COMPARISON OF PROVISIONS OF TYPICAL STATE LAW AND OF PROPOSED BILL TYPICAL STATE LAW Benefits are payable, subject to the establishment of a waiting period, to a covered and otherwise eligible unemployed worker, as follows: Eligibility. Earnings 16 times his benefit rate (rough equivalent of 8 weeks of employment) in first three out of four preceding calendar quarters. Benefit rate.-Weekly payments at the rate of 50 percent of his average weekly earnings, but not over $15 a week. Maximum amount and duration.Maximum amount in one benefit year of 16 times his benefit rate (making the maximum $240) or one-sixth of his earnings, excluding compensation over $390 in a calendar quarter, in the base period, whichever is less. Benefits for partial unemployment.Partial benefits are payable in an amount so that wages plus partial benefits equals the benefit rate for total unemployment, plus one-sixth of wages. Limited to same total amount in one benefit year as are benefits for total unemployment. (H. R. 10127) Benefits are payable, subject to the establishment of a waiting period, to a covered and otherwise eligible unemployed worker, as follows: Eligibility.-Earnings of at least $150 in his base year. Benefit basis and rate.-Benefits payable for days of unemployment in excess of seven in any period of 15 consecutive days, at the daily rate set out in the benefit scale (but without true relation to average earnings). Maximum amount and duration.Maximum amount in one benefit year of 80 times the daily benefit rate (making the maximum $240) without any direct limitation in ratio to earnings but the actual ratios ranging from 93.3 percent down to 16.9 percent of earnings in the base period. Benefits for partial unemployment.— By the above formula, benefits are payable on the same basis for both partial and total unemployment; partial benefits are not payable for loss of earnings, but for days of unemployment, regardless of whether the individual would be employed normally on those days. ILLUSTRATIONS OF EFFECT OF BENEFIT FORMULAS (Typical State law and H. R. 10127) The benefit scale (sec. 2-a of H. R. 10127) is set forth below, in columns 1 and 2. Column 3 shows the maximum amounts of benefits payable in 1 year under the bill, from the earnings in the base year shown in column 1. Column 4 shows the maximum amounts of benefits payable in 1 year under the typical State law, from the earnings in the base year shown in column 1. Columns 5 and 6 show the percentage relation which the benefits payable under the pending bill and under the typical State law (columns 3 and 4, respectively) bear to the earnings in the base year shown in column 1. (A chart included with this statement is on file with the committee.) The first statement, Mr. Chairman, is entitled "Comparison of Provisions of Typical State Law and of Proposed Bill." This is really a summary of what I have just outlined to the committee and I need not spend much time on it." The first column of the statement shows in brief the provisions of the typical State law, while the second and parallel column shows the corresponding provisions of the pending bill. The second statement, entitled "Illustrations of Effect of Benefit Formulas", is a statistical comparison of the typical State formula with the benefits payable under the bill's formula, in accordance with the benefit scale set out in section 2 (a) of the bill. You will note that columns 1 and 2 in the table exactly duplicate the bill's benefit scale. Column 3 shows the maximum amount of benefits which would be payable in 1 year under the bill, as determined by the compensation in the base year shown in column 1. Column 4 shows the amount of benefits that would be payable in 1 year under the typical State law, for the same compensation groups. Columns 5 and 6 show the percentage relation which the benefits payable under the bill and under the typical State law, respectively, as shown in columns 3 and 4, bear to the basic compensation shown in column 1. If you will look at the top line of this statement, you will find that a man who earned in his base year between $150 and $200, would under this bill, as shown in column 3, receive total unemployment benefits of $140; whereas under the State law, as shown in column 4, he would receive only from $25 to $33.33. The percentage which his total benefits are of his total earnings, which made him eligible for those benefits, is shown in column 5. In the case of the man who earned exactly $150 in his base year and received $140 in benefits, that percentage is 93.3 percent. In other words, he received 93 percent as much in benefits as he earned in his base year. Column 6 shows, however, that the same man, had he been working under a State law rather than this bill, would have received only 16.7 percent, or one-sixth, as much in benefits as he earned in his base year. You will notice that the percentage in column 6 relating to the State law remains uniform throughout-16.7 percent. Mr. MARTIN. Before you pass from the chart, the maximum under both systems apparently is the same-$240 under each system. Mr. PARMELEE. That is true. But I am going to point out in just a minute that a man must earn a great deal more under the State law to reach that maximum than under this bill. Mr. MARTIN. The complaint, then, from your standpoint, is not with the maximum under each system but as to the proportion of benefits under the bill to temporary or seasonal employees as compared with the different State systems. Mr. PARMELEE. There are two criticisms, fundamental in nature, which I am making at this point; the one you have just mentioned being one of them. That is to say, the benefits payable to the intermittent, irregular railway employee, who earns a comparatively small amount in his base year, are out of all reason to his actual earnings. Second, there is no ratio, no fixed ratio, as in all the State laws, except one, between a man's earnings and what he receives in benefits. The effect of granting these very liberal benefits to the short-time worker is, of course, to discriminate against the established, full-time, normal railway man. That point is so important that I would like to refer again to the second statement before passing on to the chart and give you one or two simple examples. In order to make it simple, I will take the hypothetical case of two men, one named Tom Brown and one named Joe Smith, both of them unskilled workers and next-door neighbors. During the course of a given year, in addition to employment in occupations not covered by either a State law or this bill, Tom happens to get railroad employment for 2 or 3 months and earns a total of $150. In the same year, his neighbor, Joe, worked for a similar period and earned a similar amount $150, in a steel mill. The following year both are unemployed long enough to receive benefits. What does each get for the same basic earnings? Looking at column 3 of this statement it will be seen that Tom, the railroad worker, receives $140 in benefits; going on over to column 4, it is found that Joe, the steel worker, only receives $25. Thus, for the same amount of basic earnings, Tom has received benefits to the extent of 93.3 percent of those earnings, or five and one-half times as much as Joe, who, under the State law, has received benefits only to the extent of 16.7 percent of his earnings. Looking at the second horizontal line, it is seen that, if Tom's railroad work and Joe's steel-mill work had produced earnings of $200 each, subsequent unemployment would have entitled Tom to receive $160 in benefits whereas Joe would only be paid $33.33. In this instance Tom would receive in benefits 80 percent of his basic earnings, while Joe would still receive just 16.7 percent. In other words, this casual worker, Tom, who has no permanent attachment to the railway industry but who happens to obtain a few months of railway employment in one year, receives as a result of that work a benefit over four times as liberal in aggregate amount as that received by his neighbor Joe, for a comparable amount of work and earnings in a steel mill. As the earnings in the base year become more substantial in amount, the disparity between benefits payable under the bill and under the State laws diminishes somewhat. However, it is not until earnings in the base year reach $1,440 that the ratio of benefits to earnings under the present bill drop down to the State level of 16.7 percent. Let us go back to the example of the two unskilled workers, Tom Brown and Joe Smith. You will recall that for basic earnings of $150 and $200, Tom, because his employment happened to be in the railway industry, would receive in benefit payments from four to five and one-half times as much money as would Joe, who made his earnings in a steel mill. Not until basic earnings reach $540 would the ratio of benefits to earnings received by Tom under the bill come down to 33.4 percent, and this percentage would still be double the ratio governing the payment of benefits to Joe under the State law. This picture of extreme liberality under the bill may be viewed from still another angle. Whereas Tom needs only to earn $150 from railway employment in order to receive benefits of $140, Joe must earn $840 in a steel mill, or nearly six times as much, in order to become eligible to receive a similar amount of benefits under the State law. To obtain benefits of $160 Tom has to earn only $200, while Joe would have to earn $960, or nearly five times as much. Mr. WITHROW. May I ask a question, Mr. Chairman? Have you a table that would indicate to us, over the past 5 or 10 year, how many men would come in that bracket that you speak of, with a maximum of $150 a year? Mr. PARMELEE. I have no exact figures on that, Mr. Congressman.. Mr. WITHROW. That would be very interesting, because I think you are taking the exceptional case. You are taking the very excep tional case. Mr. PARMELEE. I am going to present some figures a little later which will show that a very large proportion of the men and women who were employed by the railway industry in 1937, last year, are not so employed today or were not so employed in January immediately following the turn of the year. A large proportion of those men and women worked a comparatively short time during the year 1937, and I would like to enlarge on that fact in a few moments, if I may. Now, who are these Tom Browns? What is their attachment to the railway industry? The ready answer is that they are unskilled workers, and that their attachment to the industry, more often than not, is irregular, or at most temporary. Maintenance work on the railways, particularly in the North, is highly seasonal in character, in normal years reaching its peak in the summer and its low point in winter. Involved in this work are tends of thousands of casual, irregular railroad workers, whose attachment to the industry is no greater than is their attachment to one or more other industries. Many of them, particularly in the South and West, are farmers, or farm hands, who shift back and forth between railroad and farm or other work. Still others are part of the Nation's floating supply of laborers, who drift from industry to industry, or from one part of the country to another, acting as much on their own inclination as on employment opportunities. Many of these workers would come under the States' seasonal classification and, accordingly, would be entitled under State laws to benefits only in the seasons in which they would ordinarily be employed. Twenty-two State laws require the respective administrative agencies to prescribe special regulations governing the payment of benefits to seasonal employees, while three other laws direct the administrative agencies to study the matter. The object, of course, is to limit the payment of benefits to seasonal employees to periods during which they could expect to be employed. For example, I am informed that the Oregon agency has prescribed regulations. limiting the payment of benefits to logging and canning employees to those periods in the year during which they normally are employed. Departing entirely from this precedent, the pending bill does not even mention the matter of seasonal employment. Yet, throughout the country, a large part of railway maintenance-of-way work is necessarily conducted in recurring periods well under a year in length. It would seem that the same reasoning that dictated the inclusion of the special provisions in the State laws would also dictate their inclusion in a separate railway law. However, passing over the omission of special provision for seasonal employees, there seems no justification for the very liberal benefits payable to these employees under the bill. A seasonal railway employee, whose employment realtion to the carrier is casual or irregular rather than permanent, may, by working on a railroad a couple of months in a year, become entitled to receive as much money in benefits under this bill as if he had worked for an entire year under the typical State law. The prospective situation in regard to these workers is further distorted under the bill because it does not deny benefits to the selfemployed, such as the farmers I have mentioned. Mr. MARTIN. Before you go to that, if provision for seasonal benefits were to be written into the bill which would greatly reduce the cost of the unemployment insurance as a whole to the carriers, what would your position be with reference to making a corresponding increase in the cases of the more permanent employees who earned approximately the maximum amounts allowed for in the bill, running from $1,000 to $1,300 a year, or more? Mr. PARMELEE. My position, Mr. Congressman, as I shall outline in somewhat greater detail a little later, is that the various benefit provisions of this bill, taken together, almost inevitably will create a cost much higher than the tax rate in the bill. For that reason, any change such as you have indicated would do no more than to reduce somewhat the excess of the cost over the tax rate. It could not possibly contribute anything in the way of additional payments to any other classes of workers. Mr. MARTIN. Do you mean that if the benefits to temporary or seasonal or casual employees were reduced in this bill to correspond to what they get under the State systems, that the cost then would be to the carriers approximately what the State systems are costing them now? Mr. PARMELEE. No. I believe the cost would still be very much greater than 3 percent. I am going to develop the cost feature a little later, if I may, Mr. Congressman. Mr. MARTIN. Are you paying more than 3 percent into the State systems? Mr. PARMELEE. No; but I am speaking of 3 percent as the proposed tax in this bill and comparing the probable cost of the bill to that 3 percent. Mr. WITHROW. If this were actuarially sound as to cost, that it would not cost more than the 3 percent, would you favor the legislation? Mr. PARMELEE. No; I would not, Mr. Congressman, because there are so many unsound features other than that of cost, and I am in process of developing a number of them as I go along. I hope to show to the committee that this unprecedented type of bill should be considered by this committee and by the Congress with the greatest care and scrutiny before being passed upon, because of its many unsound features aside from those of cost. I shall come to one or two more in just a moment. I was just speaking, Mr. Chairman, of the fact, which to us seems extraordinary, that this bill does not deny benefits to men who are self-employed, such as the farmers that I have spoken of. The State laws prohibit the payment of benefits to individuals who fail, without good cause, to return to their customary self-employment (if any) when so directed by the administrative official. No such restriction |