Committee on Economic Security (CES)

Volume VIII. Committee Activities


Report to the Committee on Economic Security

Copy No. _______

STRICTLY CONFIDENTIAL - Not to be Released for Publication.


DECEMBER 18, 1934


I. Unemployment Compensation
II. Old Age Security
III. Security for Children
IV. Employment and Relief
V. Risks to Economic Security Arising Out of Ill Health


Frank P. Graham, Chairman
Paul Kellogg, Vice Chairman
Grace Abbott
Elizabeth Morrissy
George Berry
George H. Nordlin
Mary Dewson
Henry Ohl, Jr.
Marion B. Folsom
Right Reverend John A. Ryan
William Green
Paul Scharrenberg
Helen Hall
Belle Sherwin
George M. Harrison
Gerard Swope
Joel D. Hunter
Louis J. Taber
Morris E. Leeds
Walter C. Teagle
Sam Lewisohn
Governor John G. Winant
Raymond Moley



All members of the Advisory Council join with the President in holding that legislation for unemployment compensation, on as nearly a nation wide basis as possible, should be enacted this winter.

We support his statement to the National Conference on Economic Security that "unemployment insurance must be set up with the purpose of decreasing rather than increasing unemployment." While we believe that the states should be permitted a large freedom in choosing the type of plan they establish, we strongly recommend that the Committee on Economic Security, in considering federal legislation, and that the states in considering state legislation, keep in mind these two principal objectives:

(1) The plan should promote security by providing compensation for workers who are laid off.

(2) The plan should serve as an incentive to employers to provide steady work and to prevent unemployment.

We regard it as settled that unemployment compensation at this time should be developed along federal-state lines. In this cooperative undertaking the federal government must assume the leadership. It should make it easier for the states to act by removing those disadvantages in interstate competition which are always raised against purely state legislation that involves costs to industry. This knot should be cut by requiring industries in all states (whether the states enact unemployment compensation laws or not) to make uniform payroll contributions. The federal government should enact a law prescribing minimum standards, and should actively assist the states in preparing necessary state legislation and in getting their plans into operation. The federal government should set up an administrative authority, and as suggested by the President, should assume responsibility for the safeguarding of all unemployment reserve funds and use these funds to promote stabilization.

The states for their part must assume responsibility for state administration. Unemployment compensation benefits must necessarily be locally administrated and no large bureaucracy in Washington need be created if this principle is observed. Subject to necessary minimum standards prescribed in the federal law, wide latitude should be allowed the states to experiment with respect to the particular form and provisions of the unemployment compensation laws which they may enact. Such laws should, however, be completely divorced from relief.

The Advisory Council makes the following specific recommendations:

TYPE OF FEDERAL LEGISLATION The Council adopted a motion recommending:

(1) A federal payroll tax.

(2) An independent act providing grants-in-aid to the states for unemployment compensation and employment stabilization, and similar grants-in-aid to industry and plants accounts, conforming to the provisions and standards of this federal act.

The motion also recommended that the federal law shall include a stipulation to the effect that no state shall receive such grants until its state law providing for unemployment compensation is in effect, together with any other feasible provisions designed to stimulate prompt state action.

The majority favoring the federal tax and federal grants-in-aid type of legislation did so because they believed this type of legislation would have advantages:

a. In dealing on a nationwide basis with situations which cross and transcend state boundaries.

b. In establishing and maintaining throughout this country the essential minimum standards.

c. In removing all obstacles to bring the reserve funds into federal control.

d. In that it would run less risk of unconstitutionality compared with the Wagner-Lewis type of legislation when the latter is equally equipped with provisions of minimum standards for the states.

e. In that federal collection and federal control of funds through the power to allow or disallow grants, would be an important element in National control.

f. In that it would lend itself more readily to developing a national system should that become advisable.

The minority favoring the Wagner-Lewis type of law believes that it is a general federal-state measure, utilizing traditional American methods and local machinery in the administration of labor laws and has the following advantages:

a. It permits experimentation by the states as to the type of state law to be adopted, waiting periods, the amount and duration of benefits, and as to other matters in which experimentation is desirable.

b. It secures uniformity where uniformity is essential, namely, the equalization of competitive costs.

c. It permits the requirement of all essential uniform standards, such as that money collected must be spent for unemployment benefits, the custody of the funds, and others.

d. It secures the advantages of federal supervision with decentralization of administration, and local responsibility.

e. It avoids the hazards of an annual appropriation by Congress.

f. It raises substantially the same constitutional questions as the subsidy type of bill, but has the great merit that should it be held unconstitutional, the state laws would be complete in themselves and would remain operative.

g. It will result in federal and state legislation this winter, while 44 state legislatures are meeting and there is strong public support, which is doubtful under the subsidy plan, particularly if many detailed standards to which the state laws must conform are inserted in the federal act.

All of the members recognized that each type of federal law has distinct merits, and wished their votes to be interpreted not as necessarily opposing either type of law, but as preferring one to the other.

TYPES OF STATE LAWS. We recommend that states be permitted to adopted any one of four types as follows:

(a) State-wide pooling of funds with or without adjustment of contribution rates according to experience.

(b) Separate accounts for any employer or group of employers who may wish to establish them, provided financial guarantees, in such manner as the state administrative agency may require, are given equal to 15 per cent of their average annual payroll during the preceding five years or two years, whichever is higher. A pooled account for all other employers, 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 one per cent of the payroll are made to pooled account. All other income is to be pooled in such account. Financial guarantees may be required for the amount which is to be kept in the separate accounts.

(d) Separate accounts for all employers (or groups of employers) provided contributions of not less than one per cent of the payroll are made to a state fund.(1)

INTERSTATE INDUSTRIAL AND COMPANY ACCOUNTS. Interstate industrial and company accounts which will be exempt from the requirements of state laws, except as hereafter stated, and which will be administered under rules and regulations to be prescribed by the federal administrative agency, should be authorized in the federal act, 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 accounts.

(2) Interstate industrial and company accounts must make a contribution of one per cent on their payroll to the pooled state accounts of states in which they operate having such accounts.

(3) Interstate industrial and company accounts 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 accounts must have the approval of each state in which they operate.

(5) Interstate industrial and company accounts may be set up only with the approval of the federal administrative authority.

REINSURANCE (EQUALIZATION) FUND. While it is very desirable that there should be a federal reinsurance fund in order to give equivalent protection to unemployed workers in all states and industries, the practical difficulties are such that the Advisory Council is satisfied that it cannot be set up at this time. We recommended, however, that the federal administrative authority study this subject.


COVERAGE: The federal acts should apply to all employers who employ directly, or indirectly through sub-contractors not subject to the law, six or more employees during any 13 weeks of the preceding year; excluding, however, employees not engaged in the usual trade, business, profession, or occupation of the employer. The states should be required to have at least as broad a coverage as that prescribed in the federal law. However, any employment for which separate system of unemployment compensation may be established by federal law should be excluded. Public employees of states, counties, and cities should be made eligible to unemployment compensation on the same basis as the employees of private employers. Only the first $50.00 of the salary or wage of employees covered by the act is to be included in the computation of the federal tax.

A broader coverage than that suggested is deemed desirable by the Advisory Council, but practical considerations lead us to recommend, however, that the federal administrative authority study the problem of extending the coverage to the employers of less than six employees. We recommend also that it work out plans for unemployment compensation to the employees of the federal government, especially those employed directly on construction or other work projects.

A. Types of unemployment benefitted

(1) Total loss of weekly wages caused by lack of work, or partial loss of weekly wages caused by lack of work amounting over a 4 week period to an average of more than 50 per cent of the normal full-time weekly earnings.

(2) Unemployment occurring in the regular work season of the year in trades in which regularly recurrent periods of slackness occur (the uncompensated slack periods to be designed by the competent administrative agency).

B. Types of unemployment not benefitted

(1) Unemployment of persons directly engaged in trade disputes for duration of dispute.

(2) Unemployment caused by discharge for proved misconduct.

(3) Voluntary quit without reasonable cause may be uncompensated entirely or for such period as the plan may designate.

(4) Unemployment during which workmen's compensated entirely or other compulsory cash benefits are received.

C. Eligibility

(1) Fulfillment of the following qualifying periods:

(a) Employment of not less than 40 weeks in 24 months preceding claim.

(b) Employment not less than 10 weeks after maximum duration of benefits in a 12 months period is drawn.

(2) Registration at public employment office or other designated place and at times stated.

(3) Able to work and available for work.

(4) Unable to find suitable employment. Suitable employment means employment for which the insured is reasonably fitted, and located within a reasonable distance. No otherwise eligible employee shall be barred from or denied compensation for refusing to accept new work under any of the following conditions: (1) If the position offered is vacant due directly to a strike, lockout, or other labor dispute; (2) if the wages, hours, and other conditions of the work offered are substantially less favorable to the employee than those prevailing for similar work in the locality; (3) if acceptance of such employment would 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.

CONTRIBUTIONS. It was voted that the federal tax law recommended should imposed a payroll tax of 3 per cent on employers who are subject to the act beginning with the year 1936, but with the proviso that if for the year 1935 the index of production of the Federal Reserve Board shall be less than 90 per cent of the index for 1926, the rate of tax in the first year shall be 1 per cent. (Before arriving at the rate of payroll tax suggested, the Council rejected a proposed rate of 5 per cent and a proposed rate of 4 per cent by close votes, after which a rate of 3 per cent was agreed on).

The Advisory Council does not recommend that employee contributions be provided in the federal act. A number of members, however, believe that employee contributions should be required, since they would increase the amount and the period of benefits, and even more important, they would make the employees a part of the administration and more effective in its control. These members believe further that employee contributions would cause the worker to regard the plan as partly his own and not as given to him as a gratuity, and thus operate to prevent malingering and similar abuses.

On the other hand, a majority of the members of the Council were opposed to the principal of employee contributions. They felt that compulsory employee contributions are unjust, and while they are willing to leave this question up to the states, are opposed to any provisions for employee contributions in the federal law. In their opinion, contributions paid by the workers, who can do nothing to reduce unemployment, cannot be so shifted. Those opposed to employee contributions regard the cost of unemployment as a legitimate charge in the cost of production. These members, as well as others sympathetic to the general principle of employee participation, felt that with a waiting period of four weeks recommended in the federal law, employees would be meeting a large initial share of the risk of broken work and, coupled with the 50 per cent loss of income throughout the benefit period, should not be further burdened.

Some members voting with the majority took the position that while there are no overwhelming logical reasons against employee contributions there is a practical consideration in the fact that employee contributions will be necessary in old age insurance.

The Advisory Council recommends that it be left optional with the states to require contributions from employees. In the report of the Committee and in any model bill which it may promulgate, it is recommended that attention be called to the fact that more adequate benefits can be paid if contributions are increased, whether these increased contributions come from employers, employees, or the government. A motion to increase benefits by providing a contribution from the federal treasury itself was voted down by a large majority.

DEPOSITORY FOR FUNDS. The Advisory Council recommends that all reserve funds should be deposited in the Federal Reserve Banks under obligation that they be so managed as to assist stabilization of business and employment. We recommend that the Federal government should arrange so that the unused balances in the unemployment reserve accounts shall receive interest at 3 per cent.

REFUNDS (CREDITS) TO EMPLOYERS WHO STABILIZE EMPLOYMENT. In states providing for industry or plant accounts, under the subsidy type of federal law a refund should be paid to employers who have such accounts, and whose reserves equal to or exceed 15 per cent of their total average payroll during the preceding 5 years or the preceding two years, whichever is the higher. In states having pooled funds, with merit ratings, a similar refund, should be allowed to employers who become entitled to a low rate of contributions because of their favorable experience. Under a Wagner-Lewis type of federal act, employers who under the subsidy type of act would be entitled to a refund, should be allowed the same amount as a credit against the federal tax.

BENEFITS. It is recommended that the standard benefits in inaugurating the system be based on actuarial calculations for the period 1922 to 1930. This plan proposed is designed primarily for "normal times", minor depressions, and the early stages of a severe depression.

In the determination of the standard benefit, it is recommended that the actuarial computations assume a waiting period of four weeks and a benefit rate of 50 per cent of the average weekly earnings, (or in the case of regular part-time workers, average full-time earnings for that part of the week in which they are usually employed, with a maximum compensation of $15.00 per week.

The length of the standard benefits should be based upon the ratio of one week of benefit to four weeks of employment, with a maximum standard benefit of not less than 14 weeks in any consecutive 12 months, except that 1 additional week of benefit was drawn during the 5 years preceding the filing of the claim. This additional allowance would enable employees with a long and continuous employment to receive a maximum of 10 weeks benefit in excess of the maximum allowed for standard benefits.

In view of the wide divergence in the amount of unemployment in different states and industries, it is recommended that wide latitude be allowed to states with regard to the rate of benefits, minimum and maximum benefits, minimum duration of benefits, ratio of weeks of benefit to weeks of employment, and length of the waiting period. States should have freedom to substitute their own benefit provisions for the standard benefit recommended, provided that they satisfy the federal administrative authority that there is a reasonable prospect that they will be able to maintain payment of benefits on the basis prescribed in their law. In no event, however, is a state law to be approved unless it has a waiting period of not less than two nor more than four weeks, and prescribes a rate of benefits of at least 50 per cent of the average weekly earnings, and a maximum benefit of at least $15 per week. A minimum rate of benefits should also be included in each state law sufficient to enable unemployed workers to maintain themselves and their families during the period while they are drawing benefits without necessity of resort to private or public charity.

Actual payment of benefits is not to begin until two years after the Act becomes effective.

PROBATIONARY PERIOD. It is recommended that the length of the probationary period which employees must satisfy before they can claim any unemployment benefits be left discretionary with the states. In the federal tax bill no account should be taken of the probationary period, the taxes to apply to employees during their probationary period no less than thereafter.

INTERSTATE TRANSFER OF EMPLOYEES. The principle should be recognized that employees who have unused benefit credits should not lose those credits because they change their employment from one state to another, but no entirely practical plan to carry out this principle has as yet been worked out. It is recommended that the federal administrative agency be given authority to study this problem and to promulgate rules for carrying out the principle herein stated prior to the time when benefits actually become payable.

GUARANTEED EMPLOYMENT. It is recommended that the legislation to be enacted shall permit plans for guaranteed employment to be set up within a state or on an interstate basis subject to the following conditions:

(1) Employment for at least fifty-five per cent of the maximum period of possible work during any calendar year computed on the basis of fifty-two weeks work during the year for the standard hours per week worked in such plant or those permitted under the year for the standard hours per week worked in such plant, which ever is the higher, must be guaranteed, and any employees who are not given an opportunity for work equal to such guaranteed minimum work period shall be entitled to recover full wages for the part of the guaranteed employment for which work is not provided.

(2) Guaranteed employment plans are to be permitted only when the guarantee applies to all employees of any company, plant or separate department (properly defined) of such company.

(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.

(4) Where approved plans for guaranteed employment have been put into operation and their conditions fully complied with, employers maintaining such plans shall have returned to them, as a subsidy, the Federal excise tax levied against them.


STATE ADMINISTRATIONS. The Federal law should require that the states must accept the provisions of the Wagner-Peyser act and provide for the administration of unemployment compensation through the federal-state employment offices. It should be mandatory that all personnel connected with the administration of unemployment compensation be selected on a merit basis, under rules and regulations to be prescribed by the federal administrative agency. It should be provided in the federal act that the state administrations must furnish such statistics and reports to the federal agency as it may require. The states should be required further to provide that disputed claims shall be heard and decided in the first instance either by an impartial paid referee or by a local committee consisting of an impartial paid chairman and representatives of employers and employees, or in such other manner as may be approved by the federal administrative agency.

We also recommend that the federal act require the states to set up state and local advisory councils, representative of employers, employees, and the public for state plans, the members to be chosen by the state agency; and that advisory councils, representative of employers and employees, chosen in a manner satisfactory to the appropriate government unemployment compensation authority shall be set up for all other plans, state or interstate.

FEDERAL ADMINISTRATION. We recommend that the National administration of unemployment compensation be vested in the U.S. Department of Labor, and that the responsibility for all quasi-judicial and policy decisions be vested in a representative board, which is to have quasi-independent status, but is to make all its reports through the Department of Labor, 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 shall expire each year).

The Council further recommends that the chairman of the Board shall be appointed by the President, rather than be ex-officio, but recommends to the President the appointment of the present Secretary of Labor as the first chairman.

No qualifications for membership on this board are suggested for the federal statute, but it is assumed that the President will have in mind that employers and employees as well as the public should be represented on this board. We recommend that this federal board shall have the responsibility of passing upon state laws and their administration and of certifying to the Treasury their compliance with the federal act. It should have like responsibility in regard to interstate accounts and all other matters left by the act for the determination of the federal authority. The board should be authorized to make studies of employment stabilization and other pertinent subjects, to publish the results of its studies and to otherwise promote regularity of work. The conduct of the employment offices and the compilation of statistical and other information, however, is to remain a direct function of the Department of Labor. The intent of this recommendation is to make a separation between quasi-judicial and policy functions on the one hand, and the direct work of administration on the other, leaving the former to the new board and the latter to the Department of Labor.

ADMINISTRATIVE EXPENSES We recommend that a percentage of the proceeds of the federal tax shall be retained for the expenses of the federal and state governments in the administration of the unemployment compensation act, and in sharing in the additional costs thrown on the federal-state employment services. The federal authority should be authorized to set a maximum limit upon the administration expenses of the states from the amount remitted by the federal government.

NATIONAL STANDARDS It is recommended that the standards, conditions, and recommendations as to state laws, as set forth herein, shall be included in the federal bill, regardless of the type of legislation adopted.

The majority of the Council are of the opinion that the minimum standards herein provided should be incorporated in the federal law, but the Council realizes that as a matter of policy, in order to secure federal and state legislation, the Committee on Economic Security may find it advisable to omit or amend some of these standards in the Federal act.

ASSISTANCE TO STATES IN THE PREPARATION AND PASSAGE OF STATE LEGISLATION Since the plan for unemployment compensation we recommend contemplates cooperative federal-state action, it is essential that the national government should actively interest itself in securing the enactment of the necessary state legislation. To this end we recommend that the Committee on Economic Security frame model state bills incorporating the various types of legislation permitted, under the federal act, and be prepared upon request, to provide actuarial and expert assistance in the drafting of bills for introduction in the several state legislatures.



Three separate but complementary measures for old age security are recommended:

(1) A federal subsidy to the states toward meeting the cost of non-contributory old age pensions under old age assistance laws complying with the standards prescribed in the federal statute.

(2) A federal system of old age insurance which will be compulsory for all industrial workers who can be brought under its terms.

(3) A federal system of voluntary old age annuities for persons not covered compulsorily.


There are now twenty-nine states with old age assistance laws, providing varying standards of aid to aged persons granted upon differing conditions. Many of these laws are non-functioning; many of the others, through financial pressure, have cut benefits below a proper minimum, and have long waiting lists of needy persons; moreover, the financial limitations of many of the states and the indifference of others, indicate that state action alone cannot be relief upon to provide either adequate or universal old age assistance.

It is recommended:

(1) That the federal government enter this situation by offering grants-in-aid to the states and territories which provide old age assistance for their needy aged under plans that are approved by the federal authority, such plans to include proposed administrative arrangements, estimated administrative costs, and the method of selecting personnel.

(2) That the grants-in-aid constitute one-half of the expenditures, including administrative expenses, for non-institutional old age assistance made by any state or territory under a plan approved by this federal authority, provided that in computing the amount of said grants-in-aid not more than 5% of the total assistance expenditures for administration.

(3) A state or territory should be permitted to impose qualifications upon the granting of assistance laws and its administration measure up to the following standards:

(a) Is State-wide or territory-wide, and if administered by sub-divisions of the state or territory, is mandatory upon such sub-divisions.

(b) Establishes or designates a state welfare authority which shall be responsible to the federal government for the administration of the plan in the State; and which shall administer the plan locally thru local welfare authorities.

(c) Grants to any claimant the right of appeal to such State authority.

(d) Provides that such State authority shall make full and complete reports to the Federal administrative agency in accordance with rules and regulations to be prescribed by the Federal Administrative agency.

(e) Provides a minimum assistance grant which will provide a reasonable subsistence compatible with decency and health, provided that in the event that the claimant possesses income this minimum grant may be reduced by the amount of such income.

(f) Provides that an old person is entitled to aid if he satisfies the following conditions:

(1) Is a United States citizen.

(2) Has resided in the State or territory for five years or more,

within the ten years immediately preceding application for assistance.

(3) Is not an inmate of an institution.

(4) Has an income inadequate to provide a reasonable subsistence compatible with decency and health.

(5) Possesses no real or personal property, or possesses real or personal property of a market value of not more than $5,000.

(6) Is 70 years of age or older; provided that after January 1, 1940, assistance shall not be denied to an otherwise qualified person after he is 65 years of age or older.

(g) Provides that at least so much of the sum paid as assistance to any aged recipient as represents the share of the United States government in such assistance, shall be a lien on the estate of the aged recipient, which, upon his death, shall be enforced by the State or territory, and the amount collected reported to the Federal administrative agency.

(4) The cost of the federal subsidy to the federal-state non-contributory old age pensions will require annual appropriations from the Treasury. If, however, a Federal compulsory contributory old age annuity scheme is adopted, and the fiscal position of the government indicates financing old age assistance grants by borrowing, the reserves of the compulsory contributory old age insurance scheme might be utilized for this purpose. If such a borrowing policy is adopted, formal certificates of indebtedness carrying 3 per cent interest should be issued by the Treasury to the Federal authority administering the compulsory contributory old age annuity scheme.


A federal old age insurance system is recommended, to be instituted at the earliest date possible, on the following plan:

(1) Scope. The act shall include in a compulsory basis all manual wage-earners and those non-manual wage-earners who are employed at a rate of not more than $100 per week, provided however that no wage in excess of $50 per week shall be counted for insurance purposes. Wage-earners in agriculture, governmental employment, and railroad service are not included in a compulsory basis.

(2) Tax on Employers and Employees A tax shall be levied on employers and employees included within the scope of the compulsory provisions of the plan equal to the following percentages of payroll: 1% in the first five years the system is in effect; 2% in the second five years; 3% in the third five years; 4% in the fourth five years; and 5% thereafter. Taxes shall be paid on both payroll and wages on the assumption that the weekly wage of a single worker does not exceed $50.00.

It is recommended that employers and employees each pay one half of the above percentages, with the employer responsible for the payment of the employee's tax but entitled to deduct the same amount from the wages due the employee.

(3) Federal Contributions After a contingency reserve of reasonable proportions has been accumulated (approximating one fifth of the full reserve), the federal government shall contribute annually an amount sufficient to maintain such a reserve.

(4) Benefits(2) No annuities are to be paid until the system has been in operation for five years nor to any worker who has not made 200 Weekly contributions. Thereafter the following benefits are to be paid on retirement at age 65 or later to workers (a) who entered insurance before attaining age 60, and (b) on whose account at least 200 joint weekly contributions have been paid, provided that contributions made after reaching the age of 65 years shall not affect the amount of the annuity.

It is proposed to provide a larger relative annuity for lower paid workers by weighting more heavily the first $15 of weekly wage. In the following description of benefits, however, the average percentage paid to all wage groups is used in indicating the annuities payable in each year.

(a) A pension equal to 15% of the average weekly contribution wage (not counting that portion of average weekly contribution wage in excess of $35 weekly) to workers retiring in the sixth year the system is in operation. Pension percentages are to be increased by 1% each year in the next five years and by 2% each year in the following ten years, thus bringing percentage to a maximum of 40% of the joint contributions twenty years after the system comes into operation. In no case shall the pension be less than the amount purchasable by the worker's own contributions.

(b) A death benefit to beneficiaries of insured workers who die after retirement equal to worker's own contributions accumulated with interest at 3%.

(c) A death benefit to beneficiaries of insured workers who die after retirement equal to the accumulated value of the worker's own contributions at time of retirement, less the aggregate amount paid to the worker as a pension.

(5) Administration While the collection of the funds and the control of the administration will be national, local agencies will be used so far as possible in the operation of the system. The guarantees recommended would be impossible in any but a straight national system, since they must be based on the actuarial experience of the population as a whole. It is contemplated that the old age insurance reserve funds will be invested and managed by the treasury (or the Federal Reserve Board) on the same basis as the unemployment insurance funds. All other aspects of administration are to be vested in a federal insurance authority. It is recognized that the administration of an insurance plan for such a number of persons is a large undertaking, and to prevent duplication and to reduce administrative costs, it is recommended that the same state and local agencies handling unemployment insurance be utilized for this purpose. Other state and local labor agencies will also have to co-operate in the administration.


In addition to the compulsory old age insurance plan, it is proposed that there be established, as a related but separate undertaking a voluntary system of government old age annuities, for restricted groups as indicated below. Under such a plan, the government would sell to individuals, on a cost basis, deferred life annuities similar to those issued by commercial insurance companies; that is, in consideration of premiums paid at specified ages, the government would guarantee the individual concerned a definite amount of income starting at, say, sixty-five and continuing throughout the lifetime of the annuitant.

The primary purpose of a plan of this character would be to offer persons not included within the compulsory insurance arrangement a systematic and safe method of providing for their old age. The plan could also be used, however, by insured persons as a means of supplementing the limited old age income provided under the compulsory plan.

Without attempting to outline in detail the terms under which government annuities should be sold, it is believed that a satisfactory and workable plan, based on the following principles, could be developed without great difficulty:

1. The plan should be self-supporting, and premiums and benefits should be kept in actuarial balance by any necessary revision of the rates indicated by periodical examinations of the experience.

2. The terms of the plan should be kept as simple as practicable in interest of the economic administration and to minimize misunderstanding on the part of individuals utilizing these arrangements. This could be accomplished by limiting the types of annuity offered to two or three of the most important standard forms.

3. In recognition of the fact that the plan would be intended primarily for the same economic groups as those covered by compulsory annuities, the maximum annuity payable to any individual under these arrangements should be limited to one hundred dollars per month. The plan should be extended to persons of the lowest wage groups who are able to build up only small annuities, by providing for the acceptance of relatively small premiums (as little as one dollar per month).

4. The plan should be managed by the insurance authority along with the compulsory old age insurance system.

No estimates have been made as to the amount of annuity reserves that would be accumulated under a plan such as that proposed above. It is believed, however, that the fiscal problems presented by such reserves would not be serious.

Judging by experience abroad, relatively few persons will voluntarily take out such annuities, unless the government actively interests itself in promoting them.



The last analysis, security for family life, insurance of an environment in which the rights of children are safeguarded, is the principal objective in an economic security program. All the measures which the Council have considered--unemployment compensation, an employment and public assistance program, adequate health measures, and even old age pensions, which lift the burden of the support of the aged from those of middle aged whose resources are needed for the care and education of their children--could be described as child welfare measures. But in addition to these general measures, certain special measures are necessary for the protection of children. Two groups of such measures to be administered by the Children's Bureau of the U.S. Department of Labor were submitted to the Council with the endorsement of the Special Advisory Committee on Child and Maternal health, of the Special Advisory Committee on Public Health, as well as the Child Welfare Committee. These measures which were considered and approved by the Council are, briefly, as follows:

(1) Strengthening and expanding of mothers' pensions and of State and local services for the protection and care of homeless and neglected children and children whose surroundings are such as gravely to impair their physical and social development, through a program supported jointly by Federal grants-in-aid and State and local appropriations.

Mothers' pensions, designed to bring security in their own homes and under their mother's care to children who are deprived of a father's support by death, incapacity, etc., and for whom long-time care must be provided, are now authorized by legislation enacted in 45 States. Such pensions are, however, actually granted by less than half the local units empowered to provide this form of care, and in many of these the amounts of the grant are inadequate to safeguard the health and welfare of the children. Of the present annual expenditures of approximately $37,200,000, local appropriations total $31,200,000, and State appropriations amount to $6,000,000. In order to take care of those now on waiting lists, poor relief, or emergency unemployment relief, and those for whom existing grants are inadequate, State appropriations should be increased, and it is estimated that approximately $25,000,000 a year for Federal grants-in-aid of this program will be required for the first two years, rising to a possible $50,000,000 as the program develops. In this connection, it is noted that the Federal Government, through the Federal Emergency Relief Administration, is now spending much more than $25,000,000 on families probably eligible for mothers' aid. Federal grants should be conditioned on the State laws being made mandatory on the local units and on approved plans which would insure minimum standards in investigation, amounts of grants, etc., and after June 30,1937, State financial participation, which might take the form of equalization grants to local units or per capita grants as the individual states desired. An appropriation of $1,500,000 a year is approved for assistance to State welfare departments in promoting more adequate care and protection of children and strengthening local public child welfare agencies.

(2) A child and maternal health program involving Federal assistance to the states, and through the states to local communities, in the extension of maternal and child health service, especially in rural areas was approved. Such a program, it is understood by the Council, would include (a) education of parents and professional groups in maternal and child care, and supervision of the health of expectant mothers, infants, preschool, and school children and children leaving school for work, (b) provision for a rural maternal nursing service, © demonstrations of methods by which rural mothers may be given adequate maternal care, and (d) provision for transportation, hospitalization, and convalescent care of crippled children, in areas of less than 100,000 population. This program should be developed in the states under the leadership of the state departments of health or public welfare, in close cooperation with medical and public welfare agencies and groups, and other agencies, public and private, concerned with these problems. The Committee submitting this plan estimated that approximately $7,000,000 a year will be required for this program, to be increased as the program develops.


The report of the Special Committee of Employment and Relief Advisory to the President's Committee on Economic Security was referred to the Council for consideration and after discussion by a sub-committee and the full Council, the report was adopted in principle.

The main recommendations of the report which are herewith restated and reaffirmed are:

I. Government Employment Program

1. All of those on relief who can be employed should be given work. To accomplish this end a governmental employment program is necessary.

2. Great care must be taken to avoid any governmental work program which will nullify its own gains by retarding recovery.

3. Programs can be devised which will provide real work for large numbers of the unemployed. In selecting projects the following things should be kept in mind:

(a) The program should be varied so that workers of many different skills may be employed; it should be widely

distributed geographically; it should be free as possible from requirements which cause delays and hinder ready adaption to the needs of the unemployed - such as insistence upon self-liquidation or work by contract.

(b) The present program of public works and work relief projects should be studied and extended as far as possible. Special attention should be given to the processing of surplus products and production for use.

(c) Continuous study should be given to the adopted or suggested programs of other departments of the federal, state and local governments. For example the Committee on Medical Care is recommending the construction of 500 rural hospitals and other sanatoria. Work programs relating to the housing needs of communities can be greatly developed and the rehousing of dependant families in slum areas to be torn down is a matter which should be studied.

4. Unless work is separated from relief it loses most of its social values to the worker. Therefore the government employment program should be divorced completely from relief, and should be set up separately from the public assistance program recommended in this report.

5. Candidates for employment should be selected on the basis of their ability - not their need, but as there probably will not be sufficient government work to give employment to every one not now employed, applicants should be required to show that they are dependant on their own earnings and that they have had previous regular work experience.

6. The proper selection of these applicants, and their reabsorption into private industry cannot be properly done unless the work of the U.S. Employment Office and the state employment offices is expanded and strengthened and the personnel in many states improved.

7. There must be close and constant cooperation between all employment offices and the responsible authorities in governmental public assistance departments.

II. Educational Program for Youth.

The Committee believes that the security program should contain special educational provisions for those between that ages of 16 and 21. By utilizing the educational facilities which the nation provides, and strengthening them where necessary, education could replace work as the element necessary for security for that age group. In this way a million or more competitors would be withdrawn from the labor market.

III. Public Program:-

It is very important to retain the gains which have been made in the administration of public assistance in the last few years. The standards of service are higher and relief more nearly reaches adequacy mainly because there has been federal financial aid to the states and supervision of their work. There has also been state aid and supervision of the counties and townships. These gains can not be made permanent without the revision of all the so called poor laws in most states. It is rarely that such an opportunity comes to change a whole group of antiquated and sometimes inhuman laws. To do that and to retain the good in the present emergency set up, a plan is advocated for a federal department or administration through which equalization funds would be administered to the states. This would be a powerful influence in building up state and local agencies which would be able in turn to do away with the evils of the present relief system. Strong state and local departments of public welfare, well organized on a permanent rather than an emergency basis, should be encouraged as a means of providing assistance according to the varying needs of families and individuals. The best known methods are necessary to counteract the demoralization and insecurity which result from the social hazards encountered. Such assistance should be adequate, timely, certain and well administered and, the state and local administration developed on a permanent basis should be encouraged to give most careful attention to the selection and training of qualified personnel. It is therefore recommended:

1. That, there should be a permanent Public Welfare Bureau, Department orAdministration in the Federal government which should administer all federal public assistance efforts; and in which should be focused the development of whatever relationship should exist as between public assistance and other measures of Economic Security.

2. That we recommend that the proposed federal bureau or department of public welfare be given authority to require a state to consolidate its welfare functions in one satisfactory permanent department with appropriate local units as a condition to the use of state an local machinery in the administration and distribution of federal funds.

3. That the Committee asks support for a unified welfare program--federal, state and local. This should be a well-rounded program, unified administratively as as well as financially. The Committee believes that federal grants-in-aid are urgently needed not only for unemployment compensation but also for old age pensions, mothers aid, general home assistance, care of homeless children and adults and other parts of the proposed unified welfare program. The Committee also expresses its beliefs that no hard and fast line can be drawn between any of these categories.

It will not be possible for the state and local governments to assume full responsibility for those families whose needs would not be met by a work program but the federal government should, through its proposed welfare administration secure all possible cooperation from these sub-divisions of government.


The Advisory Council wishes to give general endorsement to the proposals of the staff and its advisory medical, public health, hospital and dental committees relative to public health and medical care. Specifically the Council approves the proposal for annual Federal appropriations of not less than $10,000,000 to the U.S. Bureau of Public Health for the following purposes:

To the Public Health Service: (1) For grants-in-aid to counties and local areas unable to finance adequate public health programs with local and state resources, to be allocated through state departments of health; (2) For direct aid to states in the development of state health services and the training of personnel for state and local health work; (3) For additional personnel within the Service for investigation of disease and of sanitary or administrative problems which are of interstate or national interest and for detailing personnel to other Federal bureaus and offices and to state and localities; and

The Council emphasizes the necessity for including in the economic security program adequate measures for preventing the risks to economic security arising out of ill health, and believe that these foregoing proposals will contribute to the development of a national health plan.

The Council also approves the three sets of proposals relative to medical care, as follows:

1. Further use of P.W.A. funds for the construction of public health and medical institutions such as tuberculosis sanatoria, mental disease hospitals, and health centers, where the need is shown to exist and funds are available for maintenance.

2. Use of P.E.A. funds for the construction of general hospitals in rural areas where such institutions are needed but where no hospitals exist, with appropriations on a decreasing scale for their operation. A preliminary survey shows that there are approximately 500 such areas.

3. Extension of hospital care to persons on FERA relief.

The Council wishes to express its appreciation of the assistance being rendered to the staff by the medical, hospital and dental advisory committees in their study of health insurance and of other measures for medical care which is still under way.

1. A motion to permit a fifth type, permitting separate accounts for all employers without either guarantees or contributions to any state fund was voted down.

2. This plan of benefits applies only to persons entering the insurance system during the first five years of its operation, and is organized to cover the situation of workers who are middle aged and over at the time that the system goes into operation. The permanent scheme of benefits not having to meet that situation will, while following the general plan outlined here adjust the full annuity to the contributory period of a normal working life.