dependents if the pay after taxes approach is used to determine the size of benefits.

The whole idea of the benefits is to provide a floor of protection to an unemployed person related to his loss in earnings because of his involuntary unemployment. This loss cannot be properly measured by his gross pay before taxes. When the system was established, it did not matter much whether net or gross pay was used to measure benefits as practically no one who was paid benefits had any income taxes to pay and his net paycheck after taxes was 97 percent of his gross pay. But with changes in income tax and railroad retirement taxes, a steady unmarried worker who averages 5 days per week work throughout the year, and has gross pay of $19 per day, will have next year after income taxes and the proposed railroad retirement taxes, only $14.63 per day after these taxes. A married man with 3 children and the same daily pay will have $16.62. One suffers $2 per day more in pay loss than does the other. We cannot properly ignore these take-home pay differences, when we liberalize benefits. As the married man in this case loses $2 per day more in earnings than does the single man, he should get a $1.20 larger daily benefit than does the single man.

To place the overall picture before you of the differences between gross pay and actual take-home pay, the following table is attached showing full-time workers averaging 5 days a week for the year, and with gross daily pay at $1 intervals from $10 per day through $19, and net pay in various dependency situations. The proposed railroad tax on employees is used. Income taxes are computed on the basis of the short form return used by practically everyone interested in benefits.

Gross and net pay of railroadmen-Net pay after railroad and income taxes

Section 302 (a) of S. 226 makes changes in the days of unemployment in the first registration period required for benefits to be paid. This will open up the system to many small claims. No unemployment system in the United States, or, I believe, in the world, other than the railroad system, ever pays a person for a 10-percent loss (caused by 1 day's unemployment) in his normal earnings. Under the railroad system this small loss is presently compensated, but only after four times this loss has been suffered in an initial 14-day registration period. Under section 302, the additional requirement for this first registration period could be eliminated and the first time a 10-percent loss occurs in a 2-week period a benefit could be paid.

Under all but a very few systems, the employee must stand the entire loss of unemployment in the first week he is unemployed in a benefit year. This is generally called the "waiting period." After this waiting period he can qualify for benefits when his wage loss in a week is substantial, but not otherwise. The railroad system does not pay benefits on a weekly basis but on the basis of a 14-day "registration period." To get benefits in his first registration period in a benefit year, a person must have more than 7 days of unemployment. The period normally has 2 Saturdays and 2 Sundays and 10 workdays. To meet the requirement for the first period he must have, besides the 4 days he usually does not work, 4 additional days of unemployment. This means that in this 2-week period he must be unemployed an average of 2 of the 5 normal working

days in the week. It means in substance that he must have a 40-percent pay loss for the first period.

After he has once met this requirement, he gets benefits if he is unemployed even 1 of the 10 normal work days in a 2-week registration period. The same rule applies to sickness benefits.

States usually, like the railroad system, disregard small amounts of earnings while not in regular employment. Most States disregard $2 to $5 per week for benefit purposes-the railroad system up to $3 per day averaged over the registration period. Under State systems, earnings above these amounts are deducted from the weekly benefit amount in determining whether any benefit will be paid and, if so, how much-excepting New York, which has an "effective day" system. The rule in four States is (1) if earnings are less than half the weekly benefit amount full benefits are paid; (2) if earnings are equal to from one-half to the total weekly benefit amount, half the benefit is payable. If earnings exceed the weekly benefit amount no benefits are paid.

In Maryland, one of the very few States without a waiting period, a person cannot receive a benefit for any week in which his compensation exceeds his weekly benefit plus $7. An individual whose "high quarter" average daily pay is $17-$85 per week-can draw at most $35 benefit for a week of unemployment. If his earnings exceed $42, he can draw no benefits at all. Thus, if he works 3 days and earns $51, he would not be eligible for benefits. If he works 2 days and earns $34, his total benefits for the week would be $8, or about 23 percent of his benefits for total unemployment. If he works 1 day, his benefits would be $25-about 71 percent of his benefits.

Under the present railroad system, assuming that the 14-day registration period is the first in his benefit year, a person who works 6 days has 8 "days of unemployment" and can draw benefits in days of unemployment in excess of 7. Assuming he earns $17 per day, his benefit under existing law is $8.50 for the 2-week period. Thus, for his first 2 weeks of unemployment his treatment is comparable with the way he would be treated under Maryland law.

The pending bill would change his present treatment under the railroad law. If he has 8 "days of unemployment”—that is, he worked 6 days in his first registration period, he would receive four times $10.20, or $40.80 in benefits. New York bases its benefits for a week on "effective days" except that if $36 is earned in any week no benefits are paid for that week. A person unemployed on 3 of the 7 days in the week has no effective days. If unemployed on 4 days-which means that he worked on only 3 days-he gets one-fourth of the full benefit for the week. If unemployed 5 of the 7 days-which means that he works only 2-he gets half the full benefit. If he works on 1 of the 7 days, he gets three-fourths of the full benefit, and if unemployed all 7, he gets full benefits.

Compared with the railroad retirement system, after the first registration period, it works out this way for not working on 1 or more of the 5 normal workdays:

The New York schedule does not apply if the person's gross pay for the week is $36. As previously stated, no benefits are paid in such a case. Under this $36 rule, the bulk of railroad employees could not qualify if they worked 2 or more days in the week.

In New York, before any benefits will be paid in a benefit year, a person must first have 4 effective days-for which he gets no benefits. "Effective days" are

defined as days of unemployment in excess of 3 in a week. Thus, suppose he is unemployed a full week. This gives him 4 effective days and constitutes a "waiting period week." If, and only if, he has less than 4 days of work in the next week can he receive benefits for that week.

The railroad system currently has what might be termed a 3-day waiting period at the beginning of the benefit year. It is now proposed in S. 226 to eliminate this.

The present railroad rule is much more lenient than State laws for the initial registration period. We propose that it be amended so that payment will be made only for days of unemployment in excess of 5 working days, instead of the present 3. This would put it on the basis of a waiting period week. More important, it would prevent claimants from getting a benefit for every workday lost unless they had first suffered a week's pay loss.

CURRENT QUALIFYING CONDITIONS

Besides meeting base year minimum work requirements designed to limit benefits to persons normally in work covered by the system, every State law, and the railroad law, imposes as a continuing condition "availability for work" requirements, and certain other conditions designed to limit the system's protection to persons who currently are genuinely in the labor market.

1. Availability for work and registration for work

Section 1k of the Railroad Unemployment Insurance Act defines "day of unemployment" for benefit purposes and provides that such a day "with respect to any employee, means a calendar day on which he is *** available for work ***"

Section 12i of that act provides that "the Board shall prescribe a procedure for registration of unemployed employees at employment offices. Such procedure for registration shall be prescribed with a view of such registration affording substantial evidence of unemployment of the employees who register * * *." Section 1h defines, for benefit purposes, "registration period" as one "which with respect to any employee * * * begins with the first day for which such employee registers at an employment office ***."

Quite obviously the purposes of the registration and availability of work requirements above quoted are to carry out the intent of the law that benefits shall not be available to persons who have not registered for work and have otherwise shown that they are currently available for work. On the basis of this intent, section 325.12 (c) of the Board's regulations contains the general rule requiring that no registration shall be retroactive by more than 6 days, and further, that the board may require that the registration be made on the very day. The only exceptions made to the above are certain unusual hardship situations which the claimant has the burden of proof of establishing.

I beg your indulgence for my going into this much detail. I do so only because of the fundamental importance of employment office registration in maintaining basic unemployment insurance purposes, and because it is directly involved in section 303 (b) of S. 226.

This section would, under stated conditions, pay certain persons who have not established claims under the Temporary Unemployment Insurance Act of 1958 "benefits for days of unemployment, not exceeding sixty-five, which occur in registration periods beginning on or after June 19, 1958, and before April 1, 1959 for which benefits otherwise would not be payable.

The section ends with the statement that "except to the extent inconsistent with this subsection, the provisions of the Railroad Unemployment Act shall be applicable in the administration of this subsection."

I understand that the language of this subsection is exactly the same as that contained in a bill reported out last year by the Senate Committee on Labor and Public Welfare. It was manifestly intended that to receive these temporary extended benefits the person concerned would have to comply fully with the normal registration for employment required of regular railroad unemployment benefit claimants. In short, it was intended to act essentially for future unemployment, like the Temporary Unemployment Act-not retroactively. For it was made applicable only to unemployment occurring after June 19, 1958.

Your committee could, of course, report out the section with June 18, 1958, stricken out and some future date substituted. The practical result, however, is that only a very short period of unemployment-that occurring between March 1, 1959, and April 1, 1959, would be compensated. That, of course, would also be the result under the Temporary Unemployment Act of 1958 if any of the many States who have not so far elected to do so, now elected to pay benefits under that act. It does not permit retroactive benefits.

At this point, I should like also to invite your attention to the provisions of section 303 (a) of the bill which would amend section 2(c) of the Railroad Unemployment Insurance Act. This amendment to section 2(c) would provide extended benefits to persons with 10 or more years of railroad service after

they have exhausted their normal benefit rights. Section 308 provides that section 303 (a) "shall be effective *** in extending benefit periods which begin after December 31, 1957." The provision, if it had been adopted last session of Congress, would have meant, except for a few days, payment of future extended benefits, i.e., for unemployment after June 30, 1958.

Both section 303 (a) and 303(b), in now using the June 30, 1958, effective date, present the same general issue whether there should be retroactive payments of unemployment benefits for periods going back to last June where there has been no registration at employment offices, and no other "availability for work" or other normal tests and procedures.

It seems clear that this is the same kind of issue that faced the Congress when, after months of delay, it finally enacted the Temporary Unemployment Compensation Act. Many persons had extensive unemployment during the time the legislation was pending. If it had been promptly passed, this unemployment would have been met with benefits. But doing so retroactively, when finally passed, would have been counter to unemployment insurance theory and practice. So it was not made retroactive. This precedent should govern here. Retroactive payments by necessity would be to persons who did not register for work. This and other qualifying requirements cannot in fact be met retroactively. It would be futile to have persons register today for job opportunities open last summer.

Before leaving this proposed permanent amendment to section 2(c) might I also point out that it violates another basic rule that unemployment insurance is by nature temporary. It is an amendment that when applied to the 15year railroad serviceman would string out his unemployment benefits to a greater extent than any system I ever heard of except in England where such a system became known as the dole and was reformed. A person with 15 years' railroad service becoming presently unemployed could begin drawing benefits today, draw until next January under existing law, draw from January 1960 until July 1960 under the proposed extended benefit provision, then draw for several additional months under existing law and then again draw 6 months more under the proposed amendment.

The section as applied to the person with between 10 and 15 years' railroad service would give him 3 months extended benefits. Under some circumstances, he could bridge the benefits between 1 benefit year and another though not entirely when the period between the 2 benefit years was more than 3 months. The railroad association is opposed to these extended benefit provisions. Both are entirely wrong in principle and we urge that the entire provision be stricken from the bill.

BENEFITS TO STRIKERS

One point that all State legislatures have agreed upon-and that Congress concurred in when writing the District unemployment insurance law-is that a person who voluntarily walks off a job should not be able to stroll over to the unemployment office for unemployment benefits. He is, at this point, voluntarily unemployed. This is true whether he walks off alone and is, in unemployment insurance jargon, a voluntary quit, or walks out with others on a strike.

As stated in BES No. U-141, the U.S. Department of Labor Publication "Comparison of State Unemployment Insurance Laws as of January 1, 1958": "In 49 States, labor dispute disqualifications last, in general as long as the labor disputes *** only two States provide for a definite period of disqualification. In New York a worker who lost his employment because of a strike or lockout *** can accumulate 'effective days' after the expiration of 7 weeks and the waiting period * *. In Rhode Island a worker *** is entitled to benefits *** after a 6 weeks' disqualification period and a 1-week waiting period."

A most important consideration is that unemployment insurance should be neutral in labor disputes. To this end all acts provide that benefits shall not be denied for refusing a job in a struck plant. Similarly, all acts except the Railroad Act prevent unemployment insurance from being used as a device to make an employer, or an industry, finance strike benefits. Whether there are many strikes, or whether the strike is lawful or unlawful, or authorized or unauthorized by a union is not germane to this issue. The legislatures have used the term "labor dispute" or the terms "strike or lockout" so as to make clear that the State law does not require or permit the unemployment insurance administrator to decide on lawfulness of or union authorization for strikes, or to

assess blame on either side. The provision simply makes clear that the system does not cover unemployment of persons participating in labor disputes.

The fact is that the claimant should not be paid benefits under basic principles. He is not involuntarily unemployed due to lack of work. He is not looking for a job. Instead, he is trying to better the hours, wages, or working conditions in a job he already has.

The Railroad Association's position is based on the foregoing considerations, It is that there is no justification for the portion of section 4(a-2) iii which permits payment of strike benefits. These strike benefits are paid unless the Railroad Retirement Board finds, and I quote, "that such strike was commenced in violation of the provisions of the Railway Labor Act or in violation of the established rules or practices of a bona fide labor organization of which he was a member."

This kind of finding is not germane to the basic issue, whether employer financed unemployment insurance should pay strike benefits, nor is it consistent with the companion provision of section 4 (c) which makes no distinction between "lawful" and "wildcat" strikes but excuses any claimant for benefits from accepting a job which, and again I quote, "is vacant due directly to a strike, lockout, or other labor dispute."

Quite a body of laws and regulations now attach to labor disputes under Taft-Hartley and under State laws, as well as under the Railway Labor Act. These are all designed to protect the public interest as well as to provide fair rules for labor disputes. To this end they impose various restrictions on labor and management. But this fact affords no basis for a provision under any system making employers pay strike benefits to strikers, regardless of whether the strike violates the law or a union constitution, rules or practices.

The fact is that strikes and strike threats are basic economic weapons providing a background to collective bargaining. To add to these, the further weapon that the employer must indirectly finance the strike through his unemployment taxes is not fair play. It violates basic unemployment principles. How can there properly be one rule for striking railroad employees and a contrary one for other strikers?

"VOLUNTARY QUITS," "JOB REFUSALS" AND "DISCHARGES"

Two other current qualifying conditions found in all State laws and in the Railroad Unemployment Insurance Act are usually referred to as "voluntary quit" and "refusal of suitable work" requirements.

The philosophy of these provisions emphasizes the point that I previously made that the provisions are not penalties, but only limitations as to what unemployment the system "insures." Without these limitations the State systems would provide 6 months' paid vacations-the railroad system frequently twice as long.

An essential part of the free enterprise system is that people decide for themselves when and where they will accept work and when they will quit work. But if Government attempts to guarantee an individual against the fiscal consequences of his decision not to work, how long could we endure before this basic right is in jeopardy?

The "quit" provisions, the "refusal of suitable work" provisions, are intended to avoid Government's guaranteeing against consequence of decisions not to work. They are intended to preserve, not to infringe these rights-just as the "strike" provisions are not intended to penalize the right to strike, or the qualifying definitions of "unemployment" are not intended to penalize persons who work in denying them unemployment benefits while they are working.

The provisions should be simply used in defining the risk covered and excluding unemployment situations controllable by the voluntary action of employee from being "insured” by unemployment insurance.

If a person leaves his job to take another job and shows the bona fides of his intention by working a few weeks on the new job, the "voluntary quit" provisions of present law do not then apply to him. If he subsequently becomes involuntarily unemployed, this is not caused by his quitting the first job and he is entitled to benefits.

It is our position that any person who voluntarily quits should be permitted to draw benefits only if he takes another job and works at least 4 weeks. The Railroad Association accordingly recommends that the present section 4 (a−2) (i) excluding from a "day of unemployment" the first 30 days after a voluntary quit be amended to exclude "any of the days beginning with the day with respect