There are provisions that if a man is offered suitable employmentand that is determined by certain provisions in here-and refuses it, he is not entitled to benefits.

I may say that we have set up here, we think, rather sound provisions for the encouragement of employment and the finding of the opportunities for employment. We are seeking to avail ourselves of the State agencies, insofar as we can, in helping to find employment. The Board shall be authorized to make provision for assisting men to find additional work and to help keep them as steadily employed as possible.

The CHAIRMAN. The railroads will not pay any more under this bill than they do at present.

Mr. HAY. They pay, in all States, at least 3 percent, and in some States a fraction over 3 percent.

The CHAIRMAN. In other words, you require all of them to pay 3 percent?

Mr. HAY. Just a flat 3 percent.

The CHAIRMAN. So that it would not cost them any more than the amount they have to pay now?

Mr. HAY. No. As I explained in the beginning, because of the fixing of the tax base on a limit of $300 per month of the employees pay roll, instead of on the whole pay roll as at the present time, they save directly $1,200,000 a year. That is the saving for them.

I have discussed these benefit provisions, calling particular attention to the more liberal provisions in the lower paid groups and for the irregularly employed men who may earn a smaller amount during the base year, and our justification for that, based upon the considerations which I have mentioned.

The CHAIRMAN. Members of the Committee must go over to the Senate floor now. I do not know whether we can get this legislation through during this session; however, I do hope so.

I was wondering if it would not be a good idea to let the railroads present their views now and explain their side of it, and then you could follow them and answer.

Mr. HAY. I think it is entirely probable that I shall have to be before a House committee in the morning, so that will suit me.

STATEMENT OF J. A. FARQUHARSON, NATIONAL LEGISLATIVE REPRESENTATIVE, BROTHERHOOD OF RAILROAD TRAINMEN

Mr. FARQUHARSON. Mr. Chairman and members of the Senate Interstate Commerce Committee, I am appearing here in support of the unemployment insurance bill, H. R. 10127, covering railroad employees, hearings on which are now being conducted before your committee.

It has been very apparent since the passage of the Social Security Act that it would be most difficult to properly handle railroad employees under the unemployment features of the Social Security Act, because of the fact that these employees, in so many instances, are obliged to work over State lines in the exercise of their seniority, and this is particularly true of the transportation group. Railroad employees who lose their positions on one railroad are usually obliged to move to another railroad and invariably into another State to get employment; for example, a majority of the transportation group

employed on the iron-ore-carrying roads at the head of Lake Superior have a seasonal job, dependent always upon the length of the season that the Great Lakes are open to navigation, and every railroad has seasonal business. Therefore, the extra men have work for a time. and then, under the rules governing furloughs found in the various schedules of wages and working conditions, these men are laid off and permitted to go elsewhere in search of employment, retaining their seniority if they return to work when called.

If railroad employees are taken care of separately, it will be easy to take care of the time earned in railroad service because of the fact that none of them today is doing anything that would result in the loss of their seniority upon a railroad, and in securing employment on another railroad they are always obliged to give references as to their former railroad employment; consequently, there is always kept a very accurate record. On the other hand, there are in existence a good many rules-for example, on the Southern Pacific System-where. men are transferred from one division to another without loss of seniority on their home division, to help move a crop. A specific case would be that of men moved from Oregon to the Imperial Valley of California or Arizona and New Mexico, to help move the cantaloup rush, but the record of the work furnished and time lost is kept by the one company and, therefore, will be more accurate than if they were under the Social Security Act and administered by State authority. Another example as to why I believe that railroad employees should be under a separate bill covering unemployment insurance is that the seniority districts of many of the men extend over State lines, as stated above, and men are obliged to move across State lines to exercise their seniority. On the district, upon which I formerly worked, the seniority district covered from El Paso, Tex., to Yuma, Ariz., and there are located on this piece of railroad eight home terminals out of which men work, and an extra man especially might be obliged in the course of a year to have work in two or more of those terminals and in two or more States, and, in my opinion, it would be possible to keep a more accurate account of his service and unemployment, and he would be able to receive the benefits due him because of unemployment more readily than if he were compelled to remain under the Social Security Act.

The purpose of unemployment insurance is to give aid when needed and, for the reasons above stated, the Brotherhood of Railroad Trainmen is lending its support to the passage of this legislation.

The CHAIRMAN. Well, we will adjourn until 10:30 tomorrow morning.

(Thereupon, at 11:50 a. m., adjournment was had until Saturday, June 4, 1938, at 10:30 a. m.)

UNEMPLOYMENT-INSURANCE SYSTEM FOR EMPLOYERS ENGAGED IN INTERSTATE COMMERCE

The committee met at 10:30 a. m., pursuant to adjournment on Friday, June 3, 1938, in room 412, Senate Office Building, Senator Burton K. Wheeler (chairman of the committee), presiding.

Present: Senators Wheeler (chairman), Brown of New Hamshire, Minton, Truman, Johnson of Colorado, Schwartz, and White. The CHAIRMAN. The committee will be in order.

Who is your first witness?

Mr. FLETCHER. I think Mr. Hay.

The CHAIRMAN. I think he is going to conclude at a later date.
Mr. FLETCHER. Mr. Young is our first witness.

STATEMENT OF C. D. YOUNG, VICE PRESIDENT, PENNSYLVANIA RAILROAD

The CHAIRMAN. Give your full name and business, Mr. Young. Mr. YOUNG. C. D. Young, vice president of the Pennsylvania Railroad, in charge, among other things, of insurance.

Senator Wheeler, gentlemen, I am here testifying on behalf of the Association of American Railroads.

It was through my activity in insurance matters for the railroad company that I was selected with others to work out the Railroad Retirement Act, and that brought me into the association on the subject of unemployment insurance, because they have direct relationship.

Mr. Chairman, I have copies of my testimony and some charts for the members of the committee, and I would be very glad to turn them over to you.

The CHAIRMAN. Very well.

Mr. YOUNG. The subject of this bill is that of unemployment insurance benefit for employees of carriers, through a Federal act, the cost of which is to be borne by the employers, versus the present 51 terri torial acts in which the carriers' employees are included with other occupational groups; and it proposes to lift all carriers' employees out of the provisions of the State acts and isolate them in a Federal act for this industry.

I come to this hearing with an open mind regarding the ultimate wisdom of a Federal unemployment insurance act for railroad em

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ployees. I am here because I am opposed to making a change at this time from the system now in effect in the States before the States have had time to make their present acts fully effective and without having had sufficient experience through the State acts with due regard to the welfare of all other employees in each of the States-to enable one to determine what should be the ultimate plan for the best interest of the railway employees.

I am against this proposed bill, gentlemen, for nine reasons:

First. The plan is not what it is purported to be-insurance against unemployment. It is, rather, unemployment insecurity for the employees longest in the railroad service.

Second. It is not a measure for stabilizing employment; in fact, it has a tendency to invite the men with shortest service in the railroad industry to become unemployed.

Third. It offers no encouragement to the employer to minimize unemployment.

Fourth. The fund may be inadequate to pay benefits to railroaders with the longest service if they do become unemployed.

Fifth. It assumes one of two things: Either the State laws are too restrictive as to benefit payments or the State tax rate is higher than need be to meet the requirements.

Sixth. The contemplated cost of administration is unnecessarily

excessive.

Seventh. It assumes that insurance is a grant at the expense of the State or the employer.

Eighth. In many respects it does not follow the draft bill recommended by the Social Security Board to the States as a guide for their laws.

Ninth. This bill is inequitable, unduly benefiting short-service men at the expense of long-service railroaders under the guise of meeting the complexity created by the crossing of State lines in interstate employment, which, however, affects less than one-fourth of railway employees; whereas there should be no preference by the Federal Government for one group of men within an industry.

The CHAIRMAN. Do you mind interruption?

Mr. YOUNG. Not at all.

The CHAIRMAN. I notice you say:

It is, rather, unemployment insecurity for the employees longest in the railroad service.

Again you say:

The bill is inequitable, unduly benefiting short-service men at the expense of long-service railroaders under the guise of meeting the complexity created by the crossing State lines in interstate employment, which, however, affects less than one-fourth of railway employees.

Let us assume, for the sake of argument, that it is more beneficial to the lower-paid employees than it is to the higher-paid employees. However, if all the men in the higher brackets are willing that the lower-paid employees should have greater benefits under the law than they do now, should not that be the thing that would be a guide as to what the employees want, as along as it does not cost the railroads any more money?

Mr. YOUNG. That would be correct, sir, if it followed the subject to its logical end, but I do not believe the longer-service men would be

agreeable to this bill if they felt that if and when they did become unemployed the fund had become exhausted.

The CHAIRMAN. As a matter of fact, all of the railroad brotherhoods, as I understand it, want this bill?

Mr. YOUNG. I so understand, too, sir.

The CHAIRMAN. They are the ones who are asking for it and who endorse it.

Mr. YOUNG. Yes, sir.

The CHAIRMAN. And is it not a fact that those who are employed in the lower brackets are the ones who suffer most from unemployment? Mr. YOUNG. Yes, sir.

The CHAIRMAN. So they are the ones, as a matter of fact, whom we ought to try to help, rather than those who have greater seniority rights and who do not suffer as much from unemployment.

Mr. YOUNG. But in the upper brackets, with the present reduction of forces, they are affected very seriously, and if the fund became exhausted before they became unemployed they would be the most seriously affected, and they are men who, as my statement will later develop, are the ones that the managements would like to see protected in the event that they are unemployed.

The CHAIRMAN. Let me ask you this question: Take a conductor on a train, for instance. When there is a shortage of labor he is demoted from conductor to brakeman, is he not?

Mr. YOUNG. Yes, sir.

The CHAIRMAN. So that those men are not unemployed to the extent that the lower-paid employees are?

Mr. YOUNG. That is right.

The CHAIRMAN. Or the men of shorter service?

Mr. YOUNG. On account of the seniority rule, the men with the shortest service naturally are the ones most frequently unemployed. On the other hand, if the benefit payments to those men are greater than the fund itself will stand, then when the long-service men become unemployed and there is no money in the fund with which to pay them, they will be the ones hurt, and it is my contention that they should be protected.

Senator MINTON. I do not understand when that will happen to those men of long service.

Mr. YOUNG. I beg your pardon?

Senator MINTON. I do not understand when that will happen to those men of long service.

Mr. YOUNG. Well, it is happening right now on some of the lines, because these men with long service, 25 or 30 years of service, now are being furloughed.

The CHAIRMAN. They would get benefits under this bill.

Mr. YOUNG. They would as long as the fund was sound, but my contention is that the fund would not be sound on account of the benefit payments to the men of short service, particularly to those with less than 1 year's service, and the men with less than 5 years' service are going to deplete this fund, on the present basis of the knowledge that we have of the amount of unemployment that will exist in those lower-service groups.

The CHAIRMAN. Why should the railroads complain if the men of the longer service, in the higher brackets, are willing to accept this bill for the benefit of the men down below?

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