We further proposed a contingent increase in a further increase in the tax rate to take effect after 1969 if and when the scheduled increase in social security taxes scheduled to go into effect after 1969 should occur. We referred to that as a contingent increase because we know that a number of times in the past scheduled increases in social security taxes have not actually gone into effect as scheduled.

By that combination of actions the fund would as I say have been put in an actuarially sound condition. We again proposed through a separate bill that the employees be permitted to exclude their railroad retirement taxes from gross income for income tax purposes. By this time also we had found that the Railroad Unemployment Insurance Act was proving inadequate to take care of the needs of our industry. The daily benefit rate for unemployment compensation had a ceiling of $8.50 per compensable day which we felt was inadequate to compensate for the wage losses that unemployed employees were suffering. That rate had been adequate when wage rates were lower, but as wage rates had increased, it was no longer an adequate proportion of the wage loss to be compensated. So we propose that a new benefits schedule be adopted which carried a maximum of 60 percent of the daily rate of pay as compensation when unemployed with a ceiling of $10.20, which is 60 percent of a $17 daily rate of pay. Of course those whose daily rate of pay was in excess of $17 would not be compensated to the full extent of 60 percent of the wage loss.

We also found that aside from the inadequacy of the rates the industry was being affected by a new and different kind of unemployment. In the ordinary fluctuations in forces we of course have the application of rather highly developed seniority rules in the railroad industry, and when forces need to be adjusted according to fluctuating requirements the junior employees go. Then as forces need to be restored they are called in seniority order. What has been happening in the postwar period has been essentially a technological revolution in the industry. Types of services that had been traditional in the industry were being greatly curtailed and in many respects skills were no longer utilized. Consequently we found not simply junior employees unemployed but employees with many years of service being displaced, and for all practical purposes permanently displaced from the industry.

We felt, therefore, that to meet the needs of those employees it was desirable and necessary for the industry properly to meet the claims of these people who had devoted their lives to the industry for an extended period of protection graduated according to the years of service they had spent in the industry.

We drew upon some collective bargaining experience we had had in the industry over 20 years ago because this same kind of problem resulting from consolidation and mergers of railroad facilities had presented itself back in the thirties. At that time we worked out what is known in the industry as the Washington job protection agreement, which is a national agreement entered into by our organizations with virtually all of the railroads in the country, providing for extended periods of protection up to 5 years in the case of employees with 20 or more years of service who are displaced or reduced to lower rated positions by reason of the consolidation or merger of facilities.

A copy of that agreement appears in the hearings that were held in 1957 on S. 1313.

We accordingly proposed extended periods of unemployment insurance protection for employees with 5 or more years of service graduated according to the years of service up to where employees with 20 or more years of service would be protected up to 5 years.

The bill S. 226 is the outgrowth of the deliberations of this committee on that proposal that was slated by the committee and considered at considerable length. It is a compromise. It is not a full adoption of the recommendations we made particularly with respect to the extended periods of employment insurance protection, although it adopts in limited form the principle that we had recommended represents a drastic reduction in our recommendations.

Senator MORSE. In what respect, if any, does S. 226 differ with S. 1313?

Mr. SCHOENE. The major differences are these, Senator: So far as retirement benefits are concerned it is substantially the same as S. 1313 in the last Congress except that the provision contained in S. 1313 to provide an insurance lump sum on the death of an employee irrespective of whether there were beneficiaries immediately entitled to monthly annuity benefits was eliminated. The tax provisions bring substantially the same results as those in S. 1313. I am speaking of S. 1313 as it was introduced, not the way it was reported by the committee. The incidence of the taxes is somewhat different. S. 1313 had provided for an immediate increase to 72 percent whereas S. 226 provides for an immediate increase to only 634 percent immediately, with graduated increase thereafter, and an acceleration of the contingent later increase, so that the net result of financing is approximately the same as S. 1313.

Senator MORSE. I think I can save some time if you will follow these instructions. Will you prepare for the committee, please, the parallel column memorandum or chart showing S. 1313 as introduced, S. 1313 as it passed the Senate, and the provisions of S. 226 in such order that the subcommittee can take a look at the chart and see the comparison on each of the items?

Mr. SCHOENE. I have before me a chart which shows that information but also shows the House bills and what the House committee action on it was. I would be glad to furnish that chart to the reporter when I get through discussing it. I need it for my reference while I am talking.

Senator MORSE. The chart Mr. Schoene refers to will be printed in the record at this point.

(The chart referred to follows:)

Retirement Act benefit changes

Mr. SCHOENE. Of course the chart I have now does not show S. 226 separately but S. 226 is exactly the bill as passed the Senate.

Senator MORSE. You can add S. 226 in accordance with my instructions. I want in this record for the use of this committee a chart show

ing S. 1313 as introduced, S. 1313 as it passed the Senate, S. 226 as it is introduced so that the committee can look at that chart on each of the items and see what the likes and dislikes are.

Mr. SCHOENE. I will be very glad to do that, Senator.

I take it you do not wish me to put the chart in which I was referring to.

Senator MORSE. Modify it. You might add the House bill to the chart.

Mr. SCHOENE. Then I will simply have to add one column for S. 226. Senator MORSE. Yes.

(The chart referred to follows:)

Railroad Unemployment Insurance Act changes

6. Minimum earnings to qualify Minimum earnings to qualify up up from $400 to $500.

from $400 to $500.

Minimum earnings to qualify up from $400 to $500.

Mr. SCHOENE. With respect to unemployment insurance, however, S. 1313 as it passed the Senate and S. 226 represents rather drastic changes from S. 1313 as introduced and as recommended by our organizations. The principal changes relate to the extended periods of protection. S. 226 and S. 1313 as it passed the Senate makes no permanent provision for extended benefits to employees with less than 10 years of service. It does provide for such employees on the same limited period of extended benefits that were provided to other industrial employees through the Federal Unemployment Insurance Extension

Act of 1958, but that expires as of June 1, 1959, the same date as the Federal legislation applicable to other employees expires.

With respect to employees of 10 to 15 years of service, only 13 weeks of additional benefits, or extended benefits, are provided, and for employees with over 15 years of service the extended benefits come to 26 weeks, which is the maximum of extended benefits provided beyond the normal benefits for any employees, which may be contrasted to 5 years of protection under the Washington job protection agreement, and a maximum of 5 years' protection under S. 1313 as it was introduced.

It is apparent from the discussions we have had so far that S. 1313 as amended by this committee did pass the Senate, but by reason of procedural difficulties in the closing days of the Congress it failed of action in the House. We had good reason to believe that if the House had been able to give it consideration it would have passed the House also.

Senator MORSE. I think the record should show that S. 1313 as it passed the Senate was based upon an understanding that the chairman of this subcommittee had with the chairman of the House subcommittee bringing the House bill and the Senate bill into conformity. It was our reasonable expectation that by doing that we would expedite the passage of the bill through both Houses of the Congress. We succeeded in the Senate but, as the witness points out, on the House side there were parliamentary objections under the rules that prevented it from going to the floor of the House for a vote because the rules required unanimous consent and that consent was not granted.

Mr. SCHOENE. That is correct.

Senator MORSE. Is that a fair statement?

Mr. SCHOENE. Yes, that is an accurate and precise statement, Mr. Chairman.

Notwithstanding the fact that, particularly with respect to unemployment insurance benefits, S. 226 does not meet our full expectations or full desires, we believe that action and prompt action is so urgently needed that we wholeheartedly support S. 226. In order that there may be full realization of the extensive consideration, not only this committee but the House Committee on Interstate ond Foreign Commerce have already been given the conflicting points of views and the difficulties have been compromised out, so to speak, in the bill that you now have before you.

It is our earnest hope that by starting with the bill that passed the Senate last year it would be possible to take very expeditious action in this Congress.

The question may be asked, Why is it necessary with respect to retirement benefits to superimpose a 10 percent increase at this time upon the 10 percent increase that was made in 1956 when only a 15 percent increase was recommended in 1956? In considering that question I think it should first be borne in mind that although the Railroad Retirement Act formula, both for retirement benefits and for survivor benefits, was adjusted by 10 percent with the exception of spouses' annuities, the actual operation did not result in a 10 percent increase in all cases. In fact, with respect to survivors the great bulk of survivors received either no increase or increase of less than 10 percent, the reason for that being that the majority of survivor benefits were then being paid under the minimum formula which provides that those benefits