The Employment Secwity Pmgram in a . Changing Economic Situation

The Federal Advisory Council of the Bureau of Employment that, during the last 3 years, con- Security at its meeting this past September adopted resolu- gressional appropriations for the op- tions, given in full in the following pages, on the employment erational functions of the United and on insurance. The conference, States Employment Service and the which was the Council’s first since the Bureau’s transfer from Veterans Employment Service have the Social Security Administration to the Department of Labor, necessitated drastic curtailment of heard brief statements from the Secretary and the Under Secre- personnel of both services, with a tary of Labor, as well as from Arthur J. Altmeyer, Commissioner consequent drastic reduction in the for Social Security, and Robert C. Goodwin, Director of the counseling, job development, place- Bureau of Employment Security. A summary of Mr. Altmeyer’s ment, and other essential activities statement follows the recommendations. of the United States Employment Service and the Veterans Employment Service. HE Federal Advisory Council of ties of the Employment Service to It is absolutely essential that ade- the Bureau of Employment Se- date in providing leadership in com- quate appropriations be made by Con- T curity met in Washington on munity employment planning. gress for these purposes, if the promise September 14 and 15. 1949. The In addition, it recommends that set forth in the Servicemen’s Read- Council, established under the Wag- State and local “maximum employ- justment Act that “there shall be an ner-Peyser Act, has 35 members, who ment committees” be established to effective job counseling and employ- represent business, labor, veterans’ bring the entire resources of the com- ment placement service for vet- groups, and the general public. Since munity together to meet critical un- erans . . . so as to provide for them the adoption of the President’s Reor- employment situations where they the maximum of job opportunity in ganization Plan No. 2 of 1949. trans- exist. the Aeld of gainful employment” shall ferring the Bureau of Employment Business, labor, civic. veteran, and be effectuated. Security to the Department of Labor, welfare organizations should be called An equal opportunity for the gain- the Council has responsibility for ad- upon to cooperate fully in the work ful employment of veterans and dis- vising the Secretary of Labor and the of the committees. abled veterans-handicapped by Iess Bureau on all matters related to the The local employment offices should seniority and less job experience-can public employment service and unem- stimulate the establishment of these be afforded them only by an intensive ployment insurance. committees and perform planning, application of these operational func- It was the consensus of the Council staff, and informational services for tions, which, unfortunately, cannot be that the unemployment insurance them when they are established. adequately performed if it is im- payments to unemployed covered The Bureau of Employment Se- possible to hire adequate personnel workers during the past several curity should further this effort by because of inadequate appropriations. months have contributed to checking meeting with national representatives The Council recommends that the a possible and that, with of national organizations in Wash- Secretary of Labor, the Director of the other complementary measures, they ington and request their cooperation Bureau of Employment Security, and have helped to “firm up” the eco- in furthering this program through- the Chief of the Veterans Employ- nomic situation to a considerable ex- out their memberships. ment Service jointly request supple- tent. 2. Special problems of veterans dn a mental appropriation to restore The following resolutions were period of increased unemployment. personnel, previously released due to adopted by the Council, which will Careful attention is invited to the inadequate appropriations, so that the meet again in late November to take report of the Committee on Veterans United States Employment Service up items carried over from the Sep- Employment, as adopted by the Fed- and the Veterans Employment Serv- tember meeting and to consider eral Advisory Council September 17 ice will be able to fulfill the obliga- other important policy questions. and 18. 1948, all of the recommenda- tions set forth by Congress in the tions of which we specifically reafllrm. Servicemen’s Readjustment Act of The Council’s Resolutions A report on the progress made toward 1944. the attainment of each specific rec- 3. cojlection and use of labor ommendation should be made by the information. The Employment Service Bureau of Employment Security to The Council recommends that labor 1. Providing leadership in commu- the members of the Federal Advisory market information collected by the nity employment planning. Council at or prior to its next meeting. Employment Service include data The Council commends the activi- It is particularly distressing to note pertaining to employment opportuni-

Bulletin, October 1949 ties for youthful job seekers. This The Council nevertheless believes 2. Removal of exclusion of coverage has reference to facts on the supply it would be highly desirable that such of nonprofit organizations. and demand for workers in entry jobs additional personnel as might be re- At the present time, about 600,000 as well as occupations suitable for quired to further develop the job jobs are outside the protection of the college graduates. The importance of opening possibilities among smaller unemployment insurance program be- thisV kind of information lies in the establishments be made available cause of the present exclusion of non- fact that young people are likely to through increased congressional ap- proflt organizations from the Unem- be among the most disadvantaged propriations. ployment Tax Act. The original elements in the labor force in the Greater penetration by the EM- exclusion of this group was based years ahead and that many thousands ployment Service in the placement of upon the fear of government control, of G. 1.‘~ and others will be graduat- employables into the labor market is and anxiety lest its tax-exempt status ing from colleges and universities in deemed highly desirable, for the mu- might be jeopardized. There is gen- 1950, 1951, and 1952 in a job market tual convenience of employers and eral agreement today that w,orkers difficult for professional workers.- potential employees. employed by these organizations are The Committee recommends the 5. Clarifying policies concerning discriminated against since they do restoration of basic industry informa- the employment of Puerto Rican and not receive the same protection as tion, including current supplements. foreign agricultural labor. privately employed workers in the Such information would furnish a Your Employment Service Commit- same occupations with whom they useful resource in counseling and tee feels that insufficient information. share the same risk of unemployment, placement. background, and time precluded a and that lifting this exemption need The Committee recommends that policy recommendation on this item not affect the special legal status of the Bureau of Employment Security and recommends that this subject be religious and other nonprofit organi- emphasize to the State agencies the put on the agenda for consideration at zations. This has been found to be importance of wide dissemination of the next meeting of the Council. the case in Hawaii, where nonprofit labor market information. The BU- organizations are covered, and in the reau of Employment Security should Unemployment Insurance six other States where some parts of also release information regularly on this group are covered. The Senate labor market conditions from a na- 1. Extension of coverage to Small Advisory Council recommended cov- tional point of view and should ex- employers. erage of nonprofit organizations in its pand its mailing lists to national While the original social security report to the Senate Finance Commit- organizations concerned with public legislation excluded from Protection tee in the fall of 1948. affairs and to industry and employees of Arms with fewer than In the light of these considerations, journals. eight workers, primarily because of the Council unanimously recommends Local of&es in collecting and an- the administrative diflticulties of ob- extension of the Unemployment Tax alyzing labor market information taining reports and auditing records Act to all employees of nonprofit or- should take special account of em- of such firms, there is general agree- ganizations except to ministers and ployment, particularly if it is reflected ment today that these considerations members of religious orders and to in short hours of work, and thus bring no longer apply. About 3.5 million part-time workers who earn less than about a more comprehensive interpre- workers, in an average week, would $45 per quarter, or whatever figure tation of the extent of total and par- be added to the coverage of the pro- may be approved for old-age and sur- tial unemployment in the area. gram if this restriction was removed; vivors insurance. 4. Establishing a systematic ap- this understates the number of work- 3. base. proach to employer relations and job ers who would benefit by the change, The Council recommends that the development. Emphasis on the job since many workers move from small wage base for unemployment taxes be development in the “major market.” to large firms and back again during brought to the same point that the The policy developed by the Bureau the course of a year. The council wage base may be brought to in old- of Employment Security, whereby lo- notes that the experience of the 17 age and survivors insurance and that cal ofllce personnel regularly visit em- States which cover employers with one the uniform base be substantially ployer establishments representing worker has demonstrated the absence raised. the greatest job opening potentials, of serious administrative difilculties, 4. Studies on benefit financing. to the extent made possible by lim- as well as the removal of inequities The Council endorses and urges the ited appropriations and personnel, is which are hard to explain to the pub- Bureau of Employment Security to commendable. lic. Coverage of one or more em- prosecute vigorously studies on the Recognizing the fact that the large ployees will establish the same cover- Anancial soundness of the several majority of small employers have age for unemployment insurance as State unemployment insurance sys- comparatively few potential job open- for old-age and survivors insurance. tems; on methods of revising the pres- ings, the use of such devices as the After careful consideration of these ent flnancing scheme in order to avoid telephone, radio broadcasts, and of factors, the Council unanimously the existing factors that impose high direct mail solicitation, accompanied recommends the extension of the Un- tax rates during depressions and low by labor market information bulletins, employment Tax Act to employers of tax rates during prosperity; that such should continue to be utilized. one or more employees. studies explore the extent to which

22 Social Security covered workers exhaust their beneflts and that, when necessary, Congress ment insurance. Eight million could before their unemployment has be requested to appropriate additional be brought into the system overnight ended: the extent to which their un- funds for administrative purposes without causing the slightest upset to employment continues after benefits from the general funds of the Treas- State or Federal administration. are *exhausted; and related issues ury to supplement the proceeds of the These would include employees of designed to throw light on the extent tax. small firms and of nonprofit organi- to which unemployment insurance is zations, Federal employees, and work- meeting the objectives of providing Unemployment Insurance ers in industrialized . The benefits to involuntarily unemployed Trends and Developing change in coverage, from Arms with people. Problems eight or more employees to those with 5. Administrative fbzancing. one or more, could be made without The effective operation of the un- Mr. Altmeyer. in his talk before the additional State legislation because employment insurance program de- Advisory Council, pointed to the fact most States have an automatic clause pends in large part on the adequacy of that as yet the unemployment insur- which calls for such change if it is congressional appropriations for ad- ance program had not faced a real test made in the Federal law; other States ministration. The program has had of its efllcacy in a major depression. permit voluntary coverage. To in- a long record of inadequate appropri- The Social Security Act was passed in clude domestic and agricultural labor ations. During the last 14 years it 1935, but unemployment insurance would present some, but not insupera- has been necessary to request 12 de- payments were not available until the ble, difliculties. ficiency appropriations. Adequate depression was on its way out, when Benefit rates.-Under various for- funds should be provided in advance persons who were unemployed had, mulas, benefit payments are meeting, of the fiscal year in order that both for the most part, not developed bene- on the average, about one-third of the Bureau of Employment Security At rights. weekly earnings, far less than the pro- and the State agencies may plan their Then came the and full em- portion met by workmen’s compensa- activities for a full Ascal year. These ployment, followed by the reconver- tion. The percentages vary widely funds should be adequate to assure sion period when unemployment was from State to State, indicating that full and prompt payment of benefits: far below the level some persons had there is no consistent relationship be- the maintenance of procedures for predicted. The recent rise in unem- tween the benefit rate and wage lev- preventing abuses of the program and ployment has been met without en- els. Eleven States are now providing for assuring public understanding of dangering the State reserves, even dependents’ allowances. Sixty per- the program. The Bureau of Employ- though in June 1949 the reserves had cent of the unemployed workers re- ment Security should be staffed to dropped from the preceding year’s ceiving benefits are drawing the maxi- provide leadership to the States in all totals in a number of States. There mum, which means that we are in fact these areas and to supply current in- have been few criticisms of the pro- approaching a flat weekly rate. formation on the effect of the existing gram in the press recently; in fact, Thirty percent of these workers are system on the stabilization of employ- the part unemployment insurance exhausting their benefits before re- ment, on providing for wage loss due payments have played in bolstering employment. In some States the per- to involuntary unemployment, and on local purchasing power has been centage runs as high as 50 percent. sound fiscal policies. termed “constructive.” Currently. Harsh disqualifications.-While we The Council therefore recommends employment is rising nationally. all agree that benefits should be paid that the Federal authorities take all though it is still spotty in some only to workers who are involuntarily actions necessary to provide funds for places and unemployment may again unemployed, the harsh disqualiflca- both State and Federal administration increase. tions imposed by some States vitiate adequate for proper administration The adequacy of the present pro- that principle. In other words, “vol- and for the development of the unem- gram for the worker and the country untary quit not attributable to the ployment insurance program. should be judged from the Point of employer” means that the worker in 6. Federal proceeds of Federal un- view of the proportion of wage loss such States must prove it is the em- employment tax. it is compensating. Mr. Altmeyer ployer’s fault if he leaves his job-a The Council recommends that the cited the case of Muskegon, Michigan, requirement inconsistent with the Federal proceeds of the Federal un- where in the Arst 5 months of 1949 principle of the workmen’s compen- employment tax be automatically ap- there was a wage loss of some $12 mil- sation programs which were estab- propriated to the Federal unemploy- lion and unemployment insurance lished to eliminate the necessity of ment account for Federal and State beneflt payments of $2.4 million- proving the employer’s fault in case administrative expenses and for rein- roughly 20 percent of the wage loss. of injury to a workman on the job; surance purposes; and for continua- Many unemployed workers received inconsistent with the principle of our tion of the provision for a contingency nothing because their earnings were free enterprise system because it dis- fund to supplement basic grants to insufficient to give them protection or qualifies a worker if he leaves his job the States for administrative pur- they had previously. exhausted their to take a better one. Further, when poses. It further recommends that benefit rights. a worker is disqualified because he re- the contingency fund be made suffl- Coverage.-At present 7 out of 10 fuses to take any job offered, even ciently large to cover probable needs; workers are covered under unemploy- though it is at lower , the

Bulletin, October 1949 23 worker loses purchasing power and and on State agencies since so few to a “hand-out” system of social secu- the employer loses the worker’s skills. wage records are ever referred to. rity. Lastly, a worker must now prove (in These could easily be obtained on re- Grants-in-aid-In advocating a the majority of States) that he is quest when claims are actually filed. Federal grants-in-aid system for op- “actively seeking work,” which is all Significant in administration eration of unemployment insurance, right as a general principle but unfair would be effected if quarterly wage re- Mr. Altmeyer read the summary of and unrealistic in its application in porting were to be abolished by all the a report made in April 1935 by the individual cases. States. Business Advisory Council for the De- Admintitrative p r o b 1e m S.-The Financing benefits.-Uneml;loy- partment of Commerce, which pointed States have no reason to be proud of ment insurance reserves are adequate up some of the advantages of such a their postwar record for prompt pay- in every State for at least the next 2 system. The summary of the report ment of claims. In States with bi- years even if present State laws are follows: weekly payments only 46 percent of liberalized. the first payments during the Ascal Federal tax rate.-Admittedly the “It is believed that the grant-in-aid year 1949 were made within 2 weeks. original 3-percent tax on employers type of Iegislation would have advan- Only 35 percent of interstate claims was too high. Therefore, the law tages: In dealing on a Nation-wide were paid within 2 weeks. should allow State-wide rate reduc- basis with situations which cross and In the meantime, the cost of ad- tions if that rate is retained. transcend State boundaries; in estab- ministration is constantly rising. There are arguments against lOO- lishing and maintaining throughout States are spending more, relatively percent Federal grants for State ad- this country the essential minimum and in dollar amounts, than ever be- ministration, among them the fact standards; in removing all obstacles fore. Greater promptness in pay- that State governments are not so im- to bring the reserve funds into Federal ment could be achieved by decentral- mediately concerned with an agency’s control; in that it would run less risk izing claims determination and pay- administrative efliciency if State of unconstitutionality compared with ments to local of&es. Most States funds are not appropriated to help the Wagner-Lewis type of legislation are tightly centralized in both re- meet the cost of operations. when the latter is equally equipped spects. At present only 28 States Relation to other programs--b&. with provisions of minimum standards have decentraIized the adjudicating Altmeyer brought out that unemploy- for the States; in that Federal collec- of claims; in four of these States- ment insurance must be considered in tion and Federal control of funds California, Michigan, Minnesota, and its relation to temporary and perma- through the power to allow or disallow Rhode Island-benefits are actually nent disability insurance, and also to grants, would be an important ele- paid in the local office. public assistance and possible work ment in national control; and in that Pay-roll rePort~nng.--Quarterly pay- programs. He said he favored a com- it would lend itself more readily to roll rePOrtirK required now in all but prehensive contributory social insur- developing a national system should five States, is a burden on employers ance program because he was opposed that become advisable.”

drew augmented benefits for depend- Notes and Brief Rep0rt.r ents : 11.2 percent for only one dependent, 8.2 percent for two de- Dependents’ Allow- data for the five older systems * of this pendents, 4.5 percent for three, 3.3 type during the first quarter of 1949 percent for four, and 0.4 percent for ances in Unemploy- might well be examined for the five or more dependents. ment Insurance answers to such pertinent questions Of the male beneficiaries, 38.4 per- as: How many beneficiaries receive cent had dependents and received Amendments to six State tmem- allowances for dependents? What dependents’ allowances; for female ployment insurance laws during 1949 type of dependents do they have? beneficiaries, this group represented brought to total number of 11 the What proportion receive the maxi- only 5.1 percent. Most of the men States with provisions for dependents’ mum Payment? How much more do who received augmented payments allowances. The new provisions en- received them for more than one de- acted in Alaska, Arizona, Maryland, they receive than other beneficiaries? How much does it cost? pendent. Of the women receiving un- North Dakota, and Ohio had all be- empIoyment insurance beneflts, more come effective by September; Wyom- Of the 217,749 new beneficiaries of unemployment insurance in these Ave than half of the 5.1 percent with aug- ing’s provision is to be effective Janu- mented payments received them for ary 1, 1950. States during January-March 1949. 72.3 percent had no dependents on one dependent only. Opey%&ms, January-March whose behalf they could draw pay- The smallest percentage of bene- ments (table 11. Only 27.7 percent Aciaries having dependents’ allow- ances was in the District of Columbia With six additional States paying I Ctxmectlcut, the Dlstrlct of Columbia, (10 percent), the highest in Michigan dependents’ allowances, operating MaSSSChUSt?tts.Mlchlgan, and Nevada. (36 percent). One factor in the large

24 SocialfSecwity