The CHAIRMAN. I think we can go on, in that case, put Mr. Latimer down for Tuesday, and if there is no objection, I will make that announcement, and we will endeavor to get through both hearings next Tuesday.

We will adjourn on that plan, to go ahead Tuesday morning and Wednesday we expect to go ahead with both hearings and endeavor to complete next week.

(At 11:55 a. m. an adjournment was taken until 10 a. m., Tuesday, May 31, 1938.)

UNEMPLOYMENT INSURANCE FOR RAILROAD

EMPLOYEES

TUESDAY, MAY 31, 1938

HOUSE OF REPRESENTATIVES,
SUBCOMMITTEE OF THE

COMMITTEE ON INTERSTATE AND FOREIGN COMMERCE,

Washington, D. C.

The subcommittee met at 10 a. m., Hon. Robert Crosser (chairman) presiding.

Mr. CROSSER. The committee will be in order.

This is a continuation of the hearings on unemployment insurance for railroad employees.

Dr. Bacus, had you finished?

Mr. BACUS. I had finished, Mr. Chairman, but at this time I should like to present on behalf of the Railway Labor Executives' Association, an expert witness in support of this proposed railroad unemployment-insurance legislation. This witness is Prof. J. Douglas Brown, director of the industrial relations section of Princeton University.

Professor Brown has served on the advisory committee to the Federal Coordinator of Transportation and on the President's Committee on Economic Security; also with the New Jersey Social Security Commission. He played a very large part in drafting the New Jersey unemployment compensation law.

Professor Brown is now chairman of the Social Security Board's advisory council.

May I present Mr. Brown?

Mr. CROSSER. We shall be very glad to hear from Professor Brown at this time.

OF

STATEMENT OF PROF. J. DOUGLAS BROWN, PROFESSOR ECONOMICS AND DIRECTOR OF THE INDUSTRIAL RELATIONS SECTION, PRINCETON UNIVERSITY, PRINCETON, N. J.

Mr. BROWN. Mr. Chairman and gentlemen of the committee, my full name is J. Douglas Brown. I am professor of economics and director of the industrial relations section of Princeton University. I happen to be at this time chairman of the Advisory Council on Social Security, but I am appearing as an individual and not in any official connection with that capacity.

In citing my experience, I might start by saying that I was a member of President Hoover's Emergency Committee for Employment in 1930-31. Following that, I was a member of the Advisory Com

mittee on Employment to Mr. Eastman, the Federal Coordinator of Transportation. Then I became a staff consultant on the Committee on Economic Security, and the technical adviser to the New Jersey Social Security Commission which drafted the New Jersey Unemployment Insurance Act.

I might say that my interest in and study of unemployment insurance covering railroads started with my work with the Advisory Committee on Employment to the Federal Coordinator of Transportation. That committee during a period of some 6 months studied intensively the problems of old-age protection, unemployment protection, dismissal compensation, and various other matters having to do with the protection of railroad employees.

As of that time I became convinced, and my colleagues on that committee were convinced, that there was need for a separate employment service covering railway employees and, with that, an unemployment-insurance program covering the employees of the railroads. Since that time, further study has convinced me that that would be a very advantageous program.

In the first place, railway employees have, for a long period of time, been subject to special legislation, as being employed in an industry affected with the public interest. Not only that, they are employed in an industry which is Nation-wide and which is interwoven within itself, in an intimate fashion that warrants special consideration in connection with the various protective devices covering those employees. There is, for example, far more intertransfer of railway employees across State boundaries than would be the case in other national industries. The industrial relations program of the industry is very definitely on a national basis, so that wages, hours, working conditions, and rules, and the programs of management and industrial relations are definitely on an interstate-national basis, rather than State basis.

In my study of the New Jersey unemployment insurance program, I began to see more intimately the problems of covering railway employees on a State basis. You have in the case of a single State like New Jersey, many national railroads crossing that State, whose employees are transferred from place to place both within that State and without that State; the problems of the railroads crossing that State are essentially national problems. The policies and arrangements of the industry, as I have said, are definitely, and have been for many years, on a national basis rather than, as with a smaller, local industry, on a community or State basis.

I might call your attention to the fact that the Federal Coordinator, following the recommendations of this advisory committee, of which I was a member, recommended unemployment insurance for railroad workers on a national basis as early as 1934-35.

While I was a member of the staff of the Committee on Economic Security, the question arose as to whether there should be any exemptions as a matter of policy, from the Federal-State program of unemployment insurance or whether the committee should recommend that all industries come within the web and woof of this FederalState arrangement for unemployment insurance, which is now in existence. At that time, while the committee on economic security expressed itself as against multitudinous exceptions, it felt very definitely that the exception of a railroad unemployment insurance act was sound, for reasons such as those I have given and many others.

Now, as far as the bill itself, I feel very definitely that accepting the principle that there should be a separate railroad unemployment insurance bill, the main provisions of this bill have very definite advantages. Those of us working with State administrations of unemployment insurance have been definitely convinced that simplicity is a very important principle to seek at this time. Many of our State unemployment insurance laws are highly complex and, now that they are in actual operations as to the payment of benefits in many States, we are finding definitely that there must be prompt simplification.

In this bill there is a very important and long step taken toward such simplification. In the first place, the qualification provision of $150 is much more simple than the various qualification provisions in the several States. The base-year arrangement is one toward which the best thinking in State unemployment insurance is tending. We have moved toward that in New Jersey, and I would certainly say, if I were working on a New Jersey bill again, I would come all the way, as this bill does.

In the case of uniform duration there is a very important administrative advantage-uniform duration of 80 days or 5 months is far simpler than the various degrees of duration which have to be administered in the State laws.

A very important advantage, it seems to me, is the coordination of the railroad unemployment administration under this bill with the railroad retirement administration.

In my work on the old-age insurance part of the Social Security Act, I felt many, many times, that it would be of great advantage if, in the administration of the Federal old-age insurance, there could be vision of records and a handling of accounts in some such way that the State unemployment insurance administrations would not have to duplicate the multiform records set up in the Federal Old-Age Insurance Records office. In this bill that goal is attained by tying together the administration of the unemployment insurance for the railroads with the administration of the retirement program, because a large proportion, in fact practically all of the same figures are needed for one administration as are needed for the other.

In explaining briefly some of the other points of policy in the bill, as I see them, I feel that the method of handling the duration of benefits is sound. It has, I believe, received considerable study. Also, the maximum duration of 5 months is satisfactory. In the case of any such bill we are experimenting to a certain extent to attain as large a degree of protection as possible. Five months is not as good, probably, as something more. But given a combination of all items of cost, and the degree of development at this time, 5 months seems to be a satisfactory, reasonable duration.

As far as the question of merit rating is concerned, I might cite an experience of my own. I was in England two summers ago and discussed merit rating with Sir William Beveridge, who is the chairman of the Statutory Commission on Unemployment Insurance in Great Britain and in a sense is the father of unemployment insurance throughout the world. He said that he felt that merit rating was highly interesting and, you might say, a "noble experiment," but he was quite sure that it would fail; that it was an interesting sort of laboratory exercise, but that his own experience and that of the British

administrators was that it was doomed to failure for two reasons: On account of the great administrative complexity involved and, on the other hand, because of the fact that it was not essentially "merit" rating.

In other words, the word "merit" is a misnomer, in that the person who receives the reduction in many cases does not possess merit, but happens to be fortunately placed in that his particular enterprise is of its very nature more stable, whereas another enterprise, less stable, although much better managed, does not receive the advantage of merit rating.

In the case of the New Jersy act, I opposed merit rating but there was very definite pressure for it. There was also definite pressure against pooling. As the lesser of two evils, with pooling highly important, I was willing to agree that merit rating was something which might be tried but, to my mind, was definitely certain to lead to great complexity and consequent failure, in order that the pooled fund principle be accepted by certain opponents.

It seems to me that the bill, as drafted, does afford definitely more adequate and uniform protection to railroad workers than would the provisions of the 48 or more State laws which now cover them. In the case of State administrations, no matter what degree of coordination may develop, they will still be agencies having their own funds to protect and their own rules to administer. There are bound to be the 48 legislatures and 48 administrations developing definitely different rules and regulations.

Therefore where a railroad employee develops credit in part under one State and in part under another State, there will be administrative complexities in matching together those credits so as to insure him his full benefit, if the program is left under State administration. Even though there may be interstate agreements where one State acts as an agent for another State so that when the employee has transferred from say, New Jersey to Ohio, the Ohio administration will accept his claim against the New Jersey fund and forward it to the New Jersey administration, there would still remain the problem that a man may have developed credits for part of the period, insufficient for eligibility in New Jersey and for part of the period in Ohio, and it would be highly difficult if not impossible for States all over the country to begin matching those partial credits together finally to pay the benefit in some, say, third State. Thus, for workers who are transferred from State to State, who are part of a national web of transportation, it is advantageous to have their benefits developed in a single national system.

I feel, from the point of view of the States, that there will be an advantage in simplification of their problems. At this time the States are definitely not following their own legislation in carefully and fully enforcing the rules as to where railroad employees are to be allocated or localized. If the States follow through their own rules and regulations, it will lead them into a very complicated and burdensome type of administrative work, in checking continuously the question, in each individual case, as to whether, for example, each worker is properly under the New Jersey Act or the Pennsylvania Act, or under some other act. If this railroad unemployment-insurance bill is passed the States will have that part of their administrative task removed from them and placed in a national system.