tax rate (122 percent) is already very high for a combination social benefit and supplementary staff program, we hope every effort will be made to improve the soundness of the program without increasing rates further-that is, by finding some costs savings. The railroad workers are now making strenuous efforts to have their railroad retirement taxes excluded from income for tax purposes. Obviously, the present 64 percent railroad retirement taxes on employees plus income taxes is about the ceiling on how much the Federal Government can exact today from their pay-without depriving so many of them of some opportunity of saving for things they want to do for their own families. It is clear that a basic social benefit program supplemented by a staff pension cannot provide complete oldage income protection. Each worker must do something additional on his own. The national chamber is opposed to any increase because benefits now provided by railroad retirement compare very favorably with those in other industries which have staff pensions supplementing social security. However, if the committee and Congress should increase railroad retirement benefits, the chamber believes the additional costs should be fully covered through additional railroad retirement tax revenues. I would appreciate the inclusion of this letter in the record of the current hearings before your committee. Cordially yours, CLARENCE R. MILES, Manager, Legislative Department. STATEMENT OF AMERICAN RETAIL FEDERATION ON PROPOSALS TO ALTER THE RAILROAD RETIREMENT AND UNEMPLOYMENT INSURANCE SYSTEMS The American Retail Federation is a federation of 31 national retail trade associations and 38 statewide retail organizations, representing through the combined membership some 800,000 individual retailers. The transportation committee of the federation, at its last meeting in New York City in January of this year, adopted a policy resolution opposing any increases in the railroad retirement and unemployment insurance systems to the extent that the employee benefits provided thereunder, and the tax rates assessed both employers and employees, exceed current and applicable benefits and rates for other individuals under other Federal laws. The various bills that are presently before the subcommittee for consideration, principally S. 226 and H.R. 1012, provide many changes in both the tax rates and the benefit programs. In view of the ARF policy expressed above, it would appear that only one change would not be opposed and that is the provision raising the tax base from $350 per month to $400 per month. The Social Security Act previously was adjusted upwardly to this figure and this change to the railroad retirement system would bring about uniformity between the two acts. The underlying objection to other increases in the above bills resulting in added financial burdens to rail carriers, is that the public ultimately pays the added cost, and the benefits accrue to a limited number of individuals who thereupon are treated preferentially as against those covered by other enactments. Initially the added rail costs are borne by the carriers but quickly form the basis for petitions to the Interstate Commerce Commission for general increases in rates and charges. Those relying on rail transportation, including the retail industry, are then faced with higher transportation costs which result in turn in higher prices for goods whether at the point of manufacturer, wholesaler, or retailer. These costs then reach the level of the entire consuming public. The financial condition of the railroads today is not such as to absorb, in its present pricing structure, the added cost of more favored treatment for these employees. Competition from other carriers, whose employees are not subject to the Railroad Retirement Act, has made severe inroads on the traffic formerly handled by the rail lines. Any additional factor which must be added to the rail price structure, will certainly accelerate this trend. For the above reasons, the American Retail Federation urges that all proposed changes in these acts, excepting the increase in the base rate to $400 per month, not be approved. AMERICAN FARM BUREAU FEDERATION, Re H.R. 1012 and other bills to amend railroad retirement and unemployment insurance programs. Hon. OREN HARRIS, Chairman, House Interstate and Foreign Commerce Committee, House Office Building, Washington, D.C. DEAR CONGRESSMAN HARRIS: At the most recent annual meeting of the American Farm Bureau Federation, the voting delegates of the member State farm bureaus unanimously approved the following policy: Retirement and unemployment benefits provided railroad workers are substantially in excess of similar benefits provided other workers under comparable legislation. A substantial portion of the costs of such programs is reflected in freight rates and prices paid by farmers. Precedents established under the railroad retirement program tend to be carried over to other social insurance programs. We are therefore opposed to current proposals to further increase railroad retirement and unemployment benefits. To the extent that the railroads could pass the costs of increased worker benefits to shippers and consumers, the costs of such benefits will be paid by shippers and consumers, a substantial percentage from the pockets of farmers. To the extent that the competitive position of the railroads will not permit the increased costs to be passed on to shippers and consumers, and this would appear to be the situation at the moment, the already low level of railroad earnings would be still further reduced. Farmers and other shippers have a major stake in this, too. The capacity of railroads to make the investment in improved equipment, that is important to the improvement of their competitive position, and essential to improving their service to shippers, would be further impaired. The railroad retirement program cannot be dealt with as an independent question. It is part of a national social insurance policy. This policy tends toward uniformity in its various phases. Thus precedents, established for one social insurance program tend to be carried over into other social insurance programs. The underlying issue, it seems to us, in all social insurance programs is, to what extent should total spendable income be diverted to the currently retired portion of our population, and what percentage retained by the currently working percentage of our population. There is no avoiding the economic reality that all payments to retirees are, in terms of the real incidence of such costs, paid by the working population, by both payroll deductions and higher prices than would otherwise prevail. The problem is one of obtaining a proper balance. Each increase in social insurance costs curtails the ability of the working population to improve their standards of living and raise their families. It seems to us that there is a real danger that social insurance benefits may be raised to a level that is inequitable to the working portion of our economy and which would represent a burden that would weaken our national capacity to meet many other national needs and requirements. A proposal that involves payroll taxes equal to or in excess of 20 percent of payroll (up to $4,800 per year) such as is involved in the bills under consideration, seem to us to go too far in the direction of diverting national income to the currently retired portion of our society. This is not intended to suggest that many railroad retirees do not have financial problems. Of course, they do. But social insurance was never intended, at least as we see it, to do other than providing a minimum standard, leaving the individual a responsibility for supplemental protection. It is, of course, necessary that the tax schedule be revised to get the railroad retirement and unemployment funds back on a self-amortizing basis. But in view of the foregoing, we do not believe it represents sound national policy to further increase worker benefits at the same time. It will be appreciated if you will include this letter in the record of the hearing. Very sincerely, MATT TRIGGS, Assistant Legislative Director. 37110-59-26 Hon. OREN HARRIS, RAILROAD PENSION CONFERENCE, Chairman, House Interstate Commerce Committee. DEAR SIR: Would you kindly insert the enclosed in the record of the hearings on railroad retirement and unemployment insurance as our testimony. We sincerely hope you will reconsider the unemployment section of H.R. 1012 and H.R. 1013 and incorporate the unemployment provision of H.R. 4353 as introduced in 1957 (85th Cong.). The 1957 measure was more in line with our unemployment needs as shown in our testimony. It seems a shame to have abandoned the fine unemployment insurance provisions of the 1957 measure, especially when more layoffs seem likely in the railroad industry. Most sincerely, C. B. CARTER, Secretary. TESTIMONY OF THE RAILROAD PENSION CONFERENCE FOR ENACTMENT OF H.R. 223 AND LONGER UNEMPLOYMENT BENEFITS Railroad workers from all crafts throughout the Nation, have long needed and sought enactment of legislation providing 30-year retirement regardless of age at 50 percent of taxable wages as provided in H.R. 223. Minor increases in annuities, and other fringe benefits have been enacted during the past 12 years. Each increase was insufficient and rail employees found it necessary to present legislation in every session of Congress since the 81st, including the present session, trying to bring the Railroad Retirement Act up to date to meet actual needs. This however, is still to be accomplished. H.R. 223 primarily increases the "average" annuity from $128 a month to abount $190 a month. However, many annuities would be much less because of the low wages earned by many. The maximum annuity would be increased from $188 a month to $200 a month. (H.R. 223 does not affect the supplementary benefits paid to the wife of a retired railroad.) Fifty percent of taxable wages annuity is needed because benefits have not kept up with the inflation dollar, in relation to the cost of living and with the increased wages of the working employee. This amount of incease is also needed, because rail workers, unlike many of those under social security, do not receive a supplementary pension paid entirely by management. For instance A General Motors 30-year employee can now get supplementary pension benefits for himself and wife age 65, as high as $246 a month, in addition to social security, paid entirely by General Motors. Workers with less service receive supplementary benefits according to length of service. Workers in many other industries likewise receive supplementary benefits paid exclusively by management. The Railroad Pension Conference, therefore, urges Congress to amend H.R. 1012 and S. 226, and similar bills, by adding the benefits provided in H.R. 223. Unless the 86th Congress enacts legislation to meet the needs of those now retired, or planning to retire, it will be necessary for rail workers to seek additional benefits in 1960 and each sesson of Congress thereafter until the needs are met. The unemployment situation confronting the Nation's rail employees calls for an increase in the daily rate of unemployment insurance benefits and for an extension of time the benefits are paid such as urged in 1957 by rail unions. AMENDING THE RAILROAD UNEMPLOYMENT INSURANCE ACT The 86th Congress is also urged to increase the daily rate of railroad unemployment insurance, as well as extending the number of days it is paid. The Railroad Pension Conference urges that S. 226, H.R. 1012 and H.R. 1013 be amended to include the extension of time unemployment benefits paid, to equal the extension of time as provided by S. 1313 and H.R. 4353 (85th Cong. in 1957). ·S. 1313 and H.R. 4353 (85th Cong.) provided the following extension of benefit periods to be paid: 1. An employee with 5 and less than 10 years_ 2. An employee with 10 and less than 15 years. 3. An employee with 15 and less than 20 years. 4. An employee with 20 years and over....... 39 extension periods. 65 extension periods. 91 extension periods. 117 extension periods. S. 226 and H.R. 1012 (86th Cong.) has considerably slashed the benefits called for in 1957. Such as 1. An employee with 10 years and less than 15. 7 extension periods (65 days). 2. An employee with 15 years or more________ 13 extension periods (130 days). Thus, S. 226 and H.R. 1012 provides no extension of benefits for those with 5 to 10 years service, those most likely to be laid off. And it also fails to provide adequate extensions to those with 20 and 30 years service, many who have already exhausted their present unemployment insurance benefits. Some 108,000 railroaders became jobless in the 1 year between November 1957 and November 1958. This was a decline of about 11.6 percent in employmentleaving only about 831,000 with employment on class I railroads. Railroad employment for 1959 looks bleak indeed as the carriers are seeking to merger various systems plus the discontinuing of many passenger trains. And "efforts" to cut labor costs by automation will continue as they develop new methods of increasing output per man-hour. General employment outlook in other industries is far from rosy. Magazine of Wall Street, December 6, 1958, sees the number of jobless as "likely to rise well above the 5 million mark," this winter. COST OF BENEFITS The Railroad Pension Conference believes that no tax increase is needed to provide the benefits proposed in H.R. 223, and that the solvency of the fund will not be endangered now or in the future. Our conclusion of this subject was substantiated in a pension conference study made in 1956, of the actuarial setup of the Railroad Retirement Act, entitled "50 Percentum Pensions After 30 Years, the Need and the Possibility." This report was presented to the Senate Labor Committee and the House Interstate and Commerce Committee in the 84th and 85th sessions of Congress. The facts presented in our study have never been refuted! The 1956 Railroad Pension Conference study concluded: 1. The actuarial calculations used to keep benefits low and cost high follow the principles of private insurance companies, seeking profits and accumulation of financial power. The public railroad retirement fund should be guided by a different motive, that of providing maximum security to the railroad workers. 2. Exaggerating the length of time an employee will receive an annuity. 3. Exaggerating the number of employees who will retire instead of working until death or their final illness. 4. Exaggerating the number of employees who will stay in the industry long enough to receive retirement benefits. RAIL WORKERS SHOULD NOT HAVE TO SUBSIDIZE THE RAILROADS So says Senator Wayne Morse. "I respectfully say that all the arguments of the railroads, namely, that they cannot stand the cost in my judgment does not constitute sufficient basis for voting against this measure (S. 1313 as amended August 22, 1958) because we have no right to ask the employee to subsidize the railroads, by means of receiving less than a fair unemployment and railroad retirement program * * * we have no right to say 'You cannot get it, you have to subsidize the railroads by taking less than is fair'" (Congressional Record, Aug. 22, 1958). GOVERNMENT SHOULD PAY CARRIERS SHARE OF COST OF NEW BENEFITS IF NEEDED "The arguments of the Association of American Railroads," Senator Morse continued, "always is that the railroads cannot afford it. If the railroads need more subsidies then let us face that fact. *** The contributions the railroads make to the economy and to the defense of the country is that we should give them a subsidy, if it is needed. I have never been afraid of the word subsidy, if the payment is necessary to the protection of the public interest. Only a short time ago the Senate provided subsidies for the railroads * by means of a Smather bill, then come January we can go farther. * ** Our first responsibility in such a field as this is to provide fair treatment for the workers. Then if the railroads end up in a situation where they are in financial difficulty, let them go to the Interstate Commerce Commission. Let them bring another Smathers bill to the floor of Congress. But let us not penalize the railroad workers." Rail officials are seeking more subsidies in the 86th Congress. President George Alpert of the New York, New Haven & Hartford Railroad recently stated in Chicago, that he did not look on Federal aid as a "giveway” or “porkbarrel appropriation" (Wall Street Journal, Jan. 14, 1959). Adequate retirement and unemployment insurance benefits as proposed by the pension conference is "for the protection" of the public. Therefore, the Railroad Pension Conference proposes that the 86th Congress1. Amend S. 226 and H.R. 1012 by including the proposals of the pension conference for both retirement and unemployment insurance benefits. 2. Defer any increase in railroad retirement taxes until further study is made of the actuarial setup of the railroad retirement system along the lines of the pension conference study of 1956. The CHAIRMAN. With thanks on behalf of the committee to everyone, the committee is now adjourned. (The following material was later received for the record from the Association of American Railroads :) Hon. OREN HARRIS, ASSOCIATION OF AMERICAN RAILROADS, Chairman, Committee on Interstate and Foreign Commerce, DEAR MR. CHAIRMAN: When I testified before the Subcommittee on Railroad Retirement of the Senate Committee on Labor and Public Welfare on February 18 there was a discussion of the relationship between outmoded railroad work rules and the ability of the railroads to pay for increased retirement benefits for railroad employees. As a result, I have written to the chairman of the Senate subcommittee today, including pertinent information on this subject. It is my belief that such information might also be of equal interest to you and your committee. Accordingly, I am providing this, as follows, and respectfully request that it be incorporated into the record of the hearings on H.R. 1012. In general, these work rules are of three principal classes: First are ones that require railroads to employ more people than they need or can profitably use for the amount of work to be done. Second are rules that compel retention and perpetuation of work and pay standards made obsolete by advancing technology. Third are rules that preempt for the brotherhoods traditional and proper management functions of determining (1) the kind and amount of work to be done and who is to do it, and (2) operational policy necessary to obtain the most efficient use of plant, equipment, and manpower. Counting all three classes, and after allowing for overlapping cost duplications, the total annual cost of outmoded work rules is placed by railroads at over $500 million. A prime example of a rule that requires railroads to employ more men than they need or can profitably use results from continued employment of firemen on diesel locomotives that have neither fires to stoke nor boilers to tend. Diesel-powered yard locomotives were operated safely without firemen for 12 years prior to the 1937 diesel firemen's agreement, and the first diesel-powered streamlined passenger trains also were operated safely without firemen. Since 1937 self-propelled motorcars and trains comprised of electric rail cars, including those of rapid transit systems, such as the Hudson & Manhattan Railway and the New York City subway, have operated safely over millions of miles without firemen. In countries outside the United States operation of other than steam locomotives without firemen is common practice. France, for example, which holds the world railroad speed record and is widely noted for excellence of its rail service, uses an engineer only on all locomotives except those not equipped with dead |