think on the whole the administrative cost in Ohio indicates, they have done a good job.

Mr. SEARLE. Thank you.

Mr. ENGEL. In other words, some of the State administrative expenses are exceptionally high. I recall this, and I think you will find the committee felt that cuts should be made among the States whose administrative expenses were exceptionally high. And when we step over here and take States like Pennsylvania and Ohio with a cost of 5.9 percent in Ohio and 7.5 in Pennsylvania, States with populations about the same, where the industry is about the same, and the amount paid would be about the same, that the ratio ought not to be that far apart. Here is Ohio with a low cost.

You see the point that I am interested in.

Mr. CROMWELL. The number covered, as indicated might have something to do with the difference in Ohio, which covers employers ofMr. SEARLE. Three or more.

Mr. CROMWELL. Pennsylvania covers employees of one or more; does it not?

Mr. ENGEL. Yes.

Mr. CROMWELL. Contributions from the very small employers require additional cost.

Mr. SEARLE. Those figures would not be the proper basis of comparison for the purpose of efficient administration.

Mr. ENGEL. Michigan covers 8, and the administrative expenditures represents 6.1 as compared with Ohio with 5.9, and Georgia, 11.4. Mr. HUIET. May I respond to the reference to Georgia?

Mr. ENGEL. Yes.

Mr. HUIET. You must remember that Georgia is the largest State east of the Mississippi and we have a large territory to cover. We will have a man over here today going out to collect contributions in Macon; he will go from there to Atlanta, and maybe the next trip might be Brunswick, which is approximately 300 miles away. Mr. ENGEL. Texas has 10.8.

Mr. HUIET. That increases the cost.

Mr. SEARLE. I may point out also that the State of Michigan has about 17,000 employers and possibly the first 50 employers pay 80 percent of the tax.

There is less work in processing the Chrysler Motor Co.'s contribution, so far as collection is concerned, than there is in processing a little restaurant down in some little country town that has 5 employees or 8 employees.

And we are in the same position in Ohio, Mr. Engel. We have 200 employers in the State that pay 75 percent, approximately, of the taxes collected.

Mr. ENGEL. Yet your overhead was 5.9 in Ohio and 6.1 in Michigan. You take care of how many?

Mr. SEARLE. Three or more.

Mr. ENGEL. And Michigan, eight or more.

Mr. SEARLE. Yes.

Mr. ENGEL. And 200 employers in your State and 59 pay the bulk of the taxes. But there is only a difference of 0.2 percent.

Mr. SEARLE. We have legislation now pending in the legislature in the State of Ohio which calls for the reduction from 3 to 1. Accord

ing to the best information we can get, the best statistics, that will bring in about 60,000 employers, the accounts of 60,000 employers, and the collection of tax from those 60,000 employers will require, to bring in about 90,000 workers, will cost several hundred thousand dollars, which will cost more than we will receive in additional taxes.

Mr. ENGEL. In other words, the amount of contributions made by the 90,000 who will be brought in will be absorbed by the cost of administering the fund?

Mr. SEARLE. That is right.

PROCESSING OF WAGE RECORDS

Mr. THOMAS. I wish somebody would refresh my recollection, Mr. Chairman. It was testified that you processed these cards three or four times a year. Why is that necessary?

Mr. CROMWELL. There are a number of States in the Union, such as Wisconsin, which give to the employers the job of maintaining records, and when individuals separate and become a claimant the employer furnishes detailed records of the wages; and there are other States in the Union that do not require the employers to do that work. Of course, employers that do that pay for this work, and many of the others do not see the need for paying additional labor.

Mr. THOMAS. What I want to get in the record is: You referred to the General Motors plant or the Ford plant.

Mr. CROMWELL. Yes.

Mr. THOMAS. The Willow Run plant that had 34,000 people, and you had to process the cards 4 times a year. That is what is not clear

to me.

Mr. CROMWELL. Under the law the basis of benefits is on wages the individual earns during the calendar quarter and you have got to get the records of the calendar quarter to arrive at the basis of things; and sometimes you have got to get them for more than one employer. Mr. THOMAS. Of course, as long as he is employed you would not have to process the records four times during the year.

Mr. CROMWELL. Oh, no.

Mr. THOMAS. That was not very clear in the record. You only process the cards during the quarter that he becomes employed.

Mr. SEARLE. You process the wage records every quarter, you process the wage records so that when he becomes unemployed you determine his benefits at the time he becomes unemployed. For instance, in Ohio we take the highest earnings, the earnings of the highest calendar quarter, and the benefits are paid on the last 4 or 5 preceding full weeks.

Mr. THOMAS. I appreciate that. There was a little conflict here. Mr. HARE. The point that Mr. Cromwell was making is that while he was employed his papers are processed only once every quarter, but when he becomes unemployed he must report back to the agency every week until he is employed, and somebody must be there to entertain

his claim.

Mr. CROMWELL. That is right.

Mr. THOMAS. Why is it necessary, at the time the man is not employed, to process the cards every quarter during the time he is employed?

Mr. CROMWELL. The employer pays the tax every 3 months and he furnishes a list of individual slips for every worker showing the amount of wages that he has earned, and those slips are listed and have to be assorted and filed and put away, so when the individual becomes unemployed we will know how much money he earned from each individual employer. For instance, if he has worked for Ford Motor we will know how much the Ford Co. paid him; if he works for Jones & Co., we have the same information.

Mr. THOMAS. In other words, it is necessary to keep a going set of books and to keep them up to date all the time regardless of whether he is employed or not?

Mr. CROMWELL. That is right.

Mr. THOMAS. I can certainly see that sometime during the next fiscal year there probably is going to be a much greater work load; that you are going to have a greater work load in 1946 than you had in 1945.

Mr. CROMWELL. Mr. Chairman, I have completed my statement.

PROBEMS OF ADMINISTERING THE UNEMPLOYMENT COMPENSATION LAW

Mr. HUIET. Mr. Chairman, and gentlemen of the committee: As a member of the subcommittee on administrative grants, I have been asked to present a few facts in support of an employment security budget request for $32,000,000.

We appreciate very much this opportunity of presenting the viewpoint of the States who have the responsibility of administering the unemployment compensation law. Since we are right off the firing line we feel we are in a position to know about what is expected of us by both the employees who receive the benefits and the employers who pay the bill.

A State employment security agency is somewhat like a farm, or a grocery store, in that it can be operated in one of three ways, namely: 1. Barely exist.

2. A fair job.

3. A highly efficient organization.

It is needless to say that all interested persons, including the employers, employees, and this honorable Congress, not only expect efficient administration of the act, but demand it. I speak for myself as administrator for the State of Georgia, and for all other State administrators as well, when I sincerely state to you that it is my most earnest desire to operate the Georgia agency in such an efficient manner as to reflect credit not only to the law itself, but to every individual connected with its operation.

The Social Security Board submitted to the Bureau of the Budget a request for $32,000,000 for the fiscal year ending June 30, 1946. Originally the Board has been asked to prepare requests based on three suppositions:

1. That both wars would end previous to July 1, 1946.

2. That the European war would end previous to July 1, 1946. 3. That neither war would end previous to July 1, 1946.

The Bureau of the Budget finally selected the third proposition as the one to be submitted to the Congress. It approved the Social Security Board's request for $32,000,000 and such request was transmitted to the Congress in the President's Budget message in January.

RELATIONSHIP BETWEEN ADMINISTRATIVE COSTS AND UNEMPLOYMENT

Whether the $32,000,000 will be sufficient is very doubtful. At least we know it is a little more than 4 percent over what we had during the current fiscal year. So far as I can learn, all States have been handicapped by the current budget, and cannot operate on an efficiency standard equal to the June 1944 level.

Unfortunately, it is necessary that budgets of this kind be prepared and submitted far in advance of the period for which they provide. If there is no change from present conditions, the Georgia agency can and will operate in an efficient manner, provided we secure our share of the increase in the budget. However, in view of the present development of the war situation, I look for rapid changes in employment, with a corresponding increase in claims filed. Even with the war going full blast we have numerous periods of unemployment brought about by expiration of contracts, re-tooling for change of pattern, or other reasons. Judge Tarver of your committee is familiar with the temporary mass lay-off in the chenille industry when approximately 2,362 initial claims were filed in his district. Many of these claimants secured jobs before serving a compensable week, but every claim had to be processed just the same. This is only one of many similar cases all over the country. And I might state that this occurred in Brunswick and Savannah, Ga., at the shipyards. Cut-backs in the Brunswick shipyard in February resulted in the lay-off of 1,700 workers, and a similar number at Savannah. A temporary shut-down of one of the plants at Atlanta, while converting their machinery to the manufacture of different products, and they were war products, resulted in a temporary unemployment of about 1,300 workers during March. Such lay-offs directly affect the work of both local offices and the central office of the State agency. It is expected that sudden increases in the number of unemployed persons in various localities of the State may occur frequently throughout this year, even though the total number of workers gainfully employed continues at a high level. This is happening all over the country.

Every State agency is somewhat like a fire department in that it must be ready with trained workers to handle any emergency that may arise. We cannot depend upon volunteers to rush in and do the job. Unfortunately, there has been a feeling on the part of the public in general, that since there is a crying need for manpower there should be no claims. And, if no claims, why maintain an employment security organization.

I feel I have just explained the need for a well-trained claim organization. We, as administrators, are expected to secure and maintain a record of the earnings of all employees coming within the law, and that such records must be set up under the social security number assigned to the individual employee. Employers must be checked and audited for liability and proper reports. Collections of contributions must be made, properly audited and set up. Employer rates must be established in conformity with the employers merit rating law. Delinquent accounts must be collected by law if necessary. Lawsuits arise and must be prosecuted or defended. Highly trained field men must be available to all parts of a State. Statistics and information must be compiled for budgetary and other purposes. Publicity to educate the public must be spread to all parts of a State.

For example, during 1940, the year of the highest benefit payments, the Georgia agency processed about 450,000 wage items each calendar quarter, while the wage items processed during each quarter of 1944 totaled 700,000, an increase of more than 50 percent over 1940.

Not only has there been an increase in the number of wage records to be set up for employed persons during a period of full employment, but the function has also been added of freezing wage credits of persons who enter the military service. At the same time the size of the social security number file has increased considerably.

I could go on and on listing the work that must be done by a State agency in addition to the actual filing and paying claims. This is something the public must learn in order to appreciate the type of organization that a State agency must maintain in order to fulfill its obligations as administrator of the law.

I made the statement that the Georgia agency will operate during the next fiscal year in an efficient manner on its part of a $32,000,000 budget, provided there is no change from present conditions. No executive, worthy of the name, and regardless of his business, would be content to allow his business to go on from day to day without proper planning for the future. What a blessed thing it was that about 1940 we had an administrator at the head of this Nation with vision and forethought enough to start preparation for a war that many of our leaders said could not happen. I just wonder if we are going to be prepared to combat the depression that is surely certain to come with the economic adjustment following the end of our present war.

I know that a $32,000,000 budget is all you are asked to approve. But, as I already stated it was based on a 1944 work level. În view of the present war situation, I definitely feel that the work level during the next fiscal year will far exceed that of 1944. On that basis, I am of the opinion that the appropriation should be at least $35,000,000 instead of $32,000,000. Why do I say we should have at least $35,000,000? We were asked by the Social Security Board to prepare our budgets on our present needs or expected needs without either the European or Pacific war ending in 1946, and adding all estimates of the several States for the fiscal year beginning July 1, 1945, and ending June 30, 1946, total $35,000,000, although the Social Security Board asked for the approval by the Budget Commission of $32,000,000.

Mr. THOMAS. Would you yield for a question?

Mr. HUIET. Yes, sir.

Mr. THOMAS. I want to state that I think you are sound in your conclusion that your work load will be greater in the fiscal year 1946 than in 1945, and I hope it is, because I am hoping that the major part of the war will be over. But I am just wondering what brings you before this committee. Were you asked by the Social Security Board to make your presentation here?

Mr. HUIET. No, sir; they have never asked us to make any appearance here. The fact of the business is, I think, they more or less discourage it. They have never told me so, but they cannot present the facts as we find them in the individual States. They only present what they believe might be the operational needs of the States.