Mr. SCHOENE. Well, in the case under which over half of all of the benefits that had been paid in 10 years were paid. Now, I might say as to the current situation that within the last 10 days I participated in the settlement of a strike on the Hudson & Manhattan Railroad. In that case all the organizations were seeking was that the carrier apply the same pattern which the carriers have been urging as providing stability in the industry for a period of 3 years. That carrier refused to do it and that was what was responsible for the strike and in the settlement of it. They have not applied the pattern, they have merely agreed to pay currently what is payable under the national pattern and defer until September the further handling of the dispute. So I think the record is very clear that this provision has not operated to encourage strikes to any undue degree and has rather operated to reinforce the spirit of the Railway Labor Act by drawing a distinction between wildcat strikes and legal strikes. Senator COOPER. Do I understand one of the arguments, and maybe the only argument heard here I think the suggestion is that by going over to this provision which requires the payment of unemployment insurance for a legal strike, has the effect of deterring illegal strikes? Mr. SCHOENE. That is one reason; yes. Now, the carriers' proposal with respect to voluntary leaving of employment which would permanently disqualify the individual unless he returns to railroad employment first, is in fact a permanent disqualification because, bear in mind, that not only is the disqualification there for 30 days under the present law, if the individual voluntarily leaves his employment, he has got to be available for work and he has got to take any suitable work that is offered him. So if he does not resume employment within or before or at the end of that 30 days, it is because he cannot find a job and the employment services of the Retirement Board cannot find him a job. It is not a situation in which an individual just decides he is going to leave the job and not work, he just chooses not to work, he is not permitted to do that. The carriers also propose to insert a disqualification of employees who may be discharged for misconduct relating to their work. Senator COOPER. If I may interrupt, Senator Allott has just brought to attention that we have been sitting here all day and he has some appointments that he must fulfill and he suggests that I ask if you could tell me about how long your testimony will take to complete? Mr. SCHOENE. I think I can complete it in about, oh, 10 minutes or so. Senator ALLOTT. I am sorry, but I am going to have to leave. Mr. SCHOENE. The original Railroad Unemployment Insurance Act as it was enacted in 1938 contained a disqualification for discharge for misconduct relating to the work. That was eliminated almost immediately in 1939 and the reason for its elimination was a very good one which met with the approval of both the carriers and the employee organizations, namely, that the question of whether a discharge is a justified or unjustified discharge is often a highly controversial question. It was not deemed good policy to have the Railroad Retirement Board passing upon that question, incidentally, to the payment of un employment insurance when there is already elaborate provision in the Railway Labor Act for the resolution of that controversy. An alleged improper discharge is a grievance referrable to the National Railroad Adjustment Board. That Board has been functioning for some 23 years resolving grievances of that sort and it was not deemed proper that the Railroad Retirement Board should either wait for those processes to be completed before they could pay benefits, or make a collateral decision anticipating the matter before it could be handled through the procedures set up by the Railway Labor Act. Nothing has occurred in the years since 1939 to impair the validity of the judgment that was then exercised in removing from the act the very disqualification that the railroads now propose to put back into it. The railroads also propose to reduce the level of benefits payable under the present law. That is not too apparent on the face of their proposal because they say they want to pay 60 percent of the take-home pay and they say that the present 50 percent of gross pay is what generally determines the level of unemployment benefits. However, their elimination of the schedule of benefits predicated upon earnings during the past year would have in combination with the use of rate of pay after withholding taxes and railroad retirement taxes, a rather drastic effect in reducing the rate of benefits. For example, an individual who is fully employed during his base year at a daily rate of $15.33 or more would earn $4,000 or more in his base year and under the present law would qualify for benefits at the daily rate of $8.50, even though that is in excess of the minimum of 50 percent of the last daily rate of pay. Now, in the carriers' proposal that same individual would find that the $15.33 rate was first reduced by $1.85 for income-tax withholdings in the case of an employee with one dependent and by 98 cents in addition for the railroad retirement tax withholding, leaving, as the measure of his benefits, not the $15.33, but $12.53 of which 60 percent would give him a daily benefits rate of $7.50 instead of the $8.50 he is entitled to under the present law. The use of the rate of pay after withholding taxes and after railroad retirement taxes becomes particularly vicious when you analyze what the effect of that is. The Congress has seen fit from the beginning to exempt unemployment benefits from income taxes. Now, what you do when you reduce the rate of pay by which you measure the benefits by the amount of income-tax withholdings on those wages, is in effect to impose the income tax on the unemployment benefit itself, except, of course, that the Government does not get it, it stays in the railroad unemployment insurance account to the advantage of the carriers. Similarly, with respect to the reduction in the measure of benefits by the amount of railroad retirement taxes, you are in effect levying the railroad retirement tax on railroad unemployment compensation. Now, railroad unemployment insurance payments are not creditable compensation under the Railroad Retirement Act. The employee getting unemployment insurance benefits is not credited with that in his earnings or his months of service, so you would, in effect, be levying the railroad retirement tax on the railroad unemployment insurance benefits without giving him any credit for it. 93396 0-57-28 Senator COOPER. May I say, you have opened up a subject-without going into too much detail, could you give us an illustration of the effect of what you have described, taking a case under the present provisions of the act and under it as it would be amended? Mr. SCHOENE. Why, I think I have done that, Senator, but I will be glad to go over it again, briefly, I took the example of an individual under the present law who might have a daily rate of pay of $15.33 or more and any such individual, if he is fully employed in his base year would earn over $4,000 in his base year and consequently would qualify for a daily benefit rate of $8.50. Now, when you take that same individual under the carriers' proposal, if he has, say, just himself and his wife and if he has two exemptions for withholding-tax purposes, the carriers' proposal would reduce that daily rate by $1.85 for income-tax withholdings and by 95 cents for railroad retirement tax which would leave as the daily rate of pay on which to measure the benefits, only $12.53, of which 60 percent is $7.50, which is $1 less than he would be entitled to under the present law. The result is simply that the daily rate has been reduced by the retirement tax and income tax and then you apply a flat percentage of 60 percent to that reduced amount and that is a reduction in the amount of benefits by the 60 percent on the retirement tax and 60 percent of the income tax that would be payable, so in effect you have levied the retirement taxes and income taxes on the benefits. Mr. Oliver has already commented and I will not repeat his comment on the impropriety of measuring the level of benefits for the railroad unemployment insurance law by comparison with the State laws. As Mr Oliver has already pointed out in more detail, and I will just remind you of it, those State laws are supplemented by supplemental unemployment insurance agreements, and they are by no means the measure of unemployment compensation that people in other industries got and when you take the totality of those benefits as Mr. Oliver has pointed out the railroad benefits even as proposed to be amended by S. 1313 are inadequate by comparison. That concludes my statement, Mr. Chairman. Senator COOPER. Thank you very much. Mr. Bernstein has some questions. Mr. BERNSTEIN. I only wish to make a request that we may have it for the record to show, which I do not believe it does now, what the possible cost of administration might be if the proposals were adopted, carrying with that more frequent reporting to the Board and more frequent submission of data and so on. Mr. SCHOENE. I will try to obtain some information on that subject, Mr. Bernstein. I will need the assistance of the Railroad Retirement Board in that because I personally have virtually no means of estimating it. I am sure it would be a great increase in the expense of administration, and I will try to provide it. (See letter, p. 407.) Mr. BERNSTEIN. Well, it is material that the Board would know best and would have, and inasmuch as the Board is represented here, it might address itself to that problem. Mr. SCHOENE. Mr. Chairman, I have one other request to make. In the testimony that Mr. Oliver gave, he predicated it upon a number of tables he had compiled, particularly statistical information and I would like permission of the committee to submit copies of those tables to the reporter and have them included in the record. Mr. Oliver has a number of copies here, if members of the committee would like to have them for their perusal before the record is complete. Senator COOPER. That will be fine. (The tables referred to follow :) TABLE I.-Current assets and current liabilities, class I line-haul railways, Source: Interstate Commerce Commission, Statistics of Railways in the United States, statement M-125 TABLE II.—Relationship of net current assets to railway operating expenses, class I line-haul railways, 1929–56 Source: Interstate Commerce Commission, Statistics of Railways in the United States, statements M-100 and M-125. TABLE III.-Railway traffic, railway investment, and population trends, 1929-56 1 Population, including Armed Forces overseas, not available for 1929. 2 Carriers' exhibit No. 27, p. 3, emergency board proceedings No. 116. Source: Interstate Commerce Commission, Statistics of Railways in the United States, Transport Statistics in the United States; statement M-220; Association of American Railroads, bureau of railway economics, Railroad Transportation; carriers' exhibit No. 27, emergency board proceedings No. 116; U. S. Department of Commerce, Statistical Abstract of the United States; Joint Economic Committee, Economic Indicators, March 1957. TABLE IV.-Net income and depreciation charges, class I line-haul railways in the United States, 1921-56 1 Includes funds available for replacements, and additions and betterments. Source: Interstate Commerce Commission, Statistics of Railways in the United States, statements M-100 and M-125. |