had not been decided previously were the following:
Refund of tax when employers have accumulated a sufficient reserve. It was decided to recommend the allowance as a subsidy a refund of the federal tax to industries and employers which established an authorized industry or plant account and have accumulated a reserve of 15 per cent of the average payroll in the preceding five years, so long as a reserve of this amount was maintained. Similar refund should be allowed to employers who became entitled to a lower rate of contribution under a merit-rating plan adopted in a state maintaining a pooled unemployment reserve fund.
Administration expenses. Two per cent of the proceeds of the federal tax should be retained for the expenses of the federal government in the administration of the unemployment compensation act. It was suggested also that the state administrative expenses be limited, but no definite limitation was decided upon.
Probationary period. It was decided that the matter of the length of the probationary period to which employees should be subjected before they could claim any unemployment compensation might be left to the states. In the federal tax on industry, no mention should be made of the probationary period.
Claim procedure. In addition to the decision previously reached that unemployment compensation should be paid through the employment offices, it was decided that disputed claims should be heard and decided in first instance by an impartial paid referee or by a local committee consisting of an impartial paid chairman and representatives of the employer and the employee, or in such other manner as may be approved by the federal administrative agency.
The following resolution was adopted unanimously by the Council:
"The Advisory Council throughly approves the statement the President made to the National Conference on Economic Security that 'Unemployment insurance must be set up with the purpose of decreasing rather than increasing unemployment.'
"The Advisory Council had recommended that the states be permitted freedom as to the type of plan to be established. It recommends, however, that the Committee on Economic Security in considering federal legislation and the states in considering state legislation keep in mind the following two principal objectives:
"(1) any plan recommended should promote security by providing a system of compensation for workers who are laid off;
"(2) any plan recommended should serve as an incentive to employers to provide steady work and to prevent unemployment."
The following statement was adopted by the Council to be incorporated in its report to the Committee on Economic Security as a statement of its position on the type of federal law preferred by a majority of the members of the Council.
"The Council by a 9 to 7 vote (Professor Moley not voting) adopted a motion recommending a federal payroll tax coupled with an act granting or appropriating the taxes collected within any state to the credit of an approved state unemployment insurance fund, conforming to the standards of the federal law, or to private funds approved under state law. The motion also recommended including a provision in the federal law to the effect that no state or private fund should receive grants until a state law providing for unemployment insurance was in effect, and any other feasible provisions designed to stimulate prompt state action. Seven members of the Council preferred a Wagner-Lewis type of law and voted against the motion.
"The majority of the members favored the federal grant-in-aid type of law on the ground that it would facilitate national standards; some of these members favored it because it would lead more readily to a national plan than the Wagner-Lewis type of law, if a national plan ever became advisable. A number of members doubted that necessary national standards could be provided under the Wagner-Lewis type law. The majority group believed that federal collection and federal control of the funds through the power to allow or disallow grants, would be an important element in national control.
"The seven members favoring the Wagner-Lewis type of law believed that it would lead to speedier action by the states. They were also influenced by the considerations, (1) that if the federal act were declared unconstitutional, the state laws would remain, and (2) the problem of annual appropriations by Congress which would be required under the grants-in-aid plan would make the continued level operation of the system uncertain. Some if these members thought that extensive federal standards were not necessary at this time, and those needed could be provided under the Wagner-Lewis type of law. These members also believed that it would be possible under a Wagner-Lewis type of law to change to greater national control or to a national system, if either became advisable in the future.
"All of the members recognized that each type of law has distinct merits, and wished their votes to be interpreted not as necessarily opposing either type of law, but as preferring one or the other."
Industrial and house funds (accounts) within a single state. The sub-committee appointed to draft a statement of the Council's position on industrial and house funds (accounts) presented a report making the following recommendations relating to industrial and house funds with or within a single state:
The state plan shall require one of the following methods:
"(a) state-wide pooling of funds with or without adjustment of contributions rates according to experience;
"(b) separate accounts for any employer or group of employers who may wish to establish them, providing financial guarantees are given, in such manner as the state administrative agency may require, equal to 15 per cent of the average annual payroll during the preceding five years or two years, whichever is higher, providing pooled fund for all other income, with adjustment of contribution rates according to experience; © separate accounts for any employer or group of employers who may wish to establish them provided contributions of not less than 1 per cent of the payroll are made to the pooled fund, pooling other income in such fund, possibly requiring financial guarantees for the amount to be kept in the separate account;
"(d) separate accounts for all employers or groups of employers provided contributions of not less than 1 per cent of pay roll are made to a state fund."
In explanation of these recommendations Mr. Folsom of the sub-committee presented the following statement:
"Under a state plan providing for separate accounts with guarantees, the employer will put up the guarantee (15 per cent of payroll) immediately upon receiving the approval of the state agency for a separate account. He will pay each year for five years the 3 per cent tax, and his account will be credited with the tax payments and debited for any unemployment benefit paid to his employer. The guarantee will be reduced by the amount of the credit of the employer in his account. In order for a separate account to maintain its status as such it must always maintain a guarantee so large that this guarantee plus the credit in the employers account will equal 15 per cent of the average annual payroll during the preceding five years or two years, whichever is higher.
"When the employer's account has a credit equal to 15 per cent of the average annual payroll, any further sums accumulated to the credit of such accounts shall be refunded by the state to the employer."
A motion was then offered that a fifth method of dealing with this question be permitted the states, under which industry and plant accounts might be allowed under such terms as the state law might permit, without any compulsory guarantees or contributions to any pooled fund. This motion was lost by a tie vote of 6 to 6, after which the Council approved the recommendations presented by the sub-committee.
Interstate industrial and house funds. On the question of interstate industrial and house funds, Mr. Folsom submitted the following explanation of the position taken by the Council on this subject at its meeting yesterday:
"Employers or groups of employers with a substantial proportion of their employees in more than one state may establish interstate funds with the approval of the federal administrative agency and the authorities in the states affected, provided such plans are not less beneficial than the plans in each state affected, and upon payment of 1 per cent into the state fund."
This statement was approved without any formal vote.
Guaranteed employment. The Council then considered the place of guaranteed employment in an unemployment compensation system. After discussion it was decided that plans for guaranteed employment to be set up either within a state or on an interstate basis subject to he following conditions should be permitted:
(1) Employment for at least 55 per cent of the maximum period of possible work during the year for the standard hours per week worked in such plant, whichever is the higher, should be guaranteed, and employees who are not given an opportunity for work equal to such guaranteed minimum work period should be entitled to recover full wages for the part of the guaranteed employment for which work is not provided;
(2) guaranteed employment plans should be permitted only when the grantee applies to all employees of the company or of all employees in any plant or department of such company.
(3) guaranteed employment plans should be established only with the approval of the federal and or state administrative agency, under such financial guarantees as such authorities might require.
Where approved plans for guaranteed employment are put into operation and their conditions fully complied with, employers maintaining such plans should have returned as a subsidy to them, the federal excise tax levied against them.
Employment administration. It was decided to recommend that there be created within the Department of Labor an unemployment compensation board to consist of the Secretary of Labor as chairman, the Secretary of Commerce, and five members appointed by the President for terms of five years (which shall initially be staggered so that the term of one member will expire each year). This board should have responsibility for the approval of state laws and all other matters of policy and discretion in connection with the federal unemployment compensation act. The conduct of the employment offices and the compilation of statistical and other information, however should remain a function of the Department of Labor, the intent being to make a separation between policy-making and quasi-judicial functions on the one hand, and the daily work of administration on the other, leaving the former to the unemployment compensation board and the latter to the Department of Labor.
Employment and relief. The Advisory Council approved the following statements relating to private employment:
(1) Under the existing economic system private employment must be the main source of support of the majority of the wage earners. Economic recovery depends more upon the revival of private industry than upon anything else. The stimulation of private employment and the protection of adequate living standards should continue to be regarded as the prime governmental objectives.
(2) An enlarged and improved United States Employment Service is essential to any adequate program for economic security.
(3) The federal government should undertake the regulation of fee-charging private employment agencies operating on an interstate basis.
The Council them considered the report of the advisory committee on employment and relief, a copy of which had been delivered to each member of the Council. Some discussion developed regarding the jurisdiction of the Committee on Economic Security to deal with the existing relief problem. Without reaching any definite decision upon this point, it was decided to approve in principal the recommendations of the advisory committee on employment and relief as a necessary part of any longtime program for economic security.
Old-age security. The Council considered the report of the Director and his staff on old-age security, a copy of which was distributed to the members and which was further explained by the Executive Director, Mrs. Armstrong, Messrs. Brown and Richer of the staff, and Mr. Murray Latimer, Chairman of the Railroad Retirement Board and also chairman of the sub-Committee on old-age security of the Technical Board on Economic Security. Discussion developed that some members of the Council felt that employers should not be required to make any contributions for old-age insurance and that other members felt that there should be no compulsory contributions on part of employees, but that instead, provisions for old people in need should be made from general tax revenues. A majority of the Council, however, voted to approve in principle the recommendations made in the report on old-age security, embracing (1) a 50 per cent federal subsidy toward meeting the costs of non-contributory old-age pensions paid by states to people over 65 years of age on a needs basis; (2) a contributory federal old-age insurance system, under which the contributions will be divided between employers, employees, and the federal government, with the latter making contributions until 1965; and (3) a voluntary federal system of old-age annuities available to people who cannot be brought into the system on a compulsory basis.
Future procedure. The Council then discussed the presentation of its report to the Committee on Economic Security. It was decided that the several sections of the report shall be presented to the Cabinet Committee by a small committee, to include the Chairman and such other members as the Chairman might select, including at least one employer and one employee representative. It was also decided that this sub-committee should hold meetings during the first part of the coming week to prepare a written report on unemployment compensation embracing the conclusions reached by the Advisory Council and also to prepare recommendations relating to the subject of old-age security and matters dealt within the agenda not taken up during the meetings of the Council held this week. These recommendations are then to be presented to a final meeting of the Advisory Council to be held on the following Friday and or Saturday.
The Council adjourned at 6:00 p.m. to meet again on call of the Chairman.
Time and place: December 15, 1934, Forenoon Session, 10:15 a.m.; 2062 Commerce Building.
Members present: Frank P. Graham, Chairman; Grace Abbot; George Berry; Mary Dewson; Marion B. Folsom; William Green; Helen Hall; Joel D. Hunter; Paul Kellogg; Morris E, Leeds; Sam Lewisohn; Raymond T. Moley; Elizabeth Morrissy; George H. Nordlin; Henry Ohl; Belle Sherwin; Gerard Swope; Walter Teagle; and Gov. J.G. Winant.
Other persons present: Edwin E. Witte, Secretary; and Joseph P. Harris of the staff.
It was moved by Mr. Nordlin that the minutes as distributed to the members be approved without reading, subject to such corrections as individual members may request. The motion was seconded and adopted.
Unemployment compensation. The Council proceeded to take up the report of the subcommittee on unemployment compensation, which after reading was amended as follows:
It was moved by Mr. Moley to insert the word "calendar" before the word "year" in subsection 1 on guaranteed employment (middle of page 11). The motion was seconded and adopted. It was moved by Mr. Folsom to incorporate a paragraph in the minutes of the meeting of December 8, top of page 9, reading as follows:
"Where approved plans for guaranteed employment have been put into operation and their conditions have been fully complied with, employers maintaining such plans shall, as a subsidy, have returned to them the federal excise tax levied against them."
The motion was seconded and carried.
It was moved by Mr. Lewisohn, amended by Mr. Nordlin, that subsection 2 on guaranteed employment be revised to read as follows:
"(2) Guaranteed employment plans are to be permitted only when the guarantee applies to all employees of any company, plant, or any separate department (properly defined) or such company."
The motion was carried.
It was moved by Mr. Nordlin, seconded, and carried, that subsection 3 on guaranteed employment be amended to read:
"(3) Guaranteed employment plans may be established only with the approval of the state administrative agency, under such financial guarantees as such authorities may require, except in interstate accounts the approval of the federal authority shall also be required."
It was moved by Mr. Swope that the report be amended to recommend that the chairman be appointed by the President instead of being ex officio, but that the Council recommend the appointment of the present Secretary of Labor as the first chairman. The motion was seconded and carried.
It was moved by Mr. Kellogg and amended by Mr. Nordlin, that the words "and state" be added after the word "federal", third line, paragraph on administration expenses, and that the last line of the same paragraph be stricken and the words "of the state from the amount remitted by the federal government" be substituted.
The motion was seconded and carried.
It was moved by Mr. Swope that the Council recommend the principle of employee contributions. The motion was seconded. At this point Mr. Moley had to leave and requested to have his vote recorded in favor of the principle of employee contributions. Mr. Swope accepted an amendment, proposed by Mr. Berry, that the motion read that the Council favors employee contributions as an additional levy to be provided by the states. Miss. Dewson offered a substitute motion that the Council opposes the principle of employee contributions. Mr. Green pointed out that the motion was stated negatively and that it would be better to have it stated affirmatively. Mr. Swope offered an affirmative motion that the Council favored employee contributions in addition to the 3 per cent employer contributions required by the recommended federal act in any unemployment compensation system which may be set up. Mr. Ohl raised the point of order that motions on the subject of employee contributions were out of order as they conflicted with the previous action of the Council. President Graham ruled that such motions were supplementary and not contrary to the previous action of the Council. Miss Abbott suggested that the vote be taken simply by a show of hands of those in favor of the principle of employee contributions and those opposed to this principle. The vote was 8 for (including the vote of Mr. Moley who had left the room), and 10 against, Mr. Leeds not voting on the ground that the question was too general.
Mr. Kellogg moved that the following sentence in the tentative draft, page seven, which had not been previously formally adopted by the Council, be incorporated in the report:
"The Advisory Council does not recommend that employee contributions be provided for in the federal act."
The motion was seconded and carried, 13 to 4. It was moved by Mr. Nordlin that the word "considerable" in the sentence following, and the word "large" in the first line of the next paragraph, pages seven and eight, be stricken. The motion was seconded and carried.
Miss Abbott pointed out that the language of the report presenting the arguments for the subsidy type of law had been greatly strengthened in the editing of the report. At this point President Graham called upon Miss Dewson to read a statement which she had prepared, strengthening the arguments for the Wagner-Lewis type of federal act. Miss Dewson read such a statement. It was then moved by Mr. Nordlin that Miss Dewson's statement be substituted for the paragraph on this subject in the tentative draft. The motion was seconded and carried. Miss Sherwin suggested it be abbreviated to conform in style to the statement in favor of the subsidy type. This suggestion was accepted by Miss Dewson.
Mr. Folsom called attention to the fact that the provisions adopted by the Council concerning the benefit rate in the case of regular part-time workers on page seven of the document with mimeograph number 4177, had not been incorporated in the report. It was moved, seconded, and carried that this be incorporated in the report. Mr. Folsom also called attention to the fact that the tentative draft, section on coverage, paragraph C4, page seven, did not define "suitable employment" and contained the language of the Wagner-Lewis bill instead of that which the subcommittee had worked out and the Council had adopted. Mr. Harris stated that he had been instructed by the subcommittee to substitute the language of the Wagner-Lewis bill in this paragraph, the instruction being somewhat indefinite as to whether the Wagner-Lewis bill section should be substituted in whole or in part. Mr. Green moved that the tentative draft be left as it stands. This motion was lost by a vote of 7 to 9. Mr. Folsom then moved that this section be amended by restoring the sentence defining "suitable employment" as follows: "Suitable employment means employment for which the insured is reasonably fitted and within a reasonable distance", and also by striking subsection 3 in paragraph incorporating instead the following: "and which does not affect the applicant's right to accept or refrain from accepting, or retaining membership in or observance of the rules of an organization of employees."
The motion was adopted 12 to 2.
The Council adjourned at 1:15 p.m. to meet again at 2:30 p.m.
President Graham called the council to order at 2:40 p.m. Of those attending morning session, all were present except Messrs. Leeds and Moley. It was moved by Mr. Nordlin that the section of the report on national standards be amended to read as follows: "The recommendation that the standards, conditions and recommendations as to state laws, us set forth herein, shall be included in the federal bill, regardless of the type of legislation adopted." The motion was seconded and carried.
Mr. Folsom asked Mr. Witte if he would not make a statement concerning the parts of the report on unemployment compensation which might make it difficult to secure federal and state legislation.
Mr. Witte in making a statement said that he first wished to convey to the Council a request from the Chairman of the Committee on Economic Security that no publicity be given to the proceedings of the council, recognizing the desirability of avoiding embarrassing publicity at this time would likewise refrain from making public its recommendations to the Committee on Economic Security.
Mr. Witte then stated that he felt a responsibility, because of his position, to point out to the Advisory Council that the incorporation of numerous standards in the federal act, particularly detailed standards of definitions, benefits, waiting periods, etc., would greatly retard action by Congress and prevent the states from enacting state laws until the federal act had been finally adopted, and endanger the whole program from the standpoint of being adopted next year. After discussion of the advisability of detailed standards in the federal action, a motion was offered by Mr. Nordlin to the effect that the policy as to whether any or all of the recommended standards should be included in the federal act should be left entirely to the judgement of the Cabinet Committee. After further discussion a motion was offered by Mr. Folsom, seconded, and carried 13 to 3 that the following statement be incorporated in the report: "The majority of the Council are of the opinion that the minimum standards herein provided should be incorporated in the federal act, but the Council realizes that as matter of policy, in order to secure federal and state recognition the Committee on Economic Security may feel it advisable to omit or amend some of these standards in the federal act."
Mr. Kellogg pointed out that one of the standards adopted by the Council concerning the maximum duration of benefits of not less than 14 weeks as contained on page seven, paragraph B of section 5, document with mimeograph number 4177, had been omitted from the report. He moved that it be incorporated on the report. The motion was seconded and carried.
Mr. Kellogg requested the privilege of incorporating a memorandum which he had prepared on the need for more adequate unemployment benefits than would be provided by a 3 per cent levy upon payrolls, as a supplementary statement to the report. Mr. Hunter moved that any supplementary statements which any member wished to submit to the Committee on Economic Security should be transmitted individually, separate from the report of the Council. The motion was seconded and carried.
Mr. Teagle moved that the report should not include a statement of the votes cast and the number favoring and opposing each motion. The motion was seconded and carried.
It was then moved, seconded, and unanimously carried that the report on unemployment compensation as amended be adopted as the report of the Council.
The Council next turned to the report on old-age security. After reading the report action was deferred until the technical staff could appear to discuss the report with the Council.
The report on economic risks arising out of ill health submitted by the subcommittee was next read and adopted.
The report transmitted by the subcommittee for the action of the Council on the security for children was next read. A motion was offered by Mr. Nordlin to amend the report to permit the provision for a child and maternal health program to be developed under the state public welfare agencies as well as state departments of health. The motion was seconded and carried. The motion by Miss Hall that the report be adopted as amended was seconded and carried.
The Council next turned to the report on old-age security and discussed various aspects of the report of the technical staff, consisting of Drs. Armstrong and Brown, and Mr. Richter. Attention was called to one or two typographical errors in the manuscript of the report which were corrected. The council then adopted the three sections of the report, voting upon them individually. A motion was made to thank the technical staff on old-age security, including Mr. Latimer, Chairman of the Railroad Retirement Board, for their excellent work in preparing the able report and for their clear presentation of it at various times to the Council. The motion was adopted by a rising vote.
Minority Report by Paul Kellogg
It was contended that such standards fall short of any reasonable protection of wage-earners in normal times, which is the limited objective of the proposed legislation. So far as length of benefits go, calculations supplied by the technical staff were offered as evidence, drawn from duration tables based on various studies and complied by the actuaries of the President's Committee on Economic Security. These showed that even in "good times" roughly half of the unemployed wage earners would fall in the long waiting period, and equally as many because they would have been out of a job after the end of the benefit period. A field survey was cited, made in 1928 for the Senate Committee in Labor (Senator Couzens, chairman) by Dr. Isador Lubin, now chief of the Bureau of Labor Statistics of the United States Department of Labor, which showed a still larger percentage who would have been without benefit at the time the survey was made.
The adequacy of the proposal was challenged from another angle, by tables prepared by the statisticians of the Committee on Economic Security. These compared the protection afforded under a 3 per cent contribution plan for the United States and that afforded throughout recent years by the standard benefits of the British system of unemployment insurance which has a 4.5 per cent contribution and which is contributed to equally by employers, employees, and the national government. It was pointed out, that an American worker, earning $2 a day, would lose $208 in wages if out of work for four or more months, and if eligible, would be assured by the proposed federal act of a total of $80 in unemployment compensation, or $6 per benefit week. In contrast, the tables showed that a qualifying British worker, earning the equivalent of $2 a day, if single, fared about the same as the American but, if married (wife and three children) would get $130 in the same period, and if allowance were made for relative purchasing power, he would get $156. As such, his benefits would fall 25 per cent short of his lost wages, while those of the American would fall short by 62 per cent. In the higher wage brackets, the tables showed that Americans would secure benefits as favorable as those of the British so long as the compensation of the individual lasted, but the American benefits begin after one week's waiting period and run on up to 26 weeks, or half a year.
It was contended that if the British people could swing such a coverage throughout the post-war depression, and are now liberating it, it is unthinkable that the people of the United States cannot match them in setting up a system of security in this period of anticipated recovery, with no benefits to accrue to unemployed workers until 1938, three years off.
Attention was called to the revised actuarial estimates submitted by the technical staff of the Committee on Economic Security, revealing as they did that if 1 per cent were added to the 3 per cent proposed, it would double the length of the benefits. Most of those who advocated these enhanced benefits recommended securing this 1 per cent by raising the payroll tax on the employers to 4 per cent. (They pointed out that in the original Wagner-Lewis bill it was 5 per cent.) Some advocated that the federal government contribute the additional income. All disagreed with the proposition that a worker who had qualified under our new system and whose savings were exhausted should find himself thrown upon public relief at the end of 14 or 15 weeks of unemployment compensation.