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Senator CLARK. Mr. Chairman, could I suggest that there also be included in the transcript a third chart which shows the overlay? The two charts separately are not as meaningful as they are when revised by this.
Senator MORSE. Yes, the suggestion of Senator Clark will be carried out and referred to as exhibit C. (Exhibit C is as follows :)
Average Number of Employees 60 50_IIIIIIIIIIII
1945 46 47 48 49 50 51 52 53 54 55 56 57 58 Mr. WHITMAN. The first chart, marked "Exhibit A,” is an overlay index chart showing the relationship of Western Pacific's total payroll to its average number of employees since the end of World War II.
You will note that in 1958 the average number of employees employed on our railroad was 55 percent of the total we had in 1945. But also please note that in 1958 the total payroll had risen 12 percent above what it was in the base year of 1945 even though we had far less people employed.
The second chart, marked "Exhibit B,” is an index chart which shows the relationship of revenue-ton-miles to revenue-per-ton-mile for the same period.
Revenue ton-miles measures the physical amount of business that the railroad does and revenue-per-ton-mile shows the revenue per unit that we receive for hauling that business.
The chart shows that since 1945 the amount of business done has diminished by almost 30 percent, while revenue-per-ton-mile has increased by 47 percent.
That, of course, is because of the freight-rate increases that have been granted by the Interstate Commerce Commission in the meantime.
By placing the overlay chart A over chart B, you will see that the decrease in Western Pacific employment almost exactly coincides with the decrease in the amount of business we have done. There also
appears on chart B an index of total operating revenue, which shows the fluctuations since 1945.
If you will compare this index with the index of payroll fluctuations on “A,” you will see that payroll is up and operating revenues are down.
The charts demonstrate a trend which we have no reason to believe will be reversed until our cost of doing business becomes more stabilized. Stabilization of our costs of doing business is not possible so long as we are arbitrarily required to divert our resources to uses which are unproductive from the standpoint of holding onto or increasing our volume of business.
In the passage of the Smathers-Harris Act of 1958, Congress took cognizance of the fact the railroads all need assistance badly. The railroads are appreciative of the aid provided by the 1958 legislation but must have the further legislative relief they are now seeking if their fortunes are to be improved sufficiently to put them in sound financial position..
Such congressional aid as has been or will be afforded them should not be subverted by any improvident action in the field of unemployment compensation, as is contemplated in the proposed bill, S. 226.
The serious effect on the railroads' financial position of increasing unemployment costs—as proposed in S. 226—is apparent in yet another, and no less important, way.
The railroads, trucks, airlines, bargelines and steamship companies are all competing for the transportation dollar.
In the field of retirement and unemployment benefits, all of these competitors—except the railroads—are subject only to the Social Security Act and the State Unemployment Compensation Acts. Thus the impact on our competitors of the expense of retirement and unemployment benefits imposed by government is much less severe than on the railroads.
For example: A comparison, between the social security tax rate of 21/2 percent of the first $400 per month of each employee's salary and the present and proposed tax rate and base for railroad retirement, shows that the trucks, airlines, bargelines and steamship companies pay $10 per month per employee earning at least $400, while the railroads now pay $21.88 per month per employee earning $350, and have at these hearings agreed to a proposed amendment to the Railroad Retirement Act which would increase this to $27 per month: $120 per employee per year for our competitors, $324 per employee per year for us; which means that our competition's cost for retirement imposed by Government is 63 percent less than ours.
As to unemployment compensation costs a similar comparison of railroad costs to those of our competitors operating in the same States in which we operate shows the following.
In California, our competitors pay $51 per employee per year; in Nevada, $82.80 per employee per year; and in Utah, $48 per employee per year; while Western Pacific and all other railroads operating in these three States pay $126 per employee per year.
Thus, depending on which State one selects in comparison, our competition's costs for unemployment compensation are anywhere from 34 to 62 percent less than what we pay under present provisions of the Railroad Unemployment Insurance A *.
By combining the relative costs of unemployment compensation and retirement, it develops that in the field of these costs the railroads have a disadvantage of anywhere from 55 to 63 percent.
How, in good conscience, can we be expected to assume a further disadvantage by increasing unemployment insurance costs under the proposed legislation by as much as $66 more per employee annually?
Gentlemen, I submit to you that in all fairness we should not be subjected to this, especially when added to the competitive disadvantages under which we are already struggling.
I would not like to have the committee get the impression from what I have said that I am opposed to railroad retirement or unemployment compensation; but I am unable to see that there is any justification for greater liberality in either of these fields, as far as the railroads are concerned, than pertains to industry generally.
The distinct disadvantage of the railroad industry in this regard should not be increased by further and costly liberalization of unemployment benefits; rather, the administration of unemployment compensation should be tightened by appropriate legislation to eliminate the flagrant abuses that were so well described by Mr. Healy in the testimony he submitted on February 4, 1959.
I was shocked to read in the Statistical Summary of Operations, Bureau of Railroad Unemployment and Sickness Insurance, for the fiscal year ending June 30, 1958, that in a 3-percent sample check for possible employment on the days claimed as idle, 22.7 percent of claimants in the 3-percent sample were found to be drawing benefits fraudulently. This is indeed alarming.
Unlike many of the State systems, under the railroad unemployment system the reason given by a person for being unemployed is not required to be checked with the last employer.'
In a recent experiment with the regional board in our area, information which we furnished the board—with respect to reason for termination of employment—resulted in the disqualification of a number of claimants who were attempting to process fraudulent claims.
In my opinion, if the act were amended to prevent the abuse of funds and to weed out unconscionable claims, there would be no need for any increase in the cost of unemployment compensation.
Accordingly, in conclusion, I respectfully urge upon the committee that the proposed amendments to the railroad retirement and railroad unemployment insurance systems contained in S. 226 be rejected and that the proposals as outlined in Mr. Loomis' testimony and as will hereafter be outlined by Mr. Calhoun be adopted.
Gentlemen, I wish to thank you for your kind attention.
Senator MORSE. I have no questions. I think your testimony speaks for itself.
Are there any further witnesses to be offered by the carriers ?
STATEMENT OF C. T. ANDERSON, ASSISTANT TO THE CHAIRMAN
OF THE RAILWAY LABOR EXECUTIVES' ASSOCIATION, WASHINGTON, D.C.
Mr. ANDERSON. I am C. T. Anderson. On behalf of our counsel, Mr. Lester Schoene, I desire to submit for him three documents-one in the form of a narrative, discussing the financial condition of the railroad industry generally; the second a document which sets forth the business experience of a number of railroads by regions for the years 1956, 1957, and 1958; and a third, a one-page document, which sets worth in dollars and cents the financial savings to the railroads resulting from the change in the 3 percent base rate under railroad unemployment insurance in 1948 to a sliding scale which resulted in an 11-year experience under this tax, indicating that the railroads have paid actually less for unemployment insurance than employers covered by the various State systems.
In addition to that, Mr. Chairman, noting what was said here yesterday, our association has asked me to say that we are delighted to cooperate with you and with the committee at any time in any meeting that you might arrange with the Association of American Railroads for the purpose of trying to find a common ground that we might all agree on in this very serious matter.
We urge on the committee, however, a sense of urgency and great need here.
We hope that such a meeting, if it is held, can be held very quickly in order that undue delay might not result from it.
We would like to share the optimism in some quarters that agreements could be reached. We hope that they can, and we stand ready to help in any way we can in arriving at such agreements.
Senator MORSE. Thank you very much, Mr. Anderson.
The memorandums and documents as identified by the witness for the brotherhoods will be incorporated in the record at this point.
(The three documents referred to follow :)
SAVINGS RAILROADS HAVE MADE SINCE 1948 REDUCTION OF THE ORIGINAL 3
PERCENT Tax RATE FOR THE RAILROAD UNEMPLOYMENT INSURANCE SYSTEM TOP $1.1 BILLION
In 1948 the tax paid by the railroads under the Railroad Unemployment Insurance Act was reduced from the original 3 percent of taxable payroll to a rate ranging from one-half of 1 percent to a maximum of 3 percent, depending upon the balance in the "Railroad unemployment insurance” account. Under this amendment, the railroads have saved over $1.1 billion from the amount they would have paid into the fund had the tax rate of 3 percent set in the original Railroad Unemployment Insurance Act been continued throughout this period. The following table, compiled by the RLEA from official figures sup plied by the Railroad Retirement Board, shows how this saving has come about.
Taxable payroll and accrued contributions under the Railroad Unemployment
Insurance Act, at actual rates and at 3 percent, calendar years 1948-58, and savings to railroads resulting from the reduced rates established 1948
(In thousands of dollars)
NOTE.-The actual rate was 0.5 percent for 1948–55, 1.5 percent for 1956, 2 percent for 1957, and 2.5 percent for 1958.
STATEMENT OF FINANCIAL CONDITION OF THE RAILROAD INDUSTRY PRESENTED IN
BEHALF OF THE RAILWAY LABOR EXECUTIVES' ASSOCIATION This statement is in response to and supplementary to the statements which have been presented here by the carriers and others with reference to the financial condition of the railroad industry. We understand, and we are sure the committee members understand, that this proceeding is not an inquiry into the general problem of the railroad industry's health or financial condition; it is a hearing to determine, in the light of our experience, what changes are needed in »the Railroad Retirement Act and the Railroad Unemployment Insurance Act. 'Both the Retirement Act and the Unemployment Insurance Act were originally passed during the depression years of the 1930's. The amendments to the acts since that time have been enacted during years with varied economic conditions, sometimes when the railroads and the Nation were in prosperity, and sometimes when conditions were relatively depressed. We are proposing permanent changes related to the whole continuing national policy of social insurance de velopment, and not to be determined by transitory fluctuations in general economic conditions or in railroad earnings. Nevertheless, since the financial condition of the industry has been brought in by the carriers, it is important that the committee be correctly informed as to the current situation. Our past experience with the representatives of railway management has demonstrated to us that the bleak despair and gloomy forebodings we have heard here are attitudes primarily developed to form a basis for resisting requests of railway workers. They do not provide a reliable view of the industry's position.
The facts are these :
3. Railway employees have made major contributions to the efficiency and economic strength of the railroad industry.