Mr. ROGERS of Texas. Mr. Schoene, what would be your feeling with regard to some percentage of these additional benefits in unemployment compensation being contingent upon the 32 percent contribution, provided in the bill?

Mr. SCHOENE. I don't think that would be justified, Mr. Rogers. I think I can indicate why by expressing the thought that I was just coming to anyway. The railroads have a great deal of control over what this unemployment insurance costs. If they would stabilize employment, utilize to the maximum degree experienced people who are unemployed, they could substantially reduce the impact of the cost of unemployment insurance. Now, surprise was expressed here yesterday over the number of new entrants which Mr. Healy pointed out are coming into the industry every year, even though over 200,000 are on the unemployment benefit rolls. Some improvement has been made through the efforts of the Railroad Retirement Board to utilize those unemployed experienced people, but not nearly the progress has been made that could be made. It is particularly true that hiring age limits, for example, will prevent employees in the prime of their life, fully experienced employees in their craft who lose out permanently on one road, from being hired as new employees on another road where that class of service may be needed, and we feel that a maximum tax rate of 4 percent with the railroads having the ability to keep it under that by stabilizing employment affords a desirable incentive to the industry to stabilize employment, to utilize the reserve manpower, experienced manpower, that is available and that is now on the unemployment rolls.

Mr. DINGELL. Will the gentleman yield to me for just a very brief question?

Mr. ROGERS of Texas. I yielded to Mr. Macdonald first.

Mr. MACDONALD. I yield.

Mr. DINGELL. I am very interested in the statement you made there. Is it not a fact that the unions have certain rules on hiring and firing written into their contracts a factor in these people not getting back, let's say, on another road once they lose their job?

Mr. SCHOENE. No.

Mr. DINGELL. Are you sure of that?

Mr. SCHOENE. I am sure of that. We don't have any rules on hiring. Mr. DINGELL. Do union agreements with the company have something to do with the fact that it is hard to shift from one road to another?

Mr. SCHOENE. I suppose you have reference to the seniority rules. Mr. DINGELL. Seniority rules is what I refer to.

Mr. SCHOENE. Naturally, under the seniority rules if you have employees with a particular craft on furlough on that road, the seniority rules would require that they be called back and put to work before new employees are hired. That, it seems to me, is entirely equitable. You have two sets of people unemployed, one that has been working on this job, but has been laid off, and they do get preference

Mr. DINGELL. I am not arguing this point. I just wanted to hear you say that there is no connection between one and the other, between union seniority, or union contracts with management, and the fact that people are having a hard time switching from one road to another. That is all I wanted. I thank both the gentleman from Massachusetts and my good friend from Texas.

Mr. MACDONALD. Sir, I was wondering if you had any opinion as to the effect of abandonment of service on various eastern lines on the unemployment situation. For a concrete example, the Boston & Maine has been abandoning service quite rapidly in my own district and other places in Massachusetts and New Hampshire. I was wondering what effect this had on unemployment.

Mr. SCHOENE. I have very decided opinions on that, Mr. Macdonald. The phenomenon that has been most conspicuous, of course, is the abandonment of passenger service and the discontinuance or consolidation of trains. That is in part due to the ease with which Congress made it possible last year to make such abandonments.

Mr. MACDONALD. I do not want to interrupt you, but actually the abandonment of service that has happened in Massachusetts has been done under the State utility regulation, not the Congress.

Mr. SCHOENE. I realize that. That was true generally prior to last year, but under the legislation you passed last year it has been made very much easier on a much less showing of need to abandon passenger service, but I would like to point this out: that that is by no means the sole extent to which service has been abandoned. All sorts of services to the public have been abandoned. During the past year and a quarter I have spent a very substantial amount of my time in the Middle West trying to keep certain railroads from discontinuing their agency service. In South Dakota, Iowa, Wisconsin, Minnesota, the Chicago & North Western Railroad, and the Rock Island Railroad, and the Minneapolis & St. Paul Railroad have been virtually abandoning agency service statewide with the approval of the State commissions. The discontinuance or curtailment of that service necessarily makes the railroad service less attractive to patrons. It makes it almost impossible to use the railroads for LCL shipments, and the whole program seems to me to be a calculated effort on the part of a number of railroads, of which I think the Chicago & North Western is the spearhead, to go out of the transportation business with the exception of long-haul carload traffic that can be handled on the main lines in long trains. They find that the most profitable portion of their business and the effort is being made to confine service to that kind of traffic. It seems to me unwise from the standpoint of the industry itself. It seems to me detrimental to the public interest, and suicidal so far as the national defense is concerned. We need a strong, healthy railroad industry and the only way we are going to get it is if management will aggressively pursue all kinds of traffic that they can get and render the service to the public that makes railroad transportation attractive to the public.

Mr. MACDONALD. I appreciate your views, but I was wondering if you had any opinion as to the extent of unemployment as related to abandonment of services.

Mr. SCHOENE. It is very hard to put any percentage figure on it, Mr. Macdonald. However, I would say that a very substantial portion is attributable to abandonment or curtailment of services. To some extent I think the unemployment we have now results from deferred maintenance of both equipment and roadway and structures, and of course you can't indefinitely defer it. Sometime they are going to have to catch up on that maintenance and that kind of unemployment will disappear as maintenance employees are called back. To

some extent it is due, as I have previously indicated, to technological changes. Those changes are permanent and the unemployment that results from that will not disappear. To the extent that unemployment results from curtailment or abandonment of services it will or will not be relieved depending upon what the policies of railroad management are going to be, and as I said in response to Mr. Rogers' question, we hope that the cost of unemployment insurance will provide some incentive not only to stabilize employment, but to go after business that the railroads can and should handle.

Mr. MACDONALD. Thank you.

Mr. WILLIAMS (presiding). Mr. Staggers I believe has a question. Mr. STAGGERS. Just a few questions.

Did I understand you to say that you are in favor of raising the 312 percent to 4 percent on wages?

Mr. SCHOENE. Yes, Mr. Staggers, and that is the one amendment to the bill that we would recommend.

Mr. STAGGERS. Second, I would like to have your view on this: A woman, a survivor, who now is drawing $74.40 a month on the railroad retirement, started to work last year. She is 62. Last year she would have been 61. She started to work on her own, sewing, and made $500. She paid into the social security fund on her sewing employment. If he continues to do that until age 65, will she be eligible for social security as well as railroad survivor benefits?

Mr. SCHOENE. I think so.

Mr. STAGGERS. Will I have to get that answer from the social security to be definite on that?

Mr. SCHOENE. Yes, that's what I would recommend. The social security system has become so complicated that, although I was once fairly familiar with it, I hesitate to make any positive answer on it. I would recommend, if you want a positive answer on it, that you inquire of the Social Security Administration.

Mr. STAGGERS. I know that she was told that although she had already paid into the fund and would pay in until 65, she would not get any social security, so we already have a letter in the mail now to the Social Security Administrator requesting an answer to that question, because if she is not going to get any money, there is no use of her paying the money. I just thought you would know.

Thank you very much.

Mr. WILLIAMS. Mr. Schoene, the time is getting late. We are going to have to adjourn pretty soon. I have one or two questions that I would like to have answered prior to the adjournment of the committee, and Mr. Younger has several questions that he would like to ask. If you do not mind, I would like to go ahead and propound my questions now.

What is the underlying philosophy of having the employer finance unemployment compensation payments made to those who voluntarily separate themselves from employment?

Mr. SCHOENE. Insofar, as voluntarily leaving of employment is concerned, we have substantially the same disqualifiation in the Railroad Unemployment Insurance Act as is contained in the FederalState systems. The law provides that an individual who voluntarily leaves suitable employment without good cause is not eligible for unemployment insurance benefits for a period of, I believe, 30 days.

Mr. WILLIAMS. That is for a period of 30 days, after which he begins to receive compensation from his former employer?

Mr. SCHOENE. He receives it out of the railroad unemployment insurance fund, which is financed by a tax on railroad employers generally. It isn't related to his particular employer.

Mr. WILLIAMS. I understand that.

Mr. SCHOENE. The philosophy underlying his becoming eligible after a period of time is the same as it is under the Federal-State systems; namely, that when he has been disqualified for a specified period of time, he has paid a sufficient penalty for having voluntarily left service and if he is still unemployed at the end of 30 days and has not been able to secure other employment, his continued unemployment may be attributable to the inability to secure other employment rather than to his having left employment. In other words, there comes a point where the casual effect of his having left employment diminishes and the casual effect of jobs being unavailable for his reemployment begins to increase.

Whether that line of demarcation should be 30 days or some longer period I suppose is a matter of judgment, but certainly one could not defend a provision which permanently disqualified anyone from receiving unemployment benefits because he had left a particular job. Mr. WILLIAMS. From the standpoint of the individual, I can see that, but from the standpoint of the man that pays the bill, what is his obligation to an employee who voluntarily separates himself from his service?

I fail to see an obligation on the part of the employer to pay unemployment compensation.

Mr. SCHOENE. The employer doesn't do it. The employer pays his taxes, the same as all other employers, but the result is an insurance fund in which employees have certain insurance rights and this is not a question of the relationship of a particular employee to a particular employer, but what should the individual's insurance protection be. Suppose an individual leaves a job. He thinks he is going to get another job. He has it in mind but it doesn't materialize.

Mr. WILLIAMS. Does he not do so at his own peril!

Mr. SCHOENE. No; not when we have unemployment insurance, I don't think he should do it at his own peril. That is what we have unemployment insurance for, in part. It isn't just limited to the leaving of employment. It is designed to deal with a condition in which employment is not available.

Bear in mind this fellow has to be available for employment.

Mr. WILLIAMS. He is available for employment and there is an available position for him at the time that he quits.

Mr. SCHOENE. That is correct, but that is not true when he starts drawing his unemployment insurance.

Mr. WILLIAMS. I am not attempting to make a point; I am attempting to get information.

Just what is the justification for requiring that the employer pay this man for quitting?

Mr. SCHOENE. Again it seems to me that you are misunderstanding the essential conception, which is that the employer does not pay him. The employer, together with all other employers, pays a general tax from which an insurance fund is built up and the individuals have