Thus the question is not one of being liberal. Instead it is one of selecting an effective requirement for the railroad system so as to preserve its fund from being used to pay unwarranted benefits to persons who, if in the labor market at all, are in that part covered by some other system.

Now I will skip to near the bottom of page 16 and quote just one of its several figures.

In the year ending June 1956, 50,000 persons who could not realistically be called railroad employees were paid on an average of $400, and a total of $20 million in railroad unemployment and sickness benefits. Nearly 8,000 persons drew as much in benefits as their total qualifying wages. Those were persons that were down near the very border of qualifying, between $400 and $600.

None had worked for railroads as much as a third of the qualifying year. Over 6,000 worked for railroads less than 40 working days and nearly 15,000 less than 60 days in the entire year.

Doubtless the great mass of these people worked in nonrailroad jobs, covered under other unemployment benefits systems, more than they worked in employment under the railroad system.

When unemployed, they should have drawn their unemployment benefits from these other systems.

Senator MORSE. This will be raised in executive session, Mr. Schreiber, and I think the Retirement Board had better prepare us a memorandum on this qualified individual section of his testimony.

Mr. SCHREIBER. We would be glad to do so, Mr. Chairman. Senator MORSE. I think we need it in order to discuss intelligently these cases that Mr. Calhoun is raising.

(The memorandum referred to follows:)

UNITED STATES OF AMERICA RAILROAD RETIREMENT BOARD,

Hon. WAYNE MORSE,

Chicago, Ill., February 25, 1959.

Chairman, Subcommittee on Railroad Retirement,
Committee on Labor and Public Welfare,

United States Senate, Washington, D.C.

DEAR SENATOR MORSE: In accordance with your request at the hearing on February 18, 1959, we are sending you herewith a statement with regard to the qualifying conditions for railroad unemployment insurance benefits. The statement contains three tables, all based on our figures with regard to beneficiaries in the 1957-58 benefit year. The first two tables furnish some indication of the degree to which beneficiaries are attached to the railroad industry. The third indicates how the provisions of S. 226 or S. 987 relating to the qualification of employees would have affected the number of beneficiaries in the 1957-58 benefit year if either of them had been in effect in that year.

Sincerely yours,

HOWARD W. HABERMEYER, Chairman. QUALIFYING CONDITIONS FOR RAILROAD UNEMPLOYMENT INSURANCE BENEFITS Under the Railroad Unemployment Insurance Act and each of the bills S. 226 and S. 987, the period during which an employee is qualified for benefits is a benefit year. His qualification is based upon his railroad service in a base year.

QUALIFICATION PROVISIONS OF RUTA

Under the Railroad Unemployment Insurance Act, the benefit year is the 12-month period beginning July 1 and ending the following June 30. The base year is the completed calendar year immediately preceding the beginning of the benefit year.

An employee is qualified in a benefit year if he had compensation of not less than $400 with respect to the base year. Compensation, in general, is money remuneration paid for services rendered as an employee to one or more employers covered by the Railroad Unemployment Insurance Act. Not more than $350 in compensation is creditable with respect to any one month.

QUALIFICATION PROVISIONS OF S. 226

S. 226 would not change the benefit year or base year but would increase the amount of compensation required for an employee to be qualified. An employee would be qualified in a benefit year if he had compensation of not less than $500 with respect to the base year. Not more than $400 would be creditable as compensation with respect to any one month. S. 226 would also permit an employee with 10 or more years of service, who met certain other conditions and who was not qualified in a current benefit year, to have an early beginning date for his next benefit year if he would be a qualified employee in that benefit year.

QUALIFICATION PROVISIONS OF S. 987

Under S. 987, the benefit year with respect to any employee would be the period of 365 consecutive days beginning with the first day of the first registration period after June 30, 1959, with respect to which the individual first files a valid claim for benefits, and thereafter the period of 365 consecutive days beginning with the first day of the first registration period with respect to which the employee next files a valid claim for benefits after the termination of his last preceding benefit year. Any claim for benefits would be deemed to be a valid claim for purposes of the definition of benefit year if the employee who filed the claim was, with respect to his base year, a qualified employee.

The base year would be the 12 completed calendar months immediately preceding the first day of the employee's benefit year.

Under the provisions of S. 987, an employee would be a qualified employee if he had

(a) Compensation in the base year of at least 87 times his daily wage (his daily rate of compensation after withholding taxes, computed according to a formula set forth in the bill); and

(b) Six or more months of service in the base year; and

(c) Two or more months of service in the last half of the base year. S. 987 provides further, however, that no employee who, since earning substantial compensation, had received 130 daily unemployment benefits, or exhausted his unemployment benefit rights, would thereafter be a qualified employee with respect to further unemployment benefits until he had again earned compensation equaling at least 20 times his last daily benefit rate. Similarly, an employee who had received 130 daily sickness benefits, or exhausted his sickness benefit rights, would not thereafter be qualified for further sickness benefits until he had earned compensation equaling at least 20 times his last daily benefit rate. Not more than $350 would be creditable as compensation in any one month. This is the same as the provision in the present law.

ATTACHMENT OF BENEFICIARIES TO THE RAILROAD INDUSTRY

The following tables furnish some indication of the degree to which beneficiaries are attached to the industry. The tables deal with 1957-58 beneficiaries, for which figures were developed in some detail in connection with reports on the bills S. 226 and S. 987. The first table shows the number of unemployment beneficiaries and the number of sickness beneficiaries who had base-year compensation in each of the compensation ranges shown in section 2(a) of the Railroad Unemployment Insurance Act. The second table shows the number of beneficiaries who earned compensation in specified numbers of months in the base year. It also shows how many of these beneficiaries had service in more than 60 months since 1936.

The following table indicates how the provisions of S. 226 or S. 987 relating to the qualification of employees would have affected the number of beneficiaries in 1957-58 if either of them had been in effect in that year. Under the provisions of either bill some of the employees who received benefits in 1957-58 would not have been qualified employees. The provisions of S. 987 would have qualified for benefits some employees who were not beneficiaries in 1957-58, and S. 226 would have permitted the benefit years of some long-service employees who were not qualified in benefit year 1957-58 to begin earlier than the beginning of the general benefit year.

1957-58 beneficiaries

Unemploy- Sickness
ment
(excluding
maternity)

Under present law...

308,000

143, 600

Under S. 226:

Not qualified..

Additional beneficiaries because of earlier beginning date of benefit years.

1,500

Under S. 987:

Mr. CALHOUN. Mr. Chairman, since the record will include my statement, I will read the portion dealing with current attachment to railroad labor force.

Besides the problem of establishing appropriate prebenefit qualifying railroad employment requirements, there is the problem of appropriate requirements of attachment to the railroad industry at the time benefits are applied for and are being received

In this connection we find in existing law certain inadequacies of provisions needed to limit benefits to persons currently attached to the railroad labor market, whose unemployment is due to their sickness or involuntary lack of work and results in their loss of railroad wages.

A basic requirement to test current attachments to the railroad industry is the registration for work and availability for work requirements. The individual, to receive unemployment benefits, must register regularly and must be available for work.

Properly enforced, this tends to limit benefits to persons only temporarily absent from railroad employment and still in the railroad industry's labor market.

This requirement of availability is entirely absent in the law governing sickness benefits. As a result sickness benefits are now paid persons who demonstrably are attached to other work, to housekeeping, schoolwork, or have otherwise removed themselves from the railroad labor market.

While availability for work during the actual period of sickness is of course nonexistent, evidence of the individual's availability just before he becomes sick can and should be required.

I think that the availability for work provisions of the four State laws that provide for sickness benefits deserves careful consideration by your committee. They follow the general approach that I mentioned and the claimant must show that he would have been available for work except for his sickness.

Section 305 of S. 987 would also add a 90-day test primarily designed to exclude persons who become sick only after they have left the railroad work and become established in nonrailroad work. I might say that the sickness benefit limitation in New York law was carefully worked out. Their termination period is much shorter than we proposed.

The proposed section recognizes that people previously in railroad work may be out on strike, or may be unemployed and registered for railroad work, and in either event have not left the railroad labor market, so these periods are excluded in computing the 90 days. The 90-day requirement would apply where a person has no reason or excuse for not applying for benefits within 90 days if he was still in the railroad industry. If that much time lapsed and he claimed no benefits he would be washed out of the sickness system. With the adoption of the individual base and benefit years, every qualified individual would be immediately eligible for benefits after a reasonably short period of work unless he had then gone into nonrailroad work. Failure to register for benefits in 90 days would thus seem to effectively negate any possibility of him being in the railroad labor market.

Now I will cover a few points in connection with the benefit formula with which the railroads are particularly concerned.

We think that the formula in S. 226 is indefensibly out of line in relation to the beneficiary's normal paycheck.

I have given you already a few examples of what happens. I might give you just one more example. That is the example that you will find in the middle of the page, which is the example that came from the report of the Railroad Retirement Board.

That was of a person whose net taxes were $2,850 a year. The Board reports that this individual, whose gross pay is $14 a day, could, by working 50 weeks, qualify for a $9.50 benefit. That $9.50 benefit would be near his regular paycheck after withholding the money he usually gets. As a matter of fact, it would be 87 percent of it.

You will notice, I have an example of persons with this pay who worked 52 weeks, 50 weeks, 45, 30, and 26 weeks. Their net from full-time work is $2,848.30 per year. Net from 26 weeks of work and 26 weeks of benefits would be $2,726.15.

You might wish to add one example to this table, and that is if this person was a woman who worked 32 weeks and drew maternity benefits 6 weeks, the figures that I worked out from the tax laws are that the gross pay would be $2,420, less railroad retirement tax of $161.31 and income tax of $314, plus benefits of $1,102, or a net of $3,017.31, substantially more than her net pay if she had worked the entire year.

We do not feel that a formula which even in exceptional circumstances would produce results of that kind should be retained.

I have stated some of the reasons against paying benefits in excess of 60 percent of a person's net pay after income and railroad retirement taxes. Our formula would automatically extend to persons with dependents larger benefits than a single person with the same gross pay before taxes. When the Railroad Unemployment System was established it did not matter much whether net or gross pay was used to measure its benefits, as practically no one who was paid benefits was normally subject to income tax. His net paycheck after taxes was 97 percent of his gross. But with changes in income tax and railroad retirement taxes, a steady unmarried worker who averages 5 days per week's 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. That is his work incentive. Á married man with three children and the same daily pay will have $16.62. One suffers $2 per day more in pay loss when unemployed than does the other. We cannot properly ignore these take-home pay differences if we further liberalize benefits.

Senator MORSE. Can we pause just a minute. On this single manmarried man case, you say one suffers $2 per day more in pay loss than does the other. We can not properly ignore these take-home pay differences.

Mr. CALHOUN. You are entirely correct. If the objective of the system is to give a person a percentage of his loss because of being unemployed, we think that this formula realistically measures his loss. So did the motor companies, and so did the UAW-CIO when they were collectively bargaining on supplemental unemployment benefits.