STATEMENT OF HON. ROBERT F. WAGNER, UNITED STATES SENATOR FROM THE STATE OF NEW YORK

Senator WAGNER. What time is it now?

Mr. LEWIS. It is about 5 minutes to 12. We do not want to restrict you in any way. I was wondering whether you would prefer to start now and resume again at 2 o'clock.

Senator WAGNER. I doubt whether that will be necessary.

After

the very admirable and as always brilliant presentation by Miss Perkins, there is certainly nothing of a detailed character that I can add. In fact, I do not even pretend to be any kind of an expert on this question, and in view of the really very clear presentation which has been made by Miss Perkins, I am going to confine myself to some general observations, which I think I can finish in 15 minutes.

Senator WAGNER. Mr. Chairman, the problem of unemployment did not result from the depression, nor will it vanish completely with the return of normal economic conditions. It is too deeply embedded in modern industrial society. In the boom year 1927 between 2,000,000 and 3,000,000 people were unable to find work, and since then the displacement of men by technological improvements suggests a long-range challenge to our social inventiveness.

Nevertheless, the depression has had a tremendous effect upon our thinking about unemployment. On the ethical side, it has sharpened a consciousness of public responsibility by proving that unemployment is due to a social disease rather than to individual shortcomings. In the early part of 1930 the first comprehensive survey showed that among the 3,000,000 unemployed, 2,500,000 were able and willing to work. I think this answers the suggestion that with the passage of this legislation we might have a large group that would prefer to accept unemployment insurance rather than work. That has often been stated, but personally I think it is a libel upon our American worker, and this depression has proved conclusively that he does not want charity; he wants to work.

On the economic side, recent events tell us unmistakably that unless we deal boldly and completely with this subject we face an endless series of catastrophes. A shrinkage of 41 percent in the volume of employment and over 50 percent in the real income of wage earners is in every sense a national calamity, and a terrific menace to democratic procedure and the preservation of our best ideals.

We are notoriously a practical people. When faced with a problem of this magnitude, we intend to solve it. Schooled as we are in self-reliance, our first thought may be that the unemployed should rely upon their own savings. During the so-called prosperity era the average wage earner received only $1,500 a year, or $29 per week, with which to provide for himself and his family. This is hardly a subsistence wage, and its persistence even during a period of rapidly increasing national wealth was an indictment of us all. Surely, we do not desire to make the record even darker by claiming that the poor should bear the costs of business decline. It should not and it cannot be done that way.

The second possible recourse is to private and public charity. The worst feature of this is its utter insufficiency to remedy want. The

State of New York is the wealthiest in the Union, and one of the promptest in responding to social needs. Yet in 1932 the largest sum ever spent for relief in 1 month in New York City was $4,000,000, contrasted with a monthly_wage loss due to unemployment of from 80 to 90 million dollars. During the last part of 1933, even when the Federal Government was engaged in the most wide-spread relief program in our history, I estimated that only 10 cents per day were available for each of the millions of men, women, and children dependent upon public funds.

Aside from its material inadequacies, charity is a poor substitute for earned income. So long as we live under a system in which industrious men normally win their bread by working, industrious men suffer degradation when they must exist by begging. Recent experience has shown that the vast majority of American workers will not enter the bread line until their families are upon the borderland of starvation. That is an answer to the suggestion that he does not want to work. They want and merit an opportunity to preserve their self-respect and morale. Their record is complete refutation of the charge that a systematic plan of unemployment reserves would encourage indolence.

The final shortcomings of the type of public relief that we have witnessed recently is that it has almost no tendency to prevent or abbreviate depressions. It begins to operate only after the emergency occurs. It seeks to raise funds at the very time when it is hardest to do so. It curtails purchasing power by drawing heavily upon people of moderate means. For example, in my own city, an appropriation of $5,000,000 per month to aid the jobless was accompanied by an annual reduction of $20,000,000 in the salaries of city employees, most of whom do not earn large incomes. Until 1932, 65 percent of the cost of public relief was borne by localities, using general property taxes that place a disproportionate burden upon people who are not wealthy and who do not possess much intangible property.

The clear alternative to these defective and makeshift devices is unemployment insurance or reserves. Almost every enlightened European nation has found insurance workable and beneficial, and no country that has tried it has deviated from its basic principles.

There was a very interesting discussion this morning on these European plans. Of course, Miss Perkins is much more familiar with these plans than I am, but I have examined into the records closely and find that every industrial country but our own has inaugurated a system of unemployment insurance.

It is even more important to note that the soundness of the reserves idea has been capitalized by American industry. During the first 3 years of the depression, the surpluses stored up by business men served as an almost complete cushion against decline in the incomes of stock owners and management. While wages were tumbling downward at a dizzy pace, dividend payments in 1930 were two and a half times as high as in 1926, and in 1932 they were 80 percent higher than in 1926. These figures not only show that insurance is feasible. They bring clearly into the limelight the social injustice of providing the least protection for the workers who need it the most, and of shifting to their backs the heaviest and most immediate burdens of depression.

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This contrast, however, is not simply an ethical eyesore. It focuses attention upon the most serious economic flaw in our present system. The building up of capital reserves to insure the continuous payment of high dividends means that when depression begins there is no provision for initiating a flow of purchasing power into the hands of consumers who have suffered reductions in wages or lost their jobs. Instead, regularity of income is provided for those in the upper brackets, an such income is reinvested in capital equipment or frozen in savings vaults. Unemployment insurance or reserves, on the other hand, would check an impending depression by releasing new stimulants to consumer demand. They would benefit every group by promoting industrial stability.

There are certain fundamentals upon which most students of unemployment insurance agree. In the first place, it is clear that compulsory action through law is necessary. Voluntary systems of protection, after two decades of propaganda, covered only 200,000 workers in 1932. This is not because the majority of employers do not realize the benefits of insurance, but because the standards of action are set by the least moral and least farsighted competitors. Secondly, the necessary compulsion should be left to the several States, because of the varying social and industrial conditions prevailing in different parts of the country, and because each of the several insurance or reserves exponents should have opportunities to test the validity of his ideas. This point was emphasized by Miss Perkins this morning.

However, there is an area that should be covered by Federal action, for without such encouragement the more progressive States, with one exception, have failed to enact unemployment insurance or reserve laws because they fear the competition of more backward areas. Therefore, this bill imposes a Federal tax upon the pay rolls of all employers utilizing 10 or more employees, excepting agricultural laborers, domestics, teachers, and a few other groups. It provides for a rebate to all employers equal to the amount that they contribute to unemployment funds under State law. Of course, the States would prefer to have reserves built up and invested at home rather than by the Federal Government. Hence the passage of this bill should lead to the rapid enactment of National wide State laws.

An important feature of this bill is its emphasis upon the stabilization incentive. An employer who has succeeded in reducing his State contribution because of success in regularizing employment will receive an additional rebate as a reward for his efforts.

Despite the wisdom of allowing each State to devise its own plan, no State will be allowed to secure rebates for employers by instituting a scheme that has not real protection features. This bill sets up basic standards to which all State laws must conform. These standards include reasonable benefits to the unemployed. They also require supervision or administration of funds by the State and prohibit the utilization of private insurance companies. They insist that no worker shall be denied benefits because he refuses to accept employment as a "scab", or upon condition either that he enter a company union or refrain from belonging to a labor union of his own choosing.

Finally, the first Federal tax would be imposed for the year commencing July 1, 1935, and thus would not introduce a novel factor at the present time into the industrial revival that is at hand.

I believe that every State which enacts unemployment insurance or reserve laws will benefit immeasurably thereby. Every law imposing an additional cost upon industry has been fought bitterly by the short-sighted or the selfish. This was the case with workmen's compensation. But every such law has been vindicated, not only by improving the lot of employees, but also by yielding beneficial returns to employers. The creating of new incentives to efficiency, the promotion of more amicable and equitable industrial relationships and above all the stabilization of employment, are matters in which everyone should have a profound interest. This bill is addressed directly to these problems. I believe that it will remove some of the causes of unemployment and afford the only possible adequate and respectable relief to those who are without work from time to time. Therefore I urge upon the members of this committee the necessity of speedy and favorable action upon this bill.

Mr. LEWIS. Thank you very much indeed, Senator.

Now, may I call on Mr. Hopkins, who I believe is present. This is an exception to the announced order of witnesses, but as we all know, Mr. Hopkins is a very busy man, and we will hear him at this time.

STATEMENT OF HON. HARRY L. HOPKINS, FEDERAL EMERGENCY RELIEF ADMINISTRATOR

Mr. HOPKINS. It seems to me that there are two wide fields or social problems that can be handled properly by means of insurance, compulsory insurance, and cannot be handled in any other way. Those are the fields of sickness insurance and unemployment insurance. It is impossible, it seems to me, for the wageworker with a family to put in his family budget sufficient to maintain himself during periods of unforeseen idleness, just as it is impossible to put in his family budget an amount to maintain him if there is illness. While there is such a thing amongst workers families as average cost of rent and food, you cannot average illness or unemployment, because the whole cost falls on the person who is ill or who is unemployed.

Therefore, it seems to me that the only way to meet those costs is through a scheme of insurance. I think we have had enough experience in the voluntary end of this business to become convinced that it can only be done by compulsory insurance.

Now, why do we have insurance when the relief funds are available? If we are unfortunate enough to have another business depression, why not do it through the relief route? Well, I think that answer is pretty self-evident. Relief is a degrading thing for an individual. He has no right to it. He gets it after an investigation as to whether he is in need. You cannot ignore the moral factor in a workingman who knows that if he is thrown out of work for no fault of his own he is guaranteed a benefit. I do not think you can overstate the value of that.

Now, we have heard a lot about these insurance schemes being a dole, and I have no doubt we will hear about that again. Most of the people that use the word do not know what it means, and in the main, it seems to me that it has been a word that has developed in the past 10 or 12 years on the part of people who simply do not believe that unemployed folks should be taken care of.

As a matter of fact, there is no question in my mind that the countries that had unemployment insurance, and particularly England, that their scheme of taking care of unemployed was far better than ours, and it does not cost any more than ours.

Now, there are a number of other arguments in favor of this. Senator Wagner brought out one, that we collected a large proportion of the funds in times when the business cycle is good, when it is fairly easy to get the money. Lately we have been trying to get these millions and these billions of dollars for the unemployed at the very time when industry and the Government could least afford a tax for it. The largest contributions toward the fund would come during periods of the largest employment.

Now, I have this feeling about it: This insurance bill or any unemployment insurance bill is not a cure-all. It does not settle this problem by a long shot. I firmly believe that in addition to any insurance scheme you have got to have work benefits provided through a well-organized scheme of public works which will be projected over years to come, which would move up in times of industrial depression, and move down when it was not needed. I do not mean to imply that I do not believe that insurance benefits are necessary. I believe they are, but I think that you are going to have to find something to supplement that at the time when the insurance benefits stop in the form of work opportunity, which is, in effect, a part of the whole scheme.

Now, as I see it, it seems to me that it does two things: First, it, the insurance bill, eliminates a fear in the minds of the workers. The average worker in this country has no security, and the constant fear that he is going to be thrown out of a job and thrown onto relief rolls, even though we have an adequate relief system, is demoralizing. It is not fair to ask these decent workers to do it. Now, I think we cannot overemphasize the importance of the elimination of the fear in the minds of the workers of America, which this bill would substantially do.

Also, I think it would provide for the expenditure of funds which would be very nicely and advantageously timed to the decline in employment, which would move funds into circulation and into industry, and into business at the very time when they are needed. I do not want to overemphasize that. This is not going to, in my opinion, prevent any depressions, but I think it will help. You have got to be cautious as to extravagant claims as to what this is going to do. It is going to do certain things that are necessary and essential, but it is not going to solve the problem of industrial depressions in my opinion.

I think the final and real argument for this is that this is a matter of simple social justice. The workers are entitled to this. We will pay it. The consumer will pay this bill, because it will all be passed on to us, but I think the workers of America are entitled to the kind of guarantees and to the kind of benefits, and these benefits are relatively modest ones, which this law will give them.

I do not believe that if we had had an unemployment insurance law even in 1926 that we would not have had to develop other supplementary schemes during this kind of a period, but in the main you are now thinking of a law which you do not associate with this kind of a depression.

You are thinking of something that you associate with an