citizen and employer, and as a member and representative of the board of directors of the Indiana State Chamber of Commerce. The membership of the State chamber includes approximately 5,000 businesses which employ some 80 percent of the nonagricultural workers of the State protected by unemployment compensation.

This organization of Indiana business people believes strongly-as I do personally that Reorganization Plan No. 2 now under consideration by your committee should be rejected by the Congress. We hope your committee will recommend disapproval of the plan and that the United States House of Representatives will follow the committee's recommendation.

If you will permit a reference to personal experience in this connection, I would like to say that I have a deep interest in the problems of government and that I believe no man should permit himself to be too busy to participate in governmental affairs. Probably because of this interest, I had the privilege of serving for 4 years as a member of the Indiana State Senate, and for one session as chairman of its social security committee. This experience, which in its much smaller way was a counterpart of your own, means that I have a full and sympathetic appreciation of the position you gentlemen are in when you must make a decision on a problem of the nature of the one now before you.

However, one of the things that my contacts with the processes of Government taught me was that when the special advocate of any particular group or class of people is permitted to control legislation or the administration of a program affecting all people, thus violating the principle of checks and balances, then good government has been lost insofar as that particular legislation or program is concerned.

Yet, that is exactly what it is proposed should be done here. The unemployment compensation and employment service program would be turned over to the United States Labor Department, insofar as Federal administration is concerned. That Department is charged by law with the responsibility of being the special advocate of labor interests. In practice, it largely is the champion of organized labor interests only. I sincerely feel the proposed shift of Federal responsibility for employment security administration would have fatal consequences.

You may be assured that if the proposal were to shift the Bureau of Employment Security to the Department of Commerce, which is intended to promote the interests of business, I would consider it equally as bad as the current proposal. Yet such a transfer could be defended just as logically as the proposed transfer to the Department of Labor.

My contacts with social-security legislation, combined with the rigors of managing a small business, also have impressed upon me the vital importance in the domestic life of the country of the employment security program as carried out under the framework of Federal and State laws. It is important to people who work for wages or salaries because it offers them cash payments to tide them over while moving from one job to another and at the same time makes available the services of public employment offices to help them find new jobs. It is important to employers because it means an added cost of doing business equal potentially to 3 percent of total taxable pay rolls-a cost item which can be reduced in most States only if individual employers succeed in giving steady employment to their employees.

The program is of even more vital import to the country as a whole because in it are opportunities for great good or great harm to be done to the country's people and its economy. In 1948 alone, unemployment benefits, as measured by State withdrawals from the Federal trust fund totaling $852,484,000, were paid out, while reserves built up by the States for future benefit payments totaled $7,537,824,000 as of the end of February 1949. If the custodianship and spending of these funds are handled with wisdom, in the broad public interest, there will be mutual benefit for everyone.

On the other hand, it is no exaggeration to say that if the employment security program is mishandled, and lush unemployment benefits are made available indiscriminately to the nondeserving as well as to the deserving, it very well can be the means of converting this country into a Nation with too great a proportion of loafers. Lowering living standards, regimentation, and a socialistic economy then would be inevitable.

Therefore, the decision to be made as to who shall administer this vast employment-security enterprise at the Federal level-as to who shall exercise the broad controls over State programs that are inherent in Federal legislation— is no trifling matter. On the contrary, we believe it can mean the difference

between management of the program in the public interest or mishandling it to the country's detriment.

In the considered judgment of responsible people of Indiana whom I represent, the proposed transfer of the Federal Bureau of Employment Security from the Federal Security Agency to the United States Department of Labor, as provided by Reorganization Plan No. 2, should be rejected for the following reasons:

1. It would increase Federal expenditures, rather than save money-and thus be contrary to the economy objectives of the Hoover Commission on Organization of the Executive Branch of the Government. This is so because the transfer would necessitate establishment by the Labor Department of a new set of regional offices, duplicating those now maintained by the Federal Security Agency. 2. The transfer would create administrative inefficiency by splitting authority over major, closely related social-security programs between the United States Labor Department and the Federal Security Agency, and with unemployment insurance separated from the rest of the social-security program, the natural tendency would be for it to be administered, both as to policy and procedural details, without regard to the other social-security programs.

3. The transfer would weaken and render more ineffective the work of the Employment Service, for successful operation of public employment offices depends upon their being utilized voluntarily by employers-and we know from experience that many employers, for reasons they believe to be sound, distrust the Labor Department and would withdraw their voluntary cooperation with the Employment Service if the transfer takes place.

4. Most important of all, the transfer would reverse the policy established and repeatedly reaffirmed by the Congress that the employment-security program, along with other social-security activities, is intended to be in the broad public interest, properly to be administered by an independent agency obligated to no single economic group. Instead, the transfer would label employment security as a "labor's rights" program, to be carried out exclusively from the organized labor viewpoint by an agency created by law to promote labor interests and viewpoints. The practical effect would be to deliver control over Federal administration of employment security into the hands of national labor union officials and to destroy the balancing of interests so necessary to the proper administration of a governmental undertaking of this kind.

Your committee undoubtedly has heard. or will hear from other witnesses, detailed discussions of these and other reasons supporting the belief that Reorganization Plan No. 2 should be rejected. Therefore I will not attempt to develop them further except to the extent that Indiana experience with which I am familiar may have a bearing on certain of them.

It goes almost without saying, of course, that I and the organization for which I am speaking gave extremely careful consideration to the fact that the transfer of the Bureau of Employment Security to the Labor Department was recommended by the Hoover Commission.

We recognize fully that the Hoover Commission has performed a monumental service in researching and recommending ways and means of increasing the efficiency of the Federal Government and of saving billions of dollars annually in Federal expenditures.

As

However, we do not believe that the general over-all excellence of the Hoover Commission's work justifies blind acceptance of all its recommendations. each of the Hoover proposals is presented to and considered by the Congress, each should be judged on its individual merits and on the persuasiveness of facts developed by Hoover Commission task forces in support of each proposal. In this connection, it is highly significant that, as you gentlemen know, the Brookings Institution research staff making the public-welfare study for the Hoover Commission declined to submit a formal recommendation with regard to the transfer to the Labor Department now under consideration. The Brookings Institution said:

"The nature of this issue regarding the proper location of the Federal agency administering the Employment Service and unemployment compensation precludes its settlement on a purely factual basis. A decision must be arrived at on the basis of judgment, and in the last analysis this judgment must be exercised by the duly elected representatives of the people."

In view of this statement by the task force, I do not know why the full Hoover Commission recommended that the issue be decided in favor of transfer to the Labor Department. I cannot agree that the transfer should be made simply to build up the significance of the Labor Department. It must be recognized that the Department in the past has been shorn of part of its functions, and

thereby lost some significance, because it proved itself incapable of carrying out these functions on an impartial basis and in the general public interest.

In my own State of Indiana the employment-security program is now and always has been administered by an independent agency of the State government, in which great care has been taken to maintain an even balance between employee and employer interests. For example, the top policy-making board, under whose supervision the unemployment compensation and employment-service functions are administered, is composed of two representatives of labor, two representatives of employers, and one representative of the general public. This board and the director appointed by the Governor are directly responsible to the Governor.

Similarly, the review board of the State division, which is the body hearing final appeals in disputed benefit cases before they go to the State appellate court, is an independent arm of the State agency composed of one representative of labor, one of management, and one of the public.

This system works. I am sure that the Indiana Legislature will have it no other way, so long as the legislature retains jurisdiction over the State program. Quite properly, neither labor nor employer groups get everything they want. But both groups recognize that the Indiana employment-security program is administered impartially and fairly. Most people want to keep it on that basis. It is true, as indicated by the Hoover Commission report, that in some States the employment-security agencies are identified with the State labor departments. I am informed, however, that in many of such States the employment-security agencies are in the labor departments in name only-but actually have a wholly independent status from the operating standpoint. Such is the case in my own State with regard to the industrial board, which administers workmen's compensation. The Hoover Commission might well have made this point clear.

The question could well be asked as to what effect the transfer of the Federal Bureau of Employment Security to the United States Labor Department would bave on the operation of the Indiana program since in most of its details it is administered under State law.

To anyone able and willing to do a realistic job of reading between the lines the answers are obvious.

With organized-labor officials in control of the Labor Department they would be in a position to bring to bear the full force of broad Federal rule-making power, of Federal purse-string controls over State programs and of Federal legislative persuasion to accomplish their well-known and oft-repeated objectives. In the first place, I am confident that one immediate result would be to damage the effectiveness of the employment-service program. It is significant that the Federal Government has almost unbridled rule-making power over the operation of employment-service offices, even though technically they are operated by the States. This power undoubtedly would be used to enforce the organized labor viewpoint that, among other things, a new job would have to meet strict union rules as to suitability before it could be offered to an unemployed worker. But regardless of whether such rule-making power were used, the fact remains that many employers distrust the Labor Department and for that reason would cease to use the employment service in placing job orders. Such a result would be to the detriment of everyone, particularly unemployed workers looking for jobs. After that, however, would come the long-range campaign to do with the unemployment-benefits systems the things that national labor-union officials have wanted to do for a long time.

They always have wanted to kill experience rating, which is the mechanism by which employment stabilization is encouraged by gearing the employer's tax rate to his record for stable employment-the better the employment record, the lower the tax, and conversely higher taxes if stability of employment declines. Employers and at least a majority of the public as represented by State legislatures throughout the country are convinced that experience rating is sound, for a number of reasons. Yet the Labor Department immediately could review and revise the many Federal administrative rules and standards developed in the last 13 years to such an extent as to throw experience rating in Indiana and other States into confusion and to make it virtually inoperative.

Many national labor-union officials want to make benefits payable to strikers. They want to eliminate or render meaningless the benefit disqualifications which serve as the only means of preventing the squandering of unemployment benefits on nondeserving claimants who would rather draw the benefits than hold a job. They want, with a single sweep, to increase benefit amounts to such high levels that, in the belief of many people, they would encourage mass idleness and make the program so costly that it would defeat its own purpose.

Finally, they want to federalize completely the entire unemployment-insurance system, with themselves in control of the national system.

Some not all-of these things could be accomplished within the framework of the existing Federal legislation, through rule-making authority and the persuasiveness of purse-string control over State programs. But with Federal administration in the Labor Department, those who have such objectives also would be in a much better position than they now are to promote the Federal-law changes that would establish new Federal standards and eventually federalize the program.

It is recognized that the Federal Security Agency for a number of years has itself been friendly to many of the organized-labor objectives which I have outlined. However, its deviations from an impartial course have been reflections of temporary administrative policy, not destructive of its basically independent status. Furthermore, the Federal Security Agency largely has been bound by its own rules and precedents established in the early years of the program. The Labor Department, in accepting new jurisdiction over the employment-security program, would not be so bound.

For the reasons here outlined, your committee respectfully is requested to recommend rejection of Reorganization Plan No. 2. I thank you.

STATEMENT OF CONGRESSMAN HUGH B. MITCHELL FROM THE STATE OF WASHINGTON IN SUPPORT OF REORGANIZATION PLAN NO. 2

THE LABOR DEPARTMENT SHOULD BE STRENGTHENED

Mr. Chairman and members of the committee, I am appealing here today in support of Reorganization Plan No. 2, which has been challenged by a resolution of disapproval. I strongly urge the committee to recommend against the resolution and thereby to lend its weight to the President's program for strengthening the Labor Department.

Reorganization Plan No. 2 proposes to transfer the Bureau of Employment Security (including Employment Service and unemployment compensation activities) to the Department of Labor. According to the terms of the Reorganization Act of 1949, the plan will take effect on August 19 (60 days after submission by the President) unless either House votes a resolution of disapproval.

This is the second time, I believe, that President Truman has endeavored to restore these important and closely related labor functions to the Department of Labor. During the Eightieth Congress, a similar reorganization plan was rejected, appropriations for the Department were slashed, and some of its major services were dispersed. This is not an example that we intend to follow in the Eighty-first Congress. We are pledged by the Democratic platform to work for a Labor Department "rebuilt and strengthened" so that it can assume its rightful place among the great executive departments of Government. I am confident that this committee, one of the ablest in the House, fully appreciates the obligation and the responsibility of the majority.

Of course the committee is fully aware that Reorganization Plan No. 2 accords with the unanimous recommendation of the Hoover Commission. During the latter part of the Eightieth Congress, the committee decided that whatever merits such a plan might possess (and the Republican majority saw few), it would be appropriate to defer action until the Hoover Commission had reported. Well, the report is now in, proposing the transfer of the Bureau of Employment Security to the Labor Department, and members of both parties should join in its acceptance.

I do not intend to take the time of the committee with a discussion of technical problems relating to job placement and job insurance activities. The weight of responsible, disinterested and informed judgment today is that these activities should be completely integrated for administrative purposes, and that they have a logical place in the Department of Labor. As a representative of the most heavily populated district in the State of Washington, I might say that the experience of that State in the field of employment security is pertinent. I refer the committee to the testimony presented in February of 1948 by the then commissioner of the employment security department in the State of Washington. The following points were made in that testimony, and I am sure they have been emphasized again in the present hearings:

1. The transfer of the Bureau of Employment Security to the Department of Labor will bring the Federal part of the structure for administering this joint program into an organizational pattern similar to that now adopted by most States.

2. There is no shred of evidence that the Department of Labor has been, or will be, improperly influenced by organized labor.

3. Fears of improper administration by the Department of Labor ignore the fact that the terms under which unemployment compensation claims are paid are defined by State laws, subject to administration by State officials, to review by State boards of review, and to appeal to State courts.

4. In field operations there is no common thinking between the public welfare and job-insurance agencies. In other words, unemployment compensation is an instrument to facilitate the search for jobs and not a form of welfare assistance. This leads me to observe, Mr. Chairman, that the closely joined functions of job placement and job insurance are appropriately a part of the original basic responsibility of the Labor Department "to foster, promote, and develop the welfare of the wage earners of the United States, to improve their working conditions, and to advance their opportunities for profitable employment."

The purpose and effect of a job-finding service and unemployment compensation certainly are to advance opportunities for profitable employment. Those who charge the Labor Department with bias in this regard really question its basic responsibility. This general responsibility is decreed by law as well as specific duties now vested, or to be vested, in the Department of Labor. In administering these laws, the Department is an agency of the public, not of any special-interest group. If any administrator or his subordinate fails to carry out the interest of Congress, that is a matter which must be rectified by the usual means available to the Congress and the President, not by separating a function which appropriately belongs to the Department.

The Brookings Institution, in its task-force report on public welfare prepared for the Hoover Commission, states as follows (p. 442):

"The Employment Service (together with unemployment compensation) is a vital and necessary segment of the functions of any agency charged with administering Federal policies with respect to the labor market, working conditions, and labor-management relations."

Certainly the Labor Department is the agency charged with administering the greater part of these functions.

There is a curious inconsistency in the argument of those who say on the one hand that labor functions have been removed from the Labor Department because of lack of confidence in its administration, and insist on the other hand that further functions should be removed. Continual dispersion of Labor Department activities will not conduce to public confidence nor to a high sense of responsibility among officials in the Department. I am constrained to believe that lack of confidence is a consequence rather than a cause of the removal of these functions.

The opponents of Reorganization Plan No. 2 simply do not want the Labor Department to have the importance and the status which it needs and deserves in promoting the welfare of wage earners. They allege the Department is biased even while they seek to prevent its development as a public agency. This opposition must be ascribed to a narrow concept of self-interest rather than to a broad concept of the public interest.

In conclusion, Mr. Chairman, I cannot do better than to quote from President Truman's statement on Reorganization Plan No. 2: "It is imperative that the Labor Department be strengthened and restored to its original position as the central agency of the Government for dealing with labor problems."

STATEMENT SUBMITTED BY ROBERT C. GOODWIN, DIRECTOR, BUREAU OF EMPLOYMENT SECURITY, SOCIAL SECURITY ADMINISTRATION, FEDERAL SECURITY AGENCY Reorganization Plan No. 2 of 1949 would transfer the Bureau of Employment Security and its Federal Advisory Council from the Federal Security Agency to the Department of Labor. The Bureau of Employment Security includes both the United States Employment Service and the Unemployment Insurance Service. Prior to July 1, 1948, the United States Employment Service was in the Department of Labor.