been found from a comparison of the benefits under the Railroad Unemployment Insurance Act and State insurance acts, that the percentage of employees receiving greater weekly benefits under State laws than under the Federal law, is as follows:

For men receiving $150 to $199 in the base year, 21 percent; for men receiving from $200 to $474, 60 percent. That is to say, 60 percent of the men who under State law would get larger weekly benefits than under the existing Federal law. For men receiving from $475 to $749, 78 percent would get more under State law than under this law. For men receiving from $750 to $1,024, 86 percent. For men receiving from $1,025 to $1,299, 97 percent. For men receiving $1,300 and over, 100 percent. In other words, all of them under the State law would get more than under this law. The percentage of those under State laws getting more than under this law increases rapidly when we come above the lowest paid railroad groups.

The next major change that is made-and it is not as much a major change as some I have discussed-is in the matter of duration of benefits. The proposal in S. 3920 is that the duration be changed from 80 days to 100 days. That would not lengthen the number of weeks in which one would receive benefits for continuous unemployment. That would result from the fact that a man who is continuously unemployed, under the existing law, would receive benefits in approximately 20 weeks. That is to say, he would get as much as 8 days' compensation in 15 days, or about 4 days per week. Dividing that into 80 it would give 20. Under this law he would get 10 days for 2 weeks, or 5 per week, and dividing that into 100 you would get 20. That would make the same duration under the existing law as in our bill. And your bill, Senator Gurney, provides no change with respect to duration.

Senator GURNEY. There is no difference and no change in that respect.

Mr. HAY. No change from the existing law. There is this additional item with respect to the duration of benefits; it is provided in our bill that if a man does not absorb his full number of daily benefits in a benefit year he may carry over into the next year not to exceed 50 days. In other words, if a man has used up 75 days he can carry over 25 days into the next year.

That was recommended by the Railroad Retirement Board as one of the changes. I think I can give you the basic reason, but Mr. Latimer in his statement will likely cover it. The basic reason for that is this: where a man has enjoyed a prolonged period of employment, so that in a benefit year he does not absorb anything like the full number of days of benefits, and then he becomes unemployed for a prolonged period, it would seem only fair that he should enjoy the benefit of carrying over at least a percentage of the days from the previous benefit year.

Then, too, it would have a very wholesome effect in cushioning the blow that would fall in a business cycle, of relative depression which might succeed a period of rather steady employment.

Those are the amendments that have to do primarily with benefits. Those are amendments that affect enjoyment on the part of the men. on the one hand and the cost on the other hand.

There are other amendments, as I stated a moment ago, which have to do with administration. Some of them may be purely administra

tive and others to a measurable extent affect the rights of the men. Perhaps I might mention one of them: The redefinition of remuneration. Under existing law if a man is engaged in work for hire and for that receives any compensation at all he is excluded from registering on the day for which he receives remuneration.

It has been found that that has worked to considerable disadvantage to those men set over against men who may be self-employed and who under the law as it now stands may register as unemployed for days in which they are self-employed in what might be termed to be profitable employment. And it is provided in our bill if it can be ascertained that on certain days when a man is self-employed he had money accruing to him, then for those days he shall not be permitted to register as unemployed. That seems to be only fair. Putting the two men on the same basis would tend somewhat to keep down the cost also.

Now, as I have said, the rest of the amendments have to do primarily with administration. I could go into a discussion of them, but I think from the standpoint of conservation of your time I shall refrain from it with this explanation: I am advised that you have asked for a statement from the Railroad Retirement Board with respect to these amendments, and inasmuch as that board is primarily concerned with this matter of administration, I would prefer to leave that for the explanation that will be contained no doubt in their statement, with this understanding, that if with respect to any of these administrative amendments there is any question on the part of the railroads, we might wish to make some observations with respect to them later on. I think, Senators, I have in the course of my discussion pointed out the agreements between these two bills on the major matters. But, to sum up, the bills agree with respect to the definition of the registration period. That is to say, it shall be the period of 14 consecutive days beginning with the first day of registration for unemployment. That is the same in the two bills.

There is this difference in the treatment of the rights of men in these registration periods as I have explained: in our bill we allow compensation for all days of unemployment above 7 in the first registration period, whereas under S. 3925 there is no allowance for that period. That constitutes the waiting period. It is the waiting period of 14 days.

In our bill the only waiting period is the first 7 days in the first registration period. The two bills agree that allowance shall be made for benefits for all days of unemployment above 4 in all registration periods subsequent to the first.

The bills are in agreement in the matter of definition of base year and benefit year.

There are the differences which I pointed out in the schedule of benefits.

If all the amendments we are urging are adopted there will of course be a substantial increase in cost. Railroad Retirement Board experts give us this estimate: That it will increase the cost 115 percent.

Senator GURNEY. What do you mean by "costs"? The total benefits?

Mr. HAY. It will increase the drafts on the account for the payment of these benefits. It will be increased to that extent.

Senator GURNEY. As I understand it the cost under your bill is to remain the same; that is, the levy on railroad salaries.

Mr. HAY. I meant so far as the tax rate is concerned it will remain the same.

Senator GURNEY. And that in my understanding of it would be the cost.

Mr. HAY. Perhaps I have not used the expression accurately. It will require 115 percent more money according to the estimate of the Railroad Retirement Board to pay the benefits if the amendments are made in full as we request them, that is, as compared to the existing law.

The Railroad Retirement Board also advised us that in their opinion the 3-percent tax will be adequate to make the payments that will be required if all these amendments should be adopted. The experts of the railroads figure-and I am confident the experts of the railroads would not say that is anything but a liberal estimate-there could be a sound financing of the benefits provided for under our bill by a 3percent tax. And that is our position.

Senator GURNEY. Let me ask you this question: You say the benefit cost would rise 115 percent. If the money necessary to pay benefits under the existing law could be maintained if the employment tax were reduced to, say, 1.4 percent of the 3 percent, that would naturally follow, would it not?

Mr. HAY. Well, I cannot speak of that as an expert, but would say perhaps that is true. If you want to leave the benefits as they are you have at least 50 percent more tax than you need.

Senator GURNEY. That is my point.

Mr. HAY. Yes; I understand from a statement made by Dr. Parmelee and inserted in the record, he figures that the increase in cost, if the amendments are adopted as contained in your bill, Senator Gurney, would be about 25 percent. So there is no question about the adequacy to support that.

Here is a major question that we come to with respect to these two bills:

With all parties agreeing that a 3 percent tax is adequate under the existing law, more than adequate, far more, and further agreeing that the large surpluses now existing and which may grow even larger under the existing law, should not be maintained-the real question is this: Shall the benefits be increased as provided in our bill, with no reduction in the tax, or shall there be an increase of benefits as provided in Senator Gurney's bill, with provision for tax reduction? That is the basic question that is presented for your consideration. Senator SCHWARTZ. Taking the amount which is now raised by the 3 percent tax, what percentage of that would be consumed under your bill?

Mr. HAY. Senator, I would really prefer to leave that for Mr. Latimer to answer. I would simply have to quote him. I cannot give you the figures on that, and I would rather not venture an observation on it.

Senator GURNEY. You have already made the statement that the 3 percent is adequate to take care of the benefits proposed in S. 3920. Mr. HAY. Yes; that is my statement; but I would not want to be more specific than that.

Senator SCHWARTZ. "Adequate" is a very indefinite word.

Mr. HAY. Yes; but you asked for the percentage of that which would be taken up from year to year?

Senator SCHWARTZ. Yes; how much leeway?

Mr. HAY. I might be off on that, and I would rather that you got some expert information on it. I am an expert on a lot of things, but I am not an expert on that. That is purely, as you understand, an expert proposition; and I do not know that I asked Mr. Latimer that. I know he did state most emphatically, and I think he will state to the committee, that the 3 percent tax will be adequate as compared with benefits that are contained in our bill.

With that as the major question before us, I want to give you as clearly as I can the position we take with respect to it. Our position is this, that the benefits provided under the existing law are indefensibly low for the reasons that I have mentioned heretofore. It is no defense of these benefits to say that they are on a substantial parity with some of the States. It would be no defense if you could claim that they are on a parity with the best of the States. It would be no defense if you undertook to put them on the basis that is contained in Senator Gurney's bill; for I think there is no one who has the proper social conscience and who has a proper conception of the obligation of industry to take care of men who become unemployed who will say that the benefits provided in the best of the State laws are anything other than low and, in many respects, shockingly low. I think everyone must agree that we started out in this country fixing this low scale of benefits more or less as an experiment, because we figured that they were about as high as a reasonable tax of 3 percent would support. But they are put on that basis. It is, therefore, no answer to say that these are somewhat on the basis of the State laws.

The cost, as I see it, is the only excuse for putting these benefits on the basis that they are on at the present time. It was the fear that the 3-percent tax would not sustain them that explains why they were put as low in the States as they are. The States have already begun to liberalize since it has turned out that the cost is not as great as was expected; and I think, as I said a moment ago, it must be accepted as sound that the people of this country have taken the position they have. They have evidenced to the States and to Congress that a 3-percent tax is a fair and reasonable tax to impose upon industry for the support of an unemployment-insurance system.

I have referred to this, and I want to state it more clearly, that the States have given legislative recognition to the fact that their benefit schedules were too low in the beginning, evidenced by the fact that they have enacted measures in numerous States to increase the benefits in those States. The country is beginning to get evidence of a recognition that the rates are too low, by the introduction, of the measures which I referred to a moment ago.

A further point is this, that if Senator Gurney's bill should be enacted, or if any provision is contained in any bill of a sort presented by his bill, it would have the immediate effect of reducing the tax; it would have the immediate effect, if I have figured it rightly, of reducing the tax to as low as 1 percent, for the reason that there is now in excess of $125,000,000 in reserve or as a surplus. If that step should be taken by the Congress it would mean that a standard of benefits that, in my judgment, is morally indefensible, would be taken as the standard for the country.

It is one thing to enact low benefits when you are uncertain about whether your tax is going to support them or not. It is another thing

to approve low benefits when you know you have the money, through reasonable taxation, to support them.

In other words, it cannot be contended that when this Congress originally enacted the unemployment insurance bill it fixed the benefit schedules as an adequate standard, because then you were not certain about the rates. But if, now, with money lying around, $125,000,000 and more lying around, with which to pay benefits, Congress should take a step that would lower the tax, and say, in effect, "Well, we have established a standard of benefits; we will now go into the process of reducing the cost," it would be one of the worst steps that could be taken. It would be a great disservice at this juncture, when the country is finding its way to a sound basis of unemployment insurance.

If it be said that the effect of Senator Gurney's bill would not be immediately to reduce the tax, but would provide a sliding scale which would enable us to have a reduction of taxes under certain conditions, then we will oppose that proposition. We do not at all concur in the view of the railroads to this effect, that the putting in of a sliding tax scale will encourage the railroads more greatly to regularize and stabilize employment. We think it might have the reverse effect. I gave you figures a while ago showing a large number of men in this country who get even less than $150, the amount necessary to qualify for benefits. There are, according to the figures in 1938, 70,931 men who earned between $150 and $300.

Senator GURNEY. They earned between $150 and $300 from the railroads?

Mr. HAY. Yes.

Senator GURNEY. Are they not stand-by employees who have income from other sources?

Mr. HAY. Perhaps some of them are.

Senator GURNEY. They must be, because they could not live on that. Mr. HAY. That is doubtless true. But what I am coming to now is the matter of regular employment on the part of the railroads. These men get from $150 to $300 per year. There were 215,958 who received less than $150.

There is a way of regularizing employment by reducing the force, which is to create a greater demand for casual employment. When you have 70,000 men who receive from $150 to $300, I would not charge the railroads with it, but it would be within the realm of possibility that they could add those men to those getting less than $150 and prevent them from qualifying under the benefit provisions of the law.

So that it cannot be said with any degree of assurance that his will tend to stabilize it.

Another thing: Stabilization of railroad employment depends more, as we know, upon general business conditions and conditions on the railroads than upon anything the management can do, and we would not sit down and prescribe some program by which they are to regularize or stabilize employment against the compulsions of business changes affecting the railroads

Senator SCHWARTZ (interposing). Let me ask you a question the answer to which I ought to know, but I do not. What is the basis on which the 3 percent is figured?

Mr. HAY. Upon the pay rolls up to $300 per month.