to which the Board finds that he left work voluntarily without good cause connected with his work, and ending with the fourth calendar week with respect to each of which the Board finds that he shall have earned pay of not less than $25."

Any person shifting from his job to a new job would therby run little risk of losing his unemployment protection under this "voluntary quit" language. And the system would at least be partly protected from paying benefits to voluntarily unemployed.

Under this provision a person quitting a job for the purpose of looking around for a job which suits him better would, of course, run the risk of not finding one. But that is part of our economic way of life. Under the Railroad Association's proposal, when he does find one, even though it may be mediocre, he would after 4 weeks' work be outside the above "voluntary quit" provision. This would be true even if he tried out three or four jobs. The system would again guarantee his not becoming unemployed through no fault of his own. would pay him unemployment benefits if his last job folded up on him.

It

The third situation, where a person may at present quit work to take an extended vacation, with the expectation that he would have a paid vacation after 30 days, would be corrected by the proposal. The requirement of getting some substantial work before they could subsequently claim to be involuntarily unemployed would tend to minimize the number who would expect the unemployment system to provide them with paid vacations.

A fourth situation is where persons quit because they are withdrawing from the labor market, to attend school, to farm, to look after their home, or for some other reason. The railroad industry should not be called upon to pay these persons benefits. Theoretically, under the "availability" requirement these may not qualify for benefits while so withdrawn. Actually, many do.

It might be observed that both this group and many of the "paid vacation" group cannot, in fact, meet the availability for work test which also delimits the system's responsibility for unemployment. The important practical point, however, is that in actual administration they may get by for weeks of benefits on a claimed availability unless it happens that they are officially confronted with a job offer.

If our proposed provision is adopted, those who have voluntarily gone on vacation or have left the labor market can still overcome their disqualification— but not merely waiting 30 days before claiming benefits. Instead, they must take the affirmative act of actually getting work for 4 weeks. This, of course, may be difficult occasionally, but this is a risk they assumed when voluntarily quitting their jobs. It is much more reasonable that they continue assuming it until they get another job than to ask the railroad industry to assume it after 30 days.

As previously mentioned, some who have, in fact, left the labor market frequently can get benefits on the claim that they are available for work-at least until they have rejected an offer of suitable employment. The voluntary quit, nonavailability for work, and job refusal in this case are all symptomatic of the individual's frame of mind. His leaving the labor market may have occurred because of some situation with which we are most sympathetic. But that does not justify using unemployment benefits to cover a risk it is not designed to

cover.

As in the case of the person who voluntarily quit suitable work, a person who refuses suitable work should assume the full risk of his further unemployment. His right to refuse cannot be infringed, but unemployment insurance should not underwrite his refusal. Refusal with the knowledge that, at most, under present law it will merely suspend his benefits for a few days is not consistent with individual dignity nor with the purpose of the program, nor is its financing by employers' taxes justified. He should be treated by amendment to section 4(1-A) (11) in the same way it is proposed to treat the voluntary quit.

A further current benefit condition found in every State law is that benefits are not paid for unemployment due to the employee's misconduct connected with his work.

As stated in the Labor Department publication I previously mentioned: "The provisions for disqualification for discharge for misconduct follow a pattern similar but not identical to that for voluntary leaving."

This is quite understandable. Each became unemployed because of his voluntary act. Certainly neither a person who quits a good job nor a person who gets himself fired by punching a fellow workman in the nose or leaving a switch open, can be said to be unemployed through no fault of his own.

I am unable to follow an argument that has been advanced that to have the Board deny benefits on the basis that an individual was discharged for misconduct would in some way interfere with the ordinary union-management grievance procedures. Misconduct determinations are currently being made in the administration of every State unemployment system. I cannot ever recall any union spokesman demanding that the "misconduct" provision be stricken out on the theory that it interfered with union-management grievance procedures. Presumably union-management grievance procedures normally follow any situation where an employer attempts to get an employee to do work described in section 4 (c) of the Railroad Unemployment Act-where, to quote from this section, "acceptance of the work would require him to engage in activities in violation of law or which, by reason of their being in violation of reasonable requirements of the constitution, bylaws, or similar regulations of a bona fide labor organization of which he is a member, would subject him to expulsion from such labor organization."

To administer this section, the Board must interpret and apply its provisions to benefit claimants. It is part of the suitable work provisions. If the Board can administer this provision without interference with union grievance procedures, I fail to see why it could not similarly administer misconduct cases.

In determining on appropriate benefit consequences of leaving or refusing suitable work without good cause or discharge for misconduct connected with the work, it seems important to me that these, like the other current conditions, be viewed basically as limitations of the contingency covered. Unemployment benefits are denied in many situations to sick persons, mothers whose family situation makes holding a job impossible, and others unavailable for work. These are not denied as a penalty for being unavailable for work, but because the system cannot properly insure persons against being unavailable for work. Nor can the system properly underwrite the consequences of being unemployed due to on-the-job misconduct.

A person who leaves a good job, whether because he thinks he can find a better one, or because he is tired of working, or who brought on his unemployment by his misconduct, should be unemployed at his own risk, not at the risk of the unemployment insurance system financed by his former employer.

The Railroad Unemployment Insurance Act presently provides that after 30 days he need no longer assume the risk of quitting his job-he can then begin receiving benefits financed by railroad taxes. In the case of discharge for jobconnected misconduct, however, he gets benefits immediately. Are these fair rules? Are they required by the public interest? I do not think so. The answer which 10 States have come to for misconduct is that he is not again insured until he gets another job and holds it for a reasonable period. This would appear preferable to a flat disqualification period 15 States have adopted, or variable durations which are decided administratively by the remaining States. These may run as high as 24 weeks in Texas and 16 weeks in Kentucky. Eighteen States likewise cancel out benefit rights. Seventeen provide for longer periods when the misconduct is aggravated.

The position of the Association of American Railroads is that a person who becomes unemployed through misconduct connected with his work should certainly fare no better than one who becomes unemployed by quitting, or other voluntary act, and his unemployment should be clearly written out of the system to the same extent previously suggested for "voluntary quits." The association accordingly suggests that this be provided by an additional subsection added to section 4 (A-2) of the act.

SICKNESS BENEFITS AND MATERNITY BENEFITS

The association proposes that railroad employees pay half the cost of sickness benefits, and that maternity benefits be discontinued.

I might point out that when American unemployment insurance systems were established, it was generally thought that these would be financed by employers and employees, and several States originally did so. But the Federal forcing tax was imposed only on employers, and the theory grew up that, due to the employer's position to regularize employment at least to a substantial degree, he should pay the cost of unemployment insurance.

However, radically different considerations apply to sickness benefits. The employer is already held liable for disabilities attributable to him. Sickness is essentially a personal, non-job-connected phenomenon that everyone is subjected to.

Sickness benefits were first adopted in Rhode Island. It was one of the few States with employee contributions toward unemployment compensation, and these contributions were shifted to, and afford the sole financing of, the Rhode Island cash sickness benefits.

California and New Jersey, each of whom had employee contributions, likewise established sickness benefits largely financed by such contributions.

New York also has adopted sickness benefits. These, too, are very substantially financed by employees covered.

The railroad system is the sole American system financed wholly by employers, and I know of no foreign system so financed. We know of no tenable theory justifying this unique railroad system financing. We feel that, with employee participation in the costs, the system would be much better protected against chiseling. I cannot but believe that employee opinion would be adverse to claimant practices which would waste employee-contributed funds and threaten to increase employeecontribution rates.

It is possible that employees as well as the railroads would support the proposal of terminating maternity benefits if employee contributions were levied to finance these benefits.

There would, of course, be a better argument for maternity benefits with employee financing, like Rhode Island where employees pay the entire bill, than there is under the railroad system where the cost is borne wholly by the railroads. But even the Rhode Island system limits pregnancy benefits to 12 weeks except in cases of unusual complication as a result of childbirth. In all cases, duration under this system is limited also by the woman's potential benefit duration in terms of base-period wages.

The other three State programs rule out pregnancy. As stated in the U.S. department publication I previously mentioned:

"New Jersey does not pay for any period of disability due to pregnancy, miscarriage, or abortion. California provides payments only for disability which lasts more than 28 days after termination of pregnancy, and New York only for disability which occurs after a woman has worked in covered employment for at least 2 consecutive weeks following the termination of pregnancy."

I shall not raise the question as to whether pregnancy, like sickness, is the occasion of an involuntary wage loss, or the further question of whether maternity benefits should be financed by payroll taxes. Instead, I shall only observe that the social need for such benefits has not been indicated by any widespread adoption of such programs in the United States, nor does there appear to be any substantial pressure for doing so.

There is no significance in railroad employment which should single out the small percent of its employees who are of childbearing age and sex, as requiring maternity benefits. It can hardly be their pay rates, in view of the railroad pay scales. If anything, these rates should serve as a basis of reducing rather than emphasizing any possible justification for maternity benefits.

The association's proposal would terminate these benefits next June-except for maternity benefits being paid on that date.

Railroad employees work under contracts where a person holding a job receives the same pay regardless of sex-and I understand that the present minimum rate is $1.97 per hour. These facts alone would seem to demonstrate that neither equity or social need requires continuance of maternity benefits.

Mr. Chairman, in conclusion, I should like to express my appreciation to your committee for its patience in listening to this extended statement dealing with these several important matters. At the same time, I should apologize for giving some of these matters the sketchy treatment necessitated by time limitations. I believe that a large part of what I have said in dealing with the complexities of the railroad system boils down to this:

1. That the general unemployment insurance concept of paying a person who becomes unemployed a substitute by way of benefits, of the wages he has just lost, requires the scrapping of the calendar base year-lag period and benefit year provisions of existing law;

2. That the general concept of replacing an equitable portion of a person's pay loss requires gearing his benefit to his normal paycheck rather than to his gross wages before tax withholding, and to his take home daily pay rate rather than to his total of gross wages in his base year;

3. That the general concept of protecting railroad pay loss of genuine railroad employees requires a basic revision of the base period test of qualified employee, and also a revision of definitions dealing with his current unemployment situation-the definition of "day of sickness," must be revised. It should be

made clear when the claimant is, and when he is not, suffering an involuntary pay loss which should be compensated;

4. That in fixing benefits the public interest and the employees' interest require that benefits of no claimant shall be at such levels as compared with his paychecks, as to impair his work incentive, and finally;

5. That, like permanent disability is now, temporary disability arising from sickness, should be financed jointly by railroad employers and employees.

Mr. Chairman, I should like to request on behalf of the Association of American Railroads that its proposed amendments both of retirement and unemployment benefits and tax provisions be accepted for inclusion in the printed record following my testimony.

Mr. CALHOUN. I shall start by following the text rather closely for the first few pages, and then I will omit matter from time to time.

By way of general preface, I shall state the almost universally agreed principal objective of unemployment insurance, as I shall refer to this key objective from time to time. Unemployment insurance is intended to provide, within reasonable cost limits, to persons normally employed but currently unemployed due to lack of work and through no fault of their own, temporary benefits reasonably related to their normal earnings and of such size as to afford a reasonable floor of protection but not to impair their incentive to seek and engage in suitable work. You will find a description of the various viewpoints of the purpose and major elements of the program in the Ways and Means study, "Issues in Social Security," made by its technical staff, which I headed in 1946.

My statement today is largely directed to the way the amendments in the pending bill meet or fail to meet the general objective I have stated, and how the proposed alternatives of the Association of American Railroads would meet this objective.

It seems manifest that S. 226 would fail to meet one of the elements of sound unemployment insurance to which I have referred, that is, providing benefits within practical cost limits. Your committee has already heard the cost estimates of the Railroad Retirement Board. You have heard the change, I presume, of the employee member of the Board from his original position that the bill should be passed without amendment to a position that the proposed tax rate of 3% percent should be increased. You have also heard the same view, I am sure, expressed by the spokesman of the Railway Labor Executives" Association.

It has also been made plain by the testimony that further amendments would be necessary to insure the making of payments which would be required under the proposed bill during the next few months expenditures would so exceed receipts as to more than exhaust all funds presently in, or coming into, the account during this period. And as I remember the estimate, it was that the deficit would be from some $25 million to perhaps as much as $75 million, if I remember those figures, for the period ending June 30 of this year.

When the original Railroad Unemployment Act was enacted, it was recognized by the spokesman for the Railway Labor Executives that there should be a general conformity in certain respects with the State-Federal systems of unemployment insurance.

Since that time there has been a great and steady increase in disparity between the benefits provided and other features of State systems and the railroad system. It is to be expected that the railroad practical minimums are considerably higher than those of the States

since class I railroad employees have a practical minimum wage of some $1.97 an hour, which under the existing half-pay formula is a weekly benefit of some $39.40. But it is difficult to justify the fact that the benefit paid these $1.97-per-hour persons under the existing railroad law is higher than the maximum in the great bulk of our States and that the pending proposals would make benefits still higher. The table in my prepared statement shows the maximum and average benefits being paid in each of our States.

I call to your attention the footnote that the totals given exclude temporary benefits that are now being paid and also exclude dependents benefits in the few States which pay dependent benefits. It does not include them because you just cannot tabulate them, some of them, the way they are framed. Also you will notice the maximum general tax per employee is the wage base times rate. The only two States where taxes are anything like $100 are Rhode Island, $108, and of course, as you would expect, Alaska, $126. Remember, the pending bill and a 4 percent rate would make the railroad maximum tax per employee $192.

Under the 1938 railroad unemployment law the maximum total of benefits paid a person with $1,300 in base year wages was $240. Today a person with $1,300 in base year wages may receive as much as $1,105 for unemployment and $1,105 for sickness. Under the pending proposal he will receive as much as $1,300 for each contingencyexclusive of the proposed extended benefits.

It is true that living costs have gone up, but so have wages. The $1,300 man of 1938 probably earns $3,500 now. The pending bill proposes to pay him $9.50 a day, $47.50 a week, a possible total of $1,135 for unemployment and $1,135 for sickness, over nine times his 1938 maximum.

Illustrative of costs is the tax schedule and its proposed expansion. In practically all States, as you will notice on this back sheet, which is as near to date as there are any presently available official figures, the costs for State systems, including the Federal tax, run around 1.50 percent of the payroll with a $3,000 wage base. The present railroad contribution schedule in effect is 3 percent on a $4,200 base. If it is expanded, if the base is expanded, to $4,800 and the rate is increased to 4 percent, of course that brings it up to the $192. And even this tax might prove insufficient.

It was most unfortunate that instead of following State patterns of adjusting taxes to costs, the railroad system, instead, from employer contributions, built up a very large reserve by requiring a full 3 percent rate over a series of years when employers under other systems were paying only a small fraction of that.

In 1946 Congress further departed from the principle of keeping the railroad system roughly in line with State systems with respect to benefits, and here are the results: Since 1946, when sickness benefits were added to unemployment benefits under the railroad system, through September 1958, according to table 1 of the December 1958 Social Security Bulletin, the railroad system paid out $445.2 million in sickness benefits and $928 million in unemployment benefits. During this same period all of the 50 State systems paid out some $17.3 billion in unemployment benefits.