income to total capital stock, and then the relation of operating revenues and expenses to total payroll taxes.

Looking first at page A-45, you will see variations in the net railway operating income, both before and after taxes. In the earlier years, of course, the taxes were relatively low Those are not just payroll, but all income taxes.

But the 1956 results in terms of net railway operating income, both before and after taxes, are among the highest of peacetime years. The net income of the railways in 1956, $874 million, is higher than any of the recent years excepting 1955 and 1953, and higher than most of the earlier years on the table other than the war years.

In spite of the very much greater income tax being paid by the carriers their net income was close to its peak as of 1956.

The dividend and net income shown on page A-46 have varied with the railroad policy of declaring maximum dividends out of available income which was followed in the earlier years. The only way that these comparisons can be made is to show together the dividends and the net income after dividends.

You will see that in 1956 the relation of dividends and net income after dividends is such that the carriers had 11.4 percent on their capital stock. That was slightly lower than 1955 when there was exactly 12 percent, the sum of the 2. It was the same as in 1953, but higher than most of the other years, higher even than in the boom year of 1929.

It is from these two sources, of course, that the railways realized a large part of the funds for the improvement of railway investment, railway plant. It is a very prosperous condition judging from that percent of return.

The effect of payroll taxes on the total railroad picture is shown on page A-47. The figures on that page cover, as do some of the others, a period of a very great change in the value of money.

I do not think I need to elaborate on the difficulty of comparing relationships of wages to revenues over a period when the value of money fluctuates widely. These do cover such a period.

Neither the railroad industry nor the railway employees control money and credit, can't be considered as responsible except in a very minor way, but that does disturb comparisons.

However, you have this relationship between operating revenue and payroll taxes. If you will look down the right-hand side of page A-47 you will see that payroll taxes have claimed a varying percentage of operating revenues ranging from 4.1 percent at the top, to, I believe, 217 percent at the lowest point.

In 1956, 3.2 percent, which is the third high, but only very little above that normal if 2.8, 2.7, 2.9 percent.

Mr. DINGELL. Do you have any projections as to what the impact percentagewise on this chart will be of the improvements in benefits which will be offered and, of course, the increased taxes necessary to furnish those increased benefits?

Mr. OLIVER. No, Mr. Dingell. The reason for not having it, from the standpoint of the past history, is this: We have seen those projections made. We have attempted to make them. And in every instance have found that the projection was wholly out of line with the actual subsequent situation."

In this 48- to 40-hour week change, for example, I went out on the limb and estimated that the effect would be, as I recall it, 10 percent,

or something just unnder 10 percent of the wage cost. Two years later when the figures became available we found that it had actually cost not one cent.

My own conviction is that if the railways will cooperate, as they are able to cooperate, in a program of placing the older employees with the Railroad Retirement Board, that the cost of the unemployment benefits for those older employees will be almost negligible.

The vacancies are there, the men are qualified, the possibilities of transporting them at a minimum cost are there, the technique for replacing and relocating them has been developed, and the vacancies are there because of the natural turnover, retirements, deaths, and voluntary quits.

I do not believe any projection can calculate how fully the carriers will cooperate. The reason for that is, of course, this: that you will find a local facility where they are hiring men to handle mail and baggage, for example, at a passenger station. The man in charge of that particular local facility may think that he wants a young fellow with a strong back. He may not realize, of course, the cost of training that man, he won't have the background nor the perspective. He won't realize the cost of unemployment for a man in a railroad station just two blocks away who may be let out because of a change in the equipment for conveying mail or baggage in that station. That local man, unless there is very strong insistence from higher railroad officials, will probably hire the 20-year-old with the strong back.

Mistakingly, but it will be the best he can do according to his own likes, instead of taking the 45-year-old man who really understands that mail and baggage has to be handled carefully to avoid loss and damage and whose unemployment compensation will otherwise be paid by the carrier.

Now, that is the imponderable, that is the immeasurable factor underlying this situation. I do not believe any projection is possible under those circumstances.

Mr. ALGER. Mr. Chairman, could I ask one question at that point? Mr. MACK. Yes, Mr. Alger.

I would like to have Mr. Oliver conclude his testimony, but go ahead if you have a question at this point.

Mr. ALGER. I will defer it, Mr. Chairman.

Mr. OLIVER. I am sorry if I am taking more time than anticipated. Mr. ALGER. It has been very interesting, of course.

Mr. OLIVER. Other American industries have recognized the inadequacy of existing unemployment compensation in the unemployment compensation laws and many employers have agreed with their employees to supplement the standard compensation.

Of the great number of such supplementary unemployment compensation agreements that have been negotiated, the best known have been those in the steel, automobile, and container industries.

I have included a list, necessarily an incomplete list, of companies that have negotiated supplementary unemployment benefits. They appear on pages A-33 and following. These have been mostly negotiated since the automobile workers more or less broke the ground a little over 2 years ago, but if you will look at the list which is those only reported to the Bureau of Labor Statistics ordinarily in newspaper or agreements available to them, you will see that a very large

part of them are plants either in the automobile industry or auxiliary to it.

Nevertheless, that is a large part of durable goods industries in the United States. I stress durable goods because those are the comparisons most frequently made in judging the condition of the railroad workers.

Not only the automobile industry, but the farm machinery industry, the rubber industry, plate glass industry, the principal companies in those fields, the aluminum industry, have negotiated such plans.

The steel industry and container industry, very substantially representing major companies in those industries, have negotiated such plans.

You will see in addition that the seamen employed on the Atlantic and gulf coasts have negotiated supplementary employment benefits. You will see that the Pullman Standard Car Mfg. Co. has negotiated such supplementary benefits covering its employees.

There are many other instances of where this program of supplementary unemployment benefits comes very close to the railroad workers. That Pullman Car Co. would cover men of exactly the same occupations, almost exactly the same as in the railway shops.

It is in the transportation equipment field and in the transportation field itself. The number of companies, their geographical distribution, is, I think, a very definite indication that this is a new addition and one destined to be nationwide and continuing in the field of caring for unemployed men.

In a very large part it extends the period among unemployment compensation and increases the benefits. My attention has not come to anyone that has this feature of the 5-year program, but that is not new to the railroad industry. It was, as I said, in the legislation in 1933; it is in the Washington agreement; it is a protection provided by the Interstate Commerce Commission regularly and consistently, these long periods of protection for displaced railway workers.

In that particular the railway program is different, but it arises out of a difference in the railway industry long recognized both in Congress and in the Interstate Commerce Commission as well as in the collective bargaining agreements.

I have included in the data and material attached to my outline statement excerpts of the plans of General Motors, the steel industry, and the Continental Can Co. I would point out that those 3 agreements are with 3 of the largest unions in the United States, United Steel Workers of America, the United Automobile Workers, and the International Association of Machinists.

So we have here not only major corporations, but major unions in agreement to provide for these improved unemployment benefits. These agreements in outside industry for supplementary unemployment compensation do not include long period protection that would be adequate for the railroad industry. There is less need in those other industries for a special provision for older workers. Their skills are more interchangeable as between industries and they are located to a much larger extent in industrial centers where reemployment is less difficult.

Moreover, many of these corporations are extending themselves into the new lines that result from increased purchasing power in the United States.

General Motors not only manufactures automobiles, but a wide variety of such products as Frigidaires, and that sort of thing makes the replacement of the older displaced worker more easily possible.

In the railway industry those openings are not available. But even in the industries of that character various kinds of severance pay programs have been developed. The proposed legislation before the committee, therefore, meets a serious deficiency in the present provisions for unemployed railway workers.

It will give particular attention to the displaced older worker and will simultaneously provide incentive for the railways to relocate and reemploy these experienced men while it gives more nearly adequate compensation to those who are not placed.

Departing in method from the protection afforded employees in other industries the proposed legislation is, nevertheless, strictly in accord with the principle now well established in the United States of increasing compensation for the unemployed; in accord also with precedence in the railway industry both in legislation, Interstate Commerce Commission protection, and collective bargaining agreements.

Finally, its cost, insofar as it cannot be avoided by better placement of unemployed railway workers can naturally be met out of the savings which technological progress is bringing to the carriers. That concludes my statement, Mr. Chairman.

Mr. MACK. Thank you very much, Mr. Oliver. That was a very fine statement.

Mr. Moulder.

Mr. MOULDER. What do you think of the proposal to invest railroad retirement funds in such things as FHA loans? I understand it would yield thirty or forty million dollars additional income to the railroad retirement fund.

Mr. OLIVER. You have asked me a question on a subject that I haven't made a special study of it and I am not qualified as an expert, but in my own judgment the matter of safety is by far the primary consideration in the investment of such funds.

Mr. MOULDER. I understand that. For example, certain FHA loans carry Government guarantees, as safe as Government bonds. Mr. YOUNGER. There is a vast difference between a Government bond and an FHA guarantee.

Mr. MOULDER. I am not saying it is the same as Government bonds, but it is a sound loan.

Mr. OLIVER. I really am not competent to pass on the question.

As I say, my feeling is that the present investment program is preferable because of the greater safety factor. Whether or not the safety margin would be great enough with the investment program to which you refer is a matter on which I would not be qualified.

Mr. MOULDER. The proposal is not to invest the entire fund, but a portion of the fund.

Mr. OLIVER. Yes, I understand that.

Mr. MACK. Mr. Hale.

Mr. HALE. Mr. Oliver, on this last page you say:

Departing in method from the protection afforded employees in other industry

What did you have in mind?

Mr. OLIVER. The method in other industries has two characteristics: In the first place, it is not possible to provide for them by legislation. Any legislation cannot be patterned to the problems of the steel industry for example, or of the automobile industry.

Mr. HALE. What you mean to say is that a statutory unemployment system like the railway unemployment system is necessarily different from such consensual systems as exist in the industries you mention? Mr. OLIVER. That is a large part, the difference in method. Therefore, collective bargaining has been the method used in those other industries. It permits adaptation to the wide variety that exists in outside industry, but with the railway industry's long historical precedent of dealing with these questions through legislation, this method is fitted to the railway industry.

Mr. HALE. In one sense it is easier to have an unemployment system for railway workers than for people who make tin cans?

Mr. OLIVER. Yes. It is easier to have a statutory unemployment system.

Mr. HALE. Because you have better statistical studies of experience in the field? Is that what you have in mind, Mr. Oliver?

Mr. OLIVER. Yes. Among many factors, sir, is that a long period of governmental concern in the industry and vast body of precedent built up in legislation has standardized the railroad industry to a much greater extent than is true in any other industry.

That permits legislative handling of the problem, it permits adaptation of measures to the specific situation in a way that would not be possible with cans, for example.

Mr. HALE. Let me say that I think you deserve a great deal of credit for these very elaborate and very illuminating exhibits. I think they would be more illuminating if I had studied them more than I have But certainly they display an enormous amount of industry and they reveal what can be learned in studied of this sort.

Mr. OLIVER. Thank you, Mr. Hale.

Mr. MACK. Mr. Staggers.

Mr. STAGGERS. Mr. Oliver, I would like to commend you for the elaborate presentation. I think it is enlightening to me and should be to the rest of the committee members.

I have been listening to these presentations for a good many years. There are certain things in here that have enlightened me. I hope I can keep these and have them for reference. I am sorry I had to leave the room once or twice and did not hear all of your presentation. I would like to follow up your idea of the 5-year protection and just a little bit more about what Mr. Hale said, but I do not believe time will permit.

Again I commend you for your presentation.

Mr. OLIVER. Thank you, sir.

Mr. MACK. Mr. Heselton.

Mr. HESELTON. Mr. Oliver, as to one portion of your statement I would like to have a little bit more information. On page 6 you refer to the fact there is only 1 year when carriers hired fewer than 150 thousand new employees while older experienced workers were unemployed, available and drawing unemployment compensation.