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Another important item is that of added cost, and we believe that the accounting cost under this bill would be many, many times the cost incurred or to be incurred in the operation of State schemes.

At this time, Mr. Chairman, I would like to introduce into the record and furnish to you copies of a statement which I have recently prepared, indicating the analysis of benefits awarded by certain States in which our railroad operates, as compared with the benefits that would be provided under this bill.

Senator SCHWARTZ (presiding). It may go into the record. (The document referred to is as follows:)

Illinois Central System Analysis of benefits awarded to former employees in the States of Louisiana, Mississippi, Tennessee, Indiana, and Minnesota, and the amount of the benefits which would have been awarded these individuals under the provisions of the proposed bill based on the latest figures obtainable

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Mr. LAWLER. In the first column there is shown the amount earned in the base year, which is equivalent or conforms to the scale of earnings provided in this bill.

In the second column there is shown the number of individuals who have been awarded benefits in the five States named in the heading of this exhibit.

In the third column is shown State benefits awarded, which means the amounts which have been certified by the States as unemployment benefits to which these employees are entitled on the basis of their base period earnings. Now, just what part of these benefits have been paid, I do not know. The State benefits were started only in the early part of this year, and one State, Indiana, has only very recently started the payment of benefits.

In the fourth column is shown the benefits that would be payable to these individuals under the proposed bill.

In the fifth column there is shown the percent of proposed benefits to the State benefits.

For the lower-rated employees, or those of less compensation, who have only had incidental employment, the present bill provides benefits more than five times the benefits provided by the States.

This statement does not purport to show all the claims that have been filed with the States. These are just the claims that have been reported by the States to us. There may be many other claims pending adjudication by the state boards and there may be a large number of others that have been declined because the claimants did not qualify under the State laws, although they might qualify under this bill.

Senator MINTON. What is the significance of this exhibit? Does it show, in your opinion, that the set-up of this bill would not furnish adequate revenue to meet the requirements?

Mr. LAWLER. The general purpose, Senator, is to show that the benefits provided in this bill are far more liberal than the benefits provided in the State laws.

Senator SCHWARTZ. Is it your thought that these benefits are too high or that the State benefits are too low?

Mr. LAWLER. Well, if these benefits could be supported by the present tax rates, then certainly the State benefits would be too low. On the other hand, if the State benefits are reasonably fixed for the contribution, then these benefits are far too high to be supported by a similar tax, and we believe that to be true. From the best information that we can get, we feel that the benefits provided in this bill will equal something like twice the benefits provided by the States. Just over this short period

Senator SCHWARTZ (interposing). Your schedule shows a total increase of 147.76 percent?

Mr. LAWLER. Yes, it does; but there is one thing that brings that down materially, and that is the large number of employees who become separated from the service, who would obtain the maximum benefits by the States and by this bill, and that may not be fully represented in this table, and I do not think it is, of the situation as it will eventually level off to be.

As I said before, these States have just begun paying benefits and there doubtless is a large number of employees who have not yet learned of their rights or opportunities under the State laws. However, people are quick to learn, and doubtless, before the end of the year, additional claims will be filed for those who may be entitled to them and have not awakened to their opportunities.

Senator SCHWARTZ. You have no records as to the percentage of applications filed that were rejected, have you?

Mr. LAWLER. I have not, Mr. Chairman. I simply introduced this exhibit to show, as clearly as possible, what is happening now in the States that have just begun paying benefits, and, of course, we believe that as time goes on the payment of benefits will mount. No doubt there is a very large number of unadjusted claims now in the hands of the various States.

Finally, may I say, Mr. Chairman, that the railroad industry has a definite relationship to the objectives of local governments of the States in which they operate. Until such time as the present State systems have had a fair and reasonable trial and the State administrators have had an opportunity to simplify and unify their procedure, we submit that no attempt should be made to disrupt the orderly procedure of their experiment.

Mr. Chairman, I thank you for your indulgence.

Senator SCHWARTZ. We were very glad to hear you.

Senator MINTON. Assuming that this bill as set up would be adequate in its contributions to meet these requirements and would not require any additional outlay of money by railroads, would you not think that it would be better for your system to operate under one system, rather than under five or six?

Mr. LAWLER. If that were true with respect to every phase of it, I would say "Yes," Senator, but even though the rate of contribution

should be sufficient to support the benefits, still the vast expenditures that would be incurred by the railroads in carrying out the mechanics of this bill would be far in excess of what is now required in complying with State regulations.

(At this point Senator Wheeler, chairman of the committee, entered the hearing room.)

Senator MINTON. Why would the mechanics of complying with this bill be greater than the mechanics of complying with five or six State bills?

Mr. LAWLER. As a matter of fact, Senator, we now merely make

Senator MINTON (interposing). The chairman suggests that there are 48 States that require reports, and conceivably you may have to comply with more than just the States that you pass through.

Mr. LAWLER. The expense of registration of employees is an uncertainty, wholly dependent upon what the Railroad Retirement Board may prescribe, that might involve many times more expense than is now incurred. At the present time our reports to States, so far as wage statistics are concerned, are generally merely copies of reports made to the Railroad Retirement Board-carbon copies, if you pleaseand the elimination of those reports to States would mean practically nothing in our expenses.

On the other hand, this bill provides that the Board may require railroads to furnish employees statements of their monthly earnings as reported to the Board. Now, if we had to make even that statement each month or each quarter, the expense of making and mailing the statements out to the individual employees would probably exceed the cost that is now incurred in making all the reports to States, and there is a problem of recording time not worked in comparison with the time actually worked, and, incidentally, recording the cause for absence, so that it may be determined whether the cause of the absence qualifies the employee for benefits or disqualifies him from receiving them.

The CHAIRMAN. Do you not have to do that now?

Mr. LAWLER. We do not. It would all depend upon the regulations issued by the Railroad Retirement Board, and from about one-third of a century of experience with railroad accounts and statistics, the probabilities that are inherent in this bill, in my judgment, will cost the railroads a far greater sum than the amount of any benefits that would accrue to them under the bill.

The CHAIRMAN. Have you finished your statement?

Mr. LAWLER. Yes, Senator.

The CHAIRMAN. We will hear next from Mr. Ettenger.

STATEMENT OF R. L. ETTENGER, JR., ASSISTANT TO VICE PRESIDENT, ASSOCIATION OF AMERICAN RAILROADS

Mr. ETTENGER. My name is R. L. Ettenger, Jr. I am assistant to the vice president of the Association of American Railroads, who has charge of the finance, accounting, taxation, and valuation department. I have been in railroad accounting work since 1914, and since the first of these State unemployment-compensation acts one of my assignments has been to attempt to bring the procedure of recording and accounting in line with as simple and as practicable a method as possible.

The proponents of S. 3772, a bill to establish an unemploymentinsurance system for railroad employees, have stressed, among other things, their claim that substantial savings will accrue to both railroads and State governments through administration of the proposed system by the Railroad Retirement Board, the agency which is now administering the Railroad Retirement Acts of 1935 and 1937. The proponents say that railroads would be relieved of the multiplicity of reports now required by State unemployment-compensation agencies and that this relief would save them from three to five millions of dollars per year.

All employers have been concerned about the voluminous records and statements required by the several State unemploymentcompensation acts and the Federal retirement acts, particularly railroads, which were already seriously burdened by the reporting requirements of regulatory authorities. Therefore, savings in these nonproductive fields are constantly being sought and the proposed bill has been examined carefully to determine what it may reasonably be expected to produce. The conclusions reached by this examination are that there would be no savings in either accounting or administrative expense if the proposed bill is enacted into law. On the contrary, it appears likely that such costs will be greater under the proposed separate system than under the present Federal-State system. I would like to explain briefly the reasons for our conclusions. Ever since the passage of the Social Security Act railroads have actively cooperated with the administrative authorities in the development of a procedure as uniform and as simple as practicable, having in mind the purposes of the acts. Committees of railroad personnel were organized in each State to represent the railroads before the State agencies. The chairmen of the State accounting committees were constituted a general or coordinating committee to promote uniformity. Many conferences have been had with the technicians of the Social Security Board and with the State agencies to work out the problems caused by this new venture.

The State agencies have a national association known as the Interstate Conference of Unemployment Compensation Agencies. Railroad representatives have appeared before this conference, always with the same thought—that is, to promote uniformity and simplicity in the administrative procedure.

At the last meeting of the conference in October 1937, a special interim committee was appointed to confer with the railroad committee on matters of mutual interest. A joint 3-day session was held in December 1937, at which time the interim committee agreed with many of the suggestions offered by the railroads and recommended that all State agencies adopt them so far as practicable. This realization of a mutuality of interest between the administrative agencies and employers has developed a generally cooperative attitude. The CHAIRMAN. What has that got to do with this bill?

Mr. ETTENGER. I hope to come to that in just a few moments. The CHAIRMAN. Well, come to it, if you will. What you are trying to say is that you have worked out some kind of scheme with the State agencies at the present time?

Mr. ETTENGER. Yes, exactly; and I would like to show you that scheme.

The CHAIRMAN. Why do you not put into the record what the difference is going to be in cost?

Mr. ETTENGER. I brought along a copy of the statement. It is made in one operation from a punch card, and railroads have about 70 percent of all employees under the punch-card machines. The railroads have been very quick to adopt the best methods of making these reports. That comes from having had to make for many years statistical statements in detail.

We take our punch card

The CHAIRMAN (interposing). I am not interested in the details of that punch card. What I want to know is this: Can you tell us how this bill is going to change that? I assume that you have some kind of system worked out, and I think we all assume that.

Mr. ETTENGER. We can start out with the premise that the extra cost in connection with the State work is minor.

The CHAIRMAN. All right. You have covered that.

Senator MINTON. What would prevent you from having a set-up with the Retirement Board similar to what you have with the States? Mr. ETTENGER. We would have an exactly similar set-up, but when we would have got through with it we would not have saved anything. Senator MINTON. Would you have increased your cost?

Mr. ETTENGER. Not in making the report of wages. There would be no increase in that at all.

At the joint meetings an understanding of the problems of each interest is obtained through informal discussions across the table. For example, the basic requirement for administering any unemployment compensation system is a statement of the earnings of covered employees. This statement is the most voluminous and consequently the most burdensome report required of employers. Generally speaking, wages are reported to the States either on what is known as a list form, or a slip form. The list form is one upon which 30 or more names can be entered one under another. The slip form is, as its name indicates, a separate statement for each employee.

Now, in addition to showing each employee's earnings, employers in some cases were required to compute an arbitrary full-time weekly wage and indicate dates of entry into or separation from service occurring during the covered period.

In recognition of the fact that railroads are required to report earnings of individual employees to the Railroad Retirement Board for the purposes of the Railroad Retirement Act of 1937 and, further, that they have at all times complete records of employment, the interim committee recommended that States requiring current quarterly earnings data adopt for railroads a list form of report which may be coordinated with that required by the Railroad Retirement Board insofar as the State consistently could do so, having in mind its accounting set-up; that full-time weekly wages should be based on earnings in the highest quarter where the State law follows substantially the provisions of the draft bill; that date of entry into service be not required; and that date of separation from service be required only when necessary to compute the employer's merit-rating status. These recommendations are being actively progressed with the State agencies and have been adopted in many cases. The Social Security Board has taken the position that the convenience of the employer in the preparation of reports should be given every consideration by the State agencies. With this background we have reason to hope that the simplified procedure will become the general rule within a reasonable period.

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