The record in this hearing includes a comment from the Acting Secretary of the Treasury on the question of policy involved, which needs no amplification. The collection methods, time, and so forth, are to be prescribed by the Board, but regardless of how it is done it will entail additional expense to the Board but without any corresponding savings to the States or Treasury Department. Accounting work will be increased substantially. A claims bureau will have to be organized. Field representatives will be needed. Employment offices must be established which will duplicate and be competitive with existing State agencies. Certainly, if the best possible service is to be available these employment offices must be operated primarily in the interest of the railroad employees and staffed by personnel skilled in social work. All of these expenses will be incurred, without a corresponding decrease in the present expenses of the agencies administering the State unemployment compensation laws, including the Social Security Board. 1 have completed my statement, and I thank you for listening. Mr. MARTIN. We thank you very much. The next witness is Mr. A. E. Lawler, and Mr. Souby is also to appear. How much time will you want, Mr. Souby? Mr. SOUBY. Mr. Chairman, I am a lawyer, and can adapt myself to the necessities of the situation. Mr. MARTIN. How much time do you have left for the opponents? Mr. MARTIN. We are anxious to close the hearings on the bill this morning. The House meets at 11 o'clock, but I am willing to go along as long as anybody else will. You may proceed, Mr. Lawler. STATEMENT OF ANDREW E. LAWLER, CHICAGO, ILL., APPEARING FOR THE ASSOCIATION OF AMERICAN RAILROADS Mr. LAWLER. Mr. Chairman, my name is Andrew E. Lawler; my residence is Chicago, Ill. I am employed by the Illinois Central Railroad System in the capacity of general auditor and appear before you for the Association of American Railroads. Since the inception of the Social Security program I have been quite closely associated with the work in the various States in which we operate. Our railroad has major operations in eight States in which we are subject to unemployment compensation laws, and it has been very important that we cooperate with the States in this new undertaking. It was new to us, and it was new to the States. In fact, it was the beginning of an experiment in which it was difficult to organize the mechanics and to carry through in a satisfactory manner. It was my privilege last summer to attend a conference of the seventh district administrators, consisting of the States of Tennessee, Mississippi, Louisiana, Alabama, Georgia, and South Carolina, held at Birmingham, Ala., where a great many problems were discussed and considerable progress was made. Subsequently I have served on committees that cooperated with different committees appointed by the National Conference of Unemployment Compensation agencies, and in that manner have come in contact with administrators from a great many States of the Union. Only last December we had a prolonged meeting between a committee of railroad accountants and representatives of the national agencies, at which considerable progress was made in the matter of simplifying the procedure, and this progress has become more evident every day. Recently, within the last 2 or 3 months, I have served on a committee of the Association of American Railroads, which conferred with a labor committee, some of whom have appeared before you, and explored the possibilities of such a bill as this. It is my purpose to discuss bill H. R. 10127 in some of its practical aspects in light of an intimate acquaintance with railroad pay rolls, records, and procedure extending over a period of nearly one-third of a century. Any discussion of the bill will necessarily involve frequent references to the Board. The definition given in the act (sec. 1, par. r) is that the term "Board" means tke Railroad Retirement Board. This word appears in the bill something like 165 times with respect to what the Board shall do and what the Board may or can do. One of the reasons that has been advanced in favor of the bill is that it will save the railroads vast sums of money by eliminating accounting detail and reporting to States. This saving has been variously stated at from $3,000,000 to $6,000,000 per year. Surprise has been expressed that the railroads have not accepted the prospect of such an immediate saving, with the inference that railroads are not interested in saving such substantial amounts. As a matter of fact, railroads are eagerly interested in any real saving, regardless of amount be it measured in millions, thousands, or hundreds of dollars-even the ordinary two-bit piece is not despised. Instead of the bill offering the immediate prospect of very substantial savings, we do not believe that any saving would be accomplished, but, on the other hand, additional expenses would be incurred. A great deal has been said about the expensive reports to the various State commissions which would be entirely eliminated if one central agency were established which could use the same reports that are now made to the Railroad Retirement Board. We believe this to be an assumption premised on a fallacy. So much has been accomplished within the last few months toward simplification of State requirements that the expense involved has been greatly reduced as compared with the initial procedure. In many cases the wage statistics furnished to the States are simply a carbon copy of wage statistics furnished quarterly to the Railroad Retirement Board in connection with the Railroad Retirement Act. As I stated awhile ago, this was a new experiment; it was new to the railroads and new to the States, as well as new to the employers. It was necessary for them to grope around and try to determine some method of accounting and some method of reporting that would satisfactorily meet the requirements. Of course, we know that in any new venture some mistakes must be made, and some regulations were apt to be set up that were burdensome and impracticable of operation. State commissioners and State agencies have made some very thorough studies of those matters, and have done much toward simplifying the procedure. It is true that some States require a different kind of report which involves some expense. This may be due to the provision of their laws or the scheme adopted, but these conditions are rapidly disappear ing as a result of arrangements that have been worked out through the cooperative efforts of the organization known as the Interstate Conference of Unemployment Compensation Agencies and we confidently expect that this particular difficulty will eventually disappear. With respect to costs incurred by the railroads in connection with reporting to States, I will attempt to show that these present-day costs do not aggregate anything like the vast sums that have been variously estimated by proponents. The most recent figures quoted indicate that there are now about 913,000 railroad workers in the country. The Illinois Central system has approximately 27,000 employees which is about 3 percent of the total class I railroad employees. We on the Illinois Central have the work, incident to reporting to the Railroad Retirement Board, and to the various State commissions, entirely separated from all other accounting work and therefore know the costs. A careful survey of our work shows that if we should at this time, discontinue making any reports whatever to States, and only make reports that are now made to the Railroad Retirement Board, we would only be able to eliminate about $400 per month, or $4,800 per annum, which is the only additional expense that we incur on account of making reports to States. When all States begin paying total and partial benefits, this amount will be increased to about $600 per month, or $7,200 per year. On the basis of $4,800 representing the cost of reporting to States for 3 percent of the railroad employees the total cost to all railroads would aggregate $160,000 per annum. When all States begin paying total and partial benefits, the total annual cost to railroads for various reporting may reach a figure of about $250,000 per year. It is true that this ratio may vary upward or downward on different railroads according to their organization, and so forth, but it is obvious that, if the railroads only spend about $250,000 per year for reporting to States they cannot save up to $6,000,000 out of that amount unless they obtain dividends from some unknown sources. Of course, if railroads did not have to make returns to the Railroad Retirement Board, and the returns to States had to be independently prepared, the cost would be very much greater. But, as the records and reports made for the Railroad Retirement Board are utilized for reports to States, the cost for the latter may be stated as only the cost incurred, in addition to the cost of reports to the Railroad Retirement Board. What has been said with respect to the saving of approximately $1,200,000 in taxes on account of excluding amounts of wages and salaries in excess of $300 per month is based on the pay rolls for the year 1937, and, in order to obtain this, we would necessarily have to give up the merit rating provisions now embodied in the laws of 39 States; and, in that connection, may I say that we believe that the merit rating provision is one of the inspirations of the Social Security program. On the basis of 1937 pay rolls, if merit rating permitted even a reduction of, say, from 3 percent to 2 percent, it would mean a saving of $20,000,000. This fact indicates that the merit rating provisions would encourage employers to stabilize employment. The social-security program seems to me to be rather founded on the premise of obtaining employment for unemployed individuals and keeping them in employment, the payment of benefits being something incidental, to assist in furthering the major objective. Before considering any saving to be effected we must take into consideration the additional expenses that will be incurred. (Sec. 6, p. 22) In considering the possible cost to railroads to be incurred under the proposed scheme, we must examine some of the provisions of the bill. It is provided that employers shall file with the Board, in such manner and form and at such times as the Board by regulations may prescribe, returns under oath of monthly compensation of employees, and, if the Board shall so require, shall furnish employees with statements of their monthly compensation as reported to the Board This latter provision alone, if enforced by the Board, would cost the railroads several times more than any saving that could be realized from discontinuing making reports to the States; because reports to States, as a general proposition, are on list forms, often copies of reports to the Railroad Retirement Board. When reports are on slip forms, the aggregate of 3 months' earnings is reported to the States and all reports for employees of a given State are filed together, only requiring one mailing. The burden of mailing out individual reports to employees monthly, or even quarterly, would be very expensive. (Sec. 12, par. (i), middle p. 42) It is also provided that the Board shall prescribe a procedure for registration of unemployed employees at employment offices with a view of affording substantial evidence of the days of unemployment of the employees who register. The regulations of the Board may provide for group registration-whatever that is-and reporting, through employers, and need not be uniform with respect to different classes of employees. In the first place it is self-evident that the Board is empowered, without restriction, to place a very considerable burden on employers in the matter of registration. At large employment points, such as repair shops and terminals, and at different places over the railroad where a considerable number of employees might be located, it would doubtless be necessary to provide some one almost constantly to receive registrations of men our of employment. I have heard it stated that with respect to employees out on the line of road, where they would not be convenient to a registration office, that a registrar, if you please, might be sent on a freight train every day to make the trip over the district in order to register these employees. On a large railroad system there would be a very great number of people to be engaged in this work, and that number would only be limited by the discretion of the Railroad Retirement Board, in the matter of requirements. What is meant by group registration is certainly a matter of conjecture, but, of course, this would be a matter for determination of the Board and the exercise of their good judgment. It is the declared purpose of registration that it shall afford substantial evidence of the days of unemployment of the employees who register. 73643-38-14 It is even suggested in the bill that an initial first registration will justify the payment of benefits. Well, perhaps that would be satisfactory to the Board, but I do not believe that any other department of the Government would ever be willing to pay out money, day after day, month after month, and year after year, without any more than a formal, personal claim for benefits. I have always understood that the Government is very meticulous in paying out money as well as in collecting it. The Bureau of Internal Revenue and some other departments of the Government do not seem to be willing to take an individual's word for anything; but, of course, if there is a chance of that policy being changed by the Railroad Retirement Board, there may be some citizens who will be glad if that generosity spreads to some other departments. It is difficult to see where registration would be of any value whatsoever, unless the employee personally registered and that this registration should be made on each and every day of unemployment in order to determine whether or not the employee may be entitled to benefits, in light of the various disqualifying conditions imposed under section 4 of this bill. Here is injected the feature of negative timekeeping or the recording of days when employees did not work and the reasons therefor, so that it may be determined whether the reasons qualify the employee for benefits or disqualify him from receiving them. This is essentially a very expensive procedure, with respect to accepting registrations, recording, and reporting them. Apparently, from all that can be determined from the bill, this will be an obligation and an expense of the railroads which will more than offset any saving that they might enjoy through the escape from the State systems. Taking into consideration the additional cost to the railroads that appear to be inevitable, one cannot help but conclude that the expenses to be borne by the railroads will exceed, many times, the costs that they now incur in handling under the State systems. MALINGERING In contemplating the cost of an unemployment-compensation scheme, both with respect to administrative features and compensation, it is important to take into consideration the effects of placing too easy a premium on indifferent workers. In the part of the country with which I am best acquainted-the southern territory-there are a large number of certain groups of workers who are satisfied to exist on a very little money, particularly if they do not have to work for it. It is the experience of years that it is difficult to get these workers to follow employment so long as they have any money whatever. If they work in a factory where they are paid on Saturday night, many of them do not return to employment in the next week, until all of their money is gone, whether spent for necessities, or in pastimes, if you please. It is readily conceivable that under the operation of an unemployment-compensation scheme, such as provided in this bill, where earnings of $150 during one year would guarantee unemployment compensation benefits of $140 during the next year, and so on, that the incentive to malinger will be much more than ever before, and much more than under State unemployment-compensation laws, the most liberal of which provides for total benefits of $25 on a similar amount of earnings. |