and must be available for work. Properly enforced, this tends to limit the system to persons who are in the railroad market looking for railroad jobs.

This requirement of availability is entirely absent, however, in the law governing sickness benefits. As a result, sickness benefits are now being paid persons who demonstrably are attached to other work, to housekeeping, school work, and so forth, or who have otherwise removed themselves from the railroad labor market. The availability test also should bar from benefits the gentleman I referred to as receiving sick benefits while he was in jail. Obviously he was not available for work and was suffering no railroa dwage loss because of his sickness.

The railroad association proposes provisions which would serve to exclude persons who are not in the railroad labor market and are suffering no loss of railroad wages. It would define a day of sickness to include only days the individual can show he would have been available for work except for his sickness. It would also add a 90-day test primarily designed to exclude persons who become sick after they have left railroad work for 90 days, and become established in nonrailroad jobs or have otherwise withdrawn from the railroad labor market.

The proposal recognizes that people normally in railroad work may be out on strike or may be unemployed and registered for railroad work, so these people, who are still attached to the railroad labor market, are not affected by the proposal, as that period is excluded in calculating the 90 days. With adoption of the individual base year and benefit year, every individual would be immediately eligible for benefits and if he failed to register for work or benefits in 90 days, it certainly is a clear indication that he has left the railroad labor market.

The proposal would also exclude from sickness benefits persons who are experiencing only the normal incidents of pregnancy in a maternity period, but provides that unrelated sickness can be compensated.

Now I shall talk briefly about the railroad benefit formula. The railroads are particularly concerned with the levels of the unemployment sickness and maternity benefits proposed in H.R. 1012. They seem to be indefensibly out of line in relation to the beneficiary's normal paycheck. I have already given you a few examples so I will give you only one more.

If by regularly working throughout the year a person's pay after railroad and income taxes is $2,850 per year, and this is the example that was given by the Railroad Retirement Board's report on page 15, it seems that we are acting against common sense and the public interest, if we reduce his work incentive to much less than $4.50 a day by paying him a benefit above $6.50 a day. His net pay after his railroad retirement taxes, which would be $245 under the proposed new schedule contained in H.R. 1012, and his income taxes, which are $546, would be $2,849 for 260 days' work, $10.92 a day.

Under the withholding provisions, his actual pay check will usually be for somewhat less, and the Board reported that he could qualify under H.R. 1112 for a $9.50-per-day benefit. That would be within 15 percent of his normal take-home pay after taxes.

I don't think it requires any argument that 13 percent is enough to inspire a man to work and pay his work expenses out of it rather than to draw benefits.

I now skip over to page 24. I have stated some of the reasons against paying benefits in excess of 60 percent of a person's net take after income and railroad retirement taxes. When the system was established, it didn't matter much whether net or gross pay was used to measure benefits, as practically no one who was paid benefits had any income taxes to pay and his net paycheck after taxes was 93 percent of his gross pay. The 3 percent was the early rate for railroad retirement. With change in income tax and railroad retirement taxes, a steady unmarried worker who averages 5 days per week throughout the year and has a gross pay of $19 per day will have next year, after income taxes and the proposed railroad retirement taxes, only $14.63 per day after the combined withholdings.

A married man with three children in the same daily pay will have $16.62. One suffers $2 per day more pay loss than the other.

We cannot properly ignore these take-home-pay differences if we further liberalize benefits.

I will skip over the next page, which is a table converting gross daily pay into net pay after railroad and social security taxes. That was computed under the short form for income taxes. It is almost exactly pay after income and railroad retirement tax withholding.

The matter of waiting periods and partial unemployment insurance is important to any system. If the only time people were unemployed and received benefits was when they were unemployed in the usual sense of the word, that is, when they lose a week or several weeks from work, the problem I shall now discuss would not exist. The railroad system has no such limitation. In the initial registration period of 2 weeks it pays benefits for unemployment in more than three of the normal working days. After that for each day. We feel that one of the most dangerous provisions of H.R. 1012 is section 302 (a) which strikes out the required days of unemployment in the first registration period.

This deletion would open up to the system a multitude of small claims. No unemployment system in the United States, or I believe in the world, other than the railroad system ever pays a person for a 10-percent loss caused by 1 day's unemployment in his normal earnings. Under the railroad system this small loss is presently compensated, but only after four times this loss has been suffered in an initial 14-day registration period.

Under section 302, the additional requirement for this registration period could be eliminated and the first time a 10-percent loss occurs in a 2-week period, a benefit could be paid.

I will leave for your later reading illustrations as to what will happen if this section becomes law.

On page 28 of my statement there is a comparison between the New York system and the railroad system inasmuch as both of them deal with the concept of days instead of weeks of unemployment like the other systems. I might say in summary that under State system very few people qualify for benefits that are not wholly unemployed during a week. In general they must suffer at least a 30- or 40-percent wage loss in the week. I won't attempt to give the various rules but in

summary, anybody who earns as much as his benefit amounts generally receives no benefit at all, and a person who earns less than his benefit amount receives only the difference. That is quite different from the treatment under the Railroad Act.

New York, unlike other States, bases its benefits for a week on effective days, except that if $36 is earned in any week, no benefits are paid for that week. A person unemployed on 3 of the 7 days in the week has no effective days. That is, he is employed only on one normal workday. If unemployed on 4 days, which includes Saturday and Sunday, and this means that he worked only 3 days of the normal 5 days, he gets one-fourth of the full benefit for the week. If unemployed 5 of the 7 days, which means that he works only 2, he gets half the full benefit. If he works on only 1 of the 7 days, he gets three-fourths of the full benefit; and if unemployed all 7, he gets full benefits.

The New York schedule does not apply if the person's gross pay for the week is $36. As previously stated, no benefits are paid in such a case. Under this $36 rule, the bulk of railroad employees could not qualify if they worked 2 or more days in the week. The New York system also requires that a person have suffered, before he can draw benefits, a solid week of unemployment for which he is not compensated. Only then can he start counting the "effective" days that I have referred to.

The proposal of the railroad association would make the first week of the present initial 2-week registration period a waiting period, instead of merely the first 3 normal workdays of that week. That would be the sole bulwark between the system paying only persons who have had substantial unemployment in the year and paying everybody for any day of sickness or any day of unemployment that occurs in the year.

At this point I shall discuss current qualifying conditions, particularly because of their importance in the retroactive benefit provisions in this bill. Every State law and the railroad law imposes, as a continuing condition an availability for work requirements and also registration and other requirements.

Section 1(k) of the Railroad Unemployment Insurance Act defines day of unemployment in those qualifying terms, and section 12(i) provides that the Board shall prescribe a registration procedure. The normal registration requirement where there are not unusual circumstances, requires that registration be made within 6 days. That is, as has been brought to your attention by various and sundry witnesses, an important safeguard of the system against claims from people who shouldn't get benefits.

I beg your indulgence for going into even this much detail about qualifying requirements. However, it is of fundamental importance and is directly involved in section 303 (b) of H.R. 1012. The section would, under stated conditions, pay persons who haven't as yet registered or otherwise established claims, benefits for days of unemployment not exceeding 65, which occur in registration periods beginning on or after June 19, 1958. That is about 8 months retroactive already. The section ends with the statement that:

Except to the extent inconsistent with this subsection, the provisions of the Railroad Unemployment Act shall be applicable in the administration of this subsection.

The provision retains that effective and terminal dates were adopted last year, but now with those same dates, benefits will be substantially all retroactive.

I should like to point out that section 303 (a) of the act also would pay retroactive benefits to the long service railroad men. Before leaving the matter of these permanent benefits under section 303(a), I should like to point out that they also violate another basic rule besides retroactivity.

That rule is that unemployment insurance protection is by nature temporary. But the amendment under section 303 (a) when applied to the 15-year man would string out unemployment benefits to a greater extent than any system I have ever heard of, except England's for a period in the depression when it became known as the dole. The system was afterward reformed so that benefits would be only for a temporary period of unemployment.

Under section 303 (a) a person with 15 years railroad service sometime in his lifetime, including some work in 1957, 1958, and this year, becoming presently unemployed, could begin drawing benefits today, draw benefits until next January, under existing law, draw benefits from January 1960 until June 1960 under the extended benefits provided by the section, draw for several months again under existing law on his 1959 wage record, and then again begin drawing and draw 6 months more under the proposed amendment.

The association believes that this provision should be stricken from the bill.

I shall now touch very briefly on the matter of benefits to strikers. One point that all State legislatures have agreed on and that Congress concurred in in writing the unemployment law for the District of Columbia, is that a person who walks off the job cannot walk over to the unemployment office and get benefits. That is true whether he walks off alone as a voluntary quit, or where he walks out in concert with others and the walkout is a strike.

Unemployment insurance should be neutral in labor disputes. To this end all acts provide that the benefits shall not be denied for refusing a job in a struck plant. Similarly, all acts except the railroad act prevent unemployment insurance from being used as a device to make an employer or an industry finance strike benefits.

I might mention that even the International Labor Organization located at Geneva, Switzerland, where I attended as an American employer delegate in 1952, in formulating the so-called international standards in unemployment insurance, recognized that strikes are not properly financed by unemployment benefits. You will find that that is strike exception to benefit provisions available to every nation that adopts the standards.

The fact is that the claimant should not be paid benefits while he is striking under other unemployment principles.

He is not involuntarily unemployed due to lack of work. He is not actually available for normal employment or looking for a normal job. Instead, he is trying to better the hours, wages, or working conditions in a job he already has.

The railroad association's position is based on the foregoing considerations. It is that there is no justification for the portion of section 4(a-2) iii which permits payment of strike benefits, and that this part

should be stricken from the law. The association's proposal would do this.

Quite a body of laws and regulations now attach to labor disputes— under Taft-Hartley and under State laws, as well as under the Railway Labor Act. These are all designed to protect the public interest as well as to provide fair rules for labor disputes. To this end they impose various restrictions on labor and management. But this fact affords no basis for a provision under any system making employers pay strike benefits to strikers, regardless of whether the strike violates the law or a union constitution, rules or practices or whether it does

not.

The fact is that strikes and strike threats are basic economic weapons providing a background to collective bargaining. To add to these, the further weapon that the employer must indirectly finance the strike through his unemployment taxes is not fair play. It also violates basic unemployment principles I have referred to.

I want to now mention very briefly the present situation of what is called in unemployment jargon "voluntary quits" and "job refusals.” The basic philosophy of provisions is highly important, as the provisions are often opposed as penalties. They are instead limitations as to what unemployment the system "insures." Without these limitations the State systems would qualify persons for 6 months' paid vacations-the railroad system frequently for vacations twice as long.

An essential part of the free enterprise system is that people decide for themselves when and where they will accept work and when they will quit work. But if Government attempts to guarantee an individual against the fiscal consequences of his decision not to work, how long could we endure before this basic right of decision would be in jeopardy?

The "quit" provisions, and the "refusal of suitable work" provisions, are intended to avoid Government's guaranteeing against the natural fiscal consequence of decisions not to work. By limiting protection to involuntary unemployment the system preserves the right to be voluntarily unemployed, just as the "strike" provisions are not intended to penalize the right to strike, and the definition of "unemployment" is not intended to penalize persons who work, in denying them unemployment benefits while they are working.

The "voluntary quit," "strike," "job refusal," "availability" and "misconduct" provisions should be simply viewed as defining the risk covered, and excluding unemployment situations controllable by the voluntary action of employee from being "insured" by unemployment insurance.

If a person leaves his job to take another job-I am starting out with a case where nobody wants to penalize him-and shows the bona fideness of his intention by working a few weeks on the new job, the voluntary quit provision, both of existing law and of the association's proposal, which I will shortly describe, would not apply to him. If he subsequently becomes involuntarily unemployed, this is not caused by his quitting the first job and he is entitled to benefits.

It is our position that any person who voluntarily quits should be permitted to draw benefits only if he takes another job and works at least 4 weeks.