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Unemployment in the United States HEARINGS BEFORE T H E COMMITTEE ON EDUCATION AND LABOR UNITED STATES SENATE SEVENTIETH CONGRESS SECOND SESSION PURSUANT TO S. Res. 219 A RESOLUTION PROVIDING FOR AN ANALYSIS AND APPRAISAL OF REPORTS ON UNEMPLOYMENT AND SYSTEMS FOR PREVENTION AND RELIEF THEREOF TOGETHER WITH SENATE REPORT NO. 2072 DECEMBER 11, 12, 13, 14, 17, 18, AND 19, 192.8, JANUARY 9 AND 14, FEBRUARY 7, 8, AND 9, 1929 Printed for the use of the Committee on Education and Labor U N I T E D STATES GOVERNMENT P R I N T I N G O W I C B W A S H I N G T O N : 1929 29193 COMMITTEE ON EDUCATION AND LABOR JAMES COUZENS, Michigan, Chairman WILLIAM E. BORAH, Idaho. LAWRENCE C. PHIPPS, Colorado. JESSE H. METCALP, Rhode Island. HIRAM BINGHAM, Connecticut. FREDERICK H. GILLETT, Massachusetts. ROYAL S. COPELAND, New York. LAWRENCE D. TYSON, Tennessee. DAVID I. WALSH, Massachusetts. CYRUS LOCHER, Ohio. MORRIS SHEPPARD, Texas. JOHN CARSON, Clerk n 70TH CONGRESS ) 2d Session SENATE j ( EEPORT ( No. 2072 CAUSES OF UNEMPLOYMENT FEBRUARY 25 (calendar day, MARCH 1), 1929.—Ordered to be printed Mr. COUZENS, from the Committee on Education and Labor, submitted the following R E P O R T [Pursuant to S. Res. 219] Under date of May 3, 1928, the Senate adopted Senate Kesolution 219 of the Seventieth Congress, first session. The resolution was as follows: Whereas many investigations of unemployment have been made during recent years by public and private agencies; and Whereas many systems for the prevention and relief of unemployment have been established in foreign countries, and a few in this country; and Whereas information regarding the results of these systems of unemployment, prevention, and relief is now available; and Whereas it is desirable that these investigations and systems be analyzed and appraised and made available to the Congress: Therefore be it Resolved, That the Committee on Education and Labor of the Senate, or a duly authorized subcommittee thereof, is authorized and directed to make an investigation concerning the causes of unemployment and the relation to its relief of (a) the continuous collection and interpretation of adequate statistics of employment and unemployment; (b) the organization and extension of systems of public employment agencies, Federal and State; (c) the establishment of systems of unemployment insurance or other unemployment reserve funds, Federal and State, or private; (d) curtailed production, consolidation, and ecomonic reconstruction; (e) the planning of public works with regard to stabilization of employment; and (f) the feasibility of cooperation between Federal, State, and private agencies with reference to (a), (b), (c), and (e). For the puroses of this resolution such committee or subcommittee is authorized to hold earings and to sit and act at such times and places; to employ such experts and clerical, stenographic, and other assistants; to require, by subpoena or otherwise, the attendance of such witnesses and the production of such books, papers, and documents; to administer such oaths and to take such testimony and make such expenditures as it deems advisable. The cost of stenographic services to report such hearings shall not be in excess of 25 cents per hundred words. The expenses of such committee, which shall not be in excess of $15,000, shall be paid from the contingent fund of the Senate upon vouchers approved by the chairman. The committee or subcommittee shall make a final report to the Senate as to it« findings, together with such recommendations for legislation as it deems advisablef on or before February 15, 1929. E ni IV CAUSES OF UNEMPLOYMENT Shortly after the Senate had adopted the resolution your committee met to consider plans for making the survey. The assistance of the Institute of Economics of the Brookings Institution of Washington, a nonpartisan, private organization, was sought, and the institute assigned Dr. Isador Lubin, of its staff of economists, to assist in directing the work. The work of the institute has been voluntary, and, as a result, the expense of the survey to the Government has been slight. The committee and the Senate owe the Institute of Economics a debt of gratitude, and the committee herewith expresses it and also compliments the institute upon the work it has done. The report of Doctor Lubin, which summarizes the evidence submitted to the committee and comments upon it, is printed at the conclusion of the printed hearings. Anyone who has followed this work or is interested in this subject should read this report. The committee is likewise indebted to the Industrial Relations Counsellors of New York, another endowed organization which has been interested in the subject of unemployment. This organization contributed to the committee three volumes of a report it has made on the subject of unemployment-insurance plans. Although this report touches on some subjects which had also been reviewed by your committee, we feel that the whole is of such value that it should be printed as a part of the evidence of your committee and this has been done. Likewise, the committee is indebted to any number of business men who gave, unstintingly and willingly, of their time and services. Your committee was interested, primarily, in the worker who desires to work, who is seeking an opportunity for gainful employment, and who is unable to find it. There are others who might be listed as "among the unemployed" but those who are not employed because they do not choose to be employed, hardly constitute a problem for this committee. The evidence taken shows the causes or the types of unemployment might be divided into three classes, cyclical, seasonal, and technological. Little necessity exists for describing these three classifications. Cyclical unemployment has been like the plague; it has come and gone at regular intervals until it has been accepted as a necessary evil by some who should know otherwise. We do not believe, any more, that it is necessary for the baby to have the diphtheria and rickets and other " diseases of childhood." We have found and are finding methods of preventing these diseases. We should recognize also that there is an obligation on all society to attack, unceasingly, the problem of unemployment. Cyclical unemployment can be best attacked through the control of credit, according to the experts who testified before your committee. It was the expressed view of these students that the Federal reserve system has done and is doing a great deal toward this end. We all know the story of progression and retrogression in industry as told in the history of all cyclical unemployment. Although there may be different causes and although no student seems to be able to lay down a dogma as to causes which is universally accepted, the results are much the same. We have the first evidence of increased business, development of "better times" psychology, increased orders CAUSES OF UNEMPLOYMENT V and increased production, plant extensions, increased stocks on shelves, extensions of credit and then the swing downward, a swing which is merely accelerated. And for labor, we have the inculcation of the practices of inefficiency which are definite marks of every period of overdevelopment and overexpansion and then—unemployment. As Dr. John R. Commons put it in his testimony before your committee, " W e first demoralize labor and then we pauperize it." We desire to call the reader's attention to the statement of Doctor Lubin in the report of the Institute of Economics, which reviews the incidents of cyclical unemployment at greater length and with more pointed facts. Seasonal unemployment is of more immediate interest because here we have a daily problem, year in and year out, which confronts the industrial leader and society in general. If the business men of the country will solve this problem to the extent it is possible of solution, will eliminate this waste, the saving to industry will be two billions of dollars a year, according to the testimony of Mr. Sam O Lewisohn, a leader in many industries, who appeared before your committee. Seasonal unemployment can be attacked in many ways. I t is being successfully attacked in many industries as the evidence will show. Discussion of these methods of attack will be found in other sections of this report. Technological unemployment covers that vast field where, through one device or another, and chiefly through a machine supplanting a human, skilled workers have found that their trades no longer exist and that their skill is no longer needed. What becomes of these men? What can be done about these thousands of individual tragedies? What do these individual tragedies mean to society as a whole? I t is an imponderable thing. Some of the experienced witnesses who appeared before your committee stated that new industries absorb the labor turned adrift by machine development. The automobile, the airplane, the radio, and related industries were suggested as examples. Undoubtedly there is much truth in these statements, but nevertheless we are not relieved of the individual problem. I t offers little to the skilled musician to say that he, who has devoted his life to his art, may find a job in a factory where radio equipment is manufactured. Then there is the delay, that inevitable period of idleness when readjustments are being effected, the suffering, the loss, the enforced change in environment. True, this may all be " t h e price of progress" but society has an obligation to try, at least, to see that all this " p r i c e " does not become the burden of the worker. This subject also will be discussed more fully under other chapters of this report. There is one other field of unemployment, the field wherein we find the crippled, the superannuated, the infirm. This field constitutes a problem for industry and for society. I t is a growing field, we believe. The man of mature years is not so successful when competing with a machine as is a younger man. The problem of these men will also be touched upon in other chapters of this report. Your committee is required by Senate Kesolution 219 to make a report on the causes of unemployment. So many inquiries have been made on this subject, so many conferences have been held, so many reports made, so many volumes written, that it would seem impos* sible to contribute anything additional of great value. VI CAUSES OF UNEMPLOYMENT However, your committee feels that it has accomplished something. We have striven to obtain an understanding of some of the conditions which cause unemployment, of the machinery now had to detect when and where unemployment exists, and of the existing facilities for the treatment and the relief of the condition, once it is known to exist. I t is probable the survey could have been more comprehensive and that the report of your committee might be more dogmatic, but we emphasize that this is a so-called short session of Congress, and that it is most difficult to accomplish a great work like this at a short session. Senators are beset with two or more conflicting committee meetings and they must choose between them. Because of this condition, it was impossible to obtain the constant attendance of all members of the committee at all meetings. Notwithstanding, your committee feels that it has contributed toward an aroused interest in the subject, that another effort has been made to interest leaders in industry in the problem of stabiUzing employment, that the evidence collected and printed in the hearings will provide an opportunity for a better understanding of the whole situation, and that as a result of this survey another advance has been made in the effort to solve the difficult problem of unemployment. Regardless of what may be said in 'derogation of conferences and investigations, this survey shows conclusively that the unemployment conference, which was convened in 1921 under the leadership of Herbert Hoover, did accomplish something. That conference aroused the interest of some employers in the subject of stabilization. They returned to their plants and began an effort to stabilize employment in their industries. They attained some success and then more, and as they succeeded and realized what they had gained, they became missionaries in the field. Now, they have appeared before your committee and their testimony speaks for itself. Before proceeding with a detailed discussion of the evidence, your committee wishes to voice the opinion .that the unemployment problem can only be solved through constant struggle on the part of all members of society. When your committee uses the word "solved," it merely means that an opportunity will have been given to everyone who really desires work. No one will question that every man is entitled to the opportunity to provide for himself and his family. T h a t is a fundamental right and society can not consider itself successfully organized until every man is assured of the opportunity to preserve himself and his family from suffering and want. If we consider the question from the viewpoint of duty alone, every member of society has an obligation to assist in solving it. The employer, undoubtedly, has the greatest duty and the greatest responsibility. He is using labor to make a profit for himself and if he is going to take the advantages of this system of society, he must assume the obligations likewise. The laborer, or worker, or employee has a duty to assist also because there is nothing more certain than that, as every step forward is made in the solution of this problem, the individual laborer or worker will gain tremendously. I t is an interesting thing in this connection that the man who must labor inevitably thinks most of steady employment, as the evidence presented by the Industrial Relations Counsellors shows. The fear of being " o u t of a job " i s one of the most demoralizing factors in all the relations of man to his job and employee to his employer. CAUSES OF UNEMPLOYMENT VII And it may as well be remembered that society is going to solve this problem, is going to provide an opportunity for man to sustain himself, or is going to sustain man. Society is going to provide an opportunity for man to pay his own way or is going to pay for him. Society may as well make every effort to do the job constructively, because no society can be strong in which its members are encouraged or forced to adopt the position and the place of those seeking charity, and secondly, because when society pays the bill through charity or through the cost of crime, the payments offer little possibility of any advance for mankind. Mr. Daniel Willard, president of the Baltimore & Ohio Railroad Co., put the whole story rather pithily. In the first place, he described the old days of intensive individualism where goods were produced, largely, in individual shops and by hand labor. Now we have the tremendous factories, the mass production, and the wealth pouring from machines and moving on for the benefit of society. If society is going to take this benent, then society must also accept the burdens, Mr. Willard suggested. A man out of work, discontented, and suffering, constituted a danger for society, he added. As he put it, a man is going to steal before he starves, and the word " s t e a l " may cover a multitude of other crimes—crimes perhaps of the man who steals b u t crimes of far greater magnitude for that society which permits a condition which induces or invites men to steal. Your committee will now proceed with the detailed demands of the resolution and will discuss the subjects in the order in which they are presented in the resolution. (A) THE RELATION HAD BY THE CONTINUOUS COLLECTION AND INTERPRETATION OF ADEQUATE STATISTICS OP EMPLOYMENT AND UNEMPLOYMENT TO THE RELIEF OF UNEMPLOYMENT The testimony of Commissioner Ethelbert Stewart, of the Bureau of Labor Statistics of the Department of Labor; the testimony of Dr. John K. Commons; of Mr. Bryce M. Stewart; of Mr. Morris E. Leeds, and of a number of other witnesses, shows the necessity of having adequate statistics of employment and unemployment. To know there is a problem, that there is unemployment, and how severe it is, is necessary before a successful attack on it can be made. That seems so obvious it is hardly worth stating. We have absolutely no figures as to the number of persons unemployed at any definite time. Commissioner Stewart explains that situation in has testimony. He has made estimates on the "shrinkage" of employment. The unemployment conference of 1921, after deploring the fact that there were absolutely no data obtainable on the subject made its "best guess." Just last year, one dispute after another arose in Congress over the number of men out of work. True, the discussion was open to the charge of being largely political, but political or otherwise, it should have served to have driven home the point that here was a government without any machinery for knowing whether it was afflicted with a disease to which might be added the cancer that destroys government. If we do not have accurate information on this subject, we may rest assured we are going to have plenty of inaccurate information. VIII CAUSES OF UNEMPLOYMENT The subject is one which is very articulate in itself. Our experience should be convincing that all this is so. And in this connection it might be well to reflect on the truth that facts will permit sound thinking and that an absence of facts produces a condition of fear and panic which may be far more costly to the country than would be the cost of maintaining a system of obtaining these statistics. As to the method of gathering information, and as to what should be gathered, there is cause for question and study. Statistics, to be of any immediate value, must be gathered quickly, must give a true picture and must permit of proper and correct appraisement. Inaccurate statistics are of no value, and statistics which are months and years old are of about the same value as is the result of a post mortem to a physician and no more so. They may have value in dealing with the problem as a whole, but have no use in relieving immediate necessity. Commissioner Stewart proposes to develop statistics as to unemployment by measuring the shrinkage and the increase of employment and unemployment in a considerable number of industries and by applying to the norm the factors thus obtained. This should permit a fairly accurate measurement of conditions to be obtained with sufficient rapidity to meet any demand. But the norm must be first established and Commissioner Stewart proposes to have it established by an accurate census. The Bureau of the Census should obtain the information t h a t Commissioner Stewart desires and should obtain it at the next census in 1930. The Bureau of the Census may say its other duties would be delayed in this effort, but this work of building an efficient system of measuring unemployment is far more important, in the opinion of your committee, than a great deal of other information obtained through the census. As to supplementary statistics, these might and perhaps should be obtained in any number of ways. However, it is the testimony of witnesses before your committee that until we get a system of unemployment exchanges established in the various cities and States, it is doubtful that we shall get a report more valuable than that proposed to be obtained by Commissioner Stewart. (B) THE ORGANIZATION AND EXTENSION OF SYSTEMS OP EMPLOYMENT AGENCIES, FEDERAL AND STATE PUBLIC The Government now appropriates $200,000 for the work of the United States Employment Service. The director of that service, Mr. Francis I. Jones, appeared before your committee, and his testimony will be found in the hearings. Your committee also directs attention to the testimony of Mr. Bruce M. Stewart, to that of Dr. John R. Commons, and to the report of Doctor Lubin, of the Institute of Economics. As is shown by Doctor Lubin, the Employment Service is a result of war experiences. When the country was mobilized for war purposes and the necessity existed to find a man for every place more than a place for every man, a war unemployment machine was developed. And, being regarded as an instrument of war, the machinery was scrapped in time of peace. Funds were not appropriated, offices were abandoned, personnel dismissed, and of even more im CAUSES OF UNEMPLOYMENT IX portance, the employers in private life who had maintained an active interest in the unemployment exchanges permitted that interest to wane. The result is we have an unemployment service which functions as a Federal organization only in the matter of placing farm labor and which endeavors to function through grants of money, out of the Federal appropriation, to assist in the maintenance of State or city employment exchanges. The situation is one not conducive to building interest in the organization as it now exists. As is shown by Doctor Lubin in his report, recommendations for the establishment of public employment exchanges have been made for two decades whenever a program for relieving conditions of unemployment was given consideration. As far back as 1916 recommendations were made that the country must first organize a national system of labor exchanges in order to deal with the unemployment problem, as Doctor Lubin shows. In 1921 the President's conference on unemployment recommended the formation of a national system of employment exchanges and later this recommendation was indorsed by the committee which prepared for Mr. Hoover a special report on business cycles and unemployment. The conclusion of the committee was that " t h e greatest promise seems to be in the development and raising to a high standard of efficiency of a national system of employment bureaus." The " p i n c h " of unemployment is rarely appreciated until it becomes personal. Epidemics of disease may afflict one section of the countiy and arouse tremendous interest and even concern in the other sections, but until unemployment becomes local and personal it seems to arouse little fear. The man at work appears to have little realization of how he is affected by the fact that his fellow man is out of a job. The organization to handle the disease in this form should be local also, it seems to your committee. I t should be one which would be responsible to local conditions and one which is responsible also to local officials, to local employers, and to local employees. Doctor Commons advised your committee that the States and cities should establish and operate the unemployment exchanges and that the Federal Government should merely establish an organization of experts to coordinate the work of the local exchanges and " t o bring up the standard" of those offices. Your committee is in accord with the idea that the Federal Government should remain as far away from the operation of those local offices as is possible. The employment exchanges should be local, we repeat. To be successful, in fact to be of any great value, public employment agencies or exchanges must have the confidence of those for whom the exchanges are established, in other words for the employer and the employee immediately interested. This confidence can only be established through efficient operation of such offices. The personnel must have the ability to invite and induce and then to assemble information as to the needs of the employer and, having done this, must perform the next function of making the contact between the employer and the man who wants a job. If the office is efficiently operated and deserving of the confidence needed for success, the endeavor will not only be to find a job for the man and a man for the job, but will be to find the right man for the right job, to effect a placement where both the employer and the employee will be pleased and likely to remain so. X CAUSES OF UNEMPLOYMENT As Doctor Commons said in his testimony, " t h e best employment agencies in the United States are not the public employment agencies but they are the employers themselves." He added that he "did not believe that we can have public employment offices in this country until the employers are willing to support those offices." In other words, the employers who have the most intimate touch with the opportunities for labor, must have sufficient confidence and interest in the employment exchanges to make use of them. The labor or unemployment exchange must become to the employer for labor purposes just what his bank is for purposes of obtaining capital. Discussing the organization of employment exchanges, Doctor Commons offers the example of the Milwaukee office, which is conducted and maintained by the local governments, State and city. There, he testified, we had for years the experience connected with an employment exchange which existed for itself and for jobs for the personnel. Then the personnel was placed under civil service rules, candidates for positions were graded in accordance with educational qualifications and experience and then an advisory committee, representing organized employers and organized labor, selected the best candidate for director of the office. This man was appointed. To the criticism that the unorganized worker is not represented in this plan, Doctor Commons replies that the organized employer always takes care of the unorganized worker and adds that " t h e plan has worked." Aside from the Wisconsin offices, there are efficient exchanges in some other States, although the number is so small that it does not even offer the skeleton of a national system. Thirteen States, as Doctor Lubin shows, have no employment offices whatsoever. In 11 States there is only one office and in other States the number of offices vary up to the point where 17 offices are found in the State of Illinois. The amounts appropriated by the States also vary tremendously. In Wyoming, for example, $900 is granted for the work, and from that point the State expenditures for this purpose increase to the point where $231,360 is spent in Illinois. The total appropriations of all the State governments aggregate only $1,203,906. Aside from these general services on the part of the Government of the United States and upon the part of State governments, the United States Employment Service conducts a farm-labor division which has temporary offices at important points in the agricultural States. Critics who have studied the work of the service concede that this is an important task and that it is well done. In view of this very limited service throughout the country, in view of the few offices conducted and the apparent lack of interest, is there any cause for amazement in the fact that private employment exchange* thrive in many cities, and thrive despite the manner in which some of the private exchanges are conducted—to not always cast credit r»n the business? The burden of assisting the unemployed to find work should be borne by organized society through the maintenance of efficient public employment exchanges. Efficient public employment exchanges should replace private exchanges. Private employment exchanges which merely attempt to make contact between a worker and a job, which are operated for profit and solely for profit, present a situation where there are conditions conducive to petty graft. Such CAUSES OF UNEMPLOYMENT XI rac tice at the expense of the unemployed is a crime which should not « e tolerated. Your committee might summarize its views on this subject in this manner: 1. The existing United States Employment Service should be reorganized. 2. The director and every employee of the service should be selected and appointed after a rigid civil-service examination. 3. The administrative features of the civil-service examination should permit the cooperation of organized industry and organized labor in weeding out the candidates for these places, at least the place of the executives. 4. The service should become an organization of experts whose duties would be to coordinate the work of the States. 5. Aside from compiling statistics and endeavoring to arrange a plan which would permit the Government to be advised promptly and accurately of conditions throughout the various State exchanges, the Federal service should not be active. In other words, the Government should remain as completely detached from the operation of exchanges throughout the States as it is possible for it to be. There has been some question of the plan now in vogue whereby the Government contributes financial assistance to the State offices. Witnesses before your committee insisted unemployment anywhere in the country was of national concern and therefore should be treated to some extent with the aid of the Government. But it is certain that some definite system or plan should be devised under which the Government should grant this money to the States if the Government assistance is to continue. The Government expert should make certain that the Government was not contributing to inefficiency in the service. (C) THE ESTABLISHMENT OP SYSTEMS OP UNEMPLOYMENT INSURANCE OR OTHER UNEMPLOYMENT RESERVE FUNDS, FEDERAL, STATE, OR PRIVATE In connection with this subject your committee recommends the reading of the testimony of Dr. John R. Commons, of the Institute of Economics, and the Industrial Relations Counsellors, as well as the testimony of the business men who discussed conditions in their own industries. We think it is generally agreed by the witnesses that at the present time the following conclusions would be drawn from the evidence: 1. Government interference in the establishment and direction of unemployment insurance is not necessary and not advisable at this time. 2. Neither the time nor the condition has arrived in this country where the systems of unemployment insurance now in vogue under foreign governments should be adopted by this Government. 3. Private employers should adopt a system of unemployment insurance and should be permitted and encouraged to adopt the system which is best suited to the particular industry. Until an opportunity or some cause such as this survey is had to focus attention on the industrial developments in this country, little consideration is given to the accomplishments such as we find in the field of stabilizing employment. Xn CAUSES OP UNEMPLOYMENT Undoubtedly there are not sufficient industrial leaders who are interested as yet, but there is cause to believe they will be, and simply because of economic pressure. It seems reasonable to assert, from the testimony taken during this survey, that the employer who does not stabilize his employment and thus retain his experienced workmen is the employer who is going to fail. Just as the efficient business man is stabilizing the return for capital invested, by building up reserves for dividends, so shall he establish a reserve for return to labor in the hours of adversity, according to the well-founded arguments advanced by business men. And why? The testimony from witness after witness stresses the point that there is no suggestion of charity in this effort, no idea of being philanthropic, no desire to have industry to become paternalistic. True, in most cases the plans were started because an industrial leader became conscious of some of his obligations to society. But there is general accord on the proposition that the plan is "good business," that it has increased profits. One witness asked, "Shall the business man who expands his business without consideration for future requirements escape his responsibility ?" Mr. Morris E. Leeds, of Leeds & Northrup, described his theory as follows: I was convinced a good many years ago of the element of unfairness and social wrong that modern industry had gotten into by freely hiring people and with equal freedom, firing them. Mr. Daniel Willard said: It seems to me that those who manage our large industries, whatever the character of their output may be, whether it be shoes, steel, or transportation, should recognize the importance and even the necessity of planning their work so as to furnish as steady employment as possible to those in their service. Not only should that course, in my opinion, be followed because it is an obligation connected with our economic system, but I fully believe that such a course is justifiable from the standpoint of the employer because it would tend to develop a satisfied and contented body of workmen which of itself would improve efficiency and reduce costs. The testimony speaks for itself and everyone interested should read it. At this time there is nothing that can be recommended on this score in the way of legislation. However, your committee can express the hope that organizations of capital and of labor and that officials of the Federal and State Governments shall never lose an opportunity to inspire thought and discussion on this question of the necessity and the advisability of stabilizing employment within the industries themselves. Stabilization has been sought and obtained in various ways. One employer has placed practically all his workers on a salary basis, has assured them of a continuous wage throughout the year, and has placed upon them the responsibility of making the industry succeed. Others have established reserve funds and have so arranged them that executives and workers strive to prevent them from being drained. Others have so ordered their production that it is spread throughout the year. Otters have begun the production of articles which are related to the general business plan but which can be produced in periods which formerly were marked by idleness. CAUSES OF UNEMPLOYMENT XIII The testimony is fairly convincing that stabilization can be accomplished in industries which were once regarded as being seasonal in their every aspect. Fifteen bills dealing with unemployment insurance have been introduced in six State legislative bodies since 1915, and none of them has been successful. Probably the so-called Huber bill, introduced in the Wisconsin Legislature, came nearest to adoption, and its author, Doctor Commons, advised your committee that it "was as dead as anything could be." In many industries, as the evidence will show, a reserve fund for unemployment which offers protection in the form of insurance has been adopted. The testimony of Doctor Commons as to the practice in the Chicago clothing industries is important as well as the reports of the Industrial Relations Counselors. Whatever legislation is considered on this subject, your committee is convinced, should be considered by the States. The States can deal with this subject much better than can the Federal Government. But in any discussion of legislation, your committee thinks consideration should be given to the arguments of Doctor Commons—that the plan of reserve funds or insurance confined to one company or plant rather than to all industries, should be adopted. Doctor Commons stresses the fact that the insurance idea as practiced in the Chicago market follows the experiences gained from the adoption of disability compensation plans in various States. Employers were moved to adopt every precaution against accidents when they realized that accidents were costly under the plans for disability compensation. In the same way, employers and employees will be more likely to fight the causes of unemployment within their industries when they have seen tangible evidence of the cost of unemployment, according to the arguments advanced in this evidence. On the other hand, Doctor Commons insists that, "the paternalistic and socialistic" schemes adopted in foreign countries, penalize success in that the employer who stabilizes his employment does not escape the burden of paying for unemployment in other industries. Your committee can not leave this subject without suggesting that consideration be given to the benefits of stabilized production—the finer morale of the workers, the better workmanship, the increased production, the lowered costs of production, and the elimination of the cost of training the unskilled recruits. The testimony proves conclusively that the workers who cooperate with their employers and who are given a chance and encouraged, contribute tremendously to the success of the enterprise. (D) CURTAILED PRODUCTION, CONSOLIDATION, AND ECONOMIC RECONSTRUCTION This subject covers so vast a field that it also immediately becomes imponderable. To exhaust it seems impossible. A committee of Congress could proceed with a study on this one phase of the unemployment problem and could continue indefinitely. The general opinion given your committee on this score is that undoubtedly just at this time we are experiencing a program and a problem which are no different to those occurring since the advent of machines in industry. The difference is, however, that undoubtedly XIV CAUSES OF UNEMPLOYMENT at this time the developments are far more extensive and far more intensive than they have ever been in our history. Of course there is going to be individual suffering, for example, the suffering of the musician who discovers that a machine is forcing him to forego his life work and to seek employment in new fields. How to answer the many questions which arise with every minute of consideration for this topic, is what makes the subject imponderable. The printed evidence contains suggestions of the shortened working day and the reduced working week, has contentions that new industries are arising constantly out of the graves of departed trades and the workers are thus absorbed. Your committee is convinced, however, that it is the duty of society to provide for these workers during the period of readjustment, as many employers are now doing. Conflicting opinions are offered as to the effect of the vast consolidations of wealth. One side contends that the day of the small business man is passing, that the individual merchant can no longer compete with the national chain, while another will contend that no nationally organized chain can overcome the personal effort put into a business by the individual business man. However, in the time your committee had for this subject no opportunity presented itself for the consideration of legislation on this subject, and your committee has nothing to suggest at this time. (E) THE PLANNING OF PUBLIC WORKS WITH REGARD TO STABILIZATION Another committee of Congress, the Committee on Commerce, has considered this subject and has reported legislation which is now before the Senate. The legislation is commonly referred to as the " Jones prosperity reserve bill." Your committee would suggest that the evidence submitted with reference to that bill should be read in connection with this study. There is some testimony of interest on this subject in these hearings, but your committee did not devote a great deal of time to this topic, because no one disagreed with the suggestion that the Government and all other public agencies should so order their public works that they would offer a buffer in time of unemployment. The evidence is very clear that the Federal Government may set a valuable example to the States in the adoption of a practical scheme for the planning of public works. Of course, the States and the other divisions of Government will have the greatest opportunity to provide this buffer because the expenditures by the Federal Government for public works are not large as compared with the expenditures by the States and other civil divisions. There should be no delay upon the part of the various Governments, Federal, State, city, and other minor subdivisions in the adoption of such plans. There are minor objections to this scheme but your committee is convinced they can be overcome without difficulty. (p) THE FEASIBILITY OP COOPERATION OP FEDERAL, STATE, AND PRIVATE AGENCIES WITH RESPECT TO ALL THESE SUBJECTS RELATED TO THE UNEMPLOYMENT PROBLEM Your committee has discussed this j>hase of the survey as it has proceeded with this report and there is little to add. In general, CAUSES OF UNEMPLOYMENT XV it is the opinion of your committee that the responsibility should be kept as "close to h o m e " as is possible. Private agencies should make the first effort and should do everything they can for themselves. The States should contribute only that service that private agencies would find impossible and the Government should merely coordinate the work of the States and supply any effort which is entirely and purely of national character. Your committee will now endeavor to sum up the suggestions and recommendations: 1. Private industry should recognize the responsibility it has to stabilize employment within the industry. The Government should encourage this effort in every way, through sponsoring national conferences, through publishing information concerning the experience had by industries in this work, and through watching every opportunity to keep the thought of stability uppermost in the minds of employers. 2. Insurance plans against unemployment should be confined to the industry itself as much as possible. There is no necessity and no place for Federal interference in such efforts at this time. If any public insurance scheme is considered, it should be left to the State legislatures to study that problem. 3. The States and municipalities should be responsible for building efficient unemployment exchanges. The Government should be responsible for coordinating the work of the States so as to give a national understanding of any condition which may rise and so as to be able to assist in any national functioning of the unemployment exchanges. 4. The existing United States Employment Service should be reorganized, and every employee should be placed under civil service. 5. Efforts should be made to provide an efficient system for obtaining statistics of unemployment. The first step should be taken by the Bureau of the Census in 1930, when the bureau should ascertain how many were unemployed as of a certain date and how many were not seeking employment and yet were unemployed as of that date. 6. The Government should adopt legislation without delay which would provide a system of planning public works so that they would form a reserve against unemployment in times of depression. States and municipalities and other public agencies should do likewise. 7. Further consideration might well be given to two questions, the effect had on unemployment by industrial developments such as consolidation of capital, and the necessity and advisability of providing either through private industry, through the States, or through the Federal Government, a system of old-age pensions. CONTENTS REGULARIZATION OF EMPLOYMENT Page Henry S. Dennison Sam A. Lewisohn. __ Ernest G. Draper William Powers Hapgood William Green A. C. Bennett.Daniel Willard O. S. Jackson James T. Loree J. M. Larkin Fred M. Sargent W. J. Burns Jackson Johnson William Cooper Procter H. F. Johnson, jr Donaldson Brown Alexander Bing M. A. Styles — — 2 19 27 35 53 69 77 94 101 118 129 131 133 133 134 136 146 147 EMPLOYMENT EXCHANGES Bryce M. Stewart Whiting Williams Memorandum on employment exchange legislation in foreign countries Memorandum on the organization and administration of public emploj*ment offices in foreign countries. 149 167 168 169 UNEMPLOYMENT STATISTICS Ethelbert Stewart Francis I. Jones W. A. Berridge 179 188 190 PUBLIC WORKS Gardner S. Williams Otto T. Mallery 193 198 _ UNEMPLOYMENT INSURANCE Morris E. Leeds John R. Commons Hart, Shaffner & Marx unemployment insurance agreement Benjamin M. Squires Huber unemployment insurance bill Huber bill revised Industrial Relations Counsellors (Inc.) Metropolitan Life Insurance Co Mary B. Gilson Mollie Ray Carroll __ 205 212 245 256 257 270 278 456 468 476 SUMMARY OP TESTIMONY AND REPORT OP INSTITUTE OF ECONOMICS OP THE BROOKINGS INSTITUTION Isador Lubin 29193—29 491 2 xvn UNEMPLOYMENT IN THE UNITED STATES TUESDAY, DECEMBER 11, 1928 COMMITTEE ON EDXTCATION AND LABOR, UNITED STATES SENATE. Washington, D. C. The committee met, pursuant to call, at 10.30 o'clock a. m., in the committee room, Senate Office Building, Senator James Couzens presiding. Present: Senators Couzens (chairman), Phipps, Tyson, Walsh, and Sheppard. Present also: D r . Isador Lubin, economist of the Institute of Economics of the Brookings Institution, Washington, D . C , assisting the committee. The CHAIRMAN. This meeting was called for the purpose of carrying out the Senate's instructions under Senate Eesolution 219, and for the purpose of having it clear as to what we are here for I will read the resolution: [S. Res. 219, Seventieth Congress, first session] RESOLUTION Whereas many investigations of unemployment have been made during recent years by public and private agencies; and Whereas many systems for the prevention and relief of unemployment have been established in foreign countries, and a few in this country; and Whereas information regarding the results of these systems of unemployment, prevention, and relief is now available; and Whereas it is desirable that these investigations and systems be analyzed and appraised and made available to the Congress: Therefore be it Resolved, That the Committee on Education and Labor of the Senate, or a duly authorized subcommittee thereof, is authorized and directed to make an investigation concerning the causes of unemployment and the relation to its relief of (a) the continuous collection and interpretation of adequate statistics of employment and unemployment; (b.) the organization and extension of systems of public employment agencies, Federal and State; (c) the establishment of systems of unemployment insurance or other unemployment reserve funds, Federal, State, or private; (d) curtailed production, consolidation, and economic reconstruction; (e) the planning of public works with regard to stabilization of employment; and (f) the feasibility of cooperation between Federal, State, and private agencies with reference to ( a ) , (b), (c), and (e). For the purposes of this resolution such committee or subcommittee is authorized to hold hearings and to sit and act at such times and places: to employ such experts and clerical, stenographic, and other assistants; to require, by subpoena or otherwise, the attendance of such witnesses and the production of such books, papers, and documents; to administer such oaths and to take such testimony and make such expenditures as it deems advisable. The cost of stenographic services to report such hearings shall not be in excess of 25 cents per hundred words. The expenses of such committee, which shall not be 1 2 UNEMPLOYMENT IN THE UNITED STATES in excess of $15,000, shall be paid from the contingent fund of the Senate upon vouchers approved by the chairman. The committee or subcommittee shall make a final report to the Senate as to its findings, together with such recommendations for legislation as it deems advisable, on or before February 15, 1929. The CHAIRMAN. First I want to say for the benefit of the committee that during the recess of Congress the Institute of Economics, at Washington, through its staff, have been very helpful in cooperating with the secretary of the committee and myself in getting witnesses who are familiar with the subject and who have evinced an inclination or willingness to come to the committee to testify as to their experience and make recommendations. We have a list of the witnesses who have promised to be here. This will carry us along until about the 20th of the month, sitting every day. The first witness we have here who has volunteered to testify is a man of great experience—Mr. Henry S. Dennison, president of the Dennison Manufacturing Co., of Framingham, Mass. I shall be very pleased if Mr. Dennison will tell us his experience and training along this line. STATEMENT OF HENRY S. DENNISON, PRESIDENT DENNISON MANUFACTURING CO., FARMINGHAM, MASS. Mr. DENNISON. Mr. Chairman and gentlemen of the committee: If it is agreeable to you, I will talk principally about the measures for diminishing unemployment that largely have been worked out and found successful. And in any discussion of what can be done about unemployment I want to emphasize my belief that it has got to be thought of under three separate divisions. The three are all unemployment. When built up on each other they sometimes make the situation worse, but from the point of view of any cures or steps toward betterment it is very helpful to consider them separately; in fact, I think quite necessary. The first I want to speak about is the unemployment that comes with times of depression, whether you call them parts of the business cycle or not. There have been in the past dozens of periods of depression. We don't fully understand why they come, but they do come, and it would be very unwise to suppose we are through with them. They will very likely come along again in the future. Anything that is to be done toward mitigation or diminution of unemployment that arises from the cycle is separate from that which has got to be done for unemployment from other causes. The next is the annual seasonal unemployment. It occurs every year; it occurs in good times as well as in bad, but, of course, rather less in good times than in bad. Certain businesses shut down in certain months of the year. Others are irregular and shut down at irregular periods during the year. I t would be foolhardy to attempt to improve some of them, like cutting ice in the winter. But, on the other hand2 there are a great many of the seasonal irregularities in manufacturing that can be conquered that have in fact been distinctly reduced in the last four or five years. A good deal of work has been done lately by some companies to reduce seasonal irregularity. And the third, for lack of a better name, may be called " transitional." That takes place when people who don't fit their jobs are discharged, or quit, or when people are discharged on account of UNEMPLOYMENT IN THE UNITED STATES 3 changed processes. Until these people find other jobs they are among the unemployed. These three I shall treat separately, from the point of view of reducing the amount of unemployment. I don't want to say prevention or cure, because I don't think there are such things in any absolute sense. I will take these three in reverse order. To find the causes of transitional unemployment we should turn first to the record of the turnover; that is, the number of hirings and firings that go on in various concerns. Obviously, the more people that are hired and fired the more people there are out looking for some new job somewhere. To account for the fairly large amount of transitional unemployment which exists at all times we find that the turnover figures are enormous. The figures were shocking when they were first shown up. The first work on this was done by Magnus W. Alexander, who was then with the General Electric Co. He issued a pamphlet showing the number of people going from one job to another; and it almost seemed as if some employers were in the habit of firing workers just for the fun of it, or because they didn't like the necktie the worker had on. This was, perhaps, not uncommon in the old days. The cutting down of turnover is being pushed in industry pretty freely now, but still the figures are quite large. It is not uncommon, in fact, for the average or median figure for turnover to be from 50 to 60 per cent per year. If you have a thousand employees, let us say, you would hire and fire 500 to 600 in order to keep that group up to a thousand. Turnover can not be entirely eliminated, of course. It will always be present because of girls leaving to get married, and people leaving the community, but a tremendous amount of it can be prevented. The CHAIRMAN. Are those figures the present figures, or are they for some previous period? Mr. DENNISON. They are figures for the present time and show the best records we have had for a long, long time. Here are cases back in 1925 showing a turnover of 230 per cent, where industries were hiring and firing 2,300 men in order to keep the establishment up to 1,000 men. Senator TYSON. I S that for a particular line of business ? Mr. DENNISON. That represents the metal trades—230 per cent for the metal trades in Milwaukee and Detroit. And it was 200 per cent in the New York and Philadelphia group. Senator WALSH. Who collected those figures ? Mr. DENNISON. The Metal Manufacturers' Association, of Philadelphia. There are some figures collected by the Metropolitan Life which show considerable progress. Still there is a lot to be done and it can be done by letting the business men know, just as Mr. Alexander did, that it carries the possibility of a very considerable saving to them; and, incidentally, of course, it is a distinct saving to society. The next step, granting that turnover is down to a practical minimum, is to have employment exchanges. When we get the turnover down to the best figures, to facilitate the transition, so that the workers don't have to go from door to door, employment exchanges fit in. They have other uses, of course, but that is a oasic use. 4 UNEMPLOYMENT IN THE UNITED STATES Now, seasonal unemployment is a very serious matter and savings from its elimination can be of great importance both socially and economically to the country. I t is obviously poor management, that is to say, it is very expensive for management to run a plant full time for 8 months and slack for 4, or partly for 10 and not at all for 2, as a good many do, for when a plant is shut down overhead expenses continue to go on. I t is a very common experience in industry that there should be irregular periods of employment. Periods of seasonal unemployment vary in extent, and they vary as among industries. The ways of overcoming them, of course, vary among the industries on account of the special problems each has. Yet in general they can be more or less roughly classified. The companies that have undertaken regularization policies are considerable in number. Mr. Feldman went into the matter two or three years ago and wrote a very good book on the subject. He included some 43 companies, and a survey made since that time shows about 40 more companies. There has been definite work done, enough to prove that work can be done and done successfully, that is, profitably. The throwing of people out of work seasonally is a thing we will always have to a limited extent. There will always be some girls in candy factories and in hotels thrown out of work seasonally. Resort hotels want more employees in summer than they do in the winter, and workers can not always be distributed about. But it is the preventable cases that we want to work toward diminishing. And, as I say, such work is profitable to both sides. It keeps up the morale and income of the workers and it calls for no sacrifice on the part of industry; on the contrary it cuts costs. But the idea needs advertising, it needs a knowledge spread widely around that it is practical. The commonest cause of seasonal employment arises from the placing of special orders for special seasons. Special orders for clothing is a typical case. Certain kinds of clothing are not ordered until styles have been announced, and then are rushed at the very last minute. With other kinds of goods this seasonal variation has been helped by putting responsibility on the selling department to get seasonal orders as early as possibly and by giving special terms for early orders. In our own case the success of our attempts to get early orders was really amazing. Jewelers want their boxes chiefly in the fall, and it was a tradition that they didn't place their orders for them until April or May. We wanted to handle them in January, and once we made a serious effort to do so, we had very little trouble in persuading jewelers to place their orders at the earlier date. That isn't a typical case, but it illustrates many cases where we all are at fault in failing to tackle the problem. There are a variety of devices for helping to get special orders early for later shipment so that production can be taken care of smoothly and regularly, such as advance dating, which is quite common. Placing an early order with one paper house entitles the buyer to an advanced dating of two months or so. Special pricing also has been tried in a variety of industries. Then, too, a number of concerns have definitely set about bu,ilding up an out-of-season business. One shovel plant which sold its prod UNEMPLOYMENT IN THE UNITED STATES 5 uct in summer took up the manufacture of sleds which can be sold in the winter. One of the reasons the Carter people put pens and pencils in their line was because the seasons for these products matched perfectly with the seasons for ink and glue. The season for ink was quiet in winter—because of ink freezing they had to ship in the early fall and not again until spring. Pens and pencils could be shipped in the winter months. A good many concerns dovetail side lines with their other goods. These side lines which can be sold in the off seasons are supplemental to the main lines and help to regularize employment. The changing over from production for special orders to production for stock, that is, having staple goods replace special orders wherever possible makes for regular employment. Staple goods can be carried in stock. There are, of course, some products that can not be manufactured in advance, automobiles are goods that can not be over heavily stocked, but a very large proportion of the goods handled in this country can be stocked and to good advantage. If we produce staples and know roughly how they are going and don't depend entirely on the special orders, we can adjust our output so as to keep oar forces regularly employed. In our own concern we figure out how our orders are likely to come in and adjust our production in such a way that we can work regularly, irrespective of the exact time when orders do arrive. Senator WALSH. Are these discussions carried on among manufacturers and those who employ help ? Mr. DENNISON. Yes; but only crudely. They are the methods that have proved themselves and are being more and more discussed. Senator WALSH. An active campaign of discussion along these lines would be helpful, wouldn't it? Mr. DENNISON. Anything that would emphasize the desirability of eliminating unemployment would be nelpful. We have been at it since 1914, when we were severely hit by a depression. Since that time, in Massachusetts, those that got into the middle of it realized that regularization was the cure for that sort of thing. Senator WALSH. Has much been done to regularize employment? Mr. DENNISON. Taking the country as a whole, not much has been done. Those that have done it have done well, but they form an extremely small proportion of the total number of business men. Senator TYSON. I S there very much competition in your business? Mr. DENNISON. Yes, Senator TYSON. DO sir. you have very much change in prices for your own material? Mr. DENNISON. Not very much. Senator TYSON. Therefore you have a special advantage, so that your production can be distributed very easily over parts of the year. Where the prices of material have varied, such as on cotton and wool, you would have a different proposition. Mr. DENNISON. Cotton and wool don't have very much trouble spreading over. When I was familiar with the situation three years ago, the cotton manufacturer hedged. He buys his cotton on futures, and thus his costs for raw material are fixed. Senator TYSON. My experience is contrary to that. They make up two seasons a year—lights and heavyweights. That is what you 6 U N E M P L O Y M E N T I N T H E UNITED STATES are speaking of. If wool is staple, that would be one thing; if cotton ,is staple, that would be another. My experience, at least, is that in both cotton and wool you will find that they buy two or three seasons a year. They can not easily produce for stock, although they are getting more and more to do that now. I think you are doing the right thing if it can be done. In some industries you have a lot of orders at one time and don't have any at all at another time. Mr. DENNISON. A complete cure can't be had. When industry starts in to improve and discovers for itself the varied financial advantages of eliminatiing waste, it usually finds some more waste which it can save. If the same ingenuity could be applied to the problem of employment as has been applied to the question of the installation of machinery, we should have a great improvement. We will not entirely cure it, but by constantly eating into the waste pile we will decidedly improve the seasonal problem. If the problem is a serious one, as it is in many cases, it is necessary to look over all possible ways of reorganizing the particular industry concerned. I t is possible in a good many cases, where the irregularities of employment come at regular times, to plan in advance of certain fluctuations and keep production more or less stable. If this attitude is developed in all of those industries where an attack can be made upon seasonal irregularities, we can well find a way to cure seasonal unemployment. In those remaining cases where nothing can be done about it, it would not be of such importance as to cause any serious national question. If individual employers or managers of business can be made to tackle the problem seriously, I think it will be reduced to a relatively unimportant one. Finally, effective training of operatives in supplemental jobs is being carried on in many plants more and more actively. We formerly thought that a person could only be successful on one job. Experience, however, has shown rather the reverse. There are certain people who can be transferred from job to job and gain great skill in two or three jobs. American business is taking to the budget system more rapidly than ever before. The budget forces us to look ahead, and it clarifies more and more the special losses that we undergo in business. Without a budget we do not see when our losses are incurred. We are unable to tell whether they are concentrated in August, September, or December, but when we lay out a budget these special conditions are brought very much into prominence. The measures for regularizing employment, then, are various. Many measures for the prevention of seasonal unemployment are relatively simple, and I think that they should be spread abroad among all business men. So far as unemployment growing out of the business cycle is concerned, we have a much more difficult problem, and one which, when it does come, is a more serious problem than the other types of unemployment. Yet I suppose we could get through a business cycle without great suffering and loss if we could keep cyclical unemployment from piling up on top of seasonal unemployment, as it did particularly in 1914. The country is well-to-do when people are unemployed. Somehow or other we can't put them to work during business depressions, be UNEMPLOYMENT I N T H E UNITED STATES 7 cause we are too well off. We have too many goods. How to eliminate the business cycle is not an easy question to answer. Those who had experience with the 1914 unemployment problem know how suddenly it came upon us and how severe the problem was. The first thing to" do in order to flatten out the business cycle is to increase the knowledge at the command of business men. The Department of Commerce has been working to this end constantly. We can not have too much information. The more widely the knowledge of present conditions spreads the better chance we have that people will gauge their activities on actual knowledge rather than by guesswork and snap judgments. The first thing to do in order to mitigate the conditions of the business cycle is to know more and more about conditions, such as stocks on hand, production, and the activities of other businesses. This sort of information is now being collected and disseminated by the Department of Commerce and by private agencies as well. The Government can help in moderating the business cycle by making a provision for public works during periods of depression. Private industry should also make reservations for periods of depression and keep back certain work which otherwise would be done in times of prosperity. In the President's unemployment conference it was perfectly obvious that once we get into a hole we are at a very great disadvantage, and that the measures for mitigating the evils of the cycle are not to be taken after the depression is upon us. When we attempt to do things when already in a period of depression we are undertaking nothing but patch work. The way to reduce the swings from extreme prosperity to extreme depression is to control ourselves during prosperity and not go the limit and " blow '* ourselves for everything when the going is good. We have to learn that in every branch of life. It is a healthy lesson, anyhow. During the panic of 1907 most people were absolutely dumbfounded. They acted as if that sort of thing never had happened before. There were only a few people, like Mr. Schumann, in Boston, who had made provision for such a thing. The rest of us believed that each panic was the result of some unique individual cause. Somebody's name was usually attached to each panic and we felt that the individual whose name was tied up with it was the determining cause. Yet you can go back and find them recorded time after time, dozens of them, in history. When we are able to estimate with reasonable correctness what stage of the cycle we are in at any moment then we can make some provisions for the future. We must, therefore, cultivate among our business people the idea of reserving activity—holding back— and not blowing ourselves in peak times. The CHAIRMAN. This system of installment sales, or consumers' credit, was that merely a method for keeping up our unusual prosperity ? Mr. DENNISON. I don't think anybody can answer that question with full knowledge. I think that all we can have are our own tentative views. My own view is that installment buying did not materially affect the character of the swing. It was rather like a dose of greenbacks. It meant from three billions to five billions of additional purchasing power rather rapidly thrown into the 8 UNEMPLOYMENT IN T H E UNITED STATES economic situation, and it served about the same as though wc had increased our currency. There is a limit to this, however, and I believe the credit institutions of the country will always limit the extent to which we can use the installment system for buying. The CHAIRMAN. S O that the benefit from this consumers* credit can not continue to grow? Mr. DENNISON. N O . I t is the kind of medicine you can take once. If you take two doses you are in a bad way. I t is like inflation— if controlled it is all right. The CHAIRMAN. Was it wise to have taken the first dose? Mr. DENNISON. I think so. I don't see why not. Under control I don't see that that is a bad thing at all. I t it got out of control it would be very bad. But the same can be said of everything. Senator W ^ L S H . When an effective cycle of depression comes, though, won't the depression be sharper? Mr. DENNISON. We haven't been through a real depression since the installment system has become prevalent, although some people think it won't make any difference, for Ave went through a moderate one in 1924, when there was a good deal of installment money out. A good many are ready to say 1927 was not too active in some lines and that installment buying did not seem to show any unfavorable effects then. I think, as I have said, that installment buying is like a dose of greenbacks, and if limited to a certain amount it changes the situation for the moment, but will have no lasting bad effects. The CHAIRMAN. What was the advantage of taking it, then, if it only tended to speed up business? Mr. DENNISON. I t put us just that much ahead, and if there was no bill to pay afterwards and no extra cost it did no harm. Some individuals have overplayed it, of course. The CHAIRMAN. If that was successful why not keep on trying it ? Mr. DENNISON. One dose is all right, but more than one dose may do us harm. Senator TYSON. Does not installment buying help consumption along? Mr. DENNISON. I t is the same thing as inflation. There is nothing bad about a single dose of inflation. The trouble is you can't stop it after you get going. I t is like morphine. There is nothing bad about one close if you can stop at one. I n installment buying there is always a final check in the bankers who control the credit situation and there is a limit to the amount of credit they will extend for installment purchases. The CHAIRMAN. YOU don't believe, then, there is to be any deflation after the first inflation that you spoke oi? Mr. DENNISON. If it is just an ordinary dose. I t is conceivable that England could have gone on at $3.80 to the pound. France did not deflate, England, however, was proud and would have been hurt. Inflation in itself is not necessarily a bad thing. I t must be controlled, however. I am not an economist and my word must not be taken too seriously on this, but to my mind the worst dangers of inflation are obviated if we can be certain of keeping it under close control. UNEMPLOYMENT IN THE UNITED STATES 9 The CHAIRMAN. The trouble in regard to it, to use your analogy, is that if you took a dose of morphine and you liked it, you are very likely to t r y it again. Mr. DENNISON. Yes. That is the reason why printing greenbacks is deadly. Installment buying, however, is not fatal because it carries its own cure. You get enough pretty soon and you don't want any more. Your credit structure saves you. That is, I think, the advantage of it as against other methods of inflation. I n handling cyclical unemployment we come to the consideration of public works—city, State, and national—in just exactly the same way we would consider the work of corporations. A t the height of prosperity when all are active is the time to do not quite so much. When conditions are slack is the time to do more. To accomplish that we certainly have got to do some advance planning. I n 1914 all the States were ready, more than ready, to do everything they could to help out in the situation, but when they undertook to do so they found that it would take six months before they could put a single shovel into the ground. Senator Walsh remembers that during the depression of 1914 we attempted in Massachusetts to drain the Bridgewater Swamp, but before engineering reports could be in and plans could be made, a year and a half would have passed. Without advance planning, anywhere from six months to a year is taken up before a bit of work can be done. I n all the Government units we should establish the custom of planning public works in advance, and then control ourselves so as not to carry them on just because they were planned. With private companies the same control is necessary and the public must face this same question. To control the cycle is to control ourselves. Senator TYSON. YOU testified before the Committee on Commerce on the so-called Jones bill, did you not ? Mr. DENNISON. Yes. Senator TYSON. You are in sympathy with the principles of the Jones bill? Mr. DENNISON. Yes, sir; I think those principles ought to be adopted. If the principles are adopted much more can be done than could be written into any bill. I n our company when we undertook advanced planning, we did so because we got so deeply involved in 1914. We laid out a program for ourselves—we wrote our own " Jones bill," and then worked it out. Soon it became so automatic that now we don't need any Jones bill. I n times of great activity, for example, we realize now that we don't need so much advertising, the factory is full anyhow. The time for heavy advertising is when business is slow and we haven't full employment for our force. An entire reversal of mind was necessary and we have found that our minds have been reversed automatically once we have put in a system of advance planning. When we make"our plans the first of the year, if it looks as though we are going to have an active year, we find that that is the time to say " W h a t can we trim from here and there ? " If it looks as though it is going to be an inactive year, then we should put in tonics to spur or increase our selling efforts to meet the situation. I am confident that if we give the Jones bill a fair chance it will start a custom that will be stronger and have greater effects than any 10 UNEMPLOYMENT IN THE UNITED STATES other single bill could have. And, of course, it will have its reverberative effects on the States and the cities. We must impress upon our people the doctrine that we must control ourselves during periods of activity. We must study what is going on and carry out a long range program for the good of the social and industrial structure. Reserving public works for periods of inactivity means getting raw materials at periods when prices are easier. If prices are not easier we can at least get better workmen at the same wages that we would have to pay for inferior workers during periods of great activity. During periods of unemployment the best men, working at their best pace, are usually available at normal wages. If we attempt to do our work in busy times, even if the wage rate is the same, our workers will not necessarily be of the higher level. I t is best to do more during times of unemployment than during times of great employment. Senator TYSON. I want to ask you. what about production—do you think the country can produce more than it can consume in nearly every line of endeavor? Mr. DENNISON. I t can be done temporarily, I believe. I think that there is a rate of increase in consumption that perhaps we might not exceed safely. I do believe, however, that consumption can increase ad infinitum. Senator TYSON. YOU can't increase consumption unless you have somebody that can buy, and in order to buy a man has got to be employed. Now, take the cotton machinery in your own State. I f all the cotton mills in New England were going overtime we would come eventually to the point where they wouldn't have this unemployment. Don't you think the country would soon be overstocked? Mr. DENNISON. Yes. Senator TYSON. Assuming that the present hours of labor were to continue and full-time employment given to everybody, don't you think that the country would be overstocked in a very short time? Mr. DENNISON. Overstocking a single commodity is quite a different thing from overstocking everything. Going back about 150 years ago, since the industrial revolution, we have been increasing our production and we have been increasing our consumption. We got into difficulties when the production of certain commodities increased too fast. B u t oyer that whole period of time there is sufficient proof that we can increase production at a certain rate each year and that rate can go on forever. Red flannel petticoats, of course, have gone out of fashion, and it would be absurd to continue producing them, for no matter how few you produced jo\x would be making more than the market could take. So with individual goods of all sorts, they come atid go and you can overstock with them. But we haven't yet reached the point where we can have too much of all commodities. Now, as a matter of fact, on account of manufacturing efficiency increasing siiice 1922 and 1923, and the notable increase in the productivity of the workers, we have fewer men in factories than we had before. A t the same time we have a greater factory production. Senator TYSON. Have we more unemployment than we had two or three years ago? 'Mr. DENNISON. N O . UNEMPLOYMENT IX THE UNITED STATES 11 Senator TYSON. We are consuming now practically not all that we can manufacture. If we had everybody employed, what would happen then ? Mr. DENNISON. There might be a period of adjustment that would have to be allowed for—a short period of adjustment—and then, to judge from the past, we should be able to consume all we produced* provided it was not all out of balance as between one kind of goods and another. Senator TYSON. DO you think it would be beneficial for unemployment to have shorter hours of labor ? Mr. DENNISON. That is a temporary matter if it is put in just to help unemployment. For the long run* I do not think it would help much. Senator TYSON. DO you think if you had 60 hours of labor a week you would increase unemployment? Mr. DENNISON. At first, if we should work 60 hours a week, I suppose we would increase our output without immediately increasing proportionately the demand for goods. Then after a period of adjustment we would probably consume all that could be consumed, Judging by the past. I suppose it is fair to assume that we can look forward to a 5 or 6 per cent increase in consumption each year without fear of abnormal unemployment. Senator TYSON. It seems to me what we want to learn is to consume more. If we don't find some method of consuming more it strikes me that the great thing for people to do is to find some way for the people to consume more, because we can certainly consume a great deal more than we are producing now. And if we don't sell all we produce everyone gets into trouble sooner or later. The pigiron industry is now depressed very badly. The textile business is very badly depressed. The coal business is very badly depressed. The woolen business is very badly depressed. Everybody knows that there is overproduction. Now, then, how are you going to remedy that—by continuing to produce? Mr. DENNISON. I S it so accurate to say that there is overproduction in those lines, or is it overcapacity to produce ?• Senator TYSON. NO ; if they would only use all the capacity they could in the cotton business you could produce in 75 per cent of the normal working time all that the country can produce working irregularly 100 per cent of the time, but if you had to produce 100 per cent of the time the whole country would go broke. Mr. DENNISON. Business men in reaching for their own advantages make mistakes very often in putting in too much equipment. Senator TYSON. Then what would become of the people that are being employed now in factories that operate only temporarily? Eegular employment everywhere would certainly cause unemployment for the time being in many lines of industry. Mr. DENNISON. That would cause unemployment for the time being, but the workers would have other employment eventually. I don't think that a reasonab.e percentage of overcapacity is a serious matter. I think it is probably necessary, because we don't know just how to adjust our capacity just right. A moderate overcapacity is a good tonic. People try harder to become efficient because of this overcapacity. When you come to overproduction, that can't be car 12 UNEMPLOYMENT IN THE UNITED STATES ried on very long, because it means that somebody's stocks of goods, somebody's merchandise account, must grow very big. I don't think that is now true in cotton manufacturing. Overcapacity, if not excessive, is not, in my opinion, a very bad feature. Sooner or later we come to the point where we have 10 to 15 per cent, perhaps, of overcapacity. I don't think that that is anything more than reasonable insurance, and all that it means is that the return on capital has to adjust itself. We have to have a little extra to meet situations that can not be known. In normal situations I don't think overcapacity could be called an evil. Overcapacity in the coal industry is, however, very serious. Part of the overcapacity in the textile business came out of the war demands, and then, of course, there is the change of custom in women's dresses. Women's clothes now take one-fourth of the textile material that they took a generation ago. There are swings in demand in individual cases that are simply the result of having to adjust ourselves to changed conditions—changes in civilization. Those I do not think we can hope to avoid. When there is a new kind of wheat developed, as in the Canadian Northwest, it has its effect upon certain farmers in certain parts of this country. Those are adjustment evils that I do not think we can avoid. That brings me to the last point I want to make about our own company. We realized that we should do everything we could to stop irregular employment, and that, nevertheless, even at the best there would still be some unemployment. So we instituted a plan in 1915 and started a fund for unemployment relief. It has proven highly successful. The fund has amounted to $150,000, which is used to take care of our regular employees who are put out of employment when we have no work for them to do. If laid off because of lack of work,, we pay them 80 per cent of their pay if they have dependents and 60 per cent of their pay if they do not have dependents. Eelief begins within one and one-naif or two days of the time of unemployment. This has been one of the most fruitful things we have done. The CHAIRMAN. That fund—was that created entirely by your organization? Mr. DENNISON. Entirely by our organization. The CHAIRMAN. There wasn't any augmentation of it by the employees? Mr. DENNISON. ISiot at all. Senator WALSH. Have you reports in confirmation of the information which shows the extent to which such funds have been developed by other firms? Doctor LUBIN. We have on our list witnesses representing a half dozen firms who have done that very thing. Mr. DENNISON. The great value of this unemployment fund is that it assures employees that a distinct effort is going to be made to keep them regularly employed. The CHAIRMAN. In other words, if there is any lack in managerial initiative you are penalized out of that fund ? Mr. DENNISON. Certainly. It is away beyond anything we thought possible. Executives are strongly impelled to see that something is done so that we shall not have unemployment. It is a spur to the elimination of unemployment, just as our mutual fire premiums are UNEMPLOYMENT I N T H E UNITED STATES 13 spurs to eliminate the hazard of fire. Our unemployment insurance is a daily practical reminder that workers are not to be laid off. The way the thing is working is very astonishing. We pay out not only for actual lay offs but we pay when we transfer a man or a woman from one department to another when the rate of. pay in the new department is not equal to the rate formerly received. This system is administered by a joint committee of workers and the management. With a regular pay roll of $75,000 a week we have paid out since 1920 only $75,000. Our worst year was 1021, when we paid out $25,000. The pay roll was smaller then. What our unemployment scheme has done is to state definitely that " W e are going to fight unemployment through the institution of this fund." We guarantee to pay only to the extent of the fund. I t isn't strictly insurance, for we don't guarantee to pay for any indefinite time, because we can not tell what the cost will amount to. We say, " We will pay until the fund is exhausted." This has been the best single move we have ever made in our whole labor-management policies. Other concerns will tell you about the success of similar measures in their plants. Sometimes the scheme takes the form of guaranteeing employment. Practically, in our plant, we work so hard to keep our people on the pay roll that our scheme is in effect a guarantee of employment. I t is a shock absorber. Other individual corporations have undertaken similar measures, and some of us met recently and talked over with each other the problems we have to cope with, and we discussed improvements and suggested changes. Senator W A L S H . How many firms were represented in this discussion ? Mr. DENNISON. Eleven firms. Senator W A L S H . I n the whole country ? , Mr. DENNISON. Well, that was all we know about. There may be others. Senator TYSON. Were they all in the same kind of business you are in? Mr. DENNISON. N O . Senator TYSON. Different kinds of Mr. DENNISON. Different kinds of Mr. SWEETZEK. Some of them were business? business. the most seasonal in the country. One was a writing-paper firm, another was a clothing firm; one was cast-iron pipe; another was candy—Schraft's candy—and another was a diamond cutter in New York, and so on. Senator W A L S H . Mr. Dennison, if you have finished this one phase of the discussion, I would like to have your comments upon this matter: I have been impressed by the large number of letters that have come to me in recent years from a class of men stating that they had been denied work or been discharged from their employment ancl were unable to get new employment because they had reached the age limit of 50 or more years. That seems to be a growing complaint or assertion. I would like to have your views on that feature of unemployment. Mr. DENNISON. We tried very hard last summer, in a survey cf 100 concerns, to find cases of that sort. While there were a* few more, perhaps, than there used to be, we couldn't find any evidence that they were as great as popularly supposed. 14 UNEMPLOYMENT IX T H E UNITED STATES I t has always been hard for the man of 55 out of a job. There has usually been an age limit where a man's fingers stiffened even if his knowledge of the job got better. On the other hand, the modern implements that have grown so rapidly do take the places of some of the older men. But retail selling has increased, and there is there a demand for the middle-aged. Doctor Lubin has studied that and can probably give a better answer than I can. I am inclined to think that it is not a serious problem. However, among the unemployed you would probably find some larger proportion of older men than you used to. Senator W A L S H . Has unemployment among the older men increased? When working forces are reduced are the older men discharged first? Mr. DENNISON. Only a little more than has always been the case. There has lately been a very strong movement toward more productivity and in manufacturing there is a tendency toward the discharge of the older men whose best working years have passed by. When we go through the plant as carefully and as earnestly as we have had to during the past five years, to find every possibility of eliminating waste, we find men of all ages who have just been doing one sort of thing or another and we are led to figure what good they are doing. Jobs of that sort are often eliminated. When we do this we usually find something for these fellows to do. There has always been the practice to discharge at a certain age in industry, and it is probably more than it used to be; but it does not yet seem to me to be an important problem. Senator W A L S H . Some of the most pathetic cases have come to my attention—of men with families, large families. Mr. DENNISON. I n our own shop in 1905 we wouldn't take a man of 45 if we could get a man at 25. I t is less expensive to break in a man of 25 than it is a man of 45 whose habits are set, except in a very few cases where there is a trade knowledge that comes with the increase of years and which makes up for the lack of physical activity. I think it is slightly worse than it used to be, but still it is not yet a problem of major size. Nevertheless, it is very difficult and very discouraging for the individuals concerned. Senator W A L S H . D O you know if any of these concerns—and have you evidence of them—have rules and regulations when they take on new employees, to instruct their employment agents not to take on men over 50 ? Mr. DENNISON. I don't know of any particular case. Among the 100 concerns I am speaking about we didn't have a single case of that kind. The old story is that if you can hire the younger men to do the work they become better acquainted with it. Of course, we would always rather have started them in at 20, every one of them, from top to bottom. Senator P H I P P S . H O W many of those cases would have to pass a physical examination to see how healthy they were—something like 20 per cent ? Mr. DENNISON. I don't think you would find anything like 20 per cent, but the practice of physical examination is growing all the time. Senator W A L S H . In a public forum a Polish priest put this question to me that I put to you, stating that amongst his parishioners he UNEMPLOYMENT IX THE UNITED STATES 15 found a very growing tendency to discharge men of large families who reached 50 years of age. H e was a clergyman, working among a class of people noted for their hardiness and endurance. I was quite surprised at his insistence upon the importance of that problem and his fear for the future because of its possible growth. Mr. DENNISON. He is getting his first dose of it. I t is only in recent years that people of this character—the immigrant population from the southeast of Europe—have come into the class of the middle and old age groups. Senator W A L S H . And you think that will always happen and increase? Mr. DENNISON. Slightly. Doctor Lubin has made a study of several hundred individual cases and he knows more about it. So f a r as we can find we don't believe that it ever was a major problem. Society has changed its methods and its demands upon the different members of the family. I n the old days of handicraft the younger people were left out of the picture in p a r t ; now the younger ones have to do more of their share of supporting the family. The CHAIRMAN. I don't want to bore you on this morphine question, but I am very much interested because usually the more we take of morphine the more we want to take. Don't you think that installment buying will act in this way? Mr. DENNISON. There are a lot of individuals who would like t a see more of it so that they might sell more goods. The CHAIRMAN. S O wThen we wTant another period of great activity, will we take on more morphine? I n other words, the patient has had a dose of it and liked it, and the doctor comes in to stimulate the situation by giving more morphine in the form of credit. The patient likes the dose. Mr. DENNISON. The installment people do. The CHAIRMAN. Of course, they go back to the credit fund and make a profit. So does the banker. You can't do business with the banker without making a profit. Mr. DENNISON. I am glad to know that. The CHAIRMAN. YOU knew it before I said it. Mr. DENNISON. Of course, I knew i t ; but I didn't say it because I might have my credit curtailed. Senator TYSON. D O you think that they sell a great many more automobiles to-day because of the installment plan than they could possibly sell if they did not have it? Mr. DENNISON. I think when they started in it they undoubtedly did, but it is questionable to-day. Senator TYSON. D O you think a man would buy a car if he had to pay $700 or $500 clown as quickly as he would if he only had to pay $50 down? Mr. DENNISON. N O ; but we must bear in mind that he has committed himself to pay installments on a variety of things. Senator TYSON. New people are coming into the country every year. A man has an automobile which is paid for and he wants t a get a new one. He says, " I wTill turn it in and get a new one on the installment plan." Do you think that Henry Ford, one of the greatest business men in the world, would have adopted the installment plan if it wasn't a good thing ? 29193—29 3 16 UNEMPLOYMENT IN THE UNITED STATES Mr. DENNISON. I have said that the installment plan was a good thing. Senator TYSON. Then why not continue it if it is a good thing? Mr. DENNISON. The evil would be in allowing the system to get out of control. Senator TYSON. A man couldn't be carried if he didn't buy things on the installment plan. The CHAIRMAN. I think there is a conflict between the Senator and the witness. I asked whether it was wise to expand the installment plan. Mr. DENNISON. My guess is that it has reached its limit. Its proportion does not seem to increase and has not increased in the past two years. Senator TYSON. T O stop it would be a very bad thing. Mr. DENNISON. T O stop it would be a very bad thing. The CHAIRMAN. Doctor Lubin desires to ask a question. Doctor L U B I N . Mr. Dennison, can you give the committee an approximate estimate of what proportion of unemployment could be eliminated by an attack upon this problem of unemployment by American industry itself? Mr. DENNISON. All sorts of unemployment, I feel certain—I can't express it in figures, but the serious part of unemployment could be conquered by the Government and industry acting wisely. If the Government and industry should attack this problem in* the right way, we should be able to cut our unemployment by at least one-half. Doctor L U B I N . Has your firm found regularization a profitable venture ? Mr. DENNISON. We surely have. There isn't anything we are more sure of, and we would do it again readily. I n recently discussing with our employees which of our schemes should be given up if it were ever necessary to make a radical change, the employment guaranty feature was the last one that they wanted to see go, and that in spite of the fact that they have only received $75,000 from this fund in the last eight years. Senator W A L S H . H O W many employees do you have ? Mr. DENNISON. Three thousand. Senator W A L S H . H O W many did you have in 1921 ? Mr. DENNISON. About 2,700. (Appended is a statement showing the unemployment fund reserve transactions of the Dennison Manufacturing Co., Framingham, Mass. This table shows the source of the reserve unemployment fund, and the payments made each vear from the funds, from 1920 to October 31, 1928:) Summary of Dennison Manufacturing Co., unemployment transactions Appropriated from profit and loss: Dec. 31, 1916 Dee. 31, 1917 Dec. 31. 1918 Dec. 31, 1919 Total appropriated from profit and loss. fund reserve .$20,000. 00 35, 000.00 35,000. 00 50,000.00 140,000.00 UNEMPLOYMENT IX THE UNITED STATES 17 Interest on fund: 1910-1920, inclusive 1921 1922 1923 1924 1925 1926 1927 $9, C41.28 7,056.00 5, 750.00 6,630.00 4, 806. 00 5, 822.50 5, 760.00 4,485.49 Total accretions Less payments from f u n d : 1920 1921 1922 1923 1924 1925 1926 1927 189,951.27 $4, 489.97 23, 372.92 1, 510.15 1, 348. 29 2, 084.11 8, 981. 01 20,924. 27 15,465. 27 Subtotal 78,175.99 1928 (10 months) 6,413.89 Total payments 84,589.88 Balance of fund, Oct. 31, 1928 105,361.39 (The following table is an analysis of the payments made from the unemployment fund reserve of the Dennison Manufacturing Co. It shows how much was paid out each year for actual lay off, how much was paid out from the fund to make up the differences in wage rates which resulted from transfers of labor to new jobs to avoid unemployment, and the percentage which unemployment payments bear to the total yearly factory pay roll:) Analysis of payments Year made from unemployment Cash paid for actual lay oft fund DiiTerence in value of labor paid on transfers to avoid unemployment reserve Total payments Per cent of unemployment payments to factory yearly pay roll 1920 1921 1922 1923 1924 1925 1026 1927 $2,897.22 18,602.08 111. 80 406.20 22.06 945.43 7,382.32 6,146.35 $1,592.75 4,770.84 1,398.35 942.09 2,062.05 8,035.58 13,541.95 9,318.92 $4,489.97 23,372.92 1,510.15 1,348.29 2,084.11 8,981.01 20,924.27 15,465.27 0.0014 .0080 .0005 .0004 .0006 .0025 .0057 .0042 1923 (10 months) 36,513.46 2,159.85 41,662.53 4,254.04 78,175.99 6,413.89 .0029 .0022 38,673.31 45,916.57 84,589.88 .0028 (Thereupon, at 11.50 o'clock a. m., the committee adjourned until to-morrow, Wednesday, December 12, 1928, at 10.30 o'clock a. m.) UNEMPLOYMENT IN THE UNITED STATES WEDNESDAY, DECEMBER 13, 1928 UNITED STATES SENATE, COMMITTEE ON EDUCATION AND LABOR, Washington, D. C. The committee met, pursuant to adjournment, at 10.30 o'clock a. m., in the committee room, Senate Office Building, Senator James Couzens presiding. Present: Senators Couzens (chairman), Tyson, Walsh, and Locher. Present also: Dr. Isador Lubin, economist, Institute of Economics of the Brookings Institution, Washington, D. C , assisting the committee. The CHAIRMAN. I think we will proceed. We may have some more of the committee here later on, but they are all busy for the moment. Will you enter in the record Mr. Lewisohn's connections and activities. Doctor LUBIN. The reporter has that information, Mr. Chairman. The CHAIRMAN. Mr. Lewisohn, we will be very glad to have you tell us what you know about this unemployment situation. STATEMENT OF SAM A. LEWISOHN, DIEECTOE EQUITABLE LIFE INSTTEANCE CO., DIEECTOE OF THE BANK OF AMEEICA, FIEST VICE PEESIDENT TENNESSEE COPPEE & CHEMICAL C0EP0EATION, FIEST VICE PEESIDENT MIAMI COPPEE CO. Mr. LEWISOHN. Mr. Chairman, it is my belief that if seasonal unemployment were done away with we could probably save to American business, conservatively, $2,000,000,000 a year. I will explain the figures later on. Up to recently unemployment has been considered largely a matter of taking care of the unfortunates, the unemployables, and the mendicants. Twenty years ago it was considered a matter of getting work for tramps, or, as a matter of fact, making tramps work. Now we realize that it is really a complex problem of industry, in the broader meaning of that term. Though it isn't a matter that can be cured solely by industrial executives, unemployment is largely a matter of having our whole industrial organization work better. And the main point, I think,, to keep in mind in unemployment, on its preventive side^ is that it can not be approached directly, but rather as an incident to other problems. I suppose the trouble was that we used to regard unemployment as a sort of specific germ disease that could be eradicated by finding some specific cure, some panacea, some antitoxin. More recently, 19 20 UNEMPLOYMENT IN T H E UNITED STATES since it has been studied more thoroughly, we realize that it really is a symptom of a lot of complex situations that arise in connection with other problems. Sometimes it is due to situations that are the exact opposite of each other, just as a rash can be due to a healthy condition, like sunburn, or an unhealthy condition, like hyperacidity. In a similar way anyone connected with business can see that unemployment is the result, fundamentally, of a healthy condition of the country, sometimes of an unhealthy condition. Sometimes it is the price of progress, sometimes it is the price of decay. For example, we can have unemployment in a country such as this, in a healthy condition, having healthy growing pains, due to the introduction of labor-saving devices; and, on the other hand, we can have unemployment in a community that is economically decaying. We have had it in States such as Colorado, you wiil remember, Senator, where we had unemployment due to the fact that the mines were more or less exhausted in that State. We have unemployment in a country like Austria, or the port of Venice, where the channels of trade have changed. Again, we can have unemployment due to opposite conditions, due to efficient management, and you can have unemployment due to inefficient management. For example, progressive management is often under the necessity of introducing labor-saving devices. Take the mining business, in which I am engaged; very often we find ourselves under the necessity of mining more efficiently in order to mine the lower grade ores. Now, that is a sign of efficient management to be able to do that, and yet it may mean that you suddenly would have to throw out several hundred men on the community. Now, in the same way we are hearing of the introduction of new processes in some of the steel plants. I know one in particular that is run by a friend of mine. They have new processes and they are under the necessity of discharging 500 men just because of efficient management. Now, on the other hand, we have the problem of seasonal unemployment, and that type of unemployment, far from being due to efficient management, is due usually to inefficient management. Seasonal unemployment, as I suppose some other gentlemen have explained to you, can be met, largely met, by executives who possess a sufficient amount of ingenuity, Yankee ingenuity, and Yankee imagination. And thus where we have that type of unemployment we can say that we have had poor management, whereas in the other cases it was really the result of good management. I think the main point to keep in mind, therefore, in all these problems is that unemployment can not be approached directly, and that it must be approached as an incident in the solution of other problems. I am discussing this problem of seasonal unemployment first because it is the one problem tha£ is the most susceptible of a direct, definite, and immediate attack. Its cure quite often is a by-product in the process of solving some other problems. It is something that you can do something concrete about right away—now. If the business men are conscientious enough about the problem, and if they attack it with sufficient ingenuity, it always seemed to me to be a very interesting problem in which there doesn't have to be any conflict between the desire of business men for profits and their social UNEMPLOYMENT IN T H E UNITED STATES 21 and humanitarian instincts, for Ave all know that seasonal unemployment is usually a needless waste which cuts down our profits. I have estimated that probably if we were able to do away with that type of unemployment Ave could save $2,000,000,000 a year in profits. We have unemployed, year in and year out, approximately, let us say, 1,600,000 to 1,700,000 men. We could probably do away with a million of that unemployment, which would mean that we would have done awpy Avith about 3 per cent of the unemployment among those that want work, which number about 35,000,000. I am just estimating it. Our national income is about $70,000,000,000 a year, and that would mean that we might save about $2,000,000,000 a year. So here we have the problem which is incidental to the problem of making larger profits. Now, I am not going into detail about the seasonal unemployment, because I am in the mining business, and also, to some extent, as a by-product, in the acid and fertilizer business, in which we have practically continuous employment. We have certain seasonal problems that Ave meet in the fertilizer business by the establishment of proper storage facilities. We make a large part of the acid that is made in the South and we have found it important to see that we have enough storage facilities so that we don't have to shut down our work unduly. Seasonal unemployment, as the name implies, and as you gentlemen know, is a matter of unemployment due to the yearly seasons. Winter compels a change in diet, in clothes, and in recreation, and there are certain industries in which we have the problem of what electrical engineers call the peak load. We have that in the electriclight business. We have tried to do away with it. The activities of the particular business or industry are concentrated at one time for us, and unless something is done about meeting the problem there is no Avork for the men for the balance of the year. Of course, we have the farm problem, and many of us who have farms try to find work for the men to do in the winter, so that we can keep them employed all through the year. During the President's unemployment conference in 1921 a serious study was made of the problem and we sent a questionnaire around, and we found a large number of businesses doing a great deal to meet the problem. Of course, you are all familiar with the type of man that goes into the coalr business in the winter, and the ice business in the summer. We haA e seen those in the migrating hotel business who don't employ their people in the hotel business in Florida during the summer but take them aAvay to the Berkshires. The business man Avho has given any thought to the problem begins to realize that there are ingenuities that can be introduced all along the line. Now, for example, there are, first, ingenuities in distribution. The telephone and telegraph companies cut their prices at certain times. The anthracite coal companies have done it to some extent. In the automobile business we know that people used to think that they could use cars only in the summer. Now, with the closed cars, they use them just as much in the winter, so that we haven't had that seasonal problem to such an extent there. Then there is the method of introducing supplementary lines. A manufacturer of farm and garden implements, for example, may 22 U N E M P L O Y M E N T I X T H E UNITED STATES introduce sleds in order to balance that business so that he can keep his men at wrork the year round. I t is very much of a problem, and I am giving these examples merely to illustrate it. Then there is the problem of manufacturing for stock. You will probably hear about that further from Mr. Draper. I n my own experience I have found that it is important to have managers keep in mind the necessity of providing adequate storage facilities so as to make it unnecessary to close down the plant just because the demand for a short time may not be sufficient. I am not going further into details, because it seems to me that this matter is largely a matter of emphasis, and those interested in a public way in this question can best help bring about progress in it by providing educational means to bring this matter into the consciousness of the business men. The important thing is to make regularization the fashionable thing to do. We know that our business men always do the profitable thing and should use their ingenuity to make regularization fashionable, but they don't. Necessity is the mother of invention, and in business, it seems to me, anybody can realize that the important thing is to create a state of mind among business men so that, if I may use the phrase " regularization first," it becomes t h e . fashionable thing among them to introduce stability in their plants. I think that once the business men are alive to the possibilities in this direction we can rely on their ingenuity to find means of solving the problem. Here we have a problem that is largely one that business executives can solve. Then we have the problem of technological unemployment, which is the price of progress and a real acid test of a healthy condition. Somebody called my attention to that in 1900. They were complaining of technological unemployment. We heard complaints about high unemployment due to labor-saving devices during the latter part of the nineteenth century. Xow, here it is, in a way, a sacrifice the working man is asked to make to posterity. There is really no solution of this problem •except to provide adequate public labor exchanges. Our private exchanges aren't adequate. Many of us have felt that we should have adequate Federal and State unemployment services that cooperate with each other. A n investigation by the Institute of Economics has shown that American labor is very adaptable and that it readily jumps from one trade to another. The CHAIRMAN. Will they jump from one location to another as Avell as they will jump from one trade to another? Mr. LEWISOHN. We have men come down to Tennessee from Detroit, Senator, down to our plant in Tennessee, and the difficulty we had was to be quite sure that the men we took from the automobile business were adapted to mining. That is a matter of trade test. They will come if it is necessary; but, at any rate, I think we can not ask labor to make all the sacrifices in this problem of being absorbed into other work, because of the introduction of laborsaving devices. I t seems to me we should at least do everything we can to help them. Besides, it would be profitable for the country to do so. There are a lot of complex problems connected with it. We are further behind in Federal employment exchanges than they UNEMPLOYMENT I X T H E UNITED STATES 23 are anywhere else in the world, and this situation seems to me almost ridiculous. The CHAIRMAN. Isn't that due to the fact that the country is so large, compared with other countries—European countries ? Mr. LEWISOHN. I don't know. One of the causes has been, Senator, that we tried to take it up during the war, and set it up too quickly, without proper administrative study, without proper civilservice concern, and the proper thing in the Federal service, both State and Federal, is the administration, as it is in all these problems. I t seems to me that the way to solve that problem is to make sure that we have a well-paid staff at the top to go about it just as they would a big business. And, indeed, it is a big business. I suppose doing away with seasonal unemployment by business men is one of the most important things we can do toward the unemployment situation in the country. It is well that an adequate appropriation should be made by Congress for the building up of an efficient staff. The first thing, it seems to me, is an adequately paid director, which would assure the country that adequate service is given. There has been a great deal of experience had on the problem and a very extensive survey made by the Russel Sage Foundation. I think there is no doubt that we could have an adequate survey made if anyone was anxious enough to have it. We are very ingenious when we want a thing hard enough. I see no reason why we shouldn't have a public employment exchange to promote or accelerate the absorption of the men thrown out by those of us who are introducing labor-saving devices. I have known plants where men were thrown out of work in order to make a success of the operations, and there are no facilities making certain or making fairly easy their absorption into other industries. Then, of course, we have got the other problem of cyclical unemployment. I suppose during 1921 the depression caused the country a loss of $9,000,000,000. That is a guess, but there was a 15 per cent drop in the national income, which was $60,000,000,000, so that the loss due to that depression can be estimated at $9,000,000,000. Now, the individual business man can help in preventing excesses of those depressive periods by proper forecasting methods. Probably you will hear from some manufacturers on the subject. By proper forecasting methods they can prepare for those times by building up adequate reserves, have their sales force ready, and not too large inventories. I think in this respect we have improved greatly over 1921, and that sort of thing adopted by American industry will have its effect on the buying policy. I think it is a healthy thing. I t may have gone too far, but I think it is a healthy thing. By proper forecasting in individual businesses a good deal can be done to prepare individual businesses to meet a depressive period. On the other hand, I think it would be an excellent thing if the Government could lead the way in the direction of meeting the problem of mitigating these depressive periods by reserving a certain amount of public work for those periods. The great thing, the important thing, about the Government taking the lead in that direction, if they were ready to do a certain amount of construction during the time when we were threatened with depression, is that it would instill confidence in the business world; it would make construction at that time fashionable among other groups, and a gesture of this 24 UNEMPLOYMENT IN THE UNITED STATES character by the Federal Government would stimulate States and cities to do" likewise. I t wouldn't, of course, prevent depressions, but it would have a marked influence in mitigating their force. I t is particularly important also because, I think, it would prevent too much public work in boom times, which is just :as important, by cutting out public work in boom times. I t would also be important in helping prevent subsequent depressions. So that, all in all, it seems to me that public works, if we are ingenious enough, could be a balancing force to flatten out the force of these waves of overaccentuated prosperity and successive depressive periods. The CHAIRMAN. YOU spoke a while ago about setting up a reserve during prosperous times. Did you mean that to be used exclusively for the promotion of your own industry, or were those reserves anticipated to be used in a way to balance the income of the workers? Mr. LEWTSOHN. N O ; I wasn't going into the problem of unemployment compensation, which is a large problem, and almost a separate one in itself. I think that is a very healthy thing, but the most important thing, it seems to me, is to have the reserves so that you don't have unemployment. I think the healthiest thing, first, is the approach of unemployment as a problem that comes incidental to a lack of forethought in business. The CHAIRMAN. Yes; but Mr. Dennison, in testifying yesterday, stated that they had created a fund during a period of eight years, and I think the maximum amount of the fund was some $75,000, and that that was to be used anytime they were required to lay off men. I n other words, they penalized themselves for having to lay off any of the help; and that in itself, of course, was naturally an incentive for not laying them off but keeping them in continuous employment. If I remember correctly he said they had only paid out one week's pay roll in all that period of time—eight years. Mr. LEWISOHN. I think it would be an excellent thing if we could get employees to do that in a larger way. I was interested to know that one large insurance company—the Metropolitan Life—is ready to insure companies against unemployment. Senator W A L S H . What you mean by adequate reserves, then, is reserve business, rather than any fund, as Senator Couzens speaks of? Mr. LEWISOHN. That is what I mean. Senator W A L S H . YOU mean that each employer should keep in reserve some business that he could bring forward and develop in times of depression, is that it ? Mr. LEWISOHN. Well, also that he should have funds in his treasury so that just at the time of depression he wouldn't be broke and have to shut down because of lack of working capital to pay his workmen. I t quite often happens. Senator W A L S H . In times of boom, if they have adequate resources, so that they can carry on in times of depression for restoration of the business. In other words, they could accumulate a stock on hand, in reserve. That is your thought ? Mr. LEWISOHN. Financial resources. Senator W A L S H . And by these resources they could carry on their business at a temporary loss in anticipation of the reserve prosperity. Mr. LEWISOHN. Yes. As a matter of fact, I think it has become more the custom among the larger companies to have much larger UNEMPLOYMENT IX T H E UNITED STATES 25 reserves than has ever been the case before in the history of this country. We all do. They used to rely very much more upon bank loans. Now, they build up fairly large reserves. I think that is a very healthy tendency because it provides the possibility of manufacturing for stock during depressive periods. The CHAIRMAN. Have you given any study or thought to unemployment insurance yourself? Mr. LEWISOHN. I have given just a little thought to it. I don't think it is a problem that the American people are ready to handle in a public way yet. I am interested, however, to find that some of the larger insurance companies, at least one as I said—the Metropolitan Life—is ready, if it can get legislation to amend its charter, to insure companies that desire to pay a premium in order to pay unemployment bonuses in case their men are discharged because of lack of work, or perhaps thrown out for other reasons. This would be very useful, it seems to me, in times of depression when men are thrown out of work, because it would sustain the buying power of the public just at a time you want to sustain the buying power. I know that insurance companies are writing billions of dollars worth of group life insurance. I am a director in the Equitable Life. I known it is billions these insurance companies write. I t has only been built up in the comparatively last few years. I t might be very useful to know that insurance companies would write group unemployment insurance, because it would be a balancing force in such a period. And also it would mitigate the horrors of unemployment for at least a fraction of the workers. I don't believe that all the companies would be willing to insure on that basis. My opinion, if you asked my opinion, would be that ultimately, far off perhaps, it is to be very carefully considered. We will have to get some method for State unemployment insurance, but that may be many, many years from now. Senator WALSH. Have you made a study of what has been done in that direction in other countries ? Mr. LEWISOHN. I have studied some of the literature on the subject. Senator W A L S H . YOU stated a while ago that your company had a relatively small unemployment problem, that you were giving the workers practically continuous work. Mr. LEWISOHN. Yes. Senator W A L S H . That refers to Mr. LEWISOHN. T O our copper the copper industry? business and to the acid business and fertilizer business. Senator W A L S H . H a s that been generally true of the copper business throughout the country? Mr. LEWISOHN. I think the metal mining industry is usually pretty stable. Senator W A L S H . H O W has it been with you the last few years in .the copper business? Mr. LEWISOHN. I t has been fairly stable—year in and year out, of course. Of course, copper is something that can be sold continuously. The small mines, let us say, are shut down and those men are thrown out of work. Senator WALSH. YOU mean they all carry the same number of employees, year in and year out? 26 UNEMPLOYMENT IN THE UNITED STATES Mr. LEWISOHN. Yes; practically. They may take on a few more or a few less. Senator W A L S H . We read so much in the financial papers about the copper business being dull, about copper not being mined, that you would naturally infer that there are periods of rise and fall in employment. M r / LEWISOHN. Of course, all the copper isn't mined in this country. Some copper is mined in Chile, South America. Senator LOCHER. Wasn't there a tremendous slump immediately after the war ? Mr. LEWISOHN. Immediately after the war, yes. I t threw a lot of men out of work. The CHAIRMAN. Where are your copper mines ? Mr. LEWTISOHN. Arizona and Tennessee. The CHAIRMAN. Are they producing at a lower cost than other copper mines in the country ? Mr. LEWTSOHN. N O ; they are what we call medium cost. The CHAIRMAN. I was under the impression there was unemployment in the copper mines in Michigan. Mr. LEWISOHN. Of course a lot of men are thrown out of work in Michigan because of competition. That means a .shutting down of the mines because the cost is too high for the producers. I don't see how you could prevent it. We use, in the manufacture of fertilizer, large gangs of men, and we have introduced traveling cranes, and we provide adequate storage facilities, and have less /seasonal unemployment because the men employed in that work are employed the year round. Now, you have men thrown out of work just because you have improved your process. Federal employment offices seem to me to be necessary because men thrown out of work should be absorbed in other industries just at that time. I n the mining industry we find at times we have to discharge a certain number of men in order to make the mines profitable. Or, again, take the industry, as I said, in Colorado, or in other States, where we have mines that have become exhausted, and, as a result, the men have to find other work. They have to be absorbed. So we have a certain amount of unemployment that can't be done away with, so there we have this problem of reabsorbing them into other businesses. I t seems to me, particularly in seasonal unemployment, among business men it i^ largely a matter of making the business men conscious of the necessity of stability in their business, and that we ought to have a regularization movement. I really think you can get pretty far with that. The CHAIRMAN. You would have no difficulty in arousing their conscience if they were the sufferers the same as the men out of work. Mr. LEWISOHN. I think they are the sufferers, without being conscious of it. The CHAIRMAN. But not in the sense that the worker suffers in not being able to provide adequate support for his family. Mr. LEWISOHN. But they lose their profits. The CHAIRMAN. YOU can lose your profits without sacrificing your home life; but it is different with the worker out of employment UNEMPLOYMENT IN THE UNITED STATES 27 going through a period of that kind. His suffering is physical as well as mental. Mr. LEWISOHN. I am speaking of unemployment that occurs during the year in almost every industry. That may be done away with if the business men were ready to emphasize the problem sufficiently. I agree with you that it is very important, indeed, from the humanitarian point of view that you just mentioned, and I believe that it can be very largely mitigated at least if you could get the business men to become sufficiently interested. The CHAIRMAN. I think that is all. Thank you very much for coming. STATEMENT OF ERNEST G. DRAPER, TREASURER AND GENERAL MANAGER THE HILLS BROS. CO., NEW YORK CITY The CHAIRMAN. Please give your name and occupation. Mr. DRAPER. My name is Ernest G. Draper. I am treasurer and general manager of the Hills Bros. Co., New York. The CHAIRMAN. W h a t is their business? Mr. DRAPER. Packers of food products. The CHAIRMAN. H O W extensive is their business ? Mr. DRAPER. We do business amounting to seven or eight million dollars a year, in many countries of the world. Senator W A L S H . H O W many employees have you? Mr. DRAPER. We have about 1,000 employees. Senator W A L S H . Doing what kind of work? Mr. DRAPER. Packing; food products, principally Dromedary dates. We have a packing station in Basrah, Mesopotamia, at the head of the Persian Gulf. The crop of dates that matures in September is packed in 70-pound boxes and then transported by steamer to a factory in Brooklyn, N. Y. There the dates are unpacked, cleaned, and sterilized and replaced in small cartons, in which form they are sold to the trade. Because of the nature of the crop it is inevitable that the raw material for a whole year's production must arrive at the Brooklyn factory from Mesopotamia between the months of October and January of each year. As the greatest demand for dates is from September to January, it was customary in the old days to pack in a small way during the first part of the year and then to concentrate upon high-speed production during the last four months. This meant that the average working force during the first eight months of the year had to be expanded by about 600 per cent during the last four months. The wrench involved in expanding this force over night, so to speak, is apparent. For years the company struggled to keep up with the demand for its product, which became so insistent in the fall. I n trying to meet this demand there was the temptation to lower the quality of packing and in other ways to encourage wasteful methods which are bound to creep in under forced-draft production. Finally conditions became so critical that the executives determined upon a drastic change in policy. Their chemists told them that if, upon arrival, raw material was placed in cold storage until taken out to be packed, was packed in cartons and then replaced in 28 UXEMrLOYMEXT IX THE UNITED STATES cold storage, it would keep indefinitely, providing the proper temperatures to be maintained were determined beforehand. Accordingly, the company erected a cold-storage warehouse adjoining its packing plant. It purchased raw material which would supply not only the fall demand but the following year's demand as well. In 1921 the new plan was tried, but only in an experimental way. The experiment proved successful. Dates packed in January were taken out of cold storage in September and found to be in perfect condition. In the following year of 1922 a much larger quantity was packed during the off season and for the first time in six years the supply of Dromedary Dates during the fall rush season was equal to the demand. After this successful experience the company awoke to a realization of the great savings which could be effected by attacking the problem from a production standpoint. In the past, practically no attention has been paid to the kind of labor employed or its effectiveness during employment. The best way to meet such a situation was to establish a personnel department. This the company did, and procured the services of a college woman who had had some experience with department store employees. One of the first needs which became apparent was that of additional lines during the off season for dates. The company has consistently tried to meet this problem by promoting several off-season products. While our success in this direction has not been spectacular, a glance at the records indicates that it has been considerable. It takes time to work out problems of this character, but that they can be worked out, now that we have a definite formula for more regular production, goes without saying. We are staunch advocates of budgetary control. At the beginning of each year we budget every item of importance, whether it refers to sales, purchasing, or production, and then we try to rigidly keep within this budget. This method has eliminated waste to a remarkable degree and has undoubtedly increased our profits. The facts will show that more stabilized production has brought about a higher quality of product, a more continuous working period for employees, and a general increase in smoothness of operation throughout all branches of the company. Our attitude toward broken employment has changed. We never decide upon a major shift in production without considering what this change will mean to our employees. This is not a sentimental attitude alone. It is an attitude that bears fruit in better morale and more profitable operation. To this extent it may be called a selfish attitude. It may be selfish, but at least it is enlightened selfishness which has regard for the social welfare as well as for the individual gain. The reason I took the time, Mr. Chairman, to make that detailed statement of this company's successful efforts to stabilize employment was that so many business men seem to think that stabilization of employment is more or less a charitable affair; that it is good for society. But we aren't in business for charity; we are in business to make profits; and it seemed to me that by giving an example, an example of a comparatively small company, to be sure, but one that has tried to regularize its production and has succeeded, we can show that it not only is desirable from the standpoint of society but that it is also desirable from the standpoint of individual gain. UNEMPLOYMENT I X T H E UNITED STATES 29 The CHAIRMAN. After you adopted that method, what was the difference in the roll, the emplojonent of your men? Mr. DRAPER. Our employment in the old days was about 200 employees for the first eight months of the year, then about 1,300 or 1,400 employees for the last four months. Our production is now on the basis of between 800 and 900 employees through the year. I n other words, as I have already stated, instead of expanding overnight almost our number of employees about 600 per cent, we now work regularly between 800 and 1,000 employees right through the year. The CHAIRMAN. Do you still expand some during those four months? Mr. DRAPER. Yes; we have to expand some or contract some, depending on the amount of business that we get in. We will say, for instance, we expect to sell a certain number of cases of our product— we hope we will sell it, and that is based on a very careful forecast— of course, it fluctuates somewhat. I have here a book entitled " The Regularization of Employment," and if it is in order I would like to give a copy of this book to each member of the committee, because it seems to me it contains a great deal of valuable information along the line of our discussion here. This chart indicates the time of our production and the number of our employees. This line indicates the volume of our sales and this line our production in the old days [referring to page 54 of said book]. Now, here are the sales, and this was our production, taken from our actual records. That was for the year 1921-22, but it has remained approximately the same. The CHAIRMAN. When was that book written? Mr. DRAPER. I t was written in 1924. The CHAIRMAN. Have you any idea of any legislation that might be undertaken which would be helpful? Mr. DRAPER. I am not so enthusiastic about any definite legislation because I think that this, to some extent—in fact, to a great extent— is a problem for the business men themselves. I agree with Mr. Lewisohn that a great deal could be done by bolstering up the Federal employment service. I t seems to me that industry ought to be glad to get its employees easier and quicker, and this I believe would also be of tremendous value to the employee himself. Senator W A L S H . I shall appreciate your sending me a copy of this book, and I am sure the rest of the committee would like to have cop <*-• Will you mail them to us? Mi I >RAPER. I wrill mail them to you; yes, sir. The CHAIRMAN. Have you any information as to what became of those employees that you used the last four months of the year during the other eight months? Mr. DRAPER. We haven't any definite information, but we do know that they were absorbed to some extent by the factories of the American Can Co., which were in our neighborhood, and by other plants somewhere near there, but we also know that a great many of them didn't get any employment at all and undoubtedly suffered as the result of this drastic swing. I should also like to say in answer to your question as to whether I think any legislation would be desirable in this connection, that I 30 UNEMPLOYMENT IX THE UNITED STATES am very much in favor of the public works idea which has been expressed here for us. Senator W A L S H . The Jones bill? Mr. DRAPER. The Jones bill, and others of that type, yes; because I think anything of that sort which will help smooth out the curve, this cyclical curve, or seasonal curve, is desirable. Mr. Lewisohn, I think, was supposed to spend more time on the cycles of industry, and that is why I am not attempting to say anything about that phase of the problem. I am more interested, more anxious, to present the view that the business men are, in my humble opinion, losing money by not making employment more regular. I believe, as I have already stated, such a plan benefits society and increases profits. The CHAIRMAN. Did you read the proposal of the governors' conference at New Orleans? That proposal was supposed to be authorized by President-elect Hoover. Mr. DRAPER. Yes, sir. The CHAIRMAN. Did that appear to you to be a practicable plan? Mr. DRAPER. S O far as I can see it was more or less the putting into effect of some of the major stipulations of the Jones bill. I am not familiar with all details of it, but it seems to me that that was more or less Doctor LUBIN (interrupting). I t doesn't bring in the question of the various States. Mr. DRAPER. Yes; I think that is perfectly true. This is a problem that everybody has got to get behind. I t can not be merely a problem Senator WALSH (interposing). Of the National Government without the State government. Mr. DRAPER (continuing). That isn't supported by the rest of the communities. The States, cities, and towns must all do their share. Senator W A L S H . Have you made any study or given any thought to unemployment insurance? Mr. DRAPER. I have, yes, sir; but I agree with Mr. Lewisohn that state unemployment insurance seems perhaps a little far in the distant future. I n any event, it seems to me that it is more or less academic until we make production in our plants more regular. I t is perfectly ridiculous to talk about giving insurance to individual employees—unemployment insurance—until you regularize your employment, because if you do it without making your employment regular you are liable to burst the company—break the company. Senator W A L S H . W h y have business men been so slow, if I am correct in saying they have been so slow, in realizing if they don't regularize their production they are losing profits ? "Mr. DRAPER. A S I said before, business men jseem to think of this as humanitarian, so to speak, something you do in a paternalistic way, and not anything that really affects the pocket. If they were going to make more money in undertaking these things they would be very quick in doing it, but I think business men are really to a great degree conservative minded, and they naturally don't like to engage in anything that looks like an experiment to them. The CHAIRMAN. The general adoption of workmen's compensation due to accidents and other causes was brought about by the social demand for it, the demand of the people. Mr. DRAPER. Yes; I think that is absolutely so, Senator. UNEMPLOYMENT IN THE UNITED STATES 31 The CHAIRMAN. YOU don't find any employers now opposed seriously to workmen's compensation, do you? Mr. DRAPER. N O . The CHAIRMAN. Yet, in the final analysis, unemployment is just as serious for the workmen's families as workmen's compensation. Mr. DRAPER. I think more so. I 'think the impetus came from the people themselves. I think, also, that what brought them around to it was the fact that they realized that they had to take good care of their employees or their morale would suffer; and good morale means good production, and good production means good goods. So that any problem of that sort, it seems to me, can be looked upon as enlightened selfishness, if you wish to call it that, or intelligence, because it means increased profits. The CHAIRMAN. Perhaps the most effective wav of accomplishing this stabilization of employment is to create a puolic demand for it; is that correct ? Mr. DRAPER. Yes; I am ready to agree with tl^at, yes, sir, absolutely ; because I think a great many business men will not study the problem unle,ss they are iorced to do so. I think that has been the history in other cases. Along that line I have a memorandum here which gives exactly that point of view. May I be permitted to read this? The Mr. CHAIRMAN. DRAPER. I t Yes. is a brief memorandum [reading] : 1. Most intelligent persons will agree that the present mass production methods of American industry are sound and should be further developed. 2. One of the most important factors in such development is the economic well-being of the individual consumer. 3. The continued success of large-scale production, of quick turnover, and of installment buying hinges upon steady employment for the individual. 4. A man out of work is a drag upon his family, upon his community, and upon industry itself, which might have won him as a consumer if he had been working and therefore able to buy in normal volume. 5. Unemployment then is not only harmful from a social point of view. It is wasteful from a business point of view. 6. While endless discussion upon the problem of unemployment has taken place in the last 50 years, and various associations and periodicals have attempted to deal with certain aspects of it, no adequate machinery has ever been set up to attack the problem in an organized, nation-wide way. The field is practically virgin territory. 7. If several of the largest and most influential corporations of the country would cooperate to investigate and strive to cure this evil, they could do more in 5 years than a drifting policy could accomplish in 25 years. 8. The hazard of broken employment is intrinsically no more difficult to deal with than the hazard of industrial accidents. These have been reduced to manageable size since 1910 by safety engineering, workers* education, factory inspection, and the like. 9. The time for industry to help in solving the problem by regularizing its production and, in other ways, adopting far-seeing methods of production, is when the country is prosperous as at present instead of later when conditions may have changed. The time to .act is now. I have attempted to give there the viewpoint that we have been discussing, that workers are consumers as well as producers, and to increase the purchasing power of consumers is desirable not only for the worker himself but for industry and society as a whole. Senator TYSON. I would like to ask Mr. Draper if he thinks it is possible to devise a method by which there could be unemployment insurance. 29193—29 4 32 UNEMPLOYMENT IN THE UNITED STATES Mr. DRAPER. I think ultimately such a plan would be very desirable, but until you get your production more or less regularized it would be a very difficult thing, it seems to me, to embark upon compulsory State unemployment insurance. If we turn on and off the current of employment, as one automobile manufacturer possibly might do, we would be forced to pay such premiums that it would be disastrous. If, however, that manufacturer or any other would first regularize his production it would be a very feasible thing and a very easy thing, it seems to me, for him to take out unemployment insurance, or be forced to take out unemployment insurance. Senator TYSON. Wouldn't it be better for unemployment purposes to take it out, the same as a man buys his own insurance for sick benefit? The reason the workmen's compensation laws have become general was that the manufacturer or person responsible for a worker's injury were compelled by law to compensate him. They were compelled to pay him. If he got hurt in your factory or mine through no fault jon his part in the course of his employment, the jury was compelled to give him a verdict. But the verdicts were so irregular. I think the main reason we have the workmen's compensation laws so generally now was because the verdicts were so irregular. The compensation laws are so much better and more regular and uniform. Senator W A L S H . The witness illustrated by his own business the successful results he has had by stabilizing his own production. H e argues that the first thing to do is to educate the producer to the importance of stabilizing production, before we consider insurance. Isn't that it? Mr. DRAPER. That is my view of it. Senator TYSON. Of the two, the buyer and the producer, the buyer is more responsible than the producer because the buyer will always buy if the producer will produce. The CHAIRMAN. I don't agree with the Senator on that. I n the early days of the motor-car industry, when we sold only open cars, we had to lay off thousands and thousands of men in the winter when the weather got cold. Of course, since closed cars have come into such general use, production and employment have become regular. Don't you think that the American business man, with the creative mind, by using his imagination and ingenuity, could regularize production so that there would be very little seasonal employment? Mr. DRAPER. That is my view, absolutely. Senator TYSON. I think something has got to be done about it. The CHAIRMAN. The witness testified that they stabilized their business by providing enough storage facilities to take care of their goods until the market Avas ready for them. Senator TYSON. YOU can pile up certain things. I n the automobile business you can not pile up automobiles. You can put coal in storage and it will go the year round. You can pile up with some commodities and can't with others. The CHAIRMAN. Does the witness have any more suggestions to offer the committee, or does Senator Tyson want to ask any questions? Senator TYSON. YOU don't have any seasonal unemployment in the* food-packing industry, do you? UNEMPLOYMENT IN THE UNITED STATES 33 Mr. DRAPER. Oh, yes. Practically 80 per cent of our dates are sold in the fall. Senator TYSON. D O they eat them in the fall ? Mr. DRAPER. Yes; they eat them in the fall. Senator TYSON. They don't eat them the year round? Mr. DRAPER. There is a great peak that takes place in the early fall and winter; then it falls off. Senator TYSON. That is, so far as the selling of your product is concerned; but don't people eat dates the year round ? Mr. DRAPER. N O . Take the month of August, you will find it rather unsatisfactory because it is pretty heavy food in hot weather, and people don't seem to desire it. Senator TYSON. H O W did you manage to stabilize your business. Don't you get the buyers to take the dates the year round ? Mr. DRAPER. N O ; we couldn't do very much with the buyers because the product won't keep very well. We put the product in a cold-storage warehouse and keep it scientifically. Senator TYSON. I n other words, you pile it up ? Mr. DRAPER. Yes, sir. Senator TYSON. NOW, dates are a staple article of food. They don't change in flavor or appearance. But if you manufactured something different, something that people had to have days before, you would find it a different proposition ? Mr. DRAPER. Oh, yes. As Senator Couzens intimated, it is a question of leadership in this matter of manufacturing for stock. Another man has another proposition, but he will answer it equally effectively if he applies his business acumen. Senator TYSON. Those who have staple articles that don't change the year round, I can see how they can do i t ; but you take the man who is making a variety of things, he doesn't have as much chance. But there are a great many who manufacture what you call staples, and to that extent it would help employment. The CHAIRMAN. If there are no further questions, the committee will adjourn until to-morrow morning at 10.30 o'clock. (Whereupon, at 12 o'clock noon, the committee adjourned until to-morrow, Thursday, December 13, 1928, at 10.30 o'clock a. m.) UNEMPLOYMENT IN THE UNITED STATES THURSDAY, DECEMBER 13, 1928 COMMITTEE ON EDUCATION AND LABOR, UNITED STATES SENATE, Washington, D. C. The committee met, pursuant to adjournment, at 10.30 o'clock a. m., in the committee room, Senate Office Building, Senator James Couzens presiding. Present: Senators Couzens (chairman), Tyson, and Walsh. Also present: Dr. Isador Lubin, economist, Institute of Economics of the Brookings Institution, Washington, D. C , assisting the committee. The CHAIRMAN. The committee will please come to order. Mr. Hapgood, we would be glad to have you tell us what your* experience has been and of your interest in the resolution on unemployment pending before the committee. Tell us in your own way. STATEMENT OF WILLIAM POWERS HAPGOOD, PRESIDENT COLUMBIA CONSERVE CO., INDIANAPOLIS, IND. Mr. HAPGOOD. Might I tell you in the beginning that I had my first experience in the canning business of the Franklin, Crane Co., wholesale grocers, in Chicago. Shortly after I began my employment with them they put me in charge of a small food-manufacturing plant in connection with the grocery business. I remained with them until 1903, when I went down to Indianapolis, and, with my father, took a controlling interest in a food plant there, called the Mullen, Blackledge Co., which was changed at that time to the Columbia Conserve Co. I became president of the company; am still with it, and it is still operating under that name. In the beginning it manufactured a small line of food products— catsup, pork and beans, and some country products. The business was highly seasonal, as most food-packing establishments are. In March, 191.7, wre took the first steps in the change toward regularization of employment. At that time about 5 per cent of our workers were on what we call "salary," which meant that they were paid by the week and retained indefinitely, pending good behavior. The balance were on " wages," which with us generally meant payment by the hour, and only for the hours worked, with no protection. But in March, 1917, partly with the consent of my brother Norman, and partly independent of him, I thought that the time had arrived when we ought to make as the first principle of our business the abolition 35 38 UNEMPLOYMENT I N T H E UNITED STATES of irregular employment. U p to that time my purpose had been that instead of stressing for regularity of employment we should follow the practice usually followed in the industry—to stress for the lowest possible pay roll. During several years preceding 1917 my philosophy still was that the stress of our establishment at least snould be not toward reducing the pay roll whenever that could be done without affecting our establishment or sales. I t should rather be toward the contrary direction—stressed toward retaining people to the very limit of our ability. So we made a radical change in our philosophy and in 1917 we took off the wage basis and put on the salary basis a considerable portion of our employees. I can't remember what the percentage was, but I am quite sure that it would at that time have increased the proportion the salary people bore to the wage people from 20 to 140. I won't follow the details of the steps taken in that respect in the succeeding years, but will bring you down immediately to date. Iri this present year, in the first eight months of the year, 97 per cent of our workers were on salary, and 3 per cent on wages, as against 10 years ago, when 5 per cent were on salary, and 95 per cent on wages. The CHAIRMAN. NOW, when you say they are on salary, does that mean continuous employment throughout the year ? Mr. HAPGOOD. Yes; continuous employment throughout the year, quite irrespective of exigencies, such as retrogression of business or sales inactivity. Now, I want to make this exception, that we have a peak load during the month of September, a very tremendous peak load, when we handle tomato products during a period of six weeks sufficient to last us 12 months. And when I speak of a change in the situation this year, the first six months of this year, by which 97 per cent were on salary, and 3 per cent on wages, I am not speaking of the three weeks during the peak load this year. I will give you those figures— I have them down here somewhere. I n 1917 we had 5 people on salary, as opposed to 90 people on wages, during the first eight months of the year. I n 1928 we had 97 people on salary during the first eight months, and 3 people on wages. The CHAIRMAN. I n other words, your total number of employees was 100. Mr. HAPGOOD. Yes; during what we call our regular period, which means 12 months in the year, less six weeks during the peak load. W h a t 1 am trying to make clear to you now is the relation between the two peaks as far as salaried people compared with wage workers are concerned. I n 1916, at which time our turnover was about as it has been this year, but caused largely by the war situation, when we "entered the peak, or when we were in the peak, rather, we had 5 salaried workers—the same number as when we began the year, and had a total force of 150 workers. I n other words, a total of 145 workers on wages. The fall peak just past, we had 97 salaried workers during the peak and 130 altogether. Now, to repeat that, considering the two situations, the fairly normal though variable Joad that occurs during 46 weeks in the year, before the planning began we had 5 protected workers, 50 not; to UNEMPLOYMENT IN THE UNITED STATES 37 date, 97 protected workers, 3 not; until we entered the peak. I n 1916 we had 5 protected workers, 147 not. I am trying to make clear to you the two situations with which we are dealing—one a 46-week period, the other a 6-week period. I am trying to explain that by saying that in the canning business we handle a highly perishable commodity during our extreme peak. The CHAIRMAN. H a s this change in the conditions made any difference in relation to your earnings? Mr. HAPGOOD. Our earnings have been very much greater since 1917 than before. As a matter of fact, preceding 1916 our business was extremejy uncertain as to its earnings. Beginning with 1917 our earnings jumped up. Following—I can't say definitely on account of this change in plan—our earnings increased, and only once during the decade following did we not make a satisfactory profit. I n 1921 we lost very heavily, but that was due to a swollen inventory. You remember about it—certainly about what happened then. We went into 1921 with a very heavy food inventory, when prices dropped off, and we lost about 25 per cent of our capital stock. We got most of it back in 1922. Even in that period in 1921, when this system that I speak of had been in operation for four years, we didn't release any of our protected workers. The CHAIRMAN. Of that increase in profits, dr at least the satisfactory profits since that time, have you any idea what percentage is attributable to an increase in business and what is attributable to more efficiency in stabilization of employment? Mr. HAPGOOD. Not very much was attributable to increase in business. Some would be attributable to increase in business—I don't remember the percentage—but as much as 25 per cent in 1917 as compared to 1916. Following 1917 we had years in which our turnover was not any greater than in 1916, and we made a good deal more money. I n other years, as in 1925, for example, with a business not as great as 1917, we made a great deal more money. Now, in the year in which we are now, we seem to have struck a new situation with regard to sales progress and our earnings these next 12 months—the next 6 months, including the last 6, are going to be altogether the largest we have had. Senator TYSON. What is the name of your company? Mr. HAPGOOD. Columbia Conserve Co. Would youcare to have me go on, Senator? The CHAIRMAN. Yes; I would be very glad to have you go on. Mr. HAPGOOD. Because of this protective feature there isn't any question in my mind as to the effect upon the morale of our employees. Senator TYSON. W h a t protective feature are you speaking of ? Mr. HAPGOOD. Full-time employment. We don't speak of it as unemployment, but rather as employment. Our aim the last 10 years has been to protect our workers by the year. Most of our workers now are on salary, by which we mean that the individual worker gets his weekly income, irrespective of any difficulties that may arise, not only inactivity of business, but sickness on his p a r t ; and there is no subtraction made from the total number of our workers from any cause whatever. Senator TYSON. W h a t business are you in? Mr. HAPGOOD. The food-canning business, of which the chief item is canned soup. I t is highly seasonal. 38 UNEMPLOYMENT IN THE UNITED STATES I repeat that our effort has been in a measure successful to place everyone within the protected list after he has served with us six or eight months, after we have come to the conclusion that he is a satisfactory worker. Then we put him on our salaried list, which means what I just said. W e will not then discharge him because of inactivity of business. We will carry him through any depression that comes. We did that in 1921, when business was very much depressed and had a very heavy loss. Now, I said before you came in, Senator Tyson, that in 1921, having followed this policy to a considerable measure for four years, beginning in 1917, we recouped in 1922 almost all our losses of 1921, of $75,000, which losses were occasioned in large measure, if not almost entirely, by depreciation of the inventory. My conclusion, although this is an imponderable thing, why we recouped in 1922 our losses of 1921, was because of the morale we built up in our organization. There were really other protective features that entered into it, such as I have testified, in relation to sickness. We at that time took the position that I just described, that even in case of illness no person on salary would have his salary cut. Senator TYSON. D O you have insurance against that ? Mr. HAPGOOD. N O ; all these charges are made directly against the pay roll. We haven't built up any insurance fund to take care of that. We haven't thought it necessary. I still doubt the necessity of it. The time may come when we feel it is advisable to take care of periods of depression, but we went through the most serious depression the food business has been in in 1921 and carried through (without a reserve). I t is true we lost money heavily then, but most of it we lost because of the depreciated inventory and not because of carrying people not active on Senator TYSON (interrupting). How do you manage to determine whether or not a man is sick enough not to work? Do you have him examined, or do you just take his own statement? Mr. HAPGOOD. If any one employee feels that a man is simulating illness he will bring his thoughts or belief before the governing body, which consists now almost entirely of the workers, but we have very little deception, I think. They have come in when they were not in condition to work, although they know that they won't be penalized, so far as their income is concerned. They are just playing the game a little different way than an ordinary person would play it. Senator TYSON. H O W many employees do you have? Mr. HAPGOOD. We have now about 140 employees. The number is growing quite rapidly now, as our business is growing. Our main economic problem has not been keeping our workers, it has been with our sales—breaking through. I think one of the most difficult pieces of business any concern in the United States has met with has been that which we have had to meet with our competitor, the Campbell Soup Co. I don't know of any concern that more completely dominates the market than the Campbell Soup Co. does to-day, and this dominance is due to an enormous advertising campaign. Three years ago I think the advertising records show that he spent more money than any company in the United States on advertising. This situation has been an extremely difficult one for us to meet. We seem now to be breaking through the hypnotism caused by this enor UNEMPLOYMENT IN THE UNITED STATES 39 mous advertising campaign, and, consequently, our business grew over 50 per cent this last 6 months, tand we figure that in the next decade we will have perhaps a thousand employees. The assumption is that our sales will be adequately large enough to make that possible. L think it is possible, in fact, probable, that this will come to pass mainly because of the effect on our employees of the various measures we put into being looking toward their protection during periods of adversity over which they have no control, and also because of stimulating their intelligence. The CHAIRMAN. Have you any knowledge of the Campbell Soup Co.'s employment policy? Mr. HAPGOOD. Only in a general way. I think its main policy is that used by most canners, or in most businesses—keeping the pay roll as low as possible, rather than as large as possible. Our business has shown 150 per cent increase, and instead of stressing the lowest possible pay roll, we stress the highest possible pay roll. Senator WALSH. D O you work by piece, or do you work on salary? Mr. HAPGOOD. Our employees work on salary. We don't work by piece, evfen with our wageworkers, not protected. Three years ago we decided to guarantee our wageworkers 50 hours a week. The CHAIRMAN. W h a t is the regular time that you do work? I s that your regular time—50 hours a week ? Mr. HAPGOOD. N O , our regular time is 9 hours a day, 5 days a week. There was some hesitation about it at first, but the good effect of the results of the first 4 months upon our employees was so satisfactory that we decided to continue guaranteeing our wageworkers 50 hours a week. The CHAIRMAN. YOU say 5 days a week, 9 hours a day? Mr. HAPGOOD. Yes. The CHAIRMAN. Does a worker get the same pay for 5 days that he gets for 6 days? Mr. HAPGOOD. Yes. He gets the same pay anyway, Senator. We are now admitting the new worker into the general protective system—to the same protection. We are now guaranteeing a worker 50 hours a week. I t is customary with us when a local holiday comes on Tuesday or Thursday, to shut down on Monday or Friday. But when that happens not only salary workers get their full pay, but the wageworkers gets the full 50 hours. Senator TYSON. W h y do you give 50 hours when they only work 45 ? Mr. HAPGOOD. When we reduced the length of the week for the salaried worker we said we will not pay any wage worker for less than 50 hours a week, irrespective of what he works during the day, unless he just loafs. Now, the time may come when we will raise our wage rate and then be on the basis of 45 hours. Senator TYSON. YOU think it is a good thing, then, to reduce the hours, do you? Mr. HAPGOOD. Very much so. Senator TYSON. What effect would a reduction in hours have, taking it by and large, on unemployment? Suppose the country 40 UNEMPLOYMENT IN THE UNITED STATES went on an 8-hour day in all manufacturing plants, what effect would that have on unemployment ? Mr. HAPGOOD. That is too difficult a question for me to answer. I will say this: That if the workers' morale were affected, as ours has been affected, by reduction in hours, a short time after the reduction was made it might not increase the output any, and if it didn't increase the output, then I don't think that it would increase unemployment any. Senator TYSON. If it didn't increase the output? Mr. HAPGOOD. If it didn't increase the output. Senator TYSON. YOU think the decreased output would decrease employment, do you? Mr. HAPGOOD. Because of the lesser number of hours. I t seems to me that the output of commodities generally throughout the country would decrease by the decreased number of hours. Then, obviously, in order to hold the present output of commodities we would have to increase the number of workers. Senator TYSON. Exactly. Mr. HAPGOOD. NOW, what I am trying to say is that the decrease in our hours doesn't necessarily decrease the output. Senator TYSON. But that would not be true where you had a machine, and that machine were to produce a certain number of pounds. If you lose hours, you lose production, because a machine has a certain fixed production for a given time. Mr. HAPGOOD. NOW, Senator Couzens, you have asked me some questions in your letter: " H o w irregular was employment in your plants before you attempted to stabilize it ? " and " By what means did you undertake to provide steady employment ? " Kather naturally when we assumed this responsibility for fulltime payment to our employees, or the major number of them, we cast about for new methods of keeping ourselves busy, not by pounding sand into rat holes, so to speak. One of them was a change in policy, doing important repair and clean-up work, which we had done before during periods of activity, and throwing that kind of work into periods of the valley load. There have been times during the last 10 years when the plant has been shut down and all the employees have been used to clean up shop—painting, doing various repair work, and so on. You may be interested to know that at times we have turned some of our more active and younger women into painters, painting walls of the building. They may not be very good painters, but they are perfectly satisfactory for work on the interior of the building. If you were in our shop, you would see 10 good mechanics not working in the machine shop at all, but working in the kitchen labor room, working at work not as completely adapted to them, such as running a lathe or doing mechanical work, but fitting in when'the machine department wasn't active. Almost all of our employees are trained to do more than one job. We haven't been training our women into good mechanics yet, but we have been training our men so that they can do a large variety of work. The CHAIRMAN. Some of the witnesses we have had here testified that they had, in an effort to secure regularization of employment, thought of new things to do in the way of manufacturing merchandise which would offset the peak of the seasonal business. UNEMPLOYMENT IN THE UNITED STATES 41 Mr. HAPGOOD. We have done that. I will come to that in a moment. I have spoken of the training of our employees to do more than one kind of work—repair work, clean-up work, and so on. Our valley load always occurs sometime around about the month of June—and we entered this system in 1917—and June came about, we then changed our vacation program. Before that time only the major employees were given vacations on pay. The others took vacations, or lay offs, rather, at their own cost. In 1917 we began a new system by giving no less than one weeks' vacation to every salaried employee. That was gradually extended until 1921, when we got into the depression, we extended our vacation period to three weeks, and in some instances to four. Now, that is one way of filling up the valley for manual workers. I have filled it in tne past by going out and playing golf. We have carried it through now to every salaried employee. During the month of June, sometimes overlapping into the month of July, the whole valley load go on vacations, except a few people, and those few go on vacation later. That isn't the usual way of the ordinary business man. That leads me to say this—that our approach, or our consideration of the average worker in our business is now the same as it is of the exceptional worker in its various protective features. Senator TYSON. Mr. Hapgood, it seems that good workers, as a rule, have jobs anyway. I t is the man who is more or less shiftless and not as steady as others that you have to look to. You happen to select your people with good care. They would get jobs anyway. As I see this, there are still a great many people in this country going from pillar to post that are, perhaps, not very healthy, not very strong, that lose their jobs. They are the ones that are laid off. Of course, your plant is comparatively small. You can select them with care. What we have to do is to find some means of taking care of these people who have to be helped, the ones that need help the most. They have got to be helped. I would like to ask you a few questions. Have you any idea what could be done to reduce this general unemployment? Is there any way of having insurance against unemployment, like insurance against sickness, for instance, or something like that? It seems to me if something of that kind were worked out, where a man paid insurance against his own unemployment, in the long run he would insure it if it could be done. Because in that way he would be penalizing himself by paying insurance premiums for himself when he could not be employed. Like the workmen's compensation, they don't give a man as much as he would get by actual employment or working, but it keeps him always spurred up with the idea of getting well and getting back to the point where he could make his full wage. Mr. HAPGOOD. NOW, Senator, you covered several points there. I will answer them in order. One was the question if I did not think that capable employees may at all times, or possibly at all times, be employed. Senator TYSON. Not at all times, but generally. Mr. HAPGOOD. Approximately at all times. That unemployment, therefore, falls mostly upon the least-fitted people. I want to tell 42 UNEMPLOYMENT IN THE UNITED STATES you my experience in our own business. You are not correct in your surmise that the success of our business has been because we have been very careful in the selection iof our employees. As a matter of fact, the canning business up to date, and certainly with us up to a few years ago, employed as poor a class of labor as any business in the country, and the reason, for that was that the business was so highly seasonal. In 1917 we didn't make any selections out of the plant. We have hired them at the door since 1916, paying them as weekly workers. They were more or less the flotsam and jetsam of the .city of Indianapolis. We put them on as weekly workers. We have made selections and taken the best from that flotsam and jetsam, yes; but at no time during this entire experience, now drawing toward the close of the twelfth year, have we gone out in the open market or advertised so as to bring us exceptional employees. We have some college men and women who would like to come into our plant for social reasons. We have taken several of these people into our organization, particularly persons who have a psychological interest in the problem of human relations. In my judgment, we have been dealing with a class of worker^ lower in average education than most other industries. I will make a comparison with the coal industry. I t happens I know the coal industry through my son Powers. Since he graduated from Harvard in 1921, through his experience and training as a coal miner, as an actual coal miner, actually digging coal himself, I have come in contact with coal miners. I came in contact with coal miners in the strike of 1922 in Somerset County, where he was active as a trade-unionist. It is my firm belief that these coal men averaged much higher in intelligence than most of our people in 1917. Many of them are active to-day. We have some coal miners in our employ to-day. We have taken four from the coal fields of Pennsylvania during the last several years, paid their expenses to Indianapolis, and transported their families there, putting them on the pay roll. I am free to admit that these four miners are better than the average coal miner, and far better than the people whom we could get to-day. No; it is not my belief—I repeat that the success, whatever success we have achieved in affecting the morale of our employees and the prosperity of our business, has not been caused by the selection of employees; it was caused by the system. I don't mean to go so far as to say that the difference in the system will change the morale of a moron into a person who is as good as the ordinary worker. I do mean to say this—given a normal man, not the man made abnormal by adversities from childhood on, but a normal man, under the system we have devised, we will make an unusual worker of him. We haven't gone outside for technicians during the whole period. When this plan went into effect in 1917 we had two technicians in our business. Every technician in our business since has been trained in the rank and file inside of our business. But our balance sheet will show, in my judgment, large advantages because of the environment. I can't help but agree in one direction you are correct, that unemployment tends to fall upon the least capable people. Senator TYSON. That is it. UNEMPLOYMENT IN THE UNITED STATES 43 Mr. HAPGOOD. But what makes these people? What is the factor that contributes mostly to the lack of ability of the worker? I t is unemployment. I t is because of unemployment, almost chronic unemployment, that there are several million people in the United States who do not get work, and whose morale is deeply affected by that fact itself. I t is constantly occurring in my experience in our own plant, as I study the situation. I repeat, the effect of unemployment upon a very ordinary group of people is demoralizing. I was the only person in the employ of the business with a college education. We had one person only who had gone through high school. The average of our employees in 1917 was less than the fourth grade. Now, in spite of that, or coincident with it, we went ahead with this system. Our organization, small, fairly well known nationally, has as its end the making of profits, but it is attempting to cope with the factors in industrial life which affect the life of our citizens. I repeat that it is my belief that one of the chief causes of a poor workman is irregular employment. Senator TYSON. I n other words, the mere fact that he is continuously unemployed accentuates his weakness. Mr. HAPGOOD. Sure. Senator TYSON. And makes him a less efficient worker. Mr. HAPGOOD. Yes. Senator TYSON. I n other words, if a man shows the slightest weakness or incompetency, irregular employment accentuates that ahd makes him worse and worse. Mr. HAPGOOD. Exactly. Senator TYSON. If industry would encourage him to improve instead of laying him off, that wouldn't be accentuated. I think you are right about that. At the same time you have to admit that you would have to take away some that are not efficient. W h a t we have to do is to get something for those to do who are out of employment. The CHAIRMAN. I didn't understand that he did throw some out of employment. Mr. HAPGOOD. I said this, we didn't put any of the original group out because they were inefficient. But as we have gone through, and added to our force, we have gone through the selective process, not a very selective process, but in a group of 45 or 40 applicants for jobs, o u t o f those we selected a half dozen, possibly 10 or 15. That is to a degree a selective process, not a highly selective process, to be sure. If we had gone through an altogether more selective process than that, and brought in workers from other industries who were well trained and fitted, then this experience of ours wouldn't have been as convincing to me. Senator TYSON. I understand that. I agree with you that your good treatment of your employees in making their interests your own has been due to your good management, but at the same time we have a lot of people unemployed. What I want to know is if you have any remedy to suggest as to what we are going to do with these people who are unemployed for whatever reasons. Mr. HAPGOOD. I am glad to attempt to answer that. Senator Couzens, in your letter you have asked me, " T o what extent can similar measures be applied to other plants and other industries ? " 44 UNEMPLOYMENT IN THE UNITED STATES I t is my belief that if a small canning plant like the Columbia Conserve Co. can successfully protect its employees, or most of them, and remain in business, that there are thousands of other plants that can do the same thing. This is a mere guess, nothing more than a guess on my part—that if some of the big industries in the country were to take the position that their chief reason for being in business was regularity of employment, full-time employment, rather than for some other reason—if they kept their employees the way we keep ours, then the number of unemployed would be vastly reduced. Now, it is obvious that there are hundreds of small plants that can't very much affect the unemployment situation by the plans we put into effect, but I repeat, that if we can do it, a weak company, I can't see why the United States Steel Corporation can't do it, or automobile companies can't do it. I n the matter of size we are insignificant, dealing in a business of highly seasonal products. I n spite of those two things, we have carried out this plan with profit to ourselves and have benefited the workers. Senator W A L S H . I understand that in 1921 you had poor business, but in the interest of your employees you kept your plant running, manufactured goods just the same, and took a chance on losing. Mr. HAPGOOD. During that depression we did not manufacture goods, but we used the employees for other purposes—repair work, clean-up work, vacations, and reduced the number of hours from a 60-hour week down to a 50-hour week. We did various things to keep them active, but we didn't have them actually producing goods. Senator W A L S H . Did you give them a 50-hour week at the 60-hour pay? Mr. HAPGOOD. The same man gets the same pay whether he works 10 hours a week or nothing at all. We make no reduction whatever in the major portion of our force for any purpose except for bad conduct; except in the group meeting when the committee decides that some person should be penalized. That never happens. Senator W A L S H . During this period of 1921 I understand you continued your pay roll just as if you were passing through a prosperous year? Mr. HAPGOOD. Yes; we did that. We have done that ever since we started in on this plan in 1917. T h a t kind of system has returned in some measure the equivalent on the part of the employees. Senator TYSON. I n other words, he has been willing to do all he can for you when he got the opportunity ? Mr. HAPGOOD. Yes. Now, beginning two years ago, we had reached the point in our dvelopment where we could begin more closely to foretell the trend of our sales. Then we undertook what they usually call " stabilization." Now, instead of working almost directly on orders we will anticipate our August business in January, and when we get into the next month we will not only manufacture food products for sale during the immediate days following, but we will also begin manufacturing a surplus to take care of our August requirements. Senator TYSON. I n other words, you will pile up during the time your orders aren't heavy, to take care of the time coming, and so on ? Mr. HAPGOOD. Yes. Senator TYSON. I n that way you will reduce the cost in the long run so that you can sell at a low price? UNEMPLOYMENT IN THE UNITED STATES 45 Mr. HAPGOOD. Our cost is coming down because we anticipate the orders and pile up, as you say, and because of the efficiency of our employees. Senator TYSON. YOU haven't answered my question about insurance. Mr. HAPGOOD. We don't carry insurance. Senator TYSON. Wouldn't it be a good idea to have unemployment insurance which the employees themselves carry? The CHAIRMAN. In other words, penalize the employee for the incompetency of the manager? Senator TYSON. Not at all. There are many people, and we haven't gotten to the point where we can consume all that you can manufacture if you were manufacturing efficiently. The CHAIRMAN. But isn't it up to the initiative of the industry, the captains of industry, to stabilize this thing, because of the natural weakness of the employees in doing anything in an organization way? In other words, with the motor car business, when they were building only open cars, the cars could only be operated in hot weather, and the employees were laid off all winter because of the fact that they didn't have the ability or imagination to build closed cars. Then the employee must be the sufferer and lay out of work all winter because we didn't try to stabilize the business. Senator TYSON. Mr. Chairman, I agree with you we ought to do everything we can to stabilize the business that way, but even if you have every plant in the country doing its best to stabilize you will still have unemployment. My idea is to agree with you that we should do that, but then I think you will still have a large amount of unemployment, because, according to Mr. Hapgood's own statement, you have got to produce more and take care of what you produce, or you can't continue to run. Now, my idea is if you had something like insurance against unemployment, which the employee himself pays, just like he would pay for his health insurance, because every employee has to pay for his health insurance, every employee has got to pay for his life insurance, it would be an incentive to keep an employee on the job. If everybody would do as Mr. Hapgood is doing, I think you would have a lot of good employees, but it is possible you will make every employee a good one, and I hope you do, but at the same time I think a large number of people would still be shiftless and inefficient, and ought to have some help. There ought to be some method, some plan, whereby they wouldn't be in a starving process, where they ought to have one-third, or one-fourth, or something to keep them going until they got a job. Mr. HAPGOOD. My experience is that you don't make people efficient by imposing a penalty on them. Senator TYSON. I see no penalty in a man paying insurance premiums against unemployment. Mr. HAPGOOD. Society ought to undertake to employ every man who is out of employment. A man that has no voice in the management of the business is certainly not responsible for his unemployment. I will admit for the purpose of our discussion here I don't want to try to consider the man who doesn't want to work, and certainly the educational problem with respect to him is difficult. I 46 UNEMPLOYMENT IN THE UNITED STATES feel I am not capable of handling it. My experience does give me some competency in discussing who is responsible for the major unemployment, and I think it is society at large. Therefore, feeling that way about it, while I agree with you that, for a time, at any rate, I would prefer that each establishment take upon itself its own insurance, in order to stimulate or accelerate the time when all employees who want employment will be protected, I don't believe in having the employee contribute. I think the burden should be placed squarely upon the employer, and those who feel they must employ workers for a period of a few weeks, or a few months, should pay a tax for such people, and thus encourage employers in all parts of the country to reduce unemployment to a minimum. Now, so far as we are concerned, we would very cheerfully pay a tax to the State or Federal Government for those people whom we employ only a few weeks in the year. Why shouldn't we ? (Senator TYSON. For everyone you have in your plant; that is all right. But there are people coming on all the time—a million population coming into this country every year, either by natural growth or by immigration. If there are not enough plants to take care of all the people who want employment, who is going to employ those who can't get a job? Assuming that you are taking care of 150 people, suppose somebody wants to get a job at your plant, 50 or more at some other plant, who is going to take care of them? Mr. HAPGOOD. It seems to me that we have to take care of them— take care almost of indefinite millions that may come both by birth and by immigration. What we need to solve is the problem of bringing about the development of a system by means of which those who wish to consume goods may be permitted to consume them, and by means of which people can secure the income with which to consume the commodity. Senator TYSON. That is the point. I realize all that; but I haven't seen any way we can fix it so that we can get it. If every lant in the country were to continue to give employment to everyody that can produce, we would soon get to the point where we should have more goods than we could sell, and I think there would be three or four million people out of employment. We have to have shorter hours. If we are to keep taking people into our industry and keep them employed, we shall have to employ them for shorter periods each day. Senator WALSH. We have overproduction now. Senator TYSON. We have overproduction now. Due to efficient management. If we employed all the people, available production would be so much greater than it now is that there would be a glut on the market in every line of endeavor. My idea is to see if we can take care of this surplus unemployment that we now have. Some people don't agree with me, but I believe if we had 70 hours of work a week2 as we had several generations ago, and people worked every day, with the present modern machinery we would have 10,000,000 out of work instead of 4,000,000, because with the machine process individuals have become much more efficient than they ever were before. E UNEMPLOYMENT IN THE UNITED STATES 47 But I think that is one theory. I think that is a fine idea to try to get every management to find some ways of taking care of their own people, of keeping them constantly employed. But even with that, in my opinion, we will have large unemployment still, because there are no jobs to be had. The CHAIRMAN. The great problem, as I understand it, at the time this resolution was introduced in the Senate, was the number of men who were laid off. We had two different problems: (1) The man who might be seeking his first job, and (2) this problem of laying off a man who has already got a job. I absolutely agree with Mr. Hapgood that the worker should not be in a position of having to worry about being laid off. If we can do anything to try to prevent people being laid off because of the cycles in business, we should do so. Senator TYSON. But the man out of employment is just as badly off as the man who has a temporary job. The man I am interested in is the poor man who can't get a job. Now, you take England, why, when a man is born in .England his parents begin to think where he is going to get a job. " W h e r e are you going to find a place to put him? " And from the time he is born until placed on a job when he i^ about 18 or 20 years of age it is a matter of concern and anxiety to his parents. That is the position we are going to be in in this country. With the growing efficiency of the people themselves, and the efficiency of the machine, it seems to me that unless we get much greater consumption capacity, we are going to have increased unemployment. That is the problem as I see it, more, even, than the one you are speaking of. Mr. HAPGOOD. I n the main, isn't the lack of consumptive power due to the lack of income, and isn't the lack of income due to lack of employment ? Senator TYSON. That is true. I see what you are doing. I am not trying to antagonize your position. I think you are only one Mr. HAPGOOD (interrupting). I think 1 agree with you there. Senator TYSON. W h a t I am trying to do is to see if you have any suggestion as to how to take care of the additional evils we are up against. Mr. HAPGOOD. I agree with you in the direction of what we want to accomplish. We might not entirely agree with regard to the method. I suggest that we put into effect a method by which the employer would be penalized for short-time work on the part of his employees. That would then cause him to do, in a measure, at any rate, what we have done voluntarily. We have forced ourselves to do it, becau.se of what I might be pleased to call a social interest. Uj) to date our social conscience hasn't been effective in industrial relations, and may not be effective for several years to come. If that isn't very effective, I suggest that the employee not be penalized for something over which he has no control, but the concern itself, the employer, pay a tax penalty to the State. How much that will benefit, I don't know. I t is obvious that if you charge the employer a considerable penalty for giving hi£ employees steady employment for 10 weeks instead of six months, he will do his best to see to it that his workers are steadily employed for six months. 29193—29 5 48 UNEMPLOYMENT I N THE UNITED STATES Senator TYSON. YOU mean that as a penalty to be imposed under the law ? Mr. HAPGOOD. A tax upon him. 1 am not talking now about the legality of it. I am not the one to give birth to that one idea; I think John R. Common^ gave birth to it in the State of Wisconsin. The CHAIRMAN. I remember in the fall of 1920 that there were 175,000 men laid off almost overnight in Detroit. While there was no law to penalize the employers who laid off these men, the employers were nevertheless penalized because we immediately spent $3,000,000 to take care of the unemployed, and that $3,000,000 was paid for by the taxpayers. Mr. HAPGOOD. We are doing it in a less desirable form. Senator TYSON. You couldn't get anything of that kind through Congre^. When you come to that you are just running up against a proposition that is simply absurd. Mr. HAPGOOD. Senator, didn't we get through many State legislatures a penalty for accidents, through insurance? Senator TYSON. That is all right. That was due to the employer's fault in not having proper safeguards about his machinery. That ha,s been the law for 50 years. If an employer is responsible for an injury to an employee he ought to pay for it. Mr. HAPGOOD. But isn't an employer equally responsible for lack of employment ? Senator TYSON. Not something which he can not overcome. Mr. HAPGOOD. Years ago. when compensation was not discussed, we said, " I can't help it if a man falls into a machine." Society came in and said, " If you can't help it, we have to pay the cost." Senator TYSON. But people will have to go out oi business, and there will be less employment than even before. I t is a wholly impracticable business. Mr. HAPGOOD. Aren't a lot of people being forced out of business because of the great expense of accidents ? Senator TYSON. N O ; not very many. A man may have to shut down his plant because he may go broke if you penalize him for not giving regular employment. I t is very hard to make money as it is. If an employer is to be penalized when he can't afford to keep his workers employed, he will soon be out of business. Mr. HAPGOOD. Senator Couzens says business does pay for it in the long run. Senator TYSON. That particular plant doesn't have to pay it all. There is a difference between that. A company can pay almost anything, but individuals can't. Mr. HAPGOOD. A group of individuals who are taxed to pay for social responsibilities Senator TYSON (interrupting). I t is just like an insurance company. You can have many people die and everybody in the United States helps to pay the insurance policies, but if you "had a few men pay it you couldn't afford it. The CHAIRMAN. I don't think that your analogy is a correct one. There are about 250,000 income-tax payers in the United States out of 120,000,000 people. I don't assume that the money that goes to pay for the maintenance of the unemployed comes entirety out of the income -tax payers of the United States. Some of the money paid out by UNEMPLOYMENT IN THE UNITED STATES 49 these taxpayers is gotten back through industry. T h a t is the medium through which it passes. They aren't really all taxpayers. The fact that the Santa F e pays hundreds of thousands of dollars in taxes doesn't mean that the Santa F e Railroad stockholders pay this amount. I t is, in fact, paid by the consumers of the service rendered by the railroad. As a matter of fact, that money comes back. Everybody pays, whether they pay it directly or indirectly. However, Mr. Hapgood, we are not the witnesses. Senator W A L S H . Have you given any consideration or study or thought to the old-age aspect of the unemployment question? Mr. HAPGOOD. Yes; a good deal. I am heartily in accord with any legislation that will pay old-age pensions. Senator W A L S H . D O you think that phase of it—the discharging of old employees by employers—can be reached by an extension of the workmen's compensation laws? Mr. HAPGOOD. I am not posted as a lawyer. I don't know what legal obstacles can be found, but it seems to me that we must protect a superannuated worker whether we consider him superannuated at the age of 50 or 60 years. We must protect him the balance of his life. We have an old-age pension in our organization now. The CHAIRMAN. What is the age limit ? Mr. HAPGOOD. N O age at all. If in the judgment of the group an individual is considered no longer physically fit for wprk, we no longer ask him to work. We believe in keeping them employed if they want to work, if physically capable, even if they work only a few hours a day. Now, to be specific about this, I have two cases in mind: One of them had been with us 10 years—a dozen years, I think. Finally he was moved from one place to another, but his income was not decreased when he became unimportant—he couldn't even be a janitor. We paid his compensation u p to the amount he got on salary—up to that amount. Whether we pay him the full amount depends on what outside income he has—whether he needs it. To make that clear: A single man had been getting $24 a week from us. H e became unable to work. H e had an income of about $800 on his investment in our private stock. The company asked him what he wanted—whether he wanted us to contribute to his support as long as he lived, and he said " N o . " We were satisfied. He finally said $8 a week, and we are now paying him $8 a week. Now, one of our subforewomen, who was getting $24 a week, became completely incapacitated. We approached her. She had more responsibilities; she was married; her husband was dead. She said she needed it all, and we paid her $24 a week for the past 13 months, and we will continue paying her $24 a week for the next 13 years if she lives that long rather than let her go broke. This is an interesting development in her case. Two or three months after she went home two doctors, one my own family physician who is now more or less regularly employed by the company, said she couldn't live long, probably not over a few weeks. For the last 11 months he had expected her to die almost any time. Lately she has improved. Now she can walk outdoors. Now, the interesting thing about her is what would have happened if we hadn't supported her? I n my judgment, she would have been dead, for she would have had 50 UNEMPLOYMENT IN THE UNITED STATES to worry with no income. Now, if our system has been the cause, not of prolongation of her life in m ; sery, if she is going to recover and have several years of fairly happy life and, in addition, if she happens to be an unusual woman, she can bring influences on her grandchildren which are beneficial to society. That was how much our $24 a week for 60 weeks contributed to the welfare of society. I t is an imponderable thing. I t has some definite effect upon morale and social welfare. I t has an feffect upon her spirit, and the people with whom she comes in contact, and it has its beneficial effect upon these people not only as human beings but also as producing units. Now, I am saying this because I want to get before you as clearly as I can the processes through which my mind has gone and the various things I have attempted to do. I disclaim—I don't want anybody to think I am doing this for what are usually called religious reasons. I am trying to approach the whole situation in our plant, to see what the effect upon the individual may be of different kinds of treatment with respect to his intellectual ability, his intelligence, and his happiness. The three factors in industry which seem to me to be important, and in the order of their importance, perhaps, are his economic ability, his happiness, and his intelligence. Now, it is my firm belief, based on an experience of almost 12 years, that by bringing into industry surety of employment we can improve the worker's economic position. We can certainly affect very greatly his intelligence, and we can through both of those vastly affect his happiness. Now, history to date, it seems to me, has aimed chiefly at the first factor—the output of the individual, his economic importance—and has paid little attention to what seems to me to be the major factor y his happiness, whatever may affect his spirits, which I think means his happiness. Senator W A L S H . I think the interest of many manufacturers has been largely based on the desire to increase the output—self-interest rather than on a spirit of altruism. Mr. HAPGOOD. Yes; I think almost entirely so. I think there is a changed attitude, however. I am very much encouraged by what I have experienced in the last few years with other manufacturers. The CHAIRMAN. The Senate will convene in a very few minutes. Have you anything further ? Mr. HAPGOOD. Now, as to the last question in Senator Couzens's letter: " T o what extent can similar measures be applied to other plants and other industries ? " I see no reason why what we have done can not be applied to all industries, and I believe it will strengthen rather than weaken the security of industry. I t won't prevent unstable and badly managed industry from going out of business, but I think it will increase in the course of years the intelligence of the workers. There is greater difficulty with respect to some workers than others. I own a farm of 650 acres, in addition to being manager of the plant, and I am trying with the farm on the same basis to see if I can't give security of employment to the major portion, if not all, of the farm workers. I t is because of my feeling that they should also be protected we should very considerably change the methods UNEMPLOYMENT IN THE UNITED STATES 51 on the farm. We now have five families on the farm, and all those workers are protected by the year, paid by the year, and employed by the year. Now, there are obviously some kinds of work, out-of-door work, like road building, that can not be a 12-months occupation. I t is my belief that when people are in work like that they should be protected by some form of insurance that will support them when th^r are going from one job to another, or that the individual State or the Nation should take upon itself the task of finding jobs and transporting these workers to other fields. If we ask harvest hands to go from one part of the country to another, we should protect them, because they are rendering a definite social service by going from Indiana, say, to Nebraska, to harvest wheat. Senator TYSON. Who did you say you should put that on—the State or the Nation ? Mr. HAPGOOD. I can't tell you that, Senator. I t is something which society should provide for. Senator TYSON. But you wouldn't think it should be put on the corporation or individual who employs him? Mr. HAPGOOD. I think in that case it shouldn't be put on the individual farmer. When we get large units like the Campbell people, for example, they will be able to bear i t ; I would be willing to put that amount of tariff on my farm. Senator TYSON. I don't mean you, but the contractor, doing road building. He contracts for eight months in the year while doing road building. Would you put it on him during the other four months? Mr. HAPGOOD. I t certainly isn't in my mind that a penalty be paid by industry unless it can give yearly employment. Begin with little people and say that any employment for less than a couple of months be subject to some kind of a penalty. Senator TYSON. Where he could absorb it, perhaps, without ruin? Mr. HAPGOOD. H e would transfer it by means of additional cost. The CHAIRMAN. If there is nothing further we will adjourn until to-morrow morning at 10.30 o'clock. (Whereupon, at 12 o'clock noon, the committee adjourned until to-morrow, Friday, December 14, 1928, at 10.30 o'clock a. m.) UNEMPLOYMENT IN THE UNITED STATES FRIDAY, DECEMBER 14, 1928 UNITED STATES SENATE, COMMITTEE ON EDUCATION AND LABOR, Washington, D. 0. The committee met, pursuant to adjournment, at 10.30 o'clock a. m., in the committee room, Senate Office Building, Senator James Couzens presiding. Present: Senators Couzens (chairman) and'Walsh. Present also: Dr. Isador Lubin, economist, of the Institute of Economics of the Brookings Institution, Washington, D. C. The CHAIRMAN. The committee will come to order. STATEMENT OF WILLIAM GREEN, PRESIDENT AMERICAN FEDERATION OF LABOR, WASHINGTON, D. C. The CHAIRMAN. YOU are familiar with the resolution which the Senate passed, No. 219, sufficiently to go into this question of unemployment, are you? Mr. GREEN. Yes; I know something about it. I understand its aims and purposes. The CHAIRMAN. YOU understand^ of course, that this question of unemployment is a very live issue? Mr. GREEN. Yes j we understand that. The CHAIRMAN. And, in view of that, I would be very glad if you would tell us of any views you have in connection with the solution and stabilization of employment. Mr. GREEN. The laboring men and women realize, of course, that unemployment is a very serious problem. Unemployment affects labor very seriously; and, as a result, we have given very great consideration to the problem and its solution. I think every thinking man realizes that it is a very difficult problem, and that i t it is ever partially solved that it will have to be approached in a careful and scientific way. There are several phases of the problem that command consideration. First, there is unemployment caused by some national depression. As a rule, that is pretty widespread. Then there is unemployment caused by seasonal fluctuations or unusual seasonal demands for labor, and then, of course, there is a recession. Now, we have a modern industrial problem, unemployment problem, caused to some extent by machine displacement. A n unfortunate feature of the unemployment problem is, in my opinion, a lack of statistical data and figures showing the continual extent of unem 53 54 UNEMPLOYMENT IN THE UNITED STATES ployment. That makes it quite difficult for us to consider the problem in the way it should be considered. The CHAIRMAN. Will you just amplify that, because my observations have been that we have accumulated a lot of statistics t h a t are very rarely available until there has been a lot of suffering from unemployment. Mr. GREEN. That is it. The statistics that we ought to have in order to approach the consideration of this problem of unemployment are not available at the time when we need them. I t was very difficult during this past year for us to find out accurately the extent of the widespread unemployment. The CHAIRMAN. Well, now, let us assume that the statistics had been available to you; what could you have done about it ? Mr. GREEN. Nothing of any moment, but it is necessary for us to have the facts for us to approach the problem in that broad and constructive way that we ought to in order for us to consider it in its full effect and full meaning. T h a t is my idea. The CHAIRMAN. YOU mean, for the next unemployment period ? Mr. GREEN. Yes. I don't think that we can wait until an unemployment situation is upon us and then expect to solve it overnight. The whole unemployment problem is bigger than that, it is larger than that, and for that reason we need to consider it and approach it in a bigger and more constructive way. That is my own opinion of it, Senator. The CHAIRMAN. Well, I think that is true. I was not criticizing what you were saying, but I have a very definite conviction that too much stress is laid upon statistics, and that the libraries and the offices of the Federal Government are full of statistics t h a t are never used. Mr. GREEN. Not unemployment statistics. The CHAIRMAN. N O ; that may be true, but it is usually so late, because of the routine and red tape involved, and the bureaucracy, that you might, for instance, take the statistics of any period on any subject and they nearly always have to be brought up to date, and about the time they are brought up to date the crisis has passed, and the statistics became old and valueless again. I t seems to me t h a t it is more a question of consciousness of the employer and the public generally, whether we have 4,000,000 or 2,000,000 unemployed. I n other words, we get into controversies, as we did in the last session of Congress, as to unemployment. No, I don't think that that was as important as the fact that there was unemployment, and the problem must be solved. Mr. GREEN. I n that respect, first of all, we don't know how many men are being displaced through the introduction of machinery. The CHAIRMAN. Well, now, if you knew that, what would you do ? Mr. GREEN. I think if we knew that then we could formulate some constructive and systematic plan by which we could place these men that have been displaced through the introduction of machinery with those who are needing men in a better way than we do now. As it is now a man is displaced and it is up to him to go out and find employment in some other line; and, usually, the man displaced is a skilled man. For instance, in the glass-blowing industry, that trade has been practically eliminated so far as the individual UNEMPLOYMENT IN THE UNITED STATES 55 glass blower is concerned. The young man went into the trade as an apprentice. Along comes the machine, and it is introduced and does the work that probably 20, 30, or 40 men formerly did. Now, those skilled glass blowers are thrown out. They must find employment then in some other industry, usually a new industry. They are absorbed somewhere. Our experience has been that it is very difficult for those men to make the contact that they should in order to find employment. Now, the same is true of men employed in other lines of industry. That takes place in the steel mills, foundries, blast furnaces, and all these classes of industry. F o r instance, in the steel mills, work that was done by 14 men, charging furnaces, is now done by 2. Twelve men were displaced. The CHAIRMAN. Well, now, just let us get down to concrete cases. F o r example, suppose you had statistics to show that there were 500 or 1,000 of those men, what difference does it make whether there are 500 or 1.000? If there are some, isn't the problem just as concrete? So far as being a problem, the problem is just as concrete, whether there are 10 or 100 men unemployed. I t is just as concrete to them as would be a larger number. Mr. GREEN. Oh, yes; except that you could take care of 10 men more easily than you could 100 men. The CHAIRMAN. If you could take care of 10 men why couldn't you take care of 100? Mr. GREEN. Well, I suppose, from the standpoint, of course, that it would be easier to place 10 men than it would be to place 100 men. That is the point of view, although the problem doesn't differ any the less. The CHAIRMAN. That i,s what I mean. Mr. GREEN. I t is a matter of taking care of the men displaced by machinery. The CHAIRMAN. That is what I mean. If there were machinery for taking care of 10 men, that machinery ought to take care of 100. Mr. GREEN. Exactly. The CHAIRMAN. That is the reason I don't get the importance of stressing the number. Mr. GREEN. We would know the number that were gradually being displaced by the machinery, and the actual information is always helpful in arriving at a conclusion. That is the point. The CHAIRMAN. YOU think, then, that if we had statistics showing 10,000 instead of 10 men, the public conscience would be more easily aroused in solving the problem ? Mr. GREEN. That is it. We would know that we would have to take care of 10,000 men, and we could begin setting up machinery by which we could meet that situation. That is the point I had in mind. Of course, any seasonal fluctuations which cause a heavy demand for labor at some periods and a falling off in others appears to me to be a problem that will have to be met by the employers realizing that it is a real problem. I think that labor can help in the matter if it is given an opportunity to by conferences, suggestions, and agreements, if necessary. Now, as an illustration in the garment-making industry it has been demonstrated that it is impossible to supply more than 40 weeks work out of the 52. T h a t 56 UNEMPLOYMENT IN THE UNITED STATES means that for about 12 weeks a number of those employed in the garment industry must secure employment in other lines of industry. The CHAIRMAN. I S it practical, from your observations, to pay those employees a 52-week wage for the 40-week service, to stabilize the income if you can't stabilize the employment ? Mr. GREEN. Well, I think it would be practical, yes, to do that. I think that could be done very readily if the employers would realize that they assumed an obligation wnen a man sought and secured employment with them—an obligation to commit the man to continuous employment. Of course, that would add to the cost of the manufactured article, and that would be passed on to the public. They have experimented, as you know, Senator, in this matter of creating unemployment funds through contributions of certain sums by employers and a relative sum by the employees. And then out of the fund thus created unemplojonent benefits have been paid for a period, say of from 12 to 14 weeks. But that is quite a burden, and after all, it is just about the same as paying them steadily, anyhow, except that the employee is compelled to contribute. Here's the thought in connection with that. The first thought about it in connection with the shoe industry was that if the manufacturer's goods could be standardized some plan could be brought about so that employment could be standardized, and thus during dull periods they would be enabled to stock up and supply the United States when the demand came. I t would help tide them over these periods. The CHAIRMAN. YOU are not so optimistic as to say that women would stand for standardized clothes and shoes; are you? Mr. GREEN. N O ; that is the trouble. There have been a good many things done, however, along that line. I don't think you can standardize women's clothes, or women's shoes. I agree with you heartily on that. But that interferes with the employment situation very greatly. Now, in agriculture, I don't know how you would meet that problem. We have our harvest times and seed times, and the demand for the harvest hands comes when the harvest is on, and that is the main difficulty faced by all these seasonal demands for employees. The CHAIRMAN. I S there much difficulty in getting men to change their environment and their homes for occupations in other localities? Mr. GREEN. Yes; it is difficult. F o r instance, you know the miner's situation. That is the most serious industrial unemployment situation that I know of. Everybody suggests, of course, that thousands of miners leave the mines and go out and seek employment in other industries. Well, now, that situation seems to be all right, but it means this, that you are asking a man that has been associated with friends all of his life to go out and seek employment in other industries, and that is the most difficult thing in the world, to persuade him to leave the employment with which he has been associated all his life. * The CHAIRMAN. There would be difficulty from that viewpoint in the labor exchanges; wouldn't there? Mr. GREEN. Yes; there would be some difficulty, how great it would, be I am unable to say. There would be some difficulty. The CHAIRMAN. I n other words, he would not willingly give up his long association with other people, his neighbors, and his accus UNEMPLOYMENT IX THE UNITED STATES 57 tomed work, and transplant himself to some other location, in a strange environment, without pressure. Mr. GREEN. N O . That is my opinion—that he will leave his home and life environment rather reluctantly. I t is human nature to cling to the home and the place where you have lived and to those with whom you have associated practically all your life. Then, the character of the work must be taken into consideration. If a man is trained, for instance, to work in mines, and to work under conditions established there, it is not an easy matter to prevail upon him to change from that line of work and seek employment in other lines of work. Take, for instance, mining—it is piecework, practically all of it; I suppose 90 per cent of it is piecework. They would be called upon to go out and work by the day in other lines of industry. That is the psychological effect. The CHAIRMAN. With respect to your statement that stabilization of income might be accomplished by paying 52 weeks' wages in case employers are not able to employ workers by the year, and that that would pass the cost on to the public, perhaps in increased prices on commodities; as a matter of fact, society has to stand that, anyway. We don't want to let the men starve or go without a decent living. So, in the final analysis there are two ways to take care of these people, one by stabilizing their income, and the other by the unsatisfactory method of charity and philanthropy. Mr. GREEN. That is the way I look at it. After all, it is a social question. The CHAIRMAN. I t is a social question. Society has to stand for it. One is self-respecting, and the other relies on charity and philanthropy. Mr. GREEN. Yes; that is our philosophy. I n approaching this unemployment problem we ought to find a practical means of stabilizing it so that every man may be made a steady consumer. We believe that we have attached altogether—I was going to say too much importance, but I don't think that would be the proper word— but while we have been attaching importance to the problem of production we have not been giving the problem of consumption the consideration that it deserves. Now, i i we could stabilize employment so that the great mass of the people could be guaranteed a steady income, then we would in a measure break down this whole structure of unemployment, because if people could be made to buy the things that industry produced steadily, then the men would be employed. The CHAIRMAN. Yes. That was one of the thoughts we had in mind when the automobile industry was quite seasonal. When the Ford Motor Co. put into effect its $5-a-day average wage, the wage of the workers was about $2.35 to $2.70 a day. Mr. GREEN. Yes. The CHAIRMAN. We thought that, if for the days they worked they got much more than that, they could afford to be unemployed, so far as the economic income was concerned, for some period of the year. Mr. GREEN. Yes. The CHAIRMAN. That would stabilize the income, and that is really the important thing—stabilization of the income if you can't stabilize the work. 58 UNEMPLOYMENT IN T H E UNITED STATES Mr. GREEN. Stabilize the income; yes. The CHAIRMAN. S O that those who are laid off during those periods don't suffer economic distress. And that is a problem that is up to industry, in my judgment, to solve. I t can not be solved by legislation. I would like you to bring out any views you may have as to what, if anything, the Federal Government can do in the matter. Mr. GREEN. I want to make these suggestions: First of all, I think the problem of stabilizing employment is a problem that should be dealt with between the owners and managers of industry and labor. W h a t I mean by that is this seasonal unemployment—these ups and downs. I think they ought to approach the problem with a determination to find a remedy. And in some of these high seasonal industries, like garment making, and others, I know of no reason why a system might not be worked out by which they could pay these workers a steady yearly income. I don't believe that under the present organization of some industries that that could be done. W e know that the unemployment problem in the coal, textile, shoe, and pottery industries is difficult. They are suffering, or were, economic ills that must be adjusted. There is overproduction in the bituminous coal industry, there is overproduction in the textile industry, there is a very continuous overproduction in the shoe industry, and now the pottery industry is claiming that it is suffering from foreign competition, and, as a result, a number of potteries in our own country are out of business. The CHAIRMAN. S O that, in that case, a tariff is the solution, is that correct ? Mr. GREEN. Well, I am not so sure about that. I am not expressing any opinion myself on that particular point. Some of those associated with the pottery industry claim t h a t that is true. I am not in the position of knowing the facts to express an opinion on it. The CHAIRMAN. D O you know of any industries, in your wide experience, that have attempted to solve the unemployment problem by either standardizing the yearly income or by diversification of work? Mr. GREEN. Well, the anthracite coal industry did. That is, the unemployment caused by seasonal demand, and as a result of it, up until a year or two ago the anthracite coal mines operated quite steadily, summer and winter. During the summer time when the trade was slack they lowered the price of anthracite coal in order t o stimulate the consumer to buy during the summer months, and, in addition to that, they provided for their surplus great stocking coal centers. And then during the winter they moved the coal from these storage centers out into the towns and cities where it was used, and as a result the anthracite coal industry was fairly well stabilized. However, since the last couple of years that situation has been greatly disturbed due to the introduction of oil-burning devices and substitutes for anthracite coal. Now, this year they have suffered a great deal of unemployment; I can't give you the number of days, but they suffered very greatly. The CHAIRMAN. During the past two years? Mr. GREEN. Yes; during the past two years. UNEMPLOYMENT IN THE UNITED STATES 59 The CHAIRMAN. That disturbance that you speak of was in part due to the arrogance of the operators, was it not? I mean in discouraging the public in using anthracite? Mr. GREEN. Well, I think it was caused partly because of the anthracite coal strike, during which the operators persisted in their opposition to the proposals made by the miners. During that period a number of substitutes were introduced, and then when the strike was settled the public just kept on using, these substitutes. But part of it has been due, of course, to the steady inroads made by these new substitutes for anthracite coal. I suppose there would have been a great many oil burners introduced into New England and other places even though there had been no stress because oil burning appeals to a great many people; and it has proven in a great many instances to be a very satisfactory sort of fuel. Now, I can't recall many other owners and managers of industry who have tried to stabilize industry during the seasonal fluctuations. I have heard about some who have been considering the problem and who have been diligently endeavoring to apply a remedy. The CHAIRMAN. H a s the American Federation of Labor any committee or agency which studies this matter ? Mr. GREEN. Only in our modest statistical department, so far as Ave are able to do it. We have gathered statistics or figures on unemployment. I will leave them here with you if you care to have them. We also have some here on fluctuations in employment, and the effect that unemployment had upon charity distribution. (At this stage Mr. Green handed to Doctor Lubin several documents and charts, to which reference is made during the following proceedings, and which are appended hereto.) These are figures on unemployment that we gathered from our own representatives in different towns and cities throughout the country during the year 1927. This gives the percentages. Now, here are the fluctuations in the building trades as we have it in the different months. Would you like to have this ? Doctor LUBIN. Yes. Mr. GREEN. NOW, the building trades are a fairly good barometer in the towns and cities, and that is the reason we have emphasized the building trades. Now, in this chart here—I will not trouble you about this. Senator, but I will explain it to Doctor Lubin. This black line indicates the number of dollars distributed each month. I t goes up here, you see. Now, the red line indicates the number of men employed, and so on, as reported by the employers' association, representing approximately two-thirds of the working population or Detroit. This is in the city of Detroit. The CHAIRMAN. They have one of the best reporting facilities, I think, in the country. Mr. GREEN. I think they have. And you can see by this [indicating on chart] that as employment went up the distribution of charity came down—down, see—up—down. And as one comes down the other goes up. The figures are there. This gives the figures on machinery, and this on displacements. The CHAIRMAN. I understand you were in New Orleans at the time the conference of governors proposed a sort of reserve for unemployment; is that correct? 60 UNEMPLOYMENT IN THE UNITED STATES Mr. GREEN. Yes. I was coming to that. Now, first of all. on this seasonal unemployment, the situation could be helped if the employers and employees would apply themselves to a study of the causes and then seek to apply a practical remedy so that the workers would be guaranteed a steady and fixed income. That, in my judgment, would go a long way toward relieving the unemployment situation, because it would guarantee a steady income and develop the purchasing power of the masses of the people; and that in turn would be reflected in increased activity in the industrial output. The CHAIRMAN. Would it also be an incentive for employers to use more imagination and foresight in their planning? Mr. GREEN. Yes. Now, on the displacement of men by machinery, I think that is a problem that ought to be considered by employers and employees, and, perhaps, by some representatives of the Government; because, in my judgment, that will eventually become a very acute problem. Thus far we have not suffered much by machine displacement because the newer industries have absorbed those thrown out of employment through the introduction of machinery. For instance, the automobile industry during the past 20 years has grown and developed, and as a result of it it has called for the employment of hundreds of thousands of men. Then came along the automobile accessories, filling stations, and all that; and they afford employment to hundreds of thousands. Then came the radio and the airplane. It is reasonable to conclude that the peak of absorption will some time be reached, and yet we are just at the edge, as it were, of mechanical development. Improvement will go on and on and industry will be equipped with machines more and more. The machinery will be perfected and improved and the steady displacement of men will go on. Now, we can't afford to have these men become permanently unemployed, because that would disturb the market. We must keep up the market as well as keep up production. The American Federation of Labor has never stood in the way of the introduction of machinery. We have invited it. We have felt that machinery relieved drudgery and toil, and that its expanded use would help increase the income of the working men and women; and, as a result, it would be a blessing to the great mass of the people. So in making this point I don't want to be understood as placing the American Federation of Labor in opposition to the introduction of machinery in industry. What I am calling attention to is the problem ot unemployment caused through the machine displacement of men, and this is a problem that is so impressive that we ought to think out at least some ways and means by which we can steadily take care of the men who are displaced through the introduction of machinery. That is a phase of our unemployment problem that I consider as of extreme importance. Now, just how it can be done is difficult, I think, for any man to foresee; but I think that there ought to be an honest approach to the consideration of that subject now and not wait until it becomes really acute, not sit down, as we do in these ups and downs, and wait until we have 1,000,000 or 5,000,000 men on our hands, but consider now what we are going to do with this number of men that are being displaced through the use of machinery. The CHAIRMAN. Well, now, the federation has proved competent to do that job on its own account. Is it doing anything toward that end ? UNEMPLOYMENT IN THE UNITED STATES 61 Mr. GREEN. I t is a difficult thing for us to do that, Senator. The trouble is that not all of the employers of the country will work with us. They wilj not confer with us. They will not hear us. They are hostile to us. So that it is difficult for us to make an approach and to make a contract and get consideration of the subject, but we are endeavoring to do what we can by arousing public opinion to a consideration of the subject and by calling attention to the number of men that are being displaced. Now, in some trades we are trying to take care of them the best we can, but it is becoming a more and more difficult problem. The CHAIRMAN. Take these industries that you are cooperating with; could you not make a study in cooperation with them as to the best means of solving this question of unemployment due to machinery? Mr. GREEN. We can, of course, with a number of the trades, like the building trades, the printing trades, and a number of miscellaneous trades, with which we have contract relations. A strange .situation exists, Senator, among the musicians. The musicians' unions are grappling now with that very problem through the introduction of the talking pictures. Musicians are being displaced and their organizations are grappling with that problem now. J u s t think of those men that have become artists, in big orchestras, men who studied music for years, men of genius, who are thrown out, being displaced, through "the introduction of mechanical devices —the talking pictures. Among these, it is skilled people, artists, that are being thrown out. I t is a pretty tough thing for a man that is skilled to go down and accept employment at unskilled work, unskilled industry. The artist, the musician, what is to become of him? Doctor L U B I N . I found 40 of them discharged in Baltimore. Senator W A L S H . I didn't hear that it was reaching out in that direction; did you, Senator? The CHAIRMAN. N O ; I haven't. Senator W A L S H . I have heard about telegraphers being thrown out of employment by the introduction of new inventions that are being used. Mr. GREEN. That displacement of telegraphers has been within the past six years. Senator W A L S H . A man can now turn on a machine and then have nothing further to do with it. Mr. GREEN. The displacement of these musicians, skilled people, through the use of machinery, is causing considerable trouble in a number of places. What are we to do with them—Jet them go out and work with pick and shovel? That is a difficult thing to determine. The CHAIRMAN. Have you asked the question that you had in mind, Senator? Senator W A L S H . I would like to ask about a letter we have here. Among the things I wish you would give some thought to and let us have your views later if you haven't thought of anything yet, is the thoroughness and accuracy of statistics prepared by the Department of Labor and the various State departments in reference to unemployment. There seems to be no distinction made between. 62 UNEMPLOYMENT IN THE UNITED STATES part-time employment and unemployment. As I interpret the figures that are gathered, if a man works one day or week or a month, he is regarded as an employee, and we are not able to get a true picture of the industrial conditions because there are no statistics that show the extent of the part-time employment. Am I correct about it? Mr. GREEN. Yes; that is correct. Senator WALSH. I would like to get a better picture of the real employment conditions in the country by having only statistics of the people who are carried on the pay rolls regularly, and not statistics of those carried part time. You appreciate that, Senator? The CHAIRMAN. Yes; I understand the point. Senator WALSH. I wish you would see what we can recommend in the way of collecting statistics, or urging our departments, or compelling them, if necessary, to get statistics of a more accurate and more definite character than we have been able to get. I am going to read a letter along that line that came here in September from Worcester, Mass. [reading]: In considering the unemployment problem of Massachusetts in considering the rating that the Manufacturers' Association gives in reference to employment, it has been called to my attention that the figure, which they give and which would seem to indicate that employment was on the increase and that there was not a considerable amount of unemployed, is arrived at in this way: A man is employed by Crompton & Knowles. He is laid off and may work for one day a week, or one day every two or three weeks or even one day every six months, but he is still kept on the roll of employees of Crompton & Knowles, although as a matter of fact he is working so brief a period of time that the fair interpretation would be that he was not working. He gets employment for two days a week with the American Steel & Wire, and is listed as being an employee of the American Steel & Wire. This would indicate that two men were being employed, while as a matter of fact one man is being employed; and then he is only being employed a short period of time. I think there is no doubt but that this condition prevails throughout among the Massachusetts Employers'Association and, of course, is used for the purpose of deceiving the public regarding the employment conditions here. I do not think that this is meant intentionally to deceive, but I think the result is that we do not get an accurate and correct picture; and I wish that you and your federation would think of that problem and see if some way can not be devised to collect statistics to give us a better picture. Mr. Grady knows that in Massachusetts one of the problems we have had there is the part-time employment problem. I t has been a great problem. It hasn't been unemployment, but it has been part-time employment. It is a fact th&t men with families have only been working two or three days a week for the past four or five years. Yet the records show that they are employed and the reports are to that effect. I want to ask you now if some one in your federation would make some suggestion along this line. The question has been suggested by Senator Couzens and has been asked of other witnesses, and it is relative to what appears to me to be a growing tendency upon the part of employers to dismiss an increasing number of their employees each year who reach what they call old age. My attention has been called to several cases where men who have just passed the age of 50 have been discharged, with the statement that they had outworn .their usefulness and reached an age where they didn't care to keep UNEMPLOYMENT IN THE UNITED STATES 63 them any longer and were going to supplant them with younger men. I would like to know to what extent that practice is growing in the country and what, if any, suggestions you have to make as to what can be done to meet the economic losses and hardships that result from the dismissal of the men who have spent the best years of their lives in an industry and who are dismissed before they are old men. Mr. GREEN. Well, Senator, that has been a problem that has been ever present with us. I t has been present with us for a great many years. Connected with that has been this policy of physical examination instituted by a great many employers, particularly those who own and manage the mass-production industries of the country. And we have been deeply concerned about the policy pursued, about either dismissing men when they reached the age of 45 or 50 years, or refusing to hire them when they reached that age in life. Now, where we have direct relations with employers we are fairly able to protect and prevent discrimination against them after they have secured employment because we have objected to men being dismissed without cause. I n the building trades, the printing trades, and miscellaneous trades, where we have contractual relations, we have been able to do something along this line. Where the men are earnest men and give good service and are doing their work right they should be permitted to remain. But in employing men they, of course, discriminate against the older men; they seek to employ the younger men. Now, how to meet that, Senator, is a difficult thing, because you can't very well say to an employer, " You shall do thus," or " You shall not do so and so." I t appears to me, however, that that is a matter for public opinion and public conscience, that the public should be aroused to this practice, and that there should be a general attempt made on the p a r t of the public to see that the practice must cease and that every man must be given a fair opportunity to earn a decent living. How to meet the problem through legislation I can not see. The CHAIRMAN. Isn't it a condition comparable to an injury in the course of employment ? If a man is injured in the course ot his employment the laws of most of our States compel the employer to compensate him for the period of his incapacitation. Mr. GREEN. T h a t involves the question of old-age pensions. I t also goes into that. The CHAIRMAN. Yes. Mr. GREEN. And then you get into the matter of States' rights and State legislation, and, of course, it would be mighty difficult to attempt uniform legislation on that subject. The CHAIRMAN. I t probably could not be done nationally, but in our report we could recommend that as one of the remedies for the various States to consider. Mr. GREEN. Well, yes, and perhaps you know—I am sure you do— that studies are being made upon that subject in many of the States. We have been making a study of it. We made a report upon it to the New Orleans convention; that is, on the subject of old-age pensions. The point you raise touches that very closely, but I don't think a man 45 or 50 years of age is ready to be classed a* eligible 29193—29 6 64 UNEMPLOYMENT IN THE UNITED STATES for an old-age pension. I think he has many years of usefulness before him and it should be possible for him to earn a living until he is incapacitated. It is not a question of putting him on a superannuated list, because most men at 45 are able to work. (The following material was submitted for consideration of the committee by Mr. William Green, president of the American Federation of Labor:) SOME EXAMPLES OF MACHINE DISPLACEMENT OF WORKERS However, no governmental or other agency had been recording the results of displacement of workers by mechanical devices and power. We know some such displacements as these were in progress: Steel.—Seven men now do the work which formerly required 60 to perform in casting pig iron; 2 men now do the work which formerly required 128 to perform in loading pig iron; 1 man replaces 42 in operating open-hearth furnaces. Machine shops and railway repair shops.—One man replaces 25 skilled machinists with a " gang " of 5 or 10 semiautomatic machines; 4 men can now do in 3 to 7 hours what it formerly took 8 men 3 weeks to perform in repair work on locomotives, due to oxyacetylene torch; 15 years ago it took 15 to 30 hours to turn one pair of locomotive tires. Now it takes 8 hours to turn 6 pairs with same number of men by use of modern processes. (Time reduction: 15-30 hours to 1 hour and 20 minutes.) Thirty workers with 10 machines now do the work of 240 workers with 20 machines in the Sun Tube Corporation machine shop. Brick.—A brick-making machine in Chicago makes 40,000 bricks per hour. It formerly took one man 8 hours to make 450. Change: It would take 711 hours to make 40,000 bricks by the old method with one man working. It now takes one hour. Glass.—The most up-to-date automatic machine makes in one hour what it would take more than 41 workers to make by hand in the manufacture of 4-ounce oval prescription bottles. In 25 and 40 watt electric bulbs the manhour output of the automatic machine is more than thirty-one times that of the hand process. Cranes and tractors.—Three men replace 28 in Youngstown Sheet & Tube Co. with tramrail crane; 5 men with tractors replace 48 men as crane loaders in Willys Overland Co. Conveyors.—Five men do three days' work in one day in emptying brick kiln. Paper-oox industry.—In New York, from 1914 to 1925, the number of workers decreased 32 per cent while the output per wage earner increased 121 per cent. General.—In the automobile industry the same number of men are producing three times as many cars as in 1914; steel mills turn out twice as much again as in 1913. On the other hand, occupational shifts resulted from the development of new industries, new inventions, and new customs. There has been a decrease in agricultural workers of over 8,000,000 (1920-1925). While those employed in all manufacturing industries have decreased in number, the automobile industry, rubber tires, electrical machinery have increased the number on their pay rolls. Such new industries as the manufacturing of radio sets, airplanes, mechanical refrigeration have required large work groups. Salesmanship and service forces for automobiles, radios, and electrical products have opened up new jobs for over 1,000,000. Mail-order houses, chain stores, and distributors of household appliances afford other work opportunities. Motion-picture houses employ about 150,000. Insurance companies have increased their employees by about 100,000; the telephone industry by 660,000. The number of barbers and hair dressers have increased by 160,000 in the past seven years. There has been a very great increase in clerical workers and in the electric-light and power industry 53,000 more are employed. EMPLOYMENT IN MANUFACTURING INDUSTRIES Regularity of employment.—One of the most fundamental aims of wage earners is regularity of employment. The whole organization of life for the wage earner and his family depends upon steady income. The commercial organization of the community is in turn dependent upon the incomes of its UNEMPLOYMENT IN THE UNITED STATES 65 residents for sustained patronage. When groups of workers of the community are unemployed business depression follows. The business community and the wage earners have a common concern for regularity of work. During the past year reports of unemployment reached headquarters with insistence and frequency. No Government agency had data disclosing the size of the problem. Definite information on unemployment was necessary to constructive planning of industries, or even a presentation of the difficulties wage earners were facing. Unemployment seemed higher than seasonal changes alone could account for. The census gave changes in the total number of workers as follows: Wage earners Wage earners 8,136,050 1899 4, 712, 750 1922 8, 778,150 1904 5,468,400 1923 7, 935,450 1909 6,615,050 1924 8,384,250 1914 7,036, 250 1925 8,401, 050 1919 9,096,350 1926 8,076, 550 1920 9, 288, 050 1927 1921 6, 946, 550 It was in the period from 1919 to 1927 when introduction of new machinery and changes in manufacturing process greatly increased productivity in manufacturing industries. The effect of machine displacement upon the workers is shown by the fact that there were 1,000,000 fewer workers in the manufacturing industry in 1927 than in 1919, a decrease of 11 per cent. It is estimated that during this period the productivity of the individual workman in manufacturing increased between 45 and 49 per cent. (Study by Woodlief Thomas of the Federal Reserve Board, published in March supplement, the American Economic Review.) Quite aside from occupational shifts and development of new industries, the federation instituted a reporting system covering the regularity of work for members of trade-unions. The details of this work are given above. The following table shows unemployment for all manufacturing industries and for the construction, metal, and printing trades workers: Unemployment in trade-unions* Percentage of unemployed members Oct. to D e c , Jan., 1928 1927 Atlanta, Ga Baltimore, Md Birmingham, Ala__. Boston, Mass Buffalo, N . Y Chicago, 111 Cincinnati, Ohio Cleveland, Ohio Denver, Colo Detroit, Mich Jersey City, N . J Los Angeles, CalifsMilwaukee, Wis Minneapolis, M i n n . New York, N.Y..__ Paterson, N . J Philadelphia, Pa Pittsburgh, Pa San Antonio, Tex___ San Francisco, Calif. St. Louis, Mo Seattle, Wash Washington, D. C _ Total building trades Total metal trades.. Total printing trades Total all trades Feb., 1928 Mar., 1928 9 31 12 18 12 11 12 17 19 8 21 212 3 16 37 8 19 15 *13 14 15 4 12 9 10 «9 10 43 17 20 27 8 19 34 21 32 22 23 10 12 24 26 13 31 18 9 14 13 11 13 11 41 18 20 18 12 14 36 19 30 21 23 8 10 21 40 24 31 17 11 14 11 13 11 11 31 10 21 14 12 11 36 20 32 17 17 8 15 23 24 13 36 18 4 14 i! 39 15 1 5 18 | 38 13 5 18 24 20 23 7 14 12 13 10 Apr., 1928 May, 1928 June, 1928 July, 1928 Aug., 1928 Sept., 1928 10 27 11 17 13 12 11 29 15 22 19 17 8 13 20 17 15 27 20 13 13 12 10 6 8 24 7 15 13 10 11 16 18 12 35 18 6 12 17 22 16 19 19 8 11 11 7 5 5 21 6 9 8 8 12 9 12 12 20 12 6 13 18 14 11 16 14 3 10 12 5 5 5 15 13 12 9 7 9 11 16 9 22 11 4 7 19 12 17 17 13 3 17 10 6 3 5 21 18 10 11 5 7 6 15 12 28 15 2 8 13 12 11 27 14 3 11 6 4 2 6 8 16 21 7 4 3 11 5 27 21 24 3 9 12 12 10 25 14 3 11 8 3 1 32 12 25 12 22 10 24 13 19 9 22 8 5 16 4 ' 13 4 11 5 1 12 5 9 5 10 i For an explanation of the collection and computation of the figures, see March, 1928, American Federationist. > Only for November and December. 3 Only for December. 66 UNEMPLOYMENT IN THE UNITED STATES Obviously the building trades have a serious problem in irregularity of employment that extends throughout the year. To deal with the problems of unemployment we recommend the following undertakings: (a) Employment service.—We believe that there should be a nation-wide employment service either under Federal management or supervision. Such service would prevent much distress among workers and would be an advantage to employers needing workers. It would help to prevent overmanning industries locally to meet temporary expansions and would greatly help in enabling workers to adjust to occupational shifts and industrial developments. Such an agency was operated by the Federal Government in the late war with many good results. It should be organized on a practical peace-time basis. (&) Stabilization of industry.—In addition to all these phases of the unemployment problem there still remains an approach to the problem that promises more lasting results than all others—stabilization of industry. Responsibility for solving this problem devolves primarily upon management. However, the organized workers through trade-unions can make a functional contribution. By cooperation with management in eliminating wastes and development of better technical procedure the trade-unions can help develop a stabilization of production that will bring regularity of work. As example of this we quote results' from union-management cooperation on the Canadian National Railroad. On the Canadian National Railroad, where cooperation has also been in effect since 1924, records of improvement in employment stabilization show that in the 4-year period ending December, 1927, there has been an increase of 14% per cent in the earning capacity of each wage earner due to increased employment. This has amounted to an actual average increase of $150 for the year 1927 over 1924 for each employee in the shops of the Canadian National. Besides this increase due to stabilization of employment, the Canadian National agreed through negotiation with its employees to establish one week's vacation with pay each year. Unemployment in the building trades.—There are 1,400,000 building-trade workers in the United States. We have found that the average unemployment in the building trades reporting to the federation for the first 11 months of 1928 is 27 per cent. This represents an average monthly unemployment of 378,000 men. Unemployment in all trades.—There are 3,000,000 union workers represented In our reports. We find the monthly average of unemployment to be 14 per cent, or 420,000 are represented as being unemployed during the first 11 months of 1928. THE UNEMPLOYED WORKER MUST DEPEND ON CHARITY Reports from charitable organizations show a close relation between unemployment and the payment of relief. Since unemployed workers exhaust every means of support before applying to charity, and draw on savings or deprive themselves of necessities during the first months of unemployment, the demand for relief usually comes about two or three months after the beginning of an unemployment crisis. The acute unemployment situation in the depression of 1921 and the consequent demand on public relief is shown by a report from the city of Detroit. 1 In four months from August to December, 1920, employment fell from 183,000 to 27,000^-that is, 85 per cent of those employed in August were out of work in December. By February large demands on relief were beginning to be made, and by March, 1921, the relief payments reached a high peak. From October, 1920, to March, 1921, relief increased from $33,000 to $309,000. Reports from 1920 to 1928 show that there is continually a very close relation between decreases in employment and increases in relief. The community bears the cost of unemployment. 1 Report from department of public welfare. Figures on employment are from Employers Association and represent two-thirds of the working population of Detroit. (A <U 1 < UNEMPLOYMENT o 4 - Li I a. -2 i \ F £ . <o % * IS , THE UNITED STATES CO o o o e o tt> o > ocao ©wo o CQWW S (O pqtOlO 0 1 ~5! OhWiO f-t d © 8O 3- 67 00 Al\ Trades Unemployment 40 Report 30 3,0 T^*1^^^^ Average 10 Percent Ho, Represented C Tan 18 540,000 Feb 18 540,000 Mar 18 540,000, Apr 16 480,000 3,000,000 given as the number of men represented. May 13 390,000 Jun 11 330,000 Jul IS 360,000 Aug 9 270,000 Sep 10 300,000 Oct 9 279,000 NOT Average 10 14 300,000 420,000 UNEMPLOYMENT IN THE UNITED STATES 69 STATEMENT OF A. C. BENNETT, OFFICE MANAGER, PACEAED MOTOR CAR CO., DETROIT, MICH. The CHAIRMAN. J u s t state for the record your name and occupation. Mr. BENNETT. My name is A. C. Bennett. My occupation is office manager of the Packard Motor Car Co., Detroit, Mich. Senator Couzens, I have been asked to come down here before this committee presumably because we have established a reputation for giving stabilized employment at our rjlant, and possibly that has been true to an extent. We hope that it has been, because we have tried to make it that way. However, we realize the question is so tremendously involved that we appreciate that we haven't made all of the progress t h a t we can make. We feel that the more information we can get to help us in that problem the more we want, because we are by no means perfect. Now, with your permission, I shall endeavor to answer the questions which you included in your letter with a view to giving you a picture of just what we have done. The CHAIRMAN. We would be very glad to have you proceed, Mr. Bennett. Mr. BENNETT. Your first question is, " H o w irregular was employment in your plants before you attempted to stabilize it? " We have always tried to provide regular employment. However, during the past several years this has been less difficult to accomplish because of our expanding business. That, in a way, is the keynote of what I have to say. Your second question is, " By what means did you undertake to provide steady employment ? " Those factors which involve the ability to expand our business are the same as those which promote to the greatest extent regular employment. However, in recent years more complete and accurate statistics have become available regarding the rate and kind of consumption of our product. I n addition to this we have continued to study even more intensely the quality and competitive desirability of our product and to provide the public with that which they want and which, in our judgment, they will want if we are able to make it available to them. This desire to produce what and as our public wants is the fundamental basis for regular employment; in other words, stabilization of employment and continuous production. The third question is, " W h a t problems did you encounter in bringing about regular employment?" The most impressive problems which confront us in our desire to bring about regular employment are those that might naturally arise in the execution of methods to obtain satisfactory information. For example, this report [exhibiting same] comes to us from our dealers at 10-day periods during a month containing, as you realize, the fundamental factors involved in production and employment. I will leave this sample copy of that report with the committee. (Keport referred to by Mr. Bennett is appended below.) I n addition, we use a long-time forecast of our business as well as a short time—three months—forecast which is subject to some revision as current facts become known. However, the interpretation of these 70 UNEMPLOYMENT IN THE UNITED STATES facts and conditions is really the most important consideration and these final conclusions, of course, rest with our president, Mr. Alvan Macauley. The fourth question is, " H o w successful have you been in your efforts ? " I t is almost impossible to answer this question, because our business has been expanding and the same factors which provide for an expansion in business will also provide for the most regular employment if successfully carried out. The fifth question is, " To what extent can similar measures be applied to other plants and other industries ? " Our knowledge of conditions in other industries is limited, of course. I t may be more or less difficult to use the same methods that we use. However, these methods seem to be fundamental, and to our limited knowledge are applicable to other industries also. I t is a matter of very rigid and close market analysis, plus the expansion of our business, and we do not have definite proof of our success because we have been expanding in recent years; and with an expansion program we have little chance of unemployment, because we are continually hiring new employees. That is very general, of course. The CHAIRMAN. YOU don't mind if I interrupt you, do you? Mr. BENNETT. Not at all. The CHAIRMAN. I was wondering if industry can keep on expanding, as you have ; at all times, with the state of productivity of the country. W h a t is to become of the industries that can't continue to expand ? Mr. BENNETT. That is a problem we hope to solve at the time. We haven't discussed the problem of the unemployed at a time of critical business depressions, but have discussed rather the minor business depressions which we have throughout the year. We have to deal principally with seasonal fluctuations in our business. The CHAIRMAN. Well, how have you dealt with the seasonal problems in your industry. Do you lay off men at some periods and employ them at others? Mr. BENNETT. T O a minor extent, of course. We try, by an analysis of our market, by knowing how and when our product will sell, to so forecast ahead and to keep our fingers continuously on the situation by the use of statistics on all available economic conditions, so that we will be able to set for ourselves a monthly schedule that will be the same possibly for each month. The CHAIRMAN. Have you any figures to show your fluctuations during the past few years? Mr. BENNETT. Yes; I have a statement here. That information is given here for the past few years. Would you like me to read this? The CHAIRMAN. Yes; if you will. Mr. BENNETT. There was a slight business depression in 1924, if I remember correctly. During that year we had approximately 5,000 employees on the roll; that is, on a monthly average for the calendar year. I will read the statement [reading] : 71 UNEMPLOYMENT IN THE UNITED STATES Average number on factory roll of PacJcard Motor Car Co. (1922 to 1928) 1922 January February March April May June July August September October November December Average Labor turnover (per cent) _ 3,503 3,816 4,518 5,402 6,708 7,337 7,795 7,371 6,324 6,007 5,721 5,673 5,848 1923 4,836 5,085 4,969 4,963 5,032 5,173 4,861 5,044 4,852 4,716 5,399 6,073 5,084 1924 6,904 6,484 5,941 5,320 4,650 4,187 4,187 4,041 4,099 4,048 4,096 4,685 4,887 1925 6,266 6,259 6,433 6,653 7,344 7,711 8,392 8,572 8,454 8,774 8,937 8,633 7,702 250 1926 1927 7,798 7,712 7,979 8,232 7,990 8,147 8,995 9,679 10,071 10,119 9.162 8,279 8,680 230 7,850 7,630 7,573 7,067 7,554 7,865 8,811 9,498 10,142 10,265 10,035 9,977 8,689 162 1928 10,369 10,606 10,686 10,728 10,529 10,094 10,308 11,606 12,213 12,405 12,040 11,053 128 The CHAIRMAN. Y O U spoke of the average for those years that you just read. Of course, that doesn't really answer the question, for the reason that when you average it that way some of your employees may have been out of work for three months, others six months; and as they need their wages from month to month it does not solve the problem to average them, does it ? Mr. B E N N E T T . T h a t is true. That is the thing we are trying to eliminate. The CHAIRMAN. That is what we are asking. Have you been successful in eliminating the number of employees that you employ month by month? Mr. B E N N E T T . During the past two years I would say we have been fairly successful. The CHAIRMAN. H O W ? Just by this plan ? Mr. B E N N E T T . B y planning for production and stabilizing employment. The CHAIRMAN. Let us say, for instance, that your knowledge or forecasts may have been inaccurate and incorrect. W h a t would you do if your orders didn't come in as you had forecast? Would you lay off the men? Mr. B E N N E T T . What we did do for a few months in the early part of 1927, instead of working a 5%-day week we kept all of our men on the roll instead of laying them off, practically all of them, as many as we could, and worked them four days a week for a few months, giving them an opportunity to earn at least four-fifths of their previous earnings. The CHAIRMAN. W h a t year was that? Mr. B E N N E T T . The early part of 1927. The CHAIRMAN. W a s the business a little slack in 1927 compared with 1926 and 1928? Mr. B E N N E T T . I believe that it was. I t was caused by a general slowing up of business, a slowing up in orders for 1926-27, and was a little slow until the summer and fall of 1927. The CHAIRMAN. Have you any rules and regulations with respect to the ages at which you employ applicants for work ? Mr. B E N N E T T . Yes; we have. The CHAIRMAN. What are those rules and regulations? Mr. B E N N E T T . Each man who is employed, who is over 50 years old, must have the approval of the head of the department. The CHAIRMAN. Under what circumstances do you approve or disapprove of the employment of a man over 50 years of age ? 72 UNEMPLOYMENT IN THE UNITED STATES Mr. BENNETT. I am not the one who approves that. We have a system of physical examinations. If the man applying for work has previously been with us, we are very generous in putting him back on the job if he has been off for only a comparatively short time. There is practically no exception to that. If he is an entirely new man, we question him. The CHAIRMAN. I n what way do you question him? Mr. BENNETT. For this reason The CHAIRMAN (interrupting). N o ; in what way do you question him if he has not been in your employ before? For what reason? Mr. BENNETT. As to his physical condition, with a view to ascertaining whether he will be able to keep up with the job he is going to be on. The CHAIRMAN. What are the factors in determining that he should not be employed? Does it depend on the kind of job it is? Mr. BENNETT. I t depends on the kind of job he is going on. If there is a hazard in it, and he is not active, he shouldn't be placed on it, but should be given another job. The CHAIRMAN. D O you give him another job or do you just dismiss him ? Mr. BENNETT. We try to give him another job. The CHAIRMAN. H O W many cases of such character come before you in a year ? Mr. BENNETT. On rejections of that nature, I haven't the records here, but in a year there wouldn't be over 20 to 25 men. The CHAIRMAN. That would be rejected? Senator W A L S H . And who are already in your employ? Mr. BENNETT. N O ; those who are new men. There have been no rejections in the past four or five years of men who have previously been in our employ. Senator W A L S H . Would you employ a man over 50 years of age as readily as you would one of 20 or 30 years of age ? Mr. BENNETT. N O ; we don't, because the positions we have for them are those that require fairly active men. The CHAIRMAN. The witness stated, Senator, that the employment department employs the men without reference to him, but if they are over 50 years of age they must be referred to him. Doctor L U B I N . What reason do you have for rejecting a man other than the fact that he is not active enough? Is there anything in your pension system, or something of that sort, that bears upon it? Mr. BENNETT. His fitness for production, as to whether or not he can get it out, and the fact that he might be injured in his employment. Those are the things considered. The CHAIRMAN. D O you have a pension system? Mr. BENNETT. We do not. We have studied every pension system we could get hold of, but we have been unable to find one that would be satisfactory. This is our plan now, we don't know whether we can carry it out or not, but we do t h i s : When a man becomes unfit for production—that is, when he is too old and worn out to keep up with the younger fellows on the production line, or on some job where they are working on a bonus plan where he could not keep up with the rest of them—we analyze his case very thoroughly and it requires the approval of our vice president to put him into a special UNEMPLOYMENT IN THE UNITED STATES 73 department which we calj the " D F " department, because we don't want to call it the salvage department. The CHAIRMAN. W h a t do you mean by " D F " department? Mr. BENNETT. Those are merely numerals indicating the department. The CHAIRMAN. Dead file ? Mr. BENNETT. Those are numerals that are used merely to indicate the department, just as the letters " D M " are used for cylinder plug. The CHAIRMAN. W h a t are the minimum and maximum wages you pay in your plant? Mr. BENNETT. For hourly work? The CHAIRMAN. Yes. Mr. BENNETT. I can't give it to you accurately, but approximately, if you want it—45 cents to $1.50 an hour. There might be some higher than that. The CHAIRMAN. The minimum, anyway, is 45 cents an hour? Mr. BENNETT. Fourty-four or forty-five cents an hour is practically the minimum. The CHAIRMAN. D O you work eight hours a day ? Mr. BENNETT. Nine hours now; 50 hours a week. The CHAIRMAN. Fifty hours a week ? Mr. BENNETT. Yes, sir. The CHAIRMAN. Itave you given any contemplation of a 5-day week? Mr. BENNETT. I t has been considered, I believe, although I can't give you an opinion that would inform you on the point. The CHAIRMAN. The question the committee would like to know about is what you would do in case of contraction of business rather than expansion. Mr. BENNETT. I can only say that if we can master the seasonal fluctuations in the business we will have greater opportunity to master the other if it comes. Through very close analysis and keeping in close touch with our market, all phases of it, we shoujd be able to eliminate unemployment to an extent if we get into a major depression. The CHAIRMAN. YOU are planning for that now, as I understand you? Mr. BENNETT. We have no definite plan now, Senator Couzens. The CHAIRMAN. NOW, assuming that in 1928 you had 10,000 men, and there was a retraction in the business in 1929, so that you only had to produce four-fifths of the 1928 business, would you reduce your staff to four-fifths? Mr. BENNETT. More likely we would have every man work fourfifths of the time. The CHAIRMAN. And keep the same number? Mr. BENNETT. Yes. That is the best solution we have arrived at yet. Doctor L U B I N . Do you have any scheme for storage through dealers so that you can keep your men more regularly employed each month ? Mr. BENNETT. D O you mean storage of cars? Doctor LUBIN. Yes. 74 UNEMPLOYMENT IN THE UNITED STATES Mr. BENNETT. Yes; we expect our dealers and distributors to take an adequate number of cars through the lean months to provide for the peak months. We do it through education. The CHAIRMAN. Have you given any thought as to whether the Federal Government can do anything to stabilize employment? Mr. BENNETT. Since receiving your request to come to Washington we have thought about it, but can't give you any definite opinion. I believe, to a very large extent, something must be worked out by the individual manufacturer. The CHAIRMAN. Have you any questions to ask, Senator Walsh ? Senator WALSH. N O . The CHAIRMAN. Have you any further statement to make, Mr. Bennett? Mr. BENNETT. I have nothing further to say, Senator Couzens, unless there is something I can tell you that will be helpful. You appreciate, of course, that my remarks here have been very general. I don't know otherwise how to treat the subject. The CHAIRMAN. I remember seeing the weekly statements of fluctuations of employment in Detroit. There was always a statement attached that it wasn't 100 per cent. I don't remember what it was. Are you a member of the employers' association ? Mr. BENNETT. Yes. The CHAIRMAN. And you report Mr. BENNETT. Yes, sir. The CHAIRMAN. Your reporting your employees to them ? facilities through the association are based upon four-fifths of this employment; is that it ? Mr. BENNETT. That is, the reports that we previously got? The CHAIRMAN. Yes. Mr. BENNETT. I believe it is 93 or 95 per cent of those employed in Detroit. The CHAIRMAN. I t is as high as that, is it ? Mr. BENNETT. Yes. The CHAIRMAN. After hearing the statement of Mr. Green, president of the American Federation of Labor, here this morning, and the questions asked of him, if anything further occurs to you that would be helpful in this discussion we would be very glad to have you file any further statement or report which you have to make, not only to assist the committee in considering the question, but in giving information to others that would be helpful. Mr. BENNETT. I have already mentioned about the problem of taking care of the older men. We do not get many applications in the first place from men that have not been with us, and those that are with us we take care of. W e put them on jobs. I n a big manufacturing plant there are certain jobs those men can be put on, and we feel that that is the very best thing to do, because the minute you pension an old man and say he is through, that there is no more work left in him, he is quitely likely to be unhappy and die. The CHAIRMAN. YOU spoke of the older men who are not able to keep up with the younger men. Are those cases picked out and referred to some other department, for consideration in some other place ? Is that the idea ? Mr. BENNETT. Yes; for consideration in this one department. The CHAIRMAN. T h a t is, the " D F " department? UNEMPLOYMENT IN THE UNITED STATES 75 Mr. BENNETT. Yes. We don't take them out unless it is absolutely essential. The CHAIRMAN. YOU say the older men would sometimes interfere with a group bonus—that is, a bonus based on the production of a group of men if Mr. BENNETT. Yes. I n an individual department every man in the department participates in the bonus, and it is of interest to each man in that department to do his utmost to establish the per cent of the bonus. The CHAIRMAN. I n case a department speeded up and earned a bonus, the bonus would go to the group in that department and be divided equally ? Is that the idea % Mr. BENNETT. Yes, sir. If they make a 20 per cent bonus they get 20 per cent added to their pay check. The CHAIRMAN. I S that for each period, or how ? Mr. BENNETT. Each period, each half month. The CHAIRMAN. Doctor Lubin, have you any questions to ask? Doctor L U B I N . YOU said earlier, in talking to me, that you felt that by the development of statistical information you could more efficiently provide for the future and perhaps with sufficient information make provision for major cyclical depressions. Are you getting any help now from the Federal Government along that line? And d o y o u think the Government could help you more ? ]VIr. BENNETT. We do use figures and get most of them from the Department of Commerce, but so far as their use in solving any problem is concerned I have always felt that the figures were late m coming and that we already had a picture of the economic condition throughout the country through our own methods. The CHAIRMAN. If there is nothing further we will adjourn until 10.30 o'clock Monday morning. Report form submitted regularly by dealers to Packard Motor Car Co., showing state of dealer's business 1-10 11-20 21-31 Total 1-10 11-20 21-31 Total 1-10 11-20 21-31 Total 1-10 11-20 21-31 Total JULY Gross sales Net sales Deliveries Shipments Stock Orders AUGUST Gross sales Net sales Deliveries Shipments Stock Orders SEPTEMBER Gross sales Net sales Deliveries Shipment Stock Orders i I i (Whereupon, at 12 o'clock noon, the committee adjourned until Monday, December 17,1928, at 10.30 o'clock a. m.) UNEMPLOYMENT IN THE UNITED STATES MONDAY, DECEMBER 17, 1928 UNITED STATES SENATE, COMMITTEE ON EDUCATION AND LABOR, WccsMngton, D. C. The committee met, pursuant to adjournment, at 10.30 o'clock a. m., in the committee room, Senate Office Building, Senator James Couzens presiding. Present: Senator Couzens (chairman) and Walsh. Present also: Dr. Isador Lubin, economist, of the Institute of Economics of the Brookings Institution, Washington, D. C. The CHAIRMAN. We are ready to proceed. Doctor L U B I N . This morning we have Mr. Daniel Willard, president of the Baltimore & Ohio Eailroad. STATEMENT OF DANIEL WILLARD, PRESIDENT OF THE BALTIMORE & OHIO RAILROAD The CHAIRMAN. Mr. Willard, we understand that you have contributed quite considerable to the regularization of the work of employees, and we would be glad to have you tell us in your own way what you have accomplished; what your experience has been in that direction. Mr. WILLARD. Mr. Chairman, I haven't had much opportunity since I heard from you to prepare for this hearing, and I will have to tell you out of mind and from such statements as we keep currently what we have been able to accomplish in the way of i stabilization of labor on the Baltimore & Ohio Eailroad. I t is not for me to pass judgment on what we have done. I know that we are keeping a more stabilized force at work now than formerly and before we began to give serious thought to the matter. That I do know. Whether we have done as much as we ought to do is another matter. I am quite sure we haven't done as much as we will do, or as much as we could do under conditions which I will refer to later on. The first inquiry in your questionnaire is, " H o w irregular was employment in your plants before you attempted to stabilize i t ? " That is almost like asking " H o w large is a piece of butter?" because there is no real standard to measure it by. If we were to take the year 1922, the year of the shopmen's strike, I recall that we hired 42,000 men within a period of six weeks. They nearly all left after seven or eight weeks. The turnover was pretty rapid just then. The next year, 1923, we had unusually large forces in almost all the departments because we were trying to make up what we had lost the 77 78 UNEMPLOYMENT IN THE UNITED STATES year previous, and our forces were much larger than they should be normally, particularly in the mechanical department. Since that time we have shown a gradual trend downwards in the number of men that are employed and less variation during the year. Here is a statement which we prepare every month showing the number of men employed in the different departments and the total man-hours worked, and you will see by that that the tendency during the last five years, from 1923, has been quite consistently downward all the time and the flunctuations have been less marked. Taking 1923 as a standard, our turnover was probably not less than 20 per cent—between 20 and 25 per cent, I suppose. To-day our turnover is probably less than 10 per cent, so there has t e e n a distinct improvement. We not only employ substantially fewer men but the men we do employ work more regularly. I have some charts here that may throw some light on that matter. I will explain in a general way what this print means. These white lines up and down show the flunctuations of business during the different parts of the year, and of course our business on the railroad responds very closely to the business of the country, because,, generally speaking, if there is not freight to move, we do not run freight trains, and if there is an unusually large amount of freight demanding movement we run an unusually large number of trains. T h a t isn't true of the passenger business. (The chart referred to by Mr. Willard faces this page.) The CHAIRMAN. I n that connection, when your volume of freight increases or decreases, do you work the men longer, or do you put more men on? Mr. WILLARD. N O ; we don't work them longer, because in the majority of instances if the men work over their established hours they get paid at the rate of time and a half for doing it. The CHAIRMAN. What I was trying to get at—the decrease in the time. Do the number of working hours per man come down ? Mr. WILLARD. N O ; the number of working hours per man do not change much, but the number of men changes, but in the train service, which I was referring to, that matter adjusts itself. I do not know of anything we can do to stabilize train service unless we have stabilized business so that the same amount of business is to be moved all the time. Suggestions have been made in that connection that if large consumers of coal, for instance, including the railroads, would in the summer months anticipate their needs for the winter months and store coal that would mean a more even operation of the railroads. Not much has been done that way, but there are possibilities, and those possibilities are encouraged in the hard-coal business, as you perhaps know, by reducing the price of coal, say 50 cents a ton, the 1st of April, to induce people to ship during the summer to keep the mines going. This line on the print shows the greatest variation and represents the movement of agricultural products. Grain moves more promptly now than ever before. Wheat is now cut and loaded into the car on the same day, and it goes forward by rail as fast as they can cut it. Trainmen and enginemen work when trains run, and they do not work when the trains do not run. That is understood. Probably about 80 per cent of the maximum force works pretty steadily all -TrH n& E MAN B A L T I M O R E HOURS REGARDLESS AVERAGE PER MOtfTTF OF 1923 OHIO WORKED DISTRIBUTION 19241925 OF Charh No.302?=A«g S Y S T E M R A I L R O A D E»Y D E P A R T M E N T HS E X P E N S E S . ^ S % f g !92£ 1927 1928 W " y v « % S r 1929 1930 Mr-Revised.-* "* ISl^lt^ wool is la £ 5000 5000 HE^&rifcjfeehfl A% Pimm B —[—Lj-^i 43001 jo A M D ^000 ^ fu^ T w^B •fr^L 1, m^z^^^-j^^gai 1 14000 < _n o 5000 5 I J ?ooo 2000J fOOO foco\ Mo |<ri ?ooo la 2:7030I <. «00 WOOiri 7000 X < 4000 ^ 1° F000J I ? 5000] 4600 4000 jffflfl. JO0O C3rd> s a 4JW| m I o 4000 _i ?;oo ^?000 2500 'AVERAGE PER MONTH O l - 1^ \92Z TTon ft ms a 233 SS 1974- 1925 mt kjoo in s \mo 2 1 w 83 1926 1927 1928 ?ooo 2 1929 '.930 «iiis0tei^ji^ij|iajgitjifei3uiiut g f e i i ^ i ^ i i ^ J ^ i i i t m i a ^ i p M 20000 fifcMoricai^: )9000\ f?000 moo 3} 17000 17000 l<ri a MOO l< )?000 |<r> Ji> 10/4000! he ' K J5000 12000 2; £q 1ECw W E p 1B i m W?o< 14000 o X W0 >\2000 IJOOO 11000 10000 10000 U f / . r * of A.MJ3J-«r>t- +0 Vice - Pre*ioleo-H-I..C.5.- & n l + [ m o r e , M o ! . J£lJ&,1?2r. 29193—29. (Face p. 78.) No. 1 29193—29. (Face p. 78.) No. 2 29193—29. (Face p. 79.) UNEMPLOYMENT I N THE UNITED STATES 79* the year in the train service. There might be at times from 10 tx> 15 per cent, sometimes 20 per cent, t h a t would be on short time. They would only run when extra trains required their services. At such times the engineers might go back to firing, the firemen would go back perhaps to work in the roundhouse, and the younger men would be laid off temporarily. That is something that we have not been able t o change very much in the way of stabilization, because we must respond to the needs of the public for transportation. With the passenger service, that condition is different. I t is pretty well stabilized in any event, and I say " i n any e v e n t " because at the present time we are running perhaps 2,000,000 more train-miles than we were eight years ago, and only half as many people riding. We have been obliged to maintain a minimum service. That does not fluctuate like freight. Senator W A L S H . I S that true of all railroads? Mr. WILLAED. To a greater or lesser extent; I think the decrease in number of people riding is due to the development of the automobile. Senator W A L S H . The bus? Mr. WILLARD. Yes; the bus takes a good many; but as nearly as we can estimate, the largest taking away from the railroad is by the individual automobile. The CHAIRMAN. Before we get to that, could you say what per cent of the total workers are engaged in the train service? Mr. WILLARD. About 20 per cent. I f business picks up very rapidly, we frequently have to put on more clerks and more yardmen, and if it drops off substantially some of them are taken off. The CHAIRMAN. When you say 20 per cent, that means 20 per cent of your employees are on trains and engines running back and forth ? Mr. WILLARD. On trains running back and forth; and the train service reacts directly with the condition of the business. That we can't help very much. Here I have a chart showing something of conditions in the maintenance-of-way department. I n that department considerable has been done to stabilize employment. That line shows1 the number of men employed, and below is shown the manhours that those men were employed; and these are different years [indicating on chart]. Now, in that year, 1923, our business was very good and we employed a large force. A t the end of the year when the cold weather came on the force was largely reduced. The next yfear we didn't put on as many. Finally, we get down to this point last year. W e ran a very uniform force except in J u l y and August this year. The CHAIRMAN. W h a t caused that? Mr. WILLARD. Well, the outlook wasn't very good for business early in the year and we didn't put the men on. The CHAIRMAN. But you cut them of? Mr. WILLARD. Yes; in July and August. We made our budget at the beginning of the year and we thought our earnings at the end of the first quarter would be better than they were, but they actually showed a decrease for that period and we didn't know whether the last half was coming out the same, so we reduced our force temporarily until we could see what was going to happen, and then we put them on again. The previous year it went through pretty steadily. 29193—29 7 80 UNEMPLOYMENT IN THE UNITED STATES In any event, you can see that this line is less wavy than this line [indicating on chart]. This represents the total hours that these men worked. So we did accomplish considerable toward stabilization in that year. The CHAIRMAN. That just raises the very point in which I think perhaps the committee is more interested than anything else. That question of dropping off employees when the earnings go down, or when there is in sight a depression in business. That seems to be the most depressing part of all the unemployment situation. You, with all of your interest in the subject, and we believe it is great, have adopted the very plan which seems to be the most troublesome one and the one causing the most suffering. Do you believe that there is any way that that may be obviated? Mr. WILLARD. Yes, I think it may be. First of all, we have had to do what we have done without any assistance by legislation or any other way. Stabilization can be promoted more by a state of mind than almost anything ejse that I can think of, because what we have accomplished on the Baltimore & Ohio is largely the result of a different state of mind or point of view. It reflects a conscious desire to improve and stabilize working conditions in one period compared with a less conscious and impelling desire in another period. This apparent indifference, you might say^ should be criticized and apologized for, and I do apologize for it, but it reflects the way I had been brought up; and when I say " I " I think that applies rather generally to a great part of all those who employ labor. I know that previous to the war we didn't think it wrong to hire 5,000 or 6,000 new men in the summer for track work, such as putting in raijs and ties, and do it as quickly as possible, and then lay them off. We had always been following that plan, at least to a large degree. When there was plenty of work throughout the country for these men so that they could work with us a period and then go somewhere else and get employment—in the timber, in the harvest fields, or anywhere else, we weren't conscious of imposing a hardship on them by our practice. Sometimes we took men from Mexico and they would work awhile in the north and then go back to Mexico. None of us was impressed at that time with the idea, at least I was not, that we were doing any particular injustice to any one. Before the war this matter never had been stressed much by anybody. After the war we were confronted in this country with a very large unemployment problem. Probably it was most serious during the demobilization of the soldiers. It was constantly referred to in the papers. We had during Federal control and a short time thereafter upwards of 2,000,000 men employed on the railroads, and then we gradually cut the number down to a million six or seven hundred thousand. It had been reduced three or four hundred thousand. Not only that, but the number of those who were working was fluctuating up and down rather violently. That leads us to the question as to why they were fluctuating up and down. This was due largely to inadequate earnings at that time. In the transportation act Congress has stated the rate of return which it thought the railroads should be permitted to earn. Of course, it is generally known that for the first two or three years after the termination of Federal control we fell far short of earning the rate of return specified in UNEMPLOYMENT IN THE UNITED STATES 81 the transportation act; in fact, we never have reached it up to this moment. But the situation was particularly trying through the years 1921,1922, and 1923. Strikes in the meantime were happening and the whole economic condition was much upset, and we felt it on the railroads as everybody else did. In 1920 the railroads were called upon to move more business, and did move more than ever before, and then business dropped down very suddenly. I t was pretty hard to stabilize employment under such circumstances. Nevertheless, the problem was there, and one of the members of the Interstate Commerce Commission brought the matter to the attention of different railroad executives. He talked to myself, among others, and urged that the railroads should see if there wasn't something they could do to stabilize the employment of their men. Well, the result of that was that the Association of Railway Executives passed a resolution emphasizing the importance of doing what could be done to stabilize employment, and a committee was appointed to investigate the matter and report upon it. It so happened that I was chairman of that committee. The CHAIRMAN. What date was that? Mr. WILLIARD. That resolution was passed on September 18, 1924. We had been talking about the matter before then, but this was the first time that we gave it serious consideration. The committee didn't report for some time. First of all we hadn't any combined data on the matter and we had to start new reports from all over the United States because conditions were far from uniform throughout the country. For instance, in the Northwest it was customary for the railroads to push their work of maintenance in the spring, and employ all the men they could use and be prepared to lay them off in July and August so that they could go into the harvest fields. That was the usual arrangement in that section. In the South it was different. Where the Baltimore & Ohio runs it happens to be 'twixt the North and South, with still other conditions. We gave the matter careful study. This chart was prepared for the committee [referring to chart between pages 8 and 9 in pamphlet entitled " Stabilization of Employment on the Kailroads," which pamphlet is appended hereto]. This shows the variation in the earnings of the roads on the top line, and the bottom line shows the percentage rate of return on the property investment of the carriers. The CHAIRMAN. HOW many roads does this cover? Mr. WILLARD. All the class I railroads in the United States. This line shows the man-hours worked. It becomes more uniform in 1925 and 1926 than it was during the preceding years. I can leave this with your committee, if you wish. The CHAIRMAN. We would be glad to have it. Mr. WILLARD. I didn't have time to work up such a report as that for all the roads and bring it up to date, but we did bring the Baltimore & Ohio figures up to date. I may have given you this one already. Senator WALSH. I have one. Mr. WILLARD. This is substantially the same thing. Senator WALSH. I notice, Mr. Willard, that you seem to have had fewer employees during the past year, but that the stabilization of their employment was better than at any other time since 1923. 82 UNEMPLOYMENT IN THE UNITED STATES Mr. WILLARD. Yes, we had fewer employees than we had before that time. Senator WALSH. Did your business increase, or drop, during that year? Mr. WILLARD. Our business this year was less than it was last year, but that wasn't wholly the cause of what you are referring to. I have something here that will show you, perhaps. Senator WALSH. Was that a general condition with the rest of the railroads? Mr. WILLARD. I think largely so. Senator WALSH. I am trying to find where the Eepublican prosperity is. Mr. WILLARD. Since you put it that way, I will have to give the matter further consideration. JSTow, here is a statement showing the man-hours employed in the maintenance of equipment department, and the number of men and the number of man-hours worked have steadily gone down,, and this year, you will see, it is almost a straight line. Last year it was pretty nearly so [indicating on chart]. Now, that is accounted for this way: 1923 was the year following the strike, and we had a lot of deferred maintenance to make up; also it was a very good year for the Baltimore & Ohio. It was the largest year in point 01 earnings we have ever had. The CHAIRMAN. That was during a Republican administration. Mr. WILLARD. Quite so, during a Eepublican administration, Our earnings were good and we employed as many men as we could to advantage. I am referring now to the mechanical department. At the end of the Federal control our equipment was much below the standard of condition generally maintained in railroad practice. Then the strike came on and accentuated the situation—this shows the peak of employment in 1923 in our effort ,to overcome the immediate effects of the strike. The CHAIRMAN. Those repairs grew out of the war? Mr. WILLARD. Yes, that is right. As time went on we gradually caught up and our forces gradually came down. So that to-day we have seventeen or eighteen thousand employed in our mechanical department, while back here [indicating on chart] one time we had as high as 28,600; and those men who are working now are working much more steadily. Now, a number of things have contributed to bring this about, which I will now refer to, if you wish me to, or I will follow through with this maintenance of way statement and chart. They are two separate things. This stabilization problem, as I have already said, became acute after the war. Senator WALSH. Was the motive self-interest, or was it altruism? Mr. WILLARD. Partly each, perhaps; it certainly was not all selfinterest, because I didn't feel at the time that we would be much benefited by it directly. I think now that we have been, by keeping a more steady force, and I think that has also tended to reduce our costs, although that wasn't the impelling motive. Senator WALSH. The reason I asked you was that some of the employers have argued that it was really from the standpoint of self-interest. Mr. WILLARD: I can not say that was the actuating motive with us in the beginning. Later on I am quite sure we realized, how 29193—29. (Face p. 82.) UNEMPLOYMENT I N T H E UNITED STATES 83 ever, that it was not only a good thing from the standpoint of the men but was also a good thing from the standpoint of the company. If I may digress a moment I would like to refer briefly to a phase of our present economic situation because in my opinion it has a most important bearing on questions such as the one we have ~been discussing. Within the last two or three generations, chiefly, there has come about in this country a very important change which has a far-reaching influence. I refer to the change which was made possible by and consequently followed the invention of the steam engine, and which was stimulated largely, if not wholly, by that invention. Before the invention of the steam engine and for a considerable period thereafter, industry in this country—and I assume generally in other countries as well—was carried on in large degree in small units. I remember when I was a boy in New England the local shoemaker, working in a room in his own home, for a number of years made the shoes which I wore. H e was an independent and self-supporting unit. He owned a small home, surrounded by a small garden, and by his own labor in his own home, with material which he purchased himself, he made a living for himself and his family. Many similar instances might be mentioned. Now our shoes, speaking generally, are made in Lynn, Mass., Endicott, Jf. Y., St. Louis, Mo., and other places where large factories have been constructed, where large numbers of men and women are employed, and where shoes are produced in mass quantity at prices much less than they could be produced for in the old-fashioned way that I have mentioned above. Consequently the independent shoemaker has almost ceased to exist. This economic change which has transformed the business of making shoes and clothing, and in fact nearly all of the things we consume, has fundamentally changed the status of those who are so employed from what it wTas before the invention of the steam engine. Presumably this change has been beneficial to society as a whole; otherwise it would not have come about; its development would not have been encouraged; but if society receives the benefits flowing from such a system, it must also accept the responsibilities < onnected with such a plan. What I mean, more specifically, is this: Workers—men and women—in large numbers have been brought together in different communities where manufacturing could be carried on in a large way and with low operating costs. The working people, so employed, get along all right when business is good and employment steady, but wThen employment slackens or vanishes altogether, then the workers are left in a much more helpless situation than was the case with the local shoemaker in the town where I was born, and in my opinion society as a whole, which undoubtedly is benefited, or thinks it is, because of our large-scale production, is confronted in times of depression, and properly so, with the problems growing out of large numbers of unemployed. Society as a whole can not be indifferent to the unemployment problem, and the Baltimore & Ohio Kailroad Co., as a unit oi society, has a responsibility in the same direction. Formerly, and particularly when I was a boy, there still remained an undeveloped empire west of the Mississippi Eiver to which the young boys growing up in the East could always turn in case there 84 UNEMPLOYMENT IN THE UNITED STATES happened to be lack of employment where they lived. I n fact, man} went West in the spirit of adventure, who might have found employment if they had remained at home. Now, however, that empire has been occupied and it no longer affords an opportunity to the boy or man temporarily out of employment in the more thickly settled parts of our country. This also has ser/ed to accentuate the seriousness of the unemployment question which I am discussing. For the reasons which I have mentioned, among others, it seems to« me that those who manage our large industries, whatever the character of their output may be, whether it be shoes, steel, or transportation, should recognize the importance and even the necessit}^ of planning their work so as to furnish as steady employment as possible to those in their service. Not only should that course, in my opinion, be followed because it is an obligation connected with our economic system, but I fully believe that such a course is justifiable from the standpoint of the employer, because it would tend to develop a satisfied and contented body of workmen which of itself would improve efficiency and reduce costs. I t is a dangerous thing to have a large number of unemployed men and women—dangerous to society as a whole—dangerous to theindividuals who constitute society. When men who are willing and able to work and want to work are unable to obtain work, we need not be surprised if they steal before they starve. Certainly I do not approve of stealing, but if I had to make the choice between stealing and starving, I would surely not choose to starve—and in that respect I do not think I am much unlike the average individual. The Baltimore & Ohio Railroad, as one of the units of society,, ought to recognize and carry whatever responsibility rests upon it as a large employer, and I think, Mr. Chairman, that it was due to our recognition in part of the obligation which I have just been discussing, that we of the Baltimore & Ohio developed a quickened sense of the importance of anything which had to do with the stabilization of employment. I do not hesitate to say that I should personally feel very much ashamed if it were made clear to me that the Baltimore & Ohio Co. was not doing all that it could and ought to do, havingdue regard for the interests of the owners of the property while other employers of labor were fully meeting similar obligations. The views which I have just expressed concerning this matter are in large degree held by all employers of labor at the present time. I n any event I think there is a more universal appreciation of the obligation resting on employers because of our economic system than ever before, and this has led to what I may refer to as a changed point of view, of a changed state of mind, and it is due to that state of mind, in my opinion, more than to any other single thing that the efforts have been made in recent years which certainly have been made by employers in all lines of business, to deal with this matter in a more constructive manner. The Baltimore & Ohio Co. has made some progress toward t h e stabilization of labor as you have already observed from the charts which I have presented, and the other railroad companies, I think, have been trying just as hard as we have to deal constructively and helpfully with this problem, and it may be that some of them have made even more progress than we have made on the Baltimore & Ohio, I think the fact that we have all been giving this matter more i d fe & UNEMPLOYMENT IN T H E UNITED STATES 85 and closer consideration than ever before, is due in part to the initiative exercised by Mr. Commissioner Potter who personally brought the matter to the attention of some of the railroad executives, and to the keener appreciation which we all have of the importance of doing what we ccald to correct a condition harmful not only to our employees but to the industry itself. You will notice that at the left of this chart it shows that the largest part of our rail replacement program was carried out during the summer months, but as you look toward the right on the chart you will see an increasing amount of rail being laid in the winter months. During the winter of 1927-28, on account of favorable weather conditions, we found it possible to put in place nearly the whole amount of steel which we had ordered for replacement during the calendar year 1928. Doing this particular kind of work in the winter enabled us to keep employed during that season a larger force of men than would otherwise have been necessary and at the same time relieved us of the necessity of employing a large force of extra men temporarily during the summer months, as had formerly been the case. Senator W A L S H . What do those men do in the summer—lay rail? Mr. WILLARD. They do not lay so much rail in the summer as formerly, for the reasons I have just been discussing. The Baltimore & Ohio Co. is obliged to apply to its tracks about 2,000,000 new ties each year in replacement of old ties worn out. This work must necessarily be done when the ground is not frozen, and then there is other work such as ditching, cleaning right of way, and repairing fences that goes on all through the summer season. I n short we have found it possible by making our rail replacements in the winter time to carry a much more uniform force in the maintenance of way department during the entire year than was formerly the case. The CHAIRMAN. But the stress of employment, however, seems to be in the wintertime and that is the time you can do the most good. Mr. WILLARD. Quite so. This is one of the things that we have been trying to do—that is, find profitable employment for the trackmen during the winter months, and as I have already explained, we have been able to accomplish considerable in that direction. The men in the maintenance department who work on bridges, buildings, signals, and so forth, are rather steadily employed during the entire year, although there is some work of that character that can not be done during severe cold weather. The CHAIRMAN. That is the time you could put some of these men at work laying rails. Mr. WILLARD. Some of them, but not all of them. I said a while ago that I thought our turnover at the present time was about 10 per cent, including all classes of men. Of that 10 per cent about one-half of it—certainly more than one-third of it—is to be found with the men working on track and buildings, because their work is necessarily out of doors and is affected by the season. About one-half of our present labor turnover, as near as we can figure it, is due to men becoming old enough to retire on pension, men who voluntarily lay off for rest and for other reasons that I do not now recall, but things over which the company has no control. I should say that our labor turnover outside of the maintenance-of-way department is considerably less than 10 per cent, perhaps not more than 6 or 7 per cent. $Q U N E M P L O Y M E N T IN T H E UNITED STATES Your second question was " By what means did you undertake to provide steady employment." I think I have already anticipated the answer to that question and have pointed out some of the means which we have made use of. Your third question: " W h a t problems did you encounter in bringing about regular employment." I have already covered that matter rather fully. We found no serious oppoisition on the part of our employees. As a matter of fact we discussed the subject with them and invited their suggestions, and on the whole they have cooperated in a very satisfactory way. I might say in this connection that some years ago we developed in the Baltimore & Ohio service a relationship by means of committees consisting of representatives of the men and of the management. These committees meet at frequent intervals and the employees attending are encouraged to make suggestions concerning matters with which they are familiar, and the result of such conferences has brought -about, I am certain, a much better understanding between the management and the employees in all the different branches of the service. Of course it is possible to arrange for a more intimate relationship in some departments than in others. I t is rather difficult to bring about meetings between the officers and the men engaged in the maintenance of way department, because the men are spread out over so much territory, while it is quite simple to bring together committees of men and management when they are all employed at the same place or in the same shop. I n our mechanical department in 1923 we had at one time as many as 28,600 men working, while at the present time we have about 17,000. Of the number now employed I think We can say that we have steady employment for about 15,000 of them all the year round, barring some unforseen occurrence. This will leave, of course, a margin of about 2,000, and when it is necessary, if it should b>e, to reduce the force in the mechanical department, we would endeavor to confine the reduction to the 2,000 men last employed. This arrangement is not completely in effect as yet, but we are endeavoring to work to it. The employees in that department are equally anxious with the management to have such an arrangement brought about. I n short, we are trying to give as many as possible of our men steady employment the year round and to reduce as much as possible the number which is likely to be affected more or less by the seasons and temporary fluctuations in business. Your fourth question i s : " How successful have you been in your effort." I think I am justified in saying that we have reduced the labor turnover, running substantially higher than 20 per cent, to a basis not exceeding 10 per cent at the present time. I hope we may be able to reduce the percentage still more. Your fifth question: " To what extent can similar measures be applied to other plants and other industries ? " Of course, I am unable to speak concerning other plants and other industries, and what I have said has had particular reference to •conditions as they are with the Baltimore & Ohio Co. I assumed that that was what you wished me to do. There is no reason that I can think of why other railroads located in the same general UNEMPLOYMENT IN T H E UNITED STATES 87 territory as the Baltimore &> Ohio should not be able to accomplish just as much as we have in the way of stabilization of employment, and it may be that some of them have accomplished even more than we have. I have no definite information in that connection. You will realize, of course, that the railroads located in the extreme North are working under restrictions that do not exist in the extreme South so far as climate is concerned, nor even in the territory where the Baltimore & Ohio is located. I n the northern country, where heavy snow storms occur,, it is sometimes necessary for the railroads to employ all the laborers they can secure for days, or even weeks, at a time, in order to keep the tracks open so that trains may be operated. These men are employed on a temporary basis, and when the road is opened their services are no longer needed. I do not know of any way to deal with that problem other than the way in which it is being dealt with at the present time. I t is an emergency situation. We have a somewhat analogous situation occasionally on the Baltimore & Ohio, but in the summer months, due to heavy rains and high water, particularly in the Potomac Valley. Occasionally that river gets high enough from heavy rains to be 6 or 8 feet over the Baltimore & Ohio main line. When the water goes down it usually leaves a condition which makes it necessary to employ large numbers of extra men for a while in order to get the road quickly in shape for service. When the emergency is past the men so hired are paid off. That is a condition over which the Baltimore & Ohio is unabje to exercise any definite control. The CHAIRMAN. What wages do you pay under those circumstances ? Mr. WILLARD. The regular wages which we pay to our other trackmen doing the same kind of work. The wages we are paying trackmen to-day, I think, are generally higher than the wages paid for the same kind of labor by farmers and others employing unskilled labor in the same vicinity. Our established rate is 42 cents an hour for common labor working on the track. The CHAIRMAN. For 8 hours, 10 hours, or what ? Mr. WILLARD. Forty-two cents an hour for 8 hours. Those wages were fixed by the labor board, and they have not been changed. We have good men working on track, and at the present wages they seem anxious to remain with us. The CHAIRMAN. YOU mentioned that you were speaking only for the railroads. Have you any information as to what effects the ups and downs of manufacturing have on the freight traffic, what fluctuations in freight traffic are caused by those ups and downs? Of course, it goes all the way down the line. Lack of stabilization in industry affects production and that in turn affects the railroads. Of course, stabilization in manufacturing would promote stabilizing transportation on the railroads. Mr. WILLARD. Certainly. The CHAIRMAN. I n that connection could you speak for any more than the railroads as to the desirability of stabilizing production ? Mr. WILLARD. Yes, it is desirable that production in the steel plants, for instance, should be stabilized as much as possible, and I might add that the railroads potentially could contribute very 88 U N E M P L O Y M E N T I N T H E UNITED STATES greatly to that end. The railroads as a whole take and consume as much as 30 per cent of the total output of the steel mills in this country at certain times. Unfortunately it has many times happened that the railroads have been obliged to go into the market for other purchases of steel and steel products when business was at its peak. That is undesirable for several reasons. First, in such circumstances, the railroads are, of course, obliged to pay peak prices; and second, it means that the railroads—those that run through the steel-mill regions—are obliged to compete with the steel mills for labor. The railroads, using upwards of 30 per cent of the entire output of the steel mills, can contribute very largely to the stabilization of the steel industry if their margin of earnings were such that in times when the steel industry was slowing down because of other business letting up, the railroads could- anticipate their future requirements and place orders which would tend to keep the mills more regularly employed, and then later on, when outside demands on the steel mills increased, the railroads could reduce their purchases and give way to their needs. I t would be a good thing if the railroads were in position generally to anticipate their needs for cars and locomotives sufficiently so that they could place their orders when the outside demand was not at its maximum. If the railroads as a whole were always in position to follow such a policy, I think the effect of it would go a long way toward stabilizing business, which, of course, would mean also the stabilization of labor. Does that answer your question ? The CHAIRMAN. I n part. Also to that could be added orders for future delivery so that the mills might make up the material for future delivery if necessary. Mr. WILLARD. Well, we do that with our rails. We budget all our expenses and have been doing so for a good many years on the Baltimore & Ohio, and when we place our orders for steel rails it is generally with the understanding that the mills will roll them when most convenient for them to do so. The CHAIRMAN. I remember meeting you one day down at the Willard, when we discussed this subject rather informally, and I remember getting the impression from you that it was considered quite possible to postpone some of this work to a time when there was an indication of the falling off of business. Mr. WILLARD. We have done that. We have been able to do quite a bit of .that, but you have to be in shape to do it. The CHAIRMAN. What do you mean by being " in shape " ? Mr. WILLARD. I mean we must have our plant as a whole in good condition, because we probably would not be justified in reducing our force if we had for instance a lot of cars that were in need of repairs, or engines that were not in condition to run. Assuming that a railroad has its plant, including tracks, bridges, cars, and locomotives at a high or satisfactory standard of maintenance, then it would be possible to plan repairs as indicated by your question. To illustrate: We find it necessary on the Baltimore & Ohio to rebuild or give very heavy repairs each year to 15,000 or 20,000 freight cars. W e have had at times quite a large accumulation of cars needing such repairs, and then if business picked up quickly it was necessary to send many of them to outside shops in order that they might be UNEMPLOYMENT IN T H E UNITED STATES 89 promptly repaired and put in service. We do not do that any more. We have our cars in such condition that we are not obliged to make emergency arrangements for repairs. We have at the present time some 20 or 25 units of 50 men each working on this kind of repairs. Each unit turns out 15 cars a week thoroughly repaired. That would be 1,200 cars a month if 20 units were employed and that rate of work kept up throughout the year would very nearly keep our equipment at the proper standard. If cars needing heavy repairs show a tendency to accumulate faster than they can be repairetl we can easily establish a few more units. Our effort, however, is directed towards keeping a regular force satisfactorily at work throughout the year. The CHAIRMAN. YOU might also, when we are prosperous, postpone construction of new machine shops and power plants by rerouting some of the freight traffic. Mr. WILLARD. Yes, that also could be done, provided a road was in well-balanced condition concerning equipment, repair facilities, and so forth. The CHAIRMAN. Perhaps I didn't make myself quite clear. For instance, there has been some publicity about electrification of the Pennsylvania Railroad. Mr. WILLARD. Yes. The CHAIRMAN. I t may be desirable to do that when the plans are ready, or, in the interest of stabilization of employment, it may be well to postpone-that or any bridge work, or any work, when we are at the peak of employment, until there is a slackening of employment. Mr. WILLARD. Yes; that would naturally come within the limits of such a policy as I have been discussing. The Baltimore & Ohio spends approximately $2,000,000 a year for bridge replacements, and inasmuch as good practice makes it necessary to keep a substantial margin of safety in all bridges, work of this character can be, within reasonable limits, deferred or expedited as you suggest. I n railroading there are at least three important if not controlling factors that influence- stabilization of employment. First of all is the matter of point of view. There must be a real desire to do all that can be clone in the direction of stabilization, and that desire, if converted into action, will frequently yield surprising results. The influence of the point of view is reflected in the joint action of the railroads concerning stabilization of labor, to which I have already made reference; and in addition to a definite desire to promote stabilization there must also be the means and opportunity for doing it. By this, I mean in the case of the railroads that there must be such a margin of net earnings as will enable the companies to continue their maintenance programs, for a time at least, even though there should be a temporary reduction in business. All too frequently in the past the railroads hav& felt obliged to immediately reduce their expenditures in all directions whenever the business snowed a tendency to fall off. The transportation act, 1920, under which the railroads are now operating, if fairly interpreted and applied, will in my opinion ordinarily permit the railroads to have such a basis of rates and earnings as will enable them to adopt such policies as I have been 90 U N E M P L O Y M E N T IN T H E UNITED STATES discussing. As a matter of information, I perhaps ought to sav that regardless of the assurances contained in the transportation act, the railroads as a whole in the United States have not been able in any single year since the act become effective to earn the rate of return fixed by the Interstate Commerce Commission upon the total valuation, also established by the commission itself with actual additions since; and, of course, the deficit would be much greater if it were calculated on the basis of the property investment of the carriers as shown in their accounts. Senator W A L S H . H O W near does the Baltimore & Ohio come to that? Mr. WILLARD. During the period that has elapsed since the end of Federal control, the Baltimore & Ohio has failed to earn the return specified in the act and by the commission by more than $50,000,000. The CHAIRMAN. D O you know of any case in which the railroads did agree with the commission as to what the railroads were worth? Mr. WILLARD. NO. I do not know of any such case. I think it would be a good thing if the representatives of the individual carriers could negotiate with the commission and endeavor to arrive at an agreed value. I know that the Baltimore & Ohio Co. is not seeking to obtain a higher valuation than it is justly entitled to, and we must assume that the representatives of this Government, members of the Interstate Commerce Commission, are equally honest. That being true, it should not be difficult, or if difficult it should not be impossible, to reach an agreement. Unfortunately, however, such a course seems impracticable, for reasons which are perhaps obvious and need not be mentioned in a discussion such as this. Senator W A L S H . Of course, the value fixed by the Interstate Commerce Commission is considered by the railroads as unfair? Mr. WILLARD. Yes. I think as a whole the railroads consider that the valuations so far fixed by the commission are less than they fairly ought to be, but I repeat that even upon the values which the commission itself found for rate-making purposes in 1920, the railroads in the United States as a whole have failed to earn the return specified by the commission, even on that valuation, by something like $1,900,000,000, covering the entire period. The CHAIRMAN. D O you assume that the traffic would have stood that difference of a billion nine hundred million ? Mr. WILLARD. I am inclined to believe that the traffic could have stood rates necessary to yield that return, but whether it would have been wise to charge such rates in another matter. You ma;y perhaps recall that the railroads voluntarily reduced many of their rates, particularly on farm products, 10 per cent in 1923, although at that time the carriers were not earning upon their property values one-half the rate of return specified by Congress itself. I n general terms, I think the railroads are fairly entitled to earn a fair rate of return upon the fair value of their properties devoted to transportation purposes in the interest of tlje public. That is the measure in general terms set up by Congress itself, and it seems to me it would be very difficult for anyone to sustain the argument that the railroads ought not to be permitted to earn a fair return upon the fair value of their properties. UNEMPLOYMENT I N T H E UNITED STATES 91 The CHAIRMAN. I t is practically a theoretical conclusion that this rate might be earned under any and all circumstances, just because it is the measure set up by Congress. Mr. WILLARD. I have not looked at the matter in quite that light. After all, what Congress said was this: That the commission should fix rates so as to yield as nearly as may be a fair return, recognizing, of course, that that was t h e only practicable way in which the matter could be handled. But evidently Congress expected that at times some if not all the railroads would earn more than a fair return, and so provided that one-half of all that any carrier might earn above 6 per cent of the value of its property should be returned to the Government. I t seems to me that that fact of itself indicates that Congress expected the return would vary from time to time, and that an effort would be made to permit the railroads to earn a fair return at all times, as nearly as that might be done. The CHAIRMAN. D O you think agriculture could stand its share of this increase of billions that you say you should have earned? Do you think agriculture should have stood it ? Mr. WILLARD. Of course, the shortage of over one billion dollars which I referred to represents an accumulated shortage extending over a period of seven or eight years. Contrary to the general belief, rates paid on agricultural products! to-day are below the average of all the rates charged by the railroads, and I can think of no reason why agriculture should not be able to pay, and required to pay, rates as high as the average, although it is a fact that ever since I have been acquainted with the matter, agricultural rates as a whole have been much below the average, considered from the standpoint of their profitability, and generally below the average when considered on the basis of the rate paid per ton-mile. One reason, at least, why it has been so difficult for the Interstate Commerce Commission to establish what the Hoke Smith resolution evidently expected would come about is, I repeat, because the rates on agricultural products are already generally below the average, and clearly could not be made lower unless something else above the average were made higher, inas much as the total earning from all the rates have not yielded the fair return contemplated in the act. I have here a chart snowing the relative earnings of the different commodities handled by the Baltimore & Ohio Co., and you will find on this chart> confirmation of the statement which I have just made concerning rates on agricultural products and their comparisons with rates on other commodities. Senator WALSH. What general per cent of increase would be required to meet the provisions of the law based upon the present valuation by the Interstate Commerce Commission ? Mr. WILLARD. I can not definitely answer that question. I can say this, however, that the increase needed would be very small. As I recall, all of the railroads in 1927 fell short some $200,000,000 of earning the return fixed by the commission. Senator W A L S H . W h a t per cent of increase in rates would that be? Mr. WILLARD. If my recollection is right an increase of 4.3 per cent on the rates of all freight traffic handled would have yielded that amount. Senator WALSH. Because the volume is so great? Mr. WILLARD. Yes; because the volume is so large. 92 UNEMPLOYMENT I N T H E UNITED STATES Another element has come into the situation since the termination of the war. Previous to the war, and for a long time, the business handled by the railroads had shown a very satisfactory increase year by year, reflecting, of course, the general increase in the business of the country. Since the, war the business of the railroads has not shown the same rate of increase as before the war; in fact the railroads have shown very little, and some of them no increase at all since the termination of Federal control. If the total business of the railroads was increasing to-day as rapidly as was the case before the war and if the present rates were permitted to remain in effect, the railroads would undoubtedly be able in a short time to earn the fair return fixed in the act without any increase of rates, as has been suggested. As a matter of fact, however, freight rates are constantly going down. That was true before the war and it has been true since the war, and that tendency is likely to continue. Some of these reductions to which I have referred have been ordered by the Interstate Commerce Commission and some have been made by the railroads themselves in response to commercial conditions. My" point is that reductions actually have been made and experience of the past justifies the belief that the tendency of railroad rates will continue downward. Such a situation could only be met and offset by constantly increasing business or by reduced operating costs with the same volume of business. The CHAIRMAN. Assuming that you didn't have that traffic at all^ and there hadn't been any reduction in rates, would you have been worse off or better off ? Mr. WILLARD. I am not quite sure that I understand your question, but of course some business at some rate, provided the rate was sufficiently high to yield something above expenses, would be better than no business at all with a higher rate. The CHAIRMAN. SO that even if you didn't earn as much as you thought you ought to have earned on that tonnage, you would be worse off if you hadn't had the traffic at all ? Mr. WILLARD. I am inclined to think that statement is true. Ordinarily and within certain clearly established limits, it would probably be better to carry freight at lower rates than not to carr}^ it at all. My reason, Mr. Chairman, for referring to this phase of the railroad problem, that is to say, the matter of earnings, is because it should be recognized that there is a very definite relation between earnings of the railroads on the one hand, and the ability of the railroads on the other to maintain service, stabilize labor and equalize their purchases so as to stabilize industry as far as may be possible. If the carriers were permitted to earn the rate of return which Congress obviously considered fair—otherwise the transportation act would not have been written as it was—I have no doubt that the railroads would be able to do much more than has been done in the way of stabilizing business by a more equal distribution of orders. The railroads in some years have used as much as 30 per cent of all the steel manufactured in this country, over 28 to 30 per cent of all the soft coal produced, from 25 to more than 30 per cent of the lumber manufactured and, as I recall, some 15 per cent of the copperproduced. The railroads are large users of material and on that UNEMPLOYMEISTT IN THE UNITED STATES 93 account can contribute substantially toward the stabilization of business. I do not think I have anything further to suggest at this time. The CHAIRMAN. Have you any questions you want to ask, Senator Walsh? Senator W A L S H . This is a little aside from our discussion here. I want to inquire about your employees' magazine. I t impresses me as being a great influence for promoting the morale of the employees. Mr. WILLARD. I hope it is. I t is costing us $60,000 or $70,000 a year to publish it, and we justify that expenditure in our own minds on the ground that it leads to a better understanding and promotes loyalty. Senator W A L S H . I t has impressed me as one of the best things I have ever seen in America for developing and maintaining a high standard of morale. Mr. WILLARD. We feel that way about it. Senator W A L S H . H O W about the insuring of your employees ? Mr. WILLARD. The Baltimore & Ohio Co. has had in"effect for many years a plan designed to encourage thrift and to provide a certain measure of insurance for its employees. If you desire, I can leave here the 40th annual report of our relief department. We have no outside group insurance. Senator W A L S H . I t doesn't provide for unemployment relief ? Mr. WILLARD. N O ; just old-age retirement. Senator W A L S H . All the railroads have that system, more or less? Mr. WILLARD. N O ; I think not. The Baltimore & Ohio was one of the first to adopt a system of that kind. I t may interest you to know that we have to-day in our custody over $18,000,000 deposited by our employees, upon which we pay them 5% per cent interest. Senator W A L S H . H O W do you invest the money ? Mr. WILLARD. At the present time over $11,600,000 is loaned out to our employees at 6 per cent per annum for the purpose of building homes. We encourage our employees to buy or build homes and we do what we can to assist them in that direction. If they become sick or temporarily out of employment because of depressed business, we assist them in carrying their payments. Since this arrangement was inaugurated 46 years ago, our employees have bought or built homes aggregating in cost more than $60,000,000, against which there is outstanding at this time about $11,600,000, which they are paying off from month to month. Senator W A L S H . All these opportunities promote thrift which is encouraged in your magazine; it brings it home to them. Mr. WILLARD. Yes; I think it is a good thing. I think our relief department is a good thing. I n effect the men themselves each month contribute a certain amount of money from their wages to be held and used for relief purposes if and when necessary. I t might be said that each of them puts a certain amount of money in the hat each month and the company holds the hat. I t costs the company about $1,000 a day to hold the hat. The railroad company takes care of the money, pays all of the administrative purposes, and accounts to the employees for all the money which they pay in. Every penny put in by employees goes back to them, with no deductions whatever tor administrative purposes. 94 U N E M P L O Y M E N T I N T H E UNITED STATES STATEMENT OF 0. S. JACKSON, GENERAL SUPERINTENDENT OF MOTIVE POWER AND MACHINERY, UNION PACIFIC SYSTEM, OMAHA, NEBR. The CHAIRMAN. Mr. Jackson, you have heard the statement of Mr. Willard? Mr. JACKSON. Yes. The CHAIRMAN. Can you add anything in the way of what you have done toward stabilizing employment on the Union Pacific system ? Mr. JACKSON. I have heard Mr. Willard describe, with a great deal of interest, the situation on the Baltimore & Ohio, which is in general quite similar to that on the Union Pacific system, and I shall endeavor to answer the questions which you have asked in writing of our president, Mr. Gray, who conveys his regrets at not being able to come personally before the committee at this time. We have given this problem of stabilizing employment in the railroad industry a great deal of study and consideratipn. I t is a problem of considerable magnitude, especially on the Union Pacific System where the spread between the maximum and minimum monthly income during the year is over 75 per cent. There is also a considerable fluctuation in revenues from one year to another. The problem itself is not only different as between the railroad industry and other industries, but between individual railroads as well. Our study of the situation on the Union Pacific lines showed that the chief factors of fluctuation are instability of income and traffic, and seasonal and climatic conditions. These factors are more or less constant so far as the Union Pacific system lines are concerned ; in fact the fluctuation in income was somewhat greater in the year 1927 than in the year 1923 when the present plan was adopted. The abnormal conditions existing prior to that year made adherence to a definite program of stabilization practically impossible. Expenditures are necessarily relative to revenues, and during periods of lean earnings reduction in expenses must be accomplished in a measure at least by reduction in force. Nevertheless, our efforts to minimize irregularity of employment have met with gratifying success. The results we have accomplished have been achieved by distributing as far as possible over light traffic periods heavy repair and maintenance work—which can be done advantageously'in such periods. This not only tends to stabilize forces but enables us to prepare for the peak period of traffic when every available locomotive and car is required. Seasonal and climatic conditions are largely controlling in the performance of roadway maintenance work. They affect equipment maintenance forces to a lesser degree. I n the territory served by the Union Pacific extending from the Missouri River to the Pacific coast, the weather varies from extreme heat in the desert and southern sections to extreme cold in the Middle West and Northwestern States. Not all of the classes employed in the railroad industry are subject to instability of employment. Only those classes working directly in connection with train operation, which is governed entirely by train conditions, and forces engaged in maintenance work affected both by traffic and climatic conditions, are subject to violent fluctuations. UNEMPLOYMENT IN T H E "UNITED STATES 95 The professional and clerical group' which includes technical and office forces, and the transportation group of other than train and engine employees, that is, train dispatchers, agents, telegraphers, i n spectors, and station forces, enjoy practically regular employment.. These groups comprise approximately 28 per cent of the total. Train and engine service employees are directly affected by the volume of traffic and provision is made under their working schedules wTith the j company for certain mileage regulations, under which forces are increased or reduced when mileage fluctuates beyond specified limitations. The maintenance forces comprise approximately 56 per cent of the total. There are two major groups, one engaged in the maintenance of the right of way and structures and the other in the maintenance of locomotives and cars. Budgets are prepared quarterly each year covering maintenance expense. Yearly budget is also prepared covering addition and betterment work to be undertaken during the year. Kail renewals, tie renewals, overhauling of power and equipment, and other work which can be anticipated is reviewed and spread out over the yearly period to the greatest extent possible consistent with undertaking the work during suitable weather and the requirements in connection with heavy traffic during the fall. Advice of projects that are approved is given sufficiently in advance of the first of the year to permit of spreading the work out over light traffic periods to the maximum possible extent. I t is not practicable to renew rail, ties or ballast during the extreme cold winter months, nor is it practicable to do outdoor painting during such months. The range in full-time positions of those classes regularly employed in maintenance of way work in which the greatest amount of instability occurs is reflected in a statement which I have had prepared and which I will read into the record at this point [reading] : Range in full-time positions, Union Pacific structures system; maintenance of w\ay and Per cent of range Class Year 1923 Below average Carpenters . Masons, bricklayers, plasterers and plumbers Painters— _ ___ Helpers., Gang or section foremen Track and roadway section laborers 31 Above average Year 1927 Below average Above average 11 9 46. 1 22: Now, M.v. Chairman, you understand, of course, that addition and betterment or new construction work must at times necessarily involve temporary employment. That can not always be avoided., The fluctuation in such forces does not represent unemployment for the class of individuals affected. These forces are comprised largely of men recruited from other sources within the industry o r from other fields of employment to which they usually return upon 29193—29 8 96 U N E M P L O Y M E N T I N T H E UNITED STATES completion of the temporary work for which they are engaged by the railroad; in fact, it is desirable that these forces be released as far as possible during the harvest period or at such times as their services are required in the agricultural field. While forces in the maintenance of equipment department are not affected as seriously by climatic conditions, they are affected to a very considerable extent by traffic conditions. Notwithstanding our budget practice under which heavy repair work is performed as far as possible during periods of light traffic, any appreciable falling off in business affects the amount of work to be performed. The extent of repairs and maintenance depends largely upon the use of the equipment, and if any substantial amount of it is entirely out of service or used to a comparatively small extent over a given period of time, less repair and maintenance work will be required. Under our stabilization plan, a definite program of heavy repairs is formulated prior to the year in which the work is to be done. I n this manner heavy repairs are distributed throughout the year and to the fullest possible extent concentrated in the light traffic months. This not only enables us to put the power in condition to handle heavy traffic movement but also to alternate the forces between heavy and light repair work. We have also inaugurated a car-building program conducted in accordance with a definite specific program that is followed throughout the year without regard to fluctuation in traffic. The range of full-time positions in the mechanical department in the years 1923 and 1927 is shown in another statement which I should also like to read into the record [reading] : Range of full-time positions, Union Pacific system; maintenance of equipment and stores Per cent of range Class Year 1923 Below average Machinists Boiler makers Blacksmiths Electricians Sheet-metal workers. Passenger-car men— Freight-car men Helpers Apprentices The not? Mr. Below Above average 5 5 7 5 3 7 10 11 5 CHAIRMAN. JACKSON. Above average Year 1927 That shows a very reduced fluctuation, does it Yes. The CHAIRMAN. Have you any exception to make to Mr. Willard's remarks as to the ability of the railroads to stabilize ? Mr. JACKSON. N O ; Mr. Chairman, I followed Mr. Willard very closely and I have no exception whatever to any part of what he said. Senator W A L S H . I suppose you agree with him in his references to the Interstate Commerce Commission and his reference to the present law? UNEMPLOYMENT I N T H E UNITED STATES 97 Mr. JACKSON. Yes; Senator, I think they would apply to railroads in general. Now, Mr. Chairman, the statement I just read into the record represents practically regular employment for most of the classes of employees shown therein, and the situation for the year 1928, for which the figures are not yet available, shows an even greater improvment over 1927. I n addition to the analysis of work in the maintenance department and the steps taken to stabilize forces with the result outlined above, we have also cooperated to the fullest possible extent with shippers in stabilizing the movement of traffic. Kecognizing that the purchase of materials and supplies during periods of light traffic stimulates industrial activity and results in increased traffic movement, railroad purchases are made as far as possible in periods of light traffic, not only to take advantage of more favorable market conditions but to provide for their movement when equipment is not required for commercial use. Arrangements have also been made for the movement as far as possible of nonrevenue traffic during periods of light revenue traffic. Commodities such as coal for current consumption and certain kinds of material and supplies must necessarily move at all times, but where possible, lumber, ties, ballast, and rails are distributed during periods of light traffic. The CHAIRMAN. Have you anything to add in the way of suggestion to what Mr. Willard has said? Mr. JACKSON. I haven't anything to add, Mr. Chairman, other than that I might emphasize what we consider a real necessity in the solution of this important problem, that the railroads and other industries study the situation and be willing to carry out or be sold to the idea of stabilizing their affairs. The CHAIRMAN. I n other words, it is the will to do, isn't it? Mr. JACKSON. The will to do; yes, sir. I n our locomotive department prior to 1923, during the months of July, August, September, and October we would have our shops full of men—all of the mechanics and employees we could get. We would have our shops full of locomotives and those men repairing them. We have devised a system, and are gradually improving it, whereby we distribute that work more evenly throughout the year. We schedule our locomotives for shopping, for the heavy repairs, for the leaner months when our business is not so heavy, or for months when the locomotives are not so much needed to move the business. We are following that plan, and whtn our work in the general repair shop decreases we transfer those employees to our roundhouse where they take care of the running repairs, thereby stabilizing the general force. (The following material was submitted by Mr. Jackson for the consideration of the committee:) Number of full-time positions, Union Pacific system; maintenance of equipment and stores 00 N u m b e r of full-time positions Classification Jan. Feb. Mar. Apr. May June July Aug. Sept. Oct. Nov. Dec. Per cent fluctuation Monthly average year Minimum below average Maximum below average 2,135 804 303 708 3,047 206 429 3,581 1,091 12.4 13.6 15.5 14.1 17.5 7.3 13.5 22.6 19.4 YEAR 1923 2,170 818 289 738 3,141 215 413 4,063 1,029 Machinists Boilermakers Blacksmiths Passenger-car men... Freight-car men Electricians Sheet metal workers. Helpers Apprentices 2,136 795 289 717 2,841 213 409 3,767 1,059 730 284 680 !,584 206 371 1,247 ,046 750 283 701 1,633 202 2,075 773 309 725 2,941 206 408 3,357 1,137 2,144 822 323 739 3,215 202 420 3,684 1,215 K 2,271 881 325 726 3,507 216 517 3,974 1,234 2,232 853 329 70S 3,492 204 442 3,956 1,175 2,362 890 323 742 3,527 216 468 4,001 1,121 2,211 858 325 743 3,228 207 497 3,713 1,083 2,096 783 302 662 3,934 193 424 3,202 1,011 1,871 695 256 608 2,514 191 394 2,773 879 10.6 10.7 8.6 4.9 29.1 4.9 15.9 13.5 13.1 1 _ v 1,792 629 218 596 2,249 217 374 2,598 766 1,743 611 214 587 2,199 218 371 2,547 758 1,716 600 223 593 2,124 217 367 2,518 763 1,768 621 246 653 2,330 232 382 2,709 791 1,850 661 257 671 2,529 237 397 2,941 802 1,812 656 263 636 2,438 233 392 2,940 793 o w YEAR 1927 Machinists Boiler makers.__ BlacksmithsPassenger-carmen Freight-car men Electricians Sheet-metalworkers Helpers Apprentices IT1 1,845 665 254 625 2,504 241 390 3,039 746 1,838 653 266 630 2,587 238 387 3,078 748 1,918 670 264 628 2,691 245 397 3,207 736 1,907 661 265 632 2,693 236 394 3,223 768 1,878 643 259 642 2,558 240 394 3,064 781 1,801 624 251 649 2,371 237 381 2,930 739 1,823 641 248 629 2,442 233 386 2,903 767 5.9 6.4 13.7 6.7 13.0 6.9 4.9 13.3 2.7 5.2 4.5 6.9 6.7 10.3 5.2 2.8 11.0 d M O CD > tel Source: Compiled from data reported by the individual system lines on I. C. C. Wage Statistics, Form A, according to method prescribed by committee on stabilization of Employment, Association of Railway Executives—i. e., multiplying the number of working days in the month by the straight-time hours per day and dividing the product into the total hours paid for. OMAHA. December 15, 1928. UNEMPLOYMENT IN THE UNITED STATES 99 Total operating revenues, Union Pacific system Year 1927 Year 1923 Amount January February March April May June July August. September October November December __ $15,433, 610 13,596,085 16,109,459 15,650,888 16,087,037 16,389, 949 16,391,067 19,058,604 21,577, 642 24,304,916 20,349,341 16, __. __. „._. _. Total for year Monthly average 211, 318,465 17, 609,872 Relative monthly average, 100 91 93 93 108 123 138 116 100 Amount Relative monthlyaverage, 100 $13, 742,564 13,285, 092 15,322,499 14,128,600 14,865,202 15,427,491 15,719,915 20, 210, 546 22.203,758 24,589,369 18,260,091 16,136,495 81 78 90 83 119 131 145 108 95 203,891, 622 16, 990,969 100 Omaha, December 15,1928. (The following is taken from the agreement between the Union Pacific lines and the Shop Employes' Association, Union Pacific system, and refers to the accepted policy of the company toward stabilizing employment:) AKTICLE 13 STABILIZATION OF EMPLOYMENT The work performed by the classes of employes subject to this agreement, being governed by fluctuations in traffic and seasonal conditions, this article is designed to provide a means of cooperation between the employes and management to reduce to the minimum the increases and decreases in the number of employes, by regulating the bulletined hours of assignment. (a) When necessary to make temporary increase in or reduction of expenses at any point or in any department or subdivision thereof, either forces, hours, or both, may be increased or reduced, subject to the provisions of article 12 (a), provided: 1. That in no case shall the aggregate of the bulletined hours of the week be less than 40 or the days per week less than 5, except when reduction in expenses can be met only by closing the shop, and/or weeks in which specified holidays occur by the number of such holidays. 2. That the maximum number of bulletined hours per week on 6-day assignments shall not exceed 54, and on 7-day assignments shall not exceed 63. 3. That the bulletined hours of assignment shall be so regulated that the average hours per day for the working days in a year, of employes who are regularly employed, shall average eight as nearly as possible, except as it may be affected by mutual arrangement between the officers and committees at point affected. (&) Before the force or working hours in any shop, department, or subdivision thereof, is increased or reduced, the local representatives of the employes affected will be consulted in order to arrive at a mutual understanding as to whether the increase or reduction shall be made in force or hours, or by an increase or reduction in both force and hours: Provided, That employees who have been in the service less than 90 days shall be laid off before hours are reduced, except that sufficient number of such employees may be retained in any one craft as are necessary to maintain balanced forces. (c) In the adjustment of forces, employee will take the rate of the job to which assigned, seniority as per article 4 (a) to govern. The CHAIRMAN. We thank you very much, Mr. Jackson. The committee will adjourn until to-morrow morning at 10.30 o'clock. (Whereupon, at 12 o'clock noon, the committee adjourned until to-morrow, Tuesday, December 18, 1928, at 10.30 o'clock a. m.) UNEMPLOYMENT IN THE UNITED STATES T U E S D A Y , DECEMBEE 18, 1928 UNITED STATES SENATE, COMMITTEE ON EDUCATION AND LABOR, Washington, D. G. The committee met, pursuant to adjournment, at 10.30 o'clock a. m., in room 412, Senate Office Building, Senator James Couzens presiding. Present: Senators Couzens (chairman), Copeland, and Walsh of Massachusetts. Present also: Dr. Isador Lubin, of the Institute of Economics, Washington, D. C , special assistant to the committee. STATEMENT OF JAMES T. LOREE, VICE PRESIDENT AND GENERAL MANAGER OF THE DELAWARE & HUDSON CO. The CHAIRMAN. Mr. Loree, will you please give the stenographer your name and address and state what company you represent'( Mr. LOREE. James T. Loree, vice president and general manager of the Delaware & Hudson Co., Albany, N. Y. The CHAIRMAN. We will be glad to have you proceed in any way you like. Mr. LOREE. I have a statement prepared, from which, if you allow me, I will read, and will be glad to answer any questions. The problem of stabilizing employment has been the subject of study by the management of the D. & H . for a number of years. In general, it has been the broad subject of employment and, specifically, how on a railroad property of some thousand miles of road, some 10,000 to 15,000 men might day in and day out be assured of steady work. The development of the industrial system consequent to the advance in facilities of communication has revolutionized the old economic order. The .economic change has reached further and been effected in a shorter time than in any other period of the world's history. Its effect has been greatest upon each of the three fundamental elements of industrial life—management, capital, and labor. Other employees, like the individuals of management, desire, and rightfully expect, continuity of employment, good wages, and good conditions under which to work. The requirements of a railroad, unlike most industries, make necessary continuous operation, and while in times of depression a certain curtailment of service is possible a certain amount must be maintained throughout the 24 hours of every day in the year. 101 102 UNEMPLOYMENT I N T H E UNITED STATES The railroad employees are divided into 6 major classifications, subdivided into 148 minor classifications. Major classifications.—Executives and their assistants; professional and clerical; general; maintenance of way and structures; maintenance of equipment and stores; transportation employees. Our problem existed in regard to 66 per cent of the employees, some 10,000, working in the maintenance classifications. * I t was early recognized that one of the most serious hardships for a man with a family was to lose his job and have to find a new one, but the realization that the railroad sustained a loss, both financially and in its morale, came much later. I t will be noted in chart No. 1 that in the year 1920 the maintenance of way employees numbered: Maximum, 4,200; minimum, 2,750; variation, 145. I n 1922: Maximum, 4,200; minimum, 2,400; variation, 1,800. Maintenance of motive power, chart No. 2, 1920: Maximum, 3,310; minimum, 3,265; variation, 45. I n 1922: Maximum, 3,112; minimum, 2,346; variation, 766. Maintenance of other rolling stock, chart No. 3, 1920: Maximum, 2,540; minimum, 2,121; variation, 419. I n 1922: Maximum, 2,535; minimum, 1,278; variation, 1,257. These figures illustrate the irregularity of employment as to numbers, but do not indicate the further irregularity caused by business depression when, for periods ranging as high as 30 days, shops were closed and the track forces only used to patrol and replace broken ties and rails. A study of this situation disclosed that business depression and the seasons caused at least a part of this irregularity. I n the last quarter of a century in only one year did traffic increase more than 25 per cent and in only one year did it decrease more than 20 per cent. These major disturbances seem to occur at approximately 20-year intervals with minor depressions at 5-year intervals. T h a t in our north country, from the middle of October to the 1st of April, replacement of ties and ballast is impossible. The construction of new yards, bridges, and main tracks, the construction or reconstruction of shops, and items of similar nature tended to necessitate new forces to do the work, and such forces were disbanded as a particular job was finished. An examination of our experience indicated that there was a loss in the full working time of the year, by sickness, 3.14 per cent; accidents, 0.16 per cent; vacations, 1.94 per cent; or a total of 5.24 per cent, a loss greater than the total effect of the minor depressions, and equal to about one-quarter of the most violent depression. To meet the problem of affording steady work throughout the year, a policy was laid down of: First. Budget for the year, both for maintenance and for improvement of the property, being a part of a 5-year program—this program to be revised annually. Second. Nonrevenue freight—i. e., fuel, rails, ties, ballast, and other company material—to be moved when revenue traffic is light because of seasonal variations. Thus, our rail is bought in September, delivered in November and December, and laid in January, February, and March. UNEMPLOYMENT IN THE UNITED STATES 103 The CHAIRMAN. Would you mind if I interrupted you there for a moment? Mr. LOREE. No, sir. The CHAIRMAN. Previously in your statement you have said that a part of the irregularity of employment was caused by the fact that it was impossible to place ties and ballast at certain seasons, because of the temperature, and so on, I suppose. Mr. LOREE. Yes. The CHAIRMAN. Does that effect the rails, too ? Mr. LOREE. NO ; we lay rails at all times. The CHAIRMAN. That can be done without disturbance on account of the season? Mr. LOREE. Yes; that is affected by two things. First of all, we know that in weather that is moist, like the damp weather in the early part of March, there is a certain natural lubrication that takes place that reduces the wear, because the rail is laid tight gauge; consequently, by putting the rail down and putting in the ties, by April 1—all the ties must be in by the 1st of July—our new ties are only spiked once, whereas otherwise we have to go back and regauge and put two spike holes in a tie. By this method you only have to spike the tie once; so that the new establishment of employment and management has turned out successful from a management standpoint. Third. An elastic day, ranging from 8 to 10 hours, dependiii£ upon business conditions. Forces to be maintained until less than 48 hours per week work is provided, and no new men hired until 60 hours had to be exceeded. Fourth. Work arranged so that program covered 12 months of the year. Fifth. A group insurance against the major hazards of life—death, sickness, accident, total disability, dismissal. Sixth. Careful employment and exchange of employees between departments. Seventh. Graduated wage scales: (a) Piece-work, (h) Skill and length of service. The detailed execution of such a policy developed at once, and continues to develop, new problems. We had a force built up upon the old plan, too large to fit the new plan, and extra work had to be provided in some cases and men placed in other departments. Seasonal work, such as large building projects and road construction, offering for a short time employment at higher hourly wages, interfere greatly with the plan of step rates. The anthracite strike of September, 1925, caused a most serious situation, and we quote from the letter addressed by the president of the company to all employees, in part as follows: In the experiment we are jointly conducting to stabilize employment conditions, the burden of the first real test has fallen upon the management. They feel no cause to regret having frankly faced their responsibilities. With the resumption of business our bad-order locomotives are not more than 11 per cent, and the bad-order cars 3.6 per cent, so that the growing traffic can be cared for without embarrassment. The forces are filled with men who are acquainted with each other and with the practices of the company. I should like to emphasize that this is only one indication of the great importance to the employees that the corporation in whose service they are should be kept prosperous and in a high 'state of credit, which alone make such action possible. 104 UNEMPLOYMENT IN THE UNITED STATES This adherence to policy entailed the immediate expenditure of $1,900,000, whereas under the old plan such expenditure might have been deferred until business improved. Men growing old in the service slow up in many of the more arduous jobs and must be placed elsewhere. I n line with a program of concentrating locomotive and car repairs at fewer shops, we were obliged to absorb some 400 men. CHAKT N O . 1 THE DELAWARE AND HUDSON COMPANY MAINTENANCE OF WAY AND STRUCTURES DEPARTMENT AVERAGE NUliBER OF ELPL0YE3S OF ALL CLASSES 4400 4400 4200 4000 3800 3600 U 3400 3000 3000 2800 2600 2400 Jan. Feb, 2to. Apr. May June July Aug. Sept. Oct. Legend 1920 2400 N O T . Dec. 1922 1924 1926 1928 — — The 10 per cent of the employees of a low level of mental efficiency incline to take holidays whenever they choose, wasting much time loitering, unwilling to accommodate themselves to a state of discipline. Fortunately, we encountered to only a small degree the usual distrust that innovations usually experience. Only to a degree have we been successful. I t will be noted in chart No. 1 that in the year 1924 the maintenance of way employees numbered, maximum, 3,400; minimum, UNEMPLOYMENT I N T H E UNITED STATES 105 2,625; variation, 775—1926, maximum, 3,200; minimum, 2,750; variation, 450—1928, maximum, 2,725; minimum, 2,475; variation, 250. Maintenance of motive power, chart No. 2 : 1924, maximum, 3,021; minimum, 2,670; variation, 351—1926, maximum, 2,587; minimum, 2,500; variation, 87—1928, maximum, 2,315; minimum, 2,052; variation, 263. I o « 8 6 i EH < W I o 3 The CHAIRMAN. At that point let me ask, why did the variation jump up from 1926 to 1928? Mr. LOREE. Because men had left our employment. I n order to get our forces normalized or stabilized as men have left employment, their positions have been abolished; so that that is not turnover, that is simply vacant positions that we will never fill again. The CHAIRMAN. S O that you are getting along with 2,052 men with the stabilized forces? 106 UNEMPLOYMENT I N T H E UNITED STATES Mr. LOREE. Yes. You see, we had all these men who were with us from the old plan, and we did not want to turn them adrift, so that they were kept, and we made as much work as we could for them, or put them elsewhere; and as they voluntarily left the service or died, their positions were never filled again. We are getting down to a stabilized force now. I 1 I I 1 I I I 8 8 1 H H H ^ H / V I i o < w o £-1 1 • — • — ^ 1 t > 8 Maintenance of other rolling stock, chart No. 3 : 1924, maximum, 2,070; minimum, 1,796; variation, 274—1926, maximum, 1,799; minimum, 1,788; variation, 11—1928, maximum, 1,614; minimum, 1,480; variation, 134. The CHAIRMAN. I assume that the same explanation applies to that? CHART No. THE D E L A W A R E A N D 4 H U D S O N C O M P A N Y WEEKLY HOURS OP SERVICE - CAR DEPARTMENT HOURS HOURS 55 S5 50 50 1 np 45 ft- 45 40 40 35 &§ 0 SO i^ijjcw^wwaj SO N 25 gs 20 ao 15 is 10 10 o u 1923 29193—29. (Face p. 107.) No. 1 19M 1925 1226 192? 1923 CHART N O . 5 T H E D E L A W A R E A N D 1 1 U 0 S 0 N C O M P A N Y tfBKKLY HOURS OF SERVICE - KOTIVS POJVER DETAR'U'ENT HOUKS I i Hotno 60 60 50 50 ir l 40 i 40 30 30 20 20 10 10 1920 1921 29193—29. (Face p. 107.) No. 2 1922 1923 1924 1925 1926 1927 1929 UNEMPLOYMENT I N T H E UNITED STATES 107 Mr. LOREE. Yes; during the last year on account of business conditions, more men stayed in the service, and so those positions did not become vacant. This year more men have gone elsewhere for work, so that more positions were abolished. Charts Nos. 4 and 5 show the working hours during these years, indicating that for all employees in the locomotive and other rolling stock departments, the hours per week range between 54 and 32, with no shutdowns. « » u I u o t>. m a n K^» aa^a***^ i <D >-* *o <# a j j 1 •* in to u o 5 <* !a o • ^ CO ** j • » 1 o (O « BS^m < w o • « M ^ ^ u W • * * * W 1 « 3 «o £^ 1 a • u iH * 1 E ^m* ^W^ ^ ^ ^ 1* <o i IS » bw ^ ^ M^ m^ +» •» flu ; So I n other words, the minimum number of hours with those employees I have just enumerated was 32, and the maximum was 54. The CHAIRMAN. Yes; it is very clearly indicated on the chart, what was done. Mr. LOREE. Yes. I n times of good business, the men have participated in same by greater earnings. Our force of .long-service employees is increasing, as indicated by chart No. 6, showing the effect of*step rates for laborers. On May 108 UNEMPLOYMENT I N T H E UNITED STATES 1, 1922, we had 2,117 employees with less than six months' service; on November 1, 1928, 714. Fifty-nine per cent of our employees have completed five or more years of service: 10 20 30 40 50 or more or more or more o r more years or years years years years over 4» 516 2, 647 §6o ^46 53 Our policy, with all the changes made necessary thereby, has entailed payment in six years of dismissal insurance on account lack of work to only 50 employees. CHART N O . Tt-Zl DZUMJX 9 *M) HUDSON 00J1TANY h'iAirrm.j;c~£. c? WAY DEPARTMENT Total "urr. v er of Track Ties Used 400,000 300,000 200,000 Tons or Hail Uaod 20,000 15,000 The CHAIRMAN. Pardon me; are you going to give us something that describes the dismissal of employees? Mr. LOREE. I thought you would perhaps develop that by questions. The CHAIRMAN. Yes. Mr. LOREE. I n order to indicate the variations of business met during the period, chart No. 7 shows the gross ton-miles and total freight car-miles, and as a measure of work performed, chart No. 8 gives material charges for repairs to locomotives and freight cars, and chart No. 9 shows ties and rails used, the two major items of maintenance and wray material. That our policy in whole or in part can be applied to other industries depends upon ihe conditions peculiar to the industry. I t is. however, felt that a studv of their cases might indicate, in their CHART N O . 7 T H E D E L A W A R E A N D H U D S O N C O M P A N Y GROSS TON K I L 2 S 800,000 300,000 1921 1923 1926 TOTAL FREIGHT CAR MILES 1921 1922 1924 1925 1926 1927 29193—29. 1928 (Face p. 108.) No. 1 CHART N O . T H S D B L J i U a E .AND M A T E R I A L 8 H U D S O N C O M P A N Y C H A N C E S REPAIRS TO LOCOMOTIVES 300,000 300,000 200,000 800,000 100,000 100,000 1931 1922 1987 1925 1923 19*3 REPAIRS TO FREIGHT CARS DOLLARS DOLLARS 500,000 300,000 800,000 100,000 K hv V V V __ 1921 . -„ _ _ A A \MA hv 1924 1^7 29193—29. 1928 (Face p. 108.) No. 2 200,000 100,000 UNEMPLOYMENT IX T H E UNITED STATES 109 efforts to stabilize employment, the adoption, in whole or in part, of the policy outlined herein. Mr. LOREE. I have tried to keep to the questions that were specifically raised in your letter, Mr. Chairman. The CHAIRMAN. Yes. Mr. Daniel Willard, president of the Baltimore & Ohio Railroad, was before the committee 37esterday, and he testified that this was largely a state of mind that the employers had to get into, for the development of the standardization or stabilization of employment, before we could get action or devise means for doing that. I suppose you agree to that ? Mr. LOREE. I think it is a state of mind; that he frankly faces his own loss, if he does not; a financial loss, which is occasioned directly and indirectly by the lowering in the morale of his people. The CHAIRMAN. In other words, it is good business practice to have a consciousness developed in that direction? Mr. LOREE. We think so. The CHAIRMAN. Did you say what you meant by this dismissal insurance ? Mr. LOREE. We have a group insurance that covers the employees in the service. That insurance is against sickness, accident, and total disability. We give all the men in the service, at the end of six months' service, $250 life insurance, and they may subscribe to $250 more; at the end of two more years, $500; and they subscribe to $500. From then up they can go to the limit of their salary, the company just carrying half of the expense, and the man carrying the rest; and this sickness, accident, and total disability the man carries entirely himself. But if a man takes two kinds of insurance, if he is a subscriber to two kinds, then if he is dismissed for cause, we pay him $15 a we,ek for six weeks, wdiile he is hunting a job. He may get a job sooner. He must make affidavit to his inability to get a job. Of course that compensation ceases the day he gets a job; but up to the limit of six weeks we pay him $15 a week. The CHAIRMAN. YOU do not dismiss any men, then, except for cause ? Mr. LOREE. NO, we do not. If a man resigns, w,e do not pay him in that case, at all. The CHAIRMAN. I n other words, you do not lay off anybody because of lack of work I Mr. LOREE. We furlough certain men. The CHAIRMAN. That is what you mean by dismissal? Mr. LOREE. NO. When a man takes a furlough, wThen as in the train service it may be, under the fluctuating of business, a man asks for a furlough, which is a strictly temporary condition The CHAIRMAN. That does not disturb his priority? Mr. LOREE. N O ; because when he comes back he goes on just where he wras before; except while he is out of the service we carry the total premium charge on his insurance, and when he comes back he then makes good, after his return to the service, gradually, the amount that has been paid for him. That is, he must cash up andl compensate the company for that portion of the premium on which he has been protected by the company. The CHAIRMAN. H O W do you protect those employees who. of necessity, have no work because of insufficient freight? HO UNEMPLOYMENT I N T H E UNITED STATES Mr. LOREE. I t only applies to the train service organization. I t does not apply to the men in the shops. I t does not apply to the clerical force or any other—to track labor or anybody else. The CHAIRMAN. When there is a shortage of transportation to handle, I understand you rotate the work in accordance with the priority, or do those that have been in the longest stay on ? Mr. LOREE. No; in the shops when work gets slack we put everybody on eight hours' work. That is the normal procedure. If we have to work less than eight hours for five days in the week—or six days in the week, rather—then we have an option, under the arrangement with the men. We can then start laying people off, or the men can voluntarily elect to go on shorter hours, which they have done during this last long period that we have had. For instance, at the present time they are working six days. The last week in this month they will work only five days, because of the decrease in business. As the ton-miles increase and the car-miles increase, that necessitates, of course, a greater amount of repair on locomotives and cars. Then we go to nine hours at the shop. If it still increases, we go to ten hours with the same personnel. After ten hours we can hire more men. That is, if we have to work the eleventh hour, we have the choice of working the eleventh hour at time and a half, or of hiring more men, which we have never had to do. (At this point Senator Copeland entered the committee room.) The CHAIRMAN. I observe from these charts that you only go back to 1924 and 1926. Was that the period when you started this effort to stabilize employment? Mr. LOREE. N O ; we started just prior, in 1922. We were just getting ourselves in shape to do it before the shop strike. Of course that temporarily dislocated our situation, as will be seen by the charts, both as to the large number of men and the very great depression that took place in 1922. I t is not a good picture. But it was immediately after the road came back from governmental control, and we started making our studies for that material, and we tried to do something specific in connection with stabilization. Senator COPELAND. I have forgotten what the attitude of your road was. I was a commissioner at the time and attempted to bring about some adjustment between the strikers in southern New York and the railroads. What was your attitude at that time ? What did you do with those men ? Mr. LOREE. Those men voluntarily left our service, and we employed new ones. About 25 per cent came back in the service either immediately or within 60 clays; or in some cases, where we made exceptions Senator COPELAND. That is, they came in outside of the union? Mr. LOREE. They came in as individuals and as new workmen. Senator COPELAND. YOU never did recognize the union in that connection ? Mr. LOREE. We never have. Senator COPELAND. Did some of the railroads ? Mr. LOREE. Oh, yes; some of the railroads have. The New York Central did, and a number of the other railroads did. Senator COPELAND. But your road and the Pennsylvania Mr. LOREE. We never did. UNEMPLOYMENT IN T H E UNITED STATES 111 Senator COPELAND. YOU did not take them as union men? Mr. LOREE. We did not put up any bar, that is on account of a man going on strike, at all; as we term it, voluntarily leaving the service. That did not act of itself as a bar to his coming back to work for the Delaware & Hudson. But that is an individual case. Of course, we would not put a man out of service who had come to us in 1922, to make way for a man who might want to come back. We did not do that. Senator COPELAND. Am I interfering at all with the progress of the hearing, Mr. Chairman ? The CHAIRMAN. We were trying to develop about the stabilizing of employment without regard to union or nonunion employees, and Mr. Loree has just made a very interesting statement of the progress that they have made in an effort to stabilize employment. What I would like to get, before you leave this subject, is in a general way, could you say, perhaps in percentages, what improvement has occurred as a result of this effort to stabilize employment? Mr. LOREE. YOU mean The CHAIRMAN. I mean in the aspect of the whole number of employees. Mr. LOREE. I do not know that I can shortly enough answer the question; but first of all, we have a force that we have at all times, a force of which the individuals are well acquainted with each other— that is the great majority of them. Certainly we must assume, I think, that the longer a man works in a job, if you keep him at all, the better he should do his work on the job. There is less waste and more efficient work. Under the piecework rate scheme, the step rate that we have, for skill and length of service, the company benefits materially by the continuity. The man benefits because whenever there is an increase in business he participates in it, by more work to do. He shares also in any diminution in the traffic, by working fewer hours. He is able to, with some degree of certainty, locate himself permanently in the community. He knows he is not going to lose his job just because business happens to temporarily fall off. He knows that a minor official will not, without at least some consideration, dismiss him, because that becomes a matter of knowledge to the heads of the departments and to the general manager, because the general manager has to personally approve the payment of the out-of-work insurance, with the dismissal insurance, and naturally he wants to know something about the facts on which he is going to authorize payment of $90 to a man who has been dismissed from the service; and of course the company has invested in that man a certain amount of money, perhaps intangible, for his training, and the wastage, and so on, that goes with the breaking in of another new man. The CHAIRMAN. YOU spoke of piecework. Are your men on piecework in the shops ? Mr. LOREE. Yes. The CHAIRMAN. YOU do not pa}' them an hourly wage? Mr. LOREE. N O . Well, I will say they are about 90 per cent, in the shop work, on piecework. The remainder is on an hourly basis because piecework we do not feel is applicable. Piecework will not go everywhere. 29193—29 9 112 UNEMPLOYMENT IX THE UNITED STATES The CHAIRMAN. I S that the general practice of railroad shops, to be on piecework? Mr. LOREE. 1 think it is the general practice of a number of roads. I t is not so with all the roads, I know. The CHAIRMAN. Based on piecework, where you show the minimum of 32 hours a week and a maximum of 54 hours a week, could you say in dollars and cents, in a general way, what that amount would mean? M. LOREE. Yes, I could. For instance, our car men on a 6-day week earn $2,100 a year, roughly. The CHAIRMAN. H O W many hours a day is thai ? Mr. LOREE. That is eight hours a day. I call it an 8-hour day. On a 5-day week—that is, an 8-hour 5-day week—our car men average $151.14 per month. That is at an hourly rate of 92.7 cents. Senator COPELAND. H O W much a month? Mr. LOREE. $151. Senator COPELAND. Those are men on full time? Those are not on piecework? Mr. LOREE. Oh, yes; those are on piecework. The CHAIRMAN. Working five clays a week. Mr. LOREE. When they work on six days a week, they average $190.92. Senator COPELAND. H O W much do they actually average in numbers of days of employment? Are they employed every week, those men? Mr. LOREE. Oh, yes. We have not laid a man off Senator COPELAND. But what is the average number of days of employment of those men who are on piecework? What is the average number of days per week? Mr. LOREE. That fluctuates between 8 and 10 hours, depending on the amount of business. The hours per day, that is what your question calls for? Senator COPELAND. Yes. Mr. LOREE. Eight to ten hours. When business is slack they work 8 hours, and when business is very good they work 10 hours. Senator COPELAND. But what I want to get is, what is the average number of days per week that they actually do work ? Mr. LOREE. Five and a half days is the average. Senator COPELAND. Throughout the year? Mr. LOREE. Throughout the year. I have a chart here that I think will perhaps illustrate that. Here are the hours [indicating on chart]. This is the depression of 1921. This [indicating] is when we were under the old practice, where we shut the shop righr down. This is the strike [indicating on chart]. This line is the 40-hour line. These are the hours that were worked above 40, and you see this was below [indicating]. The men voluntarily decided to work short hours in order not to diminish the force, and we have been working two weeks a month on full time and two weeks a month on a short period of time. (See chart No. 5.) Senator COPELAND. Does this chart mean that no man worked less than 30 hours? Mr. LOREE. Yes, that no man worked less than 32 hours. UNEMPLOYMENT IN T H E UNITED STATES 113 Senator COPELAND. NO man worked less than 32 hours, and some worked Mr. LOREE. No; this is the end of the period [indicating on chart]. Senator COPELAND. Yes, I see. In taking on new men how do you determine whether you will take a man or not? What qualifications must he possess? Mr. LOREE. That is dependent on the qualifications required for the individual department, and the job which he is applying for. In general, of course, he must take a health examination. Senator COPELAND. He is required to do that? Mr. LOREE. He is required to do that. Senator COPELAND. If he had a hernia or some other disability he would not be employed? Mr. LOREE. N O ; we allow a man to waive that. There is, of course, some question whether we should do that; but we allow a man to make a certificate with a doctor's statement that he had hernia. Senator COPELAND. That is, he agrees that if he should suffer any disability due to that hernia, the company would not be held for that ? Mr. LOREE. Yes, because he admits that, and the doctor's certificate shows that he is suffering from hernia. Senator COPELAND. But he would not be barred Mr. LOREE. Only in some respects. Of course we would not put a hammersmith on who was suffering from hernia. Senator COPELAND. I am particularly anxious to know why you would decline to give employment to a man. Mr. LOREE. We decline to give employment to a man when he is, aged. Senator COPELAND. That is the very point that I have in mind. What age? Mr. LOREE. Forty years of age. Senator COPELAND. Thai is, you would not take a man beyond 40? Mr. LOREE. Not normally. Senator COPELAND. What are we going to do with the men who are past 40? What is the country or what is society going to do with men who are past 40? Mr. LOREE. I can tell you what we do with them; we keep them in the service. Senator COPELAND. That is, you keep a man in the service when he reaches 40 or 50; but suppose a man comes to you who is 40 or 50. Suppose I come to you and say, " Mr. Loree, I want to work for your railroad." You say, " H o w old are you?" I say, " I am 50." " I cannot take you." Mr. LOREE. NO ; Ave would say, " Why have you not got a job now ? " That is the answer. Senator COPELAND. One of the things before this committee is, as I understand, what are we going to do with these poor fellows who are not working and can not get work? What is your idea about it, Mr. Loree? Mr. LOREE. Ten per cent of the men, according to our own experience—about 10 per cent of the men—are of such a low mental efficiency level that they can not undertake steady employment. That is, they will not remain on the job either efficiently for the company 114 U N E M P L O Y M E N T I N T H E UNITED STATES or for themselves. They have the " wanderlust," perhaps is about the only way you can describe it. A man does not want to work. Senator COPELAND. Grant that there are some such men. Mr. LOREE. Those men will only remain at work for a few days if you give them a job, and then they will float away; and in a week or 10 days those same men will be back wanting a couple of days' job again. Now, we have not been able to determine very definitely, because the past history of these people is, from our point of view, almost impossible to ascertain, as to whether that is a mental situation which has existed from birth. Senator COPELAND. They are tramps ? Mr. LOREE. Well, almost—or whether it is a developed mental attitude in the majority of cases; because, as I say, these men wander in and they wander out, and you can not trace their past history very well—or, at least, we can not. Senator COPELAKD. All right. Now, what about the other 90 per cent? Mr. LOREE. The other 90 per cent, or a number of them, of course, are steadily employed. You have a certain number of men who come to you who are over 40 years of age that want jobs. I would say that those men have not got jobs, or a great many of them, certainly, in the railroad business, because of infraction of the rules, or personal conduct, because of which their former employers dismissed them. Senator COPELAND. D O they represent the other 90 per cent ? Mr. LoREfl. No; 10 per cent of your total are these wanderers. Senator COPELAND. Yes. Mr. LORE$. The 90 per cent remaining are divided between the people who are steady men and the people Senator COPELAND. YOU misunderstand me. I am talking now about the man past 40 years of age wTho applies to you for a job. Your reply to me was that 10 per cent of the men who apply to you for jobs are of the tramp type. Mr. LOREE. I did not make myself clear. Ten per cent of the workers are of that type; so that you get only a proportion applying to you for a job that are of that 10 per cent. There are some men who are not of that type at all, but because of infraction of the rule, either the written rule, or their conduct, have been dismissed from former employment. Senator COPELAND. That is all right; but now what about the man who applies and appears to be all right, to be a good citizen, but he is 50 years old? W h a t are you going to say to him? No matter whether he stands a health examination or not, you are going to decline him, are you not? Mr. LOREE. NO. I n general, I would say we do. Senator COPELAND. Then what is this committee going to recommend to the Congress to be done with the man past 50, who is healthy, who is able-bodied, but who can not get employment because industry will not take him? Mr. LOREE. I think that the question is not, can he not get employment, but the question is why has he not got employment? W h y did he leave the employment in which he was ? The CHAIRMAN. I n other words, why is he seeking employment at 50 years of age, instead of having settled himself? UNEMPLOYMENT IN THE UNITED STATES 115 Mr. LOREE. Taking the specific case of an engineer, here is a man who runs a locomotive. There is hardly a man in the United States running a locomotive who has not had five years' training. That is almost axiomatic; certainly to-day. You have got an investment in that man of at least $5,000, although you may not be able to point out just where you have spent $5,000 on him. You donot let that man go without some thought; and yet he is a man who normally is up around 40 or 50 years of age. When he leaves your service, what are the causes of his separation from the service, normally? He has bad habits; he has disobeyed some of the rules, not once but a number of times. That man has trouble finding a job. Certainly he is almost barred from ever finding a job again as an engineer. You will take him on perhaps as a hostler. You might take him on as a wiper or at some job of that kind. Now, of course that is only after repeated offenses. You do not do that in a minute. No road can afford to do otherwise. If they should, they would be losing money. But that man comes to you with a bad reputation. He has to seek common laborer's work, practically, in the end. Senator COPELAND. Let me put the thought before you in a more specific way, because it is a matter of great interest to me, and I know this from my conversation with men throughout the country generally. Take, for instance, the bituminous coal-mining industry; there are 250,000 more in that industry than are needed; three or four thousand mines more than we need. If I had my way, I would do away with the law preventing it, and would permit consolidation; but that is neither here nor there. We have 250,000 more employees there than we need. Some of those employees are undoubtedly abJ#-bodied men who have been diligent ancl capable, but who are 50 years of age or over. Suppose one of those men applied to you, with a perfect record back of him, of decency and of employment; out of work because of the conditions in that industry. What would you say to him ? Mr. LOREE. We would have to say, " W e have not got a job for you to-day." But look on the other side of the situation, Senator. I n six years the Delaware & Hudson Co. have had just 50 men put out of their service because we did not have any jobs for them. We have only turned loose, into the army of the unemployed, 50 men in six years. Senator COPELAND. When you did turn them loose and you had to select out six men, you took six men who were past 50. Mr. LOREE. NO ; there were 50 men in the six years. Senator COPELAND. All right. Mr. LOREE. Those were young men. We do not turn loose old men, unfortunately—or fortunately, depending on whether your stockholders think you ought to give more to them, or whether they think it is all right. But those 50 men wTere young men who had lost standing in the company's forces, in most cases. Senator COPELAND. I was in Massachusetts during the campaign, to speak for my friend Senator Walsh, and I was in Lowell, Mass., and after my speech a man came up to me to thank me for what I had done to help the Spanish War veterans get a pension, and we passed that off; and then he said to me, " You are a doctor. How do I look? " I said, " You look 100 per cent." He said, " I have 116 UNEMPLOYMENT IX THE UNITED STATES been walking the streets in Massachusetts for six months, and I can not get a job because I am 50 years old." Now, granting that he was telling the truth about his habits, and that his situation was due to the depression in the textile industry in Massachusetts, what is going to become of that man? Suppose he comes to your railroad ; you would say to him, " We can not take you. You are over 50 years old," would you not ? Mr. LOREE. If we were hunting for men, yes. If he had come to us in the last six years, we would have said, " We can not take you, because there is no place to put you in." Senator COPELAND. What is your idea of what should be done with such men? Mr. LOREE. My idea is that men who are employable by a stabilization of the industry should be continued in employment, and then you would not have the problem of the men you are talking about. Senator COPELAND. That is, in the future we would not have them, because you would take care of them now? Mr. LOREE. Yes; that is what w^e try to do. Now we have, as I say, only had 50 men discharged in six years, since our scheme started. Doctor L U B I N . Out of a total of how many? Mr. LOREE. We started with about 15,000. We have had only 50 men in six years who have been turned loose because we did not have something for them or did not make something for them to do. Senator COPELAXD. And they were all comparatively young? Mr. LOREE. I would say they were all young. The junior man ordinarily goes out first. We have a lot of old men; there is no question about it. They have been in the service a long while; families have grown up on the property and worked there. Three generations is not unusual. We know that those men, after a certain age, become le^s effective, less efficient. That is perfectly natural; especially in the more arduous work. But, after all, they have a very good influence on the younger men. They have given the company long service. As you said, there is a problem behind it all, what are they going to do if they are out of work; and it is not with any purely humanitarian idea that we went into this problem. This is not because of some sentiment; this is because Ave think it is financially beneficial to us that we should keep them doing something. Senator COPELAXD. If there were a general reconstruction of industry, so that your own experience in attempting it would not be unique, woidd it be possible and feasible to reduce the hours of labor per week for all your men. so as to bring more into employment? Mr. LOREE. N O ; because we would not be able to get regularity of employment. Senator COPELAXD. Could there not be a reorganization of your entire structure so that it could be done? Now, you see what I have in mind is to take up the slack, if there is a slack. I suppose that is hardly doubtful, at any rate, Mr. Chairman. Would you say that there was slack among the unemployed? The CHAIRMAN. There is no argument about that. Senator COPELAXD. Well, all right; then could there be a reorganization in industry so that you could materially reduce the hours UNEMPLOYMENT IX THE UXITEI) STATES 117 of work per week, have a reorganization, and bring in a larger number into employment? Mr. LOREE. We do not feel so. Senator COPELAXD. YOU did reduce the hours. When your company was operating, years ago, there must have been a time Avhen men worked 17 or 18 hours ? Mr. LOREE. Oh, yes. Senator COPELAXD. NOW you say you work Mr. LOREE. We work between, 8 and 10 hours. Senator COPELAXD. I t must have been put up to the management of your railroad 50 years ago that you could have an 8-hour day. Mr. LOREE. We do not believe you can have an 8-hour day. We do not believe that is possible, from our experience. Senator COPELAXD. And yet your men are working less than that, or about that? Mr. LOREE. N O ; they are working a little better than that. Senator COPELAXD. But they are not working nine hours a day ? Mr. LOREE. Not as a general thing. They work at certain periods 9 hours a day and at other periods 10 hours. Senator COPELAXD. Was there not a period when they worked 12 hours a day? Mr. LOREE. Yes. Senator COPELAXD. Mr. LOREE. Yes. Senator COPELAXD. Then, the section men worked 12 hours? But there was a reorganization, so that those section men are now working 8 hours ? Mr. LOREE. Ten hours for about half of the year, and the other half of the year about 8 hours. But that is because we have introduced machinery. For instance, take a section motor car;* a man gets to work much more rapidly than when he had to use a hand car, and he gets home quicker and he works more hours on the track. Senator COPELAXD. Your judgment is that he works as many hours now on the job as he did in the old days? Mr. LOREE. Probably more; that is, actual work on the track. I am not talking about time on duty, because he is not on duty so many hours; but because of the labor-saving machinery and because of the use of motor cars he spends more time on the section, working on the track. He puts in more of his time on the track working than he used to. That is not true, for instance, taking certain sections of the New York Central Kailroad. Due to the density of the traffic, I do not believe they put in anything like the amount of actual work on the track that they used to, because they can not. I think on the New York Central—this is just my recollection of it—they figured that they only got something like two actual hours of work a day out of a section gang. That is because they had to spend so much time getting off the track and on it again. Senator COPELAXD. I want, sometime, to bring out the points that I have in mind now, but I do not want to interfere with your program. Go ahead. The CHAIRMAX. Have you anything that you could suggest, that you have not already suggested ? Mr. LOREE. N O ; I have not, Mr. Chairman. We have tried to answer here the questions that you have propounded, and we would be very glad, of course, to reply to any questions that may occur to 118 UNEMPLOYMENT IN T H E UNITED STATES your minds, later; either to write to you or state it, if there is anything further or anything you want to amplify. The CHAIRMAN. When we get all this summarized, we may have to ask you for something further. Mr. LOREE. I shall be very glad to answer. STATEMENT OF J. M. LARKIN, CHIEF ASSISTANT TO THE PRESIDENT OF THE BETHLEHEM STEEL CO. The CHAIRMAN. Please state your name and your position. Mr. LARKIN. My name is J . M. Larkin. I am chief assistant to President Grace of the Bethlehem Steel Co. The CHAIRMAN. I understand you have done considerable work and given considerable thought as to the stabilization of employment, and we would be glad to have you tell us, in your own way, what you have done. Mr. LARKIN. Mr. Chairman, wTe have answered the questions that you propounded here in a written memorandum. I am prepared to either read a statement or just follow it as an outline and discuss it as we go along, whichever you prefer. The CHAIRMAN. Suppose you read it, and we will follow you as you read your statement. Mr. LARKIN. Very well. We are glad to come down here to talk with you about this very important subject that the committee is investigating, but as Mr. Grace wrote you the other day, we believe our friends have been a little too complimentary in representing to you that we have completely solved the far-reaching and very puzzling question of unemployment. Nevertheless, I shall try to give you a picture of what Ave feel we have accomplished toward regularizing employment in answering the questions which Chairman Couzens propounded in his letter of invitation. You first ask how irregular was employment in our plants before we attempted to stabilize it. I must point out that our efforts to stabilize our employment can not be traced to any particular beginning, as we have been making a constant effort in this direction over many years with perhaps the greatest indication of progress since the war. Prior to the war there were violent fluctuations in emplo}Tment in our company, due in part to the severe cyclical changes in business in those years, in part to the fact that the products of our own company were not then sufficiently diversified to maintain a steady rate of operation, and in part to the fact that we had not established such relationships with our employees as are necessary to any permanent relief of fluctuations of employment. This I think was true of industry generally, so that we were no exception to the general rule at that time. Your second question is, By what means did you undertake to provide steady employment? As I view the matter the question of steady employment is influenced by two major factors— First, by those external elements over which a particular company has no or very little control, these having to do with the demand for its product which obviously will affect the employment of labor. UNEMPLOYMENT IX THE UXITED STATES 119 Second, by those internal elements over which a company has a certain amount of control. I n dealing with these internal elements Bethlehem's efforts have been directed along two general lines, namely: * (a) Management policies leading to stabilization of operations. (b) Labor policies leading to better relations between management and employees. Those management policies wThich have contributed toward more regular work have embraced— Consolidation of properties. Modernization of plants to the extent of expenditures aggregating over $150,000,000 during the last five years. Diversification that gives the company a complete range of products to meet all steel demands. This diversification has been a tremendous factor in affording steadier work to employees. As an example, one plant which formerly manufactured only steel rails is to-day manufacturing in addition to rails, pipe, wire products, sheet and tin plate, plates, sheet bars for the automobile industry, plates for building construction and other products. Thus this diversification has largely fortified the employees against the unemployment which arose from dependence upon the manufacture of one product which was more or less purchased on a seasonal or restricted basis. Another plant which was formerly devoted almost entirely to ordnance manufacture is nowT almost entirely devoted to commercial steel products. What has taken place in these two plants is typical of developments throughout our corporation. Improvement in operating control resulting in a more suitable distribution of work among plants to insure most economical and steady production. I n the matter of labor policies our President, Mr. Grace, about 10 years ago laid the foundation for our present industrial relations work. I n embarking upon this program he summarized the reasonable wants of employees to include, first, steady uninterrupted employment and the payment of fair wages for faithful efficient services; second, a voice in the management to the extent at least of jointly determining conditions under which men are asked to work; third, good safe physical working conditions and provision against accident, sickness, and death; and fourth, an opportunity to acquire financial independence through saving, home ownership, the purchase of a stockholder's interest in the business, relief in case of need and pensions in old age. I n carrying out this policy the company adopted a number of specific plans having a bearing directly upon stabilized employment. I t first established a department of the corporation under the direction of the assistant to the president to formulate and administer through the management of its various plants its labor policies. Briefly, some of the plans comprising our industrial relations policy .are— A completely organized employment department in each plant for the hiring, transferring, and terminating of employees on a humane and business-like basis. Through these employment departments many of the ills which formerly contributed to unemployment have been corrected. An attempt is made so far as possible to recruit labor from among local citizens. If employees are unfitted for one 120 UNEMPLOYMENT I N THE UNITED STATES class of work they are transferred to other work. During the last year some 16,000 employees were thus transferred from one kind of work to another within our plants. No employee leaves the company without being interviewed by the employment department. I t has thus been possible in a great many instances to make an adjustment for the employee which has prevented his being added to the roll of the unemployed. Our labor policy has recognized that adequate wages are the crux of the employment relationship. I t has been the constant aim of the management to increase the earnings of employees while at the same time it has striven for reduced costs of manufacture. This has been accomplished by the application of various methods of incentive wage payment that compensate employees in accordance with their output. Indeed our whole labor policy has recognized a new responsibility for management in the matter of wage payment. Management has come to believe that the ability to pay high wages is as much a measure of its efficiency as the ability to obtain low costs. I n the past much unemployment has resulted from misunderstandings between management and employees. I n some plants and some industries labor conflicts resulting in strikes and lockouts with consequent interrupted employment have occurred at frequent intervals, because of absence of an effective means of dealing between management and employees. We have provided against this condition by the inauguration of an employees' representation plan which permits of contact and conference between the employees' elected representatives and the management and provides measures for adjusting possible difficulties without interruption to work. I n addition to providing a channel of contact between management and the employees for the adjustment of misunderstandings which might otherwise entail hardship through interrupted employment the representation plan has been a powerful factor in increasing efficiency and interest of the employees because of the opportunity it affords for keeping them constantly informed on the facts of the business. Among the work hazards which the employee has to face, perhaps the greatest is the risk of accidents. Accidents in the past have caused great suffering and distress and much loss of working time in industrial life. We have vigorously attacked this problem and with the cooperation of the employees over the last ten years have been able to greatly reduce accidents. I n the last year alone a contest which we have conducted in our plants has resulted in reducing accidents 25 per cent over the }Tear before with a saving to employees in wages of over $1,000,000, and in addition there has been a substantial saving to the company. Along with these efforts in the prevention of accidents has gone an improvement in sanitary arrangements and working conditions and in the quality of medical service furnished to the employees. As a measure of relief for employees whose working time is interrupted through sickness, we have in operation a relief plan to which the employees contribute and which affords generous sickness and death benefits. I n addition to its financial aspects the plan, through its administrators, is making special effort to correct the causes of sickness as a measure of even greater employment stability. UNEMPLOYMENT IN T H E UNITED STATES 121 The one hazard which the employee has to face and which can not be overcome is that of old age, and to take care of this we have instituted a pension plan which gives an employee financial assistance when it becomes necessary for him to retire from active duty. At the present time the corporation is expending under the plan $500,000 per year, and there are perhaps 1,000 pensioned emplo}^ees on the roll. The CHAIRMAN. Would you mind if I interrupt you there ? Mr. LARKIN. NO. The CHAIRMAN. T O what extent does the employee contribute to* the pension fund ? Mr. LARKIN. He does not contribute to the pension fund. I t is paid for entirely by the company. Senator WALSH of Massachusetts. I n other words, it charges u p a certain amount against its earnings for this purpose ? Mr. LARKIN. I t goes against cost of operation, Senator? The CHAIRMAN. I S it done on the percentage basis, or how do you arrive at the amount? Mr. LARKIN. Briefly, the plan provides that a man will be pensioned after 22 years of service and after reaching 65, on the basis of 1 per cent of his annual earnings, multiplied by his years of service. I n other words, the longer he has worked for the company, the more the pension payment will be to him. The CHAIRMAN. D O you set up any fund to protect that, or how do you protect it ? Mr. LARKIN. Yes. A t the time a man is pensioned we set up an amount that is estimated to be sufficient to carry through that pension to maturity. I n other words, at the time a man is pensioned we would set up the equivalent of five years' pension in a fund. Senator W A L S H of Massachusetts. Not the pension for that one year, but for his probable lifetime ? Mr. LARKIN. For his probable lifetime; yes. The CHAIRMAN. But what I wanted to get at is, does the company set up any reserve to provide for that out of its earnings? Mr. LARKIN. Only after the man has been pensioned. The CHAIRMAN. I n other words, you do not anticipate Mr. LARKIN. There is no provision in advance for pensioning a man in any general fund. The CHAIRMAN. I n other words, if you were confronted with bad business, and a lack of cash, and you had a lot of those employees,, you might be embarrassed by not having created a fund; is that correct ? Mr. LARKIN. I t would not embarrass us, Senator, so far as the employees who were on pension were concerned, because their pension has been provided for in the fund. You see, at the time a man is pensioned the company sets aside a sum of money that is estimated to be sufficient to carry that pension through to maturity. Senator W A L S H of "Massachusetts. Aside from the pension of that year they set it aside? Mr. LARKIN. They set it aside at the time he is pensioned and charged it against current cost. The CHAIRMAN. Perhaps I have not made myself clear. You do not anticipate, then, any man who is going to be retired? Mr. LARKIN. N O ; not through any financial provision. 122 The UNEMPLOYMENT IX THE "UNITED STATES CHAIRMAN. Yes. Mr. LARKIN. A S a result of the financial aid which comes to employees to-day under workmen's compensation payments and under the relief and pension plans, it is estimated that employees are having made up to them over one-half of the loss that they wrould sustain in the absence of these plans. This is of tremendous economic benefit to industry and the community at large and furnishes effective insurance against unemployment due to accident, illness, and old age. Another form of financial aid which can have a material effect upon stabilizing employment is to give to employees encouragement and assistance toward home owning. This we have done through a home ownership aid plan. Since 1924 the company has operated a stock purchase plan under which 35,000 employees have acquired on easy and favorable terms over $13,000,000 worth of the corporation's preferred stock and this amount is increasing year by year. Senator W A L S H of Massachusetts. What percentage is that ? Mr. LARKIN. Of the total preferred stock, approximately 13 per cent. There is approximately $100,000,000 of that stock. Although devised primarily as an aid to thrift and investment, the stock plan can be an important incentive to stability of employment since the stockholding wage earner is less likely to leave the company than one whose only financial connection is through the pay envelope. Moreover, the plan is of the greatest benefit to the employee who for any reason is permanently or temporarily off the pay roll since his shares of stock provide a financial backlog as protection against emergencies. This again in effect constitutes a measure of insurance against the effects of unemployment. The CHAIRMAN. Just at that point, you say " temporarily off the pay roll.' 1 Why would he be temporarily off the pay roll, except for accident or illness? Mr. LARKIN. Due to the temporary closing down of a department, Senator, The CHAIRMAN. Why would you temporarily shut it down? Mr. LARKIN. Due to the lack of orders. The CHAIRMAN. Yes. Mr. LARKIN. For instance, I can cite one instance of a car-building department in one of our plants. Because of the lack of orders for cars for the last year and a half we have had very irregular working times, and there have been periods—say over a period of several weeks—when that department has been closed down. The CHAIRMAN. D O you make any effort to minimize the effect of that by a division of work among your employees? Mr. LARKIN. Yes. Our first effort in that instan' e would be to transfer those employees to other work within the plant, and to the extent that we would be able to do that we will take up that labor and hold it in readiness for the resumption of operations of that department. If we, however, reach a point where that labor must be absorbed, if it is a ease where the entire department is closed down and we are not permitted to rotate the employees on part time, the only other recourse would be to temporarily release them. The CHAIRMAN. Then there is no benefit for those who are temporarily released ? Mr. LARKIN. NO. UNEMPLOYMENT IN T H E UNITED STATES 123 The CHAIRMAN. Have you any figures to indicate the fluctuation due to that ? Mr. LARKIN. Yes; I have a chart here that I expect to showT you. So far as it is compared w^ith the number of employees, it is very minor. I just offer that, to illustrate the incident there. Referring again to the value of the stock plan, this again in effect constitutes a measure of insurance against the effects of unemployment. All of these industrial-relation policies, in addition to their own advantages, have a direct bearing upon regularization of employment since they reduce causes of friction, improve efficiency and morale, further confidence and cooperation between employees and management, and emphasize quality and quantity of production essential to the retention of markets. Your third question is, What problems did you encounter in bringing about regular employment ? I have already referred to the external economic conditions in business over which a particular company has no control. Assuming that we have secured the maximum effectiveness in the management policies and labor policies which I have discussed, we can offer steady employment so long as the railroads, the automobile industry, the building-trade industry, and the oil industry (these consuming the greatest tonnage in steel) and other industries continue to place orders for steel. They will, of course, place orders so long as they can in turn sell their products and services, and so it goes around an endless c}7cle all of which is based upon general prosperity throughout the country, which in turn will be supported by high wages, plentiful money supply, and profits for investors. During recent years, in 1924 specifically, there was a period of business recession which adversely affected the operations of our company, although the effect was less severe than it had been in previous periods of slack business and than it would have been except for the measures for stabilizing employment which have been discussed. One factor which made this period less severe was due to the new condition in business which we have seen in industry in the last few years—namely, hand-to-mouth buying, under which the period of recession was undoubtedly shortened because of the absence of large stocks of commodities on hand. I t is noteworthy that during the period of business recession referred to the wage scales of the workers in our company were not impaired as contrasted with the old days when the first thought of management in a business recession was to cut wages. During this period the effects of the depression from an employment standpoint were greatly modified by the policy which the company adopted of spreading out tlie work among the maximum number of employees. I repeat that in the efforts of our company to regularize employment the most serious problems which Ave have encountered are those incident to outside economic conditions which we could not control and the effects of which we could only modify. However, there were some internal conditions distinct from the general business situation which offered additional problems. These were— First, a constant necessity to hold manufacturing costs to a minimum. This necessity was accentuated by the extraordinarily keen competition in ours and in other industries. Under the older sys J24 UNEMPLOYMENT IN T H E UNITED STATES tern of management the urge to cut costs might have been the incentive to wage reductions and to instability of working forces. I n avoiding these evils management was required to handle the problem with greater foresight and skill and devise new and improved methods of doing work; second, there has been the necessity of balancing our desire for stable employment against the need for establishing working forces at the minimum from the standpoint of efficienc}^. I n the course of recent industrial changes it has been impossible to wholly avoid laying off some employees who have become superfluous. This n a t u r a l has added to the difficulty of regularizing employment. But wherever it has been done its effects have been offset because of the full-time employment it has afforded those retained and whose sustained purchasing power has indirectly served to afford relief by creating a demand for products whose manufacture absorbed this surplus labor; third, there have also been the problems growing out of the occasional situations in which economy could be effected by transferring work from one plant to another and segregating certain types of work at one plant as opposed to the diversification of products to which I have referred. Oftentimes, because of changing markets and other conditions, it is found that an established product of a certain plant can be more economically produced at another plant. I n carrying out this necessary manufacturing economy grave problems as affecting employment will arise. While they are not altogether insurmountable, they do nevertheless require special study and treatment. You now ask, How successful have you been in your efforts ? We feel that the results which we have obtained in regularizing employment are partially reflected in the following facts as to labor turnover, labor stability, and fluctuations in the pay roll. Labor turnover (rate of terminations) has been reduced from 135 per cent in 1923 to 43 per cent in 1928 as shown in the following table: 1923 1924 1925 Percent 135 63 67 1926 1927 1928 Per cent 85 55 43 The CHAIRMAN. Where was that jump from about 60 up to 85, and what caused it ? Mr. LARKIN. That was in the year 1926, when there was an increased rate of operation which necessiiated taking on additional men. The stability of the working force as shown from year to year in Ihe following table is an indication of progress toward the regularization of emplo}^ment. The working force by years was as follows: 1923 1924 3925 1926 1927 1928 Average number of employees 63,775 58.430 62.133 67,998 63,210 63.177 The CHAIRMAN. What became of those 4,000 men between those two periods you have just mentioned % UNEMPLOYMENT IN THE UNITED STATES 125 Mr. LARKIN. They have drifted out into other employment. The CHAIRMAN. That is, a part of the unemployed group. Mr. LARKIN. And that is right in line, and I would like also to say there that it reflects a reduction in our labor turn-over; and as you reduce your labor turn-over, naturally the increase in your force employed will showT a greater stability, so that that is reflected in there. The CHAIRMAN. Yes; but there was a big change between certain years that you just mentioned there. I did not get the impression that that was due to the stabilization or regularity of employment, Mr. LARKIN. The big change there is between 1925 and 1926. The CHAIRMAN. Yes. Mr. LARKIN. I n 1925 there were 62.000 employees on the pay roll and in 1926 there were 67,000. The CHAIRMAN. But I mean the drop below that. There was a drop, then. Mr. LARKIN. I n 1927 it dropped back to 63,000. The CHAIRMAN. Why was that? Mr. LARKIN. 1926 was the year of the resumption of the steel business, getting back to a high rate of operation, which necessitated taking on new employees. By the time we had gotten into 1927 and our rate of operation was steadied up. our forces became more stable, and those flurries you take on in the hiring of your employees were eliminated from the roll. The CHAIRMAN. SO that those 4,000 that were laid off in those years became a part of the general unemployment problem? Mr. LARKIN. Yes; they were a part of it before they came on our roll, and they went back to it. Doctor L U B I N . You are working steadily now? Mr. LARKIN. We are working steadily now, and the rate of operation we have this year will be in excess of that of 1926, which was also a good year from the standpoint of operation. The CHAIRMAN. YOU have not had to take on any more men? Mr. LARKIN. We have not had to take on any more men; because that is one of the advantages of steady operation and regularizing of your employment, that you can operate with a steady force of employees; whereas, if you go down in your rate of operation this year and then go up next year, there is a period there over which you are taking on new employees and trying them out and fitting them into the operation, which will mean that for a period you will show a higher average force. If you can get your operation steady. 3^ou can operate with a lesser force. The CHAIRMAN. Even with more product? Mr. LARKIN. Even with more product; yes. I might point out in that connection one figure which I think has a bearing on this from a strictly cost or financial standpoint. That is that from 1923 to 1927, without any disturbance of the wages of the men, the cost of manufacture of finished steel products has been reduced approximately $7-25 a ton. That is another advantage of coordination and stabilization of your operation and employment. Fluctuations of force within each year between 1921 and 1928 are shown on the attached chart. Whereas the high and low points of employment in 1921 fluctuated 50 per cent from the average, during 126 UNEMPLOYMENT IX THE UNITED STATES the following seven years these fluctuations were steadily reduced until in 1928 the high and low points of employment varied hardly 10 per cent from the average for the year. This is on the basis of the fluctuation in the pay roll. This line [indicating on chart] is the base line which shows the average pay roll. I might explain that in this way, that our pay roll is approximately $120,000,000 a year. That would mean that the average monthly pay roll would be $10,000,000. Taking this line on the chart to be the average of $10,000,000, then as the pay roll per month fluctuates above and below the $10,000,000 it shows the extent to which steady work has been given to the men, as reflected in their pay envelope; which, after all, is the thing that they are concerned with. I t shows here that back in 1921 the fluctuations were as great as 50 per cent above and about 38 per cent below. That has been steadily ironed out, through management and labor policies, until we come down here to-day to show that the fluctuations throughout the course of the year are minor—not over 10 per cent. This [indicating] happens to be an increase, and the decrease in no case was as great as 10 per cent. The CHAIRMAN. Was that helped by the condition of the industry or by budgeting or what not ? Mr. LARKIN. That was helped by all of the factors that I have mentioned. For instance, the program of consolidation which this corporation went into back in these years here [indicating on chart], followed by a program of modernization and diversifying the products of the operation, and then resulting in better operating control of all the properties, and, of course, a better position of the company commercial wise to go out and obtain the necessary business with which to operate on a steady basis. The CHAIRMAN. SO that in addition to being a very humane result it has proven to be a good business plan ? Mr. LARKIN. I would say that the two go hand in hand; that wdiat is a good thing for business is a good thing for the employees, and vice versa; and I certainly feel that in this instance that is borne out. The CHAIRMAN. YOU pointed out the fact that there had been considerable reduction in cost of manufacture; I think, $7 a ton reduction in the cost of producing steel. Mr. LARKIN. The actual figures, Senator, are $7.27. Senator W A L S H of Massachusetts. Has the public benefited by that reduced cost also ? Mr. LARKIN. I n that time the prices of steel products have decreased, slightly more than the reduction in cost. Senator W A L S H of Massachusetts. So that it has been of benefit to the public also ? Mr. LARKIN. T O the public also. Senator W A L S H of Massachusetts. As well as to the company? Mr. LARKIN. I have not the actual figures on the reduction to the public. Your last question asks, to what extent measures similar to those adopted in our company can be applied to other plants and other industries. 10 UNEMPLOYMENT IN T H E UNITED STATES 29193—29 127 128 UNEMPLOYMENT I N T H E UNITED STATES Naturally, I am intimately acquainted with conditions only in the Bethlehem Steel Co. I n a general way I know that other employers are interested in the subject of unemployment and are making efforts at stabilization. Their interest to a certain extent reflects humanitarian motives and the desire to benefit their employees. To a greater extent, however, it is due to a recognition that stabilization of employment and satisfactory operating conditions from the standpoint of management, stockholders, and business in general is highly desirable. Stabilization of employment is good business; on the other hand, it is by the adoption of good business methods that this stabilization can most effectively be secured. After all, industry itself has come to be dependent upon the uninterrupted purchasing power of the masses of the people, and for this reason, if for no other, it should do all it can to maintain the earning power of the wage earner through steady work in order that it in turn will have a steady market for its products. As to the extent to which other employers might make use of methods similar to our own I am not qualified to speak with authority* since I am not familiar with problems in other companies. I should think, however, that the same general principles modified to suit the conditions of each company might be followed with results approximately comparable to those which we have secured. The CHAIKMAN. YOU spoke in the former part of your statement about organizing your employment services on a very businesslike and humanitarian basis. Have you any rules with respect to age— in regard to the employment of men of certain ages? Mr. LARKIN. We have, Senator, in this respect, that we aim to employ new men—that is, men who have never had any other connection with the company, men who are not taken on on the basis of being rehired—under certain rules. The rules in those cases are that the men shall be subjected to a physical examination, that they shall be able to qualify from the standpoint of physical and mental and work ability, and that they shall not be over the age of 45, excepting in special cases where that rule may be waived by the management. But the reason for that is that we are coming to a point in industry where we are getting down to a stable basis where our effort is to regularize work and to stress doing something for the older employees, because that goes hand in hand with correcting this unemployment problem. I t means that we are building up older employees from the standpoint of age and service in our plant. Now, in order to protect them and not to bring into competition for the limited number of jobs that you have that older workers can do, workers from the outside that have had no previous connection with the company, then we must have some limit at which we will avoid bringing into competition with our permanent employees people from the outside. Senator W A L S H of Massachusetts. I n other words, your old-age problem, the problem of men having work after 45 or 50 years of age, will solve itself if every employer takes care of their men? Mr. LARKIN. Precisely. If, for instance, we can bring about consciousness in the country on the part of employers of labor, bring about a sense of responsibility to their older employees, it seems to me that is the best and soundest method of correcting the situation and solving the problem of what shall be done for the older employees. UNEMPLOYMENT IN T H E UNITED STATES 129 Senator WALSH of Massachusetts. You can adjust the older employees by taking on younger men to take the places of older employees, and who will be with you for a longer period of years ? Mr. LARKIN. Yes. From every standpoint, you have to view the taking on of a new employee as you would any other business investment. You have got to consider that if you are goin§ to do the best that you can for the company, you have got to consider, when you are taking on a man, having him for a period of years rather than taking him on for a few months and then throwing him out on the country. The CHAIRMAN. I n other words, unless such a policy as you have described is adopted, the older men will be thrown out, but when the industries become more uniform in their operation and policies the older men will not be out ? Mr. LARKIN. Yes. STATEMENT SUBMITTED BY MB. FBED W. SABGENT, PBESIDENT OF THE CHICAGO & NOBTH WESTEBN BAIWAY CO., ON THE METHODS EMPLOYED FOB BEGULABIZING EMPLOYMENT BY THE CHICAGO & NOBTH WESTEBN BAILBOAD I attach hereto a c h a r t which will show the number of occupied positions in shop crafts and maintenance of way department on this railroad since J a n u a r y 1, 1923. We undertook our stabilization program in the l a t t e r p a r t of 1925, and you will observe t h a t it h a s held a r a t h e r consistent line with one exception to the present time. I n our maintenance of way department you will observe t h a t while there a r e wide fluctuations in each year, there h a s been reasonable stabilization for corresponding months of each year since 1925. In this territory it is impossible, of course, to m a i n t a i n an even force on maintenance of way work throughout the year, as the season for us is r a t h e r short, a n d we a r e obliged to do substantially all work other t h a n ordinary maintenance from April to November, inclusive. I -therefore see no way of maintaining even forces throughout the whole j^ear for the maintenance of way department, since the m a t t e r is controlled in our territory by climatic conditions. We can, however, to a very large extent m a i n t a i n an even force throughout the year in the maintenance of equipment. We have made, as you will observe from the chart, some progress since 1925. Beginning with J a n u a r y 1, 1929, we have adopted a yearly instead of a monthly budget and will maintain substantially the same number of men each month throughout the year regardless of the volume of business. This means t h a t our comparative showing as to net earnings for corresponding months of previous years may be somewhat varied but it ought not affect t h e total for the entire year. We have not encountered any serious problems in undertaking to bring about this stabilization of employment on the railroad. We have h a d t h e cooperation of our men and the brotherhood organizations. To adopt such a program, however, it is necessary t h a t we make a very thorough survey a t the beginning of the year in which we undertake to estimate our total volume of business for the succeeding year. I t also means t h a t we will have more men employed in the wintertime t h a n we would need to maintain our equipment in good condition and fewer men t h a n we will need in the summer and fall of the year to t a k e care of the increased volume of work t h a t would be necesary if we were planning only from month to month. However, we expect to put our freight equipment in such excellent condition during the slack period of the year, t h a t the surplus will carry us through the peak period without putting on additional men who would later have to b'3 discharged in the wintertime. To increase the pay roll during the slack period of the year means t h a t we are taking some chance on recuperating by virtue of an increase in the volume of business commensurate with our own predictions later on in the year, and if our predictions as to the volume of business we will do for the entire year is overestimated, then it will mean a higher maintenance charge to equipment than would otherwise be necessary. *I think one reason why this plan h a s not been adopted before is because railway managements have h a r d l y dared to take a chance in relying on prophesy CHICAGO L NORTH WESTERN RAILWAY CO o s •d o K! g w to W to UNEMPLOYMENT IN THE UNITED STATES 131 asr to what the total volume of business for the calendar year might be, for if w e should guess wrong, we would then be in the position of having incurred a very heavy maintenance charge in the first half of the year that might not be justified if there should be an unexpected decline in business in the latter half of the year. If, therefore, the railroads could put their finances in such condition that they could always maintain a surplus for maintenance, it would aid materially in carrying out such a program, for while we might make a mistake in predicting our volume of business in a single year, yet it is reasonably certain that the law of averages would apply over a number of years, say, for instance, five, and that over such a period the charges to miantenance of equipment on the plan I have attempted to describe would prove to be reasonably conservative. We expect, however, to take the chance in the current year, believing that our predictions are reasonably accurate, and if we are successful, we will have given employment to substantially the same number of men each month throughout the entire calendar year. (The appended chart showing the fluctuation of employment in the shop and maintenance of way divisions of the Chicago & North Western Railway wras submitted to the committee by Mr. Sargent.) MEMORANDUM SUBMITTED BY W. J. BURNS, EMPLOYMENT MANAGER NATIONAL CASH REGISTER CO., DAYTON, OHIO, ON REGULARIZING EMPLOYMENT AND OUTPUT BY THE NATIONAL CASH REGISTER CO. Being unable to leave Dayton just now, I am giving below some facts and comment on employment equalization as far as our experience with the subject goes. I feel this letter will give you the desired information as well as my presence before your committee. I shall not attempt to answer your five questions specifically, in view of the fact that, as far back as my knowledge of the company's labor policies goes, it is difficult for me to put my finger upon any particular turning point or a change from highly fluctuating employment to a steadier basis. For many years we have been recognized as one of the larger companies that consistently gives steady work to its employees. We can not claim to have undertaken any definite program of stabilization in recent years wrhich had not formerly been in use as far as practicable. We have been able to improve or augment some of the methods theretofore used to level up production schedules. I am sending with this letter a copy of our enrollment fluctuation chart for the last six years. Aside from two short dips in 1924 and 1927, the extreme variation in the number of employees has been about 8 per cent. The two temporary breaks were due largely to evening up of stock on model changes. This fall we added about 800 people to our force, due to an increased demand for some of our late model registers and accounting machines, which we hope and believe will be maintained. Our sales, fortunately, are not subject to as sharp seasonable variations as are those of many companies. The low month usually is February, wThen sales run between $2,500,000 and $3,000,000. January, July, and August are the months running near the bottom. We close the factory departments for two weeks' annual vacation in July or August, and for three clays at New York for inventory. This automatically curtails production to some extent during the periods of the year when sales are lowest. Peak sales usually come in October, with May a close second. October sales run between $5,250,000 and $6,000,000. Looking only at the low and high months of the year, the fluctuation seems rather sharp, but the intervening months show a gradual increase or decrease toward the high and low points, making a fairly easy curve from which to work. I do not believe any general plan or policy of employment stabilization can be applied successfully to all lines of business or industry. Methods must be determined largely by the percentage and frequency of sales variation, perishability, weight, and bulk of product (which might be the determining factors in a warehousing program), and other things of a purely local nature. I might mention that the Frigidaire division of General Motors Corporation is located in Dayton, and we cooperate with each other in the matter of labor supply on a very friendly basis. Their peak comes in the spring and early summer. During the temporary break in our employment curve last year 1?>2 UNEMPLOYMENT IN THE UNITED STATES Frigid aire needed men. They gave preference to and absorbed practically all the desirable men we laid off. By the time cur stock situation had been adjusted to model changes, Frigidaire's production schedules were being reduced and we took buck many of our employees whom they had put on during their peak. The point of this is that employment stabilization is not a problem to be solved only by individual companies inside their own organizations. It can be worked out as a community program by companies manufacturing lines with component production peaks, giving preference to each other's surplus employees as seasonal variations make it necessary. I have had a number of letters and questionnaires about our exper.ment with employment stabilization, including one from the Institute of Economics to which you refer, but have never done anything more than explain the methods we have been using for a number of years. We do not claim to have anything particularly new, nor any universal panacea for the ills of unemployment. The sharpest fluctuations in man-power requirements naturally occur in our assembling division. Daily production quotas for the various types of registers are revised the first of each month based upon current sales. As a rule whan the sale of one particular type of machine is down another is up enough to compensate, and we use the flying-squadron system to meet these changing requirements in the assembling division. Certain groups of men have been trained to work on several different types of machines and they are transferred from one assembling department to another as the sales variations make it necessary. As for our machining and other production departments, schedules are controlled by our stock-ordering department, which corresponds to a planning or scheduling department in many plants. Approximately 45,000 d fferent register parts are manufactured and stocked. An average of seven operations are put on each part, some running as high as 30 operations. Average time of production orders in process is six weeks, with a maximum on some parts of three months. With few exceptions order for three months' supply are placed in tiie factory when there is a two months' supply in the bins. Should very sharp and unusual fluctuations occur in sales, the stock-ordering department extends or shortens the due dates of all orders in the shop according to requirements. This enables us to level off the peaks and valleys in the production of parts. The fact that we have a three months' schedule to work upon makes it possible to so adjust the work of the production departments that even sharp changes in the assembly quotas do not affect them very much, if at all. Warehousing also helps us in the matter of steady employment. Approximately 65 per cent of all registers sold are standard models, many of which are built in advance of sales, during our low months, and warehoused in Dayton, New York City, St. Louis, and San Francisco to meet the peak demands for these types during the spring and fall. This helps to keep the production schedules somewhere near normal during periods of low sales, and enables us to concentrate more upon special construction when sales are at a peak. In 1927 our peak of registers in warehouses was 17,053, and the low mark 6,724. This year the peak was 14,652, and the low 8,026. I do not wish to leave the impression that 65 per cent standard sales makes an easy problem for us. The majority of these 65 per cent are smaller models, wThich are produced inlarge quantities. The 35 per cent which are not standard are nearly all the larger and more complicated models. For instance, although our class 2,000 models comprise only 15 per cent of the total number of registers built, they require 45 per cent of our total man-hours to manufacture. Ninety-five per cent of them are specially constructed, and the number of parts run as high as 12,000 per machine. To sum up, I believe a great deal of effective work can be done to reduce employment fluctuation by the following methods, along with many which others understand better than I : 1. More intensive sales effort and perhaps extra inducements for salesman and buyer during normally slack sales period. 2. Component line manufacturing. 3. Closer cooperation and understanding between JLocal employment and personnel managers. 4. More intensive study of warehousing possibilities. 5. Educating the public against seasonal buying in many lines, such as the Hill Bros. Co. did in their compaign with the Dromedary line. (The appended chart mentioned by Mr. Burns in his testimony shows the fluctuations in enrollment in the National Cash Register Co. from 1923 to 1928.) •}U3Ul[ ( 0 J L U 3 iO M 0 ! 1 ^ T l l 0T1JJ Cm -a Sana) "6s—S6I6S UNEMPLOYMENT IN THE UNITED STATES 133 STATEMENT SUBMITTED BY ME. JACKSON JOHNSON, EOBMEE CHAIEMAN OF THE BOAED, INTEENATIONAL SHOE CO., ST. LOUIS, MO., ON METHODS OF EEGULABIZING EMPLOYMENT Until a few years ago, our operations and employment were almost constantly continuous throughout the year. That was possible because our production consisted in the main of shoes of staple character. There was very little change in styles and patterns from season to season or from year to year, and while there were dull seasons for selling and heavy seasons for selling, the fact that our product was staple enabled us to estimate our requirements for the year and employ the dull seasons as well as the heavy seasons in manufacturing and storing the shoes that would be required. While those conditions existed we were able to induce our customers to anticipate their needs, and through special datings we were able to secure their orders in advance of their actual requirements. However, there has been a radical change in these conditions in the last few years. Our industry now is subject to the same rapid changes of styles that have affected other industries. Our factories which formerly concentrated season after season on staple shoes, must now accommodate their operations to making smaller quantities of shoes that are dictated by style and fashion from time to time. Our retail merchants, because of these changes in style, can not and will not anticipate their needs. We no longer have any assurance as to future requirements. The fundamental cause for this change in conditions is, of course, beyond our control. We are meeting the changed situation by exercising more versatility in our manufacturing operations, which are constantly being adjusted and adapted to meet the changing demands. Every effort is made to distribute the production to the various factories in such manner as to assure as near as possible continuous employment in all. This distribution of production is supervised by the head of our manufacturing department, who is constantly aware of the capacity, equipment, and possibilities of each and every factory, and who directs the placing of shoes for manufacture after consideration of the fitness of the factories for producing the particular shoes, and the extent to which the facilities of the several factories are already employed or are booked for employment. In considering the facilities of the factories, as a matter of course, the extent of employment of our workmen is an important foctor. Over the period of the last 12 months there has been a decrease of about 10 per cent in the average number of employees for the year. During the same period, owing to temporary shutdowns, etc., our employees have been employed about 5 per cent less time than is normal. The foregoing statements apply to employment in our shoe factories. The situation is otherwise in our tanneries. As a matter of policy we have expanded our tanning operations only sufficiently to supply about 80 per cent of our "leather requirements, leaving a, margin of about 20 per cent of our requirements to be bought at opportune times from other tanners. The consequence is that we operate our tanneries continuously! to capacity and with a full quota of workmen throughout the year. This policy as followed in our tanning operations is perhaps the only policy of this company which is sufficiently definite to be of any value to you in your -deliberations on the problem of unemployment. As indicated above, the matter of employment in our shoe factories is subject to constant adjustment and readjustment to meet changing conditions in demand, and these changes are dictated, not by any definite or well-defined policy, but by the expediency of the particular current situations. STATEMENT SUBMITTED BY COL. WILLIAM COOPER PEOCTEE, PEOCTEE & GAMBLE CO., ON METHODS EMPLOYED BY PEOCTEE & GAMBLE CO. FOE EEGULABIZING PE0DUCTI0N AND STABILIZING EMPLOYMENT In brief, our plan is based upon the theory that the consumption of soap and other products which we make is substantially the same each year and without much seasonable variation. We can make an approximate estimate of the business anticipated for the succeeding six months and quota our production daily upon that basis. Our sales department quota the monthly sales for each sales unit, which unit is quite a small one. They are supposed to check up on on 134 UNEMPLOYMENT? EST THE UNITED STATES their sales monthly and drive after those units which have not reached their quotas. The result is the sales force is more closely followed than it was in the past, and has naturally increased its efficiency. In order to provide for any lull in the buying of our products, we have provided additional warehouse facilities, and, in the event of speculative buying, to regulate our deliveries to individual customers in accordance with their sales demands. In other words, the customer whose normal monthly sales of our brans is 100 boxes, and who for speculative reasonsi places an order for 500 boxes, our deliveries to him would be limited to 100 boxes monthly, unless he showed his actual need was greater. By regulating our deliveries on speculative buying and by providing the additional storage necessary to take care of slack buying periods, we have been able to operate during the four years the plan has been in existence without shutting down excepting the desired weekly shutdowns the first of July and the end of December. Under our plan all employees who have been in the service of the company for six months or longer become eligible to the guaranteed plan of employment. Since the plan has been adopted our turnover after six months' service in the company has been reduced three-fourths. The m)en are happier, better contented, and more pleased with the guaranteed plan of employment than any other feature that the company has adopted for their benefit, and might mention that the company has the profit sharing, sick benefit, life insurance, accident insurance, and disability and old-age pension. The company has profited largely under the plan; it is difficult to estimate how much in dollars and cents, but the reduced cost of production secured through regularity of work with the same steady employee is very great. I think I am conservative in stating that it has reduced our cost of production from 3 to 5 per cent. MEMORANDUM SUBMITTED BY H. F. JOHNSON, JR., OF G. C. JOHNSON & SON, RACINE, WIS., ON THE DEVICES EMPLOYED BY S. C. JOHNSON & SON FOR GIVING STEADY EMPLOYMENT TO THEIR LABORERS AND RESULTS OF THEIR EXPERIMENTS 1. For a business such as ours, irregular employment for a 25-year period prior to 1922 would follow very closely the employment irregularity record of other firms in our class, such as paint and varnish, household specialties, etc. In reviewing our own record for the period prior to 1922 it appears to be spotty but with an underlying trend of increasing sales to offset any apparent acute unemployment situation. It seems to me that the best way ot visual "ze the results we have secured through methods intended to eliminate employment irregularities is to refer to the enclosed Ten Year Sales by Months and Quarters (based on a new fiscal year). It is a 10-year sales history starting each year^ with February sales. At the right of the graph is a 10-year average, 1929 budget, and a mathematical budget. It is interesting to note that for the years 1925, 1926, 1927, and 1928, barring the first quarter, the succeeding quarters are almost identical as to per cent. It is also interesting to note that prior to 1922 there was more fluctuation in the quarters than in the years following. Our organization has done a great deal of work along the lines of steadying employment througn stabilizing production. Our unemployment plan went into effect in the year 1922. We have continually, for the past 10 years, increased the number of products we manufacture, and in doing so train our employees so that we can easily shift them from one department to another as conditions change. We find that advertising campaigns during periods of usual depression tend to hold up a uniform production. All of these methods depend, primarily, upon the ingenuity of the organization and, secondly, upon the state of general business. We have applied them all at various times and through their use have kept the need for unemployment extremely low. We do feel, however, that there should be something more permanent and more definite for the average working man and that his welfare should not rest solely on these methods. Our answer to this question -*s unemployment insurance, and we have worked it out definitely and practically in our own organization and, although we rarely have occasion to use it, it is there to be used in the time of general business depression or a crisis. The fund provided for in the disability and unemployment clauses in the constitution and by-laws are accumulated by the deductions from salaries of our employees in the various UNEMPLOYMENT IN THE UNITED STATES 135 classes and by the contribution from this firm to the extent of an amount per year equal to the amount contributed by all the employees combined. 3. I believe our one biggest problem is a factor that is inherent in our business. Our products are used in the spring and fall more than any other seasons. We overcome it largely by: (a) Building up stocks when sales are low, thereby relieving irregularities in employment. (&) Shifting employees to different jobs as conditions change. (c) Developing new products continually. (d) Advertising campaign during usual depression periods, viz, feature our floor polisher as a Christmas gift. (e) Vacation period comes in July, usually a depressed month. All employees go on two weeks' vacation at the same time, except for few in shipping department. (f) Salesmen's prize contest when sales lag, thereby not becoming overproduced. 4. Answered in answer No. 1. 5. Although I speak without a great deal of experience, I can not see why all the measures listed above can not be applied, with necessary modifications, to any business. Although our business is relatively small to some, I thoroughly believe in unemployment insurance and think it should be a law. Lacking this, I believe in Mr. Hoover's idea to bring about the creation by Federal, State, and local authorities, of a reserve fund of $3,000,000,000 to be used for public construction in times of overproduction and unemployment. Our Italian sales agent was in my office a few days ago and boastfully told me of a plan by Mussolini to drain marshes near Rome, thereby giving more land to the farmer and also the Government will employ 65,000 people to do the job. (The appended chart showing the annual sales of S. C. Johnson and Son was submitted by Mr. Johnson.) 136 UNEMPLOYMENT IN THE UNITED STATES STATEMENT SUBMITTED BY MB. DONALDSON BBOWN, VICE PBESIDENT, GENEBAL MOTOBS COBPOBATION, ON METHODS OF FOBECASTING AND PLANNING IN THE AUTOMOBILE INDUSTBY AND THE STABILIZATION OF EMPLOYMENT AND PBODUCTION FOROASTING AND P L A N N I N G VITAL TO I N D U S T R I A L PROSPERITY Your committee has asked me to talk to you to-day about forecasting and planning and of the relationship of these activities to business success. For a number of years, in the General Motors Corporation, we have had a plan in operation for forecasting our future consumer demands and for planning and controlling our activities in accordance with the indicated expectations. From our experience with this plan we believe that its results constitute a distinct step toward the stabilization of the automobile industry. Forecasting and planning is the essence of modern-day business management. It is not the function of an individual or a department—it is the conscious, cooperative work of an organization. The American manufacturer can no longer determine his course according to his ability to purchase the necessary raw materials and the capacity of his manufacturing facilities. No longer may he rest assured that there will be buyers for his products so long as he can manufacture them with reasonable cost efficiency, and barring a general business depression. Competition is keen and the cost of manufacture is not the only factor determining the success of the manufacturer. Efficient employment of capital is a consideration of great importance and a sound, economical method of distribution, adapted to the particular circumstances, is essential. In the final analysis the ultimate consumer, with a wide range of choice usually afforded by a number of ingenius contenders, will exercise his preference on the basis of the appeal which a particular product has for him. Forecasting and planning is nothing more nor less than a system of control whereby production, purchase of materials, and the employment of capital are coordinated with sales requirements. Budgetary control is an apt phrase except that it is likely to imply a rigidity that must be guarded against. Flexibility is a prime requisite, so that there may be a quick response, and thus the possibility of adjustment throughout the system to the requirements of changes of situation that are inevitable. The focal point of the system is the sales outlet. The flow at this point must be gauged and every other activity must be coordinated with it. A description of our forecasting and planning system has been published in pamphlet form, and is available to anyone who may desire it. I shall not, therefore, burden you with details, but will undertake instead to bring out some of the fundamental considerations upon which any such system must be based. Ultimate consumer demand is the fundamental factor absolutely controlling the continued sale of any product. This is not the demand of the manufacturer who buys from some other producer, but that of the user of the final and completed product. Some types of business are more fortunately situated than others as to the opportunity of analyzing the ultimate consumer demand for their product. Those that are producing and selling products which represent a preliminary stage in the manufacture of a final product that in course of time finds its way into the hands of the ultimate user are far removed from such an opportunity. They are none the less dependent upon the requirements of the final consumer; and it is poor solace to place the responsibility elsewhere when an unrecognized state of demand results in a decrease in sales and an enforced curtailment of production. C O N S U M E R S A N D PRODUCERS CAN NOT BE SEPARATED I N T O D I S T I N C T GROUPS Consumers and producers in this industrial and- industrious land can not be separated into two distinct parcels. We are a people of ambition, eager to work that we may enjoy the comforts, conveniences, and luxuries of modern life. In general, the consumer of one product is the producer of another product. The man who wants an automobile, for example, is ready to work in order to get it. He does not, himself, mine the iron ore, copper, and coal; cut the timber and carry on the enormous range of operations that would be necessary before he could personally make a complete motor car. Even if he could do so, the time spent in so doing, or in fact in attempting to make, for himself and by himself, any product he is not skilled and efficient in making, would be time ill spent, from the economic standpoint. But the fact remains that 'the average consumer does produce his ow% automobile, or other desired product, with his own labor, by UNEMPLOYMENT IN THE UNITED STATES 137 devoting a few days, weeks, or months to some business or trade to which he renders service and for which he obtains the price of the desired product. Through the services of others in specialized fields, and the utilization of efficient machinery, he is thus able to secure an automobile at an amazingly low price in terms of his wage-hour equivalent. He pays for the raw materials, hires the labor, the tools, and the capital required, by means of so many hours of labor performed in the production or distribution of some other article or service. It is a significant fact also, that as industrial efficiency increases this consumer is enabled to obtain his desired automobile for a progressively diminishing equivalent of his own labor. Less labor is required to-day for a given volume of production in most lines than was required five years ago; still less will be required five years hence. This is in accordance with the law of progress. It means not merely the lowering of cost to the consumer of desirable articles, but it means that this producer-consumer is building up a progressively increasing surplus of consuming power enabling him to secure other products that he could not previously afford. Thus efficiency of production, by increasing consuming power, enables industry to continually diversify and expand. I am taking the motor car as an illustration of this truth merely because it comes naturally to mind. The same principle holds good in any line of business and for any product. EFFECT U P O N E M P L O Y M E N T AND WAGES The diversification of industry made possible by this economic law of diminishing labor per unit of production, has a direct bearing upon employment. For while regularization of employment in industry depends upon the correct adjustment of supply to consumer demand, the growth of employment and wages depends upon continuing increase in efficiency and diversification of production as well as upon the growth of consuming power. There has been a tendency evident in the daily press recently to raise the question of the benefits of efficiency on the grounds that our progress in this direction is resulting in unemployment. Unemployment which progressively and in temporary stages may result from efficiency is of constructive benefit in itself. It results adversely only when industry fails to grasp the opportunity thus presented of increasing and diversifying production and building additional consuming power by the employment of the labor thus rendered vailable. A knowledge of consumer needs and adaptability in meeting them is required to take constructive advantage of such an opportunity. There is, however, another kind of unemployment that is an unmixed evil from the economic standpoint. It is that which results from a temporary curtailment of production. The labor thus rendered idle is not available for the production of other products which might attract the public fancy, except at the expense of a labor shortage or deficiency in the original line when resumption of activity occurs. Overproduction due to mistaken appraisal of consumer demand, style changes, the development of substitutes, or insufficient information regarding accumulated stocks are causes of this sort of forced curtailment and unemployment. VICIOUS CIRCLE OF OVERPRODUCTION Periodically in the past we have had glaring examples of the wide-scale overproduction ushered in by these or other causes. Also, it must be remembered, a spotty condition usually exists at all times, some industries being slack when the majority are enjoying good business. When a state of overproduction becomes fairly general, or applies to a number of principal industries, we are usually in for a depression. Thus begins a vicious circle, of which the economic consequences are intensified by an endless chain of related influences. For overproduction means subsequent curtailment of activities, with resulting unemployment. This, in turn, lowers the purchasing power of large numbers of consumers, with consequent reduction in demand, so that still further curtailment of production is necessary. During this period also occurs the necessity of liquidating surplus stocks, an additional depressing factor. This may bring the permissible production rate down to a level substantially below even the existing lowered rate of ultimate consumption. 138 UNEMPLOYMENT IK THE UNITED STATES T H E PERIODIC F L U C T U A T I O N S OF T H E B U S I N E S S CYCLE Such depressions, .like the boom periods alternating with them, are characteristic of the business cycle. Of late years business men and manufacturers have come to pay considerable attention to these periodical fluctuations. We are well aware of their economic consequences upon business, and we are all more or less subject to their influences. Therefore, as long as we have the business cycle (and probably we can never obviate it completely), we must take it into account so far as we are able. Unfortunately the statistics which are available, and which are employed quite generally as indicative of general business conditions, have a serious inherent weakness. For example, pig-iron production, freight car loadings, and bank clearings outside of New York are primarily indexes of production. Building permits and records of building construction reflect the state of confidence on the part of capital as to the demand for such structures, but there is always the chance of disappointment. If a state of overproduction exists, and a period of inflation is taking place, we may obtain no indication of it by a study of such statistics. However, to complete the background, let us look upon the other side of the picture and imagine that we have an ideal condition brought about by correct forecasting of consumer demand. We have a perfect coordination of production and consumption and therefore are able to avoid fluctuations in employment. Sustained employment means sustained purchasing power, and the ability of consumers to obtain what they want by exchanging an equivalent of work for it. As the population grows, and as the efficiency of production constantly increases, we have a continual increase in the demands that airse from desire and the ability to satisfy that desire because of the opportunity for profitable employment. With this increasing demand comes the necessity of additional production facilities and for the employment of labor and brains in fashioning new products to attract the public fancy and to serve useful purposes. We know that production creates purchasing power. We also know that production is influenced by factors some of which are controllable and some of which we are as yet unable to control. The production of agricultural products, for example, is subject to some uncontrollable influences such as unsual droughts or frosts. However, agricultural production is also subject to other conditions that are controllable, particularly in a country such as this, with it? varied climate and natural opportunities for the diversification of crops. Great progress in the direction of the control of agricultural production has in fact been made in recent years. If we could have a reasonable control of agricultural production, and in addition a coordination of business so that industrial production could be regulated and adjusted to fit the demands of the ultimate consumer, the serious consequences from overproduction ,as influencing the business cycle, would be removed. T H E E L E M E N T S OF S T Y L E AND U T I L I T Y When I speak of production being regulated to fit the demands of the ultimate tuasumer, I do not mean merely the quantity of goods to be produced. In many lines of business it is even more important to consider the elements of utility and style. This is an age of invention and improvement, and we deal with a fastidious public, which, after all, is one of the basic causes of our industrial progress. Thus what might appear from statistical indications of past consumption to foretell a continuing demand for a given product may be altered overnight, so to speak, by a change of public taste and preference for some substitute or improved article. T H E P E N A L T Y OF A LACK OF KNOWLEDGE While a good many people still regard the scrawling signature of the business cycle as almost the handwriting of fate, dictating good business or bad, there is on the other hand a growing tendency to look upon it as an effect rather than a cause. I hold to the latter thought. With the elasticity which we have in our banking structure there can be no cause for the major disturbances of the business cycle except as brought about by the condition of business itself. The basis of my discussion is directed from this line of reasoning, and has as its main object an attempt to gain your acceptance of this premise, namely, that while business is subject to the influence of the business cycle, the business cycle itself—to the extent at least that its fluctuations are of any serious conse UNEMPLOYMENT IN THE UNITED STATES 139 quence—results from lack of knowledge and from errors of judgment on the part of business management.' We should continually strive to obtain a better knowledge of the fundamental circumstances surrounding our individual businesses. To the extent that facts are revealed and used in determining the course of business management,, errors of judgment are automatically eliminated. The efforts of the Chamber of Commerce of the United States in promoting the gathering of " more and better statistics" by both government and business, have given substantial impetus to this profitable purpose. Cumulative forces will be directed toward! the stabilization of business as a whole in the degree that the essential factors of management, based upon revealed facts, are coordinated within our individual businesses. A theoretically perfect coordination of business comprehends an exact knowledge, in advance, of what the public wants (within the limits, of course, of human ability to supply) ; an exact knowledge of how much the public wants (within the limits of human ability to purchase and consume) ; and a regulation of production in accordance to fit these ultimate consumer demands for both kind and quantity of goods. If we had this ideal situation, as applied to business generally, we could stop worrying about the business cycle, because there probably would not be any business cycle left to worry about. A D J U S T I N G T H E S U P P L Y TO F I T DEMAND The attainment of such an ideal involves means of determining demand and of adjusting supply to fit it. The economic problem involved can be illustrated for any industry by the simple analogy of a large rAver flowing into the ocean and having numerous branches or tributaries. The ocean represents consumer demand as a whole; the river represents the flow of manufacture of the particular products that we may have in mind; and the tributaries and branches represent the flow of requirements from contributary suppliers at various stages removed from the main product. The rate of discharge of this river of products into the sea of demand is limited, on the one hand, by the rate of flow of the tributary branches and streams into it, and on the other hand, by the smoothness, width, and depth of the channel and the conditions at the mouth of the river. If the tributaries and feeder streams of this river supply less water than the main channel and mouth can take care of, we have the condition of demand exceeding supply. If these feeders and tributaries, on the other hand, discharge more water than can be passed through the mouth of the main river, we shall a backing up and flooding, first of the adjacent lowlands and eventually of the valleys of the tributaries. This is analogous to the piling up of inventories experienced in periods when supply exceeds demand. Ideal conditions for the flow of such a river of industry call for the operation of two distinct activities or influences incident to what we may call flood or volume control. We want our river, of course, to discharge as much volume of product into the sea of demand as iscontinually possible—therefore one set of activities has to do with the deepening and smoothing of the main channel and the removal of obstructions and bars at the mouth, where it empties into the sea. This pictures the continued improvement of our product in its consumer appeal through style or design betterments, cost and price reductions which enlarge the market, better advertising and merchandising efforts, etc. The second set of activities has to do with maintaining an even flow of water in our river without any shortages and floods. This requires a constant checking of conditions at the mouth of theriver to determine the proper rate of flow, and a means of controlling the flow of volume in the upper reaches and the tributaries in accordance with existing conditions at the mouth. GAUGING T H E C O N S U M E R DEMAND It is evident that conditions at the mouth of the river of products must determine the rate of flow of all tributaries, even of the smallest branches andstreams, representing raw materials most remote from the main channel, if we are to hope to attain and maintain the condition of an even, maximum flow of" finished product. In other words, the ideal way of regulating production through forecasting and planning is upon the basis of gauging and checking ultimate consumer demand. This applies to the welfare of the tributary producer, who may be far removed from the main channel, just as much as it does; 140 UNEMPLOYMENT IN THE UNITED STATES to that industry which is immediately next to the ultimate consumer. Practical considerations may prevent these remote contributors from attaining this ideal at present, but this does not lessen the economic desirability. The situation in 1921 illustrates the disastrous economic consequences of wrong appraisal of consumption trends. False values were built up by the period of inflation during 1919 and 1920, and exaggerated expectations of future demands were created by the competitive buying of raw materials and semifinished products by manufacturers of all kinds. A state of overproduction existed, but was not recognized. The actual consumption of goods such as automobiles, clothes, and other consumable products was overstimulated by wrong notions of available income. Retailers of various kinds stocked goods to the limit and bought ahead of requirements because of a false impression of consumption trends. They did not recognize, nor did many others, that a bubble was being blown that would burst from its own internal pressure. The expansion of credit, which reflected itself in the reserve bank statements, while recognized by many, was not generally accepted as evidence of overinflation. The Federal reserve system was designed to permit of credit expansion to take care of legitimate production needs, and these needs, in the optimistic spirit of the times, appeared to be legitimate. The cause of this situation would not have existed if there had been a way to detect the true state of consumer demand. Production would have been lower, there would have been less employment and overtime work, and consequently, less consumption than actually took place; but it would have been legitimate consumption and the serious economic loss and acute condition of unemployment incident to readjustment would have been obviated. WHAT HAPPENS WHEN GOODS A C C U M U L A T E ON T H E R E T A I L E R S ' SHELVES I t is axiomatic that, other things being equal, the nearer the producer is to the ultimate consumer of his product, the better is he able to regulace his production in accordance with consumer demands, and thus to minimize the fluctuation of his production volume. In fact, the accumulation of unsold stock in the hands of the retailer forces both its own recognition and an automatic curtailment of buying for resale. This in turn, forces a curtailment of production on the part of the final manufacturer, there resulting in his factories in all probability, an expansion of inventory as a result of commitments already made and of delayed action in conforming to the consumer trend. Then, in turn, there is the intermediate manufacturer who is selling fabricated parts to the final manufacturer; in his case, there is delayed action and expansion of inventories due to commitments previously contracted. Thus it is that the manufacturer who is at the first stage of a complex chain of manufacturing operations—and the furthest removed from the ultimate consumer—is the least sensitive to a change in the nature of consumer demand and the last to recover from an enforced period of subnormal production. For between his position and the point of ultimate consumption there has been a backing up of successive inventories. These constitute an accumulative surplus of supply which must be liquidated before his production rate can be resumed in terms of current demand. Visualizing the situation in terms of our river, the overflow must be drawn off all along the line before the initial manufacturer is in position to resume production at the rate at which the consumer, at the mouth of the river, is calling for the product. The chain of circumstances represented by this backing up of supply occurs necessarily as a result of overproduction, regardless of whether the condition is incident to an actual change in rate of ultimate consumption or to an overoptimistie expectation. RECOVERY OF AUTOMOBILE I N D U S T R Y FROM 1921 DEPRESSION It was considered quite remarkable that the automobile industry, in the later part of 1921, was among the first to show signs of recovery from the depression. The fact is not so surprising when we think about it in terms of the principles I have just discussed. The manufacturer of automobiles has nothing between him and the ultimate consumer except a dealer organization. There is no occasion for the accumulat'on of stocks in the hands of numerous intermediaries, and there are physical limitations, apart from other considerations, that limit the accumulation of stocks in the hands of dealers. The trend of retail deliveries of automobiles dropped by the end of 1920, or putting it more UNEMPLOYMENT IK THE UNITED STATES 141 accurately, deliveries in 1921 fell far short of earlier expectations. There was considerable grief throughout the industry because of what proved to have been abnormal material commitments and overexpanded inventories. But the surplus water was drawn off in a comparatively short time and by the end of 1921 automobile production was proceeding at practically a normal rate, seasonal conditions being taken into account. Again in 1923 this industry went through a period of overproduction. In this case the rate of sales to dealers was incorrectly interpreted, the manufacturers planning production on the false expectation of a continuing growth in sales such as had occurred during some months preceding and during the autumn of 1923. As a result of this overproduction, the industry suffered a setback in 1924 on account of the necessary liquidation of stocks. ADVANTAGE OF T H E AUTOMOBILE I N D U S T R Y I N FORECASTING Perhaps it was in consequence of our experience in 1920 and 1921 that we iirst became conscious of the peculiar advantages which the automobile manufacturer has in the matter of forecasting and planning his operations. At any rate we began in 1921 to accumulate all the information available as to the retail sales. Reports obtainable from dealers in those days were meager, and such information as we had from this source was not very reliable as an indicator of the over-all situation. We had State registration data, however, from many States which proved of real assistance in our efforts to develop retail sales trends, from the statistical standpoint, and we went seriously about the job of getting more complete reports from dealers. Until the depression of 1924 the automobile manufacturers had not come to a full appreciation of the advantages they naturally possessed, in the means of analyzing consumer demand. General Motors had been studying those advantages and measuring the opportunities, but it took a second period of overproduction, from which we suffered as much as other manufacturers, to force a recognition of those opportunities upon us all. In our own case production of cars in 1924 was 26 per cent below 1923; whereas retail sales in 1924 were only 10 per cent below 1923. Prior to 1924, however, we were carrying on what is still in effect as a part of our statistical activities—a practice of making monthly forecasts of sales, production, capital requirements and net earnings from operation. These forecasts are submitted on the 25th of each month by each of our operating divisions and are consolidated into a composite forecast for the corporation as a whole. They cover a period of four months, including the current month each time and three months ahead. This system was inaugurated in 1921, and at that time the stipulation was made that no division could commit for materials beyond the indicated requirements of the forecast period without special authorization of the finance committee. We have what we call a decentralized type of organization, and it is a basic principle that the management of each division should have wide latitude and the opportunity to exercise their judgment as to the various phases of operations, limited only by such policies as can be laid down in concrete terms in the interest of the corporation. The restriction in respect to material commitments has proven to be thoroughly practical. It is very rare that special authorizations are requested, and the corporation is protected effectively from an unreasonable expansion of inventories resulting from disappointment as to expected sales of our products. T H E W E A K N E S S OF OUR EARLIER FORECASTING SCHEME The weakness of our forecasting scheme in the earlier days lay in the fact that we did not predicate the sales forecasts upon an analysis of consumer demand. We did not have a clear conception of the ordinary seasonal characteristics and were liable to a sharp reduction in sales to dealers resulting from an unrecognized accumulation of stock in their hands. Forecasts of net earnings were correspondingly faulty, and our production schedules and employment of labor suffered fluctuations not justified by existing fundamental circumstances. We did not know the rate at which our product was actually passing into the hands of the ultimate consumers, nor d.d we know what the stocks were in the hands of our dealers, nor the extent to which these stock? 142 UNEMPLOYMENT IN THE UNITED STATES could suitably be allowed to expand or contract in order to secure the important over-all advantage of a more consistent rate of production at the factories. I have said that our analysis of consumer demand was not put to effective use until the spring of 1924. It is fa r to say that our operations since then, showing, as they do, a substantial betterment in rate of inventory turnover, a steadier rate of factory operation and other economic betterments, have proven the constructive benefits of our practice. Before giving you a description of our methods of forecasting consumer demand, I should state that we recogn ze two aspects in connection with these activities. One of these may be called the statistical, the other the constructive aspect. The statistical efforts, as the name implies, are directed towards ascertaining the statistical facts bearing upon future consumer demand. The constructive efforts are d:rected towards improving the probabilities. Both of these efforts go hand in hand, and our final forecasting is based upon their dual operation. I will first touch upon our statistical methods. GENERAL MOTORS DIVISIONAL INDEXES At the beginning of a sales year, we attempt to arrive at an estimate of the probable retail sales for each car division for the ensuing 12 months. If there is the problem of introducing a new model in a given line, it must, of course, be considered in forming our judgment of probable sales. We must also take into account the competitive situation and the condition of business in general as affecting our own industry. The capacity of our own dealer organization must be considered in the light of any impediments likely to restrict or hamper its sales effectiveness. Then, too, we must study the probable influence upon sales appeal of special mechanical features of the product, as well as the factors of style, general performance, and serviceability. As a result of the best judgment that we can bring to bear on the case we arrive at what we call a divisional index. This divisional index means our best guess of what the retail sales, for a particular line of cars, will be during the ensuing sales years. This does not mean that we set up an arbitrary quantity in accordance with which the production is determined, regardless of what may afterwards happen. This divisional index is under continual scrutiny, and is adjusted immediately when the trend of events demonstrates the desirability of revising our expectations. Subject to these adjustments, the divisional index at any given time is accepted as dictating the basis upon which production should be scheduled. In other words, our production is always scheduled with regard to the expected requirements for the complete sales year. This does not mean, however, that production in any given month should be exactly one-twelfth of the year's production, for in our business there is a seasonal variation which must be taken into account, and it is usually desirable to shade production somewhat during the dull season so as to modify the seasonal accumulation of stock. A compromise is perhaps best between the desirability, on the one hand, of a level rate of production in the interest of manufacturing economies, and a fluctuating rate of production in the interest, on the other hand, of minimum stocks in the) hands of dealers. I have referred to the fact that on the 25th of each month a complete forecast is submitted by each of our divisions for the current month and three succeeding months. This includes a forecast of retail deliveries by dealers. We also have very complete information as to actual retail deliveries, by months, in the past. Thus at all times we have available the actual records of the past as well as a forecast of retail deliveries for three or four months ahead. The accumulation of these records of retail deliveries by our dealers, covering a number of years, and the analysis of State registration data have given us a very good means of appraising the ordinary characteristics of our business. We have found from experience that as we proceed with the continual analysis of deliveries and forecasts and measure our performance and prospects in the light of seasonal,expectancy, we can detect changes in trends and recognize disappointments or improvements well in advance of what could be possible through any other means. DETECTING C H A N G E S I N T H E TREND For example, let us suppose that it is the latter part of November. The divisional index was laid down August 1—which, by the way, is considered the beginning of our automobile sales year. We have actual retail deliveries for UNEMPLOYMENT IN THE UNITED STATES 143 August, September, and October. We will assume that this record was such as to support the expectancy of the divisional index. When the forecast for November, December, and January was prepared a month previous it appeared to be reasonably in line with past actual experience, seasonal conditions, and any other known influences being considered. Since we get reports of retail deliveries from our dealers three times a month, we know what these were during the first 20 days of November. If they are in line with the forecast for November, there is no need yet,' from statistical observations, to modify the divisional index. If the actual deliveries during that period are out of line with the forecast for November, that is the first flash or caution signal indicating that the divisional index may require modification. And so we proceed month after month analyzing past performance and forecasts of retail deliveries—and during each month comparing 10-day delivery figures reported by our dealers with the latest forecast for the month. Ordinarily we do not actually modify the divisional index because of a statistical indication covering a brief period of time. We take that, as I say, as a caution signal, and watch the situation as it develops to see whether there seems to be a sustained change of trend. An estimate of sales a year ahead is always a guess. That is why we give the name " divisional indexes " to these 12 months' estimates—to distinguish them from forecasts. As the year progresses there is a progressive diminution of the uncertainty, and our divisional index, modified as it may be from time to time, becomes an increasingly sound foundation on which to base our production programs. CONSTRUCTIVE ASPECT OF FORECASTING I have said that these indexes and forecasts are not derived solely from statistical observations. The constructive aspect is no less important in a measurement of probabilities. Going back to our analogy of the river emptying into the ocean, the constructive part of forecasting and planning consists in deepening the channel and improving the mouth of the river so as to facilitate a maximum practical and sustainable flow. The statistical phase of forecasting lies in the continual sounding of this channel and the regulating of the flow of main stream and tributaries to accord with conditions as found and as made. The constructive efforts in forecasting and planning take on, in turn, two aspects which I may call, respectively, long-term and short-term factors of influence. Both of these are designed to favorably affect the consumer demand for our products. Among the long-term factors of influence on consumer demand may be mentioned the extensive program of research that is maintained in order to increase the consumer appeal of our products through improvements in design, functioning serviceability, style, etc. I call these long-term factors because from their nature they require a continuing program of some duration before their influence can make itself felt on consumer demand. The ultimate effect of these factors, which include a continuing study of product obsolescence, is of utmost importance upon consumer demand and must be taken into account in constructive forecasting. Unlike the short-term factors, however, they can not be called into play quickly to offset cessations in demand due to sudden and unforeseen depressions, characteristic of the minor fluctuations of the business cycle. ENGINEERING A N D SALES M U S T WORK H A N D I N HAND In connection with these long-term factors of influence, the engineering and the sales departments work hand in hand. The engineers are, of course, ahead of the salesmen, from the standpoint of time, in the development of improvements calculated to anticipate as yet undeveloped consumer needs and wants. The sales department, however, through its intimate, first-hand contact with the consumers, is in the best position to appraise the present worth of projected improvements in terms of consumer reaction to them. Particularly in the matter of style trends is the sales department able to bring to bear an adequate sense of consumer requirements. In the automobile industry, for example, engineering research could not anticipate the sudden trend toward the closed car that took place some years ago. The sales department, however, quickly sensed it. On the other hand, development of balloon tires 29193—29 11 144 UNEMPLOYMENT IN THE UNITED STATES and four-wheel brakes, which had a tremendous influence on consumer demand, was chiefly an outcome of research and engineering development. Short-term factors of influence on consumer demand are those that may quickly be called into play to offset unfavorable developments as they become apparent. Going back to the river again for illustration, while we keep dredges continually at work on a long-time program of channel deepening and widening, it may be necessary, on occasion, to send out a flying crew with some sticks of dynamite to blow up a sudden obstruction. These explosives correspond to the use of special sales stimulus, more intensive advertising, or even temporary underpricing, whenever these seem called for by a falling off in anticipated and logical demand. A policy of utilizing to the utmost the stimulating factors that I have just described as influencing demand must be adopted, in forecasting and planning its sales and production, by any industry that is not merely content with taking things as they come. I do not wish to convey the idea that forecasting and planning is of value only in so far as it may be tied up to the yardstick of ultimate consumption. It may not be possible in some industries to arrange such a tie-up as yet, especially in those stages that are remote from the final sales outlet of the completed product. As a matter of fact, forecasting and planning activities may be even more indispensable in such cases. The ideal condition, however, is that which permits consumer demand to be measured, so that the planning may be actually based upon the trends thus indicated. In our own industry, we are fortunately able to do this, because the distribution of our product is through dealers who devote substantially all of their activities to the sale of a given line. They report directly to the manufacturer and recognize the importance, in their own interest, of having the fullest use made of the yardstick of retail sales. Thus we are able, through simple means, to coordinate our forecasting and planning procedure with the important factor of ultimate consumption. In General Motors we recognize and distinguish the benefits that come from the systematic measurement of consumer demand and those that result from forecasting and planning. Among the former, I may mention again the considerable stabilization of employment in our factories in spite of seasonal fluctuations, and the marked stimulation in inventory turnover, both in our factories and among our dealers. In other words, the more consistent rate at which we are conducting operations has enabled us to manufacture and distribute a larger quantity of cars with a smaller amount of capital tied up in inventories. Moreover, it seems safe to assume the inventory turnover of supplies has been favorably affected, since this has been the effect upon our own accessory and parts divisions. I have described our methods of forecasting retail sales of our products, and have mentioned some of the outstanding benefits derived therefrom. Our forecasting and planning activities extend far beyond this, and afford many benefits in the direction of control of our operations not dependent solely upon the application of the consumption yardstick. The establishment of cost, expense, and investment standards, which is a part of our program, has not only made possible the establishment of standard prices with which actual or proposed prices may be compared, but it has also subjected the fundamental policies of the corporation to the test of actual experience. Increased accuracy in estimating, and a more thorough understanding of our fundamental policies by all concerned have been noticeable results. S T A B I L I Z I N G I N F L U E N C E OF AUTOMOBILE I N D U S T R Y U P O N ALL B U S I N E S S The comparative stabilization of any one industry necessarily has an influence upon the stabilization of industry as a whole. This must be of particular significance when applied to the automobile business which is so important to our industrial life. We feel that the more accurate appraisal of basic requirements* and the coordinated control resulting therefrom have formed a distinct step toward this end, but the imitortant question i s : Can the principles, which have worked successfully in our own industry, be applied to others? Let us test this thought by applying it to an extreme case in an industry in which prevailing conditions present many intervening stages between producer and final consumer. Take, for example, the manufacture of cotton yarn. This product may go to a second manufacturer who operates what is known as a " Gray goods " plant, and who weaves the yarn into unbleached fabric. The UNEMPLOYMENT IN THE UNITED STATES 145 product of the " Gray goods " plant, through a selling agent, goes perhaps to a merchant converter, or finishing plant. The finished and bleached fabric, which is the product of the merchant converter, may go to a cutter-up, which is the trade name for the manufacturer of cotton apparel or furnishings. His product, in turn, goes to the retailer, which may perhaps be a department store or a mail-order house, and thence to the final consumer. In such a chain, which is common to the textile industry, but not necessarily typical of it, the manufacturer of the cotton yarn is six stages removed from the final consumer in the retail market. There are simpler hookups in the same industry, but I have purposely chosen one of the more complicated to illustrate my point. It is this: From the standpoint of the stabilization of industry, the desirable production rate of every stage in the chain should be determined, not by what the demands of the succeeding stage may happen to be, but by the state of demand of the ultimate consumer. A style trend from cotton to silk, for example, among wearers of garments is of just as vital importance to the manufacturer of cotton yarn at the beginning of this chain as it is to the retailer at the other end. The fact that the gray-goods manufacturer may be calling for his product at a high rate is no safe economic indication to the yarn manufacturer that he may increase his plant capacity. STABILIZATION A N IDEAL FOB T H E FUTXJBE Stablization, of course, is an ideal for future attainment. Practical considerations compel the yarn manufacturer, even though he were in position to gauge the demands of the final market, to regulate his production according to the orders from the gray goods manufacturer. For a similar reason, the latter must control his production in accordance with the demands of the cutter-up. At last, however, in this chain of supply and demand, we get down to the retailer, who is next to the final market. If the retailer (speaking collectively, of course) were able to apply the yardstick of consumer demands, and then would regulate his commitments accordingly, it is evident that the demands made by him upon the cutter-up would be in step with basic trends, and hence a sound guide to the latter in regulating his production schedules. Similarly then, the commitments made by the gray goods manufacturer on this basis would keep the yarn manufacturer also in step with the actual demands of the final market. Thus it appears that the stablization of a multistage industry depends largely upon the proper regulation of commitment* in the final stage in accordance with retail demand. After that, with properly applied methods of forecasting and planning, synchronization becomes a matter of one stage keeping in step with another. I am not prepared to say what the technique should be in applying the yardstick of consumption to the final stage of such an industry. With so many important components in an industrial chain depending upon the one factor of ultimate consumer demand, it might seem profitable to apply cooperative effort toward the solution of the problem. As a matter of fact, a number of progressive department stores are now conducting systematic studies of style trends and are regulating their inventories and commitments in accordance with the conditions of demand thus disclosed. This is an illustration of efforts that are leading toward stablization. I have heard it said that an ideal is something that you keep shooting at but never hit. Fortunately for human progress, we possess an overwhelming desire to keep on aiming and shooting at ideals, once they have manifested themselves. Our own experience has been such as to lead us to believe, as well as to hope, that some day American business and industry will approach the ideal of stabilization sufficiently to free us from the bogey of the business cycle. When this is brought about, it will be very largely due, I am sure, to the closer and more economical control of manufacturing and merchandising operations that will follow a better appraisal of ultimate consumer demand. And intelligent forecasting and planning—vital to industrial prosperity—is the mechanism to bring this about and to remove the unnecessary hazards from the course of American business. When this is accomplished the game may not be as exciting as it is to-day, but it will be played with greater peace of mind and result in greater prosperity. For we shall know where the ball is going to go when we hit it. 14G UNEMPLOYMENT IN THE UNITED STATES STATEMENT SUBMITTED BY ALEXANDER RING, OF THE CITYHOUSING CORPORATION, NEW YORK CITY, ON THE EMPLOYMENT SITUATION IN BUILDING TRADES AND THE METHODS EMPLOYED FOR REGULARIZING THE EMPLOYMENT OF LABOR IN BUILDING CONSTRUCTION I am afraid that accurate information on the questions that you raise is difficult to obtain, although I believe that many of the unions have valuable information as to questions of employment, and that some of the research organizations have a little information, although I am afraid not any too much. Attempting to answer your questions as best I can, in the order in which you have put them, I should say: (1) I have, no accurate information as to just how irregular employment is in the building trades. I have been informed that the average employment of masons is 65 per cent, and that this figure holds approximately for other trades. My knowledge, however, is not sufficiently definite to make it possible for me to make this statement. (2) I know of very little systematic work to provide steady employment. Mechanical improvements in the trade, referred to under No. 3, have helped. There has also been a certain amount of propaganda by organizations, such as the. New York Building Congress, to induce owners and contractors to do winter work. (3) Lack of regularity in employment in the building industry is due to two sets of causes: (a) Seasonal idleness caused by the weather and by the existence of fixed rental seasons. These two factors tend to increase the amount of available work during the spring, summer, and fall, and to decrease it during the winter. Considerable progress has been made in cities like New York toward leveling the curve of employment. The advent of the steel frame building, together with improvements in the installation of concrete arches, have made it possible to build through the winter with only occasional interruptions on account of very bad storms. Even so, there is substantially less work in many trades during the winter months, than at other times of the year. This is due to the fact that residential rentals commence on October 1, and that builders plan to finish their buildings at a date approximating the 1st of October. On the other hand, the office rental season is generally May 1, and at times of heavy office building construction, this somewhat balances the October 1 date for residential work. The handicaps of freezing weather and snow removal, which entail considerable extra cost during the winter, are balanced by the fact that labor at this period is more efficient, because of scarcity of work, and that owners of equipment, such as trucks, steam shovels, etc., being anxious to procure work, are apt to eliminate profit during this period. These considerations also apply to mechanics and contractors doing such work as plastering, painting, carpentry, etc., which therefore can be done less expensively in winter than in. summer. The tendency in New York City is toward increasing winter construction; outside of New York, technical improvements in reinforced concrete building have also tended to make economical construction during the w7inter. (ft) Depressions in the industry, at which periods there is not sufficient work to give steady employment to all. These depressions have sometimes coincided with bad business due to the business cycle. Occasionally, the building industry has suffered through overproduction at some particular place, irrespective of general business depression. While it seems likely that depressions, due to the business cycle, are less likely to occur in the future than in the past, there, nevertheless, will occur periods of overbuilding, resulting in temporary depression in the building industry. Since the war, the building industry has been employed almost continuously, owing to a shortage which developed during the war, and to a demand for new buildings, which has resulted from general prosperity and expansion. It is reasonable, however, to look forward to occasional periods of substantial curtailment of work. The suggestion of President-elect Hoover to regulate public construction so as to reserve a certain amount of this work for periods that there is little private work, seems to me an excellent one for overcoming irregular employment due to this cause. (4) It is difficult to answer this question, because of the exceptionally active condition of the building industry during the last 10 years, and also because of the difficulty to trace the effects, over a comparatively short period, of the rather modest efforts that have so far been made to regularize employment. UNEMPLOYMENT IN T H E UNITED STATES 147 STATEMENT SUBMITTED BY ME. M. A. STYLES, OF ABEBTHAW €0., OF BOSTON, MASS., ON THE POSSIBILITIES OF BEGULABIZING BUILDING CONSTRUCTION INDUSTEY AND THE EXPERIENCES OF THE ABEBTHAW CO. ALONG THESE LINES The subject of your inquiry is recognized as probably the greatest problem t h a t our company h a s to face. The months of November, December, J a n u a r y , and F e b r u a r y a r e relatively poor months for work in t h e building industry. Our pay-roll curves indicate t h a t approximately 50 per cent of our normal number of summer employees are laid off when construction work eases u p with the approach of cold weather. State highway work and bridge construction is practically a t a standstill in t h e New England States during the winter months. Industrial and commercial work is carried forward to a limited extent. The situation as a whole is analogous to t h a t which exists in t h e automobile industry, and the lines of production in t h e two industries follow practically the same curve. I n our own particular case, in order to alleviate unemployment we m u s t first secure building contracts for ourselves, and this we t r y to do through our advertising, two illustrative bulletins concerning which we inclose herewith. We endeavor to sell an Owner the idea of building his new building during t h e winter months at a cost of 3 or 4 per cent e x t r a for cold-weather expense. The owner's production m a y then s t a r t in March or April, compared with September or October if it h a d been a summer job, and the profits on production during the five or six advance months will in most cases repay for t h e e x t r a cost of cold-weather expense. Our company h a s been successful, through our advertising a n d salesmanship, in getting a fair volume of winter work on this basis, and in m a n y cases it h a s been found t h a t " cold-weather e x p e n s e " is negligible or even a minus Quantity because of advantageous purchases of construction materials in a weak market, and the opportunity to select highest-grade mechanics when m a n y are seeking work. Having secured some contracts, t h e problem of unemployment with us immediately takes care of itself, but we do concern ourselves in so a r r a n g i n g the various operations t h a t our men will have regular work without lost time. T h i s means furnishing temporary heat and inclosures to afford shelter while a t work and reserving some interior work for the days when it is impossible to accomplish any work outside. We answer the five questions asked in your letter of December 6, 1928, a s follows: 1. How irregular was employment in your plant before you attempted to stabilize it? Answer. The irregularity of employment continues about t h e same as in previous years, except that, compared with 20 years ago, we do more winter work become there is more of it available. 2. By w h a t means did you u n d e r t a k e to provide steady employment? Answer. Endeavoring to secure winter contracts through advertising and salesmanship, on t h e basis t h a t winter work can be economically performed. 3. W h a t problems did you encounter in bringing about regular employment? Answer. The problem of locating owners who might require additional floor space. 4. How successful have 3^ou been in your efforts? Answer. We have been able to secure enough work to keep our home office organization intact during the winter season and to keep our field forces up to about 50 per cent of normal summer organization. 5. To w h a t extent can similar measures be applied to other plants "and other industries? Answer. A campaign to educate the public t h a t winter building is feasible and economical and can be carried on to some extent by any builder, we think, with some favorable results. The building industry is represented in Washington, by the Associated General Contractors of America. You may probably find t h a t they have information which may be of value to you, because every contractor seems to have the problem of winter building on his mind. (Thereupon, at 12 o'clock m., the committee adjourned.) UNEMPLOYMENT IN THE UNITED STATES WEDNESDAY, DECEMBER 19, 1928 UNITED STATES SENATE, COMMITTEE ON EDUCATION AND LABOR, Washington, D. G. The committee met pursuant to adjournment, at 10.30 o'clock a. m., in room 412, Senate Office Building, Senator James Couzens presiding. Present: Senators Couzens (chairman), Tyson, Walsh of Massachusetts, and Sheppard. Present also, Dr. Isador Lubin of the Institute of Economics, Washington, D. C , assistant to the committee. STATEMENT OF ERYCE M. STEWART, OF NEW YORK CITY, N. Y. The CHAIRMAN. Mr. Stewart, will you give the reporter your full name and your address? Mr. STEWART. Bryce M. Stewart, Industrial Eelations Counsellors (Inc.), 165 Broadway, New York City. The CHAIRMAN. I understand that you were formerly director of the Canadian National Employment Exchange System? Mr. STEWART. Yes, sir. The CHAIRMAN. YOU understand the purpose of the meeting, Mr. Stewart. We shall be glad to have you go ahead in your own way and tell us what your experience has been. Mr. STEWART. I have been trying to follow the hearings before the committee, and have been impressed with the fact that the gentlemen who spoke on regularization by private industry have in most cases indicated that regularization itself means the squeezing out of people, getting along with fewer people, and therefore throwing more people on the labor market itself; that in many cases those people are older people; that when one does release people for regularization purposes, one of course is apt or will try to release those that are least efficient. The CHAIRMAN. D O I understand you to say that you got that from our hearings? Mr. STEWART. Well, from the hearings I got the idea that they felt that regularization meant the release of more people on the general labor market; and I would follow that myself with the remark that that is likely to mean a considerable percentage of old people among those released. The CHAIRMAN. N O such testimony as that has been presented to this committee. Mr. STEWART. Not the latter? 149 150 UNEMPLOYMENT I N T H E UNITED STATES The CHAIRMAN. N O ; I thought you meant in these hearings. Mr. STEWART. N O ; but not the latter point, the first point, as I understood it. They did say that regularization meant the release of more people from their plants; t h a t they were getting along with fewer and fewer by the regularization process. The CHAIRMAN. N O ; there has been so such testimony as that, Mr. Stewart. Mr. STEWART. Then I should like to make that point myself. The CHAIRMAN. Proceed, then. Senator TYSON. Your point is that it will have that effect ? Mr. STEWART. I t will have that effect; yes, sir; that the regularization process toward which private industry is directing so much attention means that by cutting down their seasonal peaks they have more steady employment for a smaller number of workers, and t h a t as they do release people it is only good business to release those who are least efficient; and I think students of unemployment are agreed that in time of unemployment the first people that are let out among the workers are those that are least efficient. To me that means an ever-increasing volume of work for some kind of agency that works outside the individual plant. We have the employment agencies within the plants in this business of regularization, but the community is faced as a result of that effort with a larger element of unemployment, a greater shifting of labor, and a corresponding need for better organization as between plants and industries. First I should like to detail something about the Canadian employment service experience. Then I would say something about employment exchanges in general and their function, and probably say something about the legislation proposed in one or two bills now before Congress in the matter of public employment offices. Canada has a serious problem of distribution, whether it is in goods or in men. I t is' a long-shaped, sparsely populated country. One does not work in a square, as in the United States. The hauls are long, because the population is in a belt a few hundred miles wide just north of the border. That means that you must think in terms of long hauls; and the result has been that the railroad organization has followed the demand for long-distance transportation for goods, and one likes to think that the same considerations have led to a worker employment service as a general consideration. Secondly, the seasonal character of employment in Canada by reason of the climate has emphasized the need for some such service. The depression of 1913 and 1914 brought the matter pretty much td a head, and employment-exchange legislation was considered by a number of agencies at that time. I was with the Department of Labor of Canada then, and was set to work studying the whole problem; but in the meantime the war broke out, the war orders began, the unemployed were recruited in regiments, and in a short time there was no serious unemployment problem. However, in 1918 we began to anticipate the end of the war and the problem of demobilization, and the work we had done in 1914 and 1915 was: resurrected. There we found the recommendation for employment exchanges on a national basis, and legislation on the subject was introduced and passed. The law—the Canadian employment offices' coordination act, as it is called—provides a Federal vote of $150,000 to the Provinces to U N E M P L O Y M E N T IN T H E UNITED STATES 151 assist them in their employment-office work. The Provinces to participate in the Federal grant must conform to certain standards of efficiency and they must permit Federal inspection. They must standardize their procedure and their statistics according to Federal regulation. The money is allocated to the Provinces, not on the basis of population, as is so often proposed in those measures and, as I might say in passing, in the proposed legislation now before Congress. As you gentlemen know, in allocating your advertising appropriation, or whatever it may be, it is on the basis of the needs that you feel exist and the results that can be obtained in various parts of the country as between various advertising agencies. I n Canada we tried to do the same thing with our Federal appropriation. I t is allocated on the basis of the particular Province's expenditure in proportion to the total expenditure by all the Provinces. That is, if all the Provinces should spend $300,000 on employment service and Ontario should spend $100,000, then it would receive one-third of the Dominion Government's grant, the idea being that if they wTere spending a third it was because the need for the service was there. Obviously, different localities and different industries require different degrees: of employment service. One may be fairly stable; the people are seldom let out. Another may be a seasonal industry, and people are employed and released as the peaks and depressions of employment require. Some 75 employment offices were organized in cooperation with the Provinces. I n one or two Provinces, the smaller ones, where the need was not felt by the Province itself, the Government in view of the demobilization problem established its own employment office. Now agreements exist between the two governments, the provincial and Dominion Governments, in all Provinces but one small Province—that of Prince Edward Island, which has only 90,000 people and is mainly agricultural. There is a Federal director in the department of labor. He, in cooperation with the Provinces, works out the standards of efficiency. He also works out methods of clearance and distribution of labor between the Provinces. The standard as to statistics, so that we have a national figure comparable all through from one end of the country to the other, is also maintained; and they report regularly to him. He has an office in Ottawa which acts as the clearing house between the Provinces of the east, and an office in Winnipeg which acts as a clearing house for the western Provinces. Each office reports daily to the clearing house of the Province, indicating the labor that they have that they can not place locally, and the jobs that they have that they feel they can not fill locally. These are compiled in a bulletin and reported to every office in the Province, and the office that feels it has labor to fill the job is authorized to telephone or telegraph the office with the job and try to effect a placement. The CHAIRMAN. Have you had any experience with the men which will enable you to tell whether they would be mobile to that extent ? Mr. STEWART. There are about 400,000 placements made a year, of which approximately 100,000 are casual and the balance, 300,000, are regular placements, so called. Of the total of 400,000, the figures show that about half have to buy railroad transportation. Not only that, but the employment service has arranged with the big railroad systems of the country 152 UNEMPLOYMENT IN T H E UNITED STATES for a reduced fare to workers who are being sent by an employment office to employment at a distance. If one goes more than 116 miles, and has a fare of more than $4, therefore, he is entitled to this cheaper rate of transportation, which amounts to a reduction of about 25 pet cent from the regular rate. About 10 per cent of the placements use that cheap rate, which means that they must move more than 116 miles. I n the harvest season in the Canadian grain-growing Provinces of course there is a very marked migration of labor, both from the east toward the west and from the extreme west toward the central west. The farmers in the east used to complain about the extent of the movement, and through negotiations by the director of the employment service the railroads began to recruit on the western coast as well, so that now there is a much more efficient distribution, the western labor supply for the harvest moving east to the territory contiguous to the west, and no farther; the labor from the east moving to the Provinces contiguous to Ontario, and no farther; so that the overlapping and disjointed arrangement that formerly obtained has been pretty well cleared up. I n that movement we may move, inside of one month, as many as' 35,000 or 40,000 harvest hands at decidedly reduced transportation rates. Senator TYSON. D O they give them the same fare back, in the event the men want to go back? Mr. STEWART. The fare is slightly higher on the way back, but it is a very much reduced fare; the idea being that they have had two months' employment and should be able at least to pay their way back. The railroads try to get some compensation for the very much reduced fare. I think it is only about $15 from Montreal to Winnipeg, and a cent a mile past Winnipeg. I think you can get back, say, for perhaps $20, or something of that sort. Senator SHEPPARD. W h a t about quarters or accommodations for these harvest hands ? Do you give any concern to that ? Mr. STEWART. Nothing has been done thus far. I think that is a very important question—something that, before I came away, I was thinking seriously about. I left that position in 1922, and should have liked to take that on as the next step. If I may say in two sentences what I had in mind, I had hoped to work out with the farmers' organizations a system of canteens with tents at central points through the Provinces in the west, say the militia department furnishing the tents after the summer camps and the farmers' organizations supplying the food at cost; that as these excursions moved into the west the men should be unloaded and go into reserve in these camps; that at each of these points there should be an employment office, an employment agent, tied up to the permanent employment office nearest that point; that the men should be moved out as the farmer demand came. Of course it is a very irregular thing, on account of weather. The farmers do not like to be paying men $5 a day when it is raining. There needs to be some system of that sort for them to move into reserve and out as demands require, according as the demand has registered and according as the weather permits. Now they lose a great deal on account of the weather. The farmer sometimes charges them for their board when they are not getting UNEMPLOYMENT I N T H E UNITED STATES 153 wages, and they sometimes come back quite disappointed. Some supplementary organization of that sort should be worked out. Senator SHEPPARD. Sometimes the accommodations are very poor, too, are they not? Mr. STEWART. Quite so; because farmers are of all classes, like everybody else. The whole cost of the system is about $400,000 a year. That means that, counting casual placements and regular placements, it costs about 10 cents to effect a placement. A third of that, approximately—a little more than a third, perhaps—is paid by the Dominion Government; or, to be exact, $150,000 is the annual Federal grant. On that basis, of course, taking the population here, twelve times that of Canada, we would have, say, a $5,000,000 cost for a similar organization. Now I think I should turn to a general argument for such a system; and perhaps it would be better to enumerate some of the functions of a national system of employment offices. Its primary function, of course, is to organize the labor market on a national basis; but it has this secondary function of being a central agency in combating unemployment by whatever method we may combat it. I t is primarily an information service. I t is not a matter of the Government going into business; but the Government does tell the farmers things about their occupation; it tells them about their soil; it tells the people interested in navigation as to how they should proceed; it tells the people interested in mining as to where they shall get the best results. This service tells employers seeking labor where it can be found, and tells people seeking employment where it can be found if at all available. I t is information about jobs and information about people seeking jobs. Local maladjustment is bound to exist when the market is not organized nationally. That can be ironed out a good deal, if you have a system of this sort, by this movement that we have just indicated that takes place from points of oversupply to points of demand. There is maladjustment not only by reason of this maldistribution of the labor supply but by reason of agencies working at crosspurposes. The commercial employment agencies are, of course, not organized in any national system. I t is quite possible for a St. Louis agency to be shipping labor into Chicago, and the Chicago agency to be shipping labor into St. Louis, of the same kind, on the same day. There is no relationship between the two. That also obtains for nonprofit-making socially minded employment offices dealing even with professional people and with industrial classes of workers. They are not coordinated in any way; and there is this waste and hardship by reason of the fact that this worker here could obtain a job, were they working in cooperation, near at hand; but he is being shipped out to another point a distance away, and another worker from that point may be shipped in to the job near his home. I want to refer, just in passing, to the maladministration that comes about through public advertising of employment, the competition that exists there, and the maldistribution which results in the. same way. There we could have, through a national system, some effective coordination in the labor market which might be analogous to what 154 UNEMPLOYMENT IN T H E UNITED STATES we have in banking through the Federal reserve system. Essentially, that system interlocks a lot of different banks in a system that functions nationally; and you would have, on the one hand,, labor and industry enjoying in the labor market what is enjoyed through the Federal reserve system in matters monetary. I should like to emphasize that it is not only for the industrial or agricultural worker, the wage earner. The salaried classes obtain a great deal of assistance in this way. We have experimented a little in Canada with that. One of our offices is entirely for teachers in the Province of Saskatchewan. There, by reason of the climate, again, the schools in the agricultural districts are closed a good part of the year, certainly in winter; and there is a great migration of teachers in from the east in the summer time, and then out when the teaching period is over. This office deals with teachers entirely in cooperation with the department of education of the Province. W e have experimented somewhat in the same direction with other professional people; and we find that there is a great deal of migration of a certain type of professional classes. A mining engineer is a migratory person. A civil engineer is a migratory person. Their jobs very often are what a wage earner would call a casual job. So the effect of it is largely to annihilate distance for both parties through the system of clearance that I have indicated; and I might add that that system can be extended into the international sphere. I n Canada, just after the war, we became aware that a great many people in England wanted to migrate. We had, on the side of the employers in Canada, a demand that people should be imported. The question always arose, before we had a national employment service, as fo whether the need could be supplied in Canada. The immigration department ordinarily would call for evidence of effort to secure the labor in Canada. They would call for newspaper advertisement, or something of that sort; but that T of course, had to be a local affair, and could not very well be a national effort. N o ^ , when the immigration department receives an employer's demand or request for permission to import certain labor from the United States, from Great Britain, or from Italy, the request is referred to the employment service; and if the national director says that that labor can not be secured in Canada, if the conditions are fair and reasonable, and there is no reason why the labor should not be imported, then the immigration department proceeds on that basis. We had an experiment of this kind. The British labor exchanges,, when people in England indicated their desire to emigrate, would ask them the country of preference, and their occupations, of course. That information was compiled and forwarded to the employment service at Ottawa. That information was distributed to every employment office superintendent in the now 64 offices of the system. I remember that we had a demand for an expert dyer in a dyeing establi$hment in Winnipeg. We could not locate, throughout the country, any such person who wanted to move to Winnipeg. By scanning the list supplied by Great Britain we were able to pick out a man, to notify the English exchanges, and to have him dispatched to Canada from abroad to fill the job. I think one of the important UNEMPLOYMENT I N THE UNITED STATES 155 functions of such a system is to give the basic data needed for proper formulation of an immigration policy. Senator TYSON. D O you have restricted immigration in Canada? Mr. STEWART. We always have allowed agricultural workers and domestic servants to come in; and there has been a money qualification for some year$. There is a great deal of discretion left to the immigration authorities; but there is rather a frowning on immigration for industrial workers, and encouragement of agricultural and domestic help immigration. Senator TYSON. Then you do not have any quota system, as we do? Mr. STEWART. We have no quota system. Senator SHEPPARD. I t is a selective system; is it not ? Mr. STEWART. Rather. , Senator TYSON. And discretionary with your commissioner of labor? Mr. STEWART. With the immigration department, which is not the labor department. Senator TYSON. The immigration department? Mr. STEWART. Yes, $ir; there is a good deal of discretion, left there. An employment exchange system can do much to regularize casual employment. That is something that has not been attacked yet in Canada; but experiments in that direction have been effected abroad with success, notably in longshore work, where employees, as on the Liverpool docks, have casual jobs of a few hours or a day or t w o ; but by putting an employment-exchange system on the docks, by having all the demands for labor coming into one place, they can rotate the workers, use a limited number, and give them fairly steady employment, as against the old system of a large partially employed group waiting between jobs. That system obtains in so many employments in Canada and the United States and obtains around our grain elevators, where the carloads of wheat come in, and the men wait in groups to assist in unloading. We can also effect what me might call a dovetailing of seasonal employments through such a system. No one knows how many hundreds of thousands of men move from seasonal employment, such as bush work in the wintertime to farming or construction work or railway maintenance in the summer, and back again to the bush in the wintertime. There are some men who have a repertoire of jobs in occupations of that kind. The thing is done now in an unorganized way. These men do move, and move great distances; but they move as rumor tells them to move, as a private employment agent directs, or as some newspaper report indicates that they are required. An organized system would know at once the location of the demand and the extent of the demand and would advise the movement and control the movement accordingly, especially if it had the cooperation of the railroads, such as we have in Canada, and especially if it had a reduced transportation rate. I would not claim that a national employment exchange can relieve or ameliorate unemployment conditions resulting from great economic depressions. At best it deals with the chronic unemployment that obtains at all times by reason of maladjustment between supply and demand. Industry must have a reserve, because it has pressure 156 UNEMPLOYMENT IN T H E UNITED STATES upon it to produce in irregular amounts; and when the demand comes, labor must be had. The effect of an employment-exchange system is to reduce that reserve to the smallest possible proportions. I n effect, it is regularizing in the open labor market just as some of the gentlemen who have testified say they are trying to regularize and give steady work within their plants to a smaller number of people. I t reduces the size of the reserve through efficient handling of the demand and of the labor supply. Even in depressions, if we are to take action of any kind in the way of affording employment, such, for example, as is contemplated in the Jones bill, some kind of prosperity reserve, the efficient execution of any such program involves a knowledge of the amount of labor that needs to be absorbed, and the kind of labor that it is—if it is construction labor, if it is railroad labor, or if it is purely unskilled labor. Some kind of variegated program, suited to the kind of labor unemployed, would be the most efficient; so that data as to the unemployed that remain unplaced, as recorded by an employment office^ and their occupations, are basic data for any such program. When any program is adopted at such a time there must be a test. For instance, if one were affording relief of any kind, there should be some test as to whether the worker is genuinely unemployed, or whether he is merely seeking relief. We found in Canada, in the postwar depression and the period of demobilization, when the government did extend a money grant to returned soldiers who were unemployed, that it was necessary to have some such test. I n the English labor exchanges—where unemployment insurance, of course, is a national institution—a man, although he has contributed to the fund, can not receive insurance unless he has registered at the employment exchange and has not refused any suitable employment that the exchange can offer. Canada required for these returned men that they should be registered at the nearest employment office, and should get assistance only when the exchange could not furnish employment suited to their trade. I t is, then, in that sense also a necessary agency in a time of depression. I n other words, if the risk has been incurred, we must find out about it; and this machinery tells us whether the unemployment risk has been incurred by the particular individual. The CHAIRMAN. Have you any information as to the percentage of unemployed that is made up of those men who desire to roam and float around from job to job, and change from one to the other, and who, in my opinion, should not be included in the aggregate of unemployment ? Mr. STEWART. N O , sir. I venture the opinion, however, that it is a comparatively small percentage of the whole. The fact that unemployment coordinates with the activity of industry seems to me to indicate that it is because industry is slack that these people are unemployed; the fact that unemployment is greater in the winter than in the summer. I should not expect people to be lazier, say, in winter than in summer. I t seems to correlate with the activity of industry and the activity of agriculture; and while no doubt there is a proportion of unfit, of the loafer class, I think it is a comparatively small element. UNEMPLOYMENT IK T H E UNITED STATES 157 The CHAIRMAN. That is just your judgment? You have no statistics on the subject? Mr. STEWART. Except that I would add that in the English experience, which of course may be very different—I think usually we are supposed to be a bit more aggressive here in our working class than in European countries—inquiries on that very point as to the number of people who have tried to impose on the exchanges, to get benefit without proper qualification, have revealed a surprisingly small percentage. There have been general accusations in that direction, sir; but official investigations and independent investigations have revealed very little. The CHAIRMAN. Have you any information to verify or to show those investigations? Mr. STEWART. I could tell you what has been reported in that direction, sir. I should be glad to do that. The CHAIRMAN. I should like to have it, because I have an impression that there are many people who engage in all kinds of industry, who from time to time get tired and weary, and quit and go and look somewhere else to see if they can find a job they like better; and I suspect that they are registered as unemployed because they apply for jobs. Mr. STEWART. A good employment exchange, of course, would check up on its applicants. The CHAIRMAN. If we had a national exchange, and there was a system prevailing for registering the unemployed, would not they be counted in in the unemployed if they came in and applied for a job? Is not such a man unemployed? Mr. STEWART. I would not call him unemployed. I do not think a national employment exchange should call its applicants unemployed. The CHAIRMAN. If he reports unemployed, that is all the information you have. Mr. STEWART. I should ask him for the name of his last employer, and I should like to check up on his experience in order to make a decent placement; and unless he reported coming in from out of town, or something of that sort, which made it hard—even there, with a cooperative system, matters of this kind can be checked up. Senator TYSON. H O W would you take care of a man who had no employment? I t seems to me that a man who has not a job is unemployed. Mr. STEWART. But, as the Senator says, a number of these men would be working at the time, and would apply at the exchange. Senator TYSON. I see. Your idea is that if the man is employed now, then of course he is not unemployed ? Mr. STEWART. N O ; not at all. Senator TYSON. That is not what I understood the chairman to say. The CHAIRMAN. N O ; that is not exactly the type I mean. For instance, in a great industrial city like Detroit, with its probably 325,000 to 350,000 men employed, many thousands of thos^ men quit one job and look for another, either because they hope to get a job with higher pay, or a more congenial job, or they happen to be tired of their old job; so they quit, and they go around to these employ 158 U N E M P L O Y M E N T I N T H E UNITED STATES ment agencies and register for jobs. They are out of employment, because they have quit their old jobs. They do not, however, represent the kind of unemployed that we are interested in. Mr. STEWART. Not a bit. The CHAIRMAN. I do not understand that there is any system by which they may be segregated from those who really are in need of work. Mr. STEWART. Well, I will say that the lack of system that we now have encourages unnecessary mobility of that sort; the fact that I may quit a job in Detroit, and go to a private employment agent who will ship me, without investigation of any sort, to a job in some other industry at some other point because he gets a fee for it, and at the same time will be glad to see a man quit to give this man a place for the reason that he might get a fee for moving this other man into his old job. I n other words, they thrive on movement of labor. They can not thrive on a stabilized labor market; and that gives to these workers of the class we are now speaking of a chance to move. I t puts a premium on movement. The CHAIRMAN. Not a premium on the mover, but a premium on the agency. Mr. STEWART. Or it stimulates movement; I will put it that way. I n fact, it has a tendency to make the agent go into a gang of men and hire them away. I t has been done. Another function of employment exchanges is that of vocational guidance. Senator TYSON. I t seems to me that any man who has not a job is unemployed; it does not make any difference whether he is a good man or a bad man; and the fact that he is a bad man means that he is on the community in some way, and he either has to get employment or become a public charge. Mr. STEWART. Quite so. Senator TYSON. D O I understand you to say that your agencies do not make any effort to get a man a job unless he is considered a good man, or has some recommendation from his last job ? Mr. STEWART. N O . We would try to place the applicant, good or bad; but we would certainly try to refer the men that were most qualified for the job to which we were referring them. A man of the class that you are referring to is very apt to keep away from an efficient employment agency. If he is seeking work, he will come. If relief of any kind is being given, he will prefer to get the relief rather than the work. But if the work is made conditional upon his being registered at the employment exchange and accepting suitable employment, I think we are dealing in rather summary fashion with that type of man. Senator TYSON. Your idea is that if a man is not willing to make any effort, after you have done your part to get him a job, to comply and go in and take that job, then you deny him relief? Mr. STEWART. Quite so. Senator TYSON. I S that the way it is done in Canada ? Mr. STEWART. Since relief is not given on any kind of national scale, no. I t is done in Great Britain; but I did indicate that in the one experiment, of course, it did obtain for a few years after the war with unemployed returned soldiers, if the man did not accept suitable employment. UNEMPLOYMENT I N T H E UNITED STATES 159 Senator TYSON. I see. That was only temporary? Mr. STEWART. Quite so. Senator TYSON. But in. Great Britain, as I understand it—are you speaking now about what they call the dole ? Mr. STEWART. Yes; what we prefer to call "unemployment insurance," because the man contributes to it. Senator TYSON. Does the employee himself contribute to that dole in any way? Mr. STEWART. Oh, yes; quite so. Senator TYSON. I n what way does he do that ? Mr. STEWART. The employer deducts a contribution regularly from his pay and puts a like contribution with that, and the Government puts in an additional contribution. The CHAIRMAN. There are three contributors. Senator TYSON. That is what I wanted to get at—the employee, the employer, and the Government, the three of them? Mr. STEWART. Quite so. Senator TYSON. And that makes up a fund ? Mr. STEWART. Yes, sir. Senator TYSON. Can you tell me about how they regulate it in proportion to what the man would get ordinarily when he is working full time? They have to give him enough to live on, of course— to barely exist, at least. Mr. STEWART. That is the idea. I t is not enough to make him seek to live on that rather than to accept employment. Senator TYSON. Of course, I know it is very small. They want to let him live, but at the same time make it so that he wants to get a job and get out of it? Mr. STEWART. T h a t is it. I t is slightly over $4 a week, generally. Senator TYSON. D O they do that with every individual in Great Britain, whether he wants to work or not ? Mr. STEWART. I n the trades to which the act applies—and it covers about 12,000,000 people; it does not cover agricultural workers and railroad workers and some other fairly stable classes of workers—as soon as the man is out of work he must report to the nearest employment exchange, and bring back with him his unemployment insurance book, which his employer has retained, and in which he has marked his contributions week by week. I t shows his record; and if he is qualified, has made the required number of contributions, and has not exhausted his right to benefit by reason of previous unemployment in a year—the maximum amount of benefit that he can have in a year is 26 weeks, I think—he is entitled, after a brief probationary period, to draw a benefit from the exchange; but if the exchange can offer him suitable employment in the meantime he must accept it or his right to benefit is denied. Senator TYSON. What do they do about people who can not qualify under those conditions? Mr. STEWART. The only thing that can be done there is to fall back on charity, poor relief. Senator TYSON. The community has to take care of him? Mr. STEWART. Yes, sir. Senator TYSON. Then they do not take care of everybody in Great Britain through this dole or this form of insurance ? Mr. STEWART. N O ; not everybody. 29193—29 12 160 UNEMPLOYMENT I N T H E UNITED STATES Senator TYSON. I thought practically everybody had a chance there to get a bare existence until he could get employment. Mr. STEWART. I t is a very large percentage of them. As to some men who were qualified, they might exhaust their right to benefit and still have to fall back. After a man had drawn his 26 weeks' benefit for the year, then he could not draw any more; he would have to go over to poor relief. Senator TYSON. Then he would be absolutely on the community? Mr. STEWART. Quite so. Senator TYSON. D O you have any idea what number of people, so far as reports are available, are in that condition now in England and Great Britain? Mr. STEWART. I would not like to say, sir. Senator TYSON. Have you just an idea of it? Mr. STEWART. N O ; I have no idea, offhand. Senator TYSON. YOU have not seen any statistics except to the effect of so many being unemployed, say two or three million? Mr. STEWART. Yes. Senator TYSON. Does that include all of these men who get the dole? Mr. STEWART. N O . The usual figures give the number who are under the unemployment-insurance scheme who are unemployed. Senator TYSON. Then there must be a great many more than that? Mr. STEWART. I should not say a large number more, sir. Senator TYSON. Certainly more, however? Mr. STEWART. More. Senator TYSON. There must be some more. Mr. STEWART. There are more. There is no doubt about that. Senator TYSON. I should think there would be, in times of depression, a very great number. Mr. STEWART. Well, since most of the industries are under the unemployment-insurance scheme, except agriculture—and their people really are not unemployed in England, where it is an all-yeararound contract, as a rule. Senator TYSON. There must be a great many casuals, though, who have not any regular employment; I mean to say, in ordinary business, because agriculture in England does not amount to so very much. Mr. STEWART. N O ; but there is a considerable body of agricultural workers there. Senator TYSON. Of course, I understand t h a t ; but agricultural workers are generally employed. Mr. STEWART. Quite so. Senator TYSON. I t is the others that they have to consider. Mr. STEWART. Yes; but even the longshore industry is under the act. Senator TYSON. I could very well see how that would be; but there wmild be many other things, like taxicab driving, or something like that, or a man who had a little bit of a business of his own, and who would go broke, and have to get out of it. Mr. STEWART. Small business men—quite so. Senator TYSON. There must be thousands and thousands of them. Mr. STEWART. The figures under the act now have been running something over a million. Of late, it has been increasing a little. UNEMPLOYMENT IN THE UNITED STATES 161 I should say, just from memory, that there are probably 1,100,000 unemployed now; and then you might add 10 per cent or 20 per cent above that figure for the classes you have indicated. Senator TYSON. I see. Do you think that is the best form of insurance for unemployment that can be evolved? I mean to say, do you approve of that? Do you think that is the best form that can be had, so far as you know at this time? Mr. STEWART. May I answer that by relating a little experience here in this country with unemployment insurance ? Senator TYSON. Certainly. Mr. STEWART. After I left Canada I was employed with the Amalgamated Clothing Workers, a trade-union in the men's clothing industry. We had, in Chicago, about 300 firms with 25,000 workers, a seasonal industry, these men moving about promiscuously from plant to plant. We first organized a central employment exchange, so that instead of these men chasing about from shop to shop ? and there being a group of them at the gate every morning when the employment manager came into his office, they centered in the one employment office, and all the demands for employment were sent to that office, and the employees were dispatched as the demand was indicated. T h a t greatly cut down the reserve of labor required, because you did not have a reserve around each of 300 shops, large and small; but you had a pooling of all these reserves, and thereby, of course, diminished the total. After a year's organization of that sort in cooperation with the employers the union set up a scheme of \unemployment insurance. The employee contributed iy2 per cent of his pay, and the employer a like amount. A trustee board, chosen by the two sides, was set up, and the contributions of the firm and the employees were sent in every pay-roll period by the firm to the trustee board, together with what amounted to a copy of the pay roll, indicating each worker's work done in hours, his wages, and how much was deducted, so that it could be checked. I t also indicated, therefore, how much unemployment he had had during the week; and benefit was paid in proportion to the wages he received. I t was a percentage of wages. I t is now, I think, about 35 per cent. I t was 40 per cent at the beginning; but because of a very great depression in the industry it had to be reduced to 30 per cent. I think they have gotten back now a little. That provided, in the first year, a fund of over a million dollars. The workers, however, were required to be members and to contribute for a year in order to establish a reserve before they were allowed to begin to draw benefit. I n 1923 the scheme was adopted. I n May, 1924, we began the payment of benefit. The employment exchange, of course, was the necessary preliminary. They had to be registered there. If there was employment in any firm in the city for the unemployed worker, he was sent to that job. The test which you were raising as to whether or not they are genuinely unemployed was his desire to accept a job. If he refused any suitable employment, of course, he was not entitled to benefit. If, while he was drawing benefit, a suitable job could be found for him, he was offered the job, and had to take it or be struck off the list. 162 UNEMPLOYMENT I N T H E UNITED STATES The highest amount of benefit paid in any year amounted to about $100. That was all the fund would stand. Since that time the same system has been extended, with some modifications, to Rochester, which is the third largest clothing center of the country, and now to New York, which is the largest; and in Chicago the fund has been increased by a larger contribution from the employers. So that I should say now the fund will probably be a million and a quarter a year; and that amounts to more than it seems, because the number of workers in the industry has been very greatly reduced, I should say by perhaps 25 per cent, in the last four or five years. The CHAIRMAN. That differs very little from the English system, except that the Government does not contribute. Is that it ? Mr. STEWART. The Government does not contribute. The CHAIRMAN. I n other words, the system is almost the same except for t h a t ; is it not ? Mr. STEWART. Quite so; but it is a purely industrial thing. I n England there are, in a few instances, schemes like that operated entirely by employer and employee which are supplementary to the Government's scheme. The Government's scheme is really a minimum provision, I should call it, and where workers and employers desire to safeguard themselves to a greater degree against unemployment they organize a supplementary scheme. As a matter of fact, the English act of 1920 did contemplate schemes of this sort, and made provision even for an industry to contract out of the general scheme and set up its own scheme, apart from the Government. That was later countermanded, by reason of the fact that in this serious depression the Government needed all the good, regular industries to contribute. Obviously, the industries that were least subject to the hazard of unemployment were the ones that would withdraw. I think about two industries withdrew on that basis; and then the Government saw that it would lose revenue for the whole scheme in that way, and countermanded the right to contract out. Senator TYSON. I have read that there was some abuse of this thing, and that a good many preferred to get their dole rather than to work. Have you any knowledge on that subject; or what is your view about it ? Mr. STEWART. I will just add something to what I said a moment ago—that all the official investigations in that direction have brought out very little abuse. I t is admitted, of course, that in, say, 1,100,000 unemployed, there are some impostors who will get away with the thing they are trying to accomplish; but the Government committees that have investigated this matter have not only examined records and examined their^ own officials, but they have invited charitable officials and any citizen who has any information on the fact, any accusation to make in that direction, to come forward; and in every instance the precipitate, the information, has been very small. Senator TYSON. I n other words, you do not think there is any very great amount of abuse? Mr. STEWART. I do not think it is a serious abuse at all. Senator W A L S H of Massachusetts. Have you any information as to present unemployment conditions in this country ? UNEMPLOYMENT IN THE UNITED STATES 163 Mr. STEWART. NO, sir; not any more than any other citizen may have. Senator WALSH of Massachusetts. Only last night the man in my office who handles the mail said he had never seen so many requests for employment and so many pathetic letters come into the office in all the time he has been with me. In fact, he added further, " Some of them bring tears to my eyes." I read some of them myself, and I wondered if these letters reflected a wider extent of unemployment than we generally appreciate. Mr. STEWART. I am not in a situation, sir, to report on that. Senator WALSH of Massachusetts. I find that a great many of these letters are from people previously in rather substantial circumstances—not in industry, but heads of departments in stores, insurance men, auditors, and semiprofessional men. The CHAIRMAN. DO you mean that they are out of employment? Senator WALSH of Massachusetts. Yes. Mr. STEWART. Just to hazard a guess, the integration of industry, the mergers that have been taking place, the efficiency that has been accomplished in business, are eliminating men. Senator WALSH of Massachusetts. They are eliminating a good many of these men who received substantial salaries. Mr. STEWART. Yes, sir. That is the place where we started off again—that these men are being thrown on the market, and are searching for employment, and there is no real organized national effort to bring them in contact with the available opportunities. The CHAIRMAN. Are there available opportunities? Mr. STEWART. That is what we do not know. The CHAIRMAN. I suspect that if that condition is general, there are no available opportunities. Mr. STEWART. But, if there are no available opportunities, then at least we know the extent of the problem, and we have a factual basis for some kind of policy. One other function of employment exchanges is that of vocational guidance. I will hurry over that. We have this effort on the part of school authorities to direct children and young people coming from the colleges into lines of effort that are expanding. Just the other day I noticed that in France they had found that there was a great tendency on the part of young people to seek certain occupations regardless of whether there was a demand in those occupations or not, and that they had been successful in directing a very large proportion of them into more fruitful lines, to leave off their inclination to some favored occupation; and of course I noticed that in the bill that Representative Casey has introduced, on labor exchanges, provision is made for a special effort for juvenile workers, a junior section. A national system that would bring together the statistics of demand and the statistics of supply by occupations, by industries, would give the factual basis for a program of vocational guidance for young workers. Not only that, but in view of the thing we have just been saying here there is need, I think, for a greater body of vocational information for adults. The new efficiency in industry, the new mechanization, the technological improvement in industry, means that industry can get along with fewer workers. It means the reabsorption of 164 UNEMPLOYMENT IN THE UNITED STATES these displaced people in other lines. I n a great many cases it must mean retraining. A machine i,s developed that annihilates, all of a sudden, a given operation or a given occupation for those auditors or insurance agents that you have mentioned, or mechanical people. The CHAIRMAN. What would you say with regard to vocational training when it was stated here the other day that there are probably ten or twelve thousand musicians out of work because of the movietone ? How could they be educated into some other activity ? Mr. STEWART. The present situation is that they get into some other activity without assistance. Studies have recently been made, not yet published, of men who have been released in this way. I know Mr. Lubin has data of that sort available; and we find those men, as a rule, getting over into occupations that do not demand too much training. They have to get into a salesman's job, some kind of service occupation, running an automobile or a truck, become taxi drivers, and so on. As a rule—I think I am right in thijs—they adjust themselves, as quickly as they can, into some easily acquired occupation. The retraining, I think, often is done at a money sacrifice, because the job is so often an unskilled job. They may have more success ats a salesman than as a mechanic; there is a possibility of greater income; but in so many instances it indicates a general lowering in their standard. That is all being done at these men's own expense now. They are paying the price of progress in industrial technique. Senator W A L S H of Massachusetts. Is not one of the troubles with our vocational school that they do not take into consideration the demand? Mr. STEWART. I think it is quite so. Senator W A L S H of Massachusetts. Have you observed the condition in this country with reference to school-teaching ? Mr. STEWART. I know what you mean, sir—the oversupply of teachers. Senator WALSH of Massachusetts. Yes. I n my own State a large number of young ladies who graduated from the normal schools two years ago have been unable to get position^. I think it is stated that only about a third of those graduated last year were able to be placed; and I was inquiring, and I find that the same condition exists all over the country. Am I correct? Mr. STEWART. I think so, sir. Senator W A L S H of Massachusetts. I t seems to me that a State government that was alert to the question of supply and demand would .seek some way of turning those normal schools, or some of them, into some other vocation where there was a demand, and encourage young ladies to take up some other occupation; but, so far as I know, no effort of that kind has been made. Is not that true more or less of a great many of these vocational schools ? Mr. STEWART. Quite so. They have not had the data on which to base a policy for the direction of people into expanding occupations. I will close by saying what I have already indicated—that while a system of this sort does give information for vocational guidance, it also gives information to help in the formulation of an immigration policy, arid it furnishes a valuable statistical by-product for all UNEMPLOYMENT I N THE UNITED STATES 165 these matters; and, last of all, that it is something that requires efficient administration, and must be regarded as a big business proposition, that, if not well organized and efficiently managed in a business way, is better not tackled at all. The CHAIRMAN. Can you get that in a Federal bureau? Mr. STEWART. I do not know, sir. The CHAIRMAN. I thought you had had enough experience with Federal Governments to answer that. Mr. STEWART. I am still a Canadian. The CHAIRMAN. D O you mean by that that being still a Canadian, it is true in Canada ? Is that it ? Mr. STEWART. N O . We have there this advantage, if I may call it such—that our tenure in the civil service is fairly continuous; that when we establish an employment office in the city of Toronto with, say, 80 to 35 employees in it, those employees will be there as long as they can perform their jobs efficiently and they please to remain. They have developed a knowledge of their jobs, and I think are steadily increasing in efficiency. The CHAIRMAN. There are a great many people who believe that the very opposite is true of civil-service employment. They believe that when you once get certified in the civil service you can loaf on the job as much as you like, and not get fired, because of the civilservice protection. That may sound humorous; but, at the same time, there is a great body of Members of Congress who believe that that is true of the civil service. Mr. STEWART. There have been people dismissed, of course. The CHAIRMAN. Oh, yes; they are dismissed, but they usually cause so much row that often the chiefs have not courage enough to dismiss them. Senator W A L S H of Massachusetts. I t is largely due to lack of proper supervision. If the supervisor is not industrious and efficient, the help about him will not be. The CHAIRMAN. Yes; and then they are very frequently cowards because they do not want to create a disturbance. Senator W A L S H of Massachusetts. Are you familiar with the collection of statistics on unemployment by the Canadian Government ? Mr. STEWART. Yes, sir. Senator W A L S H of Massachusetts. Do they collect statistics for part-time employment as well as for full-time employment? Mr. STEWART. N O . Senator W A L S H of Massachusetts. That is not done by our Govern- ment, either; is it ? Mr. STEWART. N O . Senator WALSH of Massachusetts. Do you not think something ought to be done to give to the country a proper picture of employment conditions, to gather statistics on part-time employment? Mr. STEWART. I quite agree. Senator WALSH of Massachusetts. I notice, for illustration, in a report that came to me from the Massachusetts department that collects statistics, that the report showed an actual increase in employment in the month of November over the month of October, but a decrease in pay roll; and when I came to examine farther down the report, I found that the decrease in pay roll was due to the fact that there had been a good deal of part-time employment. 166 UNEMPLOYMENT I N T H E UNITED STATES Mr. STEWART. Quite so. Senator W A L S H of Massachusetts. Would you not, from your experience, recommend the statistical department of our Government including some system of obtaining the extent of part-time employment in our industries as well as the number of actual employees on the pay rolls ? Mr. STEWART. Yes, sir. I think there is an evolution in that direction among statistical people now. Senator W A L S H of Massachusetts. I n other words, simple statistics of the number of people being carried as employees in an industry can be very misleading as to the real condition of employment or as to the real condition of prosperity of that industry? Mr. STEWART. Quite so. You see, we started out with just the number of employed in the statistics. Then we began to develop the pay rolls, because that was a corrective on the number of unemployed. I think I am quite right in saying that the objective now is the man-hours worked in a pay period; and some agencies are making considerable headway in building up statistics of that kind, so that you know precisely the hours put in in the pay period by adding up the hours of all the employees worked. Senator TYSON. There has been a great deal of criticism of the d'ole system in England. I should like to ask you what you think of it. Was it a necessity ? W h a t would have happened if they had not had it; and has it benefited the conditions rather than hurt them ? Mr. STEWART. I think England had to have it, and there would have been very serious difficulty without it; and I think that all parties in England now accept it as a piece of national machinery that will be maintained indefinitely. Senator TYSON. I n other words, you consider it a national necessity in Great Britain? Mr. STEWART. Yes. Senator TYSON. I S that the general opinion of people with whom you are brought in contact ? Mr. STEWART. Yes. Senator TYSON. I s that the general opinion of, you might say, union labor in this country, so far as you know ? Mr. STEWART. I do not think union labor in this country understands the system over there or has studied it very much, and I think they are " from Missouri " about it. Senator TYSON. I S that the opinion of the people, I might say, in Canada ? Mr. STEWART. I may say in answer to that, sir, that the'committee on industrial and international relations of the Canadian House that reported early this year made the statement that it felt that unemployment insurance was just a little bit ahead—that was not the exact wording—it was something that must sooner or later be considered for Canada. Senator TYSON. Even in Canada ? Mr. STEWART. Even in Canada; and I might say that there the labor movement is in favor of it, and is strongly urging it upon the government. Senator TYSON. D O you think you have as much unemployment in proportion to your population in Canada as we have in this country, so far as your observation goes? UNEMPLOYMENT IN THE UNITED STATES 167 Mr. STEWART. I should think so, sir. The climatic conditions Senator TYSON. D O you have more? I should think the seasons would be harder on people. Mr. STEWART. The seasonal difficulty is greater. That is one reason why the United States acts as a sponge for us, in a way. Senator TYSON. A lot of your people come into the United States to get employment when they are out of employment in Canada; do they not ? Mr. STEWART. Quite so. If I might add just one remark, sir, in the Casey bill there is a provision—perhaps I referred to this—for the allocation of the Federal grant to the States on the basis of population. The CHAIRMAN. You spoke with reference to it in Canada. Mr. STEWART. Yes—well, I would quarrel with that principle, in view of the fact that the need in the different States for an employment service might not have any relation to the population of the State. The CHAIRMAN. I think j^ou would have some difficulty in Congress on that subject, because of the administrative latitude. Mr. STEWART. Other conditions might prevail. STATEMENT SUBMITTED BY MR, WHITINCJ WILLIAMS, INDUSTRIAL RELATIONS EXPERT, OF CLEVELAND, OHIO, ON THE NEED FOR A NATIONAL SYSTEM OF EMPLOYMENT EXCHANGES IN THE UNITED STATES My contact with this matter has convinced me that the ordinary unskilled worker is almost unbelievably lacking in the ability to approach effectively his problem of finding a job. In Pittsburgh, for instance, I found hundreds, If not thousands, of job seekers milling around, hour after hour, and day after day, from one factory gate to another, in the utmost of despair and with frequent exclamations of bitterness against society in general and the Government in particular—yet all the time with other factories hardly a mile away looking for workers! The whole thing struck me—and still strikes ine— as causing a state of mind which, when possessed by thousands of unhappy, bitter men, represents the most serious threat against organized society and government. In addition, it is a crime that with the general public recognition/ of the evil of unemployment, we continue to do nothing to build any tool by which the number of these unhappy, jobless men becomes anything but a guess. One reason for this appears to be that a great many employers do not use either the private or the public employment exchange. The result is that most workers are probably justified in believing that, for the present at least, there is no substitute for their visiting every possible factory gate It is easy to understand how a lot of manufacturers might not like to trust the ordinary private exchange with the job of securing anything above the level of the most unskilled workers. Usually such exchanges are equipped to handle only the lowest-grade workers and therefore hurt the pride of the better sort of skilled men who don't like to be handled like " wops." As to the public exchanges, my understanding is that employers tend to distrust these as too often under the control of local unions; or, if this is not the case, under the control of political henchmen serving other purposes than the greatest possible good of both seeker for men and seeker for work. My belief is, accordingly, that (1) any government is playing with fire as long as' it does nothing to lessen the bitterness of men looking, not only hopelessly but blindly, for work; that (2) there is great opportunity for larger use by both the employers and the workers of labor exchanges of some sort; that (3) proper regulation of private exchanges is very difiicult, though perhaps not impossible; and that, finally, there is, in any case, great need of public exchanges whose expense is met mainly by government but whose activities are under the direction of boards comprising balanced representations 168 UNEMPLOYMENT 1ST THE UNITED STATES of the various interests involved—employer and employee, union and nonunion, men and women, private citizens and Government officials. Such n group could doubtless be given the cooperation, also, of the town's organized and federated agencies, such as, for instance, the Welfare League here in Cleveland. Possibly, even, a certain amount of financial cooperation between such a body and the Government might provide the means of helping both the employers and the worker to feel that the vital interests of all concerned would not fail to be observed. MEMORANDUM ON UNEMPLOYMENT EXCHANGE LEGISLATION IN FOREIGN COUNTRIES I. International standards.—The first international labor conference at Washington in 1919 adopted a draft-labor treaty, outlining the essentials- of a system of nationally coordinated employment exchanges. Article II of that draft treaty reads as follows: " Each member which ratifies this convention shall establish a system of free public employment agencies under the control of a central authority. Committees which shall include representatives of employers and of workers shall be appointed to advise on matters concerning the carrying on of these agencies. " Where both public and private free employment agencies exist, steps shall be taken to coordinate the operations of such agencies on a national scale. " The operations of the various national systems shall be coordinated by the international labor office in agreement with the countries concerned." In pursuance of that policy 23 countries at the present moment have adhered by ratification. These include Austria, Bulgaria, Denmark, Estonia, Finland, France, Germany, Great Britain, Greece, Hungary, India, Ireland, Italy, Japan, Luxemburg, Norway, Poland, Rumania, Yugoslavia, South Africa, Spain, Sweden, Switzerland, Netherlands (approved). These countries have also passed the necessary legislation in application of the convention, either prior to or subsequent to ratification. In addition, the Netherlands has approved the ratification and is considering the necessary applying legislation. 17. Existing legislation.—The status of legislation creating national systems of employment agencies stands at the present moment as below. These include the basic acts and some orders. Special decrees or laws for special occupational groups not included. Argentine Republic: Act of September 25, 1913. Australia: New South Wales—Part 10 of act of 1912 on industrial arbitration, amended in 1916, 1918, 1919, and 1920. Queensland—Act of December 23, 1915. South Australia—Order in council of July 30, 1911. Austria: Notification of December 24, 1917; act of March 24, 1920. Belgium: Royal decree, February 19, 1924, January 19, 1925; gave legal basis to system previously existing by regulations. Bulgaria: Law of April 12, 1925, January 1, 1926; includes unemployment insurance. Canada: Employment offices coordination act of 1918, amended in 19201 (10 and 11 Geo. V, c. 25). Denmark: Act of December 22, 1921; act of March 4, 1924; act of July 1, 1927. Estonia: August 1, 1917 (since 1919). Finland: Order of November 2, 1917; act of March 27, 1926. France: Act of March 14, 1904; decree of March 12, 1916; act of February 2, 1925. Germany: Notifications of the federal council of June 14, 1916, December 9, 1918, May 5, 1920; act of July 16, 1927. Great Britain: Labor exchanges act, 1909. Greece: Act July 1, 1920; royal decree, September 22, 1922. Hungary: Order of the Minister of Commerce of February 17, 1917. Irish Free State: Labor exchanges act, 1909. Italy: Legislative decrees of November 17, 1918 and October 19, 1919; royal decrees, March 29, 1923, December 30, 1923, June 26, 1925; November 6, 1926, September 26, 1927. Japan: Act of April 8, 1921; order June 25, 1925. Latvia: Administrative instructions of January 21, 1921. Norway: Act of June 12, 1906; act of June 30, 1921; since 1896. Netherlands: Order of September 19, 1916; royal decree of April 14, 1917. UNEMPLOYMENT IN THE UNITED STATES 169 Poland: Order of January 27, 1919; act of October 21, 1921; act of March 3, 1926, and numerous decrees. Portugal: Decrees of July 27, 1912 and May 10, 1919. Rumania: Act of September 22, 1921. Russia: Decree of Labour Commissaria August 21, 1924. Serb-Croat-Slovene Kingdom: Order December 10, 1927. Spain: Royal order of September 29, 1920; act of July 13, 1922; royal legislative decree November 26, 1926; February 14, 1927. Sweden: Decrees of June 30, 1916, and May 16, 1918. Switzerland: Federal resolution of October 29, 1909; general principles laid down for the working of employment exchanges, November 29, 1910; federal resolution of October 29, 1919; act of November 11, 1924 (completely new). Union of South Africa: Act of July 25, 1924. Distribution of employment exchanges in 16 countries, ~by area and population, 1927 Number of e m p l o y ment offices Country- Czechoslovakia Denmark Finland Germany Great Britain _ Hungary . _ Japan Netherlands ___ Norway Poland Rumania .__ Russia Serb-Croat-Slovene K i n g d o m S o u t h Africa Sweden Switzerland Total „_ _ _ _ ,_ _ _ _. Population Area, square miles Average population per office Average area per office 437 89 24 1,293 1,162 8 232 40 48 20 37 281 7 268 36 35 13,613,172 3,419,056 3,526,000 62, 348, 782 42,767, 530 8,368, 273 59,138,000 7,416,419 2, 649,775 29,160,163 17,393,149 146,304,931 12,017,323 6,928,580 6,053, 562 3,936,330 54,877 17,144 149,641 180,976 88, 745 35,901 148, 756 13,205 124,964 149,140 122, 282 8,187,253 96,134 472,347 173,157 15,976 31,151 38,416 142,750 48,220 36,850 1,046,034 254,905 185,410 55,204 1,458,008 470, 085 520, 658 1, 716, 760 25,853 168,154 112,466 126 193 6,235 140 76 4,488 641 330 2,603 7,457 3,305 29,136 13, 733 1,762 4,810 456 4,017 425,041,045 10,030,498 105,810 2,497 MEMORANDUM ON THE ORGANIZATION AND ADMINISTRATION OF PUBLIC EMPLOYMENT OFFICES IN FOREIGN COUNTRIES South Africa.— (a) The Union is divided for labor purposes into eight divisions with headquarters in the largest town in each under an inspector and staff. At the headquarters, in each division, the employment: exchange operates primarily for the town and further serves as a clearing house for the division generally.. In rural areas subsidiary employment exchanges are established under head postmasters! (some 256) who act as an intermediate clearing house for all outlying centers having subordinate post offices and postal agencies under their control. In headquarters (and a few other towns) adults and juveniles are separately dealt with, juvenile affairs boards being set up under an act administered by the department of labor. The boards cooperate closely with apprenticeship committees; and both are under the same central control as the labor exchanges. The placing of aboriginal natives is dealt with as a free service under special control of native commissioners of the native affairs department, or by licensed recruiting officers, also as a free service. The functions of the committees referred to in paragraph 1 of article 2 are fulfilled by the national advisory council of labor, of which the minister of labor is the chairman and which is representative not only of diverse interests but also of different parts of the country, on whose behalf the members are competent to speak. The selection of the members is made by the minister, who pays due regard to the requirements as to the adequate representation of important and well-marked interests and who consults responsible organizations where necessary in making his choice. It is the duty of the council to advise! the minister, inter alia, on questions of unemployment; and the operations of the employment exchanges come under periodical review in that connection. The individual members or groups of members resident in one center are regarded as acting in an advisory capacity 170 UNEMPLOYMENT IN THE UNITED STATES in respect of local unemployment in those centers. Members are from time to time called upon to serve on special committees to consider specific unemployment problems; and in that connection important committees have been appointed to deal with urban and rural unemployment, the administration of poor relief, employment on the alluvial diamond diggings, and employment by public bodies. Voluntary local committees have also been established in some of the smaller centers in conjunction with the post-office employment exchanges. The appointment of these committees has usually followed a public meeting held for the purpose by an officer of the department of labor, and the committees are selected to represent different employers' and workers' interests. The postmaster, who is in control of the local exchange, acts as chairman. The committees hold periodical meetings and consider the results of the operations of the local exchange, as well as any local problems of unemployment. Central control is exercised by the department of labor. (6) Provision for the establishment of private employment agencies is contained in section 20 of the industrial conciliation act, 1924. Under the act an agency may not be conducted unless the proprietor is in possession of a certificate of registration which may be issued by the registrar of trade-unions and employers' organizations who, in isisuing certificates, takes into consideration the need for the agency and the suitability of the applicant. A maximum scale of fees has been fixed. (c) As regards the application of the last paragraph of article 2 the Government reports that this is a question which touches the Union very remotely and is bound up with immigration policy. No policy for the introduction of immigrants to South Africa is in force at the present time, and it is; difficult to see what kind of coordination would be effective as between the system in force in/the Union and systems in force in other countries. The physical fact of distance presents1 an almost insuperable obstacle apart from any question of policy. Should it be found desirable, however, by other countries to avail themselves of the employment exchange system of the Union, the Government would be prepared to consider any feasible means of rendering any coordination effective Austria,— (a) The system of free public employment exchanges existing in Austria does not rest upon any special legislative provisions, but has developed in practice through the enforcement of the unemployment insurance scheme, the free public employment exchange, acting as unemployment offices. The chief provisions which regulate the working of these free public employment exchanges (unemployment offices) are section 20 of the unemployment insurance act, the tenth and nineteenth orders issued under this act and the ministerial orders of May 26, 1920, and July 12, 1921. Almost all the public employment exchanges are controlled by joint administrative committees of which employers and workers are members. There are no legal provisions governing the selection of the members of these committees; as a rule they are elected by the district industrial commissions from among candidates proposed by the employers' and workers' organizations. (6) The existing private employment agencies are of little importance, and there is no collaboration between the private and licensed employment agencies and the public employment exchanges. Efforts are being made to limit as far as possible the activities of private fee-charging employment agencies. Some collaboration with private employment agencies which are of public utility has been effected by requiring these private employment agencies to announce their establishment to the competent district industrial commission and to supply statistical reports at regular intervals. (Order of May 26, 1920.) {o) The Austrian Government considers that it would be desirable to coordinate the working of the various national systems for finding employment, but the organization of the employment exchanges does not yet appear sufficiently developed—even in countries which have for many years been active in this respect—for the establishment of a common system to be considered. Collaboration between the various existing employment exchange systems, especially between countries which have a common frontier, seems desirable, but is difficult to realize in practice. Owing more particularly to the obstacles placed by many States in the way of those who wish to cross their frontiers, and considering that the statistical and other data available concerning the labor market are still very incomplete, it can scarcely be expected that such coordination could be successfully arranged. The first condition necessary for successful coordination would be to allow workers complete freedom in moving from one country to another. UNEMPLOYMENT IN THE TTNITED STATES 171 Bulgw-ia.—(a) The act of April 12, 1925, provides in section 1 that free employment exchange work is to be carried out by employment exchanges and by employment and unemployment offices. Section 6 provides for the establish-^ ment of employment exchanges at Sofia and Philippopolis, and gives the minis-ter of commerce, industry, and labor the power on the recommendation of the superior labor council to order the establishment of employment exchanges in localities in which there are more than 3,000> persons in permament employment. In localities where there are no employment exchanges, it is provided in section 8 that employment-exchange work shall be carried on by local employment and unemployment offices, of which the report states that 33 are to be set up throughout the country. The employment-exchange service thus created is directed and supervised in each department by the labor inspector, and throughout the country by a special branch of the labor department of the ministry of commerce, industry, and labor (sec. 15) ; the service began its preliminary work on April 1, 1926, and its regular work on August 1, 1926. In sections 11 and 13 provision is made for setting up courts arbitration and labor councils in connection with each local employment office. The courts of arbitration are to be composed of a justice of the peace as chairman, together with onerepresentative each of the employers and workers; these courts decide all disputes* relating to employment exchange work, etc. The labor councils are to consist of the labor inspector as chairman, a certain number of representatives of public, authorities, and three employers' and three workers' representatives nominated! by their respective local organizations; the duties of these councils are to* investigate the work which can be carried out in case of unemployment, and also other measures for the prevention or reduction of unemployment, the application of labor legislation and the improvement of labor conditions.. (&) As regards private employment offices it is provided in section 2 that they shall be prohibited and existing offices shall be closed not later than* six months after the passage of the law. The law further provides that in every town of more than 5,000 inhabitants a communal employment exchange must be set up. Towns of less than 5,000 inhabitants, as. well as large villages and rural communes must also set up employment exchanges or appoint an agent to deal with the finding of employment when this is thought necessary. Under section 6 the communal or municipal counsil must appoint an equal number of employers' and workers' representatives as members of the board of directors of the employment exchange. The representative organizations of employers and workers, if such exist in the district, may previously nominate their candidates for election. The council must also appoint an independent chairman. The only private employment agencies in existence are those maintained! by certain organizations and by certain special trades. These agencies, after the employment agency inspectorate has reported, are authorized by the State to exercise their functions for three years. This authorization may be renewed. As the activities of the few offices in existence is restricted to certain defined classes of employment which are not usually served by the public employment exchanges, the public exchanges are unaffected by them. The remoteness of the country renders the finding of employment internationally of little importance at present. In accordance with the instruction given by the Chamber of Deputies in 1926 the Government insures that vacancies in the country are in the first place given to Finnish nationals. Foreign workers are, as a rule, granted permission to work only when the vacant place can not be filled by Finnish labor and when the grant of a permission to work seems to be to the general interest and not merely to the interests of individuals. France.— (a) The act of February 2, 1925, to amend section 85 of Book I of the Code of Labor and Social Welfare with regard to employment exchanges and departmental employment offices maintained the existing obligation imposed upon towns of less than 10,000 inhabitants to keep a register containing offers of and application for employment and the obligation for towns of more than 10,000 inhabitants to establish a municipal employment exchange, andi added a further obligation upon the departments to set up departmental employment offices. The municipal employment exchanges are at the free disposal of the public, and the duties of the departmental offices are defined as being " t o organize and insure in every commune of their area the recruiting and placing, free of charge, of workers in agriculture, industry, commerce, and the liberal professions, as well as domestic servants and apprentices.'* The expenses of 172 UNEMPLOYMENT IN THE UNITED STATES setting up and administering municipal exchanges and departmental offices must be borne by the towns and departments concerned, and, if a town of more than 10,000 inhabitants fails to set up an exchange, it is provided that " the prefect shall take measures ex officio for its establishment, after a formal order has been given to the municipal council without effect." Municipal exchanges and departmental offices may institute trade sections for certain trades; an agricultural section must be set up in every departmental office. To every municipal exchange and departmental office, and if necessary to trade sections, is attached a managing committee composed of an equal number of wageearning or salaried employees and employers belonging as far as possible to the trades which make most use of the exchange. Public administrative regulations prescribing the conditions to which in general the various offices, exchanges or trade sections must conform, especially as regards the constitution of joint committees, measures to insure that the placing work of the offices is carried on bona fide and free of charge, and that there is impartiality in case of labor disputes, coordination between the various exchanges and offices, etc., were issued on March 9, 1926. The report further states that departmental offices existed in all except five departments before the passing of the act of February 2, 1925. Since the issue of the regulations of March 9, 1926, instructions for the full application of the law have been issued to the prefects of the departments concerned, and new offices have been created and others are being reorganized. At present the number of employment offices and exchanges is as follows: Seven regional offices, the operations of which extend over several departments and the duties of which are to coordinate the activities of the various departmental and municipal offices; 90 departmental offices (one in each department except in twc cases; 108 municipal exchanges. (b) As regards the coordination of the operations of employment agencies of different types, the report states that the police prefect, by order of July 10, 1920, prescribed that fee-charging agencies in the Seine department must forward to the police prefecture at the beginning of each month " a report on the operations of the agency during the preceding month, showing the number of applications for employment registered, the number of offers of employment received, and the number of workers placed, together with a statement of the kinds of employments sought, offered, and secured." The Minister of Labor has drawn the attention of the prefects to this order and has requested them to suggest that the mayors of towns in their departments, in which fee-charging agencies exist, should take similar measures. The report further states that a bill to amend sections 79, 81, 82, 83, 88, and 102 of Book I of the Code of Labor and Social Welfare, concerning the finding of employment for workers, was introduced in the Chamber of Deputies on July 12, 1927. This bill provides that " in each department, every fee-charging or free employment agency shall be required to communicate weekly, under conditions to be determined by the prefect, to the departmental public employment office, the figures of the requests for, and offers of, employment and of the vacancies filled." (o) The report states that the international labor office, as a center of information and research, will find useful information upon the supply of labor in the Bulletin du marche du travail. Germany.— (a) The public-employment services in Germany are the concern of the Federal Employment and Unemployment Insurance Institute. The organization consists of a head office, State employment offices and employment exchanges. The authorities of the Federal Institute are the administrative committees of the employment exchanges and of the State employment offices and the governing body and directors of the Federal Institute. The administrative committees consist of the chairman of the exchanges and an equal number of representatives of employers, workers, and public bodies, as assessors. The governing body and directors of the institute consist of the president of the institute acting as chairman and of an equal number of representatives of employers, workers, and public bodies, as assessors. The employers' and workers' representatives on the administrative committees of the employment exchanges and of the State employment offices are appointed from nomination lists drawn up by the employers' and workers' organizations. The employers' representatives on the governing body of the institute are elected by the employers' group of the Provisional Economic Council of the Reich; the workers' representatives are elected by the workers' group of the Provisional Economic Council. The employers' and workers' representatives among the directors of the institute are appointed by the Minister of Labor from special nomination lists drawn up by the groups concerned in the governing body. UNEMPLOYMENT UST THE UNITED STATES 173 (&) The finding of employment privately is carried on by employment agencies which do not work for profit and are outside the institute; the finding of employment privately is also done by professional agents, whose activities are permitted up till December 31, 1930. These two forms of finding employment, under section 49 (1) and section 55 (3) of the act respecting employment exchanges and unemployment insurance, are placed under the control of the institute, which also supervises their collaboration with the employment exchanges and the state employment offices. (o) The report states that a clearer definition of the word "coordination" would be desirable. If the International Labor Office desires to arrange the coordination of the employment-exchange systems in the various countries, the German Government is prepared to take part so far as it is possible. Great Britain.— (a) Free public employment agencies exist in pursuance of the labor exchanges act of 1909. Divisional and national clearing systems facilitate the work of finding places for the unemployed. In connection with each exchange there is a body known as the local employment committee appointed by the Minister of Labor and consisting in the main of representatives of employers and employed, who advise on matters concerning the carrying on of the exchanges. (&) Coordination between the public employment agencies and the employment agencies of the trade unions which cooperate in the application of the unemployment insurance acts (1920^-1926) is effected by arrangements made under section 17 of the unemployment insurance act, 1920, whereby weekly returns of unemployed members of the association are rendered, and the public employment exchanges offer vacancies when trade unions can not find employment for their members. The divisional and national clearing systems place this coordination on a national scale. The number of associations with which arrangements had been made was, at the time of the first annual report, 235 with a membership of 3,779,000. The figures for the succeeding years were: June 30, 1922, 142 associations, 1,655,000 members; June 30, 1923, 141 associations, 1,021,748 members; December 31, 1923, 142 associations, 1,007,140 members; December 31, 1924, 145 associations. 964,578 members; December 31, 1925, 143 associations, 1,103,000 members; December 31, 1926, 154 associations, 1,150,400 members; December 31, 1927, 145 associations with an approximate total membership of 1,042,540. Up to December 31, 1926, 135 local education authorities had approved schemes under section 6 of the unemployment insurance act, 1923, which permits such authorities to undertake duties in connection with the administration of unemployment benefit claimed by persons under 18 years of age under schemes approved by the board of education and the Ministry of Labor jointly. (c) The Government reports that the state of unemployment in Great Britain is such that the introduction of labor from other countries on any appreciable scale is not necessary. The permits required when alien labor is introduced into Great Britain, however, are issued by the Ministry of Labor after* consultation with the Home Office. On the other hand, on account of the differences in language and social and domestic conditions, there is little emigration of British labor to other countries except to British dominions and the United States of America. Close arrangements already exist for regulating interimperial migration. The United States of America immigration legislation does not provide for the transfer of labor from other continents through the machinery of employment exchanges. Greece.— {a) The royal decree of September 22, 1922, concerning the establishment of employment exchanges provided for two free public employment exchanges, one at Athens and the other at Piraeus. It was further provided that these exchanges should be supervised by a committee composed of a labor inspector as president and one representative each of employers and workers, and should be required to furnish monthly statistical information to the labor directorate. In other parts of the country the duty of endeavoring to find work for the unemployed fell to the labor inspectors. The report states that a new legislative decree relating to employment exchanges and unemployment insurance is now before the Chamber of Deputies, and that the employment exchanges set up under this decree will be administered by committees constituted in accordance with the intentions of the first paragraph of article 2 of the convention. (ft) The new legislative decree provides for the coordination on a national scale of the operations of the exchanges set up under it and of private agencies. 174 UNEMPLOYMENT IN THE UNITED STATES (o) The Greek Government considers " t h a t the present conditions in the various countries governing the entry, departure, residence, and work of emigrants only permit of a degree of coordination limited to the periodical communication by the International Labor Office to the countries concerned of the number of unemployed belonging to classes of workers who could be employed in these countries." India.—In view of the absence of industrial unemployment and of the fact that the provisions of the provincial famine codes adequately meet the case ot* agricultural unemployment, the Government decided, after consultation with provincial governments, that the establishment of special agencies is at present unnecessary. In Madras, however, there is a labor and employment bureau to secure employment for the members of the depressed classes and South African repatriates. Irish Free State.— (a) A system of free public employment exchanges exists in pursuance of the labor exchanges act, 1909. Further, under the unemployment insurance acts, practically the whole of the employed population (with the main exceptions of agriculture and private domestic service) is insured against unemployment. Insured persons, when unemployed, must lodge their unemployment books (without which employment in an insured trade can not be obtained) at an employment exchange, before they can be entitled to benefit in respect of their unemployment. Employers notify opportunities of employment to the exchange, the duty of which is to offer suitable employment to unemployed persons registered there. Benefit is paid only if such employment is not available. The system of national employment exchanges is administered by the central government through the Department of Industry and Commerce. Local offices, of which there are about 100, are established in the cities and principal towns of the country. Committees, which include representatives of employers, workers, education authorities and other local bodies or interested persons, have been appointed to advise on certain aspects of the work of exchanges. A system is in operation by which vacancies that can not be filled locally are circulated nationally from a central clearing house. This system is known as the national clearing system. (&) The chief public employment agencies, apart from the employment exchanges set up by the State under the labor exchanges act, are those of the trade unions which work from district and branch offices. These offices keep registers of unemployed members. By means of arrangements made with associations under section 17 of the unemployment insurance act of 1920, coordination is effected between the employment exchanges and the trade-union branches. If the trade union can not itself find employment for its members, the employment exchange offers any suitable available vacancies to them. By means of the national clearing system mentioned above co-ordination is on a national scale. (o) The report states that the Government w7ill be prepared to consider any definite proposals put before it for the purpose of coordination by the International labour office of the various national systems of employment exchanges. Italy.— (a) During the period under review the placing of unemployed workers has been directed by the Patronato Nazionale. This body, which was given legal personality in 1925, acts as an autonomous institution of the confederation of trade unions, with the agreement of the employers' organizations. During 1927, in addition to its other activities for the benefit of the workers in connection with labor and social welfare legislation, the Patronato has dealt satisfactorily with the finding of employment for workers under the control of the Ministries of National Economy and of Corporations. The placing of unemployed was effected in each province through special offices, which were coordinated with communal offices, and which were assisted in their detailed work by the regional authorities of the confederation of trade unions; the provincial offices were divided into trade sections, corresponding to the kinds of workers in the province. Each office has been supervised by committees composed of an equal number of employers' and workers' representatives nominated by the industrial organizations concerned, the chairman being ordinarily the director of the Istituto provinciale del Patronato. The offices have also acted as offices for the distribution of unemployment benefit as provided by law, and for the reception of the signatures of the workers in receipt of benefit. (6) Private employment agencies had been prohibited in Italy under the explicit prohibition contained in section 11 of the legislative decree No. 2214 of October 19, 1919. However, by the promulgation of the codified text of the laws relating to the public safety in the royal decree No. 1848 of November 6, 1926, the possibility of carrying on private employment agencies has again been UNEMPLOYMENT IN" THE UNITED STATES 175 permitted, provided that such agencies have received due authorization in the form of a special license granted by the public safety authorities. Under the same legislation, an obligation is imposed on such agencies to keep a daily register of their operations and to keep permanently posted up in a conspicuous place the list of fees which may be charged. Nevertheless, private employment agencies have no practical importance in Italy, and it has not therefore been considered necessary to take steps to coordinate their operations with those of the public offices. (c) The Italian Government is prepared to consider any suggestions which may be made by the International Labor Office with a view to the coordination as far as may be possible, of the operations of its employment exchange system with the systems of other countries. Japan,— (a) The act of April 8, 1921, provided for the establishment of free employment exchanges by the authorities of cities, towns, and villages or, with the permission of the director of the employment exchange board, by private persons or bodies. The exchanges maintained by cities, towns, and villages are subsidized by the State; they may be set up on the initiative of the local authorities or by direction of the Minister for Home Affairs. The exchanges thus established numbered 210 on December 11, 1927, of which 38 were private. From January to October, 1927, these exchanges received 2,975,970 applications for work and 2,548,007 offers of work; 2,365,800 workers were placed, and 2,181,106 applications were satisfied. The organization of employment exchange commissions is provided for in the ordinance of February 20, 1924. In pursuance of this ordinance a central employment exchange commission has been set up, followed by the appointment of local commissions in Tokyo, Osaka, Fukuoka, and Nagoya. The functions of these commissions are to 4advise the administrative authorities on the work of the employment exchanges by means of replies to inquiries or by representations. The chairman of the Central Employment Exchange Commission is the director general of the Bureau of Social Affairs, whilst the chairman of the local commissions are nominated by the cabinet on the recommendation of the Minister for Home Affairs from among the members of the commissions. The number of members of the central and local commissions may not exceed 20; they are chosen, as regards the central commission by the cabinet on the recommendation of the Minister for Home Affairs, as regards the local commissions directly by the minister; they include equal numbers of persons representing the interests of the employers and persons representing the interests of the workers chosen, for the present, from amongst persons nominated by the prefects. In addition, there may be set up, to express opinions on matters relating to the management of the local employment exchanges, employment exchange commissions in the cities, towns, and villages, the members of which are to be appointed by the heads of the respective cities, towns, or villages. The regular composition and the procedure of the local commissions are also to be determined by the chief magistrates of the cities, towns, or villages, who are required to report to the directors of the employment exchange boards. The members of these commissions include an equal number of representatives of both employers and workers. The method of their appointment is, for the time being, left in the hands of the chief magistrates of the cities, towns, or villages. (6) In order to coordinate the operations of the public and private employment exchanges there have been created, subject to the supervision of the Minister for Home Affairs, the central and local exchange boards, which include among their tasks the exchange of information. In order to facilitate coordination between the public and private employment exchanges, the heads of cities, towns, or villages and the directors of the local employment exchange boards designate one of the exchanges within their respective jurisdiction to coordinate the operations of all the exchanges. The total number of employment agencies charging fees or carried on for gain was 3,457 on October 31, 1927. Their operations included the receipt of 738,923 applications for work and 892,244 offers of work; 727,504 workers were placed, and 463,222 applications were satisfied. (c) The Japanese Government is of opinion that there is considerable difficulty in realizing the coordination of the operations of the various national systems by the international labor office, in agreement with the countries concerned. However, it is hoped that steps may be taken to give effect thereto as far as possible. 29193—29 13 176 UNEMPLOYMENT IN THE UNITED STATES Norway.— (a) The public employment exchanges act of June 12, 1906, established employment exchanges in communes, each under the control of a committee appointed by the commune and composed of a chairman and an equal number of representatives of employers and workers, who may be nominated by the employers' and workers' organizations. State supervision is carried out by the Ministry of Social Affairs, through the inspector of public employment exchanges. No fees are charged. There are at present 48 employment exchanges. Norway is divided into five employment areas for the transference of labor from one region to another. The local employment exchanges send to the central exchanges of the areas weekly reports showing the requests for and offers of employment with which they can not deal. On the basis of these reports the central exchanges draw up lists for the whole of the area, which are sent to railway stations, etc., to be posted up. The exchanges are also authorized to issue half-fare tickets to the place of work to the destitute unemployed. (b) The free private employment exchanges in Norway have become of so little importance that it would not be worth while to coordinate their activities with those of the public exchanges. The free private exchanges which hold a concession are required, under the act of June 12, 1906, to send reports to the central statistical office. (c) The report states that "collaboration with other countries in the finding of employment has always been practiced when an opportunity occurred. Now that the migration of labor is regulated and restricted by the legislation of various countries, the free exchange of labor between different countries is no longer very considerable. It could clearly be desirable to coordinate the system of finding employment in different countries, both as regards procedure and also as regards statistics. A special drawback is that it is difficult to compare the statistics of employment found and of unemployment in different countries." The report concludes that in this respect the Inter national Labor Office has a task which it has not yet carried out. Poland.—A system of free public employment exchanges exists in virtue of the laws and orders referred to above under I. This system included, on January 1, 1928, 38 offices in the principal towns, 18 branch offices in places of lesser economic importance and 10 communal exchanges in upper Silesia. During 1927, the public employment exchanges placed 293,935 workers, as against 324,110 in 1926, and 282,111 in 1925. Mixed advisory committees including equal numbers of representatives of employers and workers have been set up in virtue of the decree of January 27, 1919, relating to the organization of employment exchanges, and of the order of December 18, 1923, relating to the organization and powers of the joint advisory committees attached to employment exchanges. These representatives are appointed by the municipal and district councils or equivalent bodies, from candidates nominated by the industrial organizations, or, in default of such candidates, directly from the employers and workers, taking into account the economic importance of the occupations concerned. The committees advise on all matters relating to the working of the employment exchanges. In Posnania and Pomerania the working of these committees is governed by an order of September 30, 1924. (b) In addition to the public employment exchanges, there exist employment agencies carried on by social organizations in accordance with the act of June 10, 1924, and commercial employment agencies regulated by the act of October 21, 1921. The employment agencies carried on by social organizations are not to derive any financial profit from their activities, but to cover expenses they may charge employers a fee equal to 5 per cent of the first months' earnings of the person placed. In 1927 there were 158 such agencies, and the workers placed in 1926 numbered approximately 25,000. These agencies are supervised by the public exchanges, to which they must report monthly. As regards the employment agencies carried on by way of trade, section 4 of the act of October 21, 1921, provides that a permit to carry on an employment agency shall not be granted " if a sufficient number of employment agencies already exists in the locality in question, and especially if a State or other gratuitous employment exchange is in existence there and carries on its work satisfactorily." These permits may only be granted to persons who were already carrying on agencies when the act came into operation; they may be granted for one year by the minister of labor and social welfare, who specifies the occupations and localities to which the permit applies. The number of fee-charging agencies was 56 in 1927 as against 59 in 1926; they placed approximately 17,000 workers. The act of March 3, 1926, amending UNEMPLOYMENT IN THE UNITED STATES 177 section 5 of the act of October 21, 1921, extended the period of five years from the promulgation of the act, within which registry offices for domestic servants were to be abolished, to eight years. (c) The Polish Government states that it attaches importance to the coordination provided for in the third paragraph of this article of the convention, and would like the International Labor Office to make proposals, after consulting the governments concerned, with a view to the exchange of national statistics by emigration and immigration countries and the adoption of uniform methods of placing workers. Rumania.— (a) In application of the employment exchanges act of September 22, 1921, circuit employment exchanges have been established in the towns of chief commercial and industrial importance. During 1927 there were 37 such exchanges. There are also registration offices in all urban and rural communes which receive applications for employment or for labor which are communicated to the circuit employment exchanges. No fees are charged for finding employment. The sums necessary for the working of the exchanges are provided for in the general budget, upon proposals made by joint committees, regional and central (appointed by the Minister of Labor), and confirmed by the directorate of the employment exchange service. Joint committees of an equal number of workers and of employers are attached to each exchange and make proposals as regards the work of the exchanges and the budget of the exchange. These committees are under the control of the directorate of the employment exchange service. The Government intends to increase the number of circuit exchanges as the nedd arises. When the circuit exchanges are sufficiently numerous the regional exchanges provided for in the act will be set up; meanwhile, the circuit exchanges in localities where there are factory inspection offices act as regional exchanges. The activities of the circuit exchanges and the communal registration offices are coordinated by the central employment exchange directed by the directorate of the employment exchange service in the Ministry of Labor. During 1927 the exchanges received 115,716 applications for work and 111,459 offers of employment; 80,302 workers were placed. (6) Fee-charging agencies have been suppressed. Provision is made in sections 7 and 8 of the act for licensing and coordinating the activities of free private employment agencies, but, although a few trade-unions have received licenses, no such agencies have been established. (o) The report does not refer to the question of international coordination. Spain.— (a) The royal decree of September 29, 1920, provided for the institution of a general employment service and a service of unemployment statistics under the control of the Ministry of Labor. The results of this system had, however, not been very extensive, according to the report for 1925, and the report for 1926 stated that further provisions relating to the finding of employment had been included in the royal legislative decree of November 26, 1926, establishing a national corporative organization. This decree provided for the creation, for specified groups of trades or occupations, of joint local and interlocal committees, one of the functions of which was defined in section 17 (4) as follows: "To organize labor exchanges, in order to find at any time employment for unemployed workers, and for this purpose they shall make an occupational census of the employers and workers in their branch in the locality." The report for 1927 refers to previous reports. (6) The report does not refer to this question. (c) The report states that the Spanish Government considers that it is possible to apply the last paragraph of article 2 of the convention. Sweden.— (a) Employment exchanges established by the general councils of the provinces and by some communes have been in existence since 1902 and uniformity in the system has been attained by impos'ng certain conditions which must be fulfilled before support may be granted from State funds. These conditions are laid down by the decree of June 30, 1916, amended by the decree of May 16, 1918, concerning State grants for the organization and development of the public system of exchanges. At the end of 1927 there were working 36 public employment exchanges controlling 36 employment offices and 106 branch offices, 7 of which were engaged in finding employment for certain special trades. Employment agents are also established in some localities. The direct management of the work of the various public employment exchanges devolves on special committees among whose members are an equal number of representatives of employees and workers. These committees are appointed by the provincial or communal authorities which have established the exchanges; 178 UNEMPLOYMENT IN THE UNITED STATES the employers' and workers' organizations nominate their candidates previously. During 1927 there were 517,711 applications for work; the number of vacancies was 261,539, of which 211,977 were filled. (&) The report states that as the private employment agencies are considered as bound to disappear, no steps have been taken to coordinate their activities with those of the public employment exchanges. (c) As regards the possibility of coordinating internationally the various national employment systems, the report states that the question does not at present seem of practical interest, at least for Sweden. So long as there is no* radical change in the dearth of employment and in the restrictive immigration legislation in many countries, an increase in the exchange of labor between States can not be hoped for. Switzerland.— (a) Free public employment agencies had been established by the federal decree of October 29, 1909, in the form of labor offices centrally grouped in the " Association of Swiss Labor Offices "; this system was developed by the resolution of the Federal Council of October 29, 1919, concerning unemployment benefit, which provided in section 5 for the creation in each canton of a central employment office. In 1924 the system was somewhat modified by the withdrawal on July 1, 1924, of the decree of October 29, 1919, and the issue by the Federal Council of the order of November 11, 1924, respecting public employment exchanges, the object of which is to coordinate the obligations arising from the convention for the confederation and the cantons. This order requires the cantons to set up central employment exchanges. When, however, the circumstances justify it, and if the Federal Department of Public Economy agrees, several cantons may set up a joint central exchange. In accordance with this requirement there is a central employment exchange (cantonal office) in every canton. Those cantons, moreover, in which a central employment exchange is insufficient have set up employment exchanges in the communes., or, where it was thought desirable, district exchanges covering several communes. The work of the communal or district exchanges is coordinated by thecantonal offices, that of the cantonal offices by the Federal Labor Office which, publishes a daily bulletin containing the offers of and requests for employment received from the cantons. The order of November 11, 1924, further requires the formation of committees, composed of equal numbers of employers' and workers' representatives, to serve as advisory bodies in questions concerning employment exchanges. Within these limits the cantons and communes are left free to choose the method of selecting the employers' and workers' representatives, the manner of appointing, and the exact task of these committees. The requirement that these committees must be set up has up to the present been interpreted to mean that the contons need not set them up if special circumstances make them superfluous. If, for example, the communal employment exchanges in a canton have joint committees, it may not be necessary to* require the central office to appoint a committee. On the other hand, when the central office of the canton has a joint committee it may be useless to require the communal offices to appoint them as well. In practice, out of 34 public employment exchanges in Switzerland, consisting of 20 cantonal offices and 14 communal offices, 24 have at present joint committees. These joint committees do not all perform the same tasks. While some are bodies for the supervision of the employment exchange, others are of a purely advisory nature. (&) The order of November 11, 1924, lays down that the Federal Department of Public Economy shall take the necessary steps to coordinate the activities of free public and private employment exchanges. Some employers' or workers' organizations collaborate in the monthly statement upon the situation of the Swiss labor market. In addition, the daily bulletin prepared by the Federal Labor Office is communicated, whenever it contains information likely to interest them, to all the employers' or workers' organizations which have retained a service for the finding of employment. (c) Every three months the Federal Labor Office communicates to the International Labor Office a list, by occupations, of Swiss workers prepared to emigrate to take work abroad. The report adds that "the coordination of the various national employment, systems would be a very difficult task. It might even be asked whether it was worth undertaking so long as many countries place restrictions on immigration." (Thereupon the committee went into executive session, after which it adjourned.) UNEMPLOYMENT IN THE UNITED STATES WEDNESDAY, JANUARY 9, 1929 UNITED STATES SENATE, COMMITTEE ON EDUCATION AND LABOR, Washington, D. C. The committee met, pursuant to adjournment, at 10.30 o'clock a. m.? in room 212, Senate Office Building, Senator James Couzens presiding. Present: Senator Couzens (chairman). Present also: Dr. Isador Lubin, special assistant to the committee. STATEMENT OF ETHELBERT STEWART, UNITED STATES COMMISSIONER OF LABOR STATISTICS The CHAIRMAN. Mr. Stewart, you came down here at the suggestion of Secretary of Labor Davis ? Mr. STEWART. Yes. The CHAIRMAN. YOU have read Senate Eesolution 219. Mr. STEWART. Yes. I have not read it recently, but I think I know what it contains. The CHAIRMAN. We would like to have you give us such information as you can with respect to the subjects which are particularly pertinent to your department, such as the extension of systems of public employment agencies, and so forth. Mr. STEWART. On the subject of public employment agencies, Mr. Jones, of the Public Employment Service, is here, and probably will tell you more about that than I can as to what we have and what they could do if they had the means to do it. I n the nature of things there can be no statistics of unemployment without a census. If the census were taken so that we had the number of unemployed at any given time, then the Bureau of Labor Statistics, with its volume of employment, could apply that index at a given time and show the number of unemployed. I n the first place, you will have to define what you mean by unemployed. The bureau's definition of that term as given in the reply to the Senate resolution in 1926 is definite. Let me explain what I mean. I n J a n u a r y , 1928, when the employment index in manufacturing industries was 84.2 per cent, computed on the average employment in the same factories in 1923, equaling 100, the shrinkage in employment— and understand I say shrinkage in emplo}^ment as against the average of 1925—was stated to be about 1,874,000. The index for November, 1928, was 87.4, or 4.2 per cent higher than in January, 1928. That is to say, we are starting out this year with a take-up in the old industries; and when I say the old industries I mean the indus- 179 180 UNEMPLOYMENT I N T H E UNITED STATES tries that are covered by the bureau, of 4.2 per cent, which mean? that the shrinkage has been reduced approximately by 79,000 persons,. Now, the only way that I could get at unemployment would be tc have a complete census of the unemployed taken as of some one date. Sweden took a national census of the unemployed. She found 2.2 per cent of her population unemployed. Suppose we had a census which showed unemployment here as of January, 1929, at 2.2 per cent, my index of employment being 87.7 per cent, or an unemployment of 2.2 per cent. That 2.2 per cent, of course, would be worked out to actual numbers, and employment worked out to actual numbers, and then it is possible to say that with an employment index oi 87.7 per cent, and an unemployment of 2.2 per cent, if the employment index goes up, it would mean that the unemployment number, went down, because then we would have an actual number to apply. Iii the absence of such information as that it was necessary for me to take 1925 as a base line with the statement that there was practically no unemployment in 1925. Frankly I don't know whether there was or not. The CHAIRMAN. YOU started awhile ago to tell us your definition of unemployment. Mr. STEWART. By unemployment I mean a person usually employed, at present out of work, and seeking a job. That includes the industrially unemployed. I t cuts out all of the unemployable—the people who are too old to work or unable to hold a job for any reason. I n other words, it cuts out the people who really belong to the social question of outdoor relief, for which industry as such is only indirectly responsible and not immediately responsible at that time. Whatever the indirect influences may be, that is entirely a sociological question and not one that the statistics can readly handle. But, as it now stands, I am able only to state the volume of employment, and we began that in 1915. I n 1923 we radically increased the percentage of establishments in our index and we made that year our base line. I n July, 1928, as the result of the Wagner resolution, and an increase in appropriation, we have extended that very materially. I have a statement here of the extensions and of what it shows up to date. The United States Bureau of Labor Statistics began the work of collecting volume of employment and pay-roll data in 1915, and carried it along as best it could until 1923, when a more vigorous effort was made to widen its scope and materially increase the number of reports secured. I t s efforts, however, were confined solely to manufacturing industries. This was true up to J u l y 1, 1928, when, as the result of the rather wild discussion of unemployment and the bureau's reply that the only answer which could be given would necessarily be based upon the change in the volume of employment, and that as shown by the sample of manufacturing industries which it carried, together with the volume of railroad-employment records carried by the Interstate Commerce Commission, Congress materially increased the bureau's appropriation with the understanding that this particular line of work should be expanded as rapidly as possible. I n June, 1928, we were carrying reports from 11,231 establishments in 54 of the prinicpal manufacturing industries of the United States. These establishments in June had 3,091,921 employees with combined UNEMPLOYMENT IN T H E UNITED STATES earnings in one week of $83,523,193. Beginning with July, 1928, the bureau began the collection of employment data in lines of industry other than manufacturing. I t also took steps to increase the number of reports from manufacturing establishments. Right here I want to say, in reply to some of the criticisms of this employment index for the manufacturing group, that it is not confined to the old lines of manufacturing. While it is true that we have not as yet developed a separate index for the manufacture of radios and refrigerating equipment, such as Frididaire, j^et as a matter of fact we are getting a very considerable percentage of the volume of labor employed in these industries through the old-line establishments themselves. For instance, reports from the Westinghouse Electric and General Electric Cos. include their employees engaged in the manufacture of radio parts, electric refrigerating equipment, small motors, and all of those things which are included in the new lines of industry. From our textile establishments we get reports which include the manufacture of rayon textiles, and so on down the long list which it is needless here to enumerate. The volume of employment report for November, 1928, shows 11,954 manufacturing establishments reporting. This is an increase of 723 establishments over the June report. I t covers 3,273,766 employees and a total weekly pay roll of $87,870,491. The percentage of change in employment as between November and October, 1928,. was a decrease of one-half of 1 per cent, while the percentage oi change in volume of pay roll was a decrease of 2.8 per cent, which indicates principally a decrease in working time. I n August we added both wholesale and retail trade. The method was to take the directory of wholesale establishments and write to a selected list urging that they report to the bureau on employment and pay roll. I n the November report we were able to carry 1,064 wholesale establishments employing 35,362 people. I n a similar way with the retail trade we consulted the directories and the classifiedbusiness telephone directories and made similar requests upon them. To a certain extent the agents in the field on other work were used to make contacts with the retail dealers. I n the November report we had 1,663 retail establishments reporting 144,772 employees, with a combined weekly pay roll of $3,423,883. I t will be noted that the percentage of change in retail establishments as between November and October shows an increase of 5.8 per cent in the number of employees with an increase of only 4.1 per cent in volume of pay roll. Public utilities appeared for the first time in the September report, comparison being between August and September. I n this classification we include electric railway and bus lines, electric power and light, gas, water, telephone, and telegraph companies. Here, also, the reporting units were selected from the directories; and the November report shows returns from 5,259 establishments employing 471,084 workers, with a combined weekly pay roll of $13,886,101. Anthracite and bituminous coal mining appeared for the first time in October, comparison being between September and October. The November report shows 57 anthracite coal mining establishments with 39,321 employees. The weekly pay roll for these 57 companies was $1,247,513. Here the percentage of change as between November 182 UNEMPLOYMENT IN T H E UNITED STATES and October was an increase of 1.4 per cent in the number of employees and a decrease of 6.2 per cent in volume of pay roll. Bituminous-coal companies reporting for November numbered 566, with 118,998 employees and a combined weekly pay roll of $3,145,959, showing an increase in employment between November and October of 4.8 per cent and an increase of pay roll of 3.3 per cent, which, of course, is largely due to resumption of work after the strike. I n the November report appears for the first time information for metalliferous mining, comparison being as between November and October. I n this report we carry for November 133 establishments employing 30,316 persons with a combined weekly pay roll of $911,603. The November report shows an increase of 1.3 per cent in employees over October and an increase of 0.9 per cent in volume of pay roll. Information for hotels is also carried for the first time in the November report, with 315 establishments reporting 55,201 employees and a combined weekly pay roll of $957,099, representing cash payments only. As between November and October there was a decrease of 1.1 per cent in number of employees and also a decrease of 1.1 per cent in volume of pay roll. Each of these new lines of employment information will be further developed and expanded from month to month. The total number of all establishments reporting for November was 21,001 with 4,168,820 employees and a combined weekly pay roll of $112,466,366. Admittedly it will be several months before we can tell the real significance of any of these newer groups. The CHAIRMAN. YOU refer to the out-of-work people who are a sociological problem rather than an industrial problem. Mr. STEWART. Yes. The CHAIRMAN. Have you at any time attempted to get at that volume ? Mr. STEWART. NO ; nothing but a census could do that. The CHAIRMAN. That would require a national census, the same as *our reapportionment census? Mr. STEWART. I t would require a question on the census. I t would require probably two questions as to whether there was anyb o d y above a certain age and below a certain age in a particular family out of work on the elate of the census, and the age and the sex and the occupation of such person out of work, and whether they were actually seeking work at that time. That will eliminate those who are unemployable. The CHAIRMAN. Would you get at the number of unemployable t h r o u g h such a method? Mr. STEWART. Yes. Well, the number of unemployable would probably require another question, but after all, that is as I said ^before a sociological question and not an industrial question. The industries can not absorb the unemployable. The CHAIRMAN. Is it of any value to society to obtain that number ? Mr. STEWART. Yes; I should say that it is of great value. The CHAIRMAN. What would we do with the information when wre got it? Mr. STEWART. All those people have to be taken care of. We are •not letting people die in this country, at least directly, to any great number; and something must be done to provide for them. UNEMPLOYMENT I N T H E UNITED STATES 183 The CHAIRMAN. I S that a State problem or a National problem £ Mr. STEWART. Both. Unemployment insurance is taking care of it in a limited way in 18 countries of Europe, and in Australia and in New Zealand—no; unemployment insurance does not take care of the unemployable; that takes care of the unemployed. So far as the social side of it is concerned, it seems to me, while sociology is not my field, I would want some of the symptoms before I undertook to diagnose the case. I would not want a doctor to treat me who did not even ask me what the symptoms were or try to see whether I had a fever or not. We do not know anj^thing about our social conditions, in other words, without just such a census as I am talking about. For instance, half a mile from Fifth Avenue is Avenue A in New York City. I n Avenue A 3^011 find 5,000 people per square mile. I t is more densely settled than an equal space anywhere in the world, not excepting India, China^ or anywhere else. The people aresleeping four or five in a room. Of course, if we do not care anything about Avenue A, well and good. The CHAIRMAN. J u s t for information, is it your idea that it is the concern of the Federal Government in respect to conditions in Avenue A, or is it the concern of the State of New York? Mr. STEWART. Senator Couzens, is it any of the Federal Government's business whether a State whose function it is to provide education for the people provides it or not ? Is it any of the Federal Government's business that one State should have 65 to 75 per cent of illiteracy and another State have 3 or 4 per cent? I don't know how far you carry the question of the indifference of the whole to the condition of a p a r t ; but, after all, a cancer on your lip might be the business of only the lip, but you, better look after it yourself, or it will get you sooner or later. The CHAIRMAN. That is the point, whether the State should look after it or the Federal Government should come in. Mr. STEWART. Can the Federal Government afford to see New York swayed or swamped by Avenue A ? The CHAIRMAN. Of course, you can carry that to any length you like. The question is where the responsibility lies. I t is obvious that everybody is interested in the welfare of his neighbors, but there is a difference in being interested in the welfare of your neighbors and taking some particular step in that direction. I n other words, we might wish our neighbor well, but the neighbor would probably resent our tell him how to be well. Mr. STEWART. I can hardly conceive of any State resenting a count and census which would show the condition in that State as compared with other States. I n fact, that is a Federal question because you can not make the States take a census. The taking of a census ha,s always been a function of the Federal Government. The CHAIRMAN. With that I take no exception. What I ask is, What would we do with the information when we have it? Mr. STEWART. We would know what to do with the situation precisely as a physician would use the information he obtained intaking your temperature, your pulse count, and so on. He would at least know what his problem was. The CHAIRMAN. After he got his problem, he would have to have the consent of the patient to act, would he not ? 184 U N E M P L O Y M E N T IJST T H E UNITED STATES Mr, STEWART. Yes; bnt presumably he had the consent of the patient when they sent for him. The CHAIRMAN. Not necessarily. A physician might order an operation and the patient decline to have it done. Mr. STEWART. That is true. The CHAIRMAN. However, what I am trying to emphasize is that there is such a conglomeration of information secured by the Federal Government in particular, which is never used after it is obtained. Great expense and trouble are involved to secure it. After it is secured nobody knows what to do with it, and nothing is ever done with it. Mr. STEWART. I S that the fault of the information ? The CHAIRMAN. I t is sometimes the fault of the absurdity in getting the information, when you know in advance that you are not going to be able to avail yourself of it either because of constitutional or temperamental reasons. The result is the same. I am not taking any position. I am trying to find out what we would do with it when we got it. We are a little off the track, so far as that part of it is concerned. I recognize that the sociological question with respect to the unemployed is a much larger factor than generally is admitted in pretss stories. When we lump the number of unemployed, there is no accurate designation between the unemployable and the employable. They are both problems. I n my judgment they are both problems of the State particularly. Whether the Federal Government can do amrthing in a legislative way is a doubtful question. Whether they should is a question of policy and also a doubtful question. I am trying to get enlightenment from those of you who are engaged on this one job all of the time. Mr. STEWART. The question of unemployment is not exclusively a State question, because the question of unemployment i,s a question not only of production but of purchasing power. I t affects commerce, which is not a State question, which is not bounded by State lines. I t may be quite possible that Michigan is not doing anything in the case of the question of copper refineries. I n November, 1927, I published a statement that the output of refined copper in pounds p e r man per day had jumped from 610 to 1,612. I got a Jetter from a company dated December 28, 1928, showing that it had jumped again to 2,105. I n other wordts, we have the three periods, 610,1,612, 2,105, with the consequent shrinkage in employment. The CHAIRMAN. I S that from one company or all companies? Mr. STEWART. One company, which means a reduction of men from about 800 down to less than 200. I t is possible that Michigan is not doing anything about that and does not intend to do anything about that, but the fact remains that unless those men have been absorbed in some other industries Michigan and the people of the United States have lost the purchasing powder of about five-sevenths of the employees of that company. The only way that you can get at this is from a census of those working and those unemployed, because at the same time that they reduced their employees from 800 to less than 200 they jumped their product from 9,000,000 to 15,318,000 pounds per month, and they sell it. That shows that business is good. They are selling a third more copper than they did when they employed their 800 men. You can not get the conditions of labor from the volume of sales, and unless these men are reemployed UNEMPLOYMENT I N T H E UNITED STATES 185 somewhere it is going to affect not only Michigan but the United States. The CHAIRMAN. There is no question but that what affects one State affects the Nation. I am not arguing your point; I am asking the question of w7here the responsibility of solving the problem is. Mr. STEWART. I think it was Abraham Lincoln who said that if his wife fell overboard from a ship he would not wait to look up the marriage certificate before he jumped in and tried to save her. I think that so long as a strict construction is not applied where it is not convenient, the strict construction of the Constitution ought to be as pliable in cases of social cancer as it is in other cases. The CHAIRMAN. Of course, you can make those fine paraphrases and quotations from Mr. Lincoln, but it is perfectly obvious if the Federal Government is going to assume all the responsibility of the States every time something needs to be done, there is no necessity for a State taking any action at all. W h y not pass it all on to the Federal Government? Mr. STEWART. I do not mean that the Government should assume all of the responsibility, but there are certain things, like the collection of information, which the Federal Government must undertake if it is to have a complete survey, because the States do not do it. F o r instance, we have five States that do not report industrial accidents at all and that have no workmen's compensation law. We can not know how many accidents there are in the United States so long as those five States do not report unless wTe go down there and get it ourselves. The CHAIRMAN. Have you taken any action with respect to gett i n g those questions answered in the United States census ? Mr. STEWART. I have. That is to say, I have asked the secretary to write to the Secretary of Commerce to have those questions introduced in the census. That was months ago. I am sure that we have written two letters. Of course, at that time the census had reached no conclusion in the matter. I don't know whether they intend to introduce those questions or not. The CHAIRMAN. Have you anything more that you would like to say, Mr. Stewart? Mr. STEWART. On the question of employment offices in the United States, as I said, Mr. Jones has more to say about that than I, but on the question of employment offices in foreign governments we have here in the December, 1928, Monthly Labor Review an article on the employment offices and employment insurance covering the whole question as far as Europe is concerned, which I should like to submit to the committee as a part of the report. The CHAIRMAN. Have you made any study at all as to the possibility or the desirability of cooperation between the Federal, State, and private agencies of employment? Just how could they cooperate ? Mr. STEWART. That really is a question for Mr. Jones to answer. They have been through that, I have not. Before I leave I would like to say that a survey of the unemployed in England and the study of the industrial history of 11,000 cases developed the fact that 57.7 per cent of the unemployed had no trades, never having been apprenticed and not having rubbed off enough in any industry io constitute a trade. Of the insured, only 7 per cent of those who 186 UNEMPLOYMENT IN T H E UNITED STATES had a trade or had had a training were unemployed in 1926, while 12 per cent of the total of uninsured were unemployed, which indicates just as we have here, that it is the unskilled labor that is being thrown out by these new developments and new changes, and that makes them exceedingly difficult to reabsorb. The CHAIRMAN. According to the testimony as I recall it, given by President Green of the American Federation of Labor, the fact that some of these men were trained men made it more difficult to absorb them. For example, he referred to the telegraphers who were out of work because of the radio and to the musicians who are out of work because of the talking movies. They were of such a specialized character that they were little fit for anything else. Mr. STEWART. I t would operate in that way with the highly specialized. On the other hand, they are comparatively few. The CHAIRMAN. I would not say that. Mr. STEWART. As compared with the common labor. This new machine that proposes to set type on the piano-player scheme and operate a linotype by telegraph 500 miles away, 25 or 30 of them at a time, is eventually going to practically end the printing trade. The CHAIRMAN. Then what will the printers do after all of tlieir training ? Mr. STEWART. I do not know. I will say this. Take the printers? and they are as a class, of a grade of intelligence sufficiently high that their chances of absorption in some other industry, barring the question of age, would be greater than an equal number of common laborers. Then take this new scheme of development of cultivation of the farm. Everything that can be planted in rows can be treated with this mulched paper, which not only keeps down t'he weeds, and makes cultivation entirely unnecessary, but insures a crop and an increase in the percentage of crop the first year which more than covers the cost of the paper, and the paper will last from four to five years. The agricultural laborers as a rule, and I want to insist upon saying " as a rule " because there are a great many exceptions, are not the type of men who can readily be absorbed in anything else, except some kind of common labor, and, when an agricultural laborer goes to the city he finds that the conveyer and the hoist truck have taken away all of the jobs which he might have gotten. I am not saying that there is no absorption, but it does seem to me that there must come a limit to the absorption. Take, for instance, the proposition to make paper milk containers as against the glass bottle. They not only are cheaper, but they are lighter, and a man on a motorcycle with a side car can handle as much as a truck with two men now, and it is coming all along the line. Take this new engine which has just been invented, which weighs practically a million pounds, wdiich is 125 feet long. I t can carry three ordinary freight trains over a mountain. I t is going to do for the railroad people just what the linotype did for the printer at first. Of course, that readjusted itself. How far this question of readjustment can go, nobody can state, and that these questions are local does not appeal to me; that they are State problems, does not appeal to me. They are world problems. The CHAIRMAN. There is no question about it. I do not disagree with you about the question of the problem part, but the question is as to who should solve the problem. I n other words, has the Federal UNEMPLOYMENT I N T H E UNITED STATES 187 Government the power and the responsibility of solving all these problems? I n other words, are we going to have such a highlydeveloped centralized Government that we are going to assume all the responsibilities of sociology and economics without any aid from the States, or without any initiative on the part of the States ? Mr. STEWART. I think it is the Federal Government's business to at least compile the initial information from which to work. The CHAIRMAN. And that you think, perhaps, is the limit to which it should go ? Mr. STEWART. That is a pretty long step. We would be pretty well satisfied if we could get that. The CHAIRMAN. Have you anything more to say ? Mr. STEWART. I don't know that I have anything more to say. I will just leave these copies of the Monthly Labor Eeview with the article about foreign-employment service for the benefit of the other members of the committee. The CHAIRMAN. Before you leave, when you responded to Senator Wagner's resolution with respect to the number of the unemployed Mr. STEWART. NO ; I said the shrinkage in employment. I did not say the number of unemployed. The CHAIRMAN. YOU did not wait until I had finished the question. I t was generally reported that you stated that a certain number were unemployed. Mr. STEWART. I did not. The CHAIRMAN. The press got that report, and there was agitation as to the accuracy of the statement. Mr. STEWART. I never made a statement as to the unemployed. I n 1921 I made an estimate of the probable unemployed. No; I will take that back. That was not a b a t e m e n t of the unemployed. I t was a statement there again of the shrinkage from the peak of the employment in 1920 to the depth of the unemployment or the shrinkage in employment in July, 1921. I have no means any more than estimating the unemployed. The CHAIRMAN. Did you estimate the unemployed in response to the Wagner resolution ? Mr. STEWART. N O . I estimated the shrinkage in the employment. The CHAIRMAN. I recall that toward the end of the last session there was considerable agitation, political and otherwise, as to the volume of the unemployed. Mr. STEWART. Yes. The CHAIRMAN. The antiaclministrationists were saying that the unemployed was something about 4,000,000. Mr. STEWART. Yes. The CHAIRMAN. And they called upon the Department of Labor to give us information as to that, and, as I recall, there was some report saying there was about a million eight hundred thousand unemployed instead of 4,000,000. Mr. STEWART. I n that report I said that the shrinkage in the volume of employment, the shrinkage in the number of men on the pay roll was 1,874,000. I did not say that that was the number of the unemployed. I have never said anything of the kind. The estimate in 1921 of 5,735,000 was the shrinkage in the volume of the pay roll. The CHAIRMAN. By dollars or the numbers of men ? 188 UNEMPLOYMENT I N T H E UNITED STATES Mr. STEWART. The numbers of names on the pay roll. The CHAIRMAN. That is a very inaccurate report, is it not? I. mean that it is a very inaccurate representation in view of the fact that a man may be on the pay roll for one day a week, and not six days a week, and yet counted as being employed? Mr. STEWART. We took the average of a single pay roll. T h a t is all that we can handle. The CHAIRMAN. I n other words, it does not paint a picture at all of real economic conditions, because, as I say, a man may be working one day a week or five days a week,, and the fact that he is on the pay roll does not indicate his economic condition at all. Mr. STEWART. I t does not show the part time. However, we have since introduced the element of percentage of full-time operation of the plant, which helps in that a little bit. We also take the volume of money in the pay-roll period, as that goes up and down. If it goes down without the number of employees going down, it shows short time. If it goes up without a change of employment, it shows an increase in employment. Admittedly it is not a complete picture, but it is the only picture we have, and the only picture we could get with the funds we have. Mr. STEWART. I n 1928 we got the city of Baltimore to make a police census of the unemployed, which showed about 2 per cent. The CHAIRMAN. When you say 2 per cent, then you mean 2 per cent of the employable or 2 per cent of the population? Mr. STEWART. TWO per cent of the population. The CHAIRMAN. That does not mean very much either, does it ? Mr. STEWART. N O ; but it is the only thing we have that means anything. The CHAIRMAN. I think sometimes a bad picture is worse than no picture at all. Mr. STEWART. After all, nearly all of the figures we have applied to the population as a base. There is not any question in which it is not more or less deceptive. When you say that 75 per cent of the people of Michigan or of Iowa can read and write, the other 25 per cent may be too young to have learned to read and write. You can not tell anything about it. But that being your base, that being the base of your census, you can only make comparisons upon the census figures where they are the only figures that you have. STATEMENT OE FRANCIS I. JONES, DIRECTOR GENERAL UNITEB STATES EMPLOYMENT SERVICE The CHAIRMAN. Prior to coming down here, Mr. Jones, did you give any consideration to the questions raised in Senate Resolution 219? Mr. JONES. I have; yes. The CHAIRMAN. Have you a statement to make? Mr. JONES. I have no particular statement, unjess you ask me a question. I shall endeavor to answer you. The CHAIRMAN. YOU see the questions that we were instructed to investigate, and I thought perhaps you had prepared yourself to answer those questions. Mr. JONES. I have not prepared any statement. I have just returned from an official visit, looking alter some of our work. Per UNEMPLOYMENT I N T H E UNITED STATES 18$ haps you want to know the number of offices we are in cooperation with. The CHAIRMAN. I think you had better talk with the Secretary and prepare a statement in answer to the questions, such as your department can answer. I refer to the questions propounded or required to be answered in this resolution. I n other words, it is not practical for me to go down through the list and ask questions with respect to each one of these subjects, because, obviously, I do not know the extent of them all. I understood from talking to Secretary Davis that he would send somebody down here who was prepared to give us the information that the department has about these particular questions, such as feasibility of cooperating with Federal, State, and private agencies, and the establishment of systems of unemployment insurance or unemployment reserve funds, or the establishment of employment agencies throughout the country. Mr. JONES. I shall be glad to answer regarding the establishing of public employment offices throughout the nation. My personal information is The CHAIRMAN. I do not want your personal information. I want the information of the department if I can get it. Mr. JONES. The establishment of public employment offices in the States is primarily a function of the State. I believe the Federal Government should cooperate and coordinate the efforts of all of the States in conducting public employment offices. The CHAIRMAN. Have you given any consideration to any of these bills introduced by Senator Wagner? Mr. JONES. I have read Senator Wagner's bill. The CHAIRMAN. Take, for instance, S. 4167, introduced by Senator Wagner April 20, 1928. I t provides for the establishment of a national employment system, and for cooperation with the States in the promotion of such system and to regulate the expenditure of moneys that shall be appropriated for such purposes. You say that you have read this bill? Mr. JONES. Yes. The CHAIRMAN. What Mr. JONES. My views are your views about it ? are that $4,000,000, as I recall the amount, suggested to be appropriated for the national service The CHAIRMAN. I suspected that money would be the first appealing factor. Mr. JONES. I think that is too much to conduct a United States Employment Service. I t is not necessary that we should have $4,000,000 to conduct a public employment service in cooperation with the States, provided the States will do their part. I would not want $4,000,000 and be obliged to expend it in one year. The CHAIRMAN. I t does not require that. I wish you would take up with the Secretary the preparation of a statement concerning each one of the sections Mr. JONES. I shall be very glad to do that. The CHAIRMAN. I n this bill, and the opinion of the department, including the Secretary's opinion and your own, or anybody else who is consulted, and I wish you would also give us an opinion on Senator Wagner's bill, S. 4158, introduced February 20,1928, which provides in addition to the act of March 4, 1913, for the collection of certain 190 UNEMPLOYMENT IN THE UNITED STATES statistics. I assumed when I talked to the Secretary that he would have a complete answer to all these questions before the committee which have any bearing on unemployment. Mr. JONES. The Secretary asked me to come before the committee, and I was not aware of the questions you would ask. If I am asked questions I will endeavor to give you intelligent answers along the lines of our experience in the United States Employment Service. You want me to give answers to Senator Wagner's bill ? The CHAIRMAN. S. 4157 and S. 4158, and also S. 4307, which provides among other things that there shall be a Federal unemployment stabilization board, of which the Secretary of Labor will be a member. I would like to have the reaction of the department on that so far as it affects the Department of Labor, and I would like to have any other information that the department in ajl of its ramifications has to offer which will aid the committee in studying this resolution and, perhaps, arriving at something constructive. I do not want to have to do all the work of analyzing the questions and propounding them here. I think the department ought to furnish us with the information that it can, and if any questions occur to us when hearing those, we will ask them. Mr. JONES. Very well, I shall see the Secretary to-day. The CHAIRMAN. Have you any idea when that will be ready ? You better call me up after consulting with the Secretary. Mr. JONES. YOU want me to take sufficient time to consider it ? The CHAIRMAN. Yes; within two or three days. Mr. JONES. Thank you, Senator. STATEMENT OF W. A. BE&ELIDGE, ECONOMIST OF THE METB0POLITAN LIFE INSURANCE CO., ON FOUR POINTS CONCERNING EVIDENCE OF EMPLOYMENT AND UNEMPLOYMENT IN THE UNITED STATES Question 1: Is there in your opinion any trustworthy data on the extent of unemployment in the United States? Neither on the total volume of unemployment, nor on its distribution among industries, nor on its geographical distribution, nor on its duration, is there any direct evidence worthy of serious consideration. Such data as are available for organized trades are not representative of the gainfully occupied population as a whole. And such intensive local surveys as have been made in scattered places (e. g., in Columbus and in Baltimore) form too thin a sample to yield valid indications of national conditions; moreover, they differ too widely in scope, definition, and other technical respects. To definite true " unemployment" in a manner both sound from an economic point of view and workable from a statistical point of view in questionnaire or field canvass is difficult. But even when so defined a special national survey by the direct method would be prohibitively slow and expensive. The student of unemployment is therefore thrown back upon the indirect method—that based upon changes in employment—and even then with results by no means conclusive. This method, with all its drawbacks, has two advantages: (1) That the fact of a person's being employed is inherently easier to define and determine than the fact of his being truly unemployed in an economic sense; (2) that collecting data from employers by mail is far easier than canvassing individual workers. Question 2 : In what ways clo you think the present statistics on emplovment now being compiled by the Bureau of Labor Statistics could be improved? (a) By collecting current monthly data from a wider coverage of employments than has been customary in the past. Until the summer of 1928 prac UNEMPLOYMENT INT THE UNITED STATES 191 tically no current figures on employment were available except for Class I railroads and for factory industries. At that time the United States Bureau of Labor Statistics began to expand its collecting machinery, in order to cover employment in mining, in public utilities of various sorts, in retail and wholesale trade, and the like. The reporting sample in these lines is being increased as rapidly as conditions permit; also, additional lines of activity will probably be covered in due course. This is a thoroughly commendable course, indeed the only workable one, for throwing light upon the unemployment situation currently. As the numerous gaps in the employment evidence are gradually closed, we shall be able to tell to what extent the release of workers from some employment is being balanced by improvement in other lines, and to what extent such an outlet is nonavailable, thereby causing unemployment. In the past year or two there has been excessive apprehension in the public mind, because when factory and railroad employment declined it has often been assumed that the released workers became unemployed, whereas if the facts were all on record we should doubtless find that many had picked up in other lines for which employment index numbers have not been available. (&) By periodically making suitable adjustments of the employment index numbers, to bring them into alignment with pertinent evidence from other sources, such as the biennial censuses of manufacturers. Past investigations by outsiders have conclusively shown that the sample data collected currently from reporting manufacturers by the United States Bureau of Labor Statistics yield index numbers which (for technical statistical reasons) are biased downward. That bias has contributed to the exaggerated views of the extent of unemployment. That such adjustment of the sample data to the more complete data in the censuses is practicable, is evidenced by the fact that the Federal Reserve Board has already made it, and regularly publishes the results each month. Question 3 : What suggestion would you make for a plan for keeping a more or less current index of unemployment? In my judgment, the only practicable method is to expedite the project mentioned under heading 2 (a), then drawing the necessary inferences from the complete evidence on employment changes in conjunction with evidence on growth of the employable labor supply—population, immigration, and emigration, etc. Monthly or quarterly data from trade unions on percentage of members unemployed would give a useful, even though necessarily limited, check upon such inferences. Past studies have shown that unemployment indexes constructed from trade-union data in New York State and in Massachusetts have considerable barometric merit, i. e., as indicators of increase or decrease in the severity of unemployment, even though they are of very doubtful merit as measures of the number or percentage actually out of work at a given time. Question 4 : Would a census of unemployment taken in conjunction with the census of 1930 be of any aid in the compiling of a monthly index on employment for the years following 1930? As a check upon current estimates derived by other methods, such a census would prove highly valuable, provided that the one or two necessary questions be properly formulated, that the field canvasser secure bona fide answers, and that the results be properly tabulated in the census publications. A subcommittee of the Committee on Governmental Labor Statistics in the American Statistical Association has recently considered at length the possibility of including some such question in the 1930 census of population (occupations). Their recommendation, which I quote below, would involve only slight modification in the items already included at each census as to the occupation and the industry in which the worker is ordinarily gainfully employed: "A. That the following two questions should be asked on the subject of employment and unemployment, and that they be put first, thus following good psychology in the interview: "(1) If you are ordinarily gainfully employed are you now out of a job of any kind? (Yes or no.) " (2) If you hold a job of any kind, are you on lay off without pay to-day? (Yes or no.) " It would be assumed that these two questions would have to be coupled with information regarding the occupation, and we have only minor changes to suggest in the form used in 1920. Our suggested additions are underscored in the following list: 29193—29 14 192 UNEMPLOYMENT IN THE UNITED STATES "(3) Trade, profession, or particular kind of work now being done (or, if out of a job, work done when last employed), as spinner, salesman, laborer, etc. "(4) Industry, business, or establishment in which at work (or, if out of a job, in which last at work), as cotton mill, drygoods store, farm, etc. "(5) Employer, salary or wage worker, or working on own account. " B. That the occupational distribution used heretofore should be continued in the census of population, and in addition, the data should be classified for persons employed and for persons unemployed under the industrial headings used in all the other censuses, such as those of manufactures, agriculture, mines, and the proposed census of distribution." ([Thereupon, at 11 o'clock and 30 minutes a. m.? the committee adjourned subject to the call of the chairman.) UNEMPLOYMENT IN THE UNITED STATES MONDAY, JANUARY 14, 1929 UNITED STATES SENATE, SUBCOMMITTEE OF THE COMMITTEE ON EDUCATION AND LABOR, Washington, Z>. 0. The subcommittee met at 10.30 o'clock, a. m., January 14, 1929, in Eoom 212 of the Senate Office Building. Present: Senator Couzens (chairman), Present also: Dr. Isador Lubin, special assistant to the committee. STATEMENT OF MAJ. GARDNER S. WILLIAMS, OF ANN ARBOR, MICH., VICE CHAIRMAN AMERICAN ENGINEERING COUNCIL The CHAIRMAN. Major Williams, you know the purpose of the hearing and what we are taking up ? Major WILLIAMS. I n a general way, yes. The CHAIRMAN. Have you seen a copy of the resolution? Major WILLIAMS. I don't know that I have. The CHAIRMAN. I will hand you one, and ask you to look it over, as it will enlighten you somewhat as to what we would like to have you talk about. Major WILLIAMS. I am more or less familiar with the Jones bill, and I assume that it is along that line. The CHAIRMAN. GO ahead and tell us what you can about the subject. Major WILLIAMS. Perhaps it would be proper for me to say a word first as to the organization that I represent, the American Engineering Council. That is composed of representatives from some 40 or 50 engineering organizations throughout the country, the representation being in a measure in proportion to membership. I t involves a membership of about 43,000 at the present time. I do not say that to be impressive, but it simply indicates that there are that many engineers in the country, who are taking some interest in public affairs. The CHAIRMAN. That does not mean that all that number has passed on the merits of the Jones bill or the Jones proposition. Major WILLIAMS. Very few have seen it, any more than when Congress passes a bill does it mean that every citizen in the United States is conversant with that bill. The organization of the American Engineering Council is similar to the organization of the lower House of Congress. The purpose of the organization primarily was to place the service of the engineers at the disposal of the Government in dealing with those questions upon which their advice might be of value. I t is not a self-seeking organization in any way. 193 194 UNEMPLOYMENT I N T H E UNITED STATES Nobody is getting any salary except the executive secretary and his corps of clerks, and whatever time is put in is put in gratuitously. We are allowed traveling expenses to attend to the business of the council. The CHAIRMAN. And your position is what ? Major WILLIAMS. I am one of four vice chairmen of the council. This subject of endeavoring to balance the ups and downs of industrial performance is one that has received considerable attention on the part of the council and considerable attention on the part of myself. I had the fortune, or the misfortune, to be in the municipal employ of the city of Detroit during the panic of 1893-1895, when I was civil engineer at the board of water commissioners, and the things that I saw then impressed me very strongly with the desirability of some measures being taken to provide against a recurrence of those conditions. The CHAIRMAN. Have we made any progress since those days ? Major WILLIAMS. YOU mean in Detroit, or along that line? The CHAIRMAN. Along that line. Major WILLIAMS. I think this investigation indicates progress. U p to this time, or up until a couple of years ago, I don't think there has been much made. The CHAIRMAN. Have you familiarized yourself with the so-called Harding-Hoover unemployment conference in 1921? Major WILLIAMS. I knew something of it, but I have not studied the record of it carefully. I t has seemed to me that one of the things that perhaps has application in the experience of the engineers is that i t is often easier to prevent a thing occurring than it is to stop it after i t has got going. I look upon the proposal of the Government so adjusting its affairs that it can at times throw into the balance an increase of employment, though not much compared with that of the country, still an item, as being a factor, and likely an important factor in regulating depressions. I have a sort of belief that the psychological fact of its being known that if things got to going bad the Government will come to the rescue, in the mind of the general public would convey the idea rather of a large bit of assistance, although it may not be so large as compared with the general country, but for that reason I think that anything that the Government finds it possible to provide for will be advantageous in the end. There are two or three questions in connection with that that I think are important. One is the proper method of handling the situation, and that is one that I do not feel competent to pass on any more than possibly pointing out one or two things that should be avoided. There should not be, as was the case in our municipal affairs in Detroit in 1893, an appropriation of a considerable amount of money to be expended and then hunting for some place to spend it. I was in a position then where I was called upon to hunt up all of the work in the city that might be needed, and the board appropriated money to carry out those things and matters were not given the study that they should have. I don't think any great mistakes were made in the rather unimportant work that I was responsible for, but I could readily see if that were the procedure in the case with the General Government it might lead to excessive loss or failure to get value received. For that reason it seems to me, and it has seemed to the council, that there should be a more far-reaching UNEMPLOYMENT IN T H E UNITED STATES 195 plan of public improvement laid out, that we should not go on in so much of a haphazard way. Public work at present is laid out very largely, you might say, from hand to mouth. An idea comes up to-day and the Congress deals with it, wisely ordinarily, but not so well as if these things were being continually studied by a body of men who were qualified to do so, and who would lay out a program of, say, five years' work ahead. Then if an occasion of this kind arose you would have work already planned and approved upon which money could be expended wisely and properly. That of course calls for a greater coordination of our public works functions than we have at the present time. One of the weaknesses of our present system is that there is no coordination. The CHAIRMAN. Coordination between whom? Major WILLIAMS. I am speaking of our various public works; our highways, our waterways, our railroads. They are all really part of a great transportation system and they should be worked # out so as to complement and supplement one another, whereas as'things exist now they are carried out without any reference to each other. That is simply an example. Of course there are other activities in the matter of public buildings and so on. That is not so important. They stand in large measure by themselves, but I think whatever is connected with our transportation system ought to be under a single ultimate control; that is, it ought to head up somewhere in some sort of an advisory board that would exercise a certain direction of what is undertaken. But that is only one single phase of this whole proposition. If the Government is going into this thing, its public work ought to be so controlled that it can be handled so as to put the money where it will do the most good. I t will be not particularly desirable, I think, to increase public expenditures in New York when the difficulty is out on the Pacific coast. Then another element that comes in is just how we are going to start or what is going to be the key by which the governmental aid would be distributed, and I think that is one of the great questions to be studied in endeavoring to arrive at any solution in the way of the application of an appropriation. The CHAIRMAN. That would require some sort of system of either employment agencies or reporting agencies as to the exact condition ? Major WILLIAMS. Yes. Of course, the ideal condition would be based on information as to unemployment, but that may involve an amount of statistical information that is not available at present, and which may be very difficult to get. I t may be necessary to select some other key, as you may say, but the ideal method would be statistics of unemployment, and if those are not available you have to go to the other side and take some measure of employment, the amount of production that is going on. The CHAIRMAN. Have you had any experience in employing large numbers of persons ? Major WILLIAMS. Not what would be called a large number of persons to-day. Of course, I have been in positions where I have been called upon to have a few hundred men under me, in one way and another, but no such number as you yourself have had, Senator. The CHAIRMAN. Yes; but have you experienced any of the evils of unemployment ? Have you seen any of the evils of unemployment outside of your experience with the water board in Detroit? 196 UNEMPLOYMENT I N T H E UNITED STATES Major WILLIAMS. I have seen it at various times all during my life. I was born and brought up in the Saginaw Valley, and we used to have all manner of bad times up there. The CHAIRMAN. D O they still have them? Major WILLIAMS. Not to the extent that they used to. I think the Federal Reserve Act has done a great deal toward ameliorating the possibilities of those disturbances that used to come almost periodically, and were very much worse than anything we have had since. The CHAIRMAN. Have you had any experience with any State or private employment agency? Major WILLIAMS. N O ; I can not say that I have, any more than when we have wanted men and have gone to private agencies and obtained them sometimes and sometimes not. The CHAIRMAN. So that your main line of testimony deals with the question of public planning for a program of State employment ? Major WILLIAMS. Yes; I should say that is the main proposition I woulcl put up to you here as a general one. I believe this—that if the General Government started a program of this kind it would be followed to a greater or less extent by the State governments. The CHAIRMAN. Did you see the report of Governor Brewster or mention of it at the time he spoke at the convention of governors in the city of New Orleans ? Major WILLIAMS. Yes; I saw that. The CHAIRMAN. I t was generally supposed that that was approved by President-elect Hoover? Major WILLIAMS. I t quite possibly was. The CHAIRMAN. Did you study the plan as he outlined it at the governors' convention? Major WILLIAMS. I could not say that I studied it, but the general impression I got of it was that it had not been thoroughly discussed, that it was an idea set out in a rather appealing fashion, or a fashion to attract attention, but that so far as being a workable program, it did not impress me as having gotten to that detail. The CHAIRMAN. D O you believe that this program can be centered in any one point, or do you believe it would have to be done by the Federal Government and the several political subdivisions. Major WILLIAMS. T O get the most out of it you have to bring them all into it, but my belief is that if the Federal Government started it, the States would follow pretty soon, and there might be developed, probably would be, a system by which they would all " play the game," so to speak. Of course, the Federal Government has no power to compel that. The CHAIRMAN. N O . Would it be your opinion that it would be wise to do it under a generaj head, or had we not better leave it to the individual initiative of the several communities and States? Major WILLIAMS. I rather feel that so far as the national depressions are concerned, the Federal Government might wisely lead. Of course, if it is simply a local affair like a slump, perhaps, in the automobile trade, I should say that that would be a matter for the State to take care of itself. The CHAIRMAN. Of course, the best that might be done, it seems to me, would be for the Federal Government to set the example and for the various political subdivisions to follow. The plan was rather ridiculed by some of the press at the time—that is, the plan pro UNEMPLOYMENT IN T H E UNITED STATES 197 posed by Governor Brewster—on the assumption that it was contemplated to accumulate in one place and spend some $3,000,000,000 for public improvements. Did you get any such conception as that from the plan? Major WILLIAMS. N O ; I did not. I quite agree with you that what the General Government would be doing would be setting an example, and that the General Government is probably in a better position than any State government to be the leader for the reason that it is in possession or that it can get itself into possession of the information necessary to make an intelligent start. When the General Government says that the condition exists where help is needed, then the State would undoubtedly to a very considerable extent follow suit. But I hardly conceive that the States would be in as good position to carry out a program of that kind as the General Government. That is, the General Government would be in a position to start it more quickly than the States. The CHAIRMAN. I think that the smaller unit would start more easily. I n other words, if the State of Michigan had a depression, and they have a program now for spending some $25,000,000 for Major WILLIAMS. Highways? The CHAIRMAN. N O ; for keeping the mentally deficient; they are backward in that respect; and it is conceivable that the legislature might appropriate that and leave it up to the governor or to his administrative board to spend it here and there, wherever it would do the most good, to stabilize employment. I think that sort of unit is more easily operated than the Federal Government is. Major WILLIAMS. There has been a suggestion with regard to the Federal appropriation that it might be handled by providing for a reduction of the payment of the public debt. That struck me personally as rather a good suggestion. That is, that in time of such emergency when funds were called for immediately, and for the prosecution of public work in relation to unemployment, that for the time being the payments on the public debt might be suspended, to avoid a special taxing or selling of additional bonds to supply the money, that you would simply temporarily reduce the payment of the public debt, and that would avoid the necessity for creating a reserve; and to some of us it looks as though a reserve set up for this purpose might not be altogether desirable. You as a business man probably appreciate that. The CHAIRMAN. That is a mere piece of mechanics that does not present any obstacles, because we have deficiency appropriations right along; and I think they can be provided for at the proper time. Have you any other advice that you can give the committee with respect to this resolution? Major WILLIAMS. I don't know that I have, Senator. I was called here rather unexpectedly. The CHAIRMAN. Doctor Lubin, have you any questions that you desire to ask? Doctor L U B I N . I wondered if I might ask a |uestion about the advisability of collecting information so that w€g» might have some index that would guide us in the event we wanted to do something. Are you at all acquainted with the available statistical information on the subject of unemployment and employment? 198 UNEMPLOYMENT IN THE UNITED STATES Major WILLIAMS. I could not say that I am well acquainted with it. I know something of it, of course, but it is far from complete. My information is that you do not have at the present time suitable information to use, and unemployment information is the key to the operation of this program. What the cost would be of getting satisfactory results, how much that would involve, I don't know, but the cost, I think, would involve rather a large program. Doctor L U B I N . You know the index they use in the Jones bill in regard to building construction? Major WILLIAMS. Yes. Doctor L U B I N . D O you think that is a worth-while index? Major WILLIAMS. I did not approve of that index in the form it appeared in the bill for the reason that as I recall it the bill provided that the index basis was the contracts awarded for construction. A contract may be awarded that means five years' work, or that means six months' work, and the one that means five years may be awarded this month and next month there may be no corresponding contract awarded, so that that measure taken as from month to month or even from year to year would, I think, be likely to be misleading. I t would seem to me that it would be better if it wera worked on something that was more immediately responsive to the condition, as, for instance, the orders for materials actually placed or shipments, something that gets closer to the immediate daily performance. The trouble with the contract is that we don't know whether it is going to be executed this month or next month or five years from now. Doctor L U B I N . Do you think it advisable to elaborate the material we are already collecting on the question of unemployment and employment % Major WILLIAMS. I am not prepared to pass judgment on that, but it would seem to me that if anything of that kind is done it would be desirable to pick out possibly certain key agencies or key industries that would be fairly representative of conditions in various parts of the country and depend upon the statistics from those rather than trying to get everything, because the cost of getting everything would be, I think, almost prohibitive. The CHAIRMAN. Are you familiar with the method used by the Labor Department in computing emplojonent? Major WILLIAMS. I am not familiar with their actual processes. Of course, I see their reports occasionally. The CHAIRMAN. Have you any other questions, Doctor Lubin ? Doctor LUBIN. No. The CHAIRMAN. Are you now connected with the University of Michigan ? Major WILLIAMS. N O ; I left the university in 1911 and have been in private practice as a consulting engineer since that time. The CHAIRMAN. Thank you very much for coming down here. Major Williams. STATEMENT SUBMITTED BY OTTO T. MALLEHY, PHILADELPHIA, PA., Off FEDERAL PUBLIC WORKS AS A PROSPERITY RESERVE Many sound and well-managed businesses stood on the brink of disaster in 1921. During the preceding century, periods of depression similar to 1921 occurred every 5 to 10 years. During these successive periods many a capable UNEMPLOYMENT IN THE UNITED STATES 199 business man, after a lifetime of success, contemplated a bullet in the brain as the only way out. Bread lines were long and desolate as the faces of the hungry unemployed. The picture of an army of willing and capable workers idle through no fault of their own was made a bitter indictment of the ruling forces of society, whoever these were supposed to be. Capitalists, profiteers, labor-saving machinery were the favorite devils—large-scale machinery that eliminates workers faster than the consumers' market develops. Waste, suspicion, fear prevailed until the need was felt of a remedy rather than a convenient devil to relieve the emotion upon. The public works reserve is one of these constructive economic remedies, not a universal panacea, but a necessary governmental contribution to any effective program, even after employers and industry have done their utmost. It is a determined policy to expand and contract public works in accordance with the ups and downs of business activity. The United States Senate has before it two bills to develop this policy. One has been piloted by Senator Wesley L. Jones, of Washington, to a favorable report by the Committee on Commerce and to the floor of the Senate. This "prosperity reserve" bill (S. 2745) authorizes a reserve of $150,000,000 to be expended upon Federal public works only when an industrial storm is rocking the ship. The storm signal is a 10 per cent fall in the volume of all construction contracts for a three months' period as compared with the average of the same period for the three preceding years. Picture what would happen if this bill passes and a depression occurs. The construction bureaus of the Government would have had years of notice to be ready with plans. The Supervising Architect of the Treasury, for instance, would have specifications ready for post offices in all the towns which Congress had authorized but not appropriated for. The Bureau of Public Roads would have made its plans to speed up the extensive road building which it helps the States pay for. The storm signal is hoisted. The President, under the terms of the bill, asks Congress for the appropriations previously authorized. The old-time debates are short-circuited as to whether there is unemployment, if so whether it is greater than at some -other time, or greater than when the debate began. The number of unemployed has always been as troublesome a question as "How old is Ann?" Whatever is to be done will be done promptly. Work will be started. Materials will be made. Commodities will flow over the railroads, and new purchasing power created. If Congress should not be in session some unavoidable delay may occur, but in recent years Congress has been in almost continuous session. Anyhow, we must accept this limitation because Congress would give the Executive branch a free hand with such a potent reserve only with the greatest reluctance. In discussing the Jones bill Senator Robert M. La Follette, jr., asked if the amount of construction contracts was the best index of business activity. Ex-Senator George Wharton Pepper replied: " Perhaps not, but it is the simplest. The world can not be saved by any complicated scheme." Salvation by higher mathematics would bring unemployment to St. Peter himself. " I think." Senator Pepper resumed, " that this simple proposal can be presented to the public mind in such a way that the cities and States will follow suit." So the volume of construction contracts was chosen because so simple and because so quickly and authoritatively ascertained—like stock quotations. It is far from being a perfect index, but all others suggested had greater disadvantages. The appropriation authorized in the Jones bill doubles the usual annual sums. The kinds of public works are to be the usual ones—roads, public buildings, river and harbor work, and flood control. When general construction falls 10 per cent Federal construction is to double. No one has to take the responsibility of saying that times are bad and thus bring maledictions upon himself for being the bearer of bad news. The signal is nearly automatic. No interpreter of business conditionsx is required. By a preagreed signal the prosperity reserve is to be released t( sustain or restore prosperity.. The idea behind prosperity reserves is old and respectable. The pyramids are said to have been built by the unemployed. Before the French Revolution the great Finance Minister Turgot tried to breast the rising tide of desperate unemployment and starvation by a public-works program. Frederick the Great of Prussia had the canny habit of keeping his soldiers profitably and safely busy between wars by setting them to drain the worthless swamp lands now so productive. The distinguished engineer, Rawlinson, inspired the British Government to provide employment for the operatives of the cotton manu 200 UNEMPLOYMENT IN THE UNITED STATES facturing cities whose populations were thrown out of work by the blockade of our southern ports during the Civil War. In post-World War England a half-hearted effort was made to expand public works. Germany during the darkest days of discouragement and inflation executed an intelligent and extensive program. More of Frederick the Great's swamp lands weie transformed into good farms. Electric-power plants, canals, and roads were built. Work was expanded in direct relation to the amount of registered unemployment. France, in 1910, theoretically accepted long-range planning of railway equipment, but the war intervened and the plan apparently was forgotten. In this country the first move was made by Senator William S. Kenyon, of Iowa, who sponsored the forerunners of the present bills in 1919 and 1921. Most of these European samples differed fundamentally from the bills now before Congress. They were makeshift attempts to install brakes when the automobile was plunging down hilL They sought to relieve needy, unemployed individuals rather than to stabilize general employment. They sought to make work. They employed the idle whether fitted for the job or not instead of setting in motion a purchasing power which would stimulate a general demand for many products. The United States 1929 models have 4-wheel brakes in place while the car is still on the upgrade. And the fuel reserve is in the reserve tank. They are not concerned with relieving idle textile workers by giving them road jobs at less than standard wages (as an early British example). They propose to employ construction workers on construction jobs at usual wages. They will purchase materials such as steel, glass, cement, bricks, and the products of 23 other industries, as made by the usual workers in those industries. They propose no relief scheme, but an economic measure. They embody a principle recognized only in our generation, that " the purchasing power of the average man is the spring of prosperity." The 5 and 10 cent man is the giant of economics. He dominates the demand for many industries, each dependent upon another. The interdependence of apparently unrelated industries is close. When the workers in industry Number 1 are .thrown out of work they purchase less goods of industries Number 2, Number 3, and Number 4, whose workers are then thrown out and purchase less of the products of industries Number 5, Number 6, Number 7, and Number 1. Who could guess that the fruit crop determines the demand for manicure sets? A wholesale hardware house made a fortune by finding this out. A hundred traveling salesmen were required to report weekly the condition of the by-product fruit crops in grain territory. The house had observed that when the grain crop was profitable the farmer bought tools and machinery, but if the fruit crop was good, the proceeds were the wife's perquisite. She bought manicure sets and kitchen utensils, and this house was ready with the goods in the neighborhood store. Industries lean on one another like the walls in a house of cards—to hold one another up or to push one another prostrate. Fortunately, what looks like a total prostration of industry is far from it. The worst depression is only a 15 to 20 per cent fall in production. Therefore, a relatively small amount of new orders, such as a public-works program can reasonably offer, will do much to sustain the structure, for new orders multiply themselves with surprising rapidity. The American dollar in circulation is a speed devil. It may jump quickly out of your pocket, but the next fellow is also competing for the record. The dollar, like Paddy's flea, is never where it was. Look for the public-works dollar where it was—in public works—and it is not there, having jumped into a corner of the storekeeper's pocket. It jumps so fast that you can not trace it, but, like the flea, it leaves its mark. The steel worker feels it and the ice-cream man, an excellent thermometer of prosperity. The teddy-bear maker and the garment worker feel it. It wakes the alarm-clock maker and speeds up the scooter specialist. It creates jobs as apparently unrelated to public works as Spitzbergen is to Africa. A few hundred millions of new public works credit is like the flow of water in an irrigating ditch. It spreads above ground and underground. Only the result is seen, the magic touch into life. The trouble has been to start the flow of credit when needed. Credit has been frozen like ice in the mountains when the fields below were parched. Sometimes credit has thawed. The President's conference on unemployment in 1921, under Mr. Hoover's leadership, called upon every community to expand public works as part of a national program. The flow of credit was doubled. In 1921 the cities sold twice as many bonds as in any previous year, and kept it up in 1922. Conditions were favorable because the World War had dammed back public works as nonessentials. UNEMPLOYMENT IN T H E UNITED STATES 201 T h e cities h a d conserved their borrowing power. T h e period of t h e g r e a t tide of public works was t h e period of business revival. Public works w e r e not the sole cause but s t a r t e d other activity. Courage and confidence revived. A change in public psychology brings a change in conduct. H e n r y S. Dennison, president of the Dennison Manufacturing Co., p u t this clearly before t h e Senate Committee on Commerce: " When the merchant is saying, * By golly, we can't buy freely,' and is cutting his o r d e r s ; when the manufacturer finds his inventories piling up and says, 'At this r a t e we shall be wiped out,' and stops b u y i n g ; j u s t a t this time the announcement of a public-works reserve m a y encourage new buying all along the line, for new consumer purchasing power is sure to follow. A million dollars started in circulation a t such a time is worth probably ten millions. Every man reemployed pays up his bills, let us say, to the grocer, who is a little freer and buys not so closely as before. Every contractor who gets orders and can place them directly wTith the mill makes it possible for t h e mill to do and to dare w h a t it could not do with t h e whole business world as tight as it gets during a depression." So public work need not employ all the unemployed but only a few in order to lay the foundation for the u p w a r d movement. Beginning farther back in the business cycle, if the peak of the boom is kept from soaring, the fall will not be as low as level. Economics now throws light on the process from a different angle. We were always told to be cheerful to-day if we would be cheerful to-morrow. Now, we h e a r t h a t " We can be pros'perous to-day only by preparing to be prosperous to-morrow." Increase credit when purchasing power is low and use the credit t o build works t h a t will not produce more consumers' goods, for t h e m a r k e t s a r e then already glutted with goods the consumer can not buy. Don't build more factories to make more. P a y out wages t h a t can be spent only for goods t h a t have been or will be produced by the old facilities. Public works, for instance, create nothing immediately saleable to the wage earner. A road, a public building, are not consumers' goods. So the trick is to keep the supply of credit large enough to enable the buyer to t a k e away all the consumers' goods produced. Especially is this necessary when prosperity is slipping. T h u s preparation for the future is the foundation of the present. The prosperity reserve, however, does not depend upon all the implications of this credit theory, but gains additional support from it. Meanwhile, how big a fellow is this public-works chap? Are we sending a boy to do a man's work? The income of t h e United States as a going concern is about $90,000,000,000. A 10 per cent industrial depression would be a drop in our national overturn of nine billions. All construction is about seven billions. Public works is about one-quarter to one-third of all construction. If public works were doubled in a year of depression the increase would therefore fill one-fifth to one-fourth of the hole made by a 10 per cent industrial depression. So even according to a purely mechanical theory of the business cycle, now out of date, public works a r e an important factor. Such a ratio of increase is possible* for it was achieved in 1921 under the leadership of t h e President's conference on unemployment, when sales of municipal bonds for public works doubled. Would a prosperity reserve diminish a so-called technological unemployment— the displacement of workers by labor-saving machinery and more efficient management? This is supposed to be the p r i m a r y cause for the drop of 600,0-00 persons from factory pay rolls since 1920. Agriculture is getting along with 650,000 less persons, and mining with 100,000 less. On the other hand, during t h e same period there have been large increases in t h e numbers employed in transportation and communication (902,000), domestic and personal service (761,000), distribution (691,000). T h e prosperity reserve would not arrest technological unemployment or the shift to new occupations, but might tide people over temporarily while seeking adjustment. For instance, in a i y e a r of rapidly decreasing factory employment for technological reasons the release of t h e reserve would increase employment directly in cement, steel, transportation, retail distribution, etc., and indirectly by the amount of its general purchasing power exerted upon all commodities and services. I t would be a temporary refuge in the middle of the street until the traffic signal shows green for general employment. A displaced factory worker might get one of the jobs created by the reserve, for instance, as truck driver, while he makes his adjustment to, let us say, radio aerial fixer. The prosperity reserve principal has for y e a r s been supported by such bodies as the Philadelphia and Seattle Chambers of Commerce, by resolutions of the 202 UNEMPLOYMENT IN THE UNITED STATES American Federation of Labor, by party platforms, and by its active proponents, the American Engineering Council, the Associated General Contractors of America, the American Association for Labor Legislation. Since the conference of unemployment of 1921 Secretary of Commerce Hoover has never failed to lend a helping hand. At his request Governor Brewster, of Maine, urged upon the conference of governors in Louisiana the formation of a construction reserve by each State. Without the States and cities the Federal Government is powerless to stabilize, for their combined volume of public works is ten times as great as that of the Federal Government. Lacking a definite policy or control, they can overbalance any sound position the Federal Government may take. The States, for instance, control the timing of the national road-building program. Although the Federal Government gives them aid of about dollar for dollar on major highways, each State decides whether it will take its share in equal amounts each year, or more some years than others. For the cities the long term city plan is an anchor to windward. It holds well-laid plans which can be quickly used when a depression arrives—plans that will avoid choosing a makeshift and wasteful project. A depression may be used as a good lever to push over basic improvements long delayed and badly needed. Cash reserves by cites and States are not desirable. Credit reserves are better because they release credits in bad times when they are a tonic to trade. If on the contrary large municipal bond sales are made in boom times, instead of a tonic they are a heavy pastry piled in on top of an already gluttonous gorge of private credit, and may be the final precipitant of economic illness. What commonly happens is that a city exhausts its borrowing power during boom times and has little credit reserve when bad times come. Secretary of Commerce Hoover in 1923 undertook to avert a building boom and the depression inevitably to follow. He sent a public letter to President Harding suggesting in view of the great activity in private construction that as little public work as possible be undertaken. Federal public work was already at an agreed minimum. Its apparent intention was to warn the building industry and prospective builders that the pot was already seething to overflowing. The effect of the letter was the postponement of large amounts of private construction. The halt in the rise in volume of municipal bond sales for public work which occured at the same time was probably not due to this warning, for municipal authorities generally are not yet aware of their responsibilities as part of the Nation's economic defense reserve. However, in this instance private construction alone was able to accomplish much. Private building operators who postponed work until 1924, a year of business recession, first avoided adding to the high peak of 1923 and then filled in the depression of 1924, thus stabilizing at both ends the building industry, its 27 tributary industries and the general economic situation. This is a happy example of the principle embodied in the Jones bill, of exciting far wider consequences that can be detected in the text of any law. The prosperity reserve had become general prosperity insurance. The public was unaware that trouble had been averted. Why then have any legislation if the act of a public official may have such results? Because it is unsafe to depend upon the whim or the economic education of successive Federal officials. Also Congress has, and ought to have, a say in any appropriation policy and the whole subject should be aired and fought out there. Federal legislation should give in advance a national signal that all can move synchronically. As a traffic signal, a go-ahead order, the Jones bill is a big step forward. With such an example as the doubling of public wTorks bonds sales in 1921 why has not greater progress been made? Why is it that after 10 years of effort, when 1927 unemployment was almost half as great as in 1921, no special effort can be reported by New York, Chicago, Philadelphia, Detroit, Boston, San Francisco? How is it that Wisconsin, though willing, found itself without quickly available funds? Why is it that California, with an emergency public works commission, made no use of it? Prof. F. G. Dickinson, of the University of Illinois, reports these facts and that in general in the first half of 1928, in spite of many attempts to persuade public officials, there was no appreciable result. New York State responded to the request of Governor Smith and increased its hard-road contracts from $19,000,000 in the first half of 1927 to $26,300,000 in the corresponding period of 1928. Contracts of public buildings in New York State, not so subject to quick changes, UNEMPLOYMENT IN THE UNITED STATES 203 fell off from 11% millions to 8 millions. The result was that even in New York State, where an energetic and convinced attempt was suddenly made r the net increase was on!jT 8 per cent, or less than the average 10 per cent increase of the whole country for the same period, which can not be attributed to this policy. The year 1928 was not a year of depression, yet the experience of New York State is proof11 that a public-works program can not be suddenly improvised except under exceptional conditions. A fire department must be formed before the fire breaks out. A prosperity reserve must be created in advance, as the Jones and Wagner bills provide. The experience of Philadelphia is a case in point. An influential chamber of commerce committee wanted public work advanced early in 1928. A large bond issue was to be voted on by the people in 60 days, yet all efforts failed to find a short cut to begin work before the vote. In years of employment councilmanic leaders had occasionally found legal ways of doing this, but unemployment was not a strong enough motive to overcome the inertia inherent in government. This reveals the weakest point of the prosperity reserve. It will not get votes. City officials are not dependent upon long-term results for holding their jobs as business executives are. A prosperity reserve may make more secure the jobs of citizens but no tof the official, whose successor may reap the?, political advantage. Spending public money is good politics at one time; economy is better at others. These times may not coincide with the need to stabilize employment. Consequently we can not expect all public officials to dive into the prosperity reserve like boys into the old swimming hole. They will have to be pushed gradually into it by the pressure of business and banking opinion. Bankers, by nature and habit, take a long view of affairs. A sound banker plans in order that his bank and his companies may not lose next year what they made this year. Stability is his middle name. The technique of working out the prosperity reserve is a challenge to good banking brains. Federal leadership is needed. Hundreds of isolated banks used to be helpless in panics before the Federal Reserve Board was created. Every panic was a proof that a central reserve was needed, yet it required a dozen panics and several generations to achieve this essential reform. The prosperity reserve is. no different, only simpler. Perhaps it has too many polite friends. If opponents would call its advocates horse thieves and Bolshevists it might speed up action. The goal is worth while. Leadership and devoted followers are needed. Mississippi floods and epidemics have not brought more misery and destruction in their wake than have periods of unemployment. The dark specter of joblessness stalks before a million homes. The fear of it is imbedded in the subconscious mind, and this fear explains conduct otherwise inexplicable. Every depression is a strain on our institution and our system. American business should never again wait for the referee's count of nine before struggling to its feet. The time of prosperity is the time for preparation. (Thereupon, at 11 o'clock a. m., the committee adjourned subject. to the call of the chairman.) UNEMPLOYMENT IN THE UNITED STATES THUBSDAY, FEBRUABY 7, 1929 UNITED STATES SENATE, COMMITTEE ON EDUCATION AND LABOR, Washington, D. C. The subcommittee met, pursuant to the call of the chairman, in room 335, Senate Office Building, at 10.30 o'clock a. m., Senator James Couzens, presiding. Present: Senator Couzens (chairman). STATEMENT OF MORRIS E. LEEDS, OF LEEDS & NORTHRUP CO., PHILADELPHIA, PA. The CHAIRMAN. Mr. Leeds, will you please state your business and your place of residence. Mr. LEEDS. The business is Leeds & Northrup Co., Philadelphia. The CHAIRMAN. Tell us what the business of your corporation is? Mr. LEEDS. The manufacture of electrical measuring apparatus, and temperature-measuring instruments, and its field in the use of those instruments is chiefly in the precise measurements in industry, where industry wants to get an exact control of its temperatures, and for electrical quantities, and so forth; somewhat also in the line of chemistry, and somewhat also in the control of combustion. Also, we make some furnaces for heat treatment of steel. The CHAIRMAN. YOU understand the purpose of this meeting? Mr. LEEDS. Yes. I have gone over your bill, and I have read your letters and inquiries. The CHAIRMAN. Tejl us in your own way your experience and what you might suggest as to aid in the stabilization of employment. Mr. LEEDS. T O get back to the matter of experience, I was convinced a good many years ago of the element of unfairness and social wrong that modern industry had gotten into of freely hiring people and with equal freedom firing them. I do not need to go into all that. I presume that is the sort of thing that has brought this subject to the attention of your committee. I have read with interest the wriings of Eoundtree and of Abbe, a man who became a prominent industrialist, who himself rose from the ranks of labor, and saw Germany evolve through the whole stage from hand-to-hand crafts up to the modern organization of industry, and so in his own industry he said that he thought that all of the advantages it had were more than offset by its disadvantages, unless they could be controlled. One of the conspicuous disadvantages was the upset that is made in family pjans and the deterioration of moral fiber, and so forth. The absolutely arbitrary and careless way in which industry would sud- 205 206 UNEMPLOYMENT I N T H E UNITED STATES denly say to a group of people who had been brought to a locality ancl established their homes, " I don't want you any more," seems a great wrong. I n 1921 we felt that we had to lay off some people, and I took an opportunity at that time to talk with a good many of them about what it meant to them, and I found out just how it did interfere with plans for educating children, establishing homes, and even in the somewhat lower ranks more serious influences than those,, near to subsistence, and I then decided that as soon as we were in a position to do so we would make some provision against having to go through that experience again. The CHAIRMAN. May I interrupt you there? You said, " W h e n you were in a position to do so." W h a t kind of a position do you mean? Mr. LEEDS. Financial. The CHAIRMAN. Then you recognize that perhaps there are some industries that are not substantially able to do anything in this connection. Mr. LEEDS. I should not suppose there is any doubt about that— that is, under certain circumstances they would not be able to do anything about it. If we had had enough experience and had thought about the matter enough before, perhaps we could have made provisions for it at that time, but at that particular time we were in the same position as some other people, carrying bigger inventories than we should, and borrowing more money than we would like to, and not knowing when the turn was coming. As a matter of fact, it came sooner than we expected, and we did not really need to have laid off the people we did. But we could not tell that. The CHAIRMAN. The reason I asked that question is because some of the testimony and some of the correspondence we have had with industrial leaders indicates that it is not only money that is necessary to solve this problem but perhaps more frequently it is a matter of judgment and brains in the management of the industries, and the arousing of the conscience of the employer to do something to regulate the output throughout the year so as to stabilize employment. I did not mean to infer that money alone was the solution of the problem. Sometimes those who are forced by economic conditions to use judgment and talent do it best without money. Mr. LEEDS. Yes. We had not squarly faced these problems before that for ourselves, and when we did come to it money was the primary consideration with us, just at that time. W h a t we did about t h a t time was to study our history, as near as we could get at it from our records of unemployment, and we found that it was exceedingly difficult to interpret it accurately. We could tell how many people we had and it would show rises and falls in employment, but after a few years had gone by it was possible to see why those things had happened; nobody could remember in some cases and we knew they were not due to lack of work, but we made the best case we could out of that history as to the amount of money that we would need to set aside in order to give a separation wage that would fairly tide people over in case we had to lay them off, and we concluded that if we accumulated a fund that was equal to twice the largest pay roll of the previous 12 months, we would then be enabled to meet any situation that was likely to occur in our particular business. T h a t is rather larger than it looks, because when we say the largest pay roll UNEMPLOYMENT IN THE UNITED STATES 207 we mean the whole pay roll, officers' salaries and everything else, and we have only made the unemployment fund apply to those who get $2,600 a year or less, so that it is more than twice the pay roll that applies to that particular group of people. We decided to set that fund aside at the rate of 2 per cent of every pay roll until it had come up to that amount, and that we have done since. Business has been expanding, and the amount required has increased from time to time. On a number of occasions it has been necessary to put up a further amount to give us further increases, but I think it is now fully paid up, and is about $55,000, our business not being a large one. The CHAIRMAN. Did you add that to the cost of production ? Mr. LEEDS. Yes. We have set that fund aside in a trust company, not to be at the hazards of the business, nor is it recapturable under any circumstances by the business. The trust is so worded that in case we should go out of business, or in case State provision or anything of that kind should come in and make the fund unnecessary it Avould then have to be used by the trustees for some similar purpose. I t can never go back to our business, and under those circumstances we bookkeep it as to cost of production. The CHAIRMAN. That, of course, is deducted as business expense from the income tax? Mr. LEEDS. I t has been deducted regularly and has been passed by the tax collector. The CHAIRMAN. I remember in the Finance Committee that we had some of these trusts to deal with in passing the law. Did you find that this practice that you adopted made the men more efficient, that it was a good business proposition in addition to being a humanitarian move ? Mr. LEEDS. We believe it is. We have a series of provisions that are intended to work that way. We have a representative council of employees which passes on a great many things, and with which we coperate in a thorough going way. We have vacations with pay to a considerable extent, and also old-age pensions; but it would be very difficult to disentangle anyone of those features from any other and say what the effect is; but we do enjoy a very satisfactory relationship with our employees and have an organization that in a very whole-hearted way rises to whatever emergency we put up to them. The CHAIRMAN. H O W many employees have you ? Mr. LEEDS. Eight hundred. The CHAIRMAN. D O you think a plan such as that could be worked out in large industries, where there are 25,000 to 100,000 employees ? Mr. LEEDS. I don't see why the size of the industry would have anything to do with it. I t would have the same percentage relation to their costs, and from what one sees of the profit reports of these large industries it seems to me that it would not be a serious burden upon many of them. The CHAIRMAN. W h a t I have in mind is the lack of contact that exists between the management of large industries and their employees. That, I think, is the main factor in creating some discontent in industry, because the top is so far removed from the bottom that they do not get into immediate contact as they do in smaller enterprises. I conclude that from the many years' experience I had 29193—29 15 208 U N E M P L O Y M E N T I N T H E UNITED STATES when the industry with which I was associated was smaller. We then had opportunity to observe the human effect more so than we did when the industry got so large that we could not see all the way down the line. Mr. LEEDS. Don't you think that was due to your rapid growth, the great rapidity with which you had to change from a small to a large industry; that if it had gone on slowly that the means by which those things could be accomplished could have been added? I was thinking of the 6,000 employees of the Carl Zeiss Warehouse in Germany. They grew rapidly, not like your company, but they preserved the instrumentalities through which those contracts were made and the social ideal was preserved. The CHAIRMAN. I think that is correct; but what I had in mind was the attempt now to put into execution some of these very desirable plans for the creation of contentment among workers. For example, take the Steel Corporation. To now arouse their interest sufficiently to do the things that you are doing would perhaps be more difficult than in the case of a smaller enterprise, where the management was much closer to its workers. Mr. LEEDS. Oh, it would unquestionably be more difficult. The CHAIRMAN. That is the point that I was making. Mr. LEEDS. Take the economic provision to take care of unemployment. I can not see that that is a question of size. I t is a question of profits that the company makes, and whether it is in a position to set aside something for that purpose, and also how great a hazard it is for the company, whether it is one in which employment is fluctuating largely, whether it is fairly stable, and in the latter case the hazard is much smaller. The CHAIRMAN. I was thinking of ways and means of arousing their interest in doing the things necessary to do, of arousing the interest of the management of these big institutions. I t is more difficult to arouse their interest because they are so far removed from actual conditions that exist. However, I will be glad to have you proceed. I did not mean to interrupt you except that I wanted to get the psychology of what inspired captains of industry and employers to do the things that obviously ought to be done. Mr. LEEDS. YOU asked in your letter about our history. I t is hardly yet significant. We established the fund in 1923, started it then, and have had a continual period of stable growth, and no period of decline since that time, with the result that we have had no occasion to lay anyone off for lack of work. We have laid off a few people by reason of readjustments, and a few by reason of the fact that we did not consider them satisfactory work people, but that amounted to only five, and the amount that we have paid out of this fund has been only $500, so that it is not significant as yet. We have to go through a bump of unemployment before it will become significant. The CHAIRMAN. When this period, this bump of unemployment you speak of, comes about, you will use this $55,000 fund for the purpose of distributing it among those who are laid off, and in what amounts will you do that ? Mr. LEEDS. The rules under which that fund is to be distributed were made up by a joint committee of our work people and the man UNEMPLOYMENT I N T H E UNITED STATES 209 agement, in which the working people had a majority, and in which as a matter of fact we simply accepted what they proposed, which was that married people, men with the responsibility of a family, should receive 75 per cent of their wages for periods which depended on the length of time they had been with us, and unmarried people 50 per cent of their wages for periods which depend also upon the length of time that they had been with us. I can give you the range of those. The CHAIRMAN. May I ask at this point just why you regulate that on the basis of the time they had been with you? Aren't their economic needs the same whether they have been with you a long or a short time? Mr. LEEDS. Yes; their economic needs are the same. I t was due I think to a feeling that our responsibility was not the same. That may not be justified, but we felt that we had a greater responsibility for instance to a man who had been there a long time than to a man who was there only a short time. The man who had been with us for only three months would not have done very much to get settled in his way of doing things, and if we gave him three weeks compensation, which is the amount that goes with three months, three-quarters of what he has been getting, assuming that he had a family, that that would fairly represent our obligation to help him relocate himself, and that that obligation would be increased with the length of service that he had with us, and does go up to 26 weeks of compensation for those who have been with us for five years or more. The CHAIRMAN. That is, that you are responsible for those 26 weeks they are off? Mr. LEEDS. I should say that the assumption that lies behind that is that when we employ a man, it is with the expectation that we are going to have a permanent relation, that this is his permanent industrial home if he wants it to be. By reason of our failure to carry out that implied contract, we compensate him for our failure, and that the amount of compensation that we owe him for that failure increases with the length of time that he has been with us, which increases the expectancy on his part that it is a permanent industrial home for him. The CHAIRMAN. If a man has been with you for three- months and you lay him off for lack of work, assuming that he is to remain off for three months, you pay him for only three weeks. Is that the idea ? Mr. LEEDS. We will only pay him for three weeks, assuming that he does not get some other job within the three weeks, in which case our payment ceases, and what happens to him after that is out of the picture. The CHAIRMAN. Proceed. Mr. LEEDS. These schedules are not payments that are paid under any circumstances, but only in case the person does not find other work. The whole idea is to take care of him during the time when he does not find other work. When he finds other stable work the obligation ceases. Of course, that introduces the problem of who is going to decide whether he has got other work, but we put that into the hands of our employees. This is their fund to compensate them, 210 U N E M P L O Y M E N T IN T H E UNITED STATES and the compensation will not last any longer than the fund does. That is, we have assumed no obligation beyond the fund and we believe that they would be the best people to keep back of the man to see that he does not draw on the fund and work both, under a regular system of reporting. The CHAIRMAN. Does this plan, wThich I have not had an opportunity of reading, carry with it any compensation during illness? Mr. LEEDS. We have that separately. This is an unemployment fund and it is not tied up with other things. The sick relief is separately taken care of, and the old-age pension and death benefits are taken care of by a separate fund and in a separate way. The CHAIRMAN. And they have nothing to do with this $55,000 fund? Mr. LEEDS. No. You asked whether it had any influence on stabilizing our employment. Aside from the fact that we have definitely tried to accumulate some money reserves with which to keep on and build up or do other things in case we should have a time of slack orders, we have not faced that situation. I t has created in our management a state of mind that, having accumulated that fund, we do not intend to spend it if we can possibly help it. We intend to do the other thing and keep them regularly employed. The CHAIRMAN. W h a t you mean to imply is that you have had no real test? Mi". LEEDS. NO ; we have had no real test. The CHAIRMAN. SO in case of a great depression in business, you don't know what your experience might be? Mr. LEEDS. N O ; but I think it is fairly obvious that any management which had set aside a fund for that purpose and faces the fact that if they spend it they would have to set aside that amount again, would try to conduct their enterprise in such a way so as not to spend it, even if it is only a matter of pride. The CHAIRMAN. That is the trend of the testimony that we have had up to date, that if there was a penalty for bad management, or for laying off of people through perhaps bad or careless management, that they are more apt to regulate their business well. That is your experience, or at least that is your attitude of mind ? Mr. LEEDS. Yes; that is our attitude of mind, but not our experience as yet. The CHAIRMAN. Have you ever contemplated that employees should contribute anything toward this fund? Mr. LEEDS. No. I t has always seemed to me that this is a reasonable responsibility of industry, and that it should be passed on to society as a whole, if necessary, in the extra cost of the product. The CHAIRMAN. I n your old-age pension, or in your sick benefit, do you require contribution from the employees? Mr. LEEDS. I n the old-age pension we have a combination of the two. That is, we do a certain amount regardless of whether they come along or not. If they go along, we double the amount, so that it practically means that they get out of it about three times as much as they contribute, as our original contribution. The CHAIRMAN. What do you do in case of illness? Mr. LEEDS. Illness has been entirely taken care of in our organization by a voluntary organization of the employees, and we have UNEMPLOYMENT I N T H E UNITED STATES 211 kept watch of it. They meet the situation entirely adequately. They have regular contributions. They keep enough money in tlieir fund to meet emergencies, and now and then even to use it as a loan fund to people needing money to help over emergencies. The CHAIRMAN. The company does not contribute? Mr. LEEDS. N O ; it never has. The only time that the company did was in the flu epidemic some years ago, when they were faced with extraordinary demands, and when we would have been glad to make an outright contribution, but all they asked us to do was to loan them some money, and they managed their affairs so well that they paid back the loan in nine months, so you see that they have a considerable capability of taking care of themselves. The CHAIEMAN. Have you had any experience with industry through the laying off of employees through improved machinery or equipment ? Mr. LEEDS. I t has not come in our case. A few of these five cases have been that sort of thing, but for the most part when we have done anything of that kind, we have been able to take care of the people elsewhere in our plant. The CHAIRMAN. Have you anything else that you can volunteer ? Mr. LEEDS. Yes; there is another phase of the question that I would like to bring before you, and that is from another angle. The industrial relations committee of the Chamber of Commerce of Philadelphia has been devoting itself this winter to this subject of unemployment, and there has been a lot of meetings about what might possibly be done by stimulating industry, this, that, and the other way, but we have not gotten very far. Unemployment is with us just the same as it has been, and I am the chairman of the subcommittee to report a plan by which we can determine how much unemployment we have and what it is due to, and we are absolutely up against it. We have met and talked with people, and so forth, but wre can not think of any way of finding out about that. What I would like to say to your committee perhaps more emphatically than anything else is that if you can help us to measure unemployment, how much there is of it, and what it is due to, it will give us a great deal of help. We don't know how to find out how much unemployment there is in Philadelphia. We have tried organizations, and in the metal industries, and in certain textiles we can pretty easily say that in 1927 there were so many people employed, and that in 1928 there were so many people employed and then we can measure the difference if there were less in 1928 than in 1927, but everybody knows that that does not tell you how many are unemployed, and it is subject to serious errors. I n the first place, there is the error that you are always likely to make when you count 100,000 and then count 98,000 and say that there are 2,000 less. If you make a slight error in either the 100,000 or the 98,000 you make a big error in the difference, and on top of that it is subject to the much greater error that you don't know that those 2,000 people are unemployed simply because they don't happen to be employed in that particular industry at that time. And working as our friends of the Wharton School of the University of Pennsylvania, with their expert advice, and people that we have been able so far to call in, we were absolutely at a loss to report back to our committee what we consider might under the present circum 212 UNEMPLOYMENT I N T H E UNITED STATES stances be a good method of rinding out how many people are unemployed and of continually keeping that record. The CHAIRMAN. May I say, not to make a point of discrediting the value of statistics, it seems to> me there has always been an overemphasis upon the question of statistics as applied to unemployment. Just what would the difference be in Philadelphia if you had more statistics and you found that in one case you had 5,000 unemployed and a few months later 8,000 unemployed ? Tell us what you would do about that. Mr. LEEDS. I think that would come out of it, and I think the importance of the statistics in that case is that we are now all the time being told that it is not as bad as we think it is, and that this, that, and the other big industry is going to build a lot of buildings or do something else, and, therefore, that the situation can not be really very bad. I think that if it could be pointed out to the industrialists who can be drawn into such a conference where it is so and so actually, and with that is this fraction of their total labor bill, and that associated with that small fraction of their total labor bill they are bringing in an enormous amount of hardship to that particular group of people, together with great discontent, and a fertile seed bed for radical thought, that you would have a much better way of influencing them to do something about it, whatever that may be, more than you will when you just talk about it in vague r general terms. The CHAIRMAN. SO that it is largely the psychological that we would get out of these statistics ? Mr. LEEDS. Yes. I think it would be the first step to doing something. The CHAIRMAN. Have you anything else to suggest ? Mr. LEEDS. I think not, thank you. STATEMENT OF DR. JOHN R. COMMONS The CHAIRMAN. Doctor Commons, are you still connected with the University of Wisconsin? Doctor COMMONS. Yes; I have been there for 25 years. The CHAIRMAN. Doctor, we will be glad to have you tell us in your own way what we are trying to arrive at. You have seen a copy of the resolution, and the purpose of the committee's investigation. Doctor COMMONS. Mr. Chairman, I have brought with me, but did not bring down to the Capitol to-day, some exhibits, but I can sketch to you the outline of how it came about that in Wisconsin the legislature considered during three successive sessions what we called, after the name of the introducer of the bill, the Huber unemployment prevention bill. I was associated with the drafting of that bill. At one time we had a majority in the Senate, but amendments were tacked on which made it distasteful and so it failed. Then in the Chicago men's clothing market there was adopted in 1923 a system of unemployment insurance, practically identical with this proposed in the Huber unemployment prevention bill. I was chairman of that organization, covering about 30,000 employees, and the entire men's clothing industry. During the installation period from 1923 to 1925 r I was the chairman of that organization. UNEMPLOYMENT IN T H E UNITED STATES 213 The two systems, one by a legislation represented in the Huber bill and one by joint agreement between the manufacturers of men's clothing and their organized employees, worked out substantially on the same principle, and they are entirely different from any European or foreign system of unemployment insurance. I find that that is a very difficult thing to explain. People who have criticized unemployment insurance and even criticized our measures! in Wisconsin and Chicago seem to have in mind solely the European system, which I would call paternalistic and socialistic. Ours is a purely individualistic system, and in order to explain that difference I think, if you will allow me, I shall sketch here the way in which this unemployment idea started in Europe and the way in which it came to this country and indicate something of what appeals to me to be the philosophy back of it, the theory. I t started about 1895 in one of the Swiss cantons, St. Gall, and that canton imposed a premium to be paid—it amounted to a poll tax—by all of the wage earners of the canton, which was to go into a fund to be administered by what we would call the State—it was no larger than a county—and then to be distributed to the unemployed under certain rules laic1 down. This was the first attempt. The consequence of it was, on account of this poll tax, that the class of labor which they wanted to keep in the canton began to migrate to other places. I t was a tax on being in that canton. Furthermore, they could not collect from the wage earners. The expense of collecting a poll tax from the wage earner, a monthly poll tax—I can not give any exact figures—was something greater than the amount that they would get out of it, so that the canton in enforcing it found that it was getting nowhere, and it was repealed at the end of a couple of years. By driving labor from the canton and by the enormous expense comparative to the benefit to be obtained it was found necessary to repeal it. The next step was in Belgium, in the city of Ghent, about 30 or 35 years ago. There was developed there what wTas knowTn as the Ghent system, and it spread from the city of Ghent to the several States of Belgium and Denmark and Holland and to a certain extent there has been adopted in the other Scandavanian countries, Norway and Sweden, and it is of this character. Take the city of Ghent, and what I say here will apply later to Denmark and the other States. The town council of Ghent proposed or offered to any association of wage earners to duplicate any amount they might .set up voluntarily as an unemployment insurance fund, simply subsidized them, giving it to them from the city treasury; and now it is the combination of the city and theProvince and the State governments in those countries. They gave to them a subsidy to be administered by themselves equal to what they may voluntarily contribute. I t turned out in the administration of that fund in Ghent and as they spread out over into Denmark and the other countries that the only associations which could take advantage of that offer were trade-unions, organized labor, and organized labor is a large proportion of the labor in those countries, much larger than it is in this country; but mutual associations for insurance purposes, other than those built upon existing labor unions, were unable to organize for the purpose. The CHAIRMAN. Why? 214 UNEMPLOYMENT IN T H E UNITED STATES Doctor COMMONS. There was nobody to take the lead in forming an insurance association, and they are miscellaneous, unorganized, and you would have to hunt all over the towTn to find them. The unions came in and seized upon the opportunity, and that is what they have done in Denmark and the other places. They practically preempted the field. I am not positive whether or not there were any mutuals, other than trade-unions that accepted these provisions. I am quite certain that there were not others. At any rate, this is what happened, and this is the difficulty I want to get at. W h a t this amounted to, then, was the city or the State subsidizing the tradeunions, in case of unemployment, and leaving the administration solely to the unions to distribute the benefits, and it was not very long before the employers began to see that it was being used for industrial conflict purposes, enabling them to stay off work, not striking ; but the unions having another system of not going out together on a strike, but having a sort of individual vacation. Each person would take a vacation, and the union might furnish him unemployment benefits. So we have now the State and the unions cooperating and the employers and the manufacturers are raising a protest. The amendments to those laws in those States I could go into more detail about if I had the statutes before me. I have them in my room at the hotel; but the substance of it is this, that the manufacturers demanded and ultimately obtained this provision; that the State should set up itself an administrative office, which should determine and pass upon the benefits awarded to any particular individual, after seeing whether that individual was within the definition of involuntary unemployment, due to lack of work and not owing to any other cause, discharge or inefficiency or anything of that kind, to which they endeavored to limit it. These States, therefore, modified their laws, but have not repealed them. They have grown by increasing the State's responsibility for administration, but the employers do not contribute. England made the next advance. The CHAIRMAN. YOU say that the employers do not contribute. You mean that they do not contribute directly, except through taxes? Doctor COMMONS. Yes. Those subject to the taxing powers we call the consumers. The industries as such do not contribute. I n England, as I say, the next step was made, which included the employers, the State and the employees, paying the premium equally, one-third by the employees, one-third by the employers, the State paying part of the benefits, but carrying the expense of administration, so that in counting the expense of the administration with the supplementary benefits which the Government affords, the State would be paying one-third. The employers pay one-third and the State one-third and the employees one-third, and then they have certain rules for deciding the class. I shall speak of those rules later. Those systems I call insurance systems. They are insurance in this sense: That the premiums collected on the labor or on the State are based upon the number of weeks that they are employed. Suppose we had two manufacturers, one who works full time and who furnishes 52 weeks of employment, and a competitor of his who furnishes, say, 26 weeks, to take a clear-cut case. The employer who has 52 weeks pays 52 premiums, and the employee pays 52 premiums, and the State. The UNEMPLOYMENT I N T H E UNITED STATES 215 one who has 26 weeks, pays 26 premiums, and the State pays 26, and the employees pay 26 premiums, and this all goes into a common State fund. When the benefits are paid out, the employees of this employer, who has 52 weeks, get no benefit, because that employer has stabilized his work. The funds, however, which he pays in are transferred automatically by the fund system, which you call the insurance principle, as against the other principle, and are paid over and given to 13 weeks of benefit to the employees of his competitor during such period as he has not been able to furnish them steady employment. What it means then is what we call the socialistic or paternalistic system, taxing those who are successful in providing stable employment and making money by doing it, and turning their money over for the benefit of other employers and their employees who are less successful, interpreting "success" as the ability to work continuously and to make a profit continuously. What is the theory back of that? The theory back of it all is the relief theory. I t is a development of the philanthropic idea, arid also a development of the application of the idea that the causes of unemployment are inscrutible, that they proceed like the forces of nature. Economists have their theories of what causes the ups and downs of business. They have even attributed it to the sun spots, and the transits of Venus, and to rainfall, and what we may say are acts of God. That is the European theory, that here is something that industry can not control, that is a natural phenomena, and so we have to employ the taxing power, taxing people according to their ability and success to pay, to pay a relief to the unfortunate and to help out the inefficient. The CHAIRMAN. Have you any views about that ? Doctor COMMONS. I am going to tell practically what I prefer to call the American system, the individualistic system. The CHAIRMAN. And in that manner you will be able to express your views? Doctor COMMONS. Yes. The Huber bill and, likewise, the system in the Chicago clothing market, are based on an entirely different view, and that is that there shall be no fund, no joint or mutual fund, under administration of any State or organization, held by the State and distributed as in England, or any fund which should be distributed in the way of the European method, but rather, that the employers should set up what in the Chicago market we call establishment funds as distinct from a market fund. Here comes in a very interesting difference between the psychology of employers and employees on this subject, and one that must be taken into account in developing any system of unemployment prevention. The working people, the trade-unions, the working people generally, are burdened with the idea of unemployment. They don't care where the money comes from. They want a fund that will relieve them and their suffering, and they do not want to depend upon the success of an employer in building up these funds. They want to have some provision for benefits, so their idea of an insurance fund is the European idea, and which we call in Chicago the market fund principle. While the matter was under discussion in Chicago, trying to reach an agreement, the two issues were 216 U N E M P L O Y M E N T I N T H E UNITED STATES upon that basis. The Amalgamated Workers' Union stood for the market fund. The CHAIRMAN. I don't get the point of what that means. Doctor COMMONS. The employers insisted on an establishment fund. The CHAIRMAN. That is, confined to their particular factory ? Doctor COMMONS. Yes. Take Hart, Sehafner & Marx, with four or five thousand employees. They would have their own insurance fund, which would benefit only their own employees. Another concern would have a similar fund, and all of the 70 different firms would establish TO different funds in the Chicago market, and they should be responsible only for their own employees. The CHAIRMAN. That is what you designate the establishment fund? Doctor COMMONS. Yes; similar to the Leeds's fund. His is an establishment fund. H e does not pay into a market, and then by some system of rules it is paid out to all of the employees. The unions, of course, wanted the market fund, and that is what we call the difference between an insurance plan—it is a market plan under the terminology that we worked out in Chicago—and an establishment unemployment reserve fund. That is the thing that is characteristic of this Huber bill. Each establishment has its own fund. The wTay in which that idea first came about is simply this: The experience of the workmen's accident compensation in Wisconsin brought it about. When that law was enacted in 1911 it was provided that a right of action was practically created by law against the employer in case of accident, and terms were defined, and so on, and an administrative body was set up to listen to appeals in cases of suits, and so on. I t also provided what they called three systems of insurance. One was self-insurance. An establishment which showed that it was financially solvent could set up its own insurance fund and carry on its own insurance. I t really was a reserve fund, and we have in Wisconsin about 250 self-insurers, so called. Then another plan, which is permissible under the law, was mutual insurance. Employers might set up mutual insurance companies for the writing of insurance against this accident compensation. Two or three insurance mutuals have been set up, and one has grown so extensively that, according to the last figures I had, it covers about 40 per cent of all of the insurance that is written in the States, apart from self-insurers. The CHAIRMAN. YOU are speaking of industrial accident insurance when you speak about the 40 per cent ? Doctor COMMONS. Yes. Then the other provision is that an employer may take out an insurance in an old line company, a stock company. So there are three methods. I was a member of the industrial commission that put that law into effect for two years. I assisted in drafting the law. We stood out against the State fund, but wanted to have the employers have two ways of administering it. We did not like the idea of their insuring in stock companies, because that unloads the burden on somebody else, but we wanted the employers to adopt self-insurance or mutual insurance. The result of it has been that the greatest progress made in Wisconsin toward a reduction of accident, a prevention of accident, has been made by these self-insurers. These 250 people were the pioneers UNEMPLOYMENT IN THE UNITED STATES 217 in all activities for the reduction of accident. Classed with that is this employers' mutual, which writes 40 per cent. That employers' mutual insurance has a staff of safety experts, who go all over the State, and they put in a campaign of accident prevention. My idea is that they did much better than through the industrial commission. They took our best men away from us, and made them their own inspectors. That of course is just what the State wants—the employers to do their own safety inspection work. I t is the much better way. Our State commission was just a sort of training school, an apprenticeship school, for safety experts, to be taken over by the manufacturers of the State. I t is putting it up to the employers themselves to reduce accident compensation by the prevention of accident. If the responsibility comes home directly to each establishment, we can have better results. We have had wonderful cooperation with the employers in reducing accidents. The CHAIRMAN. And out of all that came your insurance principle ? Doctor COMMONS. Yes. Why could not that same principle be applied to unemployment? Why could not the employer be made responsible for stable employment by creating against the employer the right of action on the part of the employees for compensation for a certain period of time in case he was laid off solely on account of lack of work ? The CHAIRMAN. D O you believe that that could be done under the constitution of any State or of the Nation ? Doctor COMMONS. I have found by studying decisions of the Supreme Court that the Constitution of the United States is quite elastic if you will give it time. The Supreme Court is ordinarily about 15 years behind the times. I t has a lag of about 15 years, as I have tested it out; so while I think at first it would be unconstitutional, yet in the course of a few years it would be constitutional. W e went through similar developments in the case of accident compensation laws. They were at first unconstitutional, and then they became constitutional. The CHAIRMAN. S O it is not always necessary to have a constitutional amendment to have the thing become constitutional. Doctor COMMONS. All you need is to have judges who are willing to study the economic situation that you are up against, and the Constitution is sufficiently elastic to take care of any evil in the community which the judges themselves appreciate as an evil. We get the decisions eventually. I have calculated, as I say, a 15-year lag on some things, so I think I have the operations of the judicial mind down statistically. I t is an interesting thing that with all the opposition in the States to this law, the manufacturers and others never brought up that question that you have asked. No manufacturer in Wisconsin ever raised the question of whether this was constitutional. The CHAIRMAN. I can see a difference between an accident and just simply a question of economic conditions, which will prevent employment. Doctor COMMONS. Oh, there is a difference, and in the case of accidents Ave had this other situation. The compensation law came as a substitute for the old employers' liability. There has been in the law no employment liability. Our system has not been built on the liability of the employer to furnish steady employment. There has 218 UNEMPLOYMENT IN T H E UNITED STATES been, however, a responsibility to keep his place of employment safe. There is a big difference constitutionally and economically, it is true. This is an advance. There is no doubt about that. The question now is economics, and what motives are you going to appeal to ? The European idea or the insurance idea is based on the principle that some circumstances outside of industry, natural causes, produce unemployment. Neither the State can prevent unemployment, nor the employers, nor the unions. This individual responsibility of law is based on a different notion. First, it is based on the notion that the working people should not contribute to the fund simply because they could never stabilize employment if they did contribute. I t was purely a mutual insurance idea if the workingmen contributed. The State should not contribute, because the State never could stabilize employment. There is no way in which public officials can stabilize employment. The only people who can possibly stabilize it are the employers themselves, and the question is, then, is that a sound economic analysis, can a system be devised similar to accident compensation by which not merely responsibility, which Mr. Leeds accepts, but also legal responsibility in the form of a right of action can be created. Then the employer could provide in his own way for the meeting of that new responsibility or that legal liability, and the theory then is that the States will do the least possible interfering, and it reduces it down just to one thing, a legal right of action. That is all. If we could get it down to the point where there would be nothing but a legal right of action against the employer for a loss to a man because he can not furnish him work, then we will have all the State should need to do in the matter; but we found that when that was worked out in the accident compensation law there had to be certain supervisory machinery, and it could not be left to the ordinary courts on account of the great amount of litigation. We had therefore to set up some sort of an appeal board. Then the other important thing, still more important than that, was this: There are just two ways in which employers can stabilize employment. One is by watching their own individual establishment and trying to plan the work, and so on. That is quite familiar nowadays, reducing the turnover and so stabilizing their own plan. The other is, when they find it necessary to lay a man off, to find him a job as soon as possible. The best employment agencies in the United States are not the public employment offices. They are the employers themselves. They are the people who can find jobs for the men that they lay off. Nobody else can do it as effectively as the employers themselves. If we can place those two inducements or motives upon the employer, first, to smooth out his employment, and then, if he can not succeed through business success or anything else, he will set up the agency by which employment will be found for his employees, the load will be taken off him by other firms. Then it naturally follows that he would have that liability placed upon him, as in Wisconsin, if that was adopted, $1 a day for 13 weeks; but it would then become the duty of the employees to find a job or to accept a job. I t required some discrimination to determine whether it was an acceptable job or not. As soon as the job was found for the employee, or if he refused to take it, or if he did take it, then the employer's liability ceased. So if the employer went out and found UNEMPLOYMENT I N T H E UNITED STATES 219 him a job, and we put it at a dollar a day, the employer would save about $90. If he does not find a job, or if the man does not get one himself, he pays the $90. That means a system of employment offices, a system of mutually conducted employment offices. We had some experience during the war in developing a system of employment offices in Wisconsin under this same industrial commission, and it was necessary to have a system of employment offices for several reasons. First, you must get your statistics of unemployment, and you must have some place where the unemployed worker will register; and I know of no way of getting statistics except by having a system of employment offices where every man registers as soon as he is out of work and where his name is taken off when he gets work. We set up that system in the Chicago market, and I will explain how it was in the State of Wisconsin. We had a number of offices established there, and this in the principle on which these offices were established. Take the Milwaukee office. I will describe that, because I know concretely how it was, and I took part in the organization of it. We have a committee of management of the employment office in Milwaukee. I t consists of four representatives of the manufacturers, four representatives of organized labor in the city, and you must remember that in Milwaukee we have this rather tense situation, that organized labor is all socialistic, and the manufacturers are all capitalists, so a joint body administering the office is significant. The employees in the office are appointed by the State industrial commission. We have 12 offices. I n Milwaukee the employees are appointed. The locality, the municipality, pays all of the operating expenses other than the salary, so the city government and the county government each paying these operating expenses are represented on the board of management. The Federal Government has made the Milwaukee office a proposition, and Mr. Jones can tell you about that, and they have made them ex officio Federal employees, or at least their superintendent, which gives them the privilege of the post office. So you see that it is a cooperative system. Now, the all-important thing is the class of employees who administer these employment offices. When the industrial commission took hold of that situation, we had an employment-office system in Wisconsin which was solely political. People were appointed and changed according to political influence and power. The result was that no legislature, no municipal counsel, would ever appropriate money to this employment office. They had been running for 20 years, and while the State and the city made a gesture of finding work for the unemployed, yet by the very fact of incompetency in the management, neither the State or city would appropriate funds, so they had a just complaint that they could not do anything because they did not have the funds, but on the other hand the appropriating body could say,, you have not got the funds because you can not do anything. You see the circle. Under the law creating the employment offices under the management of the State industrial commission, they were placed under civil-service rules. Now, we had this other difficulty there. Our civil-service commission, like most civil-service commissions is what I would call an academic body, made up of school-teachers, and I think I know the psychology of school-teachers. Their examinations were academic examinations, strictly. The question was, having 220 U N E M P L O Y M E N T I N T H E UNITED STATES put those officers under the civil-service commission, how were we going to get that civil-service commission to get men who had established qualifications for administration. They must have experience with industry, and I mean the men who operate and man the emT ployment office. Secondly, they must have personality by which they can keep employers and employees working together, so that the employer will have the confidence that he is going to get men, that the office is not going to be used by the unions to injure the employer, and, thirdly, that the office is not to be used by the employers to injure the unions. So we made this arrangement with the civilservice commission. We had them hold an elimination examination, with the ordinary qualifications of reading and writing and so on. I t turned out that that excluded about 70 per cent of the applicants. Then the actual appointment would be made, an oral examination in which this joint committee of employers and employees examined the applicant, and they jointly would select the applicant to run that employment office. We have tried to follow that through generally in all administration of the labor laws in Wisconsin, so that it is a well-recognized method of doing things. The result is that when they started the employment office in Milwaukee—and this advisory committee of employees and employers have no legal authority and get no compensation—they selected the man they wanted and recommended him to the State industrial commission for appointment, and then the industrial commission sent this man to the civil service commission and thus he got on the State pay roll. As showing the success with which that worked in the selection of competent people and the way in which this class-conscious bias between capital and labor, which is probably more intense and has been more intense in our city because we have the socialistic party, the first two chief officers appointed in the Milwaukee office were Socialists. The employers agreed that the two best people to have charge of that office were two Socialists, and it turned out that they established the office and got it going. Then, after these people disappeared voluntarily for other jobs, the next person put in charge was a railroad contractor who was supposed to represent the employing interests, and he has been running it fairly successfully since that time, I think, but the labor people consented to his employment. If you have a system of employment offices of that type in which you have the two sides administering it, and yet cooperating as advisory with the State authorities and with this kind of a civil service law, I think we can establish employment offices that will be adapted to administering an unemployment compensation law if we could get that kind of thing. The CHAIRMAN. I understand that you are going to be here tomorrow ? Doctor COMMONS. Yes. The CHAIRMAN. I t is now 12 o'clock, and the Senate convenes at 12 o'clock. We will adjourn at this point until to-morrow at 10.30 o'clock a. m. (Accordingly, at 12 o'clock m., the committee adjourned to meet to-morrow, Friday, February 8, 1929, at 10.30 o'clock a. m.) UNEMPLOYMENT IN THE UNITED STATES FBXDAY, FEBRUARY 8, 1929 UNITED STATES SENATE^ COMMITTEE ON EDUCATION AND LABOR, Washington, D. 0. The subcommittee met, pursuant to adjournment, at 10.30 o'clock, a. m., in room 355, Senate Oifice Building, Senator James Couzens presiding. Present: Senators Couzens (chairman), Tyson, and Walsh of Massachusetts. Present also: Dr. Isador Lubin, assistant to the committee. STATEMENT OF DR. JOHN R. COMMONS—Resumed The CHAIRMAN. Doctor Commons, when you left off yesterday, you were starting to tell us about the agreement of the garment workers' plan in Chicago. Doctor COMMONS. Mr. Chairman, I have some matters I wish to introduce as exhibits, if I may, and then I shall take up the work back and forth across them, and in that way I think I can save time, and cover the clothing industry and the others. (Exhibits submitted by Doctor Commons will be found at conclusion of his testimony.) The CHAIRMAN. Very well. Doctor COMMONS. I have first Exhibit 1, the H a r t , Schaffner & Marx unemployment-fund agreement of 1923. That is the agreement of 1923. I t covers the clothing industry of Chicago, although it is printed by Hart, Schaffner & Marx. Then comes Exhibit No. 2, which is a revision of the Chicago agreement, entitled " Unemployment insurance fund, agreement of 1928." Next I shall take the liberty of introducing as part of my exhibit, two communications addressed to the chairman, Senator Couzens. The first is Exhibit No. 3, being the statement of Dr. Benjamin M. Squires, chairman of the unemployment insurance fund in Chicago. Mr. Squires is my successor in that chairmanship. Exhibit No. 4, is a letter to Senator Couzens from E a r l D. Howard, the labor manager of the Hart, Schaffner & Marx firm, dated January 22, 1929. Exhibit No. 5 is a digest of the Huber unemployment prevention bill of 1921, a statement of mine respecting the bill, and a copy of the bill itself. This is entitled " Huber Unemployment Prevention Bill, 1921." Exhibit No. 6 is a revision of the Huber unemployment prevention bill of 1925. I am submitting that in 221 222 U N E M P L O Y M E N T IN T H E UNITED STATES manuscript, because I have not the legislative copy. Then comes Exhibit No. 7, which consists of three volumes of mimeographed reports by the Industrial Eelations Counsellors, 165 Broadway, New York, dated February, March, and April, 1928. The first volume containing a report of company plans, the second the joint agreement plans, and the third the proposed legislation. I should say regarding this report that it is a confidential report, preliminary, gotten out by the Industrial Eelations Counsellors, and since coming to Washington I wired them as to whether they would consent to its being introduced as an exhibit in this hearing, and I have a telegram from them consenting that it be introduced. My reason for submitting that report, while it is quite extensive, is because it is by far the best investigation by the most competent people that could be made on this subject of unemployment insurance. The Industrial Eelations Counsellors is an organization established originally on the foundation of John D. Eockefeller, jr. The people employed are experts in this whole subject of industrial relations, the most distinguished men. One is Mr. Bryce Stewart, who appeared before your committee. He was the main instrument in developing the organization of the Chicago market. I t is as if this committee were to employ the best experts in the country to investigate this subject, and bring it down to 1928. Doctor L U B I N . Doctor Commons, I suggest that you tell the committee what they contain. Doctor COMMONS. I am quite certain that all employers who are considering anything along this line would want these reports, because they enter into great detail and are admirably digested. I n the first volume there are reports of 12 company plans, including the plan of Leeds and Northrup, that was presented to you yesterday by Mr. Leeds. I showed him this report, and he seemed quite satisfied with it. The second volume is on joint agreements, and this one includes an exceptionally competent report on the Chicago system and permits me to skip over many details that might otherwise occupy your time, but it has several other joint agreement systems. The third volume is on proposed legislation, which includes an excellent statement of the Huber unemployment prevention bill, and all of the legislation that has been proposed in any American State, giving the pros and cons of opinion regarding these measures, so that it is practically an authoritative statement of that aspect of the question. This is Exhibit 7, in three parts. I shall now take up the Chicago market system in the men's clothing industry, and present some of the general principles illustrating them by the way, in which it was worked out in the Chicago market, and then go from that onto the other aspects of the question, State and Federal. First, as to what you might say were the theories or expectations nine years ago when this matter was first presented, of what could be accomplished by unemployment insurance, so called. There were three things which were advocated at the time as reasonable to be expected by the enactment of such legislation, and by the installation of a corresponding system in the Chicago clothing market. The Chicago clothing market system is exactly the one that is proposed in the Huber unemployment prevention bill, except that the Chicago market is by joint agreement, by the associated manufac UNEMPLOYMENT I N T H E UNITED STATES 223 turers and organized employees, while the other is legislative. The three things expected were, first, an inducement to the employers to regularize their employment. The second was an inducement to the employees to remove their restrictions on output, and to cooperate with the management in increasing the efficiency of the industry. The third was an inducement to the employers and manufacturers to cooperate in the establishment of free public employment offices. These three were the expectations or the theories underlying the proposition at its beginning. I shall take those up in order, but will begin with the Chicago market and go into those three aspects of the question and see to what extent we can discover whether those expectations were realized. This agreement in the Chicago market took effect in 1923. During the first year no benefits were made. Senator TYSON. With whom was the agreement made? Doctor COMMONS. I t was made by the Associated Clothing Manufacturers, manufacturers of men's clothing, in the Chicago market, some 400 firms, and the Amalgamated Clothing Workers of America. At that time there were about 30,000 employees in the Chicago district, and for the first year they collected funds. I have a statement of the results to date, to January 19, 1929, that is, of the financial results. During this time there have been contributed to these funds, that is, since 1923 through 1928, $5,050,428. There have been paid out as benefits to the workers, $4,081,116, to which should be added a special arrangement of $103,671. The general office expenses consisted of equipment, $21,000, and operating expenses during these five years, $324,000. If you compare the benefits account, $4,100,000, with the operating expenses, $324,000, you will find that the operating expense is about 8 per cent. This being a mutual association, 8 per cent is a very good record. The CHAIRMAN. I think you told us yesterday the proportions in which this contribution was made, did you not, or whether it was made all by the employers ? Doctor COMMONS. I shall develop that as soon as I make this statement. There is a balance on hand in January, 1929, of $593,000. The agreement which started this arrangement in the Chicago market was under consideration for two or three years. Finally it developed to this effect, that the employers agreed to pay into the fund 1% per cent of the pay roll, and the employees agreed to authorize their employers to deduct from their wages a corresponding l1/^ per cent, making 3 per cent on the pay roll. I n 1928, the employers increased their contribution to 3 per cent. That agreement runs to 1931. The present agreement is 4% per cent on the pay roll. There are two systems operating in the Chicago market, possibly three. First, the general idea is that this should not be an insurance fund in the ordinary sense in which one firm pays for the unemployment of another firm, but that it should be a house or establishment fund, in which a company is responsible only to its own employees. There were only about 70 firms of size enough to undertake that kind of individual establishment responsibility, so it was necessary to organize the small firms into a mutual insurance company of about 400 small firms. So that we have in the Chicago market about 70 different boards of trustees. Each house has its own 29193—29 16 224 U N E M P L O Y M E N T I N T H E UNITED STATES board of trustees, making about 70 separate boards. Then these small contractors are united in one common fund. That is strictly a market or insurance fund. I n order to obtain uniformity all of these boards elected the same person as chairman. I was chairman of the 70 different boards, and the administrative problem was how to get them all to act uniformly, and that was worked out by a system of conferences and then holding meetings independently of about three board meetings—three different boards. That is a detail of the organization that I need not go into. The next thing was how to handle the funds. I t was necessary to set up one central office for handling the funds for all these different boards, and keeping accounts with all the firms and also keeping an account with each one of the 30,000 wage earners as to their employment and unemployment. I t required a little time to install that system, but by the aid of companies whose business it is to establish offices of that kind, we put in a system of labor-saving devices of various kinds. The significance of that is that 30,000 checks had to be written twice a year for 30,000 employees, and accounts kept with each one of those 30,000 employees and with the firms themselves individually—rather a large bookkeeping proposition, but the fact that they got through on an 8 per cent operating expense shows that it can be done very reasonably. That does not include all of the expense. I might say that the most important thing in the minds of the people working in the matter ivas to create confidence upon the part of the 30,000 workers that their future was being cared for in periods of unemployment, and to inspire confidence in them that this was to their interest, that it would affiliate them directly with industry, so that there might be developed a psychology or attitude of approval of this system. I t was devised that these checks should be distributed in two payments, not weekly payments but in two* lump sums. The fund is not a large one. I t amounts only to about $60 or $70 per year to an employee, so that he will get a check for $30 or $35 twice a year. I t must be remembered that this industry is highly seasonal. A t that time, 1923, there were only about 35 weeks of employment on the average in the market, leaving about 17 weeks of unemployment. I t has now been reduced so that they have about 40 weeks of employment this last year, leaving 12 weeks of unemployment. The result of that is that every employee is entitled to unemployment relief. The CHAIRMAN. You mean by that at some period of the year everybody is unemployed? Doctor COMMONS. Practically everybody is unemployed, and the average at that time was 17 weeks of unemployment, and now it is an average in 1928 of 12 weeks. The CHAIRMAN. I understand that the industry is in such a position that there is no continuity of employment for anybody. I s that correct? Doctor COMMONS. There are two seasons in the clothing industry. The CHAIRMAN. Yes; but does a plant relieve itself of all of its employees at some period of the year—of foremen and superintendents and workers of all kinds ? Doctor COMMONS. The great bulk of them. Practically all of them, yes, are entitled to relief, are laid off. UNEMPLOYMENT I N T H E UNITED STATES 225 The CHAIRMAN. A t some time during the year? Doctor COMMONS. Yes. The industry is largely conducted on the order basis. I shall speak further of how the companies have started in to regularize, and how some firms have reached the point where 1 was told that there was one that is now built up to 52 weeks of employment, so that it has now no unemployment relief. T h a t is exceptional. The ordinary firm, marketing competitively in the national market, and largely on orders, is not able to give steady employment, but two or three firms have developed devices and so operate their affairs now that they have about 47 weeks of employment. We call that 47 weeks of employment full employment, and we have put in 5 weeks of holidays and vacations—two weeks of vacations, twice a year, and holidays, during which they are unemployed. Senator TYSON. I n what months as a rule are these distributions made? Doctor COMMONS. At the end of the season. Senator TYSON. What time does the season begin ? Doctor COMMONS. The seasons run from November to May and from May to October. They are now working on the summer goods for next summer. They will be off the summer goods about May. Senator TYSON. Then you give them the benefit? Doctor COMMONS. Then along in June following they will get the unemployment benefit for the preceding season. Senator TYSON. And you say that that average is about $35 every half year? Doctor COMMONS. Yes. The psychology of it is t h i s : During the first year when contributions were being paid in both by employees and employers, and it was being deducted from their pay envelopes, there was a good deal of dissatisfaction and unrest. The first payment was made after it had been going about a year and a half. I t was made by calling together the employees of the various shops, and distributing at that time the checks to the individuals. They were called together by the business agents of the union who distributed the checks. I remember when that first check distribution was made. I don't know how many thousand workers received checks, but the attitude of the whole rank and file of them changed immediately, and they became firm supporters of the unemployment insurance. I shall speak about the effect of that later. Senator TYSON. May I ask what is the average wage ? You spoke about their getting $35 semiannually. About what is the average wage per week? Doctor COMMONS. The average wage for the market for the year ending May 2, 1928, for the Chicago market, is $1,564. The average weekly wage distributed over the 52 weeks would be $30. The average for the full-time weekly wage, actual work time, was $40. This figure is on the basis of 40 full-time weeks employed. The CHAIRMAN. What is the percentage of men and women engaged in the industry. Doctor COMMONS. I t is 40 per cent women and 60 per cent men. The average hourly rate of pay is 91 cents. Senator TYSON. And what hours do they work? Doctor COMMONS. Forty-four hours a week is the full tijgie. 226 U N E M P L O Y M E N T I N T H E UNITED STATES Senator TYSON. That is 8 hours for 5 days and 4 hours on Saturday? Doctor COMMONS. That is the idea. The average actual work during the year was 33 hours. I shall speak first of the feature that I mentioned last, the employment office. I n any scheme of unemployment insurance, the first requisite is a satisfactory system of employment offices for registration, and keeping a record of the individual employees, and determining the liability of the fund toward them. I know of no system of unemployment insurance which has not been preceded either in Europe or America by a satisfactory system of employment offices. I n the case of the Chicago market, the union has established an employment office of its own and has done it on a very exceptional basis. They brought it from the Canadian Department of Labor, Mr. Bryce Stewart, who testified before you, and put him in charge of building up their employment office. He was with them three or four years, and built up a very remarkable system of employment offices. When this unemployment insurance system came in the unemployment trustees'began to take some jurisdiction over the union employment office. I t had to impose upon the union office, which theretofore had been run in the interest of the union, certain rules, records, and reports, and to have close connection with the employment offices. That was worked out in great detail, so that we had the basis of a registration office there which might keep reports. The rule was substantially this. When a man or woman was laid off or out of work, he or she had to report immediately to the employment office. Unemployment benefit does not begin until after the time they have reported themselves as unemployed, and as looking for work. Then when they find work, or when the office finds work for them, they are taken off the unemployment list and the record is made on their cards in the central office of the unemployment fund. So that for the first time we have accurate statistics of employment and unemployment in the clothing industry. I t is as accurate as anything could be in any business operation. Previous to that it was entirely guesswork as to how many were unemployed. So we have been able to make charts which you will find in these exhibits of the cycles and seasons of unemployment. I want now to extend the question of the unemployment office a little further and take it up with reference to the Huber bill. The Huber bill was based on the existence in the State of Wisconsin of employment offices which we thought were very efficient. I shall take the Milwaukee office, in order to bring out the idea of an efficient administration of employment offices, not only for ordinary employment purposes, but also as a basis for an unemployment insurance system. The employment office in Milwaukee, for example, is operated by the State industrial commission, so far as the payment of salaries is concerned. The city and county of Milwaukee contributes to equipment and maintenance, telephone and similar things. Then an advisory committee" is appointed, consisting of 4 representatives from the chamber of commerce, the employers, and 4 rep,resentatives from the Federation of Labor—that is, organized labor— 4 from the city government, and 4 from the county government, making 1^ on the advisory committee. The most essential thing UNEMPLOYMENT I N T H E UNITED STATES 227 about an employment office is the training of the officers who do this work. Ordinarily we find that under our political system there is stability of emploment by the officials of the employment offices. They are changed whenever there is a change in administration, there is no future for them; but an arrangement was made in this case by which officers should be placed under civil-service rules of the State civil service commission, which would hold an elimination examination, and then the committee of employers representing the chamber of commerce, and the committee of the Federation of Labor held an oral examination and selected the people to man the employment office. They make their recommendations to the industrial commission. I t certifies that to the civil service commission, and in that way they get on to the State pay roll. That is wholly elminating politics from the organization. I t is surprising what powerful influence is brought upon a governor to retain incompetent people in employment offices. We came against that when we started the employment office, because we had to remove the preceding official who had been appointed, and when we removed him the governor was borne down upon by judges and the principal politicians of Milwaukee. We could not possibly have resisted the pressure, and the only way in which we could resist the political pressure was by referring all of these citizens, judges, and others who were supporting this man, to this committee of employers who were in charge along with the unions of the Milwaukee employment office, and those employers who had no political motive in the matter, who simply wanted to get efficient employment officers, immediately disposed of these objectors, and the whole system was established on that basis. I don't believe that we can have public employment offices in this country until the employers are willing to support those offices. We may make a gesture of establishing employment offices, as applied to the State and Federal Governments, but we have no civil service rules for selection, we have no joint committees of employers and unions. The CHAIRMAN. T O whom do you refer when you say " we " ? Doctor COMMONS. All of the people of the United States of America, including the Federal Government. The CHAIRMAN. D O you mean to say that we have no civil service rules in the Federal Government? Doctor COMMONS. We have none in the employment office service. The CHAIRMAN. Of course they could be placed under civil service by legislation. Mr. Jones, of the Department of Labor, is here, and I will ask him whether that is correct ? Mr. JONES. None of them are under civil service. A few States, as I understand it, as, for instance, in New Jersey, have civil service, and also in the city of Newark. I think they are under the civil service there, but it is not a general proposition as Doctor Commons says. I t is political. Doctor COMMONS. That means incompetency to begin with. Senator TYSON. Did I understand you to say that when this man was dismissed, when you finally got rid of him, they were under civil service in Wisconsin at that time ? 228 UNEMPLOYMENT IN T H E UNITED STATES Doctor COMMONS. N O ; he had not been under civil service. We had had an employment system for 10 or 15 years, but not under civil service. When we started this system that I speak of in 1911, then it was put under the civil service. Senator TYSON. And it is under civil service now ? Doctor COMMONS. Yes. This is the point I wish to make about civil service, and I think it is altogether important. W e will never have adequate employment offices until something of this kind is done. We must have them actually administered by the organized employers, and I think in cooperation with organized labor, and if I were to suggest any form of administration for the Federal service, I could only base it upon the experience which we have had in Wisconsin in administering it, especially the Milwaukee office, and that the Director General of the Federal Employment Service should be authorized to appoint advisory committees, representative of the employers and employed. You could not very well put that in the law, of course, that it should be organized labor. I shall give my reasons why it should be organized labor. There should be some provision regulating civil-service rules to the effect that this be the organized employers and the organized employees, because it would be something like the national association of manufacturers and the American Federation of Labor—that they should be the ones to hold the oral examinations on fitness, and to certify their recommendation of their selection to the director general, and, of course, to the Department of Labor, or whatever administrative department has it in charge. This is what is accomplished: The civil-service examination ordinarily can take into account only educational qualifications. I t can not take into account the fitness for the job. Here is the peculiar kind of fitness necessary in these employment offices, which no examination can ever accomplish. The person selected to operate the office must be one who can have the confidence of the employers who handle and patronize the office, so that he is able to go out and solicit patronage. H e must have the confidence of organized labor, because the political attacks which will be made on the system by candidates for office, who will advocate that these offices are created in the interest of labor and that labor should control those offices, and, consequently, in order to head off that kind of political attack, organized labor should be represented on the boards that actually select the staff, so that they can report to their organizations whether the thing is on the level or not, and the manufacturers should be represented so that they can similarly report to their constituency to see whether it is on the level, and it is not worth while to take into account unorganized employers or unorganized labor, because they have no constituency to report to. That does not interfere with the manufacturers association having its own employment office. For example, in the Milwaukee system, one of the four representatives of the employers in managing the municipal office is the secretary of the employment service of the metal-trades association. An employers' association needs to have its own employment service, for two reasons. One is that it may connect up with the skilled mechanics and may transfer them from one shop to another, as in the metal trades, and the other is that it may be able to head off organized labor. I t usually has a detective system along UNEMPLOYMENT I N T H E UNITED STATES 229 with the employment office, and those businesses are naturally necessarily a part of an employers' employment service. On the other hand, the unions, as in the Chicago system, want to set up their own employment office for exactly the same reason, that they may control the labor supply, and so the two systems of employment offices operated by the employers and by the unions are what you might call the militant employers' union association, and at the same time those agencies can go on and you can still have a public office as shown by our experience. One of the most useful members on this advisory board is a man in charge of the metal trade association employment system. The CHAIRMAN. YOU mean the employers' association ? Doctor COMMONS. Yes. I call it the metal trades association. So I would not think it worth while to recommend a Federal or State employment system that did not have a provision of the kind that I have mentioned, of the joint management by capital and labor, but simply as an advisory body, because the director need not take their advice. But as a body which actually does manage in the sense that it has a voice in the selection of the staff. The CHAIRMAN. YOU say that this advisory council or board should be made up of organized labor and organized manufacturers or employers. Would that in any way militate against the unorganized workers or the unorganized manufacturer or employer ? Doctor COMMONS. The manufacturer's side of the advisory committee is always going to protect unorganized labor. They are not going to allow him to be discriminated against by the union. If you have the two together, it is impossible to discriminate against the unorganized. On the union side, it is not so much the efficiency of the union as compared with the efficiency of the employer, for we find that the efficiency is much more the employer's side; their representatives are the ones who have initiative and experience; but on the union side, being present and participating, they can assure labor that the thing is being conducted without discrimination against organized labor, so that you get then a personal administration; and by the very nature of the advisory board, really the governing board, which, in Milwaukee, meets once a week to go over the week's work, there can be no discrimination either for organized labor or for unorganized labor. The CHAIRMAN. Have you any statistics as to the number of men who clear through these agencies ? Doctor COMMONS. Mr. Jones can give you all of the statistics of the Wisconsin office. He has them at his disposal. Senator TYSON. Does any unorganized labor apply to them? Doctor COMMONS. Oh, the great bulk of applicants is unorganized labor. Senator TYSON. I t is not controlled by organized labor, so that the unorganized do not come there and make application for employment? Doctor COMMONS. I should say that 95 per cent was unorganized labor. Would not you, Mr. Jones? That is, in the Milwaukee office? Mr. JONES. Yes. Organized labor takes care of their own. Doctor COMMONS. Yes; the organized unions will take care of their own mechanics, and the employers are more concerned about keeping 230 U N E M P L O Y M E N T I N T H E UNITED STATES a list in their organization of the skilled people they need, so that these public offices are more for unskilled and common labor. That is an important fact. I t is the only way in which that class of labor is goig to have a square deal from the American public as to job finding. Senator TYSON. YOU think then that the organized labor on the committee protects the unorganized labor ? Doctor COMMONS. I t protects the organized Jabor. The manufacturers protect the unorganized labor. Senator TYSON. Don't you think that the unorganized labor ought to have some protection for themselves? The CHAIRMAN. If they are not organized, how would they send their representatives there? Senator TYSON. Any man who is not representing organized labor. There can be some man, it strikes me, who could represent unorganized labor as well as organized labor. The CHAIRMAN. I don't see how you can represent anything if you are not organized. I don't see how a Member of the House or the Senate could represent anybody if he did not have the organized voters. Senator TYSON. I can see how one man can represent everybody, how one man can represent organized labor, and somebody represent everybody in the State. I t strikes me that everybody has a right to be represented. I don't see why ; you should confine it to the employers and to organized labor when 95 per cent of the people interested are not organized. The CHAIRMAN. The point of the thing lies in the fact that it has worked. Senator TYSON. That is the same point we have been fighting for for 150 years. You have no representation here. I t does not make any difference to me, but I think myself that the organized labor helps to hold the prices in wages for everybody in the country. When they get them everybody else is affected beneficially by it, but at the same time it seems to me that when you put up two classes of people, one of them representing 95 per cent of them, that you are hardly giving those 95 per cent much representation. Doctor COMMONS, Senator, it is a condition that we face rather than the theory. Senator TYSON. That is what I am speaking about. Doctor COMMONS. Prior to the installation of this system—and I am speaking of my own knowledge, having a year in administration and in the installation of it, we went on the theory that one man was as good as another for running an employment office, and we found this: That it was run solely by those who had political influence. Now we put in this system of having a joint committee. The city federation of labor names four people, the organized manufacturers name four people, and they are the people who are fighting each other. The unorganized are not doing any fighting at all. They are not engaged in any political movements to amount to anything. They are negroes and other classes of people and are advised that it is impossible for them ever to select a person that would represent them. So that the person who is presumably representing them is selected UNEMPLOYMENT I N T H E UNITED STATES 231 by political influence, so that, so far as this thing is concerned—this particular problem that we are up against—it is the conflict between capital and labor, and that is the conflict between organized capital and organized labor. That is the condition that we have to face, and the question is, if there is going to be any disturbance, or any breaking down of the system, it is not going to come from the unorganized, but it is going to come from the organized labor or from the organized capital, the organized employers. The real difficulty in the whole matter is to get the organized employers—who in our case are practically all open-shop or antiunion employers—to be willing to sit with the representatives of organized labor. I n our case organized labor has been controlled by the Socialists and the Communists so that there is keen antagonism between them, and it takes some ingenuity and a clean, open-cut program to get the two to work and meet together and to agree together upon the selection of a staff; and that staff must be selected so that it will not show any discrimination either in favor of employers or in favor of employees, and after the thing got to going—and at first it took a little time—the thing for the last 15 years has worked automatically, and we have employers on that committee, and we have had the representative of the International Harvester Co., the superintendent in Milwaukee, who was probably the genius on this whole thing, and he took a personal interest in it and developed it, and more to him than to anyone else is owing the perfection of the whole mechanism; and organized labor simply sat by and looked at him manage it. That is the way that this think has worked out. Organized labor could then say to their constituency, " Why, the International Harvester Co. is not running this office, because we are there and we see what is doing; we know what the office is doing," so that they have perfect confidence; and I don't know of any other instance where the employers and the unions in our State come together and do any talking together at all. They not only do not recognize each other, but they are politically against each other. The question is how to get them out of politics. We have the Socialist-Labor P a r t y in our State. We have really a European class-struggle situation, and we had to meet that practically, and that is the way that we met it. I n looking over the national situation I can not see really much difference if we are going to establish a Federal system. The CHAIRMAN. I S it not a fact that the railroads through some such system as you have suggested have largely overcome the carshortage proposition ? Doctor COMMONS. Yes. The CHAIRMAN. I remember that after the great car shortage happened, the railroad executive association here organized councils in all the big districts and distributed their car equipment, and on that council the shipper was represented and the railroad was represented ; and I think that system, purely voluntary, has largely solved the whole car-shortage difficulty of the country. I t is one of the most successful things that the railroads have done since the war. Doctor COMMONS. I t seems to me that all legislation for the future in dealing with this question of antagonism between employer and employees will have to recognize that it is only through collective action that Congress can hope to get the results they want to have. I t 232 UNEMPLOYMENT IN THE UNITED STATES is organized capital and organized labor that are equipped to act, and if they can be brought together to run the employment offices, that will be the solution. Of course you have your chairman or your director, and an employee of the Government selected under proper civil-service regulations, and the director himself ought, to be selected by this joint body. The CHAIRMAN. After he has passed the academic examination. Doctor COMMONS. Yes; so that he would have permanent tenure of office. He would be satisfactory to both sides, and they would know that everything was on the level. There is a third element that should be represented, which you do not get from organized employers or from organized labor, ^,nd we find that quite,important. There is what you might call the expert public. I may be speaking here somewhat in favor of professors, but we have developed in the various economic fields men of great eminence. Take this industrial relations counselors crowd. The kind of men who do that work should be on these advisory committees, because they are the men who are studying this thing in all phases and in all countries, and some of them have had a good deal of experience in administering these offices. The director general should be able to select for his advisory committee an equal number possibly of that type of people. None of them should be paid any salary or any per diem. They should be paid only expenses, because if there is any money in it, for anybody, you are going to ruin it. By having it purely voluntary, we have on our committees in Wisconsin men whom you could not get for a hundred dollars a day—engineers, managers of big properties—and you could not pay them enough, the State can not hire them, and it is necessary only to pay their expenses, because otherwise the laboring people could not attend. The expenses are the only things that should be paid. There should be no per diems, because you will understand the kind of people that get in when they pay a per diem. They stretch that out and get quite a little picking out of it. You want to get the busy men, the men who are actually solving problems in their own establishments every day. They are the people who should be enlisted in this whole national and State and municipal employment service, and you can command their services if you have the proper organization along the lines that I am speaking of. I think our 17 years of experience in this line has demonstrated that. You may question Mr. Jones when he comes before you about the employment office at Milwaukee. I t is a part of the Federal system now. I shall not go any further into that. The next question that I expect to promote by unemploymentinsurance system, assuming that we have an employment-office system that will function, is the promotion of efficiency. I shall have to make a distinction between two kinds of efficiency. One I might call spiritual efficiency—a willingness to cooperate, and the other technological—that is, the work of the engineer, the production manager, and so on. This unemployment insurance is directed toward bringing about on the part of the wage earners a favorable attitude toward increasing efficiency. I have worked on that subject for 30 years, and if you do not mind I shall give you my first piece of investigation on that. I t is in the eleventh special report of the United States Department of Labor in 1914, a report on the restric UNEMPLOYMENT IN T H E UNITED STATES 233 tion of output. I investigated for the Department of Labor a number of industries in this country and in England as to the restrictions of output by organized labor and unorganized labor, and the result of that investigation convinced me that there is just one reason why labor is opposed to efficiency, opposed to increased production. I t is simply the fear of unemployment, the fear that they will kill the job, the fear that they will throw themselves out of a job. I shall give you one concrete case, and I think perhaps you will appreciate this argument. A friend of mine, a manufacturer with about 2,000 employees, held a very humanitarian idea. He was new at the manufacturing business. I n fact he had been a professor in our engineering college. He went into business, with a professor's idea of humanity rather than with a business man's u roughneck " idea, if you will allow me that expression. He had a large contract, and when it was finished he knew that he would have to lay off his whole force for some three or four or five weeks. He reasoned to himself, " W h a t would I want to know if I were going to be laid off? Wouldn't I want to have a chance to get a job? " So he said that the fair thing for him to do by his employees was to give them two weeks' notice that when the job was finished they would have to be laid off. So he gave them two weeks' notice in a spirit of kindliness. The whole force, which was unorganized, and an open shop, laid down on the job, and it took them five weeks to finish that piece of work, and he went in the hole financially. H e simply changed from a humanitarian to a " roughneck," and he is new one of our hard-boiled employers. What was the reason ? Labor has families to feed. The one dread that causes them to restrict output—and it is not true simply of organized labor but runs through the whole ranks of labor—is the fear of unemployment. I have tested the situation in the Chicago market prior to coming here as to the efficiency question, and I tried to find out whether this unemployment insurance in the Chicago market had accomplished what I thought it would by reducing that fear of unemployment. I have figures here from one of the firms that I am not permitted to release yet—I may get permission later— and I shall have to give you merely the result. The system went into effect with the first payment of the benefit to employees, about 1924. I n 1925 the union appointed a committee to meet and to work with the committee of the employers and go through all of the shops and find out whether there was any restriction of output and to remove it. This affected several firms, but I am speaking of the one that I have in mind, with about 2,000 employees. This particular firm was about to go on the rocks. I t s unemployment fund was exhausted practically; we expected it would come out on the deficit side. The union went to work to save that firm from.going on the rocks. They enabled it to put on a different line of garment, to sell at a lower price. They cut out all of the restrictions and permitted the company to introduce mechanical devices, and the result is this, that during the period since 1925 the output per man-hour has increased just 40 per cent in three years. Because of this increased efficiency the number of suits per 44 hours has increased 40 per 5cent. W h a t happened is this. We had a remarkable burst of what I call spiritual efficiency, and I want to show 234 U N E M P L O Y M E N T I N T H E UNITED STATES the significance of that. I have known that clothing market for 30 years. All of the people employed there were Bolsheviks. I used to talk to them organized labor, and they used to talk in this casual way about how they would do when they took oyer the different manufacturing firms and operated them by the union. This is the way they put it. If the management was decent about it and did not raise a row, they were going to put them on a salary, and if they were not decent they would take them over and let the management go. They changed entirely and since 1925 are quite different. I have students who have been labor managers in industry, and they tell me now that that union has lost its ginger, its pep, and is turning to try to help the employers make profits. Senator W A L S H of Massachusetts. What has caused that change of mind ? Doctor COMMONS. This unemployment insurance has been the principal factor, in my judgment. Since 1925 they have not had a stoppage. The union could not control little shop strikes, but they have not had a stoppage. Most of the suggestions for substituting machinery for hand labor have come from the mechanics of the union. I could go into those details, but it is not necessary. The suit which they formerly had to sell for a certain price, and I shall not give you the price, they have reduced in price about 25 per cent to the public. They have shortened the hours, they have increased the wages, and the statements by the firm show a larger profit continuously, and the interesting thing about it is that the union points to the financial statements of this company as a justification for their participation with the firm in these various increases in efficiency. The CHAIRMAN. I n the case of that concern that you state was about to go on the rocks, did they come out successfully ? Doctor COMMONS. They came out successfully. They put a 3uit on that they sell for a third less, and they come out with a good balance in this insurance fund at the end of the year, whereas we expected that it would disappear; so quickly can these things operate if you have cooperation. I mention that as an extreme case, a change from an attitude of confiscation, the confiscatory attitude of the immigrant, largely Jewi$h laborers, and entirely communistic, over to a cooperative organization helping the management in making more profits, and they sharing of course. I was on an arbitration board for them two or three years ago, and we gave the union 10 per cent increases in wages, and the employers now make better statements. The CHAIRMAN. I think yesterday Mr. Leeds said that he did not believe that the employee should contribute to the unemployment insurance. Have you any views on that? Doctor COMMONS. I n the case of the system in Chicago the employees proposed that the employers should be the sole contributors, and they wanted the employers to contribute 3 per cent on the pay roll. I n the final wind-up they divided 50-50, the workers paying iy2 per cent and the employers iy2 per cent. The argument that influenced the employers was this: We need the cooperation of the laborers not only in this but in increasing productivity, and so on. We have to have them feel the sense that they have a financial UNEMPLOYMENT I N T H E UNITED STATES 235 stake in it, and they said that they would not go ahead unless organizd labor contributed. I t was against what the union wanted, because they took the view that industry was responsible for their employment and that the employers should take care of it. My opinion was that that was a satisfactory solution, but when it came to the revision in 1928, the employers increased their share up to 3 per cent, while the union left its at iy2 per cent. That was not solely because the employers were satisfied that this was a good thing but it was a part oi a trading arrangement. The union wanted 40 hours instead of 44 hours per week, and the employers did not want to give them 40 hours, but they were willing to increase the insurance to 3 per cent, and in that trading arrangement, it came out in that way. I n the Huber bill it is imposed solely upon the employer, and it is made so small, a dollar a day, that it barely pays the rent, with the idea that thfe employers who operate under this system would then develop cooperative schemes and get contributions from labor or increase their contributions. Senator W A L S H of Massachusetts. Has any legislation been passed yet? Doctor COMMONS. N O . Senator W A L S H . What is this legislation? Doctor COMMONS. I t is Wisconsin legislation. Senator TYSON. That has not been adopted? Doctor COMMONS. N O ; it is dead; just as dead as anything you have here in Congress. Senator W A L S H of Massachusetts. There has been no legislation? Doctor COMMONS. N O . Here is the digest of all of the proposed legislation in the United States, which I am submitting as an exhibit. The CHAIRMAN. What I would like to know is your own viewpoint as to the psychology of the employee contributing. You recited a statement of the facts without expressing your own opinion. What is your opinion about it? Doctor COMMON. I think that as a matter of legislation the employees should not be required to contribute. As a matter of company unions, where the employer runs the whole thing, as Mr. Leeds says. 1 think the employee should not contribute. As a matter of joint collective agreement between the employer and the organized labor, I think the employees should contribute, and that should be taken into account in the adjustment of the wages agreed upon in their collective arrangements. I t depends upon the purpose that you are going to accomplish. The CHAIRMAN. I n other words, in your description you describe two systems, the market and the establishment systems. I n the case of the establishment system, you believe the employees should not contribute ? Doctor COMMONS. N O ; although both of these in Chicago happen to be union agreements, both the market and the establishment. The CHAIRMAN. I n the case of union agreements, you do not make any distinction between the establishment and the market agreement ? Doctor COMMONS. N O ; but in both of those cases the union members should contribute. That had a remarkably good effect because you got a union of the organized benefit to capitalism to deal with, and if 236 U N E M P L O Y M E N T I N T H E UNITED STATES you can get them to assume responsibilities for discipline of their rank and file, because the leaders are all right, they will welcome this, and the problem is how to get the rank and file to fall in line. Senator W A L S H of Massachusetts. Have you a digest of legislation proposed or enacted in other countries than our own? Doctor COMMONS. The industrial relations counsellors who prepared this exhibit are proceeding now to make an investigation of European legislation which will be comparable to this, which I think is the best piece of work that has been done. Senator W A L S H . When will this be ready ? Doctor COMMONS. They say that in book form later they will have a comprehensive world-wide study of various forms of unemployment compensation. I know that they are at work upon it now, and had people in Belgium and Holland last summer. I can not say how soon it will be out. Doctor L U B I N . I have an abstract of the English, German, and Swiss systems that I am going to put into the record. Senator TYSON. I S it your idea that there should be legislation requiring employment insurance ? Doctor COMMONS. NO ; I say at the present stage that there should be no Federal legislation on unemployment insurance, that there should be legislation along the lines that I am offering for the establishment of an unemployment service, that all legislation and all unemployment insurance should be left to voluntary efforts or to the States, but that in the enactment of a law creating a Federal employment service there should be offered an encouragement to the States and the localities to set up proper employment services, and to set up insurance. Senator WALSH of Massachusetts. Could we not legislate for the District of Columbia and thereby set an example to the States? Doctor COMMONS. YOU certainly could. You are the legislating body for the District, and it could come only through your action here. I have not been able to finish all of the points that I wish to touch upon. The CHAIRMAN. H O W long will it take you to finish ? Doctor COMMONS. I think about half an hour. The CHAIRMAN. A t this point we will have to adjourn, as it is 12 o'clock, and we will meet to-morrow at 10:30 o'clock a. m. (Thereupon, at 12 o'clock noon, the committee adjourned to meet to-morrow, Saturday, February 9, 1929, at 10.30 o'clock a. m.) UNEMPLOYMENT IN THE UNITED STATES SATURDAY, FEBRUARY 9, 1929 UNITED STATES SENATE, COMMITTEE ON EDUCATION AND LABOR, Washington, D. G. The subcommittee met, pursuant to adjournment, in room 335 of the Senate Office Building, at 10.30 o'clock a. m., Senator James Couzens, presiding. Present: Senators Couzens (chairman) and Tyson. Present also: Dr. Isador Lubin, assistant to the committee. STATEMENT OF DR. JOHN R. COMMONS—Resumed The CHAIRMAN. YOU may proceed, Doctor Commons. Doctor COMMONS. Mr. Chairman and Senators, the point that I had reached yesterday was the third point which I had in mind with reference to these matters, and that is the stabilization or regularization of employment. I had spoken about it as bearing on or promoting efficiency. That is mainly with reference to the attitude of the employees. I have spoken of the inducement that it would offer, and the necessity of having a proper Federal, State, and municipal employment service. I should like to add to that that if a reorganization of the employment service is contemplated, we have an extraordinarily good example of how to proceed in the Federal Board for Vocational Education. Their system is exactly the procedure which should be followed in promoting employment offices run by the States, and so on. But I shalj not go into that any further. Senator TYSON. D O I understand that in these employment offices by the Federal Government, the State, or the municipalities, they are to be separate employment offices? Doctor COMMONS. Briefly, the Federal service is the only one that can operate the farm seasonal employment. They must be Federal employment officers. All of the other officers should be State and municipal. The Federal service, however, should have a staff of competent people to bring up the level of the State employment offices, in order to place its own agents in there to assist the State offices, but put the responsibility on the State offices and then some sort of aid based on the efficiency of the State system. Senator TYSON. YOU mean monetary aid? Doctor COMMONS. I would give a small monetary aid in order to have the influence necessary upon the State. Senator TYSON. YOU mean that the Government should give that to the States only and not to the municipalities? 237 238 U N E M P L O Y M E N T I N T H E UNITED STATES Doctor COMMONS. T O the States only. The Federal Vocational Board gives a certain sum to the States, whose plans of vocational education meet its requirements. The States must match that amount, but the figures show that the States put in about three times as much as the Federal Government, and in some cases five times as much. That is the thing to encourage, to sort of bring them up to a level and to have a national unification. You must have some sort of Federal supervision—not doing the work of employment, but attending to the plans which each State has. Senator TYSON. Have supervision and at the same time make some monetary appropriation ? Doctor COMMONS. A small monetary aid, not the inducement of a great amount, but small enough to encourage the State to go ahead and exhibit initiative on its own part. That will give you a very uneven service, because the States will not come up to any particular level. When the Vocational Board started in, the States knew nothing about vocational education, but now they have reached a point where they get remarkable results. Senator TYSON. As a matter of fact it is largely a matter of education during a continuity of service? Doctor COMMONS. The Federal service should be made up of what we call experts. I think the vocational educational service is. I t is highly specialized, and a highly informed service, of supervision, inspection, and contingent aid. On the matter of regularization, this proposition that I am placing before you, I want to repeat it is not an insurance system at all, and it should not be called an unemployment insurance. The proper name is unemployment reserve funds, leaving it to the business firms to decide for themselves whether they will form mutual insurance companies which would be necessary in the case of small firms, but emphasizing mainly the promotion of reserve funds by establishment. I n other words, it looks upon labor as a kind of fixed charge on industry, and it is in line with many things that are being done in the past 15 or 20 years. We have now a very remarkable development, which did not characterize the business of 15 or 20 years ago, of reserves for dividends, so that the stocks of the companies are made almost equal to a bond, not because there is any legal obligation, but because they set aside in good times adequate reserves to pay dividends when there is no work, and then we have reserves now for depreciation, or even for new construction, keeping up the plant, and expanding the plant. This proposition means that labor shall be treated in the same way, that a reserve for unemployment shall be created, and in the Huber bill it is provided that every firm that takes on a new man thereby incurs a liability for unemployment and becomes obligated, in order to maintain its financial standing to set up reserves to meet that liability. Take the period of 1919-20, when business, without any regard to the future, was overbidding for labor. Labor was not only fully employed, but firms were taking labor from each other by excessively high wages. That resulted in the demoralization of labor. The most inefficient period was the years 1919-20. The falli n g off in hourly output per man was .something demoralizing to labor. Labor laid down on the job. Then within a year four o r UNEMPLOYMENT I N T H E UNITED STATES 239 live million laborers were unemployed, so that they demoralized them first, and then pauperized them afterwards. This means that in periods of activity firms will not expand beyond what the credit situation would seem to indicate. The taking on of new men and the creating of new liabilities must bring the attention of commercial banks to the situation, as to whether the business is expanding too much, so that this proposition of unemployment reserve funds falls in line with other devices for stabilizing of production and employment. Of course, the most important one in the whole country is the Federal reserve system, which, after 1920-21, has used its powers very successfully toward stabilizing industry as a whole. I t may be that they have taken pretty good care to ^stabilize the totality of industry, but that is not written in the statue. There is no duty on the part of the Federal reserve system to stabilize prices or production. They have assumed that to be, and all of their actions in the last six years indicate that they recognize that as a responsibility of the concerted action of the banking interests of the country. This then falls in with the general stabilization program which is interesting all classes of people. Here is another thing about labor. Somebody has to pay the bills for unemployment. The example to which I call your attention is one that occurred in my home State. A nonresident corporation had a plant in that State in a small town, and during the period of 1919-20 they expanded to the extent of something like 3,000 employees. Their ordinary establishment was about 2,000. They brought in 3,000 people, paid them high wages, pulled them away from the farms, brought them in from other States, and then suddenly in 1921 they laid them off, 5,000 people, and they were placed on that small town without any notice or any provision of any kind, and the taxpayers of that town had to support them. These people had been taken from different parts of the States; they had been pulled away from agriculture. The taxpayer simply must support these people. This simply means that the business management shall assume that responsibility, that they will not overexpand with the certainty of laying off people. There are other forces leading toward stabilization. Much more important as the financial inducement to employers is, of course, the fixed overhead charges I have already mentioned, the care for stockholders, the care for reserves of different kinds, and then the overhead charge, which is a larger item than these rather small employment reserve funds. Take, for example, the Chicago market. The reserve to be set aside by the employers there was iy2 per cent on the pay roll. That is a very small item. I n 1928 they raised it to 3 per cent, to which the laborers added Vfa per cent. Four and one-half per cent is not a large item to attach to a pay roll in order to provide unemployment relief. If it were larger than that we could show a much greater influence of this particular scheme toward stabilizing, for, you see, according to the devices that I have named, the firm that stabilizes its work stops the payment on its fund. If its fund is large enough so that it does not need to make any more payments, it has those payments for dividend purposes. One firm, like Hart, Schaffner & Marx, accumulated a fund which if they could stabilize 29193—29 17 240 U N E M P L O Y M E N T IN T H E UNITED STATES employment in their service would amount to a reduction of theii expenses of about $200,000 a year, and if that was distributed in dividends, which they would be if the reserve fund were built up, it would make quite an item in the dividend. Senator TYSON. Did you mean dividends to the employees? Doctor COMMONS. T O the stockholders, corporate dividends. That is, having built up a fund in good times then it is so arranged that they stop paying. I n the English system, or in the insurance systems of Europe, the more properous employers are continually bearing the burden, so in Europe the insurance system is the penalty of stabilization. This idea of unemployment reserve funds is a premium on stabilization. The firm that stabilizes reduces its expenses by not having to build up its fund, as Mr. Leeds showed in his statement. By stabilizing they have a rule there that once they have accumulated a fund equal to two months' pay of their pay roll, they stop paying. The CHAIRMAN. YOU mean stop paying into the fund ? Doctor COMMONS. Stop paying into the fund. I mentioned one firm in Chicago that has stabilized, giving about 50 weeks' employment. Its fund accumulated adequately so that it has not been paying any premiums into the fund for a year or two. I want to just mention this, bearing on the three kinds of unemployment that we are familiar with, the seasonal unemployment, the cyclical unemployment, and what we are now learning to call the technological unemployment. I have illustrated it sufficiently in Chicago as to the seasonal employment. They have added the cyclical feature in the Chicago market within the last year. They .do not pay the full benefits in the year when there is good employment, as in the last year, 1928, when had a good employment up to 40 weeks on the average instead of 35, but they set aside a reserve, which may be accumulated on the succeeding year, when they are not so successful in their employment or production, so that when the cycle comes around they can give additional employment. Then a new thing that has come on within the last five or six years is the technological unemployment. There has been this enormous increase in efficiency, and where they have had labor cooperating, it has in the last few years in the Chicago market amounted to 40 per cent increase in efficiency. I n the last three years consequently the Chicago market, although it has increased its sales—and I am speaking now of one firm—by 50 per cent, at a reduction of about 25 per cent in price of suits to the customer, and the reduction of about 25 per cent in the number of employees, they have had to lay off about 25 per cent of their employees. I n that case, it is pretty nearly a thousand people that were laid off on account of the technical improvements which the employees themselves helped to bring about. That is what I call technological unemployment. T h a t is a serious matter. If we consider the different things that happen, it amounts to this. A large number of these employees drop out for sickness or death or leaving the industry. Of course that reduces the number employed. Then where the technical improvement comes too rapidly for either the expansion of markets or for the voluntary quits on the part of the employees, some provision must be made for laying off an additional number, in order that those who remain on the force may have steady employment. UNEMPLOYMENT I N T H E UNITED STATES 241 I n the Chicago market they reached that crisis in the case of the cutters, a skilled trade. I n one firm they had about 600 cutters, and now under the new devices they have reduced the number of cutters to 250. That makes a reduction of 350 cutters, although the output has increased 50 per cent. About 200 of these cutters had voluntarily quit. There were 150 that were still on the force, but they could not give steady employment to 4.00 cutters. So they added this feature to the unemployment reserve fund system. They actually paid these 150 cutters $500 each, of which the firm contributed the largest part, and the employees contributed in this way. They agreed not to receive unemployment benefits. They turned their unemployment benefits over to those 150 cutters, who were, you might say, bought off, and induced to leave the business* entirely through this technical improvement. The unemployment reserve fund then, if they are going to take care of this technological unemployment, should have some provision, and it automatically follows that if they have a provision for unemployment, they will get it when laid off through technical changes, reducing the force in order that the others may have steady employment—in order that those who are thus laid off through technological changes might find other occupations that they can go into. Of course that takes up the whole question as to whether industry as a whole in this country is expanding and new industries are coming in. That is a question that belongs, I should say, to the Federal reserve system, which has more responsibility on that subject than any one else, as to whether it maintains an even level and thus encour ages new industries to come in and take up these people who are unemployed. But during this process what happens is that, through this unemployment reserve fund, with possible accumulations for cyclical and for technological unemployment, the purchasing power of labor is maintained to a certain extent, as far as it goes, and not in a general way would support the purchasing power of labor, which otherwise through unemployment would not be available. What effect the unemployment provision has had in the Chicago market, and that is the only test I know of, and it has been in operation for six years, when you have these other inducements for stabilization, it is difficult to say. I have tried to find out from the Chicago market in the last week what the opinion of the people in industry is as to the effect which this unemployment reserve fund might have had toward inducing the management to stabilize employment, to spread out the employment over the years, and they can not separate it from the other forces which are inducing employers to stabilize their production. They can only say this, that they would not have been able to go ahead with this enormous increase in efficiency if they had not had this system which puts the employees in a frame of mind to be willing to cooperate with them. I t was an essential part of the whole system. But when it gets down to working out the actual details of the enormous amount of detail work which must be put through in order to increase the output of a suit of clothes, which is not subject to any concrete, dramatic invention, but is a matter of minute detail on each seam and each part of a suit, their minds are so occupied with those details that that is the main thing that they are working 242 U N E M P L O Y M E N T I N T H E UNITED STATES for, and it is difficult for them to say that this rather small unemployment reserve fund which they have put up has had very much influence in inducing them to stabilize employment, because there are so many agencies cooperating and leading toward the same effect. This unemployment reserve fund is simply supplementary, parallel to all of the other things which are leading business nowadays to bring about a better regularization of production, and, of course, that means of employment. I t brings attention to one of the neglected factors in the whole scheme. We want to stabilize the dividends of stockholders and thus make stocks a better investment. They are almost as good as bonds, owing to this reserve policy. We want to stabilize production by not overexpanding, and then dropping off. But the attention of the business men and the public, except for a very small number of firms, has not been directed toward doing the same things for their employees that business indicates it should do for its stockholders and for depreciation and construction of plants. So that I look upon it as a necessary inducement to all business firms to pay attention to the labor side of their stabilization policies, and it should not be a very large sum that they should pay. I n the Huber bill we made it $1 a day. Senator TYSON. A dollar for what? Doctor COMMONS. A dollar a day for 13 weeks. I t should not be large, because the employees must not be led to believe that they can live on the unemployment relief. They must hunt jobs, and it is their duty to accept the jobs. We see the great evil in England where under their system the employees can support a family almost on the unemployment dole. The Government has had to come to help of the unemployment funds there, because they had to keep these million workers alive. Senator TYSON. D O you think they are coming to a change of tht> dole in England? Doctor COMMONS. N O ; I do not. They just have not the employment ; the industries have fallen off. Senator TYSON. When you have unemployment to the extent that you have in England, you have to raise your dole. Doctor COMMONS. I would not do that out of the insurance fund. I would say that the Government has to come to their aid. That is what happened in England. The insurance fund would have been bankrupt, but the Government during this period of unemployment has gone directly to the taxpayers and has added a new system which they call the dole. Senator" T Y S O ^ . A S I understand you, do you think that this can be applied to anything but the manufacturing industry? Most of your ideas are along the line of unemployment in manufactures. Doctor COMMONS. Yes; it can be applied everywhere. Senator TYSON. Can it be applied in small business firms, where the number of employees is limited, say, to 10 or 20 or 30 ? Doctor COMMONS. When the firm has less than 50 employess, I think it is advisable for them to form a mutual insurance association among the firms. That is the way we did in Sie Chicago market, with about 400 small firms. They have built up a mutual insurance, but that is not compulsory; it is optional. UNEMPLOYMENT EST T H E UNITED STATES 243 Senator TYSON. The difficulty I see about this whole thing is the Tery thing you are making a point of. When you get this insurance, you make everybody more efficient and interested in his job. Doctor COMMONS. Yes. Senator TYSON. When a man gets more efficient he thereby puts somebody out of employment. Doctor COMMONS. Yes. Senator TYSON. And thereby increases the very difficulty that we are now trying to correct. Of course, as I see it, your idea is that they have to go into something else, some other form of industry. Do you think that we are going to go faster, so that we are going to have new industries to absorb the increased efficiency and increased population without any change in hours ? Doctor COMMONS. I think that is going to depend upon the policy of the Federal reserve system. If they adopt a policy which will lead to a gradual falling in prices by high discount rates, and so on, similar to the fall in prices in England, which is killing off their industry, then I say that new industries will not start up and take up the unemployment. If, however, they can establish what we call a stable average purchasing power of money, so that we have indust r y stabilized, then I think that new industries will be entirely adequate to take up the slack of those laid off on account of these technical improvements. I have testified on that subject on House bill 11806, and that is covered quite fully in that testimony. Senator TYSON. Then you think it is necessary for the Federal Keserve Board to keep a low rate of discount so that money can be made cheap ? Doctor COMMONS. The rate of discount must be flexible. Senator TYSON. And must not be very high. Doctor COMMONS. I t depends on how business is going. If business is expanding too rapidly—and I am not talking about the stock market, but manufacturing and commerce Senator TYSON. But the difficulty is that the stock market has such an effect on the Federal reserve that it apparently can not keep i r o m raising rates in order to try to control the situation. Doctor COMMONS. We always have to remember this Senator TYSON. If you will permit me, I think this is a very pertinent proposition, because I think they are interconnected in such a way that if you do not have reasonable rates for money you are certainly not going to have much expansion in business. Doctor COMMONS. I notice that Chairman McFadden, of the committee before which I appeared last spring, has given out a statement within a day or so—and I quite approve of his statement—that the Federal reserve system should not pay attention to the stock markets, but should pay attention to the commodity market, and if in order to kill off speculation in the stock market it has to raise the rates in such a way that it will eventually spread into the commodity markets, then its policy is bad. I could not pass judgment on what they are doing now, but I do think this. The statement given out by the Federal reserve system is quite accurate. They say their attitude to commerce and industry is that of furnishing them facilities to conduct business; the stock market is subordinate. 244 U N E M P L O Y M E N T IN T H E UNITED STATES They may have made a mistake in going after the stock market too heavily, but you have to remember this, that always when money is easy, it is going to affect the stock market first, and it has to filter through the stock market into the commodity market. Then, another thing. I am not so much alarmed about the stock prices going up. First, the companies who have done this stabilizing of their dividends, have made their stocks so that they are worth far more than they ever were, and the stock yield is now even below the bond yield. Senator TYSON. But we have had the most scientific management that we have ever had up to now. Doctor COMMONS. Then also, the statement of these companies whose stocks have risen so high, almost justify the prices which have been paid for them. The CHAIRMAN. T O make a concrete case, how do you explain, when you say that stabilization of dividends has made the stocks more valuable, that the Radio Corporation with no dividends has run up in the price of its stock to such an unreasonable figure. Doctor COMMONS. There are two kinds of dividends, the income dividend and the stock dividend. The stock dividend is a claim on future income, and those things may have come in to affect it. There may be a big reserve that has been set aside, not declaring dividends, but something they are going to have sometime in the future, and it is a big asset that the company has built up by its new policy of not paying out dividends. That is what this means, that by setting aside an unemployment reserve fund it reduces slightly the amount that can be declared in dividends, because it is another fund thatmust be taken care of as a fixed charge before they declare dividends. Then, if you analyze these stock prices you will find that the active stocks are less than 200, all of which show enormous increased earnings. I have averaged those stocks with the 2,000 listed stocks, and there is no such inflation in the others. The CHAIRMAN. I n other words, you think there are a great many stocks that are not inflated? Doctor COMMONS. I would not like to say definitely, but such as I have looked at and have seen their statement, I would say are worth the money that is being paid for them. That can go too far, but,, considering the stability of dividends that is a proposition that they provided for and the enormous increase in net earnings which they have for future dividends of some of these active stocks—15 or 20' that I could name—I think fully justify the prices as compared with what people can get by investing in bonds or in commerce. But I would not want to say to that extent, more than 5 per cent of the whole industry of the country, because so many corporations are not showing that statement at all. I t is a few of the highly efficient ones. I myself do not see any reason for being disturbed about what the stock market does, and if the reserve system, being scared about the stock market, starts in to depress those prices, it is liable to spread to commerce, and that will not show itself until there is a demand for more money, as the spring business opens up and the farm, crops begin to move, and if they can not take another turn before that time arrives it will spread to the rest of the industry of the country. UNEMPLOYMENT I N T H E UNITED STATES EXHIBIT 245 1 H A R T SCHAFFNER & MARX UNEMPLOYMENT F U N D AGREEMENT B E T W E E N H A R T SCHAFFNER & MARX AND I T S EMPLOYEES REPRESENTED BY T H E AMALGAMATED CLOTHING WORKERS OF AMERICA, 1923 INTRODUCTION The H a r t Schaffner & M a r x unemployment fund is a development of the system of relationship between the company and its employees, beginning in 1911 with the establishment of a permanent board of arbitration or industrial court, and an agreement or industrial constitution administered by a labor department. The system h a s developed and spread in the clothing industry as a definite institution. T h e most important a n d novel feature of this system is the voluntary giving u p by both management and union of t h e final determination of any disupted matter. The final determination of any m a t t e r of m u t u a l concern is delegated to the board of arbitration and its decisions become t h e law, the governing power in the industry, which both parties a r e pledged to support. The Amalgamated Clothing Workers of America have adhered for 13 years to this principle of the rule of law. The clothing industry is seasonal, due to the buying habits of the retailers and consumers and t h e rapid style changes. This fact accounts for most of the labor problems of the industry a n d the conditions now e x i s t i n g : Comparatively high wage rates, high labor cost, difficulties of administering t h e piecework system, a t t e m p t s to limit the hiring right of t h e employer, and periodical problems because of short-time a n d layoff. The hectic prosperity of 1919 raised the s t a n d a r d of expense among t h e workers, impaired their habits of thrift, a n d left them peculiarly unprepared for the depression which so suddenly descended upon t h e i n d u s t r y in 1920. T h a t situation forced t h e attention of the whole country to t h e question of unemployment. I n our case it stimulated both the company and the union to redoubled thought and planning, the result of which is t h e unemployment fund. The plan accomplishes to a degree for the worker w h a t a dam does for t h e w a t e r supply of a c i t y ; it changes an irregular a n d varying flow of income into a more regular and uniform stream of purchasing power. It distributes t h e burden of unemployment more equally over the group of workers and requires t h e employer and t h e workers to contribute equal amounts for the purpose. T h u s for every dollar t h e worker puts in on t h e average, he will d r a w out two and at the time when the utility value of a dollar is multiplied manyfold. The unanimous selection of Prof. John R. Commons of the University of Wisconsin a s t h e first c h a i r m a n of the four Chicago boards of trustees is peculiarly appropriate. H e is undoubtedly by study and experience the foremost authority on t h e subject in t h e country. T h e other members of t h e board of trustees of the H a r t Schaffner & M a r x unemployment fund a r e ; For t h e A. C. W. A., Sidney Hillman, national p r e s i d e n t ; Bryce N. Stewart, m a n a g e r employment department. For H a r t Schaffner & Marx, Milton A. Strauss, general m a n a g e r ; E a r l Dean Howard, labor manager. TEXT OF F I N A L AGREEMENT Memorandum of Agreement, made this 3d day of October, 1923, by and between H a r t Schaffner & M a r x (Hereinafter called t h e " M a n u f a c t u r e r " ) , P a r t y of the F i r s t P a r t , and the Amalgamated Clothing W o r k e r s of America (Hereinafter called the " U n i o n " ) , P a r t y of the Second P a r t ; W i t n e s s e t h : Whereas an agreement h a s heretofore been entered into between the manufacturer and the union with reference to wages a n d working conditions; a n d similar agreements have been entered into between the union and certain other clothing m a n u f a c t u r e r s in Chicago; a n d Whereas it is contemplated t h a t agreements similar to this one will be entered into between the union and other clothing m a n u f a c t u r e r s in Chicago; and the parties hereto a r e desirous of mitigating the effects of unemployment: Now therefore, in consideration of the premises a n d of the m u t u a l covenants herein contained, it is agreed by and between the parties hereto as follows: ARTICLE I. T h e union agrees to use its best efforts to cause each of its members employed by the manufacturer ( a ) to pay to t h e board of trustees, hereinafter constituted, for each pay-roll week, commencing with the pay-roll 246 UNEMPLOYMENT IN THE UNITED STATES week beginning on or immediately following May 1, 1923, 1% per cent of the amount of such employee's wages received from the manufacturer, and (b) to authorize and direct the manufacturer to deduct such sums from the contributing employee's wages and forthwith pay the sums so deducted to the board of trustees on behalf of such contributing employees. The manufacturer agrees to make the deductions so authorized and to pay over the sums so deducted to the board of trustees on behalf of such contributing employees and the manufacturer agrees to pay to the board of trustees an amount equal to each such payment so contributed by such employees as and when such contributions are made by the employees. ABT. II. All sums so received shall be held by the board of trustees in trust subject to all the terms and conditions of this agreement, and such sums and the income therefrom shall be held as a special trust fund, designated as the " Unemployment fund," hereinafter referred to as the " Fund." ART. III. Each contributing employee shall receive unemployment benefits from the fund, as hereinafter and in Schedule A hereto annexed provided. ART. IV. No right or interest of any contributing employee acquired by virtue hereof,' can be assigned, transferred, alienated, hypothecated, or bartered away, directly or indirectly, or be subject to attachment, garnishment, execution, sequestration, seizure, or other process. The board of trustees may, however, pay any benefits to which a deceased contributing employee might hav£ been entitled, to such person or persons as the board shall in its absolute discretion determine, and no heir, next of k<n, legal representative, creditor, or claimant of any such decedent shall have any right or claim to any such benefits. ART. V. Neither the manufacturer nor the union shall have any right, property, or interest in the fund. Nor shall the fund be subject to attachment, garnishment, execution, sequestration, seizure, or other process by reason of any claim on behalf of any person whatsoever against either the manufacturer or the union, or against any contributing employee. ART. VI. The manufacturer and the union agree at all times during the continuance of this agreement to keep such records as may be necessary for the proper administration of the fund (which records shall, at all reasonable times, be available and open to the inspection of the board of trustees or its accredited representatives), and also to provide the board of trustees with such information and records as it may require for the proper performance of its duties, it being the intention hereof that there shall be as little duplication of work as possible and that the existing records of the manufacturer and the union will be used with a view of having said fund administered with the least possible expense to the fund, the manufacturer, and the union. ART. VII. This agreement shall terminate on April 30, 1925, unless the same shall be renewed or extended prior to that time. If a new agreement is entered into, and any part of the fund shall then be undistributed, such fund shall be transferred by the board of trustees to such person or persons, or body, as under such new agreement shall be entitled thereto. If no new agreement is entered into, then upon the termination of this agreement, by lapse of time, or in any other way, the payments herein provided to be made to the board of trustees shall cease, but the entire amount then remaining in the fund shall be distributed by the board of trustees as unemployment benefits to the persons who were contributing employees at the time of such termination in the manner provided herein, and subject to the terms and conditions hereof, to the extent that such terms and conditions are applicable within five years from the date of such termination of this agreement. If the manufacturer shall, prior to April 30, 1925, cease to carry on business by dissolution, winding up or in any other way other than by sale, merger, or consolidation, and, as a result thereof, any of the contributing employees of the manufacturer shall be transferred to or employed by any other manufacturer who shall have entered into an agreement similar in character to this one, the same provisions, rules, and regulations shall be applicable as are effective in the event of the transfer of a contributing employee during the period of this agreement. After making provision for such' contributing employees out of said fund the remainder of said fund shall be distributed by the board of trustees by way of unemployment benefits among members of the union actually employed in the industry in Chicago, 111., the manner in which such distributions shall be made and the time or times when they shall be made being left to the sole discretion and judgment of the board. UNEMPLOYMENT IN THE UNITED STATES 247 It is expressly agreed, however, that the entire amount of such fund shall be disposed of either by transferring the same to other unemployment funds created by agreement between the union and other manufacturers in Chicago, or by distribution as unemployment benefits among contributing employees in the industry in Chicago within five years from the date when such manufacturer ceases carrying on business. A sale of the entire business of the manufacturer resulting in the continuance of the business under different ownership, or a merger or consolidation of the manufacturer with any other person, firm, or corporation, shall not be deemed a cessation of carrying on business by the manufacturer within the meaning hereof, but in such event the purchaser or the merged or consolidated business shall for all purposes of this agreement be substituted for the manufacturer The board of trustees shal,l not pay any part of the fund to any one other than the contributing employees, unless in case of cessation of business, as above provided for, and the maximum amount payable to any contributing employee shall never exceed the sum of $100 in any one year, and at no time shall any distribution of any part of said fund be made which shall, directly or indirectly, aid, assist, or encourage the carrying on of any .labor warfare or controversy, or for the purpose of relieving unemployment which directly or indirectly results from strikes or stoppages of work, or arises out of any conflict or warfare between employees and employers, or their representatives, nor shall any sums at any time be paid or distributed to any employees who at the time of such unemployment are engaged in or parties to any strike, stoppage of work or other form of labor warfare or controversy. ART. VIII. If any law or ordinance is passed compelling the manufacturer to contribute to any Federal, State, or municipal unemployment fund with reference to any contributing employees hereunder, the contributions of the manufacturer hereunder shall be reduced by the amount which the manufacturer is compelled to contribute to such Federal, State, or municipal unemployment fund. If the contribution which the manufacturer is compelled to make to any such fund is equal to or greater than the contribution required of the manufacturer hereunder, then the obligation of the manufacturer to make contributions hereunder shall cease, and in such event the fund shall be disposed of in the same manner herein provided for disposition at the expiration of this agreement. ART. IX. It is expressly understood and agreed that the fund shall never (except as hereinafter in this paragraph provided) be permitted to accumulate beyond an amount equal to the total maximum unemployment benefits which would be payable during a period of two years to all of the then contributing employees of the manufacturer. Whenever the fund reaches such maximum amount the obligation of the manufacturer and of the then contributing employers to make further payment shall be suspended, but such suspension shall not apply to such employees as have not contributed during the period of one full year. Payments to said fund shall only be revived when the fund is again reduced to an amount less than the total maximum benefits which would be payable during a period of one year to all of the then contributing employees of the manufacturer. ART. X. Al,l funds contributed by the contributing employees since May 1, 1923, and the corresponding amount contributed by the manufacturer or which should have been contributed by the manufacturer from May 1, 1923, to the date of the actual execution of this agreement shall immediately be turned over to the board of trustees. ART. XI. Any questions which may arise out of the interpretation or performance of this agreement which involve, directly or indirectly, the interpretation, or performance of the agreement between the parties with reference to wages and working conditions shall be determined solely by the instrumentalities provided for by said agreement, and such determination shall be binding and conclusive upon the parties hereto, the board of trustees and the contributing employees. It is the intention hereof not, to affect in any particular the jurisdiction, powers, rights or duties of the instrumentalities functioning under sai#d agreement relating to wages and working conditions. ART. XII. (a) The manufacturer and the union shall each appoint not exceeding three trustees (each to appoint an equal number), who shall hold office at the will of the appointing party. In addition to the trustees thus selected John R. Commons, of the University of Wisconsin, of Madison, Wis., is also hereby designated as a trustee and as chairman of the board of trustees. The number of trustees may be changed from time to ti-rte by the joint act of the manu 248 UNEMPLOYMENT IN THE UNITED STATES facturer and the union, but there shall not at any time be less than three trustees, nor more than seven, and the number of trustees shall be at all times odd. The manufacturer and the union shall at all times each be represented on said board by their respective appointees, and each shall at all times have equal representation on said board. There shall always be a chairman of the board of trustees who shall be selected by the manufacturer and the union, and who shall not be removable except by the joint act of the manufacturer and the union. Any trustee may at any time resign from the trust hereby created by giving written notice of such resignation personally or by mail, addressed to the last known post-office address of the remaining trustees. Should any of the trustees designated by the manufacturer die, resign, become incapacitated or unable or unwilling to act or be removed, the vacancy so occurring shall be filled by the appointment of a successor to be named by the manufacturer. Should any of the trustees designated by the union die, resign, become incapacitated, or unwilling to act, or be removed, the vacancy so occurring shall be filled by the appointment of a successor to be named by the union. All trustees appointed to fill any vacancy hereunder shall be vested with all the rights, powers, and duties herein and hereby vested in their predecessors. Should the chairman of the board of trustees die, resign, be removed, become incapacitated, unable, unwilling, or fail for any reason to act, then the vacancy so occurring shall be filled by the appointment of a successor named by the manufacturer and the union, and if they are unable to agree upon such successor within a period of 30 days, such vacancy shall be filled by the appointment of a successor designated by Judge Julian W. Mack and/or Judge Samuel Alschuler. Until the appointment of a successor chairman of the board to fill such vacancy, the remaining trustees shall exercise all of the powers and perform all of the duties of the board of trustees. The appointment of any trustee hereunder shall be in writing delivered to the remaining trustees, or their successors. If all of the trustees designated by the union or by the manufacturer, as the case may be, shall riot be present at any meeting of the trustees, the trustee or trustees designated by the manufacturer or union, as the case may be, present at such meeting, shall be entitled to cast as many votes or the same number of votes as the trustees designated by the other party present at said meeting shall be entitled to cast, it being the intention hereof that at any meeting of the trustees, regardless of the number present, the trustees representing the manufacturer and the trustees representing the union shall have equal voting power. (6) All questions that may arise or come before the trustees shall be determined by the affirmative vote in person or by proxy of a majority of the' trustees. Such vote may be given in meeting assembled, or by a writing signed by the trustees, or by a majority of them, provided such writing is signed by one or more trustees designated by the union, and one or more trustees designated by the manufacturer, and such decision or act of a majority of the trustees shall be binding and conclusive upon the parties hereto, the board of trustees and the contributing employees. Any trustee may act by proxy. Any trustee may call a meeting of the board of trustees by giving at least five days' notice in writing of the time of holding of such meeting and having a copy thereof personally delivered to each trustee, or by mailing the same, postage prepaid, to the last known address of each trustee. Meetings of the board of trustees may be held at any time, without notice, if all of the trustees consent hereto. (o) None of the trustees, other than the chairman of the board of trustees, shall be entitled to compensation hereunder. The compensation of such chairman shall be fixed by the manufacturer and the union and shall be paid out of the fund. (d) The board of trustees shall have power to employ at such compensation as they may fix, agents, representatives, accountants, experts, and attorneys, and such other appropriate instrumentalities to assist it in the proper administration of the fund as to it shall seem advisable. (e) The principal and interest of the fund, except such amounts as shall be required for current purposes, shall be invested by the board of trustees in direct obligations of the United States Government, and not otherwise. All moneys not so invested shall be deposited in substantially equal amounts in two or more clearinghouse banks located in the city of Chicago, or in banks which are members of the Federal reserve system. (f) The board of trustees shall keep true and accurate books of account and records which shall be audited by certified public accountants at least twice in each year. iff) Each of the trustees shall be protected in acting upon any notice, request, consent, instruction, certificate, affidavit, resolution, opinion, receipt, UNEMPLOYMENT IN THE UNITED STATES 249 application or other paper or document believed by him to be genuine, and to Jiave been made, executed or delivered by the proper party or by the proper authority, or authorities, of the union or manufacturer, as the case may be, or by the party or parties purporting to have made, executed, or delivered the same, and shall be protected in relying and acting upon the opinion of legal counsel in connection with any matter pertaining to the carrying out of this agreement. (h) Neither the trustees, nor any of their successors, shall be liable or responsible in respect to any action taken or omitted to be taken pursuant to any vote cast by the trustees, or any of them, or any proxy or proxies appointed hereunder, nor shall the trustees or any successor or successors, be liable for any loss occasioned by any act of commission or omission done or omitted to be done in good faith by them, or any of them, or of any proxy or proxies that may be appointed hereunder, nor for the acts of any agent, attorney, or employee selected with reasonable care by them, or any of them, nor shall any trustee be liable for any act of omission or commission of any mother trustee, or of any proxy or proxies, that may be appointed hereunder. (i) The board of trustees shall permit the duly accredited representatives of the manufacturer and the union, at all reasonable times during business hours to examine the books and records kept by it hereunder. (/) The board of trustees shall have the power and authority to make reasonable rules and regulations, not inconsistent herewith, to carry out the provisions of this agreement, and shall have the right to make and adopt their own rules of procedure and action. (fc) The board of trustees shall be entitled to incur reasonable expenses for the purpose of carrying out the provisions of this agreement, which expenses shall be payable out of the fund. ART. XIII. Whenever the trustees or board of trustees are referred to herein, it is intended that such term shall include the trustees or board of trustees for the time being in office. This agreement and the terms and conditions of the trust hereby established may be modified at any time by the board of trustees, upon its obtaining the written consent of both the union and the manufacturer. ART. XIV. This agreement may be extended or renewed by the joint written consent of the manufacturer and the union. ART. XV. The trustees designated by the manufacturer and the union and the chairman of the board of trustees, from time to time designated hereunder, .shall evidence their acceptance of the trusts hereby created by executing this agreement, or a duplicate thereof, and by such execution shall agree that they will in good faith and in all respects exercise the powers granted to them hereunder. In witness whereof the parties have caused this instrument to be duly executed the date first above written. HART SCHAFFNER & MARX. AMALGAMATED CLOTHING WORKERS OF AMERICA. SCHEDULE A TERMS AND CONDITIONS UNDER W H I C H A CONTRIBUTING E M P L O Y E E B E N E F I T S FROM T H E U N E M P L O Y M E N T F U N D MAY RECEIVE (1) The contributing employee must have made contributions regularly during Iiis employment; in addition, he must have been a member of the union in good standing since May 1, 1923, up to and including the date when he shall apply for benefits, or, if he were not a member of the union on May 1, 1923, then he shall be eligible for benefits after one year from the4 date of his first contribution. (2) In no case shall a contributing employee receive more than an amount -equal to five full weekly benefits in a single year; always provided, however, that there shall be no benefit payment made hereunder unless there are moneys in the fund available for the purpose. (3) It is agreed that benefits shall be paid only for such involuntary unemployment as results from lack of work, and that no benefit shall be paid to an employee who voluntary leaves his employment or to an employee who is discharged for cause or who declines to accept suitable employment. (4) It is agreed that no benefits shall be paid or distributed for unemployment that directly or indirectly results from strikes or stoppages or any cessation of work in violation of the trade agreement now in force between the 250 UNEMPLOYMENT IN THE UNITED STATES manufacturer and the union; nor shall any benefits at any time be paid or distributed to employees who at the time are engaged in strikes or stoppages or who have ceased work in violation of said trade agreement. (5) A contributing employee who has voluntarily interrupted the regularity of the payment of his contributions shall not receive benefit out of the fund in excess of one full weekly benefit for every ten full weekly contributions in a single year. (6) In complete unemployment the contributing employee shall promptly register with the employment exchange, and such unemployment shall be deemed to begin on the date of such registration. (7) Contributing employees who are entitled to unemployment benefits under this agreement, and the rules and regulations adopted by the board of trustees in pursuance hereof, shall receive out of the Fund unemployment benefits at the rate of 40 per cent of the average full-time weekly wages of said contributing employee, but in no case in excess of $20 for each full week of unemployment. (8) The payments of benefits from the fund established hereunder shall begin no earlier than January 1, 1924, nor later than May 1, 1924. The date on which such payments shall begin shall be determined by the board of trustees, and benefits hereunder shall be payable only for unemployment occurring subsequent to said date. (9) An advisory committee, composed of representatives of the parties hereto, w:th the aid if desired of an outside expert to be selected by them jointly, shall submit to the board of trustees not later than October 15, 1923, or from time to time thereafter if requested by said board, recommendations for rules and specifications concerning records required to be kept by the manufacturer, the union, and the trustees, in order to insure the efficient and economical administration of the fund. Said committee shall also submit recommendations before said date (and from time to time thereafter if requested by the board) to the board of trustees for rules and regulations relating to the transfer of contributing employees from one manufacturer to another, the return to employment of contributing employees temporarily withdrawing from the industry, the proper basis of calculating benefits in the case of short time employment, the proper reduction of unemployment or short time employment because of overtime employment of contributing employees, the proper limitation to be placed upon the amount of weekly benefits to be received by any contributing employee during any one season of unemployment, a proper waiting period between the beginning of unemployment in any one season and the accrual of weekly benefits hereunder, and other matters of like character upon which the board desires recommendations. It is understood and agreed that the board of trustees shall have power tomake rules and regulations not inconsistent with the terms of this agreement on the matters aforesaid, but shall only do so after proper investigation and examination of the recommendations submitted by the aforesaid advisory committee, it being the intention hereof that before mak ng said rules and regulations the parties hereto shall have had full and ample opportunity to make necessary investigations and present to the board the conclusions and suggestions resulting therefrom. In the event, however, that said advisory comm'ttee does not make its report on or prior to October 15, 1923, said board of trustees shall have the power, if it deems advisable, to request a report on any one or more of the aforesaid matters by the committee, or separate reports by the representatives of either party on said committee, by a day certain; and in the event that said reports and recommendations are not forthcoming may proceed to make on its own behalf any investigations that it deems proper and formulate any rules and regulations it deems advisable under the circumstances. EXHIBIT 2 UNEMPLOYMENT INSUKANCE FUND AGREEMENT ( 1 9 2 8 ) Memorandum of agreement, made this day of , 1928, by and between (hereinafter called the manufacturer), party of the first part, and the Amalgamated Clothing Workers of America (hereinafter called the union), party of the second part; Witnesseth: Whereas an agreement has heretofore been entered into between the manufacturer and the union with reference to wages and working conditions; and UNEMPLOYMENT IN THE UNITED STATES 251 similar agreements have been entered into between the union and certain other clothing manufacturers in Chicago; and Whereas it is contemplated that agreements similar to this one will be entered into between the union and other clothing manufacturers in Chicago; and the parties hereto are desirous of mitigating the effects of unemployment, Now, therefore, in consideration of the premises and of the mutual covenants herein contained, it is agreed by and between the parties hereto as follows: ARTICLE I. The union agrees to use its best efforts to cause each of its members employed by the manufacturer (a) to pay to the board of trustees, hereinafter constituted, for each pay-roll week, commencing with the pay-roll week beginning on or immediately following May 1, 1928, 1% per cent of the amount of such employee's wages received from the manufacturer, and (b) to authorize and direct the manufacturer to deduct such sums from the contributing employee's wages and forthwith pay the sums so deducted to the board of trustees on behalf of such contributing employees. The manufacturer agrees to make the deductions so authorized and to pay over the sums so deducted to the board of trustees on behalf of such contributing employees and the manufacturer agrees to pay to the board of trustees 3 per cent of the amount of such employees' wages as and when the contributions are made by the employees. ART. II. All sums so received shall be held by the board of trustees in trust subject to all the terms and conditions of this agreement, and such sums and the income therefrom shall be held as a special trust fund, designated as the " unemployment fund," hereinafter referred to as the " fund." ART. III. Each contributing employee shall receive unemployment benefits from the fund, as hereinafter and in Schedule A hereto annexed provided. ART. IV. No right or interest of any contributing employee acquired by virtue hereof, can be assigned, transferred, alienated, hypothecated, or bartered away, directly or indirectly, or be subject to attachment, garnishment, execution, sequestration, seizure, or other process. The board of trustees may, however, pay any benefits to which a deceased contributing employee might have been entitled, to such person or persons as the board shall in its absolute discretion determine, and no heir, next of kin, legal representative, creditor, or claimant of any such decedent shall have any right or claim to any such benefits. ART. V. Neither the manufacturer nor the union shall have any right, property, or interest in the fund. Nor shall the fund be subject to attachment, garnishment, execution, sequestration, seizure, or other process by reason of any claim on behalf of any person whatsoever against either the manufacturer or the union, or against any contributing employee. ART. VI. The manufacturer and the union agree at all times, during the continuance of this agreement, to keep such records as may be necessary for the proper administration of the fund (which records shall at all reasonable times be available and open to the inspection of the board of trustees or its accredited representatives), and also to provide the board of trustees with such information and records as it may require for the proper performance of its duties; it being the intention hereof that there shall be as little duplication of work as possible and that the existing records of the manufacturer and the union will be used with a view of having said fund administered with the least possible expense to the fund, the manufacturer, and the union. ART. VII. This agreement shall terminate on April 30, 1931, unless the same shall be renewed or extended prior to that time. If a new agreement is entered into and any part of the fund shall then be undistributed, such fund shall be transferred by the board of trustees to such person or persons, or body, as under such new agreement shall be entitled thereto. If no new agreement is entered into, then, upon the termination of this agreement, by lapse of time, or in any other way, the payments herein provided to be made to the board of trustees shall cease, but the entire amount then remaining in the fund shall be distributed by the board of trustees as unemployment benefits to the persons who were contributing employees at the time of such termination in the manner provided herein, and subject to the terms and conditions hereof, to the extent that such terms and conditions are applicable, within five years from the date of such termination of this agrement. If the manufacturer shall, prior to April 30, 1931, cease to carry on business by dissolution, winding up or in any other way other than by sale, merger, or consolidation, and as a result thereof any of the contributing employees of the manufacturer shall be transferred to or employed by any other manufacturer 252 UNEMPLOYMENT IN THE UNITED STATES who shall have entered into an agreement similar in character to this oner the same provisions, rules, and regulations shall be applicable as are effectivein the event of the transfer of a contributing employee during the period of this agreement. After making provision for such contributing employees out of said fund, the remainder of said fund shall be distributed by the board of trustees by way of unemployment benefits among members of the union actually employed in the industry in Chicago, 111., the manner in which such distribution shall be made and the time or times when they shall be made being left to the sole discretion and judgment of the board. It is expressly agreed, however, that the entire amount of such fund shall be disposed of either by transferring the same to other unemployment funds created by agreement between the union and other manufacturers in Chicago, or by distribution as unemployment benefits among contributing employees in the industry in Chicago, within five years from the date when such manufacturer ceases carrying on business. A sale of the entire business of the manufacturer resulting in the continuance of the business under different ownership, or a merger or consolidation of the manufacturer with any other person, firm, or corporation, shall not be deemed a cessation of carrying on business by the manufacturer within the meaning hereof, but in such event the purchaser, or the merged or consolidated business, shall for all purposes of this agreement be substituted for the manufacturer. The board of trustees shall not pay any part of the fund to any one other than the contributing employees, unless in case of cessation of business, as above provided for, and at no time shall any distribution of any part of said fund be made which shall, directly or indirectly, aid, assist, or encourage the carrying on of any labor warfare or controversy, or for the purpose of relieving unemployment which directly or indirectly results from strikes or stoppages of work, or arises out of any conflict or warfare between employees and employers, or their representatives, nor shall any sums at any time be paid or distributed to any employees who at the time of such unemployment are engaged in or parties to any strike, stoppage of work, or other form of labor warfare or controversy. ART. VIII. If any law or ordinance is passed compelling the manufacturer to contribute to any Federal, State, or municipal unemployment fund with reference to any contributing employees hereunder, the contributions of the manufacturer hereunder shall be reduced by the amount which the manufacturer is compelled to contribute to such Federal, State, or municipal unemployment fund. If the contribution which the manufacturer is compelled to make to any such fund is equal to or greater than the contribution required of the manufacturer hereunder, then the obligation of the manufacturer to make contributions hereunder shall cease, and in such event the fund shall be disposed of in the same manner herein provided for disposition at the expiration of this agreement. ART. IX. It is expressly understood and agreed that the fund shall never (except as hereinafter in this paragraph provided) be permitted to accumulate beyond an amount equal to the total maximum unemployment benefits which would be payable during a period of two years to all of the then contributing employees of the manufacturer. Whenever the fund reaches such maximum amount the obligation of the manufacturer and of the then contributing employees to make further payments shall be suspended, but such suspension shall not apply to such employees as have not contributed during the period of one full year. Payments to said fund shall only be revived when the fund is again reduced to an amount less than the total maximum benefits which would be payable during a period of one year to all of the then contributing employees of the manufacturer. ART. X. All funds contributed by the contributing employees since May 1, 1928, and the amount contributed by the manufacturer or which should have been contributed by the manufacturer from May 1, 1928, to the date of the actual execution of this agreement shall immediately be turned over to the board of trustees. ART. XI. Any questions which may arise out of the interpretation or performance of this agreement which involve, directly or indirectly, the interpretation or performance of the agreement between the parties with reference to wages and working conditions shall be determined solely by the instrumentalities pro UNEMPLOYMENT IN THE UNITED STATES 253 vided for by said agreement, and such determination shall be binding and conclusive upon the parties hereto, the board of trustees and the contributing employees. It is the intention hereof not to affect in any part.cular the jurisdiction, powers, rights, or duties of the instrumentalities functioning under said agreement relating to wages and working conditions. ART. XII. (a) The manufacturer and the union shall each appoint not exceeding three trustees (each to appoint an equal number), who shall hold office at the will of the appointing party. In addition to the trustees thus selected, Benjamin M. Squires is also hereby designated as a trustee and as chairman of the board of trustees. The number of trustees may be changed from t me to time by the joint act of the manufacturer and the union, but there shall not at any time be less than three trustees, nor more than seven, and the number of trustees shall be at all times odd. The manufacturer and the union shall at all times each be represented on said board by their respective appointees, and each shall at all times have equal representation on said board. There shall always be a chairman of the board of trustees who shall be selected by the manufacturer and the union, and who shall not be removable except by the jo.nt act of the manufacturer and the union. Any trustee may at any time resign from the trust hereby created by giving written notice of such resignation personally or by mail, addressed to the last known post-office address of the remaining trustees. Should any of the trustees designated by the manufacturer die, resign, become incapacitated or unable or unwill ng to act, or be removed, the vacancy so occurring shall be filled by the appointment of a successor to be named by the manufacturer. Should any of the trustees designated by tiie Union, die, resign, become incapacitated or unwilling to act, or be removed, the vacancy so occurring shall be filled by the appointment of a successor to be named by the union. All trustees appointed to fill any vacancy hereunder shall be vested with all the rights, powers, and duties herein and hereby vested in their predecessors. Should the chairman of the board of trustees die, resign, be removed, become incapacitated, unable, unwilling, or fail for any reason to act, then the vacancy so occurring shall be filled by the appointment of a successor named by the manufacturer and the Union, and if they are unable to agree upon such successor within a period of 30 days, such vacancy shall be filled by the appointment of a successor designated by Judge Julian W. Mack and/or Judge Samuel Alschuler. U n t l the appointment of a successor chairman of the board to fill such vacancy, the remaining trustees shall exercise all of the powers and perform all of the duties of the board of trustees. The appointment of any trustee hereunder shall be in writing delivered to the remaining trustees, or their successors. If all of the trustees designated by the union or by the manufacturer, as the case may be, shall not be present at any meet.ng of the trustees, the trustee or trustees designated by the manufacturer or the union as the case may be, present at such meeting, shall be entitled to cast as many votes or the same number of votes as the trustees designated by the other party present at said meeting shall be entitled to cast, it being the intention hereof that at any meeting of the trustees, regardless of the number present, the trustees representing the manufacturer and the trustees representing the union shall have equal voting power. (&) All questions that may arise or come before the trustees shall be determined by the affirmative vote in person or by proxy of a majority of the trustees. Such vote may be given in meeting assembled, or by a writing signed by the trustees, or by a majority of them, provided such writing is signed by one or more trustees designated by the union, and one or more trustees designated by the manufacturer, and such decision or act of a majority of the trustees shall be binding and conclusive upon the parties hereto, the board of trustees, and the contributing employes. Any trustee may act by proxy. Any trustee may call a meeting of the board of trustees by giving at least five days' notice in writing of the time of holding of such meeting and having a copy thereof personally delivered to each trustee, or by mailing the same, postage prepaid, to the last known address of each trustee. Meetings of the board of trustees may be held at any time, without notice, if all of the trustees consent thereto. (c) None of the trustees, other than the chairman of the board of trustees, shall be entitled to compensation hereunder. The compensation of such chairman shall be fixed by the manufacturer and the union, and shall be paid out of the fund. 254 UNEMPLOYMENT IN THE UNITED STATES (d) The board of trustees shall have power to employ at such compensation as they may fix, agents, representatives, accountants, experts, and attorneys, and such other appropriate instrumentalities to assist it in the proper administration of the fund as to it shall seem advisable. (e) The principal and interest of the fund, except such amounts as shall be required for current purposes, shall be invested by the board of trustees in direct obligations of the United States Government, provided, however, that the board of trustees by unanimous vote may invest the funds in securities legal for trust companies in the State of Illinois. All moneys not so invested shall be deposited in substantially equal amounts in two or more clearinghouse banks located in the city of Chicago, or in banks which are members of the Federal Reserve System. (f) The Board of trustees shall keep true and accurate books of account and records which shall be audited by certified public accountants at least twice in each year. (g) Each of the trustees shall be protected in acting upon any notice, request, consent, instruction, certificate, affidavit, resolution, opinion, receipt, application, or other paper or document believed by him to be genuine, and to have been made, executed, or delivered by the proper party or by the proper authority, or authorities, of the union or manufacturer, as the case may be, or by the party or parties purporting to have made, executed, or delivered the same, and shall be protected in relying and acting upon the opinion of legal counsel in connection with any matter pertaining to the carrying out of this agreement. (fo) Neither the trustees, nor any of their successors, shall be liable or responsible in respect to any action taken or omitted to be taken pursuant to any vote cast by the trustees, or any of them, or any proxy or proxies appointed hereunder, nor shall the trustees or any successor or successors, be liable for any loss occasioned by any act of commission or omission done or omitted to be done in good faith by them, or any of them, or of any proxy or proxies that may be appointed hereunder, nor for the acts of any agent, attorney, or employee selected with reasonable care by them, or any of them, nor shall any trustee be liable for any act of omission or commission of any other trustee, or of any proxy or proxies, that may be appointed hereunder. (i) The board of trustees shall permit the duly accredited representatives of the manufacturer and the union at all reasonable times during business hours to examine the books and records kept by it hereunder. (j) The board of trustees shall have the power and authority to make reasonable rules and regulations, not inconsistent herewith, to carry out the provisions of this agreement, and shall have the right to make and adopt their own rules of procedure and action. (7c) The board of trustees shall be entitled to incur reasonable expenses for the purpose of carrying out the provisions of this agreement, which expenses shall be payable out of the fund. ART. XIII. Whenever the trustees or board of trustees are referred to herein, it is intended that such term shall include the trustees or board of trustees for the time being in office. This agreement and the terms and conditions of the trust hereby established may be modified at any time by the board of trustees, upon its obtaining the written consent of both the union and the manufacturer. ART. XIV. This agreement may be extended or renewed by the joint written consent of the manufacturer and the union. ART. XV. The trustees designated by the manufacturer and the union and the chairman of the board of trustees, from time to time designated hereunder, shall evidence their acceptance of the trusts hereby created by executing this agreement, or a duplicate thereof, and by such execution shall agree that they will in good faith and in all respects exercise the powers granted to them hereunder. ART. XVI. The trustees representing the respective parties on April 30, 1928, shall be, and they are hereby continued as such trustees, subject to the terms of this agreement. In witness whereof the parties have caused this instrument to be duly executed the date first above written. (Firm) By AMALGAMATED CLOTHING WORKERS OF AMERICA, By UNEMPLOYMENT IN THE UNITED STATES 255 SCHEDULE A TERMS AND CONDITIONS UNDER W H I C H A CONTRIBUTING E M P L O Y E E B E N E F I T S FROM T H E U N E M P L O Y M E N T F U N D MAY RECEIVE (1) The contributing employee must have made contributions regularly during his employment; in addition, he must have been a member of the union in good standing since November 1, 1927, up to and including the date when he shall apply for benefits; or, if he were not a member of the union on November 1, 1927, then he shall be eligible for benetfis after one year from the date of his first contribution. (2) In no case shall a contributing employee receive more than an amount equal to seven and one-half full weekly benefits in a single year; always provided, however, that there shall be no benefit payment made hereunder unless there are moneys in the fund available for the purpose; and provided further that benefits less than seven and one-half weeks not paid either through lack of funds or through action, by the board shall be cumulated and payable even though these payments may raise the number of weeks of benefit in certain years in excess of seven and one-half weeks. (3) It is agreed that benefits shall be paid only for such involuntary unemployment as results from lack of work, and that no benefit shall be paid to an employee who voluntarily leaves his employment or to an employee who is discharged for cause or who declines to accept suitable employment. (4) It is agreed that no benefits shall be paid or distributed for unemployment that directly or indirectly results from strikes or stoppages or any cessation of work in violation of the trade agreement now in force between the manufacturer and the union; nor shall any benefits at any time be paid or distributed to employees who at the time are engaged in strikes or stoppages or who have ceased work in violation of said trade agreement. (5) A contributing employee who has voluntarily interrupted the regularity of the payment of his contributions shall not receive benefit out of the fund in excess of one full weekly benefit for every 10 full weekly contributions in a single year. (6) In complete unemployment the contributing employee shall promptly register with the employment exchange, and such unemployment shall be deemed to begin on the date of such registration. (7) Contributing employees who are entitled to unemployment benefits under this agreement, and the rules and regulations adopted by the board of trustees in pursuance hereof, shall receive out of the fund unemployment benefits not in excess of 40 per cent of the average full-time weekly wages of said contributing employee, and in no case in excess of $20 for each full week of anemployment. (8) An advisory committee, composed of representatives of the parties hereto, with the aid if desired of an outside expert to be selected by them jointly, shall submit to the board of trustees from time to time if requested by said board, recommendations for rules and specifications concerning records required to be kept by the manufacturer, the union, and the trustees, in order to insure the efficient and economical administration of the fund. Said committee shall also submit to the board of trustees from time to time, if requested by the board, recommendations as to rules and regulations relating to the transfer of contributing employees from one manufacturer to another, the return to employment of contributing employees temporarily withdrawing from the industry, the proper basis of calculating benefits in the case of shorttime employment, the proper reduction of unemployment or short-time employment because of overtime employment of contributing employees, the proper limitation to be placed upon the amount of weekly benefits to be received by any contributing employee during any one season of unemployment, a proper waiting period between the beginning of unemployment in any one season and the accrual of weekly benefits hereunder, and other matters of like character upon which the board desires recommendations. It is understood and agreed that the board of trustees shall have power to make rules and regulations not inconsistent with the terms of this agreement on the matters aforesaid, but shall only do so after proper investigation and examination of the recommendations submitted by the aforesaid advisory committee, it being the intention hereof that before making said rules and regulations the parties hereto shall have had full and ample opportunity 29193—29 18 256 U N E M P L O Y M E N T I N T H E UNITED STATES to m a k e necessary investigations a n d .present to t h e board t h e conclusions a n d suggestions resulting therefrom. The board of trustees shall have the power, if it deems advisable, to request a report on any one or more of the aforesaid m a t t e r s by the committee, or separate reports by the representatives of either p a r t y on said committee, by a day c e r t a i n ; a n d in the event t h a t said reports a n d recommendations a r e not forthcoming, m a y proceed to m a k e on its own behalf any investigations t h a t it deems proper and formulate any rules a n d regulations it deems advisable under the circumstances. EXHIBIT 3 STATEMENT OF DR. B E N J A M I N M. SQUIRES TO T H E COMMITTEE ON EDUCATION AND LABOR OF T H E UNITED STATES SENATE CONCERNING CERTAIN PROBLEMS OF U N EMPLOYMENT, MADE I N RESPONSE TO T H E REQUEST OF T H E CHAIRMAN OF T H E COMMITTEE J A N U A R Y 26, 1929. A joint contributory plan of unemployment insurance h a s been in effect in t h e men's clothing industry of Chicago since May, 1923. Similar plans were introduced in the same industry in t h e city of Rochester a n d in t h e city of New York during t h e year 1928, but this statement will be limited to t h e plan a n d its operation in t h e Chicago clothing market. Provisions for t h e collection of contributions, t h e appointment of trustees, payment of benefits, and the administration of the plan generally a r e set forth m t h e agreement, copy of which is inclosed, and need not be repeated in detail. At t h e outset, the plan called for contributions by employers a n d workers of 1% per cent of t h e total wages. I n 1928 the contribution of the employers w a s increased to 3 per cent, making a total contribution of 4 % per cent. Benefits were limited by t h e first agreement to 40 per cent of the wages for a period not to exceed five weeks per year. Under the present agreement, t h e n u m b e r of weeks per year is increased to 7%, with provision for t h e cumulation of unpaid benefits from year to year. F r o m time to time t h e rules governing t h e payment of benefits have been changed to safeguard the funds. At present, t h e weekly benefit is 30 per cent of the wages. For the most p a r t , the plan operates on a house fund b a s i s ; t h a t is, contributions in t h e case of any p a r t i c u l a r firm m a y be used only for t h e payment of benefits t o workers employed by t h e firm. T h e funds a r e administered by trustees representing t h e employers, trustees representing the workers, and one n e u t r a l t r u s t e e as chairman. At t h e present time, about 20,000 workers come under the insurance scheme. Contributions to date total $5,050,428.23. Benefits paid to d a t e total $4,034,863.83. Expenses of administration amount to $334,872.25. The balance available for the payment of benefits is $663,042.88. I am not prepared to s t a t e t h a t the scheme h a s accomplished much in t h e w a y of regularizing employment. I t h a s resulted in t h e accumulation of exact d a t a a s to employment and unemployment; it h a s made for more intelligent thinking about unemployment; it h a s probably m a d e for a better distribution of labor as between busy a n d slack seasons. I t is safe t o say t h a t it h a s been a factor in helping to regularize employment, b u t t h e r e a r e other more important factors. F o r example, the saving, in overhead, which would result from a fuller use of plant a n d equipment, is a much larger item than the unemployment insurance premium. On t h e other hand, t h e employer h a s probably been m a d e more a w a r e of t h e cost of slack periods by h a v i n g a better knowledge of time lost in unemployment. B E N J A M I N i/L. EXHIBIT SQUIRES. 4 CHICAGO, January 22, 1929, M Y DEAR SENATOR : I am very glad to comply with your letter of J a n u a r y 26 asking for information concerning unemployment in t h e clothing i n d u s t r y in Chicago and in H a r t , Schaffner & M a r x . ) I n the first place it is necessary to realize t h a t in all our clothing p l a n t s we h a v e agreements with t h e Amalgamated Clothing W o r k e r s of America t h a t no w o r k e r m a y be discharged except for some delinquency. This m e a n s t h a t t h e r e can be no reduction of t h e labor force to correspond to t h e slackness of business. UNEMPLOYMENT IN THE UNITED STATES 257 Whenever there is not enough work to keep all employed, the work that is available is divided equally among all the workers in each particular group. Under these circumstances the amount of unemployment varies directly with the sales of clothing. Since 1925 this company has made special effort to devise lines of clothing which could be made up before selling. The ordinary method is not to manufacture clothing unless orders are in hand. With the introduction of cheaper lines made in fewer models and fabrics we have been ablewithin the last three years to provide considerable work in the two slack periods of the year when otherwise we would be waiting for orders to be taken. This change of policy had very much more to do with the reduction of unemployment than any other device, particularly the unemployment funds. The first effects of the effort to introduce cheaper lines was a marked reduction in the amount of work required on each suit, particularly as to cutting. This created such a severe condition of unemployment among the cutters that it was finally necessary to pay a dismissal wage to 150 cutters in order to provide for abundant employment for those remaining. Since that time the amount of lay-off per cutter per year has been about five or six weeks. All the rest of the year each cutter works full time. At the present time the amount of employment we give to our people as ai general average for all tailoring is an equivalent of a full 38-week year. This, means that the amount of slackness divided equally among the workers amount in the year to an equivalent of 14 weeks in the tailor shop. On account of the aforesaid policies and efforts to increase production, any effect which might have been produced by the unemployment-insurance scheme has been entirely overshadowed, and, therefore, it is impossible to say just what effect it might have had on regularization. The fact that the company wa& obligated to contribute 1% per cent of the total pay roll into an unemployment fund was a factor of very little consequence in determining the manufacturing and selling policy of the company, which had no effect upon the policy of employing new labor, inasmuch as that factor is entirely determined by our labor agreement. The unemployment fund has had very little effect upon the efficiency of the workers because that is thoroughly well taken care of by our labor agreement itself. The efficiency of our labor is directly due to the wage policy, the efficiency of management, and the manager to hire, wage policy which prevents turnover, and the cooperation of the union. I have no means of estimating any effect upon morality. The effect of the unemployment fund, I believe, is to materially increase the satisfaction which the worker gets from his wages. It provides a reservoir from which he can draw at any time when the value of the dollar is at its maximum to him. This enables the average worker to regularize his standard of living, and does not force him to make extreme changes in his mode of life during slack times. This undoubtedly leads to greater satisfaction with our labor system generally and makes him more loyal to his union, and, therefore, more amenable to his discipline which is greatly to the advantage of the employer. For these reasons I believe that such a system is sure to be advantageous to any industry in which better industrial relations are needed. Our experience has shown us that anything which gives the employee greater security in income has manifold effects in all directions which are to the greatest benefit to the employer. If there is any further information I can furnish your committee please consider me at your disposal. Sincerely yours, EARL DEAN HOWARD. Hon. JAMES COUZENS, United States Senate, Washington, D. G. EXHIBIT 5 HUBER UNEMPLOYMENT PREVENTION BILL (Allen B. Forsberg, secretary of the Wisconsin Unemployment Prevention Association, Madison, Wis.) Many employers have prevented unemployment by the use of scientific production and sales methods. The Huber unemployment prevention bill is 258 UNEMPLOYMENT IN THE UNITED STATES based on their example, and makes an inducement to all employers to adopt similar methods, and thus keep their labor force working steadily. This bill is like the Wisconsin compensation act which puts a premium upon good management in reducing accidents. This bill would make it profitable for employers themselves to arrange their work so that avoidable lay offs will be prevented. The experience of many countries was studied in drafting this bill. Several administrative features are taken from the 1912 and 1920 unemployment insurance laws of Great Britain, which affects 8,000,000 work people. Similar measures of Denmark, France, Italy, and Switzerland have been consulted. Most industrial States are fortunate in that they already possess all the necessary commissions, boards, State officers, and employment offices needed for the administration of this act. MAIN FEATURES OF BILL Scope of act: (Section 2394—101) Applies to all employees of every corporation and of employers not incorporated who employ three or more persons. Exemptions: (1) Farmers, canneries,-State, cities, towns, villages, townships, school districts, private employers of less than three persons, and employees of each. (2) Persons dependent on others for their livelihood. (3) Those receiving pensions of $500 or more annually. Requirements: (Sections 2394—102 and 2394—103) Industry shall compensate each workman temporarily while unemployed provided he (1) has worked six months for one or more employers, and (2) is capable and available but unable to obtain suitable employment. He is not required to work where there is a strike or lockout, or where less than the prevailing wage is paid. Regulation of payments: (1) During the first three years no more than six weeks of unemployment compensation shall be paid unemployed workmen in any calendar year. The industrial commission may reduce this limit to maintain solvency of the fund. After the third year the limit shall be increased to 13 wreeks. (2) Not more than one week's unemployment compensation shall be paid for every four weeks the unemployed person has worked for employers. (3) No employee can legally waive his right to unemployment compensation payments, nor shall they be assignable or subject to attachments for employees' debts. (4) No unemployment compensation shall be paid persons unemployed due t o : (a) Voluntary leaving work; (&) Dismissal for reasonable cause; (c) Strike or lockout; (d) Confinement as inmate in State institutions, etc. Rate of unemployment compensation: (Section 2394-104.) One dollar for each work day for male and females over 18 years; 50 cents for those 16 to 18 years is paid qualified persons unemployed. Provision is made for payment of transportation to obtain work outside the district. An additional 10 per cent is paid into the State treasury to cover additional costs for administering this act. Employers' Mutual Employment Insurance Co.: (Section 2394-105.) The employers of the State will organize, to administer a reserve fund which will be accumulated during prosperous times, to tide over dull times. Each employer will pay a small premium periodically into this fund. The amount of each employer's quota will depend upon how regular he keeps his labor working. The employer who hires and fires the most will pay higher rates. Employers who keep their men working steadily will pay less. Thus there will be a continuous incentive for employers to arrange their work so as to keep their men ^working steadily. The experts of the Employers' Mutual Employment Insurance Co. will make extended studies into the causes of unemployment and will help each individual employer solve his own problems. This employers' mutual fund is controlled solely by employers themselves. The State does not interfere any more than with other insurance companies. The industrial commission, upon application, may exempt certain employers from membership in this company. Unemployment advisory board: (Section 2394-106.) To facilitate harmonious administration of the act, a State advisory board, consisting of an equal number of members to represent both employer and employees, selected by industrial UNEMPLOYMENT IN THE UNITED STATES 259 commission from lists submitted by both parties for that purpose. One member at large shall act as a chairman. The board shall serve without pay; shall meet at the call of the commission to aid in general administration of the act. Similar boards may be formed to serve in localities. Claims and procedures: All claims shall be first considered by a deputy of the industrial commission, who shall decide claims within one day; whereupon an order on the employer may be issued for the amount of unemployment compensation due him. Unless contested, the unemployment compensation will then be paid from the fund of the employers' mutual. Contested cases: In any case where the claim is disputed, it shall be referred to the industrial commission and a still further appeal is provided to the circuit court, the court action to be defended by the industrial commission. Penalties: (Section 2391-109.) Employees who endeavor to falsely secure payments, or employers who attempt to avoid payment through misrepresentation, may be punished by prison sentence, or fine, or both, at discretion of court. EXHIBIT 6 UNEMPLOYMENT COMPENSATION AND PKEVENTION (By John R. Commons) {Reprinted from the October 1, 1921, issue of the Survey, 112 East Nineteenth Street, New York] The credit problem is our biggest labor problem, because it lies at the bottom of the question of unemployment, and that question is the point of bitterest contact between capital and labor to-day. One might even say that socialism and trade unionism are both founded on the fear of unemployment. It is with this conviction that leaders of opinion in Wisconsin, the State which so often has been the pioneer in industrial legislation, have devoted much thought to the problem of unemployment prevention. The result of this, in tangible form, has been the so-called Huber unemployment prevention bill, which was before the legislature last winter and the enactment of which will again be urged during the coming session. The three main causes of unemployment are the labor turnover, the seasons, and the credit system. The labor turnover as a cause of unemployment is not a serious matter. Rather is it a good feature of modern liberty. Liberty means labor turnover; it means that the worker can quit one job and go to another; it means that the employer who is dissatisfied with the inefficiency or misconduct of the employee can dismiss him and he can look for a job for which he is better fitted. Consequently, in the Huber bill for the insurance and prevention of unemployment before the recent Wisconsin Legislature, it is provided that the first three days of unemployment shall not be considered unemployment. The bill places the date of the beginning of unemployment compensation the fourth day after the workman is laid off. Labor turnover can be accommodated on about three days' time for hunting a job if employment is steady. The question of labor turnover may not be considered a serious feature of the unemployment problem. It has other evils, however. It is expensive to the employer. Better for him is a steady force of good and willing workers, who feel that his industry is a place where they want to stay for life. Yet there are establishments that go on the other basis. They consider ft is better for them to have a procession of floaters than it is to have steady workers. This is a matter of choice, largely, with the management. The summer and winter seasons are not the most serious problem of unemployment. They are a cycle which comes regularly every year. Certain industries have a busy period in the summers; others in the winter. Consequently, with a regularly recurring cycle, both the firms and the workmen learn to adjust themselves. In some cases the adjustment is made by hiring men by the year on a salary basis; in other cases by dovetailing industries, such as the coal and ice business. If that is not accomplished, then there remains the alternative: Pay the worker higher wages during the busy season, so that he can tide himself over until the following busy season, which can be calculated upon. The leading example is in the building trades in northern sections. The 260 UNEMPLOYMENT IK THE UNITED STATES building workmen receive high wages, say, a dollar an hour, but as they work only about eight months a year, that dollar an hour is equivalent to only about 65 cents an hour through the year. The building-trade mechanic ordinarily does not have any other occupation that he can dovetail, so that in the busy season we pay him a dollar an hour, 65 cents of which is wages and 35 cents of which is a kind of insurance, in order that he may be on hand the next season, when we want to open up business. Yet there are large building contractors who are learning how to spread their work over the year. Where the industry does not equalize itself, the employer must make some special arrangement in order to keep labor steadily employed throughout the year. One of the illustrious examples in this country is the Dennison Manufacturing Co., of Framingham, Mass. This company started as manufacturers of Christmas trinkets. Their busy season began in September, when the retailers ordered their goods, and ended with about three or four months of intense crowding and overwork. Then they adopted a definite purpose of stabilizing their business. They did it by various devices, well known to manufacturers at the present time. They coordinated their sales department with their production department and it became the business of their salesmen to induce the retailers to order in advance so that the manufacturing could come along throughout the year instead of being concentrated in one season. Now they begin manufacturing Christmas cards 15 months before they are actually sold to the ultimate consumer. They introduced many other products to which their employees could be transferred, and they trained their workers so that they might change from one occupation to another or something nearly like it. Now they manufacture several thousand different articles, and for several years they have had no unemployment. They have stabilized their industry by dovetailing and spreading out. It has required ingenuity, good management, and good salesmanship, but it has been accomplished. Modern business can stabilize seasonal employment if it is deemed worth while, and can even stabilize the credit cycle. Mr. Redfield, former Secretary of Commerce, has cited his own case, in the metal industries, where since the year 1890 they had not laid off a man on account of lack of work. In the hard times of 1893 to 1897 it was skating on thin ice, and they had great difficulties but they succeeded. It was accomplished through division of labor on the part of the management. It was the business of the sales department to adapt itself to the work of the production department. This idea is well recognized. The sales department must be subject to the production department, so that rush orders are uot taken on that can not be delivered except by an overexpansion of the business with a certainty that men must be laid off after the rush orders have been finished. The cycle of unemployment is the cycle of rush orders. When credit is good and prosperity is around, people will not wait. The business man thinks then that he must expand his factory; he must take on more laborers, he must get out his orders quickly or somebody else is going to get those orders. A great firm in Wisconsin pulled in laborers from the farms and negroes from the South, then suddenly laid them off, to be supported and policed by a little city. But more important than the employer is the banker as the stabilizer of employment. During the recent overexpansion a certain manufacturer applied for a loan of $250,000 in order to enlarge the plant. The banker turned the application over to the bank's industrial engineer, recently added to the staff, and he showed the manufacturer how, by better economy and better labor management, he could get along without that loan of $250,000. The banker put the screws on the manufacturer. Six or eight months afterward, when the collapse came, the manufacturer was profuse with thanks to the banker. The service of refusing him credit in order to prevent expansion was much greater than jyould have been the service of furnishing him credit. The banking system, which is the center of the credit system, more than the business man who is the actual employer, can stabilize industry, and, in stabilizing industry, stabilizes employment. The difficulty is that no one individual can do it alone; no bank can do it by itself; no one business man can do it by himself; it is a collective responsibility and collective action is necessary. If one person is trying to stabilize his industry by not overexpanding and not taking too many rush orders, he simply knows that his competitors will get his business. But if all the business men, who are competing with each other, know that the banks are treating the others in the same way, then stabilization might be expected to work. So that the induce UNEMPLOYMENT IN THE UNITED STATES 261 ment to stabilize employment in order that it may be really effective must not only take the example of those manufacturers who have pioneered the way themselves, but must interest the entire banking system of the State or Nation in the plan. Now the Huber bill proposes that when an employer lays off a man, if the man has had six months' work in the State during the year, t l ^ employer shall pay him $1 a day for a period of 13 weeks, and pay the State 10 cents a day additional toward expenses of administration. This creates a possible liability of about $90, added to every man taken on in case he is laid off through no fault of his own, but simply through fault of the management. It means an added liability which the employer assumes when he hires a workman, so that, under such circumstances, it should be expected that when an employer wants to expand, and he ordinarily can not expand except by getting credit, he will go to the bank for additional credit and the banker will necessarily inquire as to what security he has that, at the end of these rush orders, he will be able to continue the employment or pay that possible $90. In other words, the business man and the banker together are the controllers of credit, and it is the control of credit which can stabilize business. The overexpansion of credit is the cause of unemployment, and to prevent the overexpansion of credit you place an insurance liability on the business man against the day when he lays off the workmen. As to the practicability of a proposition of this kind, unemployment insurance is already in existence in seven or eight countries, with a somewhat different system. It was started some 25 years ago in Switzerland, with a system which broke down because wrongly conceived. It then spread to Belgium where it has been in operation for some 20 years; then to Denmark some 15 years ago; then England took it up on the grandest scale yet known. It applied in England, some 10 years ago, to 2,000,000 workmen, but since the war the number has been increased until the law applies to 12,000,000 workmen. Italy followed the example of England. Norway has established the system. It appears that the industrial unrest in England and Denmark would before now have brought revolution had it not been for this unemployment insurance. By taking note of the experience of these countries, it is possible for America to improve upon their systems. In the Huber bill most of the rules and regulations, the interpretations of the law and the procedure, are taken from the British system. The British system was established in 1912. It was revised in 1920 and these particular rules and regulations were not materially changed. They had been working satisfactorily for eight or nine years and are now continued. In the first place, a worker under the British rules is not entitled to compensation benefits if he leaves his work of his own accord or if he is discharged because of inefficiency or misconduct. He is not entitled to compensation if the unemployment is caused by strikes or lockouts either in his own shop or in related shops. No strike or lockout entitles a person to the unemployment benefit. He is required to accept a job which is offered to him through the public employment offices, a job which must be substantially equivalent in compensation and conditions to the one which he has, and not too remote from his home. 5Tet if traveling expenses are paid by the employer he can be required to take a remote job. Of course he can not literally be compelled to take the job, but if he does not take it his unemployment compensation ceases and the employer's liability is discontinued. The workman must apply to these public employment offices for vacant jobs. There is at every employment office a board of arbitration to settle disputes. If the workman claims compensation and the employer denies it, the claim can be taken up by a board appointed by the Government, consisting of one employer, one employee, and a third party. The employment officer in the first case makes a record as to what the job is and he then notifies the employer whether the man is entitled to compensation or not. If the employer objects, he can appeal to this board which meets every Saturday in an informal way at the employment office. If the workman objects he can appeal to the board of three, and finally, if that does not settle the claim, he can appeal to an umpire. In England they have one umpire to settle all of these cases on appeal, and during the first four or five years there were only 1,500 cases appealed to this umpire. Any person, reading the decisions of umpire, can easily ascertain how the law worked, for there are interpreted all the points as to whether the person is entitled to the unemployment benefit or not. 262 UNEMPLOYMENT IN THE UNITED STATES The evils of the European systems are two fold: In the first place the state goes into the insurance business and operates an insurance fund, and in the second place the finding of jobs is left largely to the trade unions. The system which was started in St. Gall, Switzerland, 25 years ago, broke down in two years. It provided for compulsory insurance on every workman. The workman was to insure himself. The state did not contribute and the employer did not contribute, but the workman was assessed and he had to pay into a state fund for his own benefit in case of unemployment. The result was that workmen began to leave the canton. The system broke down. It was next taken up about 35 years ago in the city of Ghent, Belgium. A different feature was added. It provided that if any association of workmen of a voluntary character should be organized for the relief of unemployment and the accumulation of a fund, the city of Ghent would add one-half of the amount that the association paid out. In other words the city of Ghent subsidized the trade-unions, which were the only organizations that could take advantage of the law. They have already their out-of-work funds; they already have their employment offices, their business agent to find jobs, and the city of Ghent comes to their aid, subsidizes them by paying practically onehalf the amount that the union itself had paid. Apparently the only reason why that system has worked in Ghent and has spread over Belgium is because certain individuals have given very great and careful attention to it. When the same system, applied in Denmark, had resulted in great abuses, and the law was revised in 1920, it was provided that the unions should no longer decide whether a man was entitled to compensation benefit or not. A state officer was appointed whose business is that of an umpire to decide as between the union and the state. The practice of subsidizing the union was continued, but the provision took out of the hands of the unions the decision as to whether the union is entitled to the state subsidy or not. When England took it up, 10 to 15 years after these other countries, she adopted an eirely new idea—that the three parties were to contribute. The workman was to contribute something like 5 cents a week, the employer 5 cents a week, and the state 2y2 cents a week. This money was to be put into a state fund, operated by the Government. But England retained the feature that if a trade union was paying out-of-work benefits it could present a bill to the Government showing the amount of money it had paid out and the Government would refund to the union the amount called for by the insurance scheme. These theories and practices in Europe have been based upon the idea, first, that unemployment is something that can not be prevented, that it is something inevitable, and that, this being the case, a philanthropic system to aid working people when out of work should be established ;*second, that the state should both contribute to the fund and operate the insurance business. The Huber bill, introduced in Wisconsin, abandons the idea that the State can operate the system successfully or that the trade-unions can operate it. It starts on the idea that the modern business man is the only person who is in the strategic position and has the managerial ability capable of preventing unemployment. In other words, the system proposed is exactly like that of the workman's accident compensation law of this State. A mutual insurance company is created, operated, and managed solely by the employers. That company is created upon the same principle as the State's accident compensation law. The employers establish their own premiums, supervised by the State insurance board; they pay out the benefits to the workmen exactly as they pay out the benefits under the accident compensation law. The only difference is that instead of the doctor who cures the man of accidents, the bill provides an employment officer who finds the man a job. The system avoids what hight be called the socialistic and paternalistic schemes of Europe. It is a capitalistic scheme. It avoids the socialistic scheme, in that the State does not go into the insurance business; it avoids the paternalistic scheme in not paying out relief for an inevitable accident. It induces the business man to make a profit or avoid a loss by efficient labor management. It places the compensation so low that the workman has no expectation of more than enough to pay his rent. T H E CASE I N ACCIDENT COMPENSATION If we may judge from what employers have done in the case of the accident compensation law we may predict what they will do under an unemployment compensation law of this kind. When the State of Wisconsin enacted UNEMPLOYMENT IN THE UNITED STATES 263 Its accident compensation law, it tied it up with an accident prevention law and placed both laws under the administration of the State industrial commission. The industrial commission then made a search throughout the country to find the best man for the prevention of accidents. They found O. W. Price, of the International Harvester Co., and succeeded in inducing him to come into the State and take up the work of accident prevention. This was done even before the compensation law went into effect. Mr. Price organized the accident prevention work; he started the safety movement. He started organizations in the shops and in communities. He established safety committees by which the employers themselves, along with their engineers and their workmen, drew up the safety rules. The industrial commission law provides a place for these advisory committees. If one examines the 300 pages of the labor law of the State he will find that the legislature enacted only 100 pages and these advisory committees of employers and employees drafted 200 pages. These were then issued as " orders " by the industrial commission. Two-thirds of the labor laws of the State are actually made by the men in the industries, who must obey the laws and who therefore frame them. • The legislature simply has given to the industrial commission the power to make these rules and orders and has authorized the commission to bring in the employers and safety experts to assist them in making them. The unemployment compensation bill follows along the same line. We can safely predict how it will work. At the time when the accident compensation law went into effect one of the large firms of the State came to the industrial commission with the alarm that the law would increase their premium for employers' liability from $5,000 a year to $22,000 a year. The insurance company had put up their premium'to that figure under the new law, and the claim agent had figured it out the same. The commission asked them why they did not adopt the safety first movement; why they did not convert their claim agent into a safety expert; why they did not equip their plant with safeguards and teach their workers safety first. They took the idea and equipped their establishment fool proof. The first year, instead of paying $5,000 on account of increased cost of premiums, they paid only $2,500 on account of industrial accidents. They made money by the new law. It is amazing what business can accomplish when it has a sufficient inducement. If there is enough money in it, it can accomplish more than any other agency. At the present time the business men of this country have formed their great national safety council. They have taken Mr. Price away from Wisconsin and have taken three or four other employees of the industrial commission who have made names as safety experts. They have put them in charge of this national safety movement, and they are carrying on throughout the Nation, not only in the factories, but on the streets and in the schools, a great safety campaign. They have taken these people away from the State because the State will not pay high enough salaries. Public business will always be more inefficient than private business, because, as a man becomes efficient in public business, he either gets fired on account of politics or the business man hires him and pays him a bigger salary. These former employees of the industrial commission are now paid three to five times the salary paid by the State. The manufacturers of the Nation, with their help, are now doing more for safety than all of the legislatures, all of the labor organizations, all of the philanthropic associations, ever thought possible, simply because they make money by doing it and the others do not. They even operate safety campaigns on the streets and in the schools, indirectly reducing accidents in the shops. The employer was probably never legally liable for more than a third of the accidents in the shops. The hazard of the industry and the carelessness of workers and fellow workers caused the other two-thirds. Yet the employer was made responsible for all the accidents. He knows how to " s e l l " safety to the public and to his own employees, and to turn safety into profit. He can reduce accidents 75 per cent, say Mr. Price. T H E EMPLOYERS' GAIN Likewise, in Wisconsin, the State Employers' Mutual Liability Insurance Co. has taken over actuaries and safety experts from the industrial commission, at higher salaries. At the hearings on the Huber bill, a leading employer, while opposing the bill, showed how it would work. He figured that 264 UNEMPLOYMENT IN THE UNITED STATES the proposed law would cost his firm $50,000 a year. If it should go into effect, he would not trust the State employment offices—he would hire his own employment manager to find jobs for his men when he laid them off. This is the business way of looking at it. The State will pay low salaries to men responsible for spending $20,000,000 a year, because the people can not measure inefficiency, and the legislature can save the State from bankruptcy out of the pockets of the taxpayers. But the business man, who must measure inefficiency by bankruptcy in dollars and cents, will pay an employment manager two to five times the State salary in order to save $50,000 a year. Incidentally, efficient employment management, as it has come to be known during the past 10 years, may be expected to make money for employers under an unemployment compensation law if organized like their safety work. The labor turnover, the dovetailing of jobs, the training of employees for different jobs, the selection, promotion, and transfer of employees, the spreading out of the overhead expense, the cultivation of willingness, the improved morale of steady workers, all belong to this new profession of the industrial engineer. The saving effected by the new efficiency of this new profession may be expected to exceed the cost of the unemployment compensation which both makes it necessary and opens up a wider field for it. Consider, too, how much employers get by having a steady force of workmen who can feel that it is practicable for them to buy their homes. Under our present system it would usually be a mistake for workmen to buy homes. Home ownership ties the workman down to the job. It ties him to the locality and he loses his power of movement when unemployed. Under a system of stabilizing employment the workman can afford to engage in home building, his main inducement to thrift. This increased efficiency and thrift,and spreading out of overhead expense is the answer also, in part, to the objection that one State can not pioneer the way, on account of interstate competition. Such objections did not hold back accident-compensation laws. The increased efficiency in avoiding accidents may be repeated in avoiding unemployment. But this objection has validity and can be met in full only by introducing the system gradually. Certain transitional measures are required. A preventive measure can not prevent a condition already existing. Hence a revision of the Huber bill provided that the law should not go into effect until a finding should be made by the industrial commission that business conditions are improving and workmen are being reemployed in reasonable numbers. That is the time when companies begin to set aside their reserve funds for investors and they set them aside for unemployment also. Then, too, they begin to pay their premiums to the mutual insurance company. ACTUAEIAL E X P E R I E N C E Further than this, there is no actuarial experience on which to base premium rates. The best statistics are from Massacuhsetts. They show that in the factories of that State, over a period of 25 years, the amount of unemployment averaged about five weeks a year. It went as high as 30 per cent in the years 1893 to 1897 and as low as 2 per cent in the best years. The average was about 10 per cent. That is almost the only existing basis for calculating premium rates. Consequently, an initial period of three years is provided in the revised Huber bill, during which the maximum period of compensation is fixed at 6 instead of 13 weeks. And further, if, during this initial period, the reserves of the insurance company run low and menace the solvency of the company, the industrial commission is authorized to shorten the period to even less than 6 weeks, in order to protect the solvency of the company. This feature is taken from the insurance plan of the Duchess Bleachery. With these provisions it is necessary to create a single Employers' Mutual Employment Insurance Co., for at least the initial period, to which all employers are eligible, rather than leave the field open to competition. The company is both a prevention and an insurance company, managed by the employers. During the initial period, the premium rates can be worked out, under the approval of the State insurance commissioner, and the rules and regulations can be worked out under the approval of the industrial commission. For the purpose of working out the rules and regulations a State advisory board of employers and employees is provided. This has been the method by which, as already mentioned, the safety and sanitation orders, the ininiFmn? U3TEMPL0YMENT IN THE UNITED STATES 265 wage orders, the apprenticeship rules and other orders of the industrial commission were made. So the unemployment compensation bill provides a framework, and leaves the details to the employers' insurance company and the advisory committee of employers, employees, and employment managers, under supervision of the existing State authorities. The duty of the latter is simply to see that the law is carried into effect and to decide disputes. The employers themselves make the rules and the State acts as umpire. The 12 States free employment offices are already managed in some cases by these joint committees, cooperating with the State commission, and no material change is needed in their administration. They become mainly recording offices for the unemployment-compensation law, since the employers do the job-finding themselves through their employment managers and their State-wide insurance companies. DESIKABILITY AND PRACTICABILITY In any proposition of this kind there are two questions. Is it practicable? Is it desirable? The foregoing has indicated its practicability. It is based on the knowledge gained from the experience of various European countries and upon the experience of the industrial commission with the accident compensation law. If we recognize that this question of capital and labor acquires its bitterness from this failure of capitalism to protect the security of labor, then we shall conclude that unemployment compensation and prevention is of first importance. We have already removed from the struggle between capital and labor the bitterness over the responsibility for accidents. Labor agitators formerly could stir up hatred of the employer on the ground that the employer gets his profits out of the flesh and blood of his workmen. No longer do we hear that language ; but we do hear them say that capital gets its profits out of the poverty and misery of .labor and the reserve army of the unemployed. That is the big remaining obstacle which embitters the relations between capital and labor. While individuals may think it is undesirable, yet from the standpoint of the States and of the Nation, we must submit somewhat our individual preferences to what may help to prevent a serious menace in the future, and must impose upon capital that same duty of establishing security of the job which it has long since assumed in establishing security of investment. HUBER UNEMPLOYMENT INSURANCE BILL STATE OF WISCONSIN, I N SENATE. Substitute amendment No. 1, S., to bi,ll No. 122, S. May 3, 1921, offered by Senator Huber. Referred to Committee on the Judiciary. To create sections 2394—101 to 2394—111, inclusive, of the statutes, relating to the prevention of unemployment by compensating workingmen while temporarily unemployed, providing insurance, and providing penalties. The people of the State of Wisconsin, represented in senate and assembly, do enact as follows: SECTION 1. Eleven new sections are added to the statutes to read: Section 2394—101. The following terms, expressions, and phrases as used in sections 2394—101 to 2394—111, inclusive, shall be construed as follows: 1. The term " employee " shall mean every person, including aliens, in the service of a person, firm not incorporated, or partnership which at any time after the date of the passage of this act has three or more persons serving in a common employment, and every person including aliens in the service of any corporation (including public-service corporations), under any contract of hire, express, or implied, oral or written, all helpers, and assistants of employees whether paid by employer or Employee, if employed with the knowledge, actual or constructive of the employer and also including minors who have reached their 16th birthday or over, who for the purpose of this act, shall have the same power of contracting as an adult employee, excepting persons— (a) Who are employed by farmers, or canneries; or, 266 UNEMPLOYMENT IN THE UNITED STATES (b) Who are in receipt of any pension or income of $500 annually or upwards, which does not depend upon their personal exertion; or, (c) Whose total annual income exceed $1,500, or who are ordinarily or mainly dependent for their livelihood upon some other person. 2. The term " employer " shall mean and include every person, firm not incorporated, or partnership which shall at any time after the date when this act takes effect have three or more persons serving in a common employment, and every corporation operating in the State of Wisconsin (including public service corporations) having in service one or more persons under any contract of hire, written or oral, express or implied, and whether paid by time or by piece, or partly by time and partly by piece, or otherwise. The provisions of this subsection shall not apply to farmers and canneries. 3. The expression "in service" shall be construed to mean in the service of one or more employers. 4. The expression " strike or lockout" shall mean and include any dispute or controversy between employees and employers, or between employees and employees in connection with the employment or nonemployment or the terms of employment, or with the conditions of employment of any persons whether employees in the employment of the employer with whom the dispute or controversy arises or not. # 5. The term " deputy" shall mean and include any deputy as defined in section 2394-41, employed by the industrial commission. The deputy shall investigate and determine applicants' eligibility of unemployment compensation and be engaged in the performance of duties under the direction of the commission. 6. A person shall not be deemed to be unemployed on any day on which he is following an occupation for which he derives remuneration or wages, provided his remuneration or wages shall not be less than 75 per cent of his usual remuneration or wages by day. 7. Two periods of unemployment of not less than two days each separated by a period of not more than three days, shall be treated as a period of continuous unemployment, and the expression " continuously unemployed" shall have a corresponding meaning. 8. The term " employment district" shall mean and include such suitable area within a reasonable distance from any free employment agency established and conducted by the industrial commission, within which unemployed workmen may be required to accept offers of employment under the provisions of sections 2394—101 to 2394—111, inclusive, of the statutes. SEC. 2394—102. Any employee who is unemployed shall be compensated as wages on the fourth day of unemployment, subject to the provisions of sections 2394—101 to 2394—111, inclusive, referred to as " unemployment-compensation," at weekly intervals, and at such rates and for such periods as are authorized in the provisions of section 2394—101 to 2394—111, inclusive, so long as the statutory conditions continue to be fulfilled and so long as he is not disqualified under this act for the receipt of unemployment compensation. SEC. 2394—193. 1. Liability for the unemployment compensation as herein provided shall exist against the last employer of an unemployed person while unemployed in those cases where the following statutory conditions for the receipt of unemployment compensation occur. (a) That the employee has been in service for twenty-six weeks in accordance with the provisions of sections 2394—101 to 2394—111, inclusive; and, (b) That the employee has made application for unemployment compensation in the prescribed manner, and since the date of application has been continuously unemployed; and, (c) That the employee is capable and available for work, but unable to obtain suitable employment, as provided in subsection 2 of this section; and, (d) That the employee has not exhausted his right to unemployment compensation in accordance with the provisions of sections 2394—101 to 2394—111, inclusive. 2. An employee shall not be deemed to have "failed to fulfill the statutory conditions provided in subsection 1 of this section because he has declined: (a) An offer of employment in a situation vacant in consequence of stoppage of work due to a strike or lockout; or, (&) An offer of employment in an employment district where the employee was last ordinarily employed at a rate of wage lower, or on conditions less UNEMPLOYMENT IN THE UNITED STATES 267 favorable than those which he habitually obtained in his usual employment, or in similar employment for which he is fitted, in that district, or would have obtained had he continued to be so employed; or, (c) An offer of employment in any other employment district at a rate lower than the prevailing rate of wage in his usual or similar employment for which he is fitted, or on conditions less favorable than those generally observed in that district, or without prepayment, by the last employer, of his railroad fare to such other employment district as provided in subdivision (i) of subsection 3 of this section. 3. For the purpose of and .subject to the provisions of sections 2394—101 to 2394—111, inclusive, (a) No employee shall receive unemployment compensation for more than 13 weeks in any calendar year, and employees shall receive unemployment compensation in the proportion of one week's unemployment compensation for every four weeks in service; provided that during the period of three years ensuing from the date when the requirement of insurance and unemployment compensation herein provided takes effect no employee shall receive unemployment compensation for more than six weeks in any calendar year; and (&) No employer shall solicit, receive, or collect any money from his employees, or make any deduction from their wages, either directly or indirectlyr for the purpose of discharging any liability under the provisions of sections 2394—101 to 2394—111, inclusive; and (c) No agreement by an employee to waive his rights to unemployment compensation under sections 2394—101 to 2394—111, inclusive, shall be valid, and no unemployment compensation under this act shall be assignable, or subject to attachment, or liable in any way for any employees' debts; and (d) When an employee has lost employment through his own fault, or volunr tarily leaves his employment without reasonable cause, he shall be disqualified from receiving unemployment compensation; and (e) When an employee has lost employment by reason of stoppage of work due to a strike or lockout at a factory, workshop, or other premises at wThich he was employed he shall be disqualified for receiving unemployment compensation so long as the stoppage of work continues, unless he since became employed elsewhere in an occupation which he usually follows, or has become employed in some other occupation or employment; and (f) An employee shall be disqualified for receiving unemployment compensation while an inmate of any prison or any workhouse, or other like institution; and (ff) Any time during which an employee is under this act disqualified for receiving unemployment compensation shall be excluded in the computation of periods of unemployment under this act; and (h) A period of unemployment shall not be deemed to commence until the employee has made application for unemployment compensation in the manner prescribed by the industrial commission; and ( (i) If any unemployed person has a definite offer of employment in any other employment district, and in the opinion of the deputy would be entitled to receive or continue to receive unemployment-compensation provided he became or remained unemployed, he may apply to the deputy for his railway fare to that place, provided that the amount of the railroad fare does not exceed the maximum amount payable in respect of unemployment-compensation, and the deputy shall thereupon issue, to him an order upon his last employer requiring said employer to pay or continue to pay the unemployed person the unemployment-compensation as provided in section 2394—104, or of paying the amount of the railroad fare to such place of employment and the amount of such railroad fare shall be deducted from the maximum amount payable in respect of unemployment-compensation. The industrial commission shall divide the State into employment districts and establish free employment agencies as may be found convenient, as provided in subsections (9), (9a), and (11) of section 2394—52 of the statutes. SEC. 2394—104. 1. Subject to the provisions of sections 2394—101 to2394—111, inclusive, unemployment-compensation shall be payable to any employee unemployed each week of the continuous period of unemployment commencing with the fourth day of unemployment and shall be paid by his last employer at a $aily rate of $1 for each working day for male and female persons 18 years of age or over, and 50 cents for each male and female person between the ages of 16 and 18 years. 268 UNEMPLOYMENT IN THE UNITED STATES 2. Subject to the provisions of sections 2394—101 to 2394—111, inclusive, for each obligation to pay $1 to any employee as unemployment-compensation, the employers shall pay an additional 10 cents into the treasury of the State of Wisconsin, and for each obligation to pay 50 cents to persons between the ages of 16 and 18 years of age, the employer shall pay an additional 5 cents into the treasury of the State of Wisconsin. The employers' mutual employment insurance company, created by section 2394—105, shall insure said obligation owing to the State of Wisconsin in the same manner as the unemployment-compensation herein provided. The amount of such payments due to the State of Wisconsin shall be determined by the industrial commission in the same manner as provided for determining the amounts of unemployment-compensation owing by such employers, and, upon certification by the industrial commission to the State treasurer, shall be payable as a debt to the State in monthly installments on the 10th day of each month for all payments due as of the preceding calendar month. Sums paid into the State treasury under the provisions of this section are hereby appropriated to the industrial commission, the commissioner of insurance and the compensation insurance board under regulations to be prescribed by the State board of public affairs, for the use of said industrial commission, said commissioner of insurance and said compensation insurance board in operating free employment agencies and meeting additional expenses of administration imposed by sections 2394—101 to 2394—111, inclusive. SEC. 2394—105. 1. Every employer liable for the payment of unemploymentcompensation under sections 2394—101 to 2394—111, inclusive, shall insure such liability in the employers' mutual employment insurance company which is hereby created for the insurance and prevention of unemployment: Provided, That the industrial commission may exempt any employer from insuring said liability upon showing of financial ability and upon such other conditions and penaltes as are provided in subsections 2 and 3, of section 2394—24 of the statutes, which, including said penalties, are made a part hereof except in so far as inconsistent with sections 2394—101 to 2394—111, inclusive. Said employers' mutual employment insurance company shall, without payment of license fee, be subject to the provisions and ail rules, orders, and inspections of the industrial commission, the commissioner of insurance, and the compensation insurance board within their respective jurisdictions as provided in sections 2394—26, 2394—28, 2895m, 1896, 1896m, 1897a to 1905a, inclusive, sections 1921—1 to 1921—11, inclusive, 1966y to 197£a, inclusive, of the statutes, except in so far as inconsistent herewith. Said employers' mutual employment insurance company shall admit to membership any employer required to insure his liability under the provision of this act. 2. The commissioner of insurance within sixty days after the passage of this act shall fix a time and place for the first meeting of employers subject to the provisions of sections 2394—101 to 2394—111, inclusive, for the purpose of organization and incorporation of the employers' mutual employment insurance company, herein provided, and shall give public notice of such meeting at least thirty days before such meeting. Each of said employers, himself or by his duly authorized representative, not exempt under the provisions of this section and having le;ss than one hundred employees subject of the provisions of sections 2394—101 to 2394—111, inclusive, shall be entitled to one vote at such first meeting, or having one hundred or more employees subject to said provisions shall be entitled to one vote for each one hundred such employees or major fraction thereof, as determined by the commissioner of insurance, and in the organization, adoption, and amendment of articles of incorporation, and in the conduct of said employers' mutual employment insurance company the provisions of sections 1895m, 1896, 1896m to 1905, inclusive, 1966y to 1972c inclusive, and chapter 86 of the statutes, shall be made a part hereof in so far as applicable and not inconsistent herewith. 3. The requirements of insurance provided in this section and of unemployment compensation provided in sections 2394—102, 2394—103 and 2394—104, shall take effect thirty days after such date as the industrial commission shall, upon investigation, findings, and notice, ascertain and determine that employment conditions are improving and that unemployed persons are being reemployed in reasonable numbers. The industrial commission shall have power, authority, and jurisdiction to determine such date. 4. During the period of three years from the date when the requirement of insurance and unemployment compensation provided herein takes effect, if the reserve fund of said employers' mutual employment insurance company falls UNEMPLOYMENT IN THE UNITED STATES 269 below such reasonable ratio to the net liability of the company as may be determined by the compensation insurance board to endanger the solvency of said company, then the compensation insurance board shall reduce the periods for which unemployment compensation is payable as provided in sections 2394—103 and 2394—104, to such reasonable periods as may secure the solvency of said company. Thereafter the periods of unemployment compensation shall be as provided in sections 2394—103 and 2394—104. Provided, further, that no action to recover unemployment compensation shall be entertained during the period of sixty days first ensuing after said date when the requirement of insurance and unemployment compensation takes effect. 5. The employers' mutual employment insurance company shall have authority subject to approval by the compensation insurance board: to classify the industries of this State that are subject to unemployment-compensation insurance into proper classes for unemployment compensation insurance purposes; to make inspections of unemployment compensation risks and to apply thereto an experience rating system; to establish charges and credits under such system; to provide for refunds to employers on the basis of experience in preventing unemployment; to assist the compensation insurance board in approving rates, investigating unemployment conditions and other material facts in connection with unemployment compensation risks and to assist in promoting regularity of employment in the industries. SEC. 2394—106. The industrial commission shall appoint a board, to be known as the " Unemployment Advisory Board," consisting of one member at large who shall act as chairman and an equal number of members to represent respectively employers and employees, to be selected from lists submitted for that purpose by employers and employees. The board shall meet on call of the industrial commission, and shall assist the industrial commission without pay, except for expenses, in investigations, and determinations, and general administration of sections 2394—101 to 2394—111, inclusive, of the statutes. In like manner the commission may appoint similar advisory boards to function in localities where the commission deems necessary to facilitate and promote the effective administration of sections 2394—101 to 2394—111, inclusive, of the statutes. The industrial commission shall make reasonable regulations for recording the facts upon the claims of employees to unemployment compensation may be determined. SEC. 2394—107. 1. All questions relating to whether an employment is such as to make the person engaged therein an employee under the meaning of sections 2394—101 to 2394—111, inclusive, or as to who is the employer of any employee shall be decided by the industrial commission. 2. All claims for unemployment compensation as provided in sections 2394—101 to 2394—111, inclusive, shall be filed with the deputy and all questions whether the conditions for such unemployment compensation provided in sections 2394—101 to 2394—111, inclusive, are fulfilled in the case of any person claiming any unemployment compensation, or whether these conditions continue to be fulfilled in the case of a person claiming such unemployment compensation, or otherwise arising in connection with such claims, shall, subject to the provisions of section 2394—101 to 2394—111, inclusive, be decided in the first instance by a deputy of the commission. 3. The deputy shall take into consideration any claim or question submitted for his determination under the provisions of subsection 2 of this section, and shall give his decision thereon within one day from the date on which the claim or question was so submitted, whereupon he shall issue or refuse to issue a statement to the employer liable for the payment of such unemployment compensation, of the employee's right to receive such unemployment compensation, giving the reasons which shall require the employer to pay such unemployment compensation due to the employee. The employer shall, unless he contests such statement in the prescribed manner, compensate as. wages the amount of unemployment compensation due said employee at least one week after the fourth day of unemployment. The deputy shall re-issue such statement at weekly intervals thereafter as provided in this act. SEO. 2394—108. In any case where unemployment compensation is refused or stopped, or where the amount of unemployment compensation allowed is not in accordance with the claim, the person claiming such unemployment compensation or in receipt of such unemployment compensation, or where the employer or employers' mutual employment insurance company is aggrieved by the decision of the deputy, such party or parties may appeal their case to the 270 UNEMPLOYMENT I N T H E UNITED STATES industrial commission for review and reconsideration a n d thereafter to t h e D a n e County circuit court, in t h e same m a n n e r as provided in sections 2394—15 to 2394—24, subsection 1, inclusive, of t h e statutes. SEO. 2394—109. 1. If for t h e purpose of obtaining any unemployment compensation or p a y m e n t under sections 2394—101 to 2394—111, inclusive, either for himself or for any other person, or for t h e purpose of avoiding any paym e n t to be m a d e by himself a s provided in sections 2394—101 to 2394—111, inclusive, or enabling any other persons to avoid such payment, a n y person knowingly makes any false statement or false representation, or any person who buys or offers for sale, takes or gives in exchange, or pawns, or t a k e s in p a w n any document, paper, or card provided by t h e industrial commission for recording t h e facts upon which t h e claims of employees to unemployment compensation m a y be determined, he shall be guilty of misdemeanor, a n d upon conviction he shall be liable to imprisonment for a t e r m not exceeding three months, with or without h a r d labor, or shall forfeit an amount not exceeding five hundred dollars, or both, according to t h e opinion of t h e court t h a t th^ justice of t h e case would be better met. 2. If any employer refuses or neglects t o comply with any of the requirements of sections 2394—101 to 2394—111, inclusive, or t h e regulations m a d e thereunder, or if any employer solicits, receives, or collects any money or deducts or a t t e m p t s to deduct from t h e wages or other remuneration of t h e employee, either directly or indirectly, for the purposes of discharging any p a r t of t h e employer's liability under t h e provisions of sections 2394—101 to 2394—111, inclusive, he shall be guilty of misdemeanor a n d shall upon conviction thereof forfeit twenty-five dollars for each offense. SEC. 2394—110. I t shall be t h e duty of t h e industrial commission, t h e insurance commissioner a n d t h e compensation insurance board, within their respective jurisdictions, a n d they shall have power, jurisdiction, and authority, to m a k e all investigations, classifications, rules, regulations, a n d orders and to require all reports from employers a n d t h e employees' m u t u a l employment insurance company reasonably necessary to enforce t h e provisions of sections 2394—101 to 2394—111, inclusive. Such investigations, classifications, rules, regulations, a n d orders, a n d any action, proceeding or suit to set aside, vacate, or amend any such order of t h e industrial commission, insurance commissioner, t h e compensation insurance board, or to enjoin the enforcement thereof shall be m a d e p u r s u a n t to the proceedings in subsections 2 and 3 of section 2394—24, sections 2394—41 to 2394—71, inclusive, or p u r s u a n t to the proceedings in sections 1966y to 1972c, inclusive, or p u r s u a n t to the proceedings in section 1921—1 to 1921—11, inclusive, a s the case may be, which sections a r e hereby m a d e a p a r t hereof, so far as not inconsistent with t h e provisions of sections 2394—101 to 2394—111, inclusive, and every order of said industrial commission, insurance commissioner, or said compensation insurance board shall have the same force and effect a s the orders issued p u r s u a n t to said subsections 2 a n d 3 of section 2394—24, sections 2394—41 to 2394—71, inclusive, sections 1966y to 1972c, inclusive, and sections 1921—1 to 1921—11, inclusive, a n d t h e penalties therein shall apply and be imposed for any violation of sections 2394—101 t o 2394—111, inclusive, of t h e statutes. SEC. 2394—111. Should a n y portion of sections 2394—101 to 2394—111, inclusive, be adjudged unconstitutional, t h e remaining shall, nevertheless, be valid and of full effect. SEC. 2. This act shall t a k e effect upon passage a n d publication, EXHIBIT 7 REVISION OF HUBER UNEMPLOMENT PREVENTION BILL, 1925 A BILL To create sections 112.01 to 112.20 of the statutes and to amend subsection (5) of section 201.04, section 205.01, and subsection (9a) of section 101.10 of the statutes, relating to the prevention of unemployment by compensating workmen while temporarily unemployed, providing penalties, and making an appropriation of fees The people of the State of Wisconsin, represented in senate and assembly, do enact as follows: SECTION 1. T w e n t y new sections a r e added to t h e statutes, to r e a d : 112.01. T h e following terms, expressions, a n d phrases, a s used in this chapter, shall be construed a s follows: UNEMPLOYMENT IN THE UNITED STATES 271 (1) The term "employer" shall mean every person, firm, and private corporation, who shall, at any time after the date when this chapter takes effect, have six or more employees in a common employment. But the term " employer" shall not include farmers. Any employer who has been subject to this chapter upon his showing to the satisfaction of the industrial commission that at no time during the previous twelve months he has employed six or more employees and that all his liability for compensation or for insurance is discharged or provided for, shall (until such time as he again employs six or more employees) cease to be an employer within the meaning of this chapter. (2) The term "employee" shall mean every person in such a common employment in the service of an employer under any contract of hire, express or implied, oral or written, including all helpers and assistants of employees, whether paid by employer or employee, if employed with the knowledge, actual or constructive, of the employer, and also including minors of permit age or over. But the term " employee " shall not include persons— (a) Who are engaged in farm labor; (b) Whose employment is not in the usual course of the trade, business* profession, or occupation of the employer; (c) Whose income from employment other than manual labor is at the rate of one thousand five hundred dollars or more per year. (3) The expression "weeks of employment" shall mean the total weeks of employment by one or more employers during which the employer or employers were liable for compensation under this chapter. (4) An employee shall be deemed partially unemployed when his usual weekly work is reduced to such an extent that his weekly remuneration or wage is less than seventy-five per cent of his usual weekly remuneration or wage. (5) The term "compensation" shall mean compensation for total or partial unemployment. 112.02. (1) Whenever in any industry or class of employment it is customary to operate only during a regularly recurring period or periods of less than one year in length, then the employer's liability for compensation and his obligation to insure this liability shall apply only to the longest seasonal period or periods which the best practice of such industry or class of employment will reasonably permit. The industrial commission shall ascertain and determine or redetermine such seasonal period or periods for each such seasonal employment. Until such determination, no employment shall be deemed seasonal. (2) Whenever in any establishment it is customary to afford a regularly recurring vacation period, then the employer's liability for compensation and his obligation to insure this liability shall not apply to such vacation period. The industrial commission shall ascertain and determine or redetermine such vacation periods. Until such determination, no period of unemployment shall be deemed a vacation period. (3) Whenever in any industry or class of employment it is customary to engage employees for a term of three days or less, then the employer in such industry or class of employment shall owe compensation beginning with the day of filing claim as provided in section 112.07. The industrial commission shall ascertain and determine or redetermine the casual employments to which this section shall apply. Until such determination no employment shall be deemed casual. 112.03. The liability of an employer for compensation shall arise whenever after June 30, 1926, an employee leaves or loses employment with an employer. The amount of the liability shall be determined by the provisions of sections 112.04, 112.05, 112.07, and 112.08. 112.04. (1) Compensation shall be payable weekly by the last employer of an employee or by the insurance company with which he may have insured his liability under this chapter and shall accrue: (a) Beginning with the third day after filing claim (except in casual employments in which it shall accrue beginning with the day of filing claim) to an employe totally unemployed, if of permit age, at the rate of 50 cents for each working day including half holidays; if above permit age, at the rate of $1 for each working day including half holidays: Provided, however, that na employee shall be compensated at a higher rate per we,ek than 65 per cent of his usual weekly remuneration or wage in his last employment by an employer. 29193—29 19 272 UNEMPLOYMENT IN THE UNITED STATES (b) Beginning with the day of filing claim to an employee partially unemployed, at the above rates reduced proportionally to the reduction in his usual weekly remuneration or wage. (2) Compensation shall not accrue to an employee either for more than thirteen weeks in a calendar year or in greater ratio than one week of compensation to four weeks of employment during the two preceding calendar years. (3) For the purpose of computing the number of weeks during which compensation may accrue to an employee, any period during which an employee receives compensation for partial unemployment shall be counted in the ratio which this compensation bears to his maximum compensation for the same period. (4) Employment by a person not an employer or by an employer in a seasonal employment outside of the seasonal period, as determined by the industrial commission, shall not terminate, but only suspend, the liability of a previous employer. If the employee becomes unemployed within six months of the cessation of his employment by such previous employer, compensation shall again accrue upon his filing a claim against such previous employer within one month of the cessation of his last employment. 112.05. (1) Compensation shall accrue to an employee as provided in section 112.04: (a) On condition that the employee has been employed by one or more employers within the State not less than twenty-six weeks during the two preceding calendar years; (b) So long as he is continuously unemployed except as provided in subsection (4) of section 112.04; (c) While he is capable of and available for ^employment and (unless only partially unemployed) unable to obtain suitable employment and while he continues to report from time to time according to rules prescribed by the industrial commission. (2) Suitable employment shall mean employment in his usual employment or other employment for which he is reasonably fitted in the vicinity, as determined by the industrial commission, of his residence or last employment. But an employee shall not lose his right to compensation if he refuses an employment as unsuitable: (a) Because the situation is subject to conditions substantially less favorable than the prevailing conditions in his usual employment, but the conditions shall not be deemed less favorable because the employment is likely to be less permanent or because it is an employment to which compensation does not attach; Cb) Because the situation is vacant owing to the direct participation of a previous occupant in an existing strike or lockout. (3) An employee shall not be entitled to compensation: (a) If he lost his employment through his misconduct; (b) If he has left his employment voluntarily without reasonable cause; (c) If he has left or lost his employment by reason of stoppage of work •due to a strike against or lockout by the employer at the factory, workshop, or premises at which he was employed, so long as the strike or lockout continues; (d) If his unemployment has been directly caused by an act of God. 112.06. No agreement by an employee to waive his right to compensation shall be valid, and no compensation shall be assignable, subject to attachment, or liable in any way for an employee's debts. 112.07 (1) Claims for compensation, in such form as the industrial commission shall provide, shall be filed with the deputy in charge of the employment office in the district of the claimant's last employment, or other deputy designated by the commission for this purpose. Such claim shall be filed within one month of the cessation of employment. (2) (a) If the claim appears to the deputy invalid, he shall reject the claim and notify the claimant in writing of such rejection and of his right to make an application for a hearing. This application must be made within three working days of such notification and in such form as the industrial commission shall provide. (b) If the claim appears to the deputy valid, he shall give written notice of the claim to the claimant's last employer and notify him that he owes compensation unless he contests the claim by filing with the commission, within three working days after receipt of the notice, a denial of the claim in such UNEMPLOYMENT IN THE UNITED STATES 273 forms as the industrial commission shall provide. If such a denial is filed, it shall operate as an application for a hearing. (c) In case the employer does not contest the claim, he shall pay compensation so long as it is due under this chapter. Upon his failure to make proper and prompt payments, the claimant may make, in such form and within such time as the commission may prescribe, an application for a hearing. 112.08 (1) On application for a hearing or upon its own initiative, as provided in subsection (2) of section 102.17, the commission shall proceed in the manner provided in sections 102.14 to 102.19, to hear and determine any contested claim for compensation. (2) The industrial commission may provide for the hearing of contested claims by local boards representing the employers and employees, and make rules for the proceedings before such boards and for review or rehearing before the commission. (3) If the application for a hearing arises under paragraph (c) of subsection (2) of section 112.07, the employer shall be estopped to set up: (a) That he is not the claimant's last employer; (b) That the claimant was not his employee; (c) That the claimant lost his employment through his own misconduct; (d) That the claimant left his employment voluntarily without reasonable cause; (e) That the claimant left or lost his employment by reason of stoppage of work due to a strike or lockout; (f) That the unemployment was directly caused by an act of God. (4) The provisions of sections 102.20, 102.22, 102.27, inclusive, and subsection (1) of section 102.28, shall apply, as far as may be, to claims and awards for compensation under this chapter. 112.09 (1) Every employer liable for the payment of compensation, unless be exempted as provided in section 112.10, shall insure such liability in the employers' mutual employment insurance company hereinafter created. The obligation to take out a policy shall take effect July 1, 1926, or as soon thereafter as a person not theretofore an employer becomes such, and premiums shall be payable within ten days of the date when the employer is required to take out a policy. Any nonexempt employer who fails to take out a policy of insurance with the employers' mutual employment insurance company shall nevertheless, be liable to such company for premiums at the same rate as if he had taken out a policy. (2) If it appears by the complaint or by the affidavit of any person in behalf of the State or of the employers' mutual employment insurance company that any nonexempt employer has failed to take out a policy with such company or that any premium is due upon such policy and not paid, there shall forthwith be served on the employer an order to show cause why he should not be restrained from employing any person in his business pending the proceedings or until he shall have satisfied the court in which the m'atter is pending that he has complied with the provisions for insurance or for payment of premiumSuch order to show cause shall be returnable before the court or the judge thereof at a time to be fixed in the order not less than twenty-four hours nor more than three days after its issuance. In so far as the same may be applicable and not herein otherwise provided, the provisions of chapter 268 relative to injunctions shall govern these proceedings. If the employer denies under oath that he is subject to the provisions of this chapter, and furnishes bond with such sureties as the court may require to protect all his employees who may leave or lose their employment after the commencement of the action, then no temporary restraining order or injunction shall be issued pending the trial. If no such answer is filed, or if it appears upon trial unfounded, then the court shall issue an injunction restraining such delinquent employer from employing any person until he sha(ll have satisfied the court that he has taken out such policy or paid such premium. (3) Liability for compensation shall not be affected or reduced by any insurance, contribution, or other benefit in respect of unemployment due to or received by the employee entitled to such compensation. (4) The claimant of compensation, in addition to the right to recover the same directly from the employer may enforce in his own name, by proceedings before the industrial commission in conformity with section 112.08, the liability of the employers' mutual employment insurance company, whether the employer has taken out a policy of insurance or not, unless such employer 274 UNEMPLOYMENT IN THE UNITED STATES has been exempted from insuring his liability with the employers' mutual employment insurance company under section 112.10, or the liability of such, company in which an exempt employer may have taken out a policy as provided in section 112.10; provided, however, that payment in whole or in part of such compensation by either the employer or a company shall, to the extent thereof, be a bar to recovery against the other of the amount so paid, and provided, further, that as between the employer and a company, payment by either directly to the claimant shall be subject to the conditions of the insurance policy, if any, between them; and that as between the claimant and a company, the failure of the assured to do or refrain from doing any act required by the policy shall not be available to the said company as a defense. 112.10. (1) An employer desiring to be exempted from insuring his liability for compensation in the employers' mutual employment insurance company shall make application to the industrial commission, showing either Ms financial ability to pay such compensation or else insurance with a company authorized to transact employment insurance under subsection (5) of section 201.04 of the statutes; whereupon the commission by written order may grant, on or after February 1, 1926, such exemption upon payment by the employer of the fee provided in section 112.17. Such exemption shall take effect on the next January first or July first. Until such exemption takes effect, every employer shall have all the rights and obligations of a nonexempt employer including membership in the employers' mutual employment insurance company. As a condition to granting exemption, the commission may require the employer to furnish such security as it may consider sufficient to insure payment of all claims for compensation. Where the security is in the form of a bond or other personal guaranty, the commission may, at any time either before or after the entry of an award, upon ten days' notice and opportunity to be heard, require the sureties to pay the amount of the award, the same to be enforced in like manner as the award itself may be enforced. (2) (a) The commission may from time to time require further proof of financial ability of any exempt employer or of his insurance with a company authorized to transact employment insurance under subsection (5) of section 201.04 of the statutes. Upon his failure to satisfy the commission of such ability, upon his entering into any agreement for insurance coverage with an insurance company or interinsurer not licensed to operate in this State, upon his wilful failure or that of the insurance company in which he may have insured, to furnish any reports that the commission may require in pursuance of this chapter, or otherwise to comply with provisions of this chapter and the rules, regulations, and orders of the commission pertaining to the administration thereof, the commission may, upon ten days' notice and opportunity to be heard, revoke his exemption and shall notify the employers' mutual employment insurance company of such revocation. (b) An employer .may terminate his exemption January 1 or July 1 of any year upon 10 days' notice to the industrial commission and to the employers' mutual employment insurance company. (3) If exemption ceases owing to the provisions of subsection (2) of this section, it shall be the duty of the employer to insure according to the provisions of section 112.09. Such an employer shall pay to the employers' mutual employment insurance company, in addition to his current premium, his pro rata share of the excess of premiums over losses and expenses developed during the period of his exemption by the industry or group in which he has been classified by the compensation insurance board for the purposes of this chapter. (4) An exempt employer may, with the approval of the industrial commission, substitute for his liability under this chapter equal or greater liability to his employees under a plan which will, in the opinion of the commission, give to every employee protecton equivalent to or greater than that which is given by this chapter. Any such plan may include the use of the agencies named for carrying out this chapter and shall provide for review by the industrial commission and the courts, as provided in section 112.08, of contested claims arising under such plan. If at any time any such plan or its administration fails to meet the standards herein provided, the industrial commission shall, upon ten days' notice and opportunity to be heard, withdraw its approval, whereupon the employer's liability under such plan shall cease to be a substitute for his liability under this chapter. 112.11 (1) There shall be created, for the purpose of insuring the liabilty of employers under this chapter and of preventing unemployment, an employers* UNEMPLOYMENT IN THE UNITED STATES 275 mutual employment insurance company. Such company shall be deemed to insure all the liability for compensation of all employers under this chapter who have not been exempted from insuring in such company under the provision of section 112.10. The compensation insurance board shall fix a place in Madison and a time between September 1, 1925, and January 15, 1926, for the meeting of employers required to insure their liability, for the purpose of organizing and incorporating the company, and shall give public notice of such meeting at least thirty days in advance. Each employer or his authorized agent shall be entitled at such first meeting to one vote for each one hundred •employees or fraction thereof. The meeting shall provide for incorporation as a mutual insurance company and the provisions of chapters 201 and 205 relating to mutual insurance companies writing workmen's accident compensation insurance shall apply so far as not inconsistent with the provisions of this chapter. The member of the compensation insurance board chosen by the board to preside at the meeting shall pass upon the credentials and voting rights of persons attending the meeting. (2) Not later than February 1, 1926, the employers' mutual employment insurance company shall collect and every employer who would then be required to insure with the company if the requirement of insurance were already in effect, shall pay a deposit premium of at least fifty cents for each employee on his pay roll in the calendar month preceding that in which the organization meeting of the employers was held, which sum shall be credited as prepayment of premiums. (3) During the period from July 1, 1926, to December 31, 1929, if the assets ©f said employer's mutual employment insurance company fall below the net reserve and other liabilities of the company, as determined by the compensation insurance board, the compensation insurance board shall temporarily reduce the periods for which compensation shall accrue under this chapter to such reasonable periods as may secure the solvency of such company. 112.12. (1) The employers' mutual emplbyment insurance company and comX)anies insuring the liability of employers exempted under section 112.10 shall make such reports as the compensation insurance board may require. The compensation insurance board shall prescribe the forms and shall make rules governing the filing and making of such reports. (2) The employers' mutual employment insurance company and companies insuring the liability of employers exempted under section 112.10 shall establish separate funds by groups of industries, as may be directed by the compensation insurance board, so that each of such groups of industries shall bear approximately the cost of its own unemployment. (3) The employers' mutual employment insurance company and companies insuring the liability of employers exempted under section 112.10 shall have authority, subject to the approval by the compensation insurance board, and in so far as it does not conflict with the authority hereinafter granted to the •employment insurance rating bureau— (a) To classify industries of this State that are subject to employment insurance into proper classes for employment insurance purposes; (b) To make inspections of risks and to apply thereto an experience rating system; (c) To establish charges and credits under such system; (d) To provide for refunds to employers on the basis of unemployment experience; (e) To investigate unemployment conditions and other material facts in connection with compensation risks and to promote regularity of employment and to prevent unemployment. (4) Every contract for the insurance of the compensation herein provided for or against the liability therefor, shall be made subject to the provisions of sections 112.01 to 112.20, and provisions thereof inconsistent with sections 112.01 to 112.20 shall be void. Such contract shall be construed to grant full coverage of all liability of the assured under and according to the provisions of sections 112.01 to 112.20, notwithstanding any agreement of the parties to the contrary unless the industrial commission has theretofore by written order specifically consented to the issuance of a contract of insurance on a part of such liability. (5) No company shall enter into any such agreement unless such company shall have been approved by the commissioner of insurance, as provided by law. 276 UNEMPLOYMENT IN THE UNITED STATES (6) For the purpose of sections 112.01 to 112.20, each employee shall constitute a separate risk within the meaning of section 201.17 of the statutes; provided that no company organized by employers under subsection (5) of section 201.04 shall be licensed or authorized to effect such insurance unless at least five employers shall join in the organization of such company and unless such company shall have in force or put in force simultaneously insurance on at least one thousand five hundred separate risks. 112.13. Every company transacting the business of insurance of loss due to unemployment in this State, including the employer's mutual employment insurance company, shall be a member of a bureau to be maintained for the following purposes: (1) Subject to the approval <of the compensation insurance board— (a) To classify industries of this State that are subject to employment insurance into proper classes for employment insurance purposes; (b) To m&'ke inspections of risks and to apply thereto an experience rating system; (c) To establish charges and credits under such a system; (d) To provide for refunds to employers on the basis of unemployment experience; (e) To investigate unemployment conditions and other material facts in connection with compensation risks and to promote regularity of employment and to prevent unemployment. (2) To assist the compensation insurance board and companies in making and approving rates and in carrying out the insurance features of this chapter. 112.14. The compensation insurance board shall fix a place and time within thirty days after the organization of the employers' mutual employment insurance company, for the purpose of organizing the bureau and shall give notice of such meeting at least ten days in advance to all insurance companies authorized to transact employment insurance in this State. Each such company shall be entitled at such first meeting to one vote. The bureau shall make by-laws for its government and for the government of its members. Such articles and by-laws and all amendments thereto shall be filed with and approved by the compensation insurance board and shall not be effective until so filed and approved. Such bureau shall admit to membership any company authorized to transact employment insurance in this State. The charges and services of such bureau shall be equitable and nondiscriminatory as between member companies. 112.15. The provisions of sections 205.01 to 205.26, relating to the accident compensation insurance rating bureau and companies writing accident compensation insurance, shall apply to the employment insurance rating bureau and companies transacting employment insurance, in so far as they do not conflict with the provisions of this chapter. 112.16. (1) The minimum pure premiums which any company insuring loss due to unemployment shall charge, shall be subject to approval by the compensation insurance board and shall not be effective until approved by the board. It shall approve only of minimum pure premiums that are fair and adequate for the various industries to which they apply over a period of years and which do not discriminate unfairly between risks or industries. Such premiums shall be modified by such a system of experience rating as the compensation insurance board may approve, which shall not be effective or used until so approved. The application of such system shall not discriminate unfairly between risks or industries. The board shall also approve of maximum and minimum expense loadings to be incorporated in premiums collected on such business in1 this State. (2) The compensation insurance board, either upon its own motion or upon written complaint of any employer who is aggrieved by any rate, rule, or classification affecting him made by any company authorized to write employment insurance or by the rating bureau, shall have power to review the acts of such company or rating bureau and to make findings and orders requiring compliance with the provisions of this chapter. The proceedings shall be governed by the provisions of section 205.11 of the statutes and the findings and orders shall be subject to summary review by the circuit court of Dane County, as provided in said section. 112.17. (1) Ten cents of each one dollar of total premium received under the provisions of this chapter by any insurance company authorized to transact employment insurance, shall be paid to the treasury of the State of Wiscon UNEMPLOYMENT IN THE UNITED STATES 277 sin. The amount of such payments due to the State of Wisconsin shall be determined by the compensation insurance board and, upon certification by the compensation insurance board to the State treasurer, shall be payable as a debt to the State at such times and intervals as the compensation insurance board may direct. (2) An equivalent annual fee determined by the compensation insurance board, shall be paid by exempt employers who have not insured their liability under this chapter. The compensation insurance board, after a hearing, shall classify every such employer in the industry or group to which he would belong if he were insured in the employers' mutual employment insurance company and shall determine his fee at ten per cent of the estimated amount of the total premium at the manual rate exclusive of experience rating, which he would owe t6 the employers' mutual employment insurance company but for his exemptioji. This fee shall be payable in advance to the treasury of the State of Wisconsin in the month of January (or the first month of the employer's fiscal year, if the compensation insurance board shall so permit), except as provided in section 112.10. At the end of the calendar year or the employer's fiscal year, such employer shall furnish the board with a true statement of his actual payments to the State of Wisconsin during the said calendar or fiscal year and with information from which the compensation insurance board may determine the total premium, at the manual rate inclusive of experience rating, which he would owe but for his exemption. If the actual advance payment for the year is in excess of the amount due, the difference shall be refunded or deducted from the fee for the succeeding year. If the payment is less than the amount due, the difference shall be payable at the same time as the fee for the succeeding year. The orders of the board detering fees shall be subject to summary review by the circuit court of Dane County as provided in section 205.11. (3) Sums paid into the State treasury under the provisions of this section are hereby appropriated to the industrial commission and the compensation insurance board, under regulations to be prescribed by the State board of public affairs, for the use of the industrial commission and the compensation insurance board in meeting expenses incurred in administering this chapter and in operating free employment agencies. 112.18. The industrial commission shall appoint a board, to be known as the "employment advisory board," consisting of one member at large who shall act as chairman, and an equal number of members to represent respectively employers and employees, to be selected from lists submitted for that purpose by employers and employees. The board shall meet on call of the industrial commission, and shall assist the industrial commission without pay, except for expenses, in investigations, determinations, and general administration of this chapter. 112.19. It shall be the duty of the industrial commission, the commissioner of insurance, and the compensation insurance board, within their respective jurisdictions, and they shall have power, jurisdiction, and authority, to make all investigations, classifications, rules, regulations, and orders, to require all reports from employers and insurance companies reasonably necessary to enforce the provisions of this chapter. Such investigations, classifications, rules, regulations, and orders Und any action, proceeding, or suit to set aside, vacate, or amend any such order of the industrial commission, the commissioner of insurance, or the compensation insurance board, or to enjoin the enforcement thereof shall be made pursuant to the proceedings in sections 101.01 to 101.27, or pursuant to the proceedings in sections 200.01 to 200.16, or pursuant to the proceedings in sections 205.01 to 205.11, as the case may be, which sections are hereby made a part hereof, so far as not inconsistent with the provisions of sections 112.01 to 112.20, and every order of said industrial commission, commissioner of insurance, or said compensation insurance board shall have the same force and effect as the orders issued pursuant to said sections 101.01 to 101.27, sections 200.01 to 200.16, and sections 205.01 to 205.11. 112.20. (1) If, for the purpose of obtaining any compensation either for himself or for any otht>r person, or for the purpose of avoiding any payment to be made by himself under this chapter, or enabling any other person to avoid such payment, any person knowingly makes a false statement or false representation, he shall be guilty of a misdemeanor, and upon conviction he shall be liable to imprisonment for a term not exceeding there months, with or without hard labor, or shall be fined an amount not exceeding five hundred dollars, or both. 278 UNEMPLOYMENT IN THE UNITED STATES (2) Any person who buys, sells, or offers for sale, takes or gives in exchange or pawns or takes in pawn, any document, paper, or card provided under the regulations of the industrial commission for recording the facts upon which the claims of employees to compensation may be determined, shall be fined an amount not exceeding fifty dollars. (3) If any employer refuses or neglects to comply with any of the requirements of this chapter or the regulations, rules, and orders made thereunder, or if any employer solicits, receives, or collects any money, or deducts or attempts to deduct from the wages or other renumeration of the employee, either directly or indirectly, for the purpose of discharging any part of the employer's liability under the provisions of this chapter, he shall forfeit ten dollars for such offense. Each day's violation of continuing offense shall be a separate offense. (4) If any company, rating bureau, or any agent or other representative of any company or rating bureau fails to comply with or is guilty of any violations of any of the provisions of this chapter, or of any order or ruling of the commissioner of insurance or of the compensation insurance board made in accordance with this chapter and with sections 205.01 to 205.06, and 205.11 of the statutes, such failure to comply or such violation shall be punished by a fine of not less than fifty nor more than five hundred dollars. In addition thereto, the license of any company, other than the employers' mutual employment insurance company, or of any agent or other representative of any company or rating bureau guilty of such violation may be revoked or suspended by the commissioner of insurance. SEC. 2. Subsection (5) of section 201.04, section 205.01, and subsection (9a) of section 101.10 of the statutes are amended to read: "(201.04) (5) Liability insurance.—Against loss or damage by the sickness, bodily injury, or death by accident of any person, against loss or damage to the property of any person by accident, and against loss due to unemployment, for which loss or damage the insured is liable." 205.01. The word " company" whenever used in this chapter means any insurance carrier authorized, by license issued by the department insurance, to transact the business of workmen's compensation insurance or insurance against loss due to unemployment in this State. The phrase, "merit or schedule rating" shall, for the pupose of employment insurance, include experience rating. Reference in this chapter to companies writing workmen's compensation insurance shall apply to companies writing insurance against loss due to unemployment. 101.10. (9a) Any county, city, town, or village may enter into an agreement with the Wisconsin industrial commission for such period of time as may be deemed desirable for the purpose of establishing and maintaining local free employment offices, and it shall be lawful for any county, city, town, or village to appropriate and expend the necessary money to permit the use of public property for the joint establishment and maintenance of such offices as may be agreed upon. The industrial commission may establish such free employment offices as it deems necessary to carry out the purposes of sections 112.01 to 111.20 and all expenses connected with the conduct of such offices shall be charged to the appropriation to the industrial commission in subsection (3) of section 112.17. SEC. 3. The provisions of sections 112.09, 112.11, 112.12, and subsections (1), (2), and (3) of section 112.10 shall be inseparable from one another, but separable from all other provisions of this act. If the above enumerated provisions shall for any reason fail, all other provisions relating to exempt employers shall apply to all employers. SEC. 4. This act shall take effect upon passage and publication. UNEMPLOYMENT COMPENSATION PLANS IN THE UNITED STATES [Telegram] NEW YORK, N. Y., February 7, 1929. J O H N It. COMMONS, Powhatan Hotel: Re letter sixth concerning preliminary reports of February, March, and April, 1928 issue, we consent that you submit them at Senate committee hearing conditional that corrections may later be made. These reports were distributed as UNEMPLOYMENT IN THE UNITED STATES 279 preliminary drafts to be checked for accuracy by contributors and authorities, and will be published in book form later this year by us in comprehensive worldwide study of various form of unemployment compensation. Miss Mary B. Gilson and Dr. Bryce M. Stewart are the authors. Corrections thus far indicated are of relatively minor character, but if any parts are published as Government documents, they should be subject to such corrections. If they are regarded as valuable by Senate committee, you may submit them subject to limitations above, but permission to use them for any other purpose can not now be authorized. You may quote this telegram. INDUSTRIAL RELATIONS COUNSELORS ( I N C . ) , By A. H. YOUNG. VOLUME I . C O M P A N Y P L A N S — P R E L I M I N A R Y REPORT [Copyright 1928 : Industrial Relations Counselors (Inc.), 165 Broadway, New York,, N. Y.] FOREWORD Every industrial depression of the last quarter century has given rise to a somewhat short-lived interest in unemployment and a brief advocacy of such relief measures as employment exchanges, the systematic release of public works contracts, unemployment insurance, and various devices for the control of the business cycle. The depression of 1920-1921 was noteworthy in that it marked not only the first determined effort for the enactment of unemployment insurance legislation in this country, but also the establishment of most of the American plans of unemployment compensation by organized industries, trade-unions and individual employers. These experiments attracted interest at the time and a considerable literature describing their provisicfns and procedure has grown up, but because of their brief history little has been written as to actual experience. In the period since their inception, adoption of labor-saving machinery and improvements in management technique have proceeded at an unprecedented rate and it has been discovered that prosperity and increased productivity may also have their bread lines. The general trend and manufacturing employment has been downward since 1920 while production has increased, and though some or all of the workers released may have been absorbed in other lines (a matter on which we have little quantitative data) during the lag between the two processes may have involved much suffering. This " technological" unemployment has been reinforced by that involved in the slackening of a number of industries in the last six months or more and evidences are at hand of a renewed consideration of the subject of unemployment on the part of industrial leaders and social agencies. This situation would seem to lend a timely interest to the study of unemployment compensation of which this preliminary report on American experience is a part. The entire study will be issued later in more complete form as one of the research series of Industrial Relations Counselors (Inc.). Information concerning the operation of foreign laws will be included following visits to the countries which have such measures. It is hoped that the final report will be of practical use in the consideration of unemployment and of the efficacy of unemployment insurance as one approach toward the solution of this problem. An effort has been made to include all plans in the United States which are primarily for the relief of unemployment. There are thus omitted plans aimed solely at the stabilization of employment and those in which payments are merely discharge bonuses. For the same reason the loan fund of the General Electric Co. and the pension savings fund of the Joseph & Feiss Co. are not covered, although both of them may be drawn on to tide over the emergency of unemployment. Neither has payment of full week's wages to casual workers who may only work a few days in the week—as, for example, is the case with some of the Chicago packers—been considered within the scope of this report, Abandoned and proposed plans have been discussed along with the active ones. Neither employers nor labor leaders have yet awakened to the value of consistent record keeping as a guide for policy and employment, and unemployment statistics in the United States are conspicuously lacking. In few 280 UNEMPLOYMENT IN THE UNITED STATES companies is there a comparable basis for measuring adequately the results of unemployment compensation. The information assembled is therefore presented without any attempt at evaluation. In the final report common factors running through all of the plans will be examined and some indication given as to their accomplishment. Practically all of the data presented in this report have been assembled through investigation at the headquarters of the companies and industries involved and supplemented by correspondence with persons directly responsible for the administration of the plans. In addition, advice and suggestions have been obtained from competent authorities. A careful examination of all available reports previously published has been made and numerous misstatements have been discovered, many of them due to reliance upon earlier reports rather than upon original sources. Each of the descriptions has been examined by persons in the companies or industries involved and indorsed as accurate; it is hoped that any errors which may have crept in will be corrected and subsequent experience added when the final study is published. Comments and suggestions are solicited from all who read this preliminary report. The descriptions of the plans have been grouped as follows: (1) Compajay plans; (2) Joint agreements; (3) Trade-union out-of-work benefits. The co*mpany plans have been arranged chronologically. The joint agreements have been arranged chronologically by industry. In the final report which will be brought up to date so as to include data on all phases through 1928, there will be included (a) additional data concerning trade-union out-of-work benefits, through the courtesy of the research department of the American Federation of Labor, which is now undertaking to assemble information covering such plans; (b) a description of the plan of the Brown & Bailey Co., of Philadelphia, which has been so recently adopted that there has been practically no experience to report; and (c) a description and abstract of proposed laws covering unemployment compensation or insurance in the six States that have considered such legislation. (Item G is presented in this report.) COLUMBIA CONSERVE Co., INDIANAPOLIS, IND. BACKGROUND The Columbia Conserve Co., of Indianapolis, is engaged in canning soups, chili con carne, chicken a la king, chop suey, and bean sprouts. One of the members of the family owning the plant is the active manager. This company is noted for its excellent working conditions and for its unique system of profit sharing, for its complete control by those directly engaged in production and its provision for ultimate ownership by them, as well as for its almost complete substitution of salaries for wages. The last-named feature is so basic to the unemployment compensation that it will be described later in some detail. In 1927 the average number of salaried employees was 81, constituting 84.4 per cent of the total number of employees. In January, 1928, there were 102 salaried workers, or 89.9 per cent of the total number* of employees. The number of workers has varied in the last two years from 93 in June, 1927, to 294 in September, 1926. Total man-hours show wide variations also. Previous to the adoption of the profit-sharing plan the normal hours were 55 a week. A 50-hour week was put into effect in 1918, and although the hours are now only 45 a week, longer hours are worked during peak loads when the council so decides. Salaried workers work longer hours when the occasion demands, without extra pay, while wage workers are paid for overtime work. During the early years of the^plan there was great seasonal variation in hours, a 70 or 80 hour week being worked at the peak of the season. The length of hours has been reduced by better management, and in 1924, a year of unusually great, output, 60 hours a week was the maximum number of hours worked. An unusual feature in this plant is that office workers work the same hours as the workers in the factory. Vacations are three to four weeks in length, with full pay for salaried workers. The plant is closed on the following holidays: New Year's, Fourth of July, Thanksgiving, and Christmas. Many mechanical devices and improved methods have been introduced which have reduced the required number of workers and the cost of operation. Workers have shown themselves eager and inventive in devising methods even though they result in reduction of force. UNEMPLOYMENT IN THE UNITED STATES 281 There is a works council consisting of both salaried employees and wageworkers. Both classes of workers are eligible and have equal votes. The one exception, exercised but once, is the right of employees who have been employed more than a year to call for a revote, in which the workers of shorter length of service do not participate. This company has introduced a form of family wage payment. The minimum weekly wake for a married man or woman whose wife or husband is not a wage earner also and who has children dependent upon him or her is $28.50. The minimum weekly wage for a single worker is $19. One dollar a week is paid for each child under 16 up to a total income of $32.50. Stabilization measures have consisted in introducing new products which can be prepared during dull seasons, such as pork and beans and chili con carne. In April, 1917, the president and part owner of the company, William P. Hapgood, proposed a plan of conducting business which has been in operation ever since. This plan included the phases of industrial relations already mentioned. In June, 1918, the original plan which applied to wage earners as well as salaried employees was altered so that only the ,latter were eligible to profit sharing and consequently to the employment guarantee. Except for this one modification of the plan there have been no changes since its installment. PROVISIONS OF T H E P L A N A yearly guaranty of full salary for 52 weeks, including vacations, is given to every office and factory employee who is elected by his fellow workers to the salaried group. People who are not placed on this salary basis of pay, but remain wage earners, are guaranteed 50 hours' employment a week at a fixed hourly rate during the period they are employed. These workers belong, as a usual thing, to two classes: Those who are hired during the peak of a season and are not employed much more than four consecutive months, and those who have not as yet proven themselves satisfactory to the rest of the organization, regardless of their length of service. The plan provides that in case it becomes necessary to discharge a salaried worker because he is not satisfactory, he is paid a discharge bonus of two weeks' pay. Workers are transferred according to departmental needs, their salaries not being affected by such transfers. If, because of stoppages or some other emergency beyond the control of the workers, the plant can not furnish a ful.1 day's work to a wage earner, he is nevertheless paid a full day's wage. The plan now provides for automatically considering for membership in* the salaried class every wage worker whose length of service amounts to six months, but an obviously desirable worker may be admitted to that class much sooner. Additional members are thus added to the salaried group except at rare intervals when business does not warrant an increase in the permanent force. It is increasingly desired by the present salaried group to retain in the employ of the company only potential salaried workers and to weed out employees who do not show themselves worthy of being included in this class. ADMINISTRATION Promotions and demotions from one class of workers to another are determined by the works council. The council also handles all matters relating to discharge, it being impossible to discharge a salaried employee without a vote to the council. A wageworker may be discharged by his foreman, but he may appeal to the council for a -hearing of his case. In slack times wageworkers are laid off, but salaried employees are invariably retained on the pay roll. Salaried workers are paid weekly, by check, for 52 weeks a year. SUMMARY OF EXPERIENCE Inasmuch as all costs attendant upon the unemployment guaranty are charged to current operating expenses and are not separated from the general expense accounts, it is impossible to furnish any data showing the cost of guaranteeing employment. Although when the employment guaranty first went into effect some of the less responsible workers took advantage of it by .remaining away from wrork without sufficient reason, this abuse was soon checked by the censure of their fellow workers. 282 UNEMPLOYMENT IN THE UNITED STATES As has been said, in dull periods wageworkers are the first to be laid oft. In 1921, when business depression was very acute, only three salaried workers were laid off, and since that time no salaried worker has been released because of slack work. With the exception of 1921, it has always been possible to keep salaried employees busy on cleaning or repairing when they have no work on their regular jobs. While it is not possible to submit data covering the entire life of the employLnent-guaranty plan, the available figures for 1926 and 1927 show fluctuations in numbers of workers, in man-hours worked, and in pay roll. The maximum number of employees during these two years was 294 in September, 1926, and the minimum number was 93 in June, 1927, a difference of over 200. An example of the variation in man-hours is shown by the fact that 94 workers worked 16,219 hours in May, 1927, while 93 workers worked only 10,341 hours the following month, owing to a partial shut-down. The number of salaried workers in June, 1927, was 90 and the following month, 102, and the total number of workers rose suddenly from 93 to 123 during those two months. One of the most striking fluctuations in the number of employees was from 160 in August, 1926, to 294 in September, 1926, while the hours of work more than doubled during that period. (See Table 1.) The sudden ripening of tomatoes or some similar emergency in relation to perishable food products often accounts for marked fluctuations. As has been stated, stabilization measures have consisted in introducing new products. In 1908 only 7 per cent of the total output was handled during the first six months of the year, but with the new lines added, the following results were obtained: 1923, 23 per cent of total output produced first six months. 1924, 20 per cent of total output produced first six months. 1925, 22 per cent of total output produced first six months. 1926, 24 per cent of total output produced first six months. 1927, 29 per cent of total output produced first six months. In January, 1928, Mr. Hapgood said: " I believe that regularity of employment is absolutely necessary in order to secure stability of attendance, intelligent cooperation in the management of the business, and devotion to its welfare. It is the first step to the making of a fine morale both as workers and citizens." One of the workers who has been with the company since 1918 and is known among his fellow employees for his frankness expressed the following opinion of unemployment compensation: ".Our employment guaranty has been to me and many of my fellow workers a medium through which we could look into the future. " We, as workers, with the fear of unemployment removed, have made many steps forward. Our brain, which in the past was blurred by worries caused by the uncertainty of employment, is now becoming active. Those mechanically inclined have developed new machines and ideas to increase production and save human energy. Social problems have become interesting because of our ability to think clearer. This has brought us to the point where we are cooperative, working as a group rather than as individuals." TABLE 1.—Number of worJcers and amount of pay roll, Columbia Conserve Co. PERSONNEL Salaried e m Wage w o r k e r s at e n d a t e n d of m o n t h ployees of m o n t h Month 1926 Janauary February March April _ May_ June July August September . October N o v e m b e r . _„ December » _ - 12 26 25 22 21 3 3 63 197 60 7 7 1927 7 13 5 5 4 3 21 21 24 26 1926 94 94 94 93 94 99 98 97 97 97 98 98 1927 97 96 100 98 90 90 102 102 97 100 Total employees at e n d of m o n t h 1926 106 120 119 115 115 102 301 160 294 157 105 105 1927 104 109 105* 103 94 93 123 123 121 126 Total m a n hours during m o n t h 1926 14,522 18,879 18,755 23,451 19,321 8,512 17, 638 22,062 46,643 43, 526 24, 530 20,891 1927 17,307 18, 634 21,910' 16,636 16,219 10,341 18,185 20,789 31,472" 24,380^ 283 UNEMPLOYMENT I N T H E UNITED STATES T A B L E 1.—Number of workers and amount of pay roll, Columbia Conserve Co.— Continued MONTHLY PAY ROLLS Wage workers Salaried employees Total Month 1926 January February. _ March April..May June ._ July i__ August September October___ November December _ „ _. _ $435.96 1,188. 51 1,386.55 1,593.62 1,218. 07 136. 60 235. 00 1, 680. 92 11,212. 07 4,317. 91 2,920. 81 534. 72 1927 $456. 70 797. 38 575. 60 317. 00 326. 74 200. 84 982.61 1,334.15 2, 239.13 1, 904.22 1926 $8,919.55 9, 022. 30 9,029. 00 11,639.45 12,508. 50 7,062. 50 11,943.10 9, 567.45 12,239.97 9, 996. 30 9, 677. 00 12,137. 52 1927 $9, 638.80 9,629. 46 12,050. 60 9, 783. 50 10,291. 93 10, 745.80 9,325.18 9, 530.30 11,669. 05 9,146. 75 1926 $9,354.51 10,210.81 10,415, 55 13,233. 07 12, 726. 57 7,199.10 12,178.10 11,248.37 23,452.04 14,314. 21 12, 597.81 12, 672.24 D U T C H E S S BLEAOHERY ( I N C . ) , WAPPINGERS F A L L S , N. 1927 $10,095. 50 10,426.84 12,636.20 10,100. 50 10,618.67 10,946. 64 10,307. 79 10,864.45 13,908.18 11,050.97 Y. BACKGROUND Because the Dutchess Bleachery ( I n c . ) , of Wappingers Falls, N. Y., installed a unique p a r t n e r s h i p and profit-sharing plan of which its unemployment compensation is a part, this organization h a s been the object of much attention a n d interest. On August 8, 1918, H a r o l d A. Hatch, vice president of Deering Milliken & Co. ( I n c . ) , described t h e p a r t n e r s h i p plan to the operatives of t h e Dutchess Bleachery ( I n c . ) . T h e unemployment fund w a s established in December, 1919, a n d benefits were first paid in February, 1920. Mr. H a t c h states it was the result of " a desire to protect t h e regular employees as far as financially possible against t h e fear of unemployment." Through mass meetings and the publication of a news sheet t h e employees were informed, from time to time, of the provisions of t h e plan. T h e controlling company, Deering, Milliken & Co. ( I n c . ) , some time after t h e p a r t n e r s h i p plan w a s inaugurated by them a t the Rockland Finishing Co., a p r i n t and dye works a t Garnerville, N. Y., and a t the Dutchess Bleachery ( I n c . ) , installed unemployment funds a t both of these plants. The fund is now in operation in the l a t t e r plant only. The Dutchess Bleachery ( I n c . ) , is a bleachery a n d dye works. Inasmuch a s it sells service a n d not merchandise, it is largely dependent upon the conditions of t h e textile industry for continuity of work, stabilization being therefore largely controlled by conditions in another industry. I n May, 1927, there w e r e 547 employees. The employment superintendent estimated t h a t in 1926 about 85 per cent of the employees, exclusive of office workers, were eligible for unemployment compensation, and of those eligible t h e r e were 288 actual beneficiaries. Only one group of employees, the folders, a r e members of a t r a d e union. Owing to the n a t u r e of the work but few skilled workers are required. The normal w T orking week is 48 hours. Records show t h a t some men have worked 100 hours a week in emergencies, but no adequate records of regular h o u r s worked a n d overtime a r e available. Vacations with p a y h a v e been abandoned, a t least for the present. The p l a n t is closed on the usual six holidays. The fact t h a t the company w a s making unusually large profits a t the time of t h e establishment of the plan probably h a d something to do with the generous provisions embodied in it. I n 1920 the Dutchess Bleachery (Inc.) w a s very conservatively capitalized a t $1,350,000, entirely represented by 27,000 shares of stock. Because of subsequent depression in the textile t r a d e s a n d the consequent drain on t h e unemployment fund, only $18,936 remained in t h e fund on October 31, 1927. 284 UNEMPLOYMENT IN THE UNITED STATES PROVISIONS OF T H E P L A N 1. Source of fund.—The unemployment fund is, as has been noted, part of at general plan for the distribution of funds between dividends and wages. A. dividend of 6 per cent is first paid from net profits to invested capital, after which a sinking fund, sufficient to provide 6 per cent on the invested capital, is set aside as a reserve fund for the payment of dividends in years when they are not earned. (In 1921, the amount required to pay 6 per cent on invested capital was approximately $85,000.) After thes^ amounts are set aside, a further fund not to exceed the same amount is set aside to establish a sinking fund to reimburse workers when the company can not furnish employment. As stated in the handbook, issued by the plant: "At the end of each year the board of directors of the Dutchess Bleachery (Inc.), shall set aside from the net profits of the company, if any, a sufficient sum to raise the sinking fund for capital's minimum wage to an amount equal to 6 per cent on the invested capital. If, and after, this has been accomplished, a further sum shall be set aside to raise the sinking fund to be drawn upon by labor in times of unemployment to $85,000." It was understood when the unemployment sinking fund was set aside that it was to bear a ratio to capital invested and was to be increased and decreased accordingly. If the fund exceeded the requisite amount at the end of the year, the excess was to be distributed as profits to officers and employees of the company. Originally the plan provided that the board of directors should first set aside 15 per cent of the net profits of the company for an employee sinking fund, before 6 per cent was set aside as a return to invested capital; the change was made in January* 1922. 2. Definition of unemployment.—A worker is considered to be unemployed in the sense of being eligible for unemployment benefits when the plant or any department of the plant is closed temporarily on account of business depression or other cause not within the control of the operatives. Holidays are not counted as unemployed time when employees work 48 hours a week, but they are so regarded in case the week is 35 hours or less. 3. Eligibility *for benefit.—Every employee on a piece-work or hourly basis of pay is covered by the unemployment fund plan. Twelve months of consecutive service with the company must precede drawing of benefits; prior to 1922 the time was two months. Temporary workers are sometimes hired with the understanding that their work is to be temporary and that they are not eligible for benefits. The limit of time a worker is considered temporary is 12 months; at the end of this period he is transferred to the permanent pay roll. If a worker secures employment elsewhere during periods, of unemployment at the Dutchess Bleachery he does not forfeit any part of his benefit. If he refuses to accept a job assigned to him in the plant in lieu of his own job, he forfeits not only his unemployment benefit but his job. 4. Scale and duration of benefit.—If an employee works less than 48 hours a week he is given half pay for any unemployed time within that limit. If, however, the fund, drops below $50,000 he is allowed a benefit for the lost time based on a 35-hour instead of a 48-hour week, but in no case shall a person eligible to benefit receive less than 24 hours' pay per week unless the fund becomes wholly exhausted. (The change to the 35-hour basis was madein 1922.) No provision is made for suspending the payment of benefits unless the fund is exhausted. It is stated in the " Rules and Regulations " concerning the sinking funds that the amount of $50,000 is understood to bear a ratio to the pay roll and it is therefore possible to increase the amount in case of ai> appreciable increase in the pay roll. In computing hours worked per week for purposes of paying unemployment compensation, overtime is not counted. All half-time pay is based on an average weekly wage for hour workers and on an average of the past month's wages for pieceworkers. Length of service after 12 months and number of dependents do not affect the amount of benefit. 5. Transfers.—If a worker is transferred temporarily to a job paying a lower rate, he is paid the rate of the new job. The employment manager states, however, that " sometimes he prefers not to work at all unless he getshis old rate, so occasionally, in such cases, he is paid his old rate for a short time job." If, during the time the man is working on a job not his own, the* plant is closed down for lack of work, his unemployment benefit is invariably UNEMPLOYMENT IN THE UNITED STATES 285 based on his old job rate. If a department is discontinued, no benefit is paid to people laid off permanently. There is no formal method of training workers to do different jobs, the foreman in each department being held responsible for teaching workers. ADMINISTRATION The routine in relation to the fund is handled by the paymaster. Appeals in case of any dispute are taken to the board of management, consisting of 12 members, 6 of whom are elected by the board of directors and 6 by the board of operatives from among their number. Until January, 1927, beneficiaries were paid by cash in their regular pay envelopes. After that date payments were made by checks, which were placed in separate pay envelopes marked " Sinking fund." The board of operatives consists of one member from each department and is elected annually by secret ballot of all employees. Among the activities of the board are the handling of sick benefits, the saving plan, and recreational and educational activities and the initiating of any complaints concerning working conditions, wages, etc. The board of management deals with controversial questions and plant problems, including hours, wages, grievances, and conditions of employment and discharge, which are referred to them by the board of operatives. As a matter of actual practice, the personnel director usually handles such matters directly, but they may be taken to the board of management by employee representatives for discussion and action if so desired. The regulations state: "Any operative discharged for crime or continued neglect of duty shall forfeit the full amount of his or her share of the sinking fund. "Any operative leaving without due notice of one week, or satisfactory agreement with his or her foreman, shall forfeit the full amount of his or her share in the sinking fund." S U M M A R Y OF EXPERIENCE Records of the amounts contributed to the fund from time to time and the dates of contributions could not be obtained, but, as has been stated, the amount in the fund at the time of writing this report was $18,936.55. Both the capital and wages' funds bear interest at 6 per cent and the interest on the unemployment fund has always been used for health benefits until 1926, when these benefits had to be discontinued because of the diminishing of the fund. The health benefits paid out of the eunemployment fund were as follows: Amount 1920 $79.68 1921 2, 516. 70 1922 5, 392. 84 1923 2, 535. 61 1924 2, 276. 06 1925 1,118.00 In a book entitled " Sharing Management with the Workers " 2 the author says: "The employees' sinking fund is in reality an insurance fund against unemployment and disability arising from illness or nonoccupational accidents * * *. One-half of a worker's wages is also paid for the first week of unemployment due to occupational accident, the period not covered by the compensation laws of the State." The management is unable to furnish records of the amounts paid out from the fund in accident compensation in supplementing State awards. As has been stated, it was understood when the unemployment sinking fund was set aside that it was to bear a ratio to the pay roll and was to be increased and decreased accordingly. If the fund exceeded the requisite amount at the end of the year the excess was to be distributed as profit to oflicers and employees of the company. As* there has never been an excess since $85,000 s Ben M. Selekman, Sharing Management With the Workers. A Study of the Partnership Plan of the Dutchess Bleachery (Inc.), Wappingers Falls. New York, N. Y., Russell Sage Foundation, 1924. 286 UNEMPLOYMENT IN THE UNITED STATES was established as the maximum sinking fund, no distributions have been made. Records of the amount of overtime worked during the operation of the fund are not available, but for the last week of April, 1927, overtime amounted to 2,035 hours and for the week ending May 14 it amounted to 1,436 hours. Previous to the first of May, 1927, there was an average of 2,000' hours overtime per week. These figures do not include overtime worked by mechanics, power men, nor yard men. Records of average hours per employee worked during a typical week each month in 1925 and 1926 show no consistent seasonal fluctuations. (See Table 2.) TABLE 2.—Number of employees and hours iiyor'keiL, Dutchess Bleachery Average Total number of man-hours employees worked on payroll during a during a typical typical week week Month 1925 January February March April May June July August September October___ November December __ 637 624 605 560 548 532 523 535 484 488 479 467 Total average. _ 34,162 32,052 27, 602 23,751 23,986 22,682 23,607 22,960 22,429 20,456 20,366 22, 696 Average hours 45.6 Average Total number of man-hours employees worked on payroll during a Average hours during a typical typical week week Month 1926 53.6 January— 51.4 February 45.6 March 42.4 April 43.8 May 42.6 June 45.1 July 42.9 August 46.3 i September 41.9 j October 42.5 November 48.6 December (Inc.) _ 460 451 475 478 471 441 444 441 444 448 463 454 20,308 20,601 25,819 23,437 21,037 19, 697 21,222 18, 581 20,935 18,615 19,054 19, 278 Total average—_ 44.1 45.7 54.4 49.0 44.7 44.7 47.8 42.1 47.1 41.6 41.2 42.5 45.4 It is evident that the greatest amounts were paid out in benefits during the first four years after the fund was established. Because of the impossiblity of procuring annual figures of the number eligible or any labor turnover data or records of plant or department idle time, it is not possible to state just how far the fund was able to* meet the demands on it. Since June, 1922, when the fun fell below $50,000, benefits have been paid on the basis of 35 hours a week or less. On this basis every operative receives a minimum of half-time, but not less than 24 hours, when he works 13 hours or less. If he works over 13 hours he is paid for the time he works, plus half the difference between that and 35 hours. The employment superintendent stated that at times when it is necessary to lay people off for lack of work the company naturally lays off employees of shorter length of service, and consequently amounts of benefits paid out do not reflect' acute unemployment in case large numbers of employees ineligible to benefits because of their less than a year's service are laid ofit Records of the total number of employees on the pay roll during a typical week each month in 1925 and 1928 indicate that the greatest number of workers were employed during the first five months of each of those years. (See Table 2.) s In March, 1921, H. A. Hatch, vice president of Peering, Milliken & Co. (Inc.), stated: "No criticisms, either personal or secondhand, have so far reached me, although I have made repeated inquiries. On the other hand, the advantages of the funds have inspired many favorable comments by operatives. All one can say at present is that this fund has, to date, relieved all members of the partnership from the fear of joblessness. And another thing that can be said now is that we work with a far different and better will with each other than we did formerly, each for himself."8 In November, 1921, at the annual meeting of the Academy of Political Science, Mr. Hatch said: 8 American Labor Legislation Review, Vol. XI, No. 1, March, 1917, pp. 43-44. UNEMPLOYMENT IN THE UNITED STATES 287 " The testimony both from representatives of the operatives and from the managers of the plants is unanimously to the effect that the unemployment funds have so far adequately protected the operatives." 4 This was said in the face of severe unemployment, but it must also be remembered it was in the early history of the fund. In a letter from Mr. Hatch, dated July 11, 1927, the statement is made that " the weakness of the plan is that it depends for its fund upon the ability of the individual company to earn in excess of what is considered a fair wage on capital, i. e., 6 per cent. Manifestly, if there are no excess earnings over this amount, the fund becomes gradually exhausted." In the same letter Mr. Hatch said: "Although the withdrawals from the unemployment fund have not been large during the past four years, they have been beneficial. I think they have unquestionably reduced our labor turnover." RocMand Finishing Co., Gamerville, N. Y. (Fund exhausted) BACKGROUND The Rockland Finishing Co. is, like the Dutchess Bleachery (Inc.), one of the Deering, Milliken & Co. (Inc.), plants. It is a print and dye works, and is located at Garnerville, N. Y. In November, 1927, there were 650 employees, including factory and office workers. When the fund was established in 1920 there was an average annual total enrollment of 846 of whom 758 were eligible to unemployment compensation. The general scheme of management of the Rockland Finishing Co. is like that of the Dutchess Bleachery (Inc.), the board of operatives and the board of management having similar powers and the same profit-sharing plan being found in both plants. Printers, engravers, and folders are the only unionized crafts in this plant. The first contribution to the unemployment fund was $100,000 on January 1, 1920, and the first benefits were paid on April 21, 1920. On account of industrial depression and the unusua.1 demands on the fund it was exhausted on June 30, 1923. PKOVISIONS OF T H E PLAN The provisions of the plan were the same as at the Dutchess Bleachery (Inc.), except for the amount set as a maximum fund before profits could be distributed, which was $120,000. The following notice was posted in the plant on April 21, 1920: " Payment will be made this afternoon from the employees' fund to such employees who have not worked full time, through no fault of theirs, over the period from January 1 up to April 3. (Viz, half-time for all time lost under 35 hours per week, where a person has not worked at all, or where one-half the lost time added to the time worked does not equal 24 hours per week, the person will be paid suflicient to equal 24 hours in each week.) " The provision for payment from this sinking fund can best be illustrated from the following: " 1. If an employee works four days—35 hours—or works any part of four days and makes 35 hours nothing is due him from the sinking fund. " 2. If an employee works three days, as follows: Monday, 8% hours; Tuesday, 8% hours: Wednesday, 8% hours; total, 26% hours. Guaranteed one-half time for time less than 35 hours: 35 hours minus 26% hours is 8% hours. Eight and three-fourths times one-half equals 4% hours. Due from sinking, fund, 4% hours. Total hours, 26% plus 4% equals 30% hours. " 3. If an employee works two days as follows: Monday, 8% hours; Tuesday, 8% hours; total, 17% hours. Guaranteed one-half time for time less than 35 hours: 35 hours minus 17% hours is 17% hours. Seventeen and one-half times one-half equals 8% hours. Due from sinking fund, 8% hours. Total hours, 17% plus 8% equals 26% hours. "4. If an employee works one day: Monday, 8% hours; 35 hours minus 8% hours is 26% hours. Twenty-six and one-fourth times one-half equals 13% * Proceedings of the Academy of Political Science, New York, January, 1922, pp. 23-24. 29193—29 20 288 UNEMPLOYMENT IN THE UNITED STATES hours. Employee is guaranteed 24 hours, therefore must be paid 24 minus 8% equals 15% hours from sinking fund. Total hours, 8% plus 15*4 equals 24 hours. " 5. If an employee does not work at all he receives pay for 24 hours from the sinking fund." ADMINISTRATION The plan was administered in the same maimer as at the Dutchess Bleachery (Inc.). The board of management, however, consisted of 14 members at Rockland as contrasted with 12 members at the Dutchess Bleachery (Inc.). Benefits were paid in the regular weekly pay envelopes. S U M M A R Y OF E X P E R I E N C E It is unfortunate that the Rockland Finishing Co. can not furnish a picture of monthly fluctuations in employment, turnover, unemployment compensation, etc., covering the life of the unemployment fund, as this was one of the first companies to establish such a fund, and, even though it was exhausted in a little over three years, detailed experience relating to it would furnish valuable guidance. Beginning with the first contribution of $100,000, the fund was finally built up to the sum of $106,279.95, the dates of contributions being as follows: Jan. 1, 1920 $100, 000. 00 Dec. 10, 1920 2, 959. 06 Sept. 10, 1921 2,110. 86 Jan. 1, 1922 549. 63 Dec. 31, 1922 510. 77 Oct. 20, 1923 149.63 Total J 106, 279. 95 Operatives were paid half pay on the basis of a 35-hour week. The amount paid out in benefits during 1920 and 1921 was a severe drain on the fund, as is shown by the following figures: Year 857 767 695 714 947 857 785 804 1920 1921 1922 1923 1 1 Average N u m b e r of a n n u a l enbeneficir o l l m e n t of aries eligibles Average t o t a l enrollment Average ann u a l payroll 590 $1,113,488. 01 930,074.16 678 885,809. 32 640 547,844.63 503 Benefits Cost of Average benefits i n benefits relation t o e m p l o y epee r payroll $63,643.19 35, 565.81 5,979. 32 1,091.83 Per cent 5.72 3.82 .68 .20 $67. 21 41.50 7.62 1.36 First six months. The average cost of benefits in relation to pay roll, during the entire life of the plant was 2.6 per cent. The largest sums were paid out in benefits during October, November, and December of 1920, and in January of 1921. During these months $80,0Q0 was paid out in 13 weeks, every employee who was eligible being guaranteed a minimum of 24 hours' pay per week in spite of the fact that, because of depression in the cotton-textile industry, the plant was almost completely closed down. Amounts of benefits paid monthly during the existence of the fund were as follows: Month January February March April. May June July _-. August__ September _. _ _ _ _ __ _ _ November... December Total 1920 1921 1922 $480.40 763. 23 978.41 1,140.62 1, 576.09 1,847. 32 2,686.20 23,366.26 30,804. 66 $23,802.47 2,428. 09 1,935. 35 1, 708.47 2,027. 26 1,000.87 614. 04 488.43 357.61 82.41 476.88 643. 93 $483. 50 167.47 177. 57 262. 81 147. 35 731. 20 992.30 556. 31 2,189. 02 133.19 93.34 45.26 63,643.19 35, 565. 81 5,979. 32 1923 $331.74 760. 09 1,091. 83 UNEMPLOYMENT IN THE UNITED STATES 289 No data are available showing employment fluctuations and labor turnover. The firm reported in October, 1927, " Records of discharges, lay offs and voluntary qu.ts are only kept five years, and such records as would cover that period have already been destroyed." However, one of the executives states, "Although no records are now available we do know positively that at that time the labor turnover was exceptionally low due to the aid received from the unemployment insurance fund. It had a very marked effect upon keeping the turnover at its lowest. Because no information is available concerning exact periods when the basic week was 48 hours, and when it was 35 hours, it is impossible to estimate how much the reduction of amounts paid out in benefits is due to the reduction of hours paid for and how much is attributable to an increase in employment. In October, 1927, the executive secretary of the board of management stated, "We still feel that there might be something to this plan even though the depression lasted longer than we expected. Had the idea or ginated with the company several years previous to 1920, a much larger sinking fund would have been built up and probably would have carried us over the depression. As an industry we are making very marked progress, and we hope that the time will come when we can give the matter of unemployment insurance further consideration." DENNISON MANUFACTURING CO., FRAMINGHAM, MASS. BACKGROUND The Dennison Manufacturing Co. manufactures boxes, tags, and a great variety of paper novelties includ.ng crepe paper. It is considered one of the most progressive organizations in America, and, with the leadership of Henry Dennison, has shown courage and initiative in management methods and industrial relations policies. The main factory is in Framingham, Mass.; the other factories are in Marlboro, Mass., and London, England. This report will cover the Framingham and Marlboro plants which are regarded as a unit. The total number of employees in all plants, stores, and domestic offices was 4,133 in May, 1927, of which number 3,438 were employed in the Framingham and Marlboro plants. There are 3,336 employees covered by the unemployment compensation plan, of whom 2,982 are workers in the Framingham and Marlboro plants. It was only recently that all salaried workers, including those in the score of offices scattered throughout the country and executives in these offices, became eligible for unemployment benefits. Although in actual practice it has not been necessary to consider the question of unemployment in the selling division, these employees are classified as eligible. Total pay-roll hours have been reduced by a large number of minor installation of improved mechanical devices as well as by improved methods of planning, rout ng, and scheduling work which have done a great deal to cut down delay time and thus increase productive efficiency. The linotype, monotype, and the Ludlow machines have reduced the force of compositors from 30 to 15. Electric trucks and conveyors have decreased the amount of unskilled labor by a considerable percentage, while improvements in the craping machine and cutting machine have resulted in cutting down the labor force required by from 20 per cent to 40 per cent. Split operations and the introduction of belt assembly work have also contributed toward the reduction of the number of workers required. The Dennison Manufacturing Co. is an open shop;. the printing pressmen, the electrotypers, the compositors, and the guillotine cutters are organized. The working week is 48 hours, eight and three-quarter hours, five days a week and four and a half hours Saturday. The regular night crew consisting of about 50 men works a 53-hour schedule, 12 hours on Monday, Tuesday, Wednesday, and Thursday, and five hours on Friday. The night employees themselves requested this division of hours, preferring tlie longer week-end of leisure to the shorter working night. There are nine holidays: New Year's Day, Washington's Birthday, Patriot's Day, Memorial Day, Fourth of July, Labor Day, Columbus Day, Thanksgiving, and Christmas. Holidays are not counted as unemployed time. One week's vacation with pay is granted to all hourly employees with over 10 years' service, and two weeks with pay are given to all hourly employees of 15 years' service. When an employee has been with the firm 25 290 UNEMPLOYMENT IN THE UNITED STATES years he receives pay for holidays and an employee of 30 years' service receives pay up to two full weeks when out on account of illness. Employees on a salary basis receive two weeks' vacation with pay and are also paid for holidays and for sick time not to exceed two full weeks. Vacations are staggered from July 1 to Labor Day and everywhere except the box division departments are kept running with about three-quarters of the crew. Any employee is permitted to take a two weeks' vacation at any time of the year provided it does not interfere with production requirements, but as a matter of fact nearly everyone takes vacations during the summer. For some years preceding the adoption of the unemployment plan, Henry Dennison, the president of the Dennison Manufacturing Co., had bent every effort toward interesting both his production and sales executives in stabilizing employment/ Because of the nature of the product and the traditions surrounding the production and distribution of many of the articles during the holiday seasons, it was a long and arduous process to achieve anything approaching steady employment. The stabilization methods have included planning ahead, budgeting sales, and personnel; educating customers through intelligent salesmen; manufacturing staples for stock; arranging for workers' vacations without pay when they are requested and when the conditions of business permit; weeding out inefficient workers in order that the production of those remaining may be steady and dependable; and other equally important measures. Because of the great diversity of products and the success which has met these efforts toward regularization, seasonal fluctuations are practically, nonexistent at present. By 1916 the peaks of unemployment had been fairly well ironed out, but the directors, foreseeing the possibility of future uncontrollable depressions, and recognizing the impossibility, even with the most careful planning, of completely eliminating the hazards of irregular work, set aside the sum of $20,000 toward an unemployment fund. 1917, $35,000 was added; in 1918, $35,000; and in 1919, $50 000, making a total of $140,000, which with interest accruals amounted to $147,237.18 at the end of 1919. In 1919 employee representation took form in the organization of a general works committee, and the president of the Dennison Manufacturing Co. referred to it the matter of considering the problems attendant upon unemployment and the spending of the unemployment fund for purposes of relief. The general works committee and the management appointed a conference committee to draw up provisions governing the use of the fund, and on November 15, 1919, this subcommittee presented its recommendations. The plan was put into effect in March, 1920. The Dennison unemployment fund is closely interrelated with other activities of the organization, in particular with profit sharing and employee representation. The large group of profit sharers, which includes workers and executives of five years or more length of service, insures a widespread desire to conserve the fund, and a healthy works council insures relative fairness in the distribution of benefits and in settling the issues relating to lay offs, transfers, and discharges. In connection with this plan two things are especially stressed; first, that prevention of unemployment is more important than its relief, and second, that the plan has connected with it no guarantee of permanency. Because of this emphasis on prevention, methods of stabilization have been given an unusual amount of intelligent direction. The term " insurance " is consistently avoided to-day just as it was when the plan was instituted so that there may be no reason for thinking of it as permanent. In the articles governing the control and use of the unemployment fund it was stated that inasmuch as the company could not entirely foresee the rise and fall in the demand for its product and could not therefore guarantee continuous employment to any fixed number of people at all times, it had done what seemed to it the next best thing, which was " to set aside * * * certain definite sums of money * * * for the partial relief of the distress due to unemployment." It was clearly stated that, while employees could have "no unlimited guaranty against the evils of unemployment," they could at least have " definite and positive assurance concerning the sum of money which stands between them and those evils." The purpose in establishing the fund was thus clearly stated. The company's attitude toward the unemployment fund has been outlined in the following published statement: " I n the first place, it is not charity; it has a business basis and must rest upon considerations of mutual advantage, with mutual self-respect. UNEMPLOYMENT IN THE UNITED STATES 291 This business basis it must find in securing and retaining better employees, in better work on the part of employees, due to their release from the risk of periodic total loss of income through unemployment, and in a steadier working force due to the abrogation of the risk that the employee will find permanent work elsewhere during times when he is unemployed." In examining the minutes of the general works committee it is evident that the workers were taken into the full confidence of the firm and that the committee felt their responsibility for working out safe and fair provisions. Both consulted literature on the subject, including a study of the British unemployment act. Because of lack of precedent, they felt their way step by step, and the minutes bear evidence to the amount of thinking and discussion that went into the shaping of provisions and their modification from time to time. The necessity of conserving the fund and of making benefits conform to its size, the purpose of the fund to relieve only when every effort to prevent unemployment had been exhausted, motivate the various measures adopted from time to time in relation to the use of the fund. Alterations in the plan since its inception are discussed elsewhere in this report. PROVISIONS OF THE PLAN 1. Safeguards of fund.—The articles governing the control and use of the unemployment fund, as revised April 1, 1922, and now in effect, state: " The articles relating to rates of compensations shall automatically become amended whenever the amount in the fund falls below $50,000 or whenever the total disbursements from the fund during 12 consecutive months shall exceed $50,000." The following safeguarding machinery is outlined in the above-mentioned articles: " Whenever the accounting department shall report to the unemployment fund committee that the total amount of money in the fund is less than $50,000 or that the total disbursements during 12 consecutive months have exceeded $50,000, then no further disbursements shall be made from the fund according to the rules and rates provided in these articles unless and until one of two things happens: The management and the works committee may reach some new agreement or else the lapse of t^me or additions to the fund may remove the $50,000 restriction. Until either of these two things happens the fund shall be disbursed according to the rates and rules which were in effect during January, 1921." It is further stipulated in the articles of 1922 that " the unemployment fund committee shall keep in touch with the condition of the fund and allow the management and works committee sufficient time to consider its new recommendations before the $50,000 point is reached. In this way whatever amendments are deemed necessary to conserve the fund may be made without any lapse in the provisions of tbese articles." Although originally the unemployment fund was set aside as a special fund and handled by appointed trustees, later it was made part of the general reserve, exactly in the same category as reserves for depreciation and other purposes. Because of this change the profit sharers, who are naturally concerned with the reserves, became deeply concerned in 1927 on account of the increased expenditures for unemployment despite increased business. They therefore directed attention particularly to the costs involved in transferring workers, and as a result various recommendations have been made with the purpose of reducing these costs. The profit sharers naturally see in the reduction of the general reserve fund an ultimate reduction of profits in case it may be decided to renew the fund at some later date. The amount available for unemployment payments at the beginn.ng of 1927 was $123,495.06, which was in the eyes of those concerned a sufficient signal for actio