Mr. PACE. That is correct.

Senator LONG. And once again, by having the two functions administered by the same agency, one would know whether a man had refused to accept reasonable placement or not.

Mr. PACE. That is correct.

Senator LONG. Thank you very much.

The CHAIRMAN. Senator Ives.

Senator IVES. Any observation I have I would rather reserve until we had the representatives of the Department of Labor before us, because I do not believe Mr. Pace would want to answer the questions which I am likely to raise.

I do want to point out, however, Mr. Pace, that from the standpoint of organization obviously these two agencies-the USES and Unemployment Compensation-should be under one single head. I mean, I do not believe anybody can challenge that very effectively.

Mr. PACE. That is correct.

Senator IVES. But there seems to be a question as to the advisability of putting them in the Department of Labor. I am not taking part in this controversy. I simply want to point it out. Management, as you may recall, is not inclined to favor placing them in the Department of Labor, because apparently they fear-and again I am not taking sides-that they would not get the consideration in the Department of Labor that they would get under some other agency of Government or under some other department of Government.

I am going into that, Mr. Chairman, when the representatives of the Labor Department are before us, because I am going to ask them some very leading questions as to purpose and intent.

Mr. PACE. I would only like to comment, Senator, that our view of the Labor Department is that it is a public department; that while it is charged with certain responsibilities, it, like every other department, must accept all of the controlling areas of law and regulation of the Government.

I also want to bring out one other point that I think is interesting purely from an administrative point of view, and that is that, for instance, in the State of New York these programs are administered by the Department of Labor.

Senator IVES. Oh, yes. I am well aware of that. I worked very closely with them, as a matter of fact, in the State of New York.

Mr. PACE. And the fact is that over a period of time in a number of States it has been administered by the various departments of Labor. Senator Ives. Please do not gather from the statement I just made that I am necessarily opposed to their being in the Department of Labor, but there are a few questions I may want to ask. The CHAIRMAN. Senator Smith?

Senator SMITH. No questions.

The CHAIRMAN. Senator Schoeppel?

Senator SCHOEPPEL. Mr. Pace, I am a firm believer in tying in these Federal agency functions, where they apply to a State, as closely as possible with the State groups. Do you see anything in this plan that would not permit of a greater degree of cooperation than heretofore has been the case in a lot of these States in regard to the Federal Government?

Mr. PACE. I do not, sir. In my judgment, it would be at least as close. The State has under the law, as you know, the primary respon

sibility, with the Federal Government operating primarily in the research, suggestion, and stimulus field. I would anticipate that there would be at least as close a relationship, and probably a slightly closer relationship, for the reasons that I previously stated in my testimony. I agree with you wholeheartedly that there should be the closest possible relationship in that area with emphasis on State functions.

Senator SCHOEPPEL. The very thing that I was referring to a moment ago was a question which concerned the long range. Heretofore there have been some practices that have developed that have been a little distasteful and certainly have not made for the best administrative practices. It seemed to me that coordinating and grouping, as has been recommended here, should give, in line with your testimony, a greater degree of cooperative effort in checks and balances.

Mr. PACE. That is exactly correct. Yes, sir.

The CHAIRMAN. Any other questions?

Thank you very much, Mr. Pace. We appreciate your appearance here.

Mr. PACE. I certainly enjoyed appearing before your committee, Senator McClellan.

The CHAIRMAN. Mr. Ewing, if you will now let us have the benefit of your views on plan No. 2, we shall be glad to hear from you.

STATEMENT OF OSCAR R. EWING, FEDERAL SECURITY
ADMINISTRATOR, WASHINGTON, D. C.

Mr. EWING. Mr. Chairman and members of the committee, Reorganization Plan No. 2 would transfer the Bureau of Employment Security from the Federal Security Agency to the Department of Labor. The Bureau of Employment Security administers the employment service and employment compensation functions now vested in the Federal Security Agency. I gave my wholehearted support to this plan.

There can be no question, in my judgment, that the progressive denuding of the Department of Labor has been a serious mistake. Sound governmental organization requires that the labor functions of the Government be closely coordinated and the work properly directed.

The United States Employment Service is primarily concerned with the placement of workers in employment, and clearly falls within the designation of "labor functions." That Service, accordingly, properly belongs in the Department of Labor.

The unemployment-compensation functions should be administered by the same agency that administers the Federal Employment Service. We have had ample experience both with united and with separate administration of the Federal Employment Service and unemployment-compensation functions. I do not think anyone familiar with that experience can deny the overwhelming advantages of united administration. For this reason, I am convinced that the unemployment-compensation functions of the Federal Security Agency should be transferred to the Department of Labor along with the Employment Service functions.

The CHAIRMAN. This is all now being transferred by plan No. 1 to this new Department.

Mr. EWING. Yes, sir.

The CHAIRMAN. And this plan No. 2, as I stated a while ago, immediately transfers it out into the Department of Labor.

Mr. EWING. Well, just as a technical difference from what you said, Senator McClellan, I think that all plan No. 1 does is to change the name of the Federal Security Agency. It does not transfer anything in or out.

The CHAIRMAN. It gives it departmental status, and under that plan it is not transferred anywhere. Now this plan, the second plan submitted, transfers it out into the Department of Labor.

Senator Ives?

Senator IVES. I believe at the present time you are administering, are you not, unemployment compensation?

Mr. EWING. Yes, sir.

Senator IVES. Could you tell us briefly, Mr. Ewing, the procedure you follow in the regulations which you have established pertaining to that particular function of your Agency? I have in mind there especially the question of merit or experience rating in unemployment insurance. I believe you handle that through regulations. Is that

correct?

Mr. EWING. I will have to get some help on that question.

Mr. Willcox?

Could I call on Mr. Willcox, who is general counsel of the Federal Security Agency?

The CHAIRMAN. Come around, Mr. Willcox.

Mr. ALANSON W. WILLCOX (general counsel, Federal Security Agency). I didn't quite understand the question, Senator. I am

sorry.

Senator IVES. The question I raised was as to the procedure you follow in the functioning of the Agency in reference to unemployment insurance in the matter of merit or experience rating.

Mr. WILLCOX. Those problems come up.

Senator IVES. They come up; yes. But in the first place you determine the regulations or make the regulations that cover them, do you not? You have blanket authority, do you, to make those recommendations?

Mr. WILLCOX. It is a matter of interpreting the rather complex provisions of the Federal statute that are involved.

Senator IVES. I know they are complex, but they give you pretty broad authority; do they not?

Mr. WILLCOX. No, sir. Let me make this clear. There are problems of interpretation that have at times been very difficult, but there is no discretion in the sense that any officer of the Agency has a choice. He has simply to interpret the Federal laws to the best of his ability. That has proved a very difficult process in some situations.

Senator IVES. As I recall, the statute authorizes the establishment of merit or experience ratings on unemployment insurance.

Mr. WILLCOx. Yes, sir.

Senator IVES. That is not mandatory; is it?

Mr. WILLCOX. On the States, no.

Senator IVES. It is not mandatory on your part. You do not have to; do you?

Mr. WILLCOx. We have no control of that.

by State law.

Senator IVES. I understand that. But as I recall also, the States have to come to you to get clearance on any plan of unemployment insurance merit rating that they desire to have instituted within their domain.

Mr. WILLCOX. The Federal Security Administrator determines whether that is in compliance with the Federal law. That is correct,

sir.

Senator IVES. And by the same token, you can refuse to accept any plan submitted to you by any State?

Mr. WILLCOX. If we believe it is not in conformity with the Federal law.

Senator IVES. If it is not in conformity with your interpretation of the statute.

Do not get me wrong. I am not trying to criticize you. I am trying to find out. The reason I happen to know a little about this is that I was one of those instrumental in getting unemployment insurance established in the State of New York. That involved dealing with your Agency. And we had very pleasant dealings, sir, so do not be disturbed about any criticism, let me say again, in connection with my questioning. But the thing that disturbs me in regard to this legislation is that under the law itself as it is now written, by a refusal on the part of your Agency to accept a plan or such plans as might be submitted by a State, you could virtually prevent any particular State from having unemployment insurance experience ratings. Is that not about right?

Mr. WILLCOX. If we found that a particular proposal was not in conformity with the Federal act, we could in effect prevent the State from adopting that.

Senator IVES. You could prevent any proposal that a State might submit. Is that not right?

Mr. WILLCOX. I think not, sir. There are so many different pat

terns.

Senator IVES. But suppose you decided, for instance, that you did not desire to have experience rating in unemployment insurance. You might get the idea that you did not want it. You could, perfectly properly. And even though the law permits it, even though the law authorizes it, as I see it you do not have to go ahead and O. K. any plan whatever of that type. Is that correct?

Mr. WILLCOXx. I don't think that is correct, Senator.

Senator IVES. I want to get this clear, because this has a bearing on what is going to happen, here.

Mr. WILLCOX. The law calls, as I see it, for a bona fide judgment on the part of the Federal Security Administrator as to whether a particular State law does or does not comply with the Federal requirements.

Senator IVES. Yes.

Mr. WILLCOX. As to any person who has to exercise a judgment, you can assume, if you want, an arbitrary and capricious action on his part. I do not think there has been any charge of arbitrary or capricious action in this field, or any reason for it.

Senator IVES. I said this is not a criticism. I am just trying to find out your interpretation.

Mr. WILLCOX. There is no discretion as such vested in the Federal Agency. That is what I am saying. There is the problem of interpretation, which may merge into discretion. I quite admit that.

Senator IVES. Then you interpretation is that under the statute as it now is you are obliged by some process to permit, or to authorize, some plan of unemployment insurance merit or experience rating in the State?

Mr. WILLCOX. Oh, yes.

Senator IVES. You are compelled to do that. That is your interpretation of it. You are compelled to do it.

Mr. WILLCOX. There is no question of that, sir.

Senator IVES. That is the thing I wanted to make clear. Although you yourself can determine the type of such merit or experience rating; is that correct?

Mr. WILLCOX. Even that is not entirely correct. We are compelled to approve any of several types.

Senator IVES. Any of several types? There are any number of types, as many as anybody could imagine, I suppose.

Mr. WILLCOX. There are three basic types listed in the law.

Senator IVES. Yes, I know.

Mr. WILLCOX. Each of which we would be compelled to approve if it met the standards specified in the law for that type. Have I answered your question, sir?

Senator IVES. Yes, but I have just one more final question. Then I understand from your statement that by no stretch of the imagination could you, under the law as it now stands, prevent some form of unemployment insurance experience rating in any State which might desire it?

Mr. WILLCOx. That is correct.

Senator IVES. You would have to allow them to have some form? Mr. WILLCOX. That is correct, sir.

Senator IVES. That is all I wanted to know. Thank you very much. The CHAIRMAN. Are there any other questions?

Senator Smith?

Senator SMITH. During the past few years it has been necessary for us to go to many departments when we wanted information or help in labor problems; and it seems to me, Mr. Chairman, that this reorganization plan, No. 2 anyway, is very commendable, very consistent; that it is time for us to get those functions into one department, where we will know where to go.

While I agree with you on some of the proposed changes, Mr. Ewing, I do not agree with you on all of them, and there are some two or three points on which I am quite undecided. I do want to take this opportunity to say that you have done a wonderful job, a magnificent job, as Director of the Federal Security Agency, the same type of job I think you would do in any assignment which you undertook. I hope you will give us a Welfare Department with the functions that rightfully belong under that Department, with the proper status for its director.

Thank you, Mr. Chairman.

The CHAIRMAN. Thank you, Senator Smith.
Senator Ives?

Senator Ives. Mr. Ewing, I just wanted to ask one question in connection with Reorganization Plan No. 2. I wanted to ask you if in your opinion, and after such a plan might be in operation, the Labor Department would have to have new regional field offices for either