The Problem of Abuse in Unemployment Benefits: A Study in Limits 9780231896535

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THE PROBLEM OF ABUSE IN UNEMPLOYMENT BENEFITS

JOSEPH M. BECKER

THE PROBLEM OF

ABUSE IN UNEMPLOYMENT BENEFITS A Study in Limits

NEW YORK COLUMBIA UNIVERSITY PRESS 1953

COPYRIGHT

1 9 5 3 COLUMBIA UNIVERSITY

PRESS, NEW

YORK

PUBLISHED IN CREAT BRITAIN, CANADA, INDIA, AND PAKISTAN B Y CEOFFREY

CUMBERLECE!

OXFORD UNIVERSITY

PRESS

LONDON, TORONTO, B O M B A Y , AND KARACHI MANUFACTURED IN T H E UNITED STATES OF

AMERICA

PREFACE B E C K E R has written a significant and much-needed book. O u r system of unemployment benefits is as yet in the experimental stage. It appears that the community will willingly and even generously provide such benefits if it has reasonable assurance that these funds go to those for whom they are intended. It will not, however, tolerate misdirection or misapplication of the benefit funds. T h e greatest threat to expansion of unemployment benefits, and even to the system itself, is the widespread apprehension that there has been considerable abuse of unemployment benefits through improper claims. But both those who attack and those who defend the administration of unemployment compensation have had to base their position largely upon conjecture. T h i s matter of abuse needed to be brought from the area of conjecture to that of established fact. It was necessary to determine the extent of the existing abuse. T h i s Doctor Becker has attempted to do. T h e author's claims for his study are extremely modest. T h e r e is no attempt to measure the extent of abuse with mathematical exactness. T h e author defines the problem, reviews the available data, and states the conclusions which these data permit. Many of these conclusions do no more than indicate in a general way the upper and lower limits of the actual amount of abuse. As the author says: " T h i s is not only a study in limits, but also a limited study." Nevertheless, it is an important study. T h e lower limit which it suggests is somewhat higher than friends of the system have been willing to concede. T h e upper limit is definitely lower than opponents of the system and its administration have thought to exist. T h e study is objective, factual, and impartial. It is a piece of work that needed to be done, and the Institute of Social Order is happy to offer it to the public. DOCTOR

LEO C . BROWN,

St. Louis, Missouri August 8, 1952

Institute

of Social

Director

Order

ACKNOWLEDGMENTS 1 WISH TO EXPRESS my appreciation to the Social Science Research Council for the grant of a field fellowship which enabled me to work in the local offices of many States and in the Bureau of Employment Security in Washington. I am deeply indebted to the Federal and State administrators and to their staffs, whom I was thus enabled to meet. The technical assistance they provided was invaluable to the investigation. But more than that. Familiarity with them in their capacity as administrators increased my esteem for the program of which they were a part. Professor C. A. Kulp, of the University of Pennsylvania, followed the investigation closely. His interest was unflagging, his criticism minute, his advice more valuable than this acknowledgment can properly indicate. Professor Eveline M. Burns, of the New York School of Social Work, Columbia University, and Professor Leo Wolman, also of Columbia University, gave the preliminary manuscript close reading and criticism. The final version bears the marks of that. It is literally true that without the Institute of Social Order and its supporters among industry and labor this study would not have been written. The Institute fed me while I wrote. JOSEPH M .

St. Louis, September,

Missouri 1952

BECKER

LIST OF CHAPTERS AND APPENDICES Introduction

xv P A R T I.

I. II.

3 38

G E N E R A L INVESTIGATION OF A B U S E

64 106 131 154

S P E C I F I C INVESTIGATION OF A B U S E

Working Violators Nonworking Violators Additional Data on Nonworking Violators Retardation of the Reconversion PART I V .

XI. XII.

ABUSE

Administrative Handicaps Survey of Labor-Force Developments General Claims Survey Conclusions of Part II PART III.

VII. VIII. IX. X.

ISSUE OF

Planning Period: Debate over Potential Abuse Reconversion Period: Charges of Abuse PART II.

III. IV. V. VI.

THE

169 205 240 268

CONCLUSIONS

Amount of Abuse and Provisions of the Law Information on Abuse and Administration of the Law

303 317

APPENDICES

I. II. III. IV. V. Tables Index

Provisions of the State Laws after the 1945 Amendment New York Particular Audit A Severe Disqualification Policy The Veterans' Readjustment Assistance Act of 1952 Growth of Interest in the Problem of Abuse

339 342 344 347 348 351 399

CONTENTS OF CHAPTERS PART I:

THE

ISSUE O F

ABUSE

I.

Planning Period: Debate over Potential Abuse Readjustment Allowance Program T h e Opponents, 3. The Proponents, 5. Legislative History, 8. Unemployment Compensation, 1944 The Proponents, 12. The Opponents, 18. Legislative History, 27. Unemployment Compensation, 1945 T h e Proponents, 30. The Opponents, 33. Legislative History, 35Conclusions II. Reconversion Period: Charges of Abuse Survey of the Charges Analysis of the Charges Classification of the Charges, 45: Class I, employed, 46; Class II, not in the labor force, 46; Class III, "voluntarily" unemployed, 49Norms of the Charges, 51: the norm of the law, 52; the norm of undesirable effects, 53. Method of Investigation of the Charges PART II:

G E N E R A L INVESTIGATION OF

3 3 12

28

36 38 39 44

61

ABUSE

III. Administrative Handicaps 64 Administrative Preparation before V J Day 64 Performance after V J Day 67 Structural Weaknesses, 67: acquiring and training personnel, 67; UC-ES relationships, 70; UC-RA relationships, 72; summary, 73. The Administrative Machine in Operation 74 Registration, 74. Referral, 78. Claims-Taking, 92. ClaimsExamining, 94. Claims Review, 99. The 1948 Fraud Questionnaire, 103.

CONTENTS OF

xi

CHAPTERS

IV. Survey of Labor-Force Developments T h e "Extras" in the Labor Force T h e Changes in Employment T h e Armed Forces, 108. Industrial Changes, 109. Occupational Changes, 113. Geographical Changes, 116. Changes in the Female Labor Force Changes in Earnings Unemployment Recapitulation V. General Claims Survey Claims Summary War-Connected Claims Benefit Payments by Industry, 134. Benefit Payments in the State of Washington, 136. Benefit Payments in Buffalo and Rochester, New York, 137: the difference in claims experiences, 138; explanation of the difference, 139. Characteristics of Claimants in Ohio, 143. Claims Chronology

106 106 108

118 122 127 128 131 131 133

145

V J Day to the end of 1945, 145: U C , 145; R A , 146. T h e Year of 1946, 147: U C , 147; R A , 149. T h e Year of 1947, 150: U C , 150; R A , 152. VI. Conclusions of Part I I 154 Abuse at a M a x i m u m 154 Control by Administrators at a M i n i m u m , 154: the j o b to be done, 155; the means for doing the job, 156; the will to prevent abuse, 157. Attempts by Claimants at a M a x i m u m , 159: too m u c h of a worker, 159; not enough of a worker, 159: norm of the law, 161; norm of employment, 163. Limits on the M a x i m u m 164 Evidence for the Limit, 165.

PART

III:

SPECIFIC

Use of the Upper Limit, 167.

INVESTIGATION

OF

ABUSE

VII. W o r k i n g Violators State of the Data Sources of the Data Content of the Data Data from Leads, 172. Data from Systematic Audits, 176: postaudit, 176 (the particular audit, 176; the sample general audit, 183; the complete general audit, 186); the preaudit, 197.

169 169 170 172

xii

C O N T E N T S OF

CHAPTERS

Interpretation of the Data Leads, 199; particular audits, 199; complete audits, 200. Criteria of Interpretation, 200: relevant industrial and cultural characteristics of the State, 200; efforts of the agency to detect and prevent violations, 201. VIII. Nonworking Violators Changes in Disqualification Rates Exhibits Exhibit 1, 213; Exhibit 2, 216; Exhibit 5, 219; Exhibit 4, 221; Exhibit 5, 226; Exhibit 6, 227. IX. Additional Data on Nonworking Violators Disqualification Ratios for Buffalo and Rochester Abnormal Census/Claims Ratio T h e Fact, 243. Possible Explanations, 245: differences in definition, 245; census error, 246; error in the claims series, 250. One Hundred Veterans T h e Female Violator Some Employers in New Jersey, 257. Gross Changes in the Labor Force, 259. T h e Investigation of Michigan Exhaustees, 260. T h e Investigation of the "108," 261. Some Impressions X. Retardation of the Reconversion General Analysis Detailed Analysis: Labor-Force Chronology Before VJ Day, 274. After VJ Day, 275: VJ Day to the end of 1945, 276; the year 1946, 280; the year 1947, 287. Concluding Argumentation

PART I V :

199

205 209 213

240 240 242

255 257

266 268 268 274

292

CONCLUSIONS

XI. Amount of Abuse and Provisions of the Law Favorable Evidence and Conclusions Unfavorable Evidence and Conclusions XII. Information on Abuse and Administration of the Law Information on Abuse Need for Information, 317. Lack of Information, 319. Methods of Securing Information, 323. Administration of Existing Law T h e Agency, 327. T h e Courts, 330. Employers, 333. Organized Labor, 336. Educators, 337.

303 304 309 317 317

326

CHARTS I. II. III. IV.

Major Shifts in Employment, 1940-47 Occupational Distribution of Employed Workers as of April 1940, 1945, and 1947 Net Civilian Migration, by State, 1940-43 Average Weekly Earnings in Selected Industries and Average Weekly Benefits in UC and R A by Month, 1945-47

110 115 117 124

INTRODUCTION

IN A COUNTRY as wealthy as ours, the chief factor limiting the further development of the system of unemployment benefits is the community's apprehension of something called "abuse"—a term that varies widely in meaning depending on the user of the word and the context in which it is used. It stretches from the case of the man who deliberately lies in order to receive both wages and benefits simultaneously to the man who honestly but mistakenly thinks that he is serving not only his own good but also that of the community by drawing benefits for "a while longer," until the right job turns up. As used, the term embraces everything between the most hardened criminal activity and the most plausible economic optimism. Between the two extremes are many degrees and distinctions which are not always clear in the mind of the community. But the whole problem is grasped vaguely, and when the community shrinks from further extending the system of unemployment benefits, it is usually because it questions whether there might not be so much "abuse" accompanying the extension as to offset its gains. W h e n a proposal is made to liberalize eligibility requirements, or to increase the benefit-wage ratio, or to lengthen the duration of benefits, a line dividing those who will favor and those who will oppose the suggestion can usually be drawn beforehand by ascertaining how much claimant abuse they think there is in the existing system. T h a t is the first sense in which this is a "study in limits": it is a study of that which chiefly limits the community's willingness to make provision for the unemployed out of a common pocketbook. Logically, the term abuse extends to abuse by taxpayers (who put in too little) as well as by claimants (who take out too much), and widespread tax-evasion would act as a further limit on the community's willingness to expand the program. In practice, however, it is only the community's apprehension of claimant abuse which exerts a significant limiting effect.

xvi

INTRODUCTION

One way to meet this apprehension of abuse is simply to ignore it. But this is also to ignore the ages-old dispute over the relative merits of a communal over an individualistic economy and to ignore the preference of great civilizations for a system of private rather than of communal control over property. T h e ideal of meeting need out of a common pocketbook is a great and good goal for society to have. It is a typical characteristic in descriptions of perfect communities. Plato's Republic has it, and More's Utopia. As applied to the needs of the unemployed it would incline us to provide the unemployed man with one hundred percent of his lost wages for as long a time as he cannot find other suitable work and to let him be the judge of what is suitable. T h a t ideal can be translated into action, however, only within the bounds of human nature as it exists at a given time and place, limited by ignorance and malice. T h e amount of existing abuse is the measure of that limit. Some knowledge of the measure enables the community to judge more intelligently where it ought to place the limit. Such knowledge also enables society to extend the current limit, for detailed knowledge of abuses enables society to cure them by specific improvements in administration instead of by general restrictions in legislation. This, indeed, should be the community's chief purpose in investigating the problem of abuse. T o refuse to investigate is to act irresponsibly. But to investigate in the hope of finding some justification for cutting appropriations for unemployment benefits is to be blind to the grandeur of the ideal of communal living. T o investigate in order further to liberalize is to act wisely. A t present there is little information on the amount and characteristics of abuse in unemployment benefits. Furthermore, until recently there has been little effort to obtain such information. In the United States there has not been a single investigation comparable in thoroughness to the several that England, for example, has made of its system of unemployment benefits. T h e only general study of the problem in this country is the present inadequate one. THE RECONVERSION

PERIOD

T h e study of abuse in unemployment benefits must always be in terms of a particular period and its particular economic characteristics. T h e very definition of abuse must be in terms of those characteristics, especially those relating to the demand for and the supply of

INTRODUCTION

xvii

labor. One's final judgment of the amount of abuse must rest largely on one's understanding of those characteristics. T h a t is the reason for the considerable, and perhaps tedious, amount of "background" material included in the present study. T h e reconversion period was the period selected for study here, assuming that reconversion extended from VJ Day through 1947. T h i s was an especially good period for the purpose. In the reconversion the inducements for workers to abuse the system were greater and the ability of the administration to prevent such abuse was less than in any period we are likely to see again. It is probable, therefore, that the reconversion period produced the maximum amount of abuse that we need fear (under the present system). If so, we have in the experience that valuable social tool, the limiting case. T h a t is the second sense in which this is a study in limits. T h e reconversion was also the period of greatest public interest in the problem of abuse. It was then that the public charges of abuse were most numerous and most vehement. T h e degree of public concern is epitomized in the award of the 1946 Pulitzer prize to the Baltimore Sun for a series of articles on that theme. T h e articles were declared to represent "the most meritorious public service rendered by an American newspaper during the year." COURSE OF T H E

INVESTIGATION

T h e order by which the investigation proceeds reflects the successive steps by which this investigator himself approached the problem. It seemed best to retain that order. T h e average reader will probably feel the same needs and in the same order. T h e first obvious need was to define abuse. It was also obvious that what people thought was abuse should chiefly determine its definition. When people draw back from social security programs it is because of what they consider to be abuses. I felt, therefore, that I had first to find out what people are actually saying about the programs, and what they mean when they speak of "abuse." T h a t would give me the issues involved and realistic definitions and criteria. Chapters I and II represent the fruits of that first line of inquiry. T o come to any solid opinion on these issues would require a detailed knowledge of the conditions of administration and of conditions in the labor market during the period. That became evident at once; so Chapters III and IV were written. When these two were

xviii

INTRODUCTION

finished, it was clear that if the study accomplished nothing more it would have marked out the "limiting case" of abuse. T h e next step was the inevitable one of sketching against this background the main events and characteristics of the claims series. These were the events and characteristics that had to be explained. When Chapter V had been completed, another limit had been established, a limit on the limiting case. T h e total amount of abuse could not have been greater than was compatible with this claims history. T h e mind had a frame within which to work. Only then did the investigator feel prepared to move on to the specific investigation of the various kinds of abuse. T h e results of that phase of the investigation are given in Chapters VII to X. T h e fragmentary nature of these results would have forced an investigator to make a more general investigation even if he had not already done so. T h e results require much interpretation. Only a judgment based on a thorough knowledge of the details of the labor-market history and the claims history of the period can be trusted with that interpretation. LIMITATIONS OF THE STUDY

T h e last paragraph hints at a third sense in which this is a study in limits. Many of its conclusions can do no better than indicate in a general way the upper and lower limits within which the answers lie. It cannot measure the extent of abuse with mathematical exactness. Important aspects of the problem are qualitative, and hence not susceptible to exact measurement. Where the problem is quantitative, the necessary data are frequently lacking. The study of abuse in the American system of unemployment benefits is just beginning. Facts are few and scattered, and even principles and definitions are in an embryonic stage. It was inevitable that an early study such as this, which is dependent on the researches of a single individual, should do little more than raise pertinent questions and indicate in a general way the probable answers. This is not only a study in limits but also a limited study. Nevertheless, it seemed worth while to make the study. T h e issue of abuse is still vital, hotly debated in State and Federal legislatures and by business and labor groups. T h e debates go on—the positions being still as widely separated as during the planning period and the same arguments still employed by both sides. There are people in this

INTRODUCTION

xix

country who even now can see nothing good in unemployment benefits, and those who can see nothing bad. When the area of disagreement is so wide and there is so little information by which to narrow it, even an imperfect collection of evidence such as this has value. It marks off more plainly the areas in which it is no longer permissible to make guesses and also those in which it is not permissible to do anything else. It enabled the writer to narrow very much for himself the limits within which he judges the answers to lie. Possibly it will be as useful for others. T h e study attempts to take in the national scene. Its conclusions relate to the system as a whole. In applying those conclusions to particular States, consideration must be had for the fact that States differ among themselves and that within each State one local labor market differs from another. I became acutely aware of that fact when I made a kind of grand tour of the country in 1946. A grant from the Social Science Research Council enabled me to spend the entire year working in unemployment compensation agencies in various parts of the United States. I started from Washington, D.C., moved down through the South to the gulf, turned west through Texas to California, then north along the coast. Turning eastward, I worked my way slowly through the Midwest, into New England, down the Atlantic coast, and back to my starting point, Washington. T h e impression of heterogeneity gathered from this experience was overwhelming. Because of this heterogeneity caution is required in going from the general to the particular. The reader will find himself frequently warned against applying the conclusions of this study to any particular State except on the basis of an intimate knowledge of that State. But heterogeneity does not destroy the need for a general view. Especially in the formative stages of a social program, when large decisions must be made (on whatever evidence is available) large studies are in place. The hill-top survey described by this study will be useful to legislators and those who seek to influence legislators, and it is for them that this study has been written. One of the unwritten textbooks most needed by the modern statesman would be entitled "How to Plan How Much of Economic Life." This study is not a paragraph of that book; it is not directly concerned with the problem of the planned society. Still, it is not totally unrelated

XX

INTRODUCTION

to the problem. As a case study it provides some material for the analyst of social planning. Congress foresaw the danger of transitional unemployment and spent some time during 1944 and 1945 debating and devising measures to meet the danger. T h e debaters addressed themselves explicitly to the two essential steps of all planning: predicting the future and devising methods to meet it. T h e debate over alternative plans turned on large, almost grandiose, issues: the right theory and the right cure for business depressions, local independence versus central authority, determination of labor's share in the national income through unemployment compensation, labor's need for the whip of necessity, and so forth. T h e story of the actual occurrences in unemployment benefits told against the background of that planning debate may not only illumine the particular problem of this study— the validity of the charges of abuse—but also, as a by-product, add to our knowledge of the planning process. T h e materials of Chapter I at least facilitate such a use of the study.

PART

I

T H E ISSUE OF ABUSE

CHAPTER

I

PLANNING PERIOD: DEBATE OVER POTENTIAL ABUSE formally announced the period of postwar planning in his War Progress Report to the Nation on July 28, 1943:

PRESIDENT

ROOSEVELT

The same kind of careful planning that gained victory in North Africa and Sicily is required if we are to make victory an enduring reality. . . . That larger objective of reconverting wartime America to peacetime basis is one for which your Government is laying plans to be submitted to the Congress for action. As regards unemployment benefits, the plans fell into two categories: those that concerned only veterans, and those that concerned the unemployed in general. The first produced a separate program that came to be known as Servicemen's Readjustment Allowances. T h e second resulted in various proposals to supplement the regular Unemployment Compensation 1 program. It will be convenient to refer hereafter to the first as R A and to the second as UC. Because action was concluded in 1944 for R A , but continued into 1945 for UC, it is best to treat the two programs separately and to take the R A program first. READJUSTMENT ALLOWANCE

PROGRAM

T h e debate over setting up a separate system of unemployment benefits for veterans revealed six separate groups of planners. Three were opposed to any kind of system; three favored some system, although they differed among themselves as to the kind. The

Opponents

The opponents came from the disabled veterans, the agriculturalists, and those on the industrial far-right. 1 This was the title generally used during the reconversion period, and it is still the legal title. "Unemployment Insurance," however, is growing in favor.

4

PLANNING PERIOD: DEBATE OVER ABUSE

T h e Disabled American Veterans comprised one of the opposing groups. The R A program would obviously not benefit the disabled (who ought to be the first concern of the nation) and might easily harm them. They feared another "Economy Act" similar to that of 1933, "when our veteran-hating President, F. D. Roosevelt . . . reduced or stopped the compensation of the disabled defenders of this country, threw us out of hospitals and degraded us to the public." * Each added expenditure for the able-bodied veteran (who ought to be able to look after himself') was an addition to the public burden and made a later economy cut that much more likely. This particular program, moreover, was especially likely to bring the veteran into public disfavor because of the abuses that were sure to accompany it; "should the Congress enact this legislation . . . they will have enacted a vehicle that will create the greatest aggregation of hoboes . . . and racketeers this country has ever known." * Secondly (and very nearly fatally, as the sequel will show) Representative Rankin, of Mississippi, opposed such a program. It was a program, he argued, that would benefit the veterans of the industrial States only.5 It would use up too much available veteran money for this select, and least needy, class of veterans. He, too, adduced the added argument of the danger of abuses inherent in the program: You will encourage the man who is inclined not to seek employment. You will have probably millions of them on the roll for a year, and at the end of that time they will be so powerful that there will be a demand that you continue them, and it will postpone recovery and readjustment . . .• Thirdly, the then president of the Interstate Conference of Employment Security Agencies (Claude A. Williams) opposed the program, partly because it would have a harmful influence on the existing State systems,7 and partly because it was undesirable in itself—the abuse argument: * U.S. Senate (78th Cong., i d sess.), Committee on Finance, Subcommittee on Veterans' Legislation, Hearings on S.1617, Jan.-Mar., 1944 (hereafter referred to as the Clark Committee Hearings), p. 261. 8 "If the veteran is a man and has the real stuff in him he can and will adjust himself to civilian life." Ibid., p. 262. * Ibid., p. s6o. • " A great many of the thinking members of Congress regarded it as being a violent discrimination against the agricultural elements and in favor of industrial labor . . . " U . S . House of Representatives (78th Cong., 2d sess.), World War Veterans' Committee, Hearings on H.R.3917 and S.1767, Jan.-Mar., 1944 (hereafter referred to as the Rankin Committee Hearings), p. 386. * Rankin Committee Hearings, p. 444. ' Claude A. Williams, "Unemployment Compensation for the Returning Soldier," Social Security in America (Chamber of Commerce of the U.S., Jan., 1944), p. 36.

P L A N N I N G P E R I O D : D E B A T E O V E R ABUSE

5

Have you given thought to what a system of unemployment compensation paying a sum of money for fifty-two weeks equal to or exceeding the prevailing wage most of the veterans will be able to earn, and conditioning the receipt of the compensation upon being idle, will do to the moral fibre of this country? 8 T h e distinctive elements of these three groups are clear enough; b u t more important is their similarity. A l o n g with their fear of abuse, they shared a c o m m o n preference for the "bonus approach" to the veteran problem. Instead of a battery of separate programs (for education, loans, unemployment, and so forth) doling out money only to specified veterans in circumstances of specific need, they preferred a general bonus w h i c h each veteran could spend as he saw fit—thus enabling society to write finis to its obligations and the individual to assume responsibility for himself. T h i s preference represents a fundamental choice among social philosophies. It is a preference for the "individual initiative" m e t h o d over the "social security" method. It is a tendency away from so budgeting the national income as to make " w e l f a r e " expenditures a first charge on it (which necessitates restricting individual liberty) and a preference for giving to each one here and now his share of the inheritance—and if the prodigal son spends his share unwisely or loses it to other individuals before he has provided for his primary needs, well, that is the price of liberty. T h i s fundamental choice was usually implied rather than expressed; for its clear expression is not easy. B u t once, at least, it did achieve exact formulation. W h e n Millard W . R i c e was testifying in favor of the bonus, he made this acute observation: ". . . thus compensating each service person on an 'earned rights' basis rather than on a 'needs' basis." " G i v e to each man what he has earned and let him look after his own needs rather than take from him part of what he has earned to hold it for h i m until he (or someone else) needs it. T o a large extent this preference seemed to be rooted in the conviction that unemployment benefits would weaken individual initiative, the driving force of liberal economic society, and that the loss to society through cheaters and dreamers would be greater than the gains of the deserving unemployed. The

Proponents

Those w h o advocated the adoption of an R A program argued that such a program was both less expensive than a bonus and furnished * ¡bid., p. 35.

» Rankin Committee Hearings, p. 262.

6

PLANNING PERIOD: DEBATE OVER ABUSE

better ultimate protection to the precise veterans who would need it most. Few of the veterans would actually draw all of the $1,040 in unemployment benefits to which they were entitled (fifty-two weeks at twenty dollars a week). The greater part of the amount would never be paid out actually and would be that much saved to the public treasury. 10 Moreover, many veterans would use up their bonus money, even if paid to them in installments, would become unemployed, and would then be without protection. While agreeing on the soundness of unemployment benefits in general, the proponents of such a system differed sharply among themselves as to what kind of system it should be. There was a clear Federal group, a clear State group, and a blurred group. T h e first of these, who started the whole movement for veterans' unemployment benefits, wanted a Federal system separate and independent from the existing State systems. This was the position which President Roosevelt took in his message to Congress, November 23, 1943We must anticipate, however, that some members of the armed forces may not be able to obtain employment within a reasonable time after their return to civil life. For them, unemployment allowances should be provided until they can reasonably be absorbed by private industry. Members of the armed services are not now adequately covered by existing unemployment insurance laws of the States. . . . It is plainly a Federal responsibility to provide for the payment of adequate and equitable allowances to those service men and women who are unable to find employment after their demobilization. For these reasons, I recommend to the Congress that a uniform system of allowances for unemployed service men and women be established.11 Back of that position lay the report of the Conference on Post-war Readjustment of Civilian and Military Personnel which the President had authorized in July of the preceding year. And back of that lay the recommendations of the Social Security Board, which the conference had consulted. The thinking of this group is most clearly evident in Senator Wagner's bill, S.1545, the opening gun in the campaign, in10 " I t is easily conceivable that not more than half the men and women released will actually resort to unemployment benefits, and of these, a large proportion will require only brief periods of payment before they are reabsorbed in employment or otherwise economically adjusted. I would venture to estimate that the average duration of benefits throughout the country would be around twenty weeks, and not the maximum of fiftytwo . . ." Testimony of Milton Loysen, Clark Committee Hearings, p. 361. For the actual figures see Table 10. 11 U.S. House of Representatives (78th Cong., 1st sess.), H. Doc. 361, Nov. 23, 1943, pp.

3-4-

PLANNING PERIOD: DEBATE OVER ABUSE

7

troduced in the same month as the President's message. It provided uniform weekly benefits of $ 1 5 , plus dependents' allowances up to a total of $25, for a period of fifty-two weeks (the Social Security Board and the Conference had suggested twenty-six weeks). Disqualification provisions were on the liberal side, and administration was vested in the Social Security Board. There was no time limit placed on the life of the program. T h e President's message and Senator Wagner's bill were like familiar battle-calls to the States' righters. In this Federal program with its separate and more liberal provisions, the States saw a flank attack on the existing State monopoly " of the unemployment compensation field. T h e Interstate Conference of Employment Security Agencies rallied to the defense. The members of the Conference were not of one mind, however, on what the best alternative was to Senator Wagner's proposal. The president of the Conference, Claude Williams, preferred a bonus, as mentioned above. Milton Loysen, director of the New York agency, had another plan, and Stanley Rector, of Wisconsin, a third. T h e plan of Mr. Loysen, as he developed it before the Clark Committee was clear-cut. It was a consistent rejection of every "bonus" and every "Federal" element. According to this plan the veterans would simply be fitted into the going State unemployment compensation systems—as though the Federal government were an interstate employer and the veterans were its employees. Veterans in the different States would receive variable benefits, that is, the maximum payable in their respective States. Each State would administer the payments according to its own law, and the Federal government would merely reimburse each State for its outlays. The three main arguments in favor of such a system were: (1) benefits varying by State automatically decreased the danger of their being too high relative to the local wage scale; (2) the absence of a separate, more liberal Federal system removed the danger of invidious comparisons; (3) administration was simplified, since there would be only one program instead of two in each State. The program of Stanley Rector had blurred edges. Fundamentally anti-bonus and anti-Federal, it yet had some elements that were both "bonus" and "Federal." It adopted Senator Wagner's benefit provisions: uniform, with dependents' allowances, for fifty-two weeks. But it (1) shifted the administration of the program from the Social Se1 : Not a complete monopoly; the railroads had their own separate program.

8

PLANNING PERIOD: DEBATE OVER ABUSE

curity Board to the Veterans Administration; (2) stiffened the disqualification provisions; (3) assigned a limit to the program (five years after the end of hostilities); and (4) changed the title from "unemployment allowances" to "readjustment allowances." This program, therefore, accepted the plan of a separate Federal system, but added these four provisions to decrease the danger of its being used to break down the regular State systems. The change of name illustrates the general strategy—emphasizing that this program was a "special and temporary program to meet a special and temporary need." 1S Legislative

History

The American Legion, more than any other single organization, was in the middle of all the legislative activity relating to unemployment benefits for veterans, and the narrative of that activity can most easily be told from its viewpoint. In November, 1943, the month of the President's message in which he proclaimed the G.I. Bill of Rights, the American Legion appointed a special committee under John Stelle, of Illinois, to draft a legislative program embodying the President's promises and to steer the bill, or bills, through Congress. For technical advice in the field of unemployment benefits the Stelle Committee had its choice of going either to the Social Security Board or to the State agencies. In the first instance the committee apparently did neither, except insofar as it favored the former by inclining toward the use of Senator Wagner's bill as a model. T h e State agencies, which seem not to have been consulted in the preparation of the President's message or of Senator Wagner's bill, at this point invited themselves to the party. Stanley Rector came to Washington and presented the position of the States to the members of the Stelle Committee. The committee was sufficiently interested to invite him to continue in the capacity of technical Mr. Loysen foresaw difficulties arising from this strategy and opposed it: " I urge that these payments be called unemployment benefits instead of readjustment allowances. It seems to me that the term 'readjustment' should be reserved for provisions that Congress may be called upon to make in order to facilitate the transition from military to civilian life. T h e payment proposed in this bill [S.1767] would be made only to unemployed veterans. They should not be confused with other types of payments that may be made to veterans as a class. T h e provisions of the bill resemble closely the unemployment benefit provisions in the several states. I recognize that the term 'readjustment allowance' has been recommended in the expectation that this will prevent identification with State unemployment insurance systems. T h i s seems to me rather an idle gesture." Clark Committee Hearings, p. 362.

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g

adviser to the committee and as the representative of the Interstate Conference. T h e Conference seemed to the Legion to be a potent political ally. T h e Legion had its " O m n i b u s B i l l " ready early in January, 1944. In the House the bill, as H.R.3917, was referred to the W o r l d W a r Veterans Committee, which had John R a n k i n , of Mississippi, as chairman. In the Senate, as S. 1617, it was referred to the Veterans Subcommittee (of the Senate Finance Committee), headed by Bennett C h a m p Clark, of Missouri, a former National C o m m a n d e r of the Legion. As its name implies, the " O m n i b u s Bill" contained a battery of programs — f o r education, loans, hospitalization, and so f o r t h — a s well as the title dealing with unemployment benefits." T h e parts of the Legion bill dealing with unemployment benefits were the joint products of the Stelle Committee and the Interstate Conference. Its main provisions were those enumerated above for the plan represented by Stanley Rector. T h e s e were already very similar to Senator Wagner's original bill, S.1545; and after the Senator had partly persuaded and partly pressured the Stelle Committee into accepting his more liberal disqualification provisions, the Legion bill in its final form (reintroduced on March 13 as S. 1767) differed from the Senator's proposals only in that it (1) changed the name to "readjustment allowances," (2) put the program under the Veterans Administration, and (3) set a time limit to the life of the program. S.1767 was sponsored by the literally record-breaking number of eighty Senators, went through the Senate without debate (on its provisions for unemployment benefits), and was passed by unanimous vote on March 24, 1944." 1« Many persons concerned with the bill considered, in retrospect, that the " o m n i b u s " method was a mistake. It resulted in one committee having more to do than it could do competently. Barden o{ North Carolina expressed the view publicly in the House: " T h e bill, with all of its various sections and provisions, w o u l d normally be assigned to four or five committees. I hope that this will not be a precedent to be followed in the f u t u r e . . ." 90 Cong. Rec., pt. 4 (May 18, 1944), p. 4644. is T h e situation back-stage is revealed in the following two statements (90 Cong. Rec., pt. 3, Mar. 24, 1944, p. 3080): "[Senator Clark:] Mr. President, before a decision is taken on the yeas and nays, I feel that I should make a statement. T h i s bill was introduced and sponsored by eighty-one Senators. So far as I am informed and know, every Senator was given an opportunity to be one of the sponsors of the bill." "[Senator Danaher:] Mr. President, I have never signed with the eighty-odd members of the Senate this bill known as S.1767. I am a member of the veterans' subcommittee of the Committee on Finance. I knew very well that many conflicting provisions were presented to us by various organizations. T h e Senator from N.Y. [Wagner] had an amendment which we considered, which markedly improved the bill, in my judgment.

IO

P L A N N I N G PERIOD: D E B A T E O V E R A B U S E

In the House, the Legion found the road rougher. Mr. Rankin was not sympathetic to the bill. Especially did he dislike Title V , which provided unemployment benefits: " T h e dynamite in this bill is in T i t l e V . . . . This Title V disturbs me more than anything that has been laid before this Committee since I have been chairman of it." 18 After the Senate had passed S.1767, the Rankin Committee was persuaded to turn its attention to that bill in order to expedite legislation, with Mr. Rankin constantly protesting against being hurried. 17 Prodded by the Legion just as constantly, the Rankin Committee finally reported out its version, much amended, and the House passed it unanimously on May 10. A conference was arranged between the Senate and the House committees, and all differences were composed except those relating to T i t l e V . T h e House had made serious changes in the Senate version. Duration of benefits was cut to twenty-six weeks. Instead of being graduated from $ 1 5 to $ 2 5 , according to the number of dependents, benefits became a flat $ 2 0 rate. 1 " T h e stricter disqualification penalties of the original Legion bill were restored, and the plan of allowing each State to use its own definition of "suitable work" was adopted. And, a complete innovation, 19 a program of allowances to the selfemployed was added. T h e Senate conferees yielded to some of these provisions, but reIndeed, Mr. President, there were many sections of the bill, in the form in which it came before us, which no eighty Senators, no eight Senators, should have approved, in my opinion. . . . I have said enough to indicate that there can be very valid and very substantial reasons why some should not appear to foreclose themselves with reference to a particular measure, either for or against. . . . On that account I was not one of the sponsors of the bill." 16 Rankin Committee Hearings, pp. 374, 377. 17 " I certainly can say that we gave it [the bill] a great deal more attention than was given it at the other end of the Capitol, where it was passed in forty minutes in the closing days of a tiresome session." 90 Cong. Rec., pt. 3 (May 1 1 , 1944), p. 4337. 18 In order to make the administration simpler and to make the single veteran's benefit more comparable with State maxima. 1» Paradoxically enough, this daring innovation in Social Security came, not from the Left, but from the Right. Mr. Rankin, who seemed bent on an indefinite filibuster against the "Omnibus Bill," gave as one of his objections to it the fact that the veterans in the agricultural regions would get little from it. As an answer to that objection, and a last-minute invention, the Scrivner-Rector team thought up and drafted the selfemployed provision. Despite the novel and certainly debatable character of the provision, the following is a complete account of its passage through the House (90 Cong. Rec., pt. 4 [May 18. 1944], p. 4675). "[Air. fiankin:] Mr. Chairman, let me say to the House that this simply puts men who are self-employed, on an equal basis with the men who are employed in industry— farmers, independent businessmen, small merchants, professional men, and others who are not employed in industry. We felt that to leave them out would not be just, but

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n

fused others. T h e Legion won over three of the seven House conferees to accept the compromise. Three others could not be budged: Rankin, Mrs. Rogers, of Massachusetts, and Cunningham, of Iowa. T h e seventh member, Congressman Gibson, of Georgia, was ill in his home State. That deadlocked the House conferees, hence the conference, hence the Congress, and hence the whole G.I. Bill of Rights—all because of unemployment benefits. For a heartbreaking (to the Legion) forty-eight hours it looked as though the efforts of the previous six months would be wasted and no legislation at all would be passed in that session. This was the situation when the invasion of Europe started. T h e conference recessed until ten the next morning. It was recognized that if the morning session was not fruitful, the conferees would report disagreement and the bill would die. Gibson's presence in Washington the next morning was imperative. Our Committee spent that night burning up the wires—using the radio— trying to locate Gibson who had left his home and was "somewhere in Georgia." We finally contacted him, rushed him with a Legion and army escort across Georgia in a slashing rain, placed him on board a plane that we had held for that purpose, closed the 1,000 mile gap and had him in Washington for the morning session of the conferees. He cast the deciding vote of the House conferees, and the bill was saved.20 T h e compromise bill contained the Senate's provisions on duration (fifty-two weeks) and the milder disqualifications. 21 But it contained the House's provisions of flat benefit amount of $20, State standards of "suitability," and the new allowances for the self-employed. President Roosevelt signed it, and it became Public Law 346 on J u n e 22, 1944, more than a full year before the end of the war. The country had spread a life-net under the returning veterans who would be highly discriminatory, and for that reason the committee unanimously adopted this provision. "[Chairman:] T h e question is on the amendment [to the Senate bill] offered by the gentleman from Mississippi. " T h e amendment was agreed to." =0 Address of Lawrence J . Fenlon delivered before the Wisconsin Department Convention of the American Legion, Aug. 6, 1944. Mr. Fenlon was a member of the Stelle Committee. -1 T h e general difference in the disqualification provisions can be gathered from the following: For voluntary quit or misconduct: strict, four weeks of suspension and cancellation of benefits; milder, four weeks of suspension of benefits. For refusal of suitable work: strict, suspension until employed two weeks; milder, four weeks of suspension of benefits.

12

PLANNING PERIOD: DEBATE OVER ABUSE

might fall from employment. It only remained to see how good a net it was. Would it facilitate or would it complicate the necessary process of readjustment? Would some of the plans not adopted turn out to have been wiser? UNEMPLOYMENT

COMPENSATION

1944

T h e task of preparing the U C program for the needs of the reconversion period revealed two groups of planners. T h e y are not easy to label. T h e terms "left" and "right" were used in the original manuscript, but led to much misunderstanding. T h e terms "progressive" and "conservative" met with the same fate. It seems best to designate them simply by their relationship to the main legislative proposal of the period, the Kilgore bill. T h e r e were proponents of the Kilgore bill, and there were opponents. T h e proponents may be represented by Senator Kilgore, of course, and also by Senator Murray. T h e opponents were themselves divided into a moderate and an extreme group. T h e former may be represented by Senators George, T a f t , and Vandenberg—especially the last named. T h e latter may be represented by Representatives Doughton and Knutson. T h e Social Security Board served all groups, but in its own thinking was between the proponents of the Kilgore bill and its more moderate opponents. T h e State administrators of the employment security programs differed among themselves, but in general were closer to the moderate opponents than to any other group. T H E PROPONENTS. Senator Kilgore introduced S.1823 early in March, 1944. T w o months later a revised form of this bill was introduced by the same Senator as S.1893. Three months after that, in August, S.2061 was introduced under the joint sponsorship of Senators Murray and Kilgore. T h e earliest bill was drafted by Senator Kilgore's assistant, Dr. Herbert Schimmel; later bills saw the addition of technicians from the American Federation of Labor, the Railroad Retirement Board, and to some extent from the Social Security Board. T h e final bill, S.2061, reported out of committee on August 5, may be assumed to contain the developed thought of the proponents. T h e following is a general description of its provisions. Coverage: (1) All servicemen; (2) anyone who had earned $150

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13

in wages d u r i n g the previous year. R o u g h l y , therefore, the entire employed population. Scale of benefits: $20 per week, plus $5 for each dependent (includi n g wife) u p to a m a x i m u m of $35. F o r civilian employees there was an additional m a x i m u m (frequently overlooked by critics) of 75 percent of "weekly wages." Duration of benefits: U n l i m i t e d over the two-year period following the end of the war. Financing: Federal funds for all expenses in excess of what the States would have spent for unemployment if this bill had not been enacted. Disqualifications: Liberal; for example, a narrow definition of suitable work, recognition of personal reasons as "good cause" for quitting a job, and limiting the disqualification period to a five-week maximum. Administration: Largely by a Federal " W o r k Administrator"; his to be the final decision on appeals. T h e proponents of the measure argued its necessity by the following line of reasoning. (1) Unavoidably there would be great initial unemployment. (2) Uncompensated unemployment would mean a loss of "purchasing p o w e r " that could send the economy into a cumulative downward spiral. (3) T h e redundant labor supply would weaken labor's bargaining position, with a consequent lowering of "labor standards." (4) T h e situation constituted an emergency which called for Federal action; the States were either unable or unwilling to take the necessary countermeasures. Each of the four arguments deserves illustration. 1. T h e proponents expected that unemployment, at least in the initial stages of the reconversion, w o u l d be unavoidably great. T h e i r other arguments stemmed from this expectation. Since Senator Kilgore said he was particularly influenced by the American Federation of Labor, 2 2 the testimony of Matthew W o l l 2 3 may claim special attention. Mr. W o l l gave the extreme figure of nineteen million as the possible n u m b e r of the unemployed in the reconversion period. H e qualified the prediction by the condition "if -- " W h e n it comes to the general outlines of the bill submitted by our subcommittee, I should say that . . . the American Federation of Labor played a larger part in the hill finally drafted than did the suggestions of any other labor organization." 90 Cong. Rcc., pt. 5 (Aug. 10, 194.1), p. 6862. -3 Chairman, American Federation of L a b o r Committee on Post-War Planning.

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PLANNING PERIOD: D E B A T E OVER ABUSE

we return to the production rate of 1940," " but evidently he wished this figure to make an impression, because it is the only figure he mentioned in his testimony, and he mentioned it in four different places. For example: " I do not like to contemplate the anger and frustration of nineteen million unemployed." 25 T h e same figure comes up again in Senator Murray's report to the Committee on Military Affairs: "Authoritative estimates that have been submitted to your subcommittee point to the possibility of nineteen million unemployed immediately following the cessation of the war." 28 Senator Kilgore inserted in the Congressional Record an estimate made in May by Labor's Monthly Survey (A.F. of L.) that " w e anticipate that with the best of plans [for reconverting industry] there will be at least eleven million unemployed d u r i n g the reconversion period . . ." 27 T h r e e months later the Senator himself estimated that " d u r i n g the first year after the defeat of Japan, unemployment may rise to twelve million, and to eighteen m i l l i o n the second year." 2t 2. Such a volume of unemployment w o u l d seriously diminish "purchasing power" (which, they said, was chronically deficient in a mature economy) and would throw the economy into a downward spiral. T h e proponents were dubious regarding the value of accumulated savings, looked for a falling wage level, and argued that unemployment compensation benefits replaced but a small fraction of wage loss at best. T h e following representative samples are taken from Matthew Woll's testimony before the George Committee. 2 8 [Savings:] Industry is relying on the billions of savings and the pent-up consumer demand to supply the industrial market during the transition period. Such reliance seems to us to show a lack of understanding of human beings. Unless these breadwinners see some prospect of more money coming in, they are not going to spend their small savings for anything but necessities. [Wage Level:] Workers are facing a price cut of 23 per cent in their incomes. . . . Wages have been "stabilized" from going higher during the 2< U.S. Senate (78th Cong., 2d sess.), Special Committee on Post-War Economic Policy and Planning, Hearings, Part 3, May and June, 1944 (hereafter referred to as the George Committee Hearings), p. 731. 25 Ibid., p. 739. 2 6 U.S. Senate (78th Cong., 2d sess.), W a r Contract Subcommittee, Report to the Committee on Military Affairs, Subcommittee Print No. 4, p. 5. 27 90 Cong. Rec., pt. 3 (May 4, 1944), p. 3992. aa 90 Cong. Rec., pt. 5 (Aug. 8, 1944), p. 6793. 2» George Committee Hearings, pp. 740-41.

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15

war. But will it be considered stabilization when workers have their wages cut by almost one-quarter? [Unemployment Benefits:] He [Sumner Slichter] estimated that in 1941 unemployed workers in the industries covered by unemployment compensation received only ten cents for every dollar of pay which they lost. T h i n k what that means in curtailing demand for the products of industry and agriculture. 3. Because the proponents expected the labor supply to be supera b u n d a n t they saw the reconversion period as a buyer's market for labor and a consequent threat to existing labor standards. T h e y never specified what standards they saw threatened (aside from objecting to the downgrading of workers who had been upgraded during the war), nor d i d they specify what the relation should be between those standards and unemployment benefits. B u t perhaps the two following excerpts showing the position of the Social Security Board may be taken as indicating the minimal position of the proponents. T h a t is, the proponents would have expected at least this much of the system of unemployment benefits. In a letter instructing its regional staff in what would be desirable State legislation for the reconversion period the Bureau of Employment Security foresaw a " p r o b l e m of maintaining reasonable wage and labor standards as a result of the pressure of a surplus labor supply d u r i n g a shortage of j o b opportunities" and explicitly recognized "the unemployment compensation program as one device for meeting" that problem. 3 0 A f t e r declaring that " f o r labor as a group, such a period may undermine standards which have been established through the slow work of years," 31 the letter pointed out that "the terms of the disqualifications for a voluntary separation and for a refusal of work and their application to specific cases will determine to a great extent the impact of the unemployment compensation program on labor standards . . ." 32 Here the Bureau seems to accept as a function of unemployment benefits that they should positively 33 raise labor standards above what they would be in the absence of unemployment bene30 Social Security B o a r d , B u r e a u of E m p l o y m e n t Security, Staff M e m o r a n d u m N o . 113, Revised, N o v . 11, 1944, p. 22. 31 Ibid., p. 29. 32 Ibid. 33 It p r e f e r r e d to speak in t h e o p p o s i t e w a y , of severe disqualifications " u n d e r m i n i n g " l a b o r standards. B u t n o r m a l l y , no m a t t e r h o w strict t h e p r o g r a m , it c a n n o t positively lower standards, that is, m a k e t h e m l o w e r t h a n they w o u l d h a v e been in the absence of u n e m p l o y m e n t benefits. A t most it can only " f a i l to raise l a b o r standards" or " f a i l to h e l p w a g e earners resist d o w n w a r d w a g e a d j u s t m e n t s . "

i6

P L A N N I N G PERIOD: D E B A T E OVER ABUSE

fits. T h e proponents certainly accepted that as a function of unemployment benefits. T h e position of the labor group among the proponents was probably " close to a position which Mr. Bigge, of the Social Security Board, took, at least momentarily, 35 when he appeared before the George Committee. Senator Hawh.es: What is your definition for "suitable work"? Because I have had occasion to offer men an opportunity for suitable work and they wouldn't take a job, they said that it was beneath their dignity. Mr. Bigge: The only Federal standards are those I just mentioned. I would say the problem of defining suitable work will be one of the most difficult problems. . . . Take the case of a man who has been a common laborer and has now gotten into a war plant and earned $50 to $60 a week. He may not be able to get that kind of work in peacetime. What kind of work would be called suitable for him? He says he is a molder, but there aren't any jobs for molders. Now, if you can offer him a job at $20 a week, the question is shall he take it or may he refuse it and still get his unemployment benefits? The period during which he can get those benefits is always limited, and I think the intention is in general that the worker is given this period of time, 15 to 20 weeks, whatever it may be, to make up his mind whether he wants to remain in this field or look for work wherever it may be available.89 T h e proponents felt no fear that in attempting to safeguard labor standards by larger benefits and easier disqualifications they might lessen the willingness of displaced workers to accept new employment and might thus retard the reconversion. T h u s Senator Kilgore: It is objected that such benefits would encourage idleness. This objection overlooks the safeguard that in no event are benefits to exceed 75 per cent of the worker's previous earnings. For workers without dependents the benefit would be less than 45 per cent of their previous earnings. But in any event we are legislating for the overwhelming number of Americans, not for the extraordinarily small number of malingering cases. I, for one, do not believe this is a nation of idlers. . . . Those who believe this is a nation of malingerers and of lazy people should say so.37 T h e proponents did not discuss the other possibility, that persons "permanently" out of the labor market might claim unemployment »« "Probably"—because they never explicitly formulated their position. 33 This was not the official position of the Board. That was more carefully worded and less extreme, as can be seen in Unemployment Compensation Program Letters No. 101 (Nov. 26, 1945) and No. 1 1 3 (Feb. 25, 1946), both issued by the Bureau of Employment Security. George Committee Hearings, p. 757. Italics mine. " g o Cong. Rec., pt. 5 (Aug. 8, 1944), p. 6789.

PLANNING PERIOD: DEBATE OVER ABUSE

17

benefits. By implication, that would be no particular problem during the reconversion period. Possibly the proponents would have been willing to adopt as their policy the one tentatively put forward by Robert Nathan, former chairman of the Planning Committee of the War Production Board, in his appearance before the George Committee. I would like to say this: If these people who are temporary entrants during the war are going out of the labor market, it is best to get them out quickly. I might say that unemployment insurance might need some modification during the period of readjustment. Perhaps we should be able to say to the displaced youths and housewives and aged persons: "You do not need to come in and apply for a job. You get your compensation anyhow." 38

It is impossible to say exactly what the proponents' expectations were in this whole matter of the relation of unemployment benefits to labor standards and to improper claimants, because the proponents never really came to grips with the problems, certainly not in the detailed, concrete form in which their opponents stated them. T o understand the position of the proponents it is necessary always to remember their fundamental presupposition of very heavy unemployment during the reconversion period. With heavy unemployment, such problems are relatively unimportant. The mood of the proponents is typified by this paragraph from the conclusion of Matthew Woll's testimony before the George Committee. I could not help but be struck in reading the autobiography of the greatest of our present war aces, Capt. Don Gentile, by his recurrent fear of the "lean, bleak years" after the war. We in the American Federation of Labor are determined that the heroes of this war shall not be harried by the fear of post-war unemployment. 39

4. The proponents did not expect the States to furnish the needed protection. The proponents contended that the State programs of unemployment compensation were then (1944) inadequate to handle the peculiar problems of reconversion and that they would probably remain so. Senator Wagner declared in August: We cannot wait for State action to deal with the inadequacies in unemployment insurance benefits. State legislatures do not meet until next year. It will require several weeks or months for the various States to consider necessary legislation. T h u s it would be mid-1945 before the States would be ready adequately to handle the problem. ss George Committee Hearings, p. 80a.

« Ibid., p. 748.

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P L A N N I N G PERIOD: D E B A T E OVER A B U S E

Moreover not one single concrete bit of evidence has yet come to light that the States plan to liberalize their unemployment insurance laws. We cannot postpone consideration of this important problem on the remote possibility that the State legislatures may do something to improve their laws.40 Senator Pepper presented the same view, somewhat exaggerated, on August 10. "Between now and the time they hold their regular meeting next year there may elapse a period of almost a year, and only about half of the State legislatures will meet then." 41 Actually, over forty legislatures would meet in 1945 and before August. T h e many analyses of the existing inadequacies of the State laws were mostly based on figures supplied by the Social Security Board. Samples of the latter may be found in the testimony of Dr. Bigge before the George Committee in May 42 or in the letter of Dr. Altmeyer to James Byrnes in June. 4 3 Limited coverage would leave about thirteen million employees unprotected (not to speak of a similar number of the self-employed). T h e average weekly benefit amount was $ 1 3 . 8 4 in 1943, and this represented only one third of the average weekly wage. As to duration, "the average period for which workers who became unemployed in 1942 were actually eligible on the basis of their wage records varied from ten weeks . . . to twenty weeks." 44 Moreover: " I n the rather good year 1 9 4 1 , for the country as a whole, onehalf of all claimants were still unemployed when they had exhausted their benefit rights." 45 T h i s was thought to exhibit the most serious deficiency of the State laws. THE OPPONENTS. T h e opponents of the Kilgore bill disputed, in varying degrees, all four parts of the proponents' argument. 1. T h e extreme opponents would not admit the likelihood of any unusual unemployment problem. While the more moderate elements were willing to admit that unemployment might be a special problem for a time which would require special legislation, 48 they maintained that (a) the amount of unemployment might be much less than the 11 personally observed its operation in local offices in many States. It was occasionally justified by quoting a (misinterpreted) remark of Ray Adams in the Proceedings of the 1944 A n n u a l Meeting of the Interstate Conference of Employment Security Agencies, p. 78. 82 See, for example, Readjustment Allowance Activities, Vol. II, No. 7 (July, 1946), pp. i-2. Processed publication of the Veterans Administration, Washington, D.C. ss Ibid., Nos. 8 and 11.

GENERAL CLAIMS SURVEY

151

the later ones. From January to December the ratio decreases in both years; it decreases 52 percent in 1946 and 31 percent in 1947. But from January to July the ratio decreases only in 1946 (32 percent); in 1947 it actually increases (8 percent). Initial claimants and beneficiaries had unlike experiences in 1947. Whereas beneficiaries were much fewer than in 1946, initial claimants were just as numerous. The weekly average of beneficiaries in 1947 was 852,392; in 1946 it was 1,150,167. Initial claims in 1947 were 9.7 million; in 1946 they were 9.8 million. T h e same number of initial claims was filed by 700,000 fewer claimants in 1947,34 an indication that individuals were unemployed more often in 1947. But the average duration of unemployment benefits was only 1 1 . 1 weeks in 1947 as compared with 13.4 weeks in 1946, indicating that individuals were unemployed less long in 1947. Also, the exhaustion rate was lower in 1947—30.7 percent as compared with 38.2 percent in 1946. All this corresponds fairly closely to the economic conditions of the period, as described in Chapter X. There were many short lay-offs, especially in the soft goods industries, which resulted in initial claims; but the economy was fundamentally sound, so that the laid-off workers were more quickly recalled or found other jobs. The year 1947 was less affected than 1946 by the experience of the warworkers—who either waited an unusually long time in the hope of getting a job as good as the one they left, or were unable to get any job at all (the aged and many of the women), or were not genuinely looking for a job. All of these would have tended to file a higher-than-average number of compensable claims per initial claim. In the first half of 1947 the disqualification rate was higher than in the corresponding quarters of 1946; but in the second half it was lower. The year 1946 had both the lower and the higher disqualification rates, and the two were probably not unconnected. The latter could have been partly a consequence of the former. The year 1947 approaches closer to being a normal year. It exhibits the usual seasonal movement of the disqualification rate (low when the jobclaimant and staff-claimant ratios are low), but the trough is not as deep or the peak as high as in the preceding year. The fact that the UC and R A disqualification rates reversed positions between 1946 and 1947 may also help to explain why the 1947 UC rate was not consistently higher than the 1946 UC rate. Possibly a« Social Security

Yearbook,

1946 and 1947.

152

GENERAL CLAIMS SURVEY

more staff time was devoted to the problem of the veterans. I know of at least several States where the UCV-1 began to be used extensively at this time and for the first time. If a staff of constant size spent more of its time on R A interviews, it could give less attention to U C claimants," and disqualification rates would change accordingly. A statistic that lends color to the conjecture is the similarity in the absolute number of disqualifications in the two years. Although laborforce conditions were quite different in 1946 and 1947, the total number of nonavailability disqualifications in the two years was almost identical. UC 1946 1947 Total

RA

Total

725,805

667,859

1,393,664

677,137 1,402,942

739,172 1,407,031

1,416,309

Perhaps a given number of interviewers tend to turn out a fairly constant number of disqualifications. T h e number certainly varies with season, the State, and the temper of public opinion, but it may average out in time so that the chief determinant of the number of disqualifications in a year becomes the number of interviewers, up to a certain staffing ratio. T h e results of the New York "experimental office" (Chapter VIII) give some support to the hypothesis, for when the staffing ratio was doubled the disqualification ratio also doubled. RA.—In practically every month of the entire reconversion period veteran initial claims were fewer than U C initial claims, and yet for a long period (from March, 1946, through March, 1947) veteran beneficiaries steadily outnumbered U C beneficiaries. For that contrast several explanations suggest themselves. T h e U C waiting-period bar kept a substantial number of initial claimants each month from becoming beneficiaries at all or as early as they otherwise would have been. Eligibility (chiefly wage) requirements stopped about 10 percent of all new initial claims in U C ; in R A the rate was only 2 percent. T h e longer duration of R A benefits and the absence of a benefit year meant that claimants could stay on the rolls through a period which in the case of U C claimants entailed exhausting benefits, remaining out of 35 California, for example, thus instructed its claims-examiners: "Departmental policy provides that this re-interviewing program must be carried forward in all offices. If unusually heavy work loads in certain offices do not permit the program's being carricd forward for both veteran and non-veteran claimants, the program must, in any event, be fully carried out in so far as veterans are concerned." (Division Notice No. 16, March 4. '947 ) 8« Not necessarily of the rate.

GENERAL CLAIMS SURVEY

153

benefit status for some time, then filing another initial claim at the beginning of a new benefit year. Finally, it is possible that a larger proportion of violaters among R A beneficiaries (Chapters V I I - V I I I ) helped bring about this larger core of long-duration claimants. For 1947 as a whole the R A beneficiary rate exhibits a different pattern from the UC rate. The U C rate did not decline notably until late fall. The R A rate, although showing the effects of the early economic uncertainty, declined steadily throughout the year." Among the reasons for the different behavior of the UC and R A beneficiary rates were the following. (1) Veterans were steadily replacing civilians in the labor force. (2) Veterans were not proportionately represented in such industries as jewelry, textiles, apparel, and shoes, where 1947 unemployment was concentrated. (3) R A exhaustees were increasing, and they could not reopen a claim in a new benefit year as exhaustees could in UC. (4) More veterans were becoming eligible for U C benefits, and more (absolutely more, certainly, and relatively more, probably) were choosing UC instead of R A . (5) The disqualification rate was higher in R A than in UC throughout most of 1947. (6) T h e R A beneficiary rate had more room to fall in 1947. That is, the decline of the R A rate in 1947 represented in part the kind of adjustments by the veterans which the civilian workers had made in 1946. T h e July rise probably represented the outflow of veterans from the schools.

CHAPTER

VI

CONCLUSIONS OF PART II T H E MATERIALS of Part II lead to this sort of judgment: In a period when abuse was at its worst it was contained within the limits established by the foregoing general characteristics of the labor-market and claims history of the period. In that judgment are comprised two separate conclusions: first, that during the reconversion period improper payments were probably at a maximum; secondly, that a survey of claims and labor-market developments establishes in the mind of the surveyor a kind of upper limit, impressionistic, b u t useful, for that maximum. ABUSE AT A M A X I M U M

T h e amount of abuse in unemployment benefits is a function of two variables: the efforts of administrators to man the defenses of the system, and the attempts of claimants to penetrate those defenses. T h e facts assembled in Chapters III and IV taken in combination lead to the conclusion that the first variable was at a minimum and the second at a maximum during the reconversion period. Such a situation may fairly be presumed, in the absence of specific evidence to the contrary, to have produced the maximum of abuse of which the present system 1 is capable. Hence, the reconversion period probably provides that very useful concept and measure, the limiting case. Control

by Administrators

at a

Minimum

T h e success of administrators in thwarting the attempts of claimants to draw benefits improperly depends upon the ability and interest of the administrators. During the reconversion period both ability i T h e qualification "present system" is important. A different system will have different limits. But the best basis for estimating what the limits of a changed system will be is to know what they are for the present system.

CONCLUSIONS OF P A R T II

155

and interest were as far below the long-run normal as they are ever likely to be. THE JOB TO BE DONE. T h e ability of administrators to prevent abuse was unusually impaired during the reconversion period because of the job to be done and the means for doing it. T h e greatest difficulty in the way of effective administration during the reconversion period was simply the overwhelming number of claimants to be handled. Or, to put it more exactly, the sudden increase in their number. N o depression and certainly no period of prosperity is ever likely to pour so many additional millions of claimants in so short a time into the offices of Employment Security agencies. Continued claims in August (1945) were one million; in September they were four million; in October, six; in January, nine. T h i s would have constituted an enormous load even if all the claimants had been run through the office as fast as they could be paid off. But, abnormally enough, job offers of a sort were simultaneously numerous, and claimants had to be processed with a view to placement—that is, they had to be interviewed, registered, reinterviewed, and referred. Other characteristics of the job to be done were minor by comparison, but still serious enough in themselves to warrant mention. T h e norms of "suitability" and "availability" are necessarily somewhat fuzzy even in ordinary times. T h e turmoil of change in the reconversion period made them more so. It was a Heraclitean world. Until the postwar pattern began to emerge it was abnormally difficult to decide what was and what was not "realistic" in claimants' specifications regarding work and wages. T h e fact that many of the changes of the war period were in the same direction as the long-term trends (especially in the cases of women and migrants) imposed a significant restriction on the use of what otherwise might have been a useful simple norm: that unemployment benefits should assist in a return to the prewar status. Reconversion could not be literally reconversion. Benefit charges had been so low during the war period that employers, even those who had been most active in policing the program, became passive. They ceased, for example, to appear for referee hearings. Their return to active participation in the program came late, if at all, and meanwhile administrators were deprived of one of their most effective aids in preventing abuse.

I56

CONCLUSIONS OF PART II

A t worst, administrators can rely on exhaustions of benefits to weed out illegal claimants; but the war came to an end at exactly the correct time to make a second round of reconversion benefits possible (with no intervening job) in States with uniform benefit years (and in Missouri, with its two-year base period). T o block out these secondrounders, mostly women, required extraordinary administrative expedients. In the program of Readjustment Allowances the long duration of benefits, twice as long as in the normal industrial program, worked in the same direction. T w o characteristics of working violators made it more difficult to detect them during the reconversion period. First, an abnormally high proportion of all claimants were interstate claimants, and it is difficult to police interstate claims because the benefit record is in one State and the work record in another.* Secondly, R A claimants were hard to detect, because most of them worked under their social security number, but drew R A benefits under their serial number. In ordinary times there are no R A claimants, but during the reconversion period they made up half of the total claim load. THE MEANS FOR DOING THE JOB. T h e war years a n d even the p e r i o d

between V E and VJ Day had produced few unemployed beneficiaries, and the system to care for them had shrunk proportionately. T h e efforts of the States to rebuild their organizations before the war ended were only moderately successful. Both in numbers and in training, personnel were as inadequate for the task at hand as they are ever likely to be. As for investigative units, they were practically nonoperative. Equipment and space were also less adequate than in ordinary times, and while this was a minor problem compared to that of personnel, still it constituted an additional hindrance to efficient administration in the reconversion period. T h e status of the Employment Service was peculiar in a number of 2 W h e n in 1950 the States found time to investigate the interstate claimant, they discovered that he was much more likely to be a violator than his intrastate brother. T h e y also discovered that their defenses were weakest in this area: " W i t h 11 States making no interstate fraud investigations, and 22 others investigating only special leads specifically brought to their attention, the investigatory phase of the work is badly neglected. In fact only 5 States are thought to have a well balanced investigation program. . . . T h i s general situation is believed to be so serious as to require the immediate attention of each State administrator." (Interstate Conference of Employment Security Agencies, Report of the Fraud Subcommittee of the Interstate Benefit Payments Committee, A u g . 10, 1950,

p. 1.)

CONCLUSIONS OF P A R T II

157

ways, none of which made for greater efficiency. In the first place, it had to lend workers to the Unemployment Compensation unit when it could not afford the loan. Although it is usual for UC to draw upon ES for emergency workers (because when the unemployed are many, job offers, the concern of ES, are fewer) during the peculiar circumstances of the reconversion period when both units were busy, the draft of ES workers to pay UC claims definitely interfered with the proper performance of ES's own work—and it is on the ES side of the office that the initial steps are taken which lead to the elimination of improper claimants. In the second place, the status of the Employment Service was the center of a fierce political fight during the reconversion period, and the resulting feeling of insecurity among its members reduced morale to a very low level. Good personnel was unusually hard to acquire or even to keep. In the third place, during this period ES was a separate organization, responsible, not to the State and the Social Security Board, as was its UC twin, but to an independent body, the Department of Labor. There is an inherent tendency for ES to slight its policing function (by which it handicaps itself while aiding UC) and in the reconversion period this tendency was the freest it is ever likely to be from UC control. In many States that was still not very free. But the proposition stands, and it is important. In the local employment office there were not merely two, but three organizations. The third, of course, was the program of Readjustment Allowances. RA had its own law, its own forms. It also had its own Federal authority on which it depended, the Veterans Administration. This was an unusual, even if not major, difficulty in the way of unified administration. THE WILL TO PREVENT ABUSE. There were several circumstances of the reconversion period which could have dulled the interest of administrators in preventing abuse. Financial responsibility was divided, social pressures were lessened, and there was a policy split. In RA.—In the RA program the States were spending Federal, not their own money. There are indications that this made a difference. Certainly there was less pressure from employers, whose experience rates were not increased by RA payments.

i58

CONCLUSIONS OF PART II

There was also less pressure from the general public (than would normally be the case), because the veterans were a favored group and enjoyed more public sympathy than would a similar group of unemployed civilians in a nonwar period.* In UC.—The situation was reversed, in a sense, in UC, where Federal employees (ES) had a crucial part to play in the guarding of State money. Moreover, the usual UC-ES split on objectives was probably intensified during the reconversion as a reflection of the Federal-State split in the area of general policy evident in the events chronicled in Chapter I. At the same time, therefore, that ES was less than usually under the influence of UC, its objectives were more than usually dissimilar from those of UC. There is evidence that this resulted in a lessened interest of ES in preventing improper payments (as defined by UC). Finally, UC itself was not as interested in the investigation of improper payments as it was to become later and to remain. Even before the reconversion, investigation had always been inadequate. It was not until after the reconversion that the trend turned markedly upward. Interest in investigation was not only in a trough during the reconversion period but also the trough itself was in the lower end of a long-time trend.4 ' A good example is the following. In a large eastern State a veteran had signed his own reporting card—instead of going through the Employment Service—six times. He was detected and disqualified. He appealed. T h e referee reversed the decision, accepting the claimant's explanation that he had done it only to avoid "all this governmental red tape" and thus have more time for his own job hunting. T h e same situation is reflected in a western State in this report from the head of the investigative unit to the director of the agency in 1947: " T h e R A program is one of the foremost factors in increasing the amount of fraud throughout this State and the whole United States. Every fraud investigator and every local office manager knows that it is practically impossible to prosecute a veteran under the present law, and this in turn has had its effect in the attitude of the local offices toward the ordinary Unemployment Insurance claimant. . . . If the veteran is found to have failed to report earnings, the local office makes as complete an investigation as possible and sends the records to Central Office. Six or eight months later, the records will be returned to the local office with orders that an overpayment be set up. If the veteran expresses his willingness to repay the money, the local office collects the overpayment under any terms the veteran sets up as suitable to him. As the money is repaid, the veteran is credited with the amount repaid, adjustment checks are issued, and the veteran can then draw the money again. As was mentioned before, they can't lose." * T h e head of one investigative unit, with more experience in the work probably than any other man, described the change in his own (large) State as follows: " I n the early days, the local offices had no interest in the problem. Later, when my office was created, they resented my activities. Since the end of the war, they have given me 100 percent cooperation and are actively interested themselves." (Personal interview, May, 1950.)

CONCLUSIONS OF PART II

»59

Attempts by Claimants at a Maximum It is probable that attempts by claimants to draw benefits improperly were at a maximum. The proposition holds both for the claimant who was "too much of a worker" and for the claimant who was "not enough of a worker"; and in the case of the latter, "not enough" as measured both by the norm of the law and by the norm of employment. Working violators originate chiefly among persons who have recently changed their labor-force status from unemployed to employed." But in the reconversion period such changes were unusually numerous. Accession rates throughout the reconversion period, but especially during the first year after V J Day, were abnormally large. In the first few months an enormous number passed through the cycle of becoming unemployed, beginning a valid • claim for benefits, and becoming employed shortly afterward. In this group must be included the ten million veterans who were "fired" and rehired during the period. This larger population of potential violators may safely be assumed to have produced more actual violators. Experience indicates that there is a perceptible correlation between violations and the opportunity for them. TOO MUCH OF A WORKER.

NOT ENOUGH OF A WORKER. Three general charcteristics of the period heightened the likelihood that benefits would go to the claimant who was not enough of a worker. First, the unusual size of the flow out of employment. Secondly, the increased gap between past and future wages, along with the lessened gap between benefits and future wages. Thirdly, the confidence engendered in job-takers by the strong demand for labor. The movement out of employment.—Nonworking violators originate chiefly among persons who have recently moved out of employment. They have changed their previous status of employment into either retirement or voluntary unemployment. Just as the working 6 Relatively few working violators are persons who while employed and without leaving their employment open a claim for unemployment benefits. « T h e eligibility rate was also unusually high. In 1940 and 1941 it was about 84 percent. In 1945 it was 91.3 percent; in 1946 it was 87.1 percent; in 1947 it was back to 84.1 percent. T h e rates refer to the proportion of claimants who had earned enough in covered wages to be eligible for unemployment benefits.

160

CONCLUSIONS OF P A R T II

violator fails to reveal his new job, so these nonworking violators fail to reveal their lessened interest in one. Movements out of employment were extraordinarily numerous during the transition. A n increased rate of both discharges and quits resulted from the extensive reshuffling of jobs and workers that took place after VJ Day. T h e abnormally high separation rates can be followed in Table 43. The gaps.—The larger the gap between past wages and proffered wages, and the smaller the gap between benefits and proffered wages, the more likely is the displaced worker to prefer benefits to work. T h e character of his preference may remove him from the labor force entirely or only place him among those whom the agency considers voluntarily unemployed. In either case he is not enough of a worker, by agency standards, properly to be paid benefits. In the reconversion period the first gap was much larger and the second gap much smaller than usual. T h e first gap was larger because past wages were earned in higher-paying industries, in temporarily upgraded jobs, and with opportunity for much overtime; whereas proffered wages were in lower-paying industries, with no opportunity for overtime, and at a rate fixed by the worker's original lower grade. T h e second gap was smaller for the same reasons, since benefits were based on those past higher wages. For all situations the gap was smaller than usual. For some relevant situations it was very small, so small as to be completely ineffective. T h e former clerks and waitresses who returned from work at a war center and were eligible for maximum benefits, if offered their former jobs would have had little financial inducement to accept them. T h e jobs might even have represented a financial loss. T h i s was especially likely if they had worked in a high-income State (such as Michigan or California) and had returned to a low-income State (such as Kentucky or Arkansas). Such extreme situations, and others approaching them, were far more numerous in the reconversion period than in normal times. The strong demand for labor.—The sharpest inducement to take a relatively undesirable job is the fear that no job at all may be available later. Contrariwise, when the demand for labor is strong, the jobtaker feels freer to decline a present job offer—whether to keep himself available for a better offer, or to prolong a vacation or to get work done at home—because he can count on a future offer at least as good as the one declined. This is why prosperity and the quit rate are cor-

CONCLUSIONS OF PART II

161

related positively. T h e mood of most workers in the reconversion is typified by the reply of the ex-corset-sewer (Chapter III) when she was asked what she would do when she exhausted her benefits: " O h , go back to sewing. There are plenty of sewing jobs around." In 1949, after the recession had set in, this carefree, confident attitude diminished, and Employment Service interviewers found it perceptibly easier to interest claimants in the dwindling job opportunities. T h e prevalence of the claimant who may possibly be "not enough of a worker" to satisfy agency standards is definitely a reflection of the prevalence of job openings. 7 Those three characteristics of the period worked to increase the number of payments which were improper both according to the norm of the law and according to the effect on the level of employment. Norm, of the Law CLAIMANTS NOT IN THE LABOR FORCE. Of the abnormal number of separated workers an abnormal proportion left the labor market, either temporarily or permanently. T h e six-million decrease in the number of "extra" workers (Table 2) is one indication of the size of the movement out of the labor market. T w o subgroups warrant special notice: women and veterans. Women.—In the year following V E Day the number of women in the labor force instead of increasing by a couple of hundred thousand, actually decreased by about three million. These women could have made a plausible claim (if they had wished) to be still members of the labor force, for they were women of working age and with working experience. T h e y could also have claimed considerable unemployment benefits, because during the war they had worked steadily and for high wages. Even if the incidence of mistakes and deceit were normal among that group, one would expect from the larger source a larger crop of illegal claimants. But the incidence was probably higher than normal. T h e r e are indications that many women considered themselves en1 Depression might produce more of such claimants than prosperity if (a) the period of depression were long enough to allow a whole generation of y o u n g workers to be brought up in a habit of dependency and (b) the duration of benefits were unlimited. T h e r e are indications that something of the sort occurred in England during the thirties. See, for example, Men without Work: a Report Made to the Pilgrim Trust (London, Cambridge University Press, 1938), pt. III.

162

CONCLUSIONS OF P A R T II

titled to the benefits, either because they had "paid in for them" (confusing them with old age benefits) or because they "deserved them" (as a kind of bonus for their war contribution). Veterans.—In the year following VJ Day there were always between one and two million veterans out of the labor force and yet not in school. For males of their age this was an extraordinary number, several times what it would have been in normal times. Practically all of them, of course, had sufficient service to claim readjustment allowances. Even if the incidence of mistakes and deceit were normal among the group, one would expect from the larger source a larger crop of violators. But again there is reason to think that the incidence was higher than normal. Some mistakenly thought (and were even taught at some demobilization centers) that a "readjustment allowance" was something to be used until a man was readjusted, whether by a vacation or otherwise. Others understood the limitations of the program well enough, but, like the women, had a "bonus" complex. T h e y might not "chisel" under ordinary circumstances; but this was different—this was taking "occult compensation," to borrow a term from the ethicians, for the sacrifices required of them by the Government during the war. T h e size of the gap between benefits and available wages was especially ineffective in the cases of some veterans who were looking for a vacation and of some who were waiting for school to open. These are the claimants who resist necessary changes. They are likely to be most numerous where the greatest changes are required and where the required changes are most distasteful. For an unusual number of claimants in the reconversion period the required changes were unusually disagreeable. Some of the reasons were given above. There are other reasons, also, especially in the case of two groups. Warworkers.—With millions of the regular workers at war and competition for jobs thus diminished, many warworkers advanced into positions, frequently by means of job dilution, which they could not hope to retain when superior workers returned to compete with them. Some did advance in skill, but in skills specific to war industries. After the war such industries not only substituted more skilled for less skilled workers but also cut back the total number of workers employed, so that there was no demand for the new skill, real CLAIMANTS VOLUNTARILY UNEMPLOYED.

CONCLUSIONS OF PART II

163

though it was. A s a result of both influences, in the reconversion period for an extraordinarily large n u m b e r of workers the n e x t j o b had to b e inferior. T h e narrowed gap between " n e w " wages and the benefits based on " o l d " wages offered less of an incentive than usual to make the unpleasant change. Veterans.—In the first phase of the reconversion more than a million veterans a month ( T a b l e 43) were being told that their j o b was finished—and that it was up to them to find another. Some of them (about half) stepped into jobs waiting under their "veteran's preference" and made the transfer without difficulty. B u t for others the move was beset by many more difficulties, and hence inducements to delay, than w o u l d be the case normally. Some had had little or no previous work experience and yet by the time they returned from the war felt too old to compete with high school seniors for beginners' jobs. T h e training which some of them had received in the armed forces was not of a sort that could be used directly by civilian employers, yet it made the men u n w i l l i n g to accept unskilled jobs. 8 For some just the exalted excitement of their last j o b — w a r — m a d e any average civilian j o b too tame to be appealing. In general, d u r i n g this reconversion period the difference between the last and the next job was extraordinary, and an extraordinary difference (unless it be for the better) constitutes an extraordinary inducement to delay acceptance of the change. T h e normal wage-benefit relationship was missing completely in the case of the veterans. N o matter what their past or present industrial abilities were, they received twenty dollars weekly while unemployed. For some of them that sum represented a distinctly larger percentage of wages in the jobs that were available (to them) than if, as in normal times, the benefits had been based on past wages earned in the market by themselves. For the young, for the untrained, for the Negro, for the small-town worker, or for the southern w o r k e r — t h a t was usually the case. Norm of

Employment

Some of the beneficiaries might have been employed workers if it had not been for unemployment benefits. T h a t was especially likely 8 T h e number of "skilled" truck drivers produced by the army was something of a standing joke in the employment offices. In the early phases of the reconversion there were twice as many applicants as there were jobs.

164

CONCLUSIONS OF P A R T II

in the case of nonworking violators. Many of the forces making for nonworking violators of both classes could have made for a decreased labor supply, also. Since the number of nonworking violators was abnormally large, the number deterred by benefits from entering employment could also have been abnormally large. Nevertheless, it is not as clear for the norm of employment as for the norm of the law that the reconversion period constitutes a limiting case. It is possible that benefits tend to have a greater undesirable effect on employment during a period of deflation than during a period of inflation such as the reconversion period was. I suspect that the possibility is limited, however, to a protracted period of depression—one long enough to produce a deterioration in the moral fiber of the work force, especially of the younger members.9 T h e payment of benefits over periods as short as those provided in our present system would scarcely produce that deterioration. In a short depression the chief way in which unemployment benefits might affect employment unfavorably would be by preventing necessary downward adjustments of wages. But for two reasons this possibility also lacks much practical importance. First, economic science is usually unable to distinguish between situations when such adjustments would be helpful and when they would be harmful. Secondly, the extent to which benefits would hinder desirable adjustments would be insignificant in comparison with the extent to which union policy would have that effect, independently of any system of unemployment benefits.10 Moreover, it is for periods of recession that the "purchasing power" theory chiefly has validity; and unemployment benefits do help to maintain consumption expenditures, at least temporarily. On balance, it seems likely that what unfavorable impact unemployment benefits have on employment is greater in periods of strong demand for labor, such as the reconversion period was, than in periods of depression. L I M I T S ON T H E

MAXIMUM

After an allowance has been made for the proportion of payments which probably were proper in the reconversion period, only the re» For a description of apparent instances of this in the long English depression of the thirties see: Men without Work: a Report Made to the Pilgrim Trust (London, Cambridge University Press, 1938), pt. I l l , section III. Unemployment benefits strengthen union policy, of course, but are not essential to it.

CONCLUSIONS OF PART II

165

mainder can possibly be improper. A kind of upper limit, therefore, can be assigned to improper payments by weighing the evidence for proper payments. Evidence

for the Limit

That evidence is chiefly the characteristics of the labor market of the period and the corresponding characteristics of the claims series (Chapters IV-V). A changing labor force can reasonably be expected to produce more involuntary unemployment and proper claims for unemployment benefits than a stable labor force. T h e greater the changes which the labor force had to execute during the reconversion, the greater is the proportion of accompanying unemployment that can be presumed to be involuntary and the proportion of claims that can be presumed to be proper. Chapter IV reviewed the main changes in the labor force: in its size and age-sex composition, and in its industrial, occupational and geographical concentration. Approximately eight million "extra" persons came into the labor force during the war. They would not have been in the labor force if the need for men and materials in the armed forces had not created a vacuum. When that need and that vacuum disappeared, so did their places in the labor force. T h e "extras" left the labor force again. If they had all withdrawn immediately, this particular change in the labor force would not have produced any unemployment. But not all withdrew, and not all those who did withdraw did so immediately. Of those who remained, most had to change their jobs because of changed conditions. More than ten million veterans were returned to the civilian labor force by the end of 1946 and had to be fitted into jobs. T h e "fitting" process was made difficult for all by the speed of demobilization and for some by changes in themselves which made them unwilling to return to their prewar jobs. Industries changed their relative positions. Manufacturing, especially the manufacture of munitions, absorbed an abnormal number of workers during the war and dismissed them again with the return of peace. T h e other industries also experienced changes in their relative positions—gaining or losing workers during the war and reversing the process during the reconversion. Occupational changes were not as extreme, but were, nevertheless, the largest the economy

166

CONCLUSIONS OF PART II

has ever experienced. Geographical changes brought about a concentration of war industries that meant a similar concentration of dismissed warworkers and a consequently greater difficulty in finding new employment. Finally, the characteristics of a disproportionate part of the dismissed workers—the females, the aged, Negroes, the half-trained—made their reemployment unusually unlikely and their unemployment unusually prolonged. Was this amount of disturbance in the labor force, a literally unprecedented amount, enough to "justify" the level of claims and the level of employment which accompanied the process of reconversion? Or was the level of claims too high and the level of employment too low to be explained even by this kind of labor-force history? The level of claims was marked out in Chapter V. In 1946, the central year of the reconversion, only 8.5 percent of all the benefits provided by the UC program were actually used; in the R A program, 12.6 percent. Roughly, 90 percent of all the unemployment benefits provided by the nation went untouched. In the UC program never more than 5 percent of those eligible were on the rolls at any one time, and during the year they averaged only 3 percent. The claimant rolls were weighted heavily by those for whom demand was least strong (females, the aged, Negroes) and by those last employed in the specifically war industries (metals, aircraft, shipbuilding). Industrially and geographically the heaviest claims-loads were concentrated in munition centers. The Buffalo-Rochester contrast was typical of the reconversion period. T h e extent to which claims were war-related creates a presumption in their favor that they were proper claims. One expects to find more unemployment among groups more disturbed by the war and is inclined to admit, in a provisional way, its voluntary character. The same fact lessens the significance of the claims which were not proper. T o the extent that they stemmed from the war they represented abnormal rather than usual conditions, the limit rather than the mean. That was the claims picture in the most disturbed period in the history of unemployment benefits. As a first approximation, one is inclined to concede that the picture, judged by either the norm of the law or the norm of employment, is "reasonable." First, by the norm of the law. The impression created is strong that most payments were made in accordance with the law. The availability and suitable-work provisions of the law show unmistakably that

CONCLUSIONS OF PART II

167

the system was designed, in general, to pay benefits for the kind of unemployment that resulted from the labor-force changes made necessary by reconversion. The system was designed to lessen the personal losses associated with the social gains of a dynamic, changing economy; and in the reconversion period the economy was changing at an extraordinary rate. In anyone conversant with the law, and studying the two general pictures—of claims and labor-force changes —glancing from one to the other and back again, the conviction is bound to grow that most of the benefit payments of the reconversion period must have been according to the mind of the administrator and therefore proper according to the norm of the law. T h e positive evidence adduced in Chapters V I I - I X for the existence of illegal payments must be evaluated within the limits set by this first general appraisal of the situation. T h e payments may have been according to the law; but was the law itself proper? Or did it grant benefits on terms that worked to the disadvantage of society during the reconversion period? More precisely, did the payment of benefits legally or illegally, have the effect of retarding the process of reconversion by reducing the supply of labor? T h e full discussion of this possibility is reserved for Chapter X , but here it may be said that unemployment benefits would have reduced the supply of labor either by decreasing the labor-force-participation rate or by increasing the unemployment rate. If they did either, the effect was at least not great enough to be evident in the national aggregates. Labor-force-participation rates remained actually above normal during the reconversion period. T h e unemployment rate at its highest never quite reached 5 percent. Its average during 1946 was 3.9 percent; during 1947, 3.6 percent. These are rates which our society has been accustomed to associate with the prosperity phase of the business cycle. T h e impression is strong that if unemployment benefits did lower employment in the reconversion period they did not do so enough to be serious or even socially significant. That much can be said as a first approximation to a more adequate judgment. Use of the Upper

Limit

The upper limit established by Chapters IV and V is necessarily vague. It cannot be expressed as an exact measure, but must be merely an impression. Of what use is such a limit? It is useful only for making

168

CONCLUSIONS OF P A R T II

the larger choices—for example, between the extreme positions represented by Senator Kilgore and his bill and by Claude Williams and his proposed benefit moratorium. 11 Even for such choices it will seem more useful to some persons than to others, depending on the weight a person assigns to the advantages of unemployment benefits. T h e persons who weight the advantages the most heavily will probably find that the evidence of Chapters I V - V is sufficient for deciding not only that a moratorium was unnecessary but even that the Kilgore bill was feasible. In their view the evidence of the general survey leaves so little room for abuse that improper payments could not possibly have been great enough to outweigh the advantages of a very liberal program. T h e persons who weight the advantages of unemployment benefits somewhat less will find the evidence for proper payments less conclusive. For these persons the upper limit established by the survey may be sufficiently low to exclude Claude Williams' position but may still leave room for positive evidence on the existence of improper payments that could show the Kilgore proposals to have been unwise, and that could even counsel some tightening of the existing programs. Those who weight the advantages least may not find the evidence sufficient to preclude even Claude Williams' position. When the advantages of having unemployment benefits are so few, even a small amount of abuse can outweigh them. Of the three types of persons, the first may consider the further investigation of the charges of abuse interesting, but superfluous; the other two will consider it essential. But for all, the general investigation will have determined the outer limits within which any further answers must fall. That is to say, the positive evidence—given in the next four chapters—for the existence of improper payments must be so interpreted as to be compatible with the general history of the period. Because the specific evidence is fragmentary, that general norm of interpretation must be put to considerable use in drawing final conclusions. 11

P- 35-

PART III

SPECIFIC INVESTIGATION OF ABUSE

CHAPTER

VII

WORKING VIOLATORS STATE OF T H E

DATA

F A I R L Y O B J E C T I V E M E A S U R E M E N T S are possible in the case of working violators; but for nearly all the States the task has remained merely possible. Even for this simplest type of improper payment data are meager. T h e "Fraud Questionnaire of 1948," described in Chapter I I I , was practically limited to working violators. T h e lack of information in 1948 disclosed by that questionnaire indicates clearly how little was known of the situation in the reconversion period. Because data of any sort are so scarce, this investigation does not limit itself strictly to the reconversion period. Some prereconversion and some postreconversion material (also meager) is included for the indirect light it sheds on the intervening period. T h e available data are obscure, as well as meager. For that there are three chief reasons. First, statistics are usually given without any indication of their methodological source. But the significance of data drawn from different sources varies greatly, as is explained below. Secondly, it is not always clear whether the data refer to all overpayments or only to some limited species of them. A given set of figures may relate to: (a) All established overpayments, including those attributable to agency error, as well as those for which the claimant was at fault, and including among the latter nonwillful as well as willful cases.1 (b) Only overpayments for which the claimant was at fault. (c) Only overpayments due to willful misrepresentation by the claimant. Note that at this point a considerable degree of discretion becomes operative, and the measurement of this category is not entirely objective. T h e exact process by which total overpayments are 1 Including, also, cases of unemployment benefits overlapping with vacation separation pay, and pensions in States where such overlapping is prohibited.

pay,

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WORKING VIOLATORS

separated into the two boxes labeled "Willful" and "Nonwillful" becomes crucial; but there is never any indication of that process accompanying the figures. I found that the procedure varied not only between States but even in the same State from time to time, depending on how busy the investigative section happened to be. If the calendar of the section was crowded, a larger proportion of cases, especially those involving small amounts, would be resolved automatically in favor of the claimant and dropped into the "Nonwillful" box without investigation. R A cases tended to be dropped into that box more easily than U C cases, because the penalties attached to willful misrepresentation were so much more severe in the veteran program. (d) Only those cases of overpayment in which the proofs for willfulness could meet the technical standards of legal evidence and where prosecution in court was recommended. Thirdly, the period to which data refer is often uncertain. Cases of overpayment discovered in one month may relate to wages and benefits paid that same month or to a period one, two, or more years earlier. T h e former is the more likely if one method of detection is utilized, the latter if a different method is used. More often than not the available records combine these results indiscriminately in a single figure. When that is the case there is no way of calculating accurately the overpayment rate, because there is no way of relating the overpayments to the beneficiaries and benefits paid in the same period. T h i s defect spoils some data where neither of the other two defects exists. SOURCES O F T H E

DATA

There are two general ways in which the existence of working violators comes to notice. T h e first is the way of individual "leads." T h e second is the way of systematic audit. During these first ten years of the program most of the States have relied entirely upon the first method. It consists in following individual leads as they are supplied irregularly by the local offices and the public. In the local office a claims-taker may notice some suspicious circumstance about the claimant: that he is wearing working clothes, or that he comes to the office at noon hour, or that he is an employee of a firm which has recently recalled its laid-off workers. Or a claims-

WORKING VIOLATORS

171

e x a m i n e r may find a claimant suspiciously apathetic t o w a r d a g o o d j o b offer. A m o n g the general p u b l i c the i n f o r m a n t may be a d i v o r c e d w i f e o r a j i l t e d suitor or a socially-minded citizen. A p h o n e call or a n anonym o u s letter may reach the local office saying that so-and-so is d r a w i n g benefits, b u t that he is also w o r k i n g at such-and-such a place. Employers sometimes detect the v i o l a t i o n through their o w n obs e r v a t i o n — a s w h e n they notice that an e m p l o y e e asks for time off each w e e k at a certain h o u r or uses a different social security n u m b e r than previously. M o r e o f t e n the employer becomes the source of d e t e c t i o n in connection with two kinds of i n f o r m a t i o n supplied to h i m by the local office: (1) notice that one of his employees has filed a n initial claim and has been d e t e r m i n e d eligible for benefits; (2) notice of charges made against the employer's experience-rating account. T h e first w i l l expose the employee w h o has started to draw benefits witho u t leaving e m p l o y m e n t ; the second may ( d e p e n d i n g o n the a m o u n t of detail supplied) expose the employee w h o has c o n t i n u e d to d r a w benefits after r e t u r n i n g to e m p l o y m e n t . T h e r e is n o adequate i n f o r m a t i o n o n the relative i m p o r t a n c e of all these sources. It seems certain, however, that the p r o p o r t i o n s vary, d e p e n d i n g on (1) the level of administrative efficiency in the offices, local and central; (2) the interest s h o w n by employers, 2 w h i c h is a f u n c t i o n usually of the type of experience r a t i n g in the State a n d also of the type of i n f o r m a t i o n supplied to t h e m by the agency; (3) the interest shown by the general p u b l i c , a f u n c t i o n largely of the agency's publicity program. T h e second general m e t h o d of detection consists in a systematic comparison of work a n d benefit records. It can be a postaudit or a preaudit procedure. T h e postaudit compares claims records w i t h wage records and occurs at a p o i n t of time after, usually considerably after, the occurrence of the violation. T h e p r e a u d i t compares claims records with accession notices and aims at stopping the would-be violator in the attempt. T h e postaudit

may be either particular or general in scope. In the

2 T h e Annual Report for 1950 of the Michigan Unemployment Compensation Commission states (p. 11) that approximately 85 percent of all potential fraud cases are brought to the attention of the agency by employers. T h a t situation is exceptional. It is due to the unusual provision of the Michigan law whereby employers receive a copy of the benefit check sent to their former employees.

I7s

WORKING VIOLATORS

particular postaudit examination of claims is confined to those of a particular industry or locality, usually one in which the incidence of violations is expected to be relatively high. New York, for example, has concentrated on its garment industry and on its longshoremen. Pennsylvania has begun to select fruitful areas for investigation by means of certain by-products of experience rating. A n average contribution rate is calculated for a given industry, and where an employer in that industry has a significantly higher rate than the average, and no other explanation appears for the difference, the benefit-wage records of that employer's workers are audited to see if part of the explanation is fraudulent claims. Michigan has planned surveys which "will be directed particularly toward areas of incidental employment and high labor turnover, such as wash-racks, bowling alleys, and lunch rooms." California has been giving its chief attention to certain agricultural areas where workers have been working full time for farmers while drawing benefits based on their last industrial job. Ohio makes special arrangements with the large-city postoffices to check their pay rolls after the Christmas holidays. T h e general postaudit matches wages and benefits either for all claimants (the complete audit) or for a sample of claimants so chosen as to be representative of all (the sample audit). Fortunately, there are a few instances of both the complete and the sample general postaudit which cover some of the experience of the reconversion period. CONTENT OF THE DATA

Data from Leads T h e least general significance attaches to the data obtained from the first method of detection, that is, from the irregular investigation of individual leads. There is no ascertainable relationship between the number of overpayments discovered by this method and the probable total number of overpayments. Hence, such data provides no index, except a rather meaningless minimum, of the proportion of working violators among the claimant population. There is no ascertainable relationship for two reasons. In the first place, the method was not fully applied even in its own limited area. Not all the promising leads that came in were investigated, and many more could have been obtained with ease. T h e States regularly have received more of these leads than they

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have had staff enough to investigate. T h e situation varied between States and over time; but it held true, for example, even in New York and California, which had the most fully-staffed investigative units, and even in 1948 and 1949, when other States began to be equipped with such units. It was much more true in the reconversion period, of course. Many States assured me at that time that the supply of such leads could be increased almost at will. T h e agency had only to give the matter a bit of publicity, such as announcing a forthcoming check-up or reporting a recent conviction, and immediately the letters and the phone calls would increase. But when the investigators could not pan the available loose ore, what use was there in digging for more? s But, in the second place, even if this method were completely exploited, its results would still bear no definite ratio to the total of working violators. There is nothing in the method which insures that it uncovers all or any assignable proportion of all the violations. From such an uncontrolled sample there is no way of estimating the size of the universe. That is not to say that the results of the method lack all significance. On the contrary, they are capable of providing interesting sidelights on several aspects of the problem. T h e following data 4 represent the experience of New York for, roughly, the reconversion period—the calendar years 1946 and 1947. During that period the method of systematic audits was practically inoperative, so that the data are the result almost entirely of the first general method. During the two-year period from December 1, 1945 to November 30, 1947, 15,391 new cases of overpayment were established, of which 2,259 were the result of wilful misrepresentation while 13,132 were due to circumstances other than fraud. [During the same period:] 19,651 new readjustment allowance cases were discovered, of which 188 were due to wilful misrepresentation and 19,463 to other causes.

In the UC program the 15,391 cases of overpayment represent about 1 percent of the number of different persons-per-year who re3 T h e failure to mine this vein more intensively was not owing to its poor quality. T h e percentage of leads sufficiently accurate to result in recoveries more than paid f o r the cost of investigating them—according to the State administrators. * Interstate Conference of Employment Security Agencies, Report of the Sub-committee on Fraud Prevention and Detection, J u l y , 1948 (hereafter referred to as Interstate Conference Report on Fraud), pp. 7 0 - 7 1 .

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WORKING VIOLATORS

ceived benefits during the two years.' And the 2,259 cheaters represent about 0.2 percent of that same number. T h i s is the State's complete record of illegal U C payments for the period. But it is probably far from being a complete record of the amount of illegal abuse that actually occurred. It omits, for one thing, nearly all nonworking violators, who rarely get into overpayment statistics. But even as regards working violators the record is certainly incomplete. T o see that, one need only compare it with the records of States using the complete audit for this same period, as given below. Delaware, for example, was finding in 1946 and 1947 that 11 percent of its beneficiaries were overpaid individuals. New York itself later found in its Test Office that an average of 10 percent of all beneficiaries going back to work were working violators. 9 In a year that proportion would apply to nearly the total of different beneficiaries in that year. T h e willful/nonwillful ratio is interesting in two respects. First of all, it is lower in the reconversion period than in either the earlier or the later periods. In the reconversion period about 15 percent of the established overpayments were determined to be willful. Both before and after the reconversion the proportion is three or four times as large. Figures are available for the years 1938-1941. (There is a hiatus in the records after that until the end of the war.) In those years a total of 24,881 cases of overpayment were discovered, of which 11,911 were judged to be the results of willful misrepresentation: that is, almost 50 percent. If the New York sample general audit described later be allowed to stand for the postreconversion ratio, the rate then was even higher: about 60 percent. T h e explanation of the difference between 15 percent and 50 or 60 percent can only be guessed at. Very likely it was chiefly due to the lack of time in the reconversion period to conduct the field investigations and the personal interviews that normally are necessary for a declaration of fraudulent intent, but are not required for the declaration of a simple overpayment. 7 Since the figures are New York's, and since New York ranks well up among the States in the matter of administrative efficiency, the same conclusion, that there was less thor5 Sum of the first payments in the two years (Social Security Yearbook). o See Chapter VIII, Exhibit 6. 7 Possibly agency errors accounted for a larger proportion of overpayments in the reconversion period; b u t there is no positive evidence for it.

WORKING VIOLATORS

175

ough screening in the reconversion period, may be applied with reasonable safety to the experience of the average State, although most States do not have comparable data by which to establish the fact. In the RA program the 19,651 cases of overpayment represented about 2 percent of different beneficiaries." The proportion is significantly lower than the Massachusetts ratio of about 6 percent for roughly the same period. In the R A program such comparison is less meaningful than in the UC program, because a large proportion of these R A overpayments consisted of overlapping subsistence allowances that were detected by the Veterans Administration and not by the individual States. The difference between New York and Massachusetts would be even larger if they could be compared on the basis of only those cases of overpayment which were detected by each State itself. The willful/nonwillful ratio is even smaller for R A (1 percent) than for UC (15 percent). For this striking difference there were probably two chief reasons. First, very many of the 19,651 R A overpayments consisted of overlapping subsistence and readjustment allowances, as just mentioned. Because of endless errors made by both the Veterans Administration and the veteran claimants in relating properly the beginning and ending dates of these programs, there existed a strong presumption that such an overpayment was "nonwillful." Hence, even in cases in which the circumstances appeared suspicious, the general and well-founded presumption of confusion made it extremely difficult to establish intent to defraud. Secondly, the penalties attached to veteran fraud were much more severe than in the UC program. Section 1300 (of Public Law 346) made fraudulent claimants "ineligible to receive any further allowance under this title"; and Section 1301 provided a thousand-dollar fine and a year's imprisonment.0 As a result, referees and claims-examiners tended to restrict their decisions of fraud to the more malicious cases and to demand more stringent proof for those. Similar figures on overpayments derived from leads could be given for a number of other States; but they would be equally unrelated to any controlled parent population of examined payments and hence equally unable to illuminate the problem of chief interest: what pro» Cumulative first payments. » T h e penalty under 1300 could be assessed by the State Unemployment Compensation Agency; the penalty under 1 3 0 1 , only by a Federal court.

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WORKING VIOLATORS

portion of beneficiaries and benefits are illegal? For that, reliance must be placed on the findings of more systematic searches. DATA

FROM

SYSTEMATIC

AUDITS

Postaud.it Although data from particular audits have one characteristic which data from leads lack, namely, a defined parent population to which the final results can be referred, they do not have the generality of the data from leads and hence cannot be taken as providing an index of average abuse. Percentages derived from special surveys in areas selected precisely because they are thought to be "hot spots" in the State provide only a kind of maximum index. T h e y indicate what the probable proportion of violators is at points of maximum concentration. There is one sense in which they might be taken as an index of average abuse—that is, as indicating how bad the whole program could become. For there is considerable evidence pointing to the conclusion that abuse in a public program is like a cancer cell—it spreads fast. W h e n half a dozen men or women in a shop have demonstrated how easy it is to add twenty dollars to their weekly wages, they will not long be without imitators. Each new participant lessens the social stigma attached to the practice and makes it easier for still others to follow. "Everybody else is doing it." New York's policing of its garment industry offers one of the betterdocumented studies of special areas.10 It illustrates both the need for particular audits and their efficacy. T h e garment industry was selected for investigation by New York because a relatively high percentage of the claimants in New York City (around 40 percent) 1 1 come from that industry; because the method of payment, on a piece-work basis, enables workers to conceal evidence for days of employment, sometimes with the cooperation of employers; and because many leads indicated that these potentialities for fraud were not going unexploited. T h e first study 12 was made in 1941 on a sample of 125 firms. It disclosed that of 6,135 employees who had collected benefits, 1,799 had THE PARTICULAR AUDIT.

10 T h e following data are drawn partly from the Interstate Conference Report on Fraud, mentioned above, partly from unpublished material of the New York agency. " Besides comprising a large part of the N.Y.C. labor force, it is an irregular industry with a pronounced seasonal pattern. T h e industry embraces about 400,000 workers. 12 Interstate Conference Report on Fraud, p. 80.

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177

misrepresented; and of the total of $540,125 collected by these employees in benefits, $85,940 had been obtained by misrepresentation. Among these firms 29 percent of all beneficiaries, 16 percent of all payments, were fraudulent. T h e amount of nonfraudulent overpayments discovered was not recorded. Serious work on this survey was not possible, and perhaps not necessary, during the war years. It was taken up again, however, toward the end of 1947 on the basis of an annual sample of 25,000 beneficiaries in this industry. The audit operates in the following manner. A number of employers are selected for investigation, that is, employers of the 25,000. Employees of these employers who drew four or more benefit checks in the period of the survey are investigated, that is, their benefit histories are compared with their wage histories. In New York this comparison is made by field pay-roll examiners, who visit each employer. If the overpayments thus uncovered are of a minor or doubtful nature and if the claimant has had a good previous reporting history, the case is automatically dropped into the "nonwillful" box. In all other cases the claimant is summoned for an interview, and then it is decided whether the violation is willful or otherwise. No continuous records of results have been kept. Compilations have been made, however, for particular occasions, and I have had the use of three such records. One seems to have been made on the occasion of the "Fraud Questionnaire" sent out to the States in 1948 by the Bureau of Employment Security. Another was made for the Interstate Conference report by the Subcommittee on Fraud earlier in that year. The third was made at my request. T h e three overlap somewhat, but since none of the three has all the advantages of the others, all three are given. The first one records the results of investigations undertaken during the twelve-month period ended June 30, 1948—which means that it covers claims filed largely in 1946. Out of 17,027 claimants investigated, 1,817 were considered by the agency to have filed fraudulent claims. That is a fraud rate of 10.6 percent. Data on nonfraudulent overpaid claimants are lacking. The second covers the activities of the six-month period, November 1, 1947, to April 30, 1948, and has the following record: 13 is Ibid., p. 82. T h e agency estimated that for every dollar spent in making this survey approximately $2.44 was set up in overpayments, and in addition approximately $9.47 in

178

WORKING VIOLATORS Number

Cases Investigated Overpayments Fraudulent Nonfraudulent 14

10,128 I >4>429 7,337 917 296 179 117 2 3>776 653 366 287

If t h e 653 u n c o m p l e t e d cases a r e d i s t r i b u t e d i n t h e same " ratios as a r e t h e c o m p l e t e d cases, t h e final results b e c o m e : Number

Cases examined Overpayments Willful Other

24,429 454 273 181

Percentage

100.0 1.8 1.1 0.7

T h e r e is a v a i l a b l e , f o r t u n a t e l y , f o r p u r p o s e s of c o m p a r i s o n a similar s t u d y m a d e by t h e N e w Y o r k agency of its R A c l a i m a n t s . It differs f r o m t h e U C s t u d y chiefly i n its t i m e r e f e r e n c e (the c a l e n d a r year 1946), i n a s s u m i n g a n a v e r a g e wage of $ 3 5 f o r t h e v e t e r a n s (166 perc e n t of t h e weekly b e n e f i t of $20) f o r t h e p u r p o s e of c o n s t r u c t i n g t h e t a b l e of " a l l o w a b l e wages," a n d i n u s i n g a larger s a m p l e . T h e results w e r e as follows: 20 Cases examined Earnings exceeded allowed wages in quarter; weekly record obtained f r o m employer Concurrent payments in week; referred to local office Overpayments established by local office Cases completed Cases not completed Responses f r o m employers p e n d i n g Responses f r o m local offices p e n d i n g

49.070 7.538 2.157 849 47.°43 1,927 1,682 245

If t h e 1927 u n c o m p l e t e d cases a r e d i s t r i b u t e d in t h e a p p r o p r i a t e ratios, t h e final r e s u l t s b e c o m e : i» If X represents the added possible overpayments, and y represents the added actual overpayments, then: X : 366 = 9 1 7 : 7 , 3 3 7 y : X = 2 9 6 : 630 y -f- »96 = Total overpayments 20 From unpublished data.

WORKING VIOLATORS Number

Cases examined Overpayments

49.070 1,171

185 Percentage

100.0 2.4

T h e further breakdown into w i l l f u l and n o n w i l l f u l cannot be given, because no record was ever made of that final d e t e r m i n a t i o n — no one seems to know why. In the U C audit 61 percent of the overpayments were adjudged fraudulent. If the same ratio be presumed to exist for R A , the fraud rate among N e w York veterans as given by this sample was about 1.5 percent in 1946. It is interesting to note that a much higher percentage of replies from employers were still pending in the R A sample. Possibly employers were less interested in cooperating when their experience ratings were not affected. Possibly, also, they had more sentimental feelings toward the veterans. T h e higher violator rate in the R A program 21 accords with other evidence; but for two reasons this particular evidence is less conclusive. T h e R A rate covers the experience of a whole year; the U C rate that of only half a year. As explained later in the chapter, the rate tends to be higher when it covers a longer period. Furthermore, the particular quarters covered by the U C audit were such as to produce abnormally low rates. T h e claims load at that time was abnormally high, and chronic violators form a smaller proportion of a temporarily high claims load than they do of a low. T h e Massachusetts data, given below, show a lower rate for the last quarter of 1945 than for other periods. 22 Vermont began to investigate working violators in 1949.23 It began with a random sample of U C and R A claimants w h o had drawn benefits in the 1947-1948 benefit year (the last three quarters of 1947 and the first quarter of 1948). Of the 1,800 U C beneficiaries investigated, 4.9 percent were found to be violators, and 1 percent were considered sufficiently serious to be prosecuted in court. For the 598 R A beneficiaries investigated, the corresponding rates were 9.2 percent and 2.7 percent. T h e agency found lower percentages in 1951, when it investigated 21 Note that the higher R A rate of overpayment cannot be attributed to the usual subsistence-allowance complication. This R A study compared only benefits and wages. 22 For both reasons it is unwise to let this particular New York UC rate represent— as has been done—"the" rate of violation among U C beneficiaries. 23 This late beginning of serious systematic investigation is typical of most of the States.

186

W O R K I N G VIOLATORS

a random sample of 8,443 U C claimants who had drawn benefits in the 1949-1950 benefit year. Of these, 3.2 percent were found to be violators, and 1 percent were judged to be cheaters. T h e lower rates may have resulted partly from the deterrent effect of the agency's increased 24 investigative activity after 1949. But they are probably owing also to the higher level of claims in the 1949-1950 benefit year, a period which included most of the recession. T h e number of potential violators, and especially the number of cheaters, is probably something of a fixed quantity in the short run. If so, it makes up a smaller part of a suddenly increased claims load. A unique classification of data according to exhaustees and nonexhaustees was available in this second Vermont sample. T h e differences are striking. T h e percentage of violators among exhaustees was 4.4; among nonexhaustees, 1.4. T h e percentage of cheaters among exhaustees was 1.4; among nonexhaustees, 0.38. N o general conclusion can be drawn from this one sample; but the large difference between the two classes certainly seems significant. It invites more investigation by more States. THE COMPLETE GENERAL AUDIT. T h e most reliable index of the proportion of working violators in the claimant population is supplied by the general audit; and the most reliable form of the general audit is the complete audit, which matches all benefit histories with their corresponding wage records. Delaware and Massachusetts have the best set of records for the complete audit. Each has certain advantages which the other lacks. T h e Delaware data are presented first because they can be presented more simply, although the Massachusetts data begin earlier. Delaware. In the Delaware audit the beneficiaries of each quarter are listed by social security number. T h i s list is compared manually with wage records for the same quarter. For each case in which there were wages and benefits in the same quarter, regardless of amount, a calendar letter is sent to the employer indicating the days on which the employee drew benefits and asking whether wages were paid for any of those days. Delaware is unusual in that it does not use the device of "allowable wages" to reduce the number of letters sent out. Every case of wages and benefits occurring in the same quarter is in« O n e measure of the increase is the history of court convictions: 14 in 1948; 3» in 1949; and 117 in 1950.

WORKING VIOLATORS

187

vestigated. Delaware's screening is closer, therefore, than that of Massachusetts. Screening that closely may or may not be worth the cost involved; but it does constitute one of the advantages of the Delaware data as a measure of improper payments. Another advantage—one which it shares with Massachusetts—is its coverage of even the smallest employers. Coverage of "one or more" reduces the area of noncovered employment, which escapes the operation of the audit. Once the overpayments have been discovered by the audit, the agency decides whether the claimant was guilty of willful misrepresentation. Cheaters not only repay the money illegally received, as do all violators, but are in addition disqualified from benefits for a year following the date of the act. They may also be prosecuted in court and fined or imprisoned. Table 17 is a view of the operation of the audit during its first four years. It is not a perfectly clear view. It includes more than overpayments to working violators discovered by the audit; it includes three classes of "other" overpayments: 25 (1) those made to the self-employed and to the employed in noncovered employment; (2) those made to nonworking violators; (3) those made through "administrative error," for example, to claimants who had exhausted their entitlement, or who had never had any (because their employer was not a covered employer or because their wages were erroneously computed). Overpayments made to the first class properly belong in the table, since they also are payments made to working violators, although not discovered by the audit. Overpayments made to the other two classes do not belong. T h e second class is probably not large; in the case of most nonworking violators the violation cannot be established with sufficient certainty to set up an overpayment. The third class does not belong and is more sizable. The presence of this third class makes the table an overcount of working violators to some unknown extent. The agency feels certain that the extent is "very small," but has nothing by which to measure it.28 The table has two parts, one relating to amounts and the other to cases of overpayment. The first measures violations; the second, violators. The first is the more significant rate, since it contains in itself a gauge of the seriousness of the overpayments. The second merely 25 Overpayments discovered other than by audit are included in the statistics according to date of discovery instead of date of occurrence. 28 T a b l e 18 shows w h a t proportion all three classes together were of overpayments in Massachusetts.

188

WORKING VIOLATORS

counts heads, and a claimant with one overpayment is indistinguishable f r o m a claimant with twenty overpayments. Nevertheless, the second is worth having. T h e number of violators is some measure of the violation potential. T h e n u m b e r w h o collect illegally one or two weeks of benefits is some indication of the n u m b e r w h o might collect more if defenses against the practice were relaxed. It is also the better index of danger to the good name of the program. T e n one-week violators do more than one ten-week violator to create the impression of "widespread abuse." T h a t is largely because violators talk so freely of their successes. O v e r the entire period covered by the table, overpayments amounted to $86,130." T h a t represented 1.28 percent of all benefits paid d u r i n g the period. T h e highest annual rate was 1.93 percent in 1947. T h e only time the rate exceeded 2 percent was in the first quarter of that year. T h e deterrent effect of the audit has thus far not been great. Colu m n 4 seems to show a mild trend toward lower rates. T h e annual rates for the last two years are lower than for the first two (the reconversion) years, and the rates for the last three years have declined progressively. T h e differences, however, are not large. Comparisons between years should be made by corresponding quarters in each year; for there is a definite seasonal pattern in the rates. T h e first quarter is always the highest in the year, and the fourth quarter always the lowest. T h e cause of the pattern is not known. O n e possible explanation is that " n e w " beneficiaries, that is, persons w h o enter benefit status during the quarter, are a larger proportion of all beneficiaries during the earlier quarters and that " n e w " beneficiaries furnish a larger proportion of working violators. T h e rates in the fourth column may be taken as roughly equivalent to the average weekly rate of beneficiaries overpaid. For a week the n u m b e r of persons and the n u m b e r of payments are nearly the same. T h u s , one may say that on the average over the period the proportion of working violators among beneficiaries at any one time was about 1.28 percent. D u r i n g the third quarter of 1945 it was about 1.03 percent; and so for all the other rates in the fourth column. Cases of overpayment.—For periods longer than a week the rate of individual violators is notably higher than the rate of violations in " T h e Delaware agency estimates that the cost of conducting the audit over the whole period was about one quarter of the amount of overpayments discovered.

WORKING VIOLATORS

189

terms of amounts. T h e explanation of that fact is contained in column 8: the typical violator drew benefits for only a short period.28 The annual rates in column 6 are higher than any of the quarterly rates in the column. That is because some violators are claimants in one or more quarters in which they are not also violators. The annual rate photographs a claimant, as it were, over a longer period of time. It gives him more opportunity to become a violator. If he is not a violator in one quarter of the year, he may become one in another. Another explanation may be the possibility of some duplication in the count of violators. A violator who appeared in two separate quarters would appear in the numerator of the rate as two different individual violators. The agency feels sure that such duplication occurs in only a negligible number of cases, and the small size of the agency makes its judgment the more reliable. Until this point is established with more certainty, however, the annual rates must be used with reservations. It is evident from the above how important it is to distinguish "overpayment rates" according to amounts or to persons, and in the latter case according to the length of the computing period. A rate that would be high with reference to amounts of overpayment would be low with reference to the annual proportion of violators, might be normal with reference to the quarterly proportion of violators, and high again with reference to the weekly proportion of violators. Roughly the same seasonal and "secular" movements are evident in column 6 as in column 4, though the changes in the two columns are by no means identical. Note, for example, the contrasting movements in 1949 and in the last quarter of 1945. Column 7 was originally part of a search for the causes of the seasonal pattern. It is retained in the table for its more interesting revelation of the extent to which overpayments can be limited to one industry. Column 9 contains the only information Delaware can offer on the proportion of working violators who might be cheaters. Delaware has an administrative penalty of one-year disqualification. Over the period covered by the table it imposed that penalty on the proportion of overpayment cases shown in column 9. There is a very definite "secular" trend here. The later rates are less than half the earlier ones. It seems that the difference is largely explained by administrative 28 Much shorter than the average duration of benefits.

igo

WORKING VIOLATORS

factors. Earlier, any overpayment of more than a week was likely to be considered willful; later, only overpayments of more than two weeks were likely to be so considered. Moreover, in the second half of 1947 a new counsel was appointed, who took a much more liberal attitude than his predecessor. Theoretically, one might argue that the operation of the audit had deterred the willful violators, thus leaving only those who were in violation through ignorance. T o some extent that may have been true; but the absence of any change in the average length of violation lessens the probability of that theory. T h e number of weeks involved in the violation in practice chiefly determines whether the violation is adjudged willful or not. But compare, for example, the first quarter of 1947 with the last quarter of 1948. Three times as large a proportion of cases were judged to be willful in the first quarter of 1947, yet the average number of weeks involved is the same in each case. T h e proportion of cases which were prosecuted in the courts is very much smaller than the proportions shown in column 9. T o the end of 1948 only 137 claimants had been prosecuted, all of whom had been convicted. The average violation in those cases was more than six weeks. Before leaving the Delaware overpayment data, one last rate may be noted which is not shown on the table, that is, the proportion of actual violators among potential violators. In the year 1947, for example, there were in Delaware about ninety-three thousand individuals with sufficient wage credits to be eligible for unemployment benefits. The 818 working violators in that year represented only 0.87 percent of all those who could have been working violators. Massachusetts. Comparison between the Delaware and Massachusetts data is limited by the fact that the Delaware data start too late and the Massachusetts data end too soon.29 T h e two series overlap only for the reconversion period and only for part of that. T h e Massachusetts data has certain advantages and certain disadvantages relative to the Delaware data. Among its advantages are: (1) it has a longer history; (2) it includes the R A program; (3) it distinguishes between overpayments detected by the audit and overpayments detected by other means; (4) all overpayments, even those dis2" T h e long Massachusetts series was interrupted in the second half of 1947 by lack of sufficient funds to continue the complete audit. T h e State did not return to a complete audit until the first quarter of 1950.

WORKING VIOLATORS

191

covered outside the audit, are listed according to the date of occurrence; and (5) it uses a uniform benefit year, which makes possible a more accurate count of the different individuals who drew benefits in that year. Among its disadvantages are: (1) it provides no quarterly rate of violators (separate cases of overpayment as a percentage of beneficiaries); (2) it uses the "allowable wage" technique and therefore screens less closely; and (3) it provides no data on cheaters or on the average number of weeks involved per case of overpayment. The Massachusetts audit proceeds by the following steps. (1) Wages and benefits are matched by quarters by means of electrical accounting equipment. (The matching is usually done considerably later than the quarter being checked. Thus, work on the last quarter of 1946 was begun in July, 1948.) This first step discloses the claims which have concurrent wages in the same quarter. (2) These claims are then screened to eliminate the cases which are less likely to involve sizable overpayments.30 The screening is done chiefly by the use of in-and-out dates and "allowable wages." If the dates on which the claimant began and ended his employment and his benefit-status are in the correct order, and if the amount of wages he earned during the quarter look "reasonable" in view of the amount of benefits he drew in the same quarter, the case is eliminated as requiring no further examination. This step in the process involves a susbtantial element of judgment. The norm of what is "reasonable" varies, depending on how busy the agency is. When the claimant load is heavy (relative to staff), the meshes of the screen are loosened so that a larger proportion of the cases can be eliminated at this stage. When the load is lighter a smaller proportion is eliminated.31 (3) The cases which remain are then exmained for weekly concurrence of wages and benefits. This step involves sending letters to employers asking for wage data according to weeks. (4) Actual overpayments are established.32 The Massachusetts data are presented in three tables. Tables 18 30 T h e screening is more effective, of course, against the larger overpayments than against the smaller. T h e typical overpayment case, which involves only one o r two weeks, easily slips through. Some of these are undoubtedly included among the cases eliminated at this stage of the process and not examined further. 31 T h e screening usually leaves only 10 to 20 percent still to be investigated, but at times a stricter interpretation of what is reasonable nearly doubles that percentage. 32 T h e following is an example of the f o u r steps. It pertains to claims filed in the fourth quarter of 1946: (1) quarterly concurrence of wages and benefits, 30,150; (2) beyond "allowable wages" limit, 1 1 , 1 8 8 ; (3) weekly concurrence of wages and benefits, 1,570; (4) overpayments established, 1,248.

i92

WORKING VIOLATORS

and 19 are by benefit year and present separately overpayments derived from the audit and "all" overpayments. Only the latter are directly comparable with the Delaware data. Table 20 is by quarter and presents only overpayments derived from the audit. Table 18 pertains to the UC program, Table 19 to the R A program, and Table 20 pertains to both. T h e two tables giving annual data are set up by benefit year instead of by calendar year, because first payments in a benefit year are a more accurate count of different individuals in that year and thus make possible a more accurate overpayment rate given as a percentage of beneficiaries. No annual beneficiary rate of any sort can be given for the R A program, because first payments are measured, not by year, but by the duration of the program. Hence, a violator rate in the R A program can be calculated only for the period extending from the beginning of the program up to the point at which the calculation is made. For neither program is there any satisfactory estimate of beneficiaries by quarter. The method of the Massachusetts audit does not tabulate the number of different individual beneficiaries in each quarter. In the UC program first payments in the quarter constitute a complete count of beneficiaries only in the second quarter of each year, when the new benefit year begins. Hence only for that quarter can a quarterly rate in terms of beneficiaries be calculated (see Table 20). In the R A program a quarterly violator rate is impossible for the same reason that an annual violator rate is impossible. Early years.—The policing impact s s of the audit is clearer in these Massachusetts data than in the Delaware data. Column 3 of Table 18 reveals how much higher the rates were at the beginning of the audit than later. Column 7 gives the same clear picture. In columns 5 and 9, however, the trend while discernible is not steady. The quarterly rates of Table 20 tell the story most clearly of all. ss A short period of nonpoliring following a long period of policing does not seem to have a great effect on overpayments. Beginning in 1947 and continuing throughout 1948 and 1949 Massachusetts had to limit its use of the mechanical audit because of a shortage of UC funds. No audit at all was made of the third quarter of 1947. nor of the first and fourth quarters of 1948. T h e third quarter of 1948 was audited about 50 percent and all the quarters of 1949 about 10 percent. When the agency returned to a 100 percent audit, in 1950, the ratio of overpayments (discovered by this audit) to all benefits paid was 0.37 percent in the first quarter and 0 4 0 percent in the second. A comparison with column 3 of Table so will show that these rates were not especially high.

WORKING VIOLATORS

193

T h e actual work of comparing benefits with wages was begun in the last quarter of 1940 with respect to the benefits in the second quarter of that year. As results of the audit became available in 1941, the discovered violators were called in, and restitution was demanded. Violators found themselves called to account for illegal payments received more than a year previously. The agency publicized the fact widely that it was beginning to check all claims and that all violators were certain to be caught sooner or later. The precipitous fall in the rates after the first and second quarters of 1941 is almost certainly connected with the operation of the postaudit thus publicized. Furthermore, some 180 cases were selected for prosecution. They were carefully prepared under competent legal direction to forestall the possibility that claimants would bring political pressure to bear on the agency to accept restitution in lieu of prosecution; no preliminary interviews were held with this group, and only "sure-fire" cases were included. All violations were for large amounts, no hardship cases were included, and, to be absolutely safe, no case involving women. On the same day, in the first week of September, 1941, cases were entered in all the district courts of the State—the cases having been selected with an eye to geographical coverage, also. Every case resulted in a conviction. It was front-page news for all the newspapers throughout the State. In many instances it was printed as the first news of the day, with scare headlines. Reconversion years: UC program.—Tables 18 and 20 present the experience of Massachusetts with overpayments in the UC program— the one table by years, and the other by quarters. Table 18 makes plain the prime importance of the audit in detecting working violators. Over the seven years covered by the table, out of a total of $1,125,910 discovered in overpayments more than 80 percent ($917,284) was uncovered by the audit alone. When the audit was first instituted and before it began to work itself out of a job, the proportion was even higher. In the benefit year 1940-1941 the audit uncovered 95 percent of all overpayment amounts, and in the next benefit year, 93 percent. The proportion of violators uncovered by the operation of the audit is usually smaller: 82 percent in the benefit year 19401941; 85 percent in 1941-1942. That difference is partially explainable by the use of the device of "allowable wages." Some of the smaller cases of overpayment tend to be missed by the audit.

i94

WORKING VIOLATORS

In the period covered by the table 0.86 percent of all benefits were overpayments, the more recent years falling below that average. This rate includes, as in the case of Delaware, the three classes of overpayment not covered by the mechanical audit and hence is comparable to the Delaware rate. It is much lower than the Delaware rate of 1.28 percent. T h e same difference exists on an annual basis for the only two years, 1946 and 1947, for which direct comparison is possible. T h e Massachusetts rate was about half that of Delaware: approximately 0.6 percent, as against somewhat more than 1.2 percent. T h e possible reasons for that are many. The closer screening employed by the Delaware audit no doubt partly explains it. Moreover, Delaware is a very small State, with about 90 percent of the claimants concentrated in the Wilmington office, so that it may be easier to maintain closer control of general claims operations. Still further, beginning in late 1947 and continuing throughout 1948, Delaware required all claimants to report twice a week instead of once every week, or once every two weeks as in other States, which would increase the likelihood of detecting violators. (But it would also act to deter them.) Again, the Massachusetts audit has been in operation longer, and its policing effect has had more of an opportunity to make itself felt. Finally, industrial differences between the two States may account for these different experiences with overpayments. The latter possibility remains to be explored. One positive piece of evidence supporting it is the difference in seasonal patterns exhibited by the data of the two States. In Table 20, column 3, the fourth quarter of 1945 shows a very low percentage of overpayments: 0.21 percent. It is the lowest quarter, in fact, of the whole period. The same quarter was also the lowest of the Delaware experience (Table 17, column 4). The fact is probably connected with the mass layoffs following the end of the war. If so, it casts some doubt on the representative nature of the New York sample audit, which was based only on the last two quarters of 1945. Reconversion years: R A program.—Tables 19 and 20 present the experience of Massachusetts with overpayments in the R A program. The R A rates are notably higher than the corresponding U C rates. In the period 1944-1947 amounts of overpayment in the R A program were 1.36 percent of benefits paid out (Table 19). In the UC program for the same period the proportion was about half that size (Table 18). A part of the reason for the higher R A rates lies in the veterans'

WORKING VIOLATORS

195

program of subsistence allowances. There was a great deal of overlapping of unemployment benefits with subsistence allowances as the veterans moved into and out of schools. There was nothing to correspond to this in the U C program as a source of overpayments. T h e difference made by subsistence allowances is shown in another feature of Table 19. The proportion of all overpayments that were discovered by the mechanical audit was smaller in the R A than in the UC program. In the UC program more than 90 percent of all overpayments were discovered by the mechanical audit; in the R A program only about 74 percent of all overpayments ($874,159 out of $1,174,012) were thus discovered. The subsistence-allowance overlap was usually not detected in the Massachusetts mechanical audit, but in the audit conducted by the Veterans Administration in New York City. Overpayments caused by overlapping subsistence allowances are not the whole explanation of the higher R A rate. The R A rate is also higher than the UC rate for overpayments detected by the mechanical audit alone, which compares benefits with wages only. For 1944-1947 the R A rate was 1.01 percent (Table 19). For UC the corresponding rate was about 0.40 percent. It would seem that in Massachusetts veterans were twice as likely as civilians to be working violators. As was explained above, the violator rate tends to increase as the period to which it refers lengthens. In the UC program the rate cannot be estimated for a period longer than a year; but in the R A program the fact that first payments are made only once and are recorded cumulatively provides a unique opportunity for following the experience of a given group of claimants over a period longer than a year. Table 20 shows the number of cumulated overpayments as a percentage of cumulated first payments from the beginning of the program through the second quarter of 1947, th e l ^ 1 quarter for which data were available. In the first part of the period the tendency for the rate to increase was offset by the continuing large influx of newly demobilized veterans. But beginning with 1946 the tendency is unmistakable. After the last quarter of 1945 the rate is higher for each succeeding quarter. In the second quarter of 1947 the rate reached 5.43 percent," more than double what it had been a year earlier. By the end of 1947 the rate was probably four times what it had been at the end of 1945. 31

5-

T h e corresponding rate for all overpayments was 7.77 percent. See Table 19, column

196

WORKING VIOLATORS

Obviously, any rate which relates to claimants must be interpreted in terms of the length of the period it covers. T h e two extreme periods are one week and the lifetime of the claimant. It is possible to argue both that any period longer than a week results in an overcount and that any period shorter than a lifetime results in an undercount of the proportion of claimants who are violators. T h e proper period depends on the purpose the rate is to serve. As regards the proportion of cheaters among violators, no satisfactory information is available for either R A or U C . In the R A program there were no convictions under Section 1301 (of Public Law 346), which provides criminal penalties; and only 10 percent of the overpaid veterans were subject to the administrative penalties of Section 1300. T h e absence of convictions under 1301 is traceable chiefly to the attitude of Federal prosecutors. T h e y were unwilling (not only in Massachusetts but also in most other States) to prosecute even flagrant cases. T h e small percentage of 1300 cases represented a policy of invoking the penalty only in cases in which comparatively large amounts were involved. T h e penalties in the R A program were so severe that all parties concerned, including the Veterans Administration unofficially, were reluctant to impose them even when fraud was admitted by the claimant. In the U C program there was even less information relating to the proportion of cheaters. T h e Massachusetts agency rarely felt the need to make a distinction between innocent violators and cheaters. T h e law required repayment from all violators, and hence there was no need to distinguish between them for that purpose. T h e r e was an administrative penalty of ten compensable weeks to be imposed on cheaters, but agency policy was opposed to its use, and in fact it was used extremely little. Hence there was no need to distinguish between violators and cheaters on that ground. (In 1948 the administrative penalty provision was removed from the law entirely.) T h e agency could decide to bring a cheater into court; but after the first blitz of prosecutions in the early years of the program, comparatively little use was made of this procedure either; during the reconversion period no prosecutions were undertaken. T h e net result is an almost complete absence of any information on the proportion of cheaters among violators in Massachusetts. T h e only scrap of evidence that I could uncover was the impression of the deputies who had the job of

WORKING VIOLATORS

197

interviewing the violators that about "two-thirds of them know what they are doing when they file their claim." " The Preaud.it Every working violator makes his approach by one of two roads. He has been working, and while continuing to work opens a claim; or he has been drawing benefits, and while continuing to draw benefits takes up employment again. T h e accession notice (notice of a hire sent by the employer to the agency) is a helpful addition to those devices which guard the first road; but its chief function is to block the second road, which is otherwise wide open." If the agency is made aware, through accession notices, of every person entering employment, it can easily set up an automatic alarm across the benefit road which will be tripped by any employed person attempting to travel that way. The device is called a "preaudit" in contradistinction to the postaudit because it discovers the illegal character of the payment before, not after, it is made. The use of accession notices is not strictly an audit, but the term "preaudit" expresses well the purpose of the device: to anticipate and render unnecessary the use of postaudits by detecting violations in the attempt. It has a basic similarity to an audit in the fact that it compares work and claims records. The preaudits of Connecticut and Maryland are the only two in operation. Descriptive details of their operations can be found in the Interstate Conference Report on Fraud.37 Connecticut has used accession notices since 1936; Maryland adopted the system April 1, 1947. The effectiveness of the device depends, obviously, on how many « These deputies were the source of another interesting, though not too reliable, observation. They were under the impression that males outnumbered females among the working violators by two to one. An on-the-spot check made of the cases in the office that day, in early 1949, showed a four to one ratio; although male beneficiaries made up only a little more than half of all beneficiaries at that time. T h e impression of the deputies is in general agreement with the findings of the special Census check described in Chapter IX. It may be that males tend to predominate among the working violators to almost the same extent that females tend to predominate among the nonworking violators. ss In most States, that is. T h e Wisconsin and Michigan system of sending a duplicate check to the employer constitutes an effective road block where the most recent base period employer is the same as the current employer. In all States the first road is partially blocked by the device of sending the base-period employers notice of a determination on an initial claim. 117 For full reference see note 4, above.

198

WORKING V I O L A T O R S

of the employers of the State are required by law to send in accession notices and how many consistently observe the requirement. Connecticut, which covers employers of four or more, claims that "tests have shown that compliance on the part of employers exceeds go percent," " but see below. Maryland, with coverage of one or more, states: "It is believed that employers have reached a high degree of observance of the accession reporting requirement." " In both States there are, of course, the usual kinds of uncovered employment. Both States are enthusiastic over what they consider to be the effectiveness of the device and emphatic with regard to its need: The agency [Connecticut] is convinced that the accession device is very effective, both as a detector of fraud and as a deterrent. In spite of the fact that the device has been in continuous use since 1936 and that its use is no secret to the insured population, approximately 0.25 per cent of all [accession] notices received . . . result in the discovery of possible fraud.40 The agency [Maryland] is convinced that the device is the only means whereby fraud can be prevented. . . . Through the use of the device fraud in Maryland has been reduced to a negligible figure, as compared with the situation which existed before its introduction. The device is more effective than criminal prosecutions; over 600 individuals were prosecuted in 1947 in the city of Baltimore alone, with a record of 99 per cent convictions, without solving the problem of fraud.41 Cases of discovered overpayments must always be low in a State which relies chiefly on the preaudit procedure. Either the procedure is efficient and overpayments do not occur, or it is inefficient and overpayments are not discovered. A low number of discovered overpayments is compatible with either situation and hence meaningless. More significant data would show attempts to draw benefits illegally. But there is only one such record—Connecticut recorded attempted violations for a single month, December, 1947. In that month fifty-three attempts to draw benefits while working were discovered and stopped. T h a t represented 0.4 percent of the 12,000 different persons filing claims that month. In interpreting this rate the following three qualifications need to be borne in mind. First, it is based on a very small sample. Secondly, it cannot be compared directly with the Delaware and Massachusetts rates, for it refers to a shorter period of time. These individuals had less than a one»»Interstate Conference Report on Fraud, p. 77.

*o Ibid., p. 77.

ii Ibid., p. 7g.

s®

Ibid.,

p. 78.

WORKING VIOLATORS

199

month opportunity to be working violators. Thirdly, it does not represent a complete count of violators even in that month. Connecticut did not pretend to stop all violators by the accession notice device. W h e n I visited the agency I found a full-blown postaudit also in operation. T h e explanation given was that only the larger companies were sufficiently prompt in transmitting accession notices. Others were usually two to four weeks late. Such late accession notices fail to catch the most frequent type of working violator, the one who draws only one or two weeks of illegal benefits. Moreover, relatively few R A claims were caught by the accession device, because the R A file was set u p by serial number, and the accession notice carried only the social security number of the worker. Postaudit data for a State using the accession-notice procedure would be especially illuminating. But Maryland had none, and a twoday examination of Connecticut's records showed that they had not been kept in a way that would permit their being related to a significant base. T h a t was the usual defect in the records of the few States which had any data at all on working violators. INTERPRETATION

OF THE

DATA

LEADS. T h e data from leads given above are useful chiefly in comparing them with the data developed by systematic audits. T h e great difference between the results of following up leads as they are developed by ordinary office procedures and of carrying through a systematic audit is the clearest indication of the need for the latter. In New York in the years 1946 and 1947 about 1 percent of all beneficiaries were found to be working violators. In Delaware in the same period about 11 percent was the corresponding rate. There can be many explanations for that difference, but it is almost certain that the main ones are the dependence of New York on leads at that time and the use by Delaware of the complete postaudit. PARTICULAR AUDITS. Data from the particular audits have a double significance. First, they bring out clearly the "spotty" nature of improper payments, a main characteristic. T h a t characteristic is important in choosing methods of control. Secondly, they show by implication the tendency of fraud to spread. T h e examples given above reveal how bad a situation can become if allowed to go unchecked. T h i s tendency to spread must be given considerable weight in estimating the need for controls.

200

WORKING VIOLATORS

C O M P L E T E AUDITS. Data from the general audits, especially from complete audits, offer the best base for making a "national average" estimate. That best, however, is not good enough. The existing data are not adequate for that purpose. The difficulty lies in the great differences that can exist between States. Delaware and Massachusetts, for example, differ considerably in the results obtained from a complete postaudit. Which is closer to the national average? It is impossible to say either for the reconversion period or for the present. The national average could be between the two, or lower than Massachusetts, or higher than Delaware.

There are two reasons for thinking that the Delaware data offer the better guide. (1) Delaware's audit is more complete than that of any other State. (2) First results of a complete audit seem to be high rates, and for most States any complete audit after V J Day was, or still would be, the first. But there are also two reasons for thinking that the Delaware data may not be representative of the nation: the strong seasonal pattern may indicate some industrial peculiarity, and most sample audits show rates nearer to those of Massachusetts.42 T h e final word must be that more data are necessary before a reliable national estimate will be possible. Criteria of

Interpretation

As available data increase, there will arise the problem of interpreting the differing experiences of different States. Proper interpretation of overpayment data will require consideration of at least the following two sets of criteria. RELEVANT

INDUSTRIAL

AND

CULTURAL

CHARACTERISTICS

OF

THE

I am not prepared to set out these "relevant" characteristics in any organized fashion. Before that is possible the States will have to classify their overpayment records (and more States will have to get some records to classify). But there is no doubt that some industries tend to develop more violations than others 43—stevedoring, for ex-

STATE.

T h e audit of Pennsylvania, however, which came close to being a continuous sample general audit, was finding in 1949 that about 1 percent of all benefits were "tainted"— by which the agency meant fraudulent. It had no data on the proportion of "tainted" beneficiaries. 43 Colorado made a complete audit of its beneficiaries in the 1950-51 benefit year. Only s percent were found to be working violators, and there was no discernible concentration by industry. T h e two results are probably related: because no industries were particularly bad, the general rate was relatively low. It is possible that if Colorado could have checked agricultural employment, of which it has a good deal, both results would have been modified.

WORKING VIOLATORS

*oi

ample, and some garment trades. Certain types of agricultural regions, if they adjoin an industrial center, tend to breed this type of violation. And there is no doubt that some cultural groups tend to show a higher rate—groups which have more to gain by the extra money, being poorer, and have less to lose in social standing because they are already at the bottom. This chapter in the history of overpayments has still to be written. E F F O R T S OF T H E A G E N C Y TO DETECT AND P R E V E N T VIOLATIONS. Both the past and the current efforts of the agency are pertinent. Any given effort at detection in the present will turn up fewer working violators if the same or greater efforts have been exerted for an appreciable period in the past. The records of State A and State B might both show a 1 percent overpayment rate; but in the case of State A it might represent the result of several years of previous vigorous policing which brought the true rate down so low, and in State B it might be the result of milder policing both in the past and currently. Or State A may have a rate of 2 percent and State B of 0.2 percent. If both have done little policing in the past the difference may represent, not the superiority of B, but merely the greater present diligence of A in discovering what is there to be discovered in both States. That "greater diligence" is composed of many elements, some less measureable than others. For the present purpose it is convenient to consider them as forming two groups. First, there is a heterogeneous group, which may be called loosely "claims control." It includes the regular activities of ordinary agency personnel: claims-takers, examiners, placement interviewers, and referees. When they are welltrained and numerous they will turn up more working violators than when they are green or overworked. In this group belong also those characteristics of the law or administration which influence the degree of employer participation in the policing task. The type of experience rating is one such characteristic. Other things being equal, the same amount of effort by the agency will turn up more cases in a State such as Michigan, where each employer must foot more of his own bill, than in a State such as Illinois, where the costs are more largely pooled. The system of "charge-back" notices is another such characteristic. In Wisconsin, where the agency informed each employer each week of each charge against his account (by sending him a copy of the check received by the claimant), the employer was in a much better position to detect violators than in, for

202

WORKING VIOLATORS

example, New York, where he received only an annual accounting and only if he specifically requested it, which he seldom did. Ohio provided its employers with a sharper policing tool when it began, in November, 1947, to send them monthly instead of quarterly listings of charges. The second group of elements is more homogeneous and more measurable, being composed of devices which have fraud detection as their sole purpose. One is the specialized fraud investigation unit which can make field investigations and can prepare cases for successful prosecution in the courts. Another is the systematic audit in its various forms: pre- or post-, particular or general, sample or complete. The order in which these elements should be studied is pretty well given by taking them in the reverse order in which they appear above. T o judge the efforts a State is making to detect working violators: investigate its use of the systematic audit; ascertain whether it has specialized investigative personnel; inquire into its provisions for enlisting employer participation; and try to gauge the general level of efficiency of the other elements of claims control. Because of the importance of the systematic audit, an additional comment on it may be in order. It is desirable to know the actual process employed in these audits and to be aware of features of the process which tend to understate results. The chief sources of undercounting are six in number and are given below. Noncovered employment.—Besides the smaller employers, there are the agricultural,44 governmental, institutional, and domestic employers. The agency will have no wage records from this sector of the economy against which to match benefits received. This is a more serious limitation in some States than in others. Naturally that might be expected to be a much-used loophole, and the agencies on the basis of their, admittedly fragmentary, experience are convinced that it is so used. For example, there is California's experience with its agricultural workers, narrated above. Massachusetts had a similar experience with its cranberry pickers. One firm of the three who hired these pickers was covered by the unemployment compensation law; the other two were not. The covered firm ** During the year 1947, for e x a m p l e , about five million persons worked in both agriculture and nonagriculture. T h i s roughly is the size of the group from which agricultural working violators might come.

WORKING VIOLATORS

203

was having difficulty securing workers, while its two competitors, paying the same wages for the same work, experienced no difficulty at all. T h e first firm suspected that its covered status had something to do with the situation and asked the agency to make a particular audit of the workers for the other firms, to see if they were drawing benefits while working. T h e audit disclosed that large numbers of them were. Another instance comes from New York. In New York an investigator was detailed to walk down any Manhattan business street, chosen at random, one day in 1949, drop into small shops— grills, barbershops, poolrooms, and so forth—and audit their wage records. Six employers were investigated in this way, with a total of thirty employees. Of the thirty, fifteen showed no violation; ten showed one week, four showed two weeks, and one showed five weeks of overlapping wages and benefits. Such examples are scarcely an adequate index to the general situation. But they do indicate a degree of awareness on the part of workers of the distinction between covered and noncovered employment. If the will to cheat is present, the necessary knowledge will not be lacking. Exemption from the weekly-wage screening process of claimants who have filed less than a certain number of claims. There were, for example, eight in the Alabama general audit; ten in the Florida general audit. When the automatic exemption is as high as this, one may doubt the legitimacy of including these claimants in the base when calculating ratios. It is probably better to exclude them and treat the resulting ratio as pertaining to a particular audit, that is, an audit of long-duration cases. Exemption from the weekly-wage screening process of claimants who have less than a certain amount of "allowable" wages.—It is important to ascertain what norm was set up and how it was used. Delinquent wage reports, which come in to the agency late or not at all.—At the time that benefits are screened against wage records, this part of the screen is missing. The equivalent of this in Connecticut and Maryland is the failure of some employers to send the required accession notices. Interstate claims.—These escape screening when the benefit ledger is in one State (the agent State) and the wage record is in another (the liable State). Except in States having the reciprocity agreement it

204

WORKING VIOLATORS

would be correct to exclude these claims from the base, if they could be identified." T h e policy of automatically resolving small or unclear cases.—The count of willful violators may be understated by a policy of automatically resolving small cases or unclear cases in the claimant's favor without making investigation and in R A by a policy of labeling "willf u l " only the extreme cases because the penalties are so severe. Some States have a policy of reporting as "fraud" only those cases recommended for prosecution. Although it is not possible to assign specific weights to these limitations, it is important to keep them in view. They are reminders that all the percentages given in this chapter are to some extent (and perhaps to a significant extent) understatements; for most of these limitations apply to most of the preceding figures. Added significance attaches to this particular omission, because working violators seem to be relatively more numerous among interstate claimants. T h e need for special policing action in this area was recognized in 1950. See Report of the Fraud Subcommittee of the Interstate Benefit Payments Committee to the Interstate Conference of Employment Security Agencies, Aug. 10, 1950.

C H A P T ER

VIII

NONWORKING VIOLATORS of this chapter is difficult, much more difficult than that of the preceding chapter. Any statistics the reader may have seen published on the subject of improper payments almost certainly referred to payments to working violators only, even though they were not so labeled. The reason is not that there are no other kinds of improper payments or that the others are insignificant by comparison. Rather, the contrary is the case: overpayments and fraud relating to nonworking violators are more important. The reason nonworking violators are omitted from the statistics is simply that it is so hard to measure them. The problem involved is to estimate what claims the agency would have disqualified. Disqualifications are the material with which one must work. But not actual disqualifications—hypothetical disqualifications. Actual disqualifications disclose hypothetical violators: those who would have drawn benefits if they had not been disqualified. Hypothetical disqualifications measure actual violators: those who were actually paid but who would have been disqualified if the agency had known all the relevant facts. Estimating hypothetical disqualifications involves two steps: first, determining what the facts were surrounding the claim; and second, determining what the judgment of the agency would have been on those facts. In the case of the working violator it is comparatively easy to take both steps: to determine the fact of the concurrence of wages and benefits, and to be certain that the agency would have refused to pay the benefits if it had known that fact. In the case of the nonworking violator, both steps are very difficult. First, the facts. The relevant facts surrounding a claim are of two kinds: the characteristics of the person who filed the claim (in the precise week in which he filed it), and the characteristics of the (local) T H E TASK

206

NONWORKING VIOLATORS

labor market in which that particular claim was filed (and, of course, in the precise week in which it was filed). That is, the conditions of supply and the conditions of demand surrounding each claim for each separate week in which the claim was filed must be known. In the reconversion period more than one hundred million separate claims were filed. What is known of the individuals who filed those separate claims? As far as published materials go, not much more than the bare fact that they did file the claims. By going into local offices in various parts of the country and tracing Unemployment Compensation claimants to the corresponding Employment Service registration cards, one could, for a recent period, learn a few of the characteristics of those claimants: age, sex, and kind of customary work. Other characteristics equally relevant would probably not be revealed by the registration card: weak arches, allergies, children at home, religious principles, seniority rights, pension rights, and so forth. Doing only that, even on a sampling basis, would be a major statistical task. But it would not be enough. T h e judgment that a claimant is "not enough of a worker" is a judgment of a relationship—the relationship between the claimant and his economic environment. So far only the claimant is known. T o acquire an adequate knowledge of the economic environment in which each claim was filed is an equally necessary and still more difficult task. For the relevant environment is a specialized one: the economic environment is not exactly the same for identical workmen living at opposite ends of Chicago, for example, since travel time between the home and the job is one of the relevant elements of that environment. T o judge the "suitability" of an unfilled job one would have to know the prevailing wage 1 for that type of work in that locality; the "working conditions" (ventilation, heat, noise, toilet facilities, morals of the foreman, and so forth); whether the job was a union job or not; whether it was temporary or permanent; what special requirements particular employers might have as to workers' weight, height, age, sex, religion, degree of skill, years of experience, and so forth. Even if the relationship could be completed, and each claim could be placed in its proper economic setting,2 only the first part of the 1 Information on the "prevailing wage" is elusive. New York has found it necessary to set up a special unit to gather such data. 2 For the country as a whole it could only be done in the generalized fashion of Chapters IV and X .

NONWORKING VIOLATORS

»07

task would be achieved. One would still have to find out how the agency would have judged that relationship if it had known it. Precedents on appealed cases give good clues; but only clues. Few cases are exactly alike, and there is inevitably some room for discretion on the part of the individual administrator, and under him on the part of the individual manager of the local office, and even within the same office on the part of each claims-examiner. Moreover, the agency's judgments on identical cases can and do change to a certain extent 3 under changing external pressures. If an employer hires a full-time lawyer to follow his cases, if unions send protest delegations, if the newspapers run critical articles, if an election brings a different political party into power, if the Bureau of Employment Security begins to raise official eyebrows—it is possible that a change will begin to show in the tenor of the agency's decisions. For all these reasons it is difficult to be certain of the agency's decision even when the relevant circumstances of claimant and economic environment are known. There are further difficulties in the way of determining what proportion of violators are cheaters. Hard as it is to make that distinction among working violators, it is doubly hard in the case of nonworking violators. The state of being "not enough of a worker" is extremely complex. The agency finds it hard to state clearly even for itself * what it means by such requirements as that the claimant should have "good cause" for leaving his job, or that he should be "available" for "suitable work," or that he should make "reasonable efforts" to find work. The agency finds it still harder to convey that meaning to the claimant. Most cases are reasonably clear, and the growth of U C case law is steadily reducing the area of indeterminancy; but that area is still substantial. In borderline cases, when the claims-taker asks "Were you available for work last week?" and the claimant answers "Yes," neither may know very clearly what the other is talking about. T h e agency may decide later that the claimant gave the wrong answer, and may disqualify him. But the possibility is so considerable that the wrong answer proceeded from misunderstanding that only evidence stronger than is usually obtainable can overturn the presumption of claimant good will. There can be tell-tale circumstances, s Such change is not likely to be " m a j o r " by any definition, and the range of such change becomes steadily smaller as precedent manuals become established a n d personnel become trained in their use. * In 1946 the agency (including in the " a g e n c y " the appeals machinery) h a d to reverse itself on a third of the 190,000 cases appealed against its first decision.

NONWORKING VIOLATORS such as Mollic R.'s false statement about her previous wages; 5 but generally such clear leads are lacking. In most cases, therefore, against the claimant's statement that he filed in good faith it is impossible to produce satisfactory evidence to the contrary. Practically all the instances of violators being prosecuted for fraud are instances of working violators. California explicitly instructs its investigators: Cases involving availability are of such a nature that prosecution cannot be instigated successfully. Also, it is not possible to prosecute cases where there is no supporting evidence of fraud other than the claimant's written statement, as no individual can be made to testify against himself. Therefore, only Section 58 (a) (3) [providing for the imposition of disqualification penalties] shall be invoked in the above cases, and the matter shall be handled by the local office without reference to the Fraud and Investigation Section.* T H E CLOSER

INTERVIEW

Direct evidence of the presence of nonworking violators can be derived only from an analysis of the three elements of the problem: claimant characteristics, labor-market characteristics, and agency policy. T h e formidable difficulties in the way of that analysis have been indicated. There is one device, however, which automatically combines the three elements and is therefore one of the more useful devices available—the closer interview. An improper payment, as defined by the norm of the law, is one which the agency would not have made if it had known all the relevant facts. Let us find a situation, therefore, in which the agency suddenly had the opportunity of becoming aware of more of the relevant facts. Then let us see how much difference that made in the proportion of claimants disqualified. It is not unreasonable to argue that the increase represents claimants who would have been disqualified somewhat 7 earlier if the agency had known the facts earlier. If the increase is small, there is reason to think that the problem of the nonworking violator is not pressing. If the increase is great, there is reason to think that the condition is unhealthy and requires immediate attention. There may be disagreement over what ought to be called "small" or "great"; but to know the size of the increase is at least to have a base for an intelligent decision. Six instances are here presented in which closer screening of claims 1

P. 47. «From the California Investigator's Manual (July, 1948), pp. 140-41. How much earlier, it is usually impossible to say with accuracy.

NONWORKING VIOLATORS

sog

ants produced a notably higher disqualification rate. T h e first three pertain to the R A program alone; the next two to the combined R A and U C program; and the last to the U C program alone. T h e order is roughly chronological—with the last two falling outside the reconversion period proper, but contributing strongly to the principle that "investigation makes a difference." T h e establishment of that principle is the main goal of these exhibits. T a k e n in conjunction with the known low level of investigation in the reconversion period, it constitutes a valid reason to think that in the reconversion period the claimant population included a significant number of violators. It is not certain that the exhibits reflect only nonworking violators. T h e exhibits show changes in disqualifications for nonavailability; but in some instances the claimant's lack of interest in finding a j o b may be because he already has one. T h e data of the exhibits may therefore contain a number of working violators. Although the characteristics of the claimants examined and the method of investigation were such as to uncover nonworking violators predominantly, this uncertainty in the data remains and must be kept in mind. Changes in Disqualification

Rates

Since all these exhibits turn about changes in the disqualification rates, two preliminary observations regarding such changes may be made at this point. In all except the last exhibit there is no completely satisfactory base by which to compare the old rate with the new. In all instances only a portion of the claimant population was subjected to the closer screening. T h e proper base for measuring the resulting increase in disqualifications is that particular group of claimants, not all claimants. But there is never a previous disqualification rate for that group with which to compare the rate produced by closer screening. O n the other hand, if the whole claimant population is used as the base, the previous rate is available, but the new rate does not fully represent the effect of the closer screening—it has been diluted by being thus merged with the larger, unscreened mass. For Exhibit i only the general, diluting base is available; b u t the change in the rate is still so large as to be unmistakable. In the case of the other exhibits the proper, restricted base is used. T h e problem of comparing the "ante" with the "post" rate for Exhibits 2 to 5 is

gio

NONWORKING VIOLATORS

discussed in connection with each exhibit. For Exhibit 6 the p r o b l e m is solved by the existence of the "control" office. T h e changes in the disqualification rate may result from a change in any of the four basic elements which enter into the decision 8 of the administrator (representing the community) on availability. Relative to the administrator two of the elements are objective, and two are subjective. O n e of the objective elements is the availability of workers for the jobs that are open. T h e other objective element is the economic situation as regards j o b openings, currently and in the near future. T h e s e t w o might be called the supply of labor and the demand for it. T h e subjective elements consist of what the community, in the person of the administrator, wants the relationship to be between the t w o objective elements and what it knows about the actually existing relationship. T h e community may want to use its system of unemployment benefits, for example, only to protect a worker from the m a j o r threat of destitution or to protect him also from the m i n o r misfortune of downgrading; and it may have more or less correct knowledge of how that purpose is being fulfilled. of in to of

It is always difficult to evaluate separately the influence of any one the four factors. However, in accounting for the particular changes disqualification rates discussed in this section it is probably correct stress the influence of the last n a m e d — a change in the knowledge the administrator.

T h e possibility that a change in the supply of labor was an important influence may be dismissed at once. T h e change in rates was in the direction of an increase. If a change in availability were the cause, it would mean that the disinclination of claimants to work increased. B u t the attitude of workers toward available jobs improved, if it changed at all. Many workers, including women, held out at first for their wartime rate of pay, or for a vacation. As they became convinced that they could not again obtain similar wage rates (or finished the vacation), they accepted other work at lower wages. 8 Of course, with the s T h e final decision, after appeal action, if any. » See, for example, the comment of Representative Wasielewski: "I noticed an item in the Milwaukee press the other day saying that there is a growing change in attitude; that people are beginning to cooperate and are, for the most part, accepting jobs that are offered to them, even though they pay less than they have been earning before. Apparently it will take a little while for that readjustment, but I am happy to note that." U.S. House of Representatives (79th Cong., 1st sess.). Committee on Ways and Means, Hearings on H.R.3736, Aug. and Sept., 1945, pp. 131-32.

NONWORKING VIOLATORS

211

passage of time those who did not adopt more realistic standards gradually became "nonavailable" in the eyes of administrators, and in this sense the unchanging attitude of claimants could be said to be the cause of a change in the number of disqualifications. But such gradual developments cannot account for the great sudden changes that mark all the exhibits. Changes in the demand for labor certainly influenced disqualification rates in the reconversion period. As demand strengthened and steadied, it both decreased the denominator of the rate (claims filed) and increased the numerator (claims denied). When jobs are more plentiful, more of those who want work can get it. They leave the body of claimants and thus decrease the denominator of the rate. That is to say, those who do not want 10 work gradually comprise a larger proportion of those who are not working. In such a period the disqualification rate will increase even though the numerator (disqualifications) does not increase at all. But disqualifications also are likely to increase, at least in the early stages of increased demand. As demand strengthens, the legal relationship between claimant and job changes, without any change in either claimant or agency, and some claimants begin to fit the definition of "nonavailable" who did not fit it before. Again, however, the gradually working forces underlying the demand for labor cannot account 11 for the sudden changes of rates. A change in the subjective factor of community purpose represents a possible qualification to the argument of this section. If the objective of the program was changed as the reconversion period wore on, so that later the agency was unwilling to make payments which it had been willing to make earlier, then to that extent the later increase in disqualifications represented the detection of would-be, rather than of actual, violators. The payments in question are identical payments, of course; that is, to exactly the same claimants, unemployed for exactly the same length of time, in exactly the same conditions of demand for labor. A claimant is not the same claimant after three months of drawing benefits, for example. It is not clear whether and to what extent such changes occurred. 10 By agency standards. 11 Besides, changes in demand often account for changes in disqualifications only indirectly, through changes in the knowledge of the administrator. More job offers do not always make claimants nonavailable; they sometimes only reveal a previously existing fact.

SI2

NONWORKING VIOLATORS

Theoretically, any important change in objectives would be reflected clearly in either a changed law or a changed administrative directive. Practically, so complex and subtle is the matter of nonavailability that changes in social purpose can take place simply by the communication of a certain attitude or spirit, and leave no official trace. I can recall off-hand two instances in which the appointment of a new administrator effected such a change (in both cases in the direction of liberalization) without any written record to mark the fact. I can recall, too, that when Kansas introduced the questionnaire into its U C program (1948) some of the local managers took it as a signal that they were to "get tougher," and the Chief of Benefits of the agency had to make a special tour through the State to disabuse them of that impression. I am convinced that changes in the norms used did not represent a major cause of the increases in disqualification rates as analyzed here. Forces to change norms existed and were operative; but strong opposing forces were also at work: immediate supervision (as in the action of the Kansas Chief of Benefits), central review of determinations, and particularly the action of appeal boards. Better trained and less hurried than administrative personnel in the field, and strongly influenced by their own written precedent decisions, appeal boards act as a very considerable deterrent to rapid changes in norms without legislative action. Some seeming changes in the public's purpose in the reconversion period were really only changes in the public's knowledge. T h e growing public grumble over the R A program, for example, stemmed not so much from a change in the public's conception of what the program was designed to accomplish as from a growing suspicion that the original purpose was not being accomplished. It may be objected that "the public" is characteristically confused regarding the purpose of all programs of unemployment benefits. Perhaps; but in this matter of disqualifications the administrators stand for the public. On the basis of my contacts with administrators, on both the Federal and the State levels, I believe that sudden changes of purpose on their part did not represent an important cause of the increased disqualification rates. When, for example, the Readjustment Allowance Service of the Veterans Administration called for a closer scrutiny of claimants in April, 1946, and again in August of that year, it was not because Ray

NONWORKING VIOLATORS

213

Adams had suddenly changed his opinion as to the purposes of R A , but because he thought those purposes were being endangered. T h e same was true of Samuel Bernstein's introduction of the questionnaire into the UC program in Illinois, and of James Bryant's use of the Joint Interview in California, and of Milton Loysen's experiment with the Seated Interview in New York. Since the other three characteristics have been excluded as possible explanations, changes in the knowledge of Administrators must be the chief source of the sudden changes in the disqualification rates. T o the extent that the increased disqualifications did stem from such changes they represented actual violators: those whom the agency had previously paid only because it did not know all the relevant facts. If the agency had known the same facts earlier, it would have disqualified them earlier. How much earlier it is impossible to say. The certainty of an extension of a rate into the past varies inversely with the distance from the point of computation. But this is a strong probability: the absolute number of nonworking violators was greater early in the reconversion period than it was later. As time passed their number was thinned by disqualifications, by exhaustions, by completed vacations, and by depleted savings. Those not in the labor force reentered it, and the "voluntarily unemployed" moderated their unrealistic (by agency standards) job stipulations. If the closer investigation had been in effect considerably earlier, say in November, 1945, for the UC program and in March, 1946, for the R A program, it would have increased the absolute number of disqualifications at least as much and probably more than it did later, and it would have increased the disqualification rate significantly, though somewhat less than it did later. Exhibits E X H I B I T 1 . In Chapter III the U C V - I procedure was described. Not all the States introduced it at the same time or with the same degree of thoroughness. That much is known; but it is very difficult to find out exactly which States did what with the procedure and when. The Veterans Administration in Washington did not have the information, and personal visits which I was able to make to some States which did introduce it failed to develop a clear picture even in those States. This exhibit and the next are illustrative, therefore, rather than

2

,4

NONYVORKING VIOLATORS

representative, of the results obtained by this use of closer screening. Table 21 presents the experience of five States; four of them began to use the procedure seriously at once (in September, 1946), and New Jersey slightly later (in late October or November). 12 T h e first four States are arranged in the order of their "severity rate"; but the purpose of the table is not to make comparisons between States,13 but to show differences within the same State from month to month. T h e rate in North Carolina more than doubled in September and continued to increase. In November it was six times as large as before the investigation started. These rates are the obverse of the North Carolina report on what it found when it collected the UCV-i questionnaire (Table 1). In Illinois the change of rate was especially sharp. Its September rate tripled that of August. Both Illinois and North Carolina maintained high rates for the balance of the year. For that there may have been a number of causes, among them the continued use of the questionnaire as additional claimants each month moved into the twenty-week group, and the extension of the questionnaire to veterans with less than twenty weeks of benefits (for Illinois see Table 25)Ohio's September rate was about as high as that of North Carolina and Illinois, but it did not represent as great an increase over the preceding month. Ohio apparently began to get strict earlier. Even in Ohio, however, the September rate was double the July rate. New York shows less extreme changes, despite the fact that it starts with a lower rate than the others. Still, percentagewise the change is notable. Out of a slightly smaller population it disqualified 50 percent more, thus almost doubling its rate in September. T h e change in the rates of these States was partly owing to the decrease in the base (in the number of claims paid) 1 1 and only a part of that can be attributed to disqualifications. Other causes were the return of the veterans to school,15 and the increase in the number of jobs that are offered in the fall. But the rates increased not merely New Jersey had sent out the questionnaires earlier, but did not find time to examine them until the later date. 13 T h e reader is warned against using such data to make comparisons of his own except on the basis of an intimate knowledge of the particular States being compared. 14 Weeks compensated is an appropriate base for these long-duration claimants, all of whom were beneficiaries. This base is less affected, also, by incidental occurrences. Although it suffices for the comparison made in the text, it cannot be used for other purposes without appropriate qualifications. « See Table 35.

NONWORKING VIOLATORS

«15

because the base decreased. They increased also because the numerator, the absolute number of disqualifications, increased. This larger number of violators taken from a smaller claimant stream was the result of a more diligent use of the nets. The New Jersey data illustrate one of the many pitfalls to which disqualification data are subject. I knew from working in the New Jersey agency that a notable increase in disqualifications had resulted from the UCV-i program. From the nature of the case, these increased disqualifications would have been "able and available" or "suitable work" disqualifications, and they would have appeared later in New Jersey because the questionnaires were not made the basis for action until later. I had included New Jersey among the States for which I asked the Veterans Administration to process data precisely because of this lag. I expected the data to provide an additional proof of correspondence. I was considerably surprised to find no indication in the data of what I knew had occurred. Correspondence with the New Jersey agency turned up the solution, which was simple enough. Clerks had put the increase in disqualifications under the heading "Other." The agency wrote in part: It is common under any administrative process to find clerks who when faced with alternatives in the recording of data follow the easiest course, and there isn't much that can be done about it. In other words, cases of ineligibility quite frequently were involved, and while the reasons for a decision are clear to the examiner, for example, such may not be the case for the clerk who subsequently records the actions. Clerks are all too prone to record such "mixed" cases as "other." If in New Jersey the comparison is made, not for "nonavailability" disqualifications, but for all disqualifications on the score of "ineligibility" (which in the R A program is composed of the issues "able," "available," and "other"), the expected rise in the rate appears unmistakably. July

5.8

August

6.3

September

6.1

October

8.0

November

10.1

December

17.7

There is no need to dwell on the details of Table 21, since it is meant to support no more than a general impression of the extent to which disqualifications of would-be violators depended on a closer screening of claimants than was possible during much of the reconversion period. If States such as these, which are of at least average administrative efficiency, doubled and tripled their disqualification

2I6

NONWORKING VIOLATORS

rates in the month when they began to examine claimants more rigorously, the general impression is unavoidable that a significant proportion of these disqualifications represented decisions which were overdue in the sense that the agency would have made them earlier if it had known the relevant facts, and which represented, therefore, actual nonworking violators. T h e increase in the number of disqualifications should not be taken as an adequate count of the number of nonworking violators; it is certainly an undercount. Not all beneficiaries, but only the twentyweek group were given the closer screening. Had the procedure been extended into the groups with nineteen weeks, eighteen, fifteen, or five—the number of disqualifications undoubtedly would have risen. Even of the twenty-week group, many more escaped disqualification only because they did not return the questionnaire. 18 What the complete number and the final rate would have been can only be a subject of speculation. EXHIBIT 2. Even Table 2 1 does not bring out fully the correspondence between investigation and disqualification. The proper base for the disqualifications resulting from the use of the questionnaire is the number of persons receiving the questionnaire. 17 New York was able to supply such a numerator and a denominator. The New York agency reported its experience with the questionnaire as follows:

Data for the period from September 13 to October 31, 1946, for the extended-duration study, that is, the special review of those veterans who had received 20 or more unemployment allowance payments, revealed that of 56,300 questionnaires distributed in the State, 52 per cent of the forms returned contained information which required interviews regarding the possibility of disqualifying conditions. As a result of the interviews, 6,400 veterans were disqualified from receiving allowances for some period, and 3,100 veterans either failed to return the questionnaires or did not report for the scheduled interview. Thus, nearly 17 per cent of the veterans included in the study were dropped from the active file.1* 1» With this increased numerator, the rate would have been larger, for the base was the same. 11 Or, even more properly, the number who returned it. Those who did not return it, but simply stopped filing could not normally have been the source of any of the disqualifications appearing in the numerator and hence should not be included in the denominator. is Division of Placement and Unemployment Insurance, Bureau of Research and Statistics, " T w o Years of Veterans' Readjustment Allowances" (Jan. 9, 1947), p. 9; mimeographed.

NONWORKING VIOLATORS

317

The disqualification rate among those who returned the questionnaires was, therefore, 12 percent (6400/56,300- 3,100)." At least two factors can be distinguished that make the 12 percent an underestimate. Only half of this twenty-week group were actually interviewed. They represented the more doubtful cases; but it is probable that if the other 27,000 of these long-duration veterans could have been interviewed and perhaps offered jobs the disqualification rate would have been increased. Secondly, 3,100 veterans did not return. T h e probability is especially high that some of this group would have been disqualified if they had been interviewed. But prescinding from the fact that it is an underestimate—even the 12 percent is a "high" rate. Probably everyone would agree that it denotes an earlier unhealthy situation when a closer investigation disqualifies 12 percent among a group of claimants whom the agency has been paying regularly, and presumably interviewing, for five continuous months or more. Some of the disqualifications may have represented only would-be violators, that is, those whose ineligibility was discovered as soon as it began to exist. But probably there were very few of them among this group of long-duration claimants. It is safe to assume that at least the increase in the rate of disqualification represented actual violators. What that increase was cannot be determined exactly, because the previous rate among the group receiving the questionnaire is not known. It was, however, probably no greater, and may have been less,20 than the rate for all R A beneficiaries. In July that rate for New York was about 1 percent." That is, for every one hundred veterans who were paid benefits in July, one was disqualified because of nonavailability. If that same rate prevailed among the questionnaire group, at least 11 percent of that group were non1» It is instructive to compare the resulting rate with the New York rates of T a b l e s i for September and October. Reduced to percentages, the rates there, produced by the larger, diluting base, were 0.53 and 0.63 percent, respectively. T h e rate produced by the smaller, proper, base was twenty times as large. 20 When an agency is busy, it tends to slip into a routine with regard to " o l d " claims (a continued claim can be paid in a minute and a half, or less) and is less likely to pick up disqualifying facts. An initial claim, especially if it is a new claim, takes longer and involves more questioning. It is significant that in 1947, 3.4 percent of R A initial claims met with disqualification on nonavailability issues, but only 1.7 percent of the continued claims. T h e corresponding rates are not available for 1946, but for 1948 they were s.5 percent and 1.5 percent, respectively. 21 T h e average weekly number of beneficiaries in J u l y was about 205,000; the number of different individual beneficiaries would have been somewhat larger, and the true rate, therefore, even lower. T h e nonavailability disqualifications in J u l y numbered 8,330 (see T a b l e s i ) .

NONWORKING VIOLATORS working violators. 21 It is possible that only a small part of these were cheaters; or a large part may have been. T h e r e is no way of knowing from available data. It would be incorrect to ascribe the same percentage of nonworking violators to the general R A population. Undoubtedly it was lower among the shorter-duration claimants, but there is no way of knowing by how much. T h e general impression, however, is strong that it was even easier than usual " in the reconversion period for nonavailability to go undetected, and for many months at a time. T h e above is not a complete account of New York's experience with the UCV-x program. T h e interviews described were conducted by N e w York's Unemployment Insurance Division. T h e Employment Service Division was also active and gave special interviews to 6,500 of the twenty-week group, who "were selected for concentrated effort by Employment Service job counselors." " Here, also, the more intensive interview resulted in removing more claimants from the rolls—by placing them in jobs. T h e effect of concentrating on a selected group is strikingly illustrated by comparing the results of this counseling project with the placement record for the entire veteran group. During the period of the survey [September s j through November 1, 1946] only 14 per cent of all veterans interviewed by offices in the New York City area were referred to jobs and only 6 per cent were placed. In contrast, of the 6,500 veterans specially counselled, 50 per cent were referred and so per cent were placed.25 T h e following excerpts from the same report are interesting partly for the bearing they have on the present problem 2 ' and partly as an illustration of the vagueness of the borderline that separates voluntary from involuntary unemployment. Although about three-fourths were offered referral to jobs, only one-half of the veterans interviewed accepted. T w o out of every five referred were placed. In the majority of cases where no placement resulted, the appli22 Some of these may have been really working violators, even though disqualified for being unavailable or for refusing suitable work. T h e subtraction to be made on this score, however, is offset by the fact that the original figure was an undercount. 2» T h a t detection of these cases is always difficult even in normal times should be evident from the nature of the violation, and is illustrated by Exhibit 6 and by the investigation of the "108" described in the following chapter. 21 Division of Placement and Unemployment Insurance, Employment Service, "Veterans Counseling Survey New York City Area, Sept. s j - N o v . 1, 1946," p. 1; mimeographed. 2s Ibid.

2» T h a t is, as possibly indicating more nonworking violators than were accounted for by the 6400 disqualifications.

NONWORKING VIOLATORS

gig

cants either failed to report or refused the job after interview. . . . T h e younger veterans (i.e. under si) were most easily referred, despite the fact that a higher proportion of them were rejected by employers. T h e less experienced applicants proved to be more flexible in their demands and more willing to try the jobs out.27 Thirty per cent of the veterans were not offered referral to jobs. . . . [Forty per cent of these] were those who were considering additional school training, waiting medical reports, had a job offer pending or were opening their own business.28 The Employment Counselors advised almost half of the men they would improve their chances for employment by seeking work in a different occupation from the one they originally specified—particularly those in labor surplus groups. Almost a quarter of them needed to bring their wage demands more in line with prevailing rates offered.2" This [experiment in intensive counseling] suggests that intensive counseling might yield equally good results if given to all applicants—non-veterans as well as veterans—who have been out of work for an extended period of time, even though the applicant may have had relatively thorough counseling earlier. A worker may not be ready to accept a realistic evaluation of his qualifications in a given labor market in the early stages of his job hunt, and be more receptive after he has unsuccessfully tried to find exactly the kind of work he has in mind. Present staff limitations make such an undertaking impossible, however.80 It is likely that the disqualification rate which accompanied the use of the questionnaire in New York was smaller, not larger, than that experienced by the other States which also conducted the closer investigation at this time. One indication of that is the smaller increase in New York's general rate (Table 21); if the general rate of the other States increased more than that, it may have been because they disqualified more of this investigated group. Another indication is found in the following case. E X H I B I T 3. T h e Maryland agency found the New York study "so revealing" that it "decided to make a similar one." 81 T h e Maryland 2 7 New York E m p l o y m e n t Service, "Veterans C o u n s e l i n g Survey," page 4; mimeographed. " Ibid. A n y of these could have been successful violators, w o r k i n g or n o n w o r k i n g . Veterans in the circle of my o w n acquaintances used three of those f o u r reasons as excuses for avoiding referral. 2» Ibid., p. 3. so Ibid., p. 4. s i M e m o r a n d u m of the director of the M a r y l a n d State E m p l o y m e n t Service to the chairman of the E m p l o y m e n t Security Board, May s i , 1947 (files, M a r y l a n d E m p l o y m e n t Security Board).

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study covered only one week, that of March 27 through A p r i l 3, 1947, and but one office, that of Baltimore, which, however, carries over three fourths of the State total claimant load. W h a t the study lacks in scope it makes u p in detail, except that it omits the n u m b e r actually disqualified. Veterans w h o had drawn their twentieth check or more were asked to complete a U C V - i questionnaire. Of these, 548 returned their questionnaires. Data is lacking on how many failed to return it. Of the 548 veterans, 423 were called in for an interview. O f the 423 called in, 237 (56 percent) failed to report. Of the 186 reporting, 8 walked o u t before being interviewed, and 24 refused referral to a job. Of the 154 remaining, 104 were referred to a job and accepted the referral. Of the 104 referred, 43 failed to report to the employer, 4 refused the employer's offer, and 3G were rejected by the employer. W i t h regard to these 36 the report comments: A total of 36 individuals, 22 colored and 14 white, were rejected by the company to which they were referred. Employers' comments on these rejections indicate that the majority of the veterans were rejected because of the attitude they displayed while being interviewed by the employer. I have directed our local office to call each of these 36 individuals in for another interview and to tell them frankly that in our opinion their attitude was the cause for their rejection. Another job offer will be given them with the statement that unless they are hired, the Employment Service will recommend to the Unemployment Compensation Division that they be denied further benefits.32 T h u s , of the 548 returned questionnaires, 352 (64 percent) were cases of d o u b t f u l eligibility. Of the 423 persons called in for an interview, only 71 (16 percent) emerged with an untarnished title to their eligibility. T h i s is a remarkable, and probably an abnormal, instance of the effect of closer investigation. In the absence of similar data for other States (and in the absence of disqualification data for this Maryland survey) it is impossible to say how abnormal it may be. T h e reduction in the rolls seems much greater, for example, than in the case of N e w York (Exhibit 2). T h e high proportion of d o u b t f u l cases is the more significant because of the season of the year. Disqualification rates tend to be lower in the first half of the year, when the claimant load is heavier. T h e fact that the investigation occurred later in the life of the R A program also adds significance to the high proportion. By this time the bulk 82 Ibid., p.

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xsi

of the young veterans who had wanted to "just stretch a while" had left the program. 33 EXHIBIT 4. In the second half of the reconversion period California added a procedure to its general claims control which it called the " J o i n t Reinterview." Every claimant who had drawn benefits for ten consecutive weeks was to be reinterviewed by U C and ES conjointly. T h e claimant was given a questionnaire (the " D E 2402") to fill out at home. 34 T h e next time he visited the office he was directed, with his completed questionnaire, to a separate part of the office. T h e interview took place with the U C examiner and the ES interviewer seated side by side at a desk with the claimant facing them. T h e relevant records from both divisions had previously been assembled, so that the claimant's complete history, both his work history and his benefit history, was available. 35 T h e process of testing the claimant's availability for suitable work could thus be, and had to be, carried on in closest cooperation. T h e interview was opened by ES. T h e procedure was inaugurated in December, 1946, but got under way only gradually. In J u l y , 1947, the local offices were directed to extend the screening to include five-week claimants; but the budget cut which occurred at the same time prevented the offices from carrying out the directive with any consistency. 38 On November 20, 1947, the directive was renewed by Division Notice No. 5 1 : This agency has been the target of criticisms by the Legislature and press due to inadequate eligibility interviews. In order to uncover problems which may be causing delay in employment of claimants and to aid individuals in resolving such difficulties, all applicants [of four successive weeks] claimants or nonclaimants, shall be reinterviewed periodically. I saw scattered reports from local offices and area managers which indicated, as was to be expected, that the various offices administered the procedure with varying degrees of intensity. 37 Nevertheless, the 33 See the reduction in the number of veterans not in the labor force who were not in school, T a b l e 35. 3« T h e claims-examiner was told to preface his instruction with a remark such as: " I notice you have been out of work for quite a while. We would like to give you a special reinterview to see if we can assist you in finding employment. Please report to this office at (naming day, date and time) with this form carefully completed." 35 T h e need for this, and the lack of it, strikes anybody who works in local offices. 36 ". . . less than 10 per cent of the reinterviews planned under the five-week schedule are currently being scheduled" (letter from the director of the California agency to the regional representative of the Social Security Administration, Sept. 18, 1947). 3i Some offices, for example, dropped the " j o i n t " feature of the procedure when they became short-handed. Separate interviewing by ES and U C allowed for a more flexible

222

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experiment had a wide scope, much wider, for example, than that of Exhibit 6. Although records on the experiment are far from complete, especially for the earlier period, they are less fragmentary than usual. It is possible to obtain at least three interesting views of the results. T h e first is of a single office for the first nine months of 1947; the second is of the whole State, with details on the separate areas by months for the last five months of our period; the third is of the whole State, though only for a single month, with details on the separate weeks. 88 I n all three, U C and R A are combined without distinction. T h e disqualifications are not given by issue, but in the nature of the case nearly all of them must have been on one or another of the three nonavailability issues. T a b l e 22 contains the record of joint-interview activities in the Ontario " office. T h e following excerpts from the report 4 0 of the manager of the office make the best commentary on the table. We began by handing out forms to those longest unemployed and working deeper each week. Currently we are largely in the 6-week group. When we began, we omitted the over-age group, the strictly seasonal worker, and those who had been given special counseling by the Employment Service. However, that idea has been abandoned because we do have jobs for the over-aged, and seasonal workers sometimes reveal secondary skills upon reinterview. Now we take them all, purely on a time basis. •

•

•

If we had sufficient people to adequately handle the program, it would be an excellent thing. When the program first began we uncovered some flagrant abuses of long standing. Our disqualifications ran 27.7 per cent in January; 27 per cent in February, and 23 per cent in March. Note the drop in later months to 6.7 per cent in July, 9.9 per cent in August and 9.1 per cent in September. The current reinterviews are with those who have more recently left the labor market, and thus there will not be so many ineligible. In the early months we caught the accumulated backlog of abuses. use of available personnel in a way that would fit the different work schedules of the two divisions. For a fourth view, a small snapshot, of this same period of investigation in California (Aug., 1947), the reader may wish to refer to Chapter VII, where a description is given of the "particular audit" which was made in the agricultural regions. If the results of these exceptional agricultural investigations are in the August figures of Tables >3 and 24, they partly account for the exceptionally high disqualification rates in August, especially for southern Area V. " In Area VI, in the southern part of the State. *o Report made by the managers of the Ontario office to Area Manager, Area VI, Oct. 1, 1947.

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2x3

(The backlog hypothesis is especially tenable here because the trend of the rates just given is counter-seasonal. T h e situation is less clear in the other two tables where the two trends coincide.) The number not reporting has always been high in our office, ranging from a high of 34.7 per cent in June to a low of 22.8 per cent in January. I can find no adequate explanation for this, as it is unreasonable to assume that that high a per cent suddenly find employment. No doubt the DE 2402 [the questionnaire] spurs some from their inactivity. . . . Sometimes claimants honestly expect the Employment Service to put forth all the effort to secure them a job. In the Ontario office we have been doing a quality job—not quantity. [Quality job: spending 12 to 15 minutes on the average with each claimant.] Consequently we have a sizable backlog. For the week ending Sep tember 24, 1947, there were 173 claimants who needed reinterviewing. During that same week 794 continued claims were filed. In other words, approximately 22 per cent of our persons filing continued claims need reinterviews. We estimate that currently about 70 claimants move into the 5-week group weekly, but our claims load now is at the lowest point in the entire year. Shortly the normal winter layoffs will begin, and our claims load will increase 50 per cent. . . . I would recommend that reinterviews be held every 8 weeks during periods of low employment and ever] five weeks during high employment. In this way the program will be adjusted to the workload (which increases in low employment) and to the possibility of referral (which rises during high employment). Dita for the whole State for 1947, beginning in August, is shown in Table 23 by month and area and in Table 24 by week and area. There are marked differences between areas—for example, between Areas I, II (which contain San Francisco), and V (which contains Los Angeles). T h e reasons for the differences are uncertain. 41 T h e y may have been caused primarily by industrial differences (the warworker was more of a problem in Los Angeles than in San Francisco); or by variations in the efficiency with which the screening was done (there is sone hint of that in the relationship of disqualification rates to timeinput: Table 24); or to varying degrees of liberality in the norms used by the different managers. The experience of the State was similar to that of the Ontario office in that disqualification rates first increased greatly and then gradually declined, while remaining higher than for the general claimant population. It is to be hoped that some day the State will be in a position to provide answers. D a t a Ike this, covering a longer period, subdivided according to local offices, linked to the eflciency of the office and to the industrial and cultural characteristics of the locality —such data would shed much light on the problem of the nonworking violator.

224 NONWORKING VIOLATORS T h e general decline in the percentage holds, at least for the month of August, even for the weeks within the month. In Area V, for example, the 21.6 percent given for August in Table 23, is seen in Table 24 to consist of four weeks of 27.8, 22.3, 19.5, and 18.9, respectively. T h e division by weeks is interesting for another reason also. It reveals some of the high rates concealed by the averaging process. And, of course, within the area average rate of 27.8 for the first week of August there must have been rates of individual offices higher than that average. T o say exactly how high these rates are it would be necessary to compare them with the rates for these same groups of long-duration claimants before the investigation and with the rates for all claimants when all claimants were investigated thus closely. Neither comparison can be made with accuracy, because the necessary data are lacking. It is possible, however, to make rough comparisons which are sufficient to support the impression that the closer investigation made a significant difference. The first comparison. T h e previous disqualification rate among these long-duration claimants probably approximated the rate for the whole claimant population. 42 In U C 43 the nonavailability disqualification rate for the whole claimant population, computed on the same basis 44 as the rates in Tables 22-24, was for the third and fourth quarters of 1946, 1.3 percent and 1.6 percent, respectively, and for the third and fourth quarters of 1947, 1.1 percent and 1.4 percent, respectively. In R A the corresponding rates for 1946 were 0.2 percent and 0.3 percent; for 1947, 1.1 percent and 1.0 percent. That is to say, in the fall of the year, in both 1946 and 1947, for UC and R A , of all the compensable claims that were "investigated" in the routine way, the California agency on the average refused to pay (because of nonavailability) between one and two claims for every « See above, note 20. T h e distribution of nonavailability disqualifications between initial and continued claims cannot be had f o r U C nationally. What scattered data do exist, however, indicate that in U C also (as well as in R A ) the proportion of initial claims disqualified on these issues is greater than the proportion of continued claims. In 1947. in Illinois, for example, 3.6 percent of initial claims were subject to these disqualifications, but only 1.2 percent of the continued claims. « These California figures present the added complication that they contain both U C and R A cases, in undetermined proportions. Hence, the previous rates of both programs must be taken into consideration. " I n each case the numerator represents nonavailability disqualifications (entirely for the rates in the text, almost entirely f o r the rates in the tables), and the denominator represents beneficiary-weeks.

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»5

hundred claims which it consented to pay. Expressing the same relationship in terms of claimants: each week the agency typically paid a hundred claimants and disqualified one or two. If the same rate applied to the reinterviewed claimants previous to the reinterview—that is, if the agency had been disqualifying one or two of every hundred such claimants each week—then the closer investigation made a considerable difference. It increased the rate from 1 or 2 percent to 16 percent for the first two months (Table 23). Approximately 15 or 14 percent of these long-duration claimants, therefore, may have been violators—the difference between the previous rate and the rate after investigation. In Area V, for the first week the proportion of violators might have been as high as 25 percent," if the previous rate in the area had been the same as or less than the State rate. T h e second comparison. T o calculate the proportion of nonworking violators in the total claimant population, it would be incorrect simply to extend the rates established for these longer-duration claimants (as one legislative investigating committee in California seems to have done). Properly to calculate the proportion for the entire population one should know at least the new disqualification rate (that is, the rate established by closer investigation) for each durationinterval and the number of beneficiaries in each interval. But neither are known. The only reasonably certain proposition is this: if the same inquiry had been made into the status of all beneficiaries as was made into the status of these longer-duration beneficiaries,49 the resulting disqualification rates would have been somewhat l o w e r " than those shown in Tables 22-24. Just as it would be incorrect to extend the rate for the long-duration claimants to the general claimant population, so it would be incorrect to extend a rate established during the first few weeks or months of closer investigation into the indefinite future. These very high rates are not permanent, and for two reasons. First, there is the backlog phenomenon, as exemplified in the experience of the Ontario office (Table 22). All the evidence available goes to show that the Ontario « See T a b l e 24. « « D i s t r i b u t e d between five a n d t w e n t y - f i v e w e e k s , w i t h p r o b a b l y most h a v i n g ten weeks or m o r e . I t was said a b o v e that the d i s q u a l i f i c a t i o n rate f o r the l o n g e r - d u r a t i o n b e n e f i c i a r i e s was a b o u t t h e same as f o r all beneficiaries. B u t that is n o t t h e s a m e as s a y i n g that it s h o u l d h a v e b e e n — t h a t is, that it w o u l d h a v e b e e n if a l l the r e l e v a n t facts h a d been known.

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experience is not exceptional, but typical. There are only number of "flagrant abuses of long standing"; once these inated, the rate declines considerably. 4 ' Secondly, there is seasonal pattern in the rates—the highest rates being in fall.4* A t other periods the rates tend to be lower.

a limited are elima distinct the early

EXHIBIT 5. This exhibit and the following one fall outside the reconversion period proper and furnish useful checks on the preceding data. T h e y show that even in comparatively normal times a closer scrutiny of claimants results in a significant increase in disqualifications. T h e argument runs: if investigation can make as much difference as this in normal times, it would have made more of a difference in the reconversion period. T h i s exhibit concerning Illinois also has certain advantages not possessed by the earlier data. It shows results separately for U C and R A , and it shows more of the separate steps involved in the screening process. Illinois used the questionnaire technique with varying intensity throughout 1947 and 1948 for both its U C and its R A program. T h e questionnaires were of the ten-week variety, that is, they were given to claimants who had a record of ten or more consecutive weeks of unemployment. For November and December, 1948, the State maintained a complete record of the results. T h e action taken on all the questionnaires issued was noted at each step of the process up to, though not including, the appeal level. T h e step of "reconsideration" was a device to diminish the number of appeals to the referee. It was not an appeal, but was action on the administrative level. Table 25 shows the results at each step. In the R A program, of the 3,711 veterans who returned questionnaires, 716 were disqualified and accepted the disqualification, and 163 were disqualified but appealed (see "Net Result" at foot of the table). There is no record of the decisions in the appealed cases. If an allowance of 20 percent for successful appeals is made (this was the « At least among these long-duration cases. For New York's somewhat contrary experience with the general claimant population see Exhibit 6, below. *» Evident in the following year, 1948, also. Thus, for Area V, the most active area, the percentage of those interviewed who were disqualified, by month, was as follows: first quarter data not available; April, 11.7; May, 11.4; June, 11.3; July, 13.7; Aug., 16.9; Sept., 15.5; Oct., 15.9; Nov., 15.2; Dec., 8.9.

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proportion of successful claimant appeals in the U C program for 1947), the second figure is reduced to 130 and the total number of disqualifications becomes 846. T h a t is 22.8 percent of the 3,711 returned questionnaires. T h e corresponding percentage for U C , calculated in the same way, is 19.5. T h e veteran rate of 22.8 percent is considerably higher than the 12 percent disqualified by New York among its twenty-week veterans one year earlier, although the longer duration of the group examined and the time of the investigation should both have resulted, ceteris paribus, in New York's having the higher rate. T h e fact supports the probability mentioned above, that the New York rate was below, rather than above, the rate that would have been established nationally if the U C V - i had been used by all the States at that time. T h e higher disqualification rate among the veterans accords with the general impression of administrators that violators were relatively more numerous in the R A than in the U C program. T h e difference in rates is not great. When added to another difference, however, the total difference becomes significant. Appropriate weight must be given to the very much larger proportion of R A questionnaires in the category "Not Returned." T h e likelihood is strong that a larger proportion of R A claimants dropped out because they believed they would be disqualified if they returned. T h e more revealing figure, therefore, may be, not the percentage disqualified, but the percentage "eliminated" from the rolls. In R A the percentage of all those investigated who ceased to file was 47.6; in U C it was 29.3.50 Whereas the disqualification rate was one and one-half times greater for R A , the "elimination" rate was two and one-half times greater for R A . EXHIBIT 6. This last exhibit has two advantages over the previous ones. It refers to the claimant population generally (rather than to long-duration claimants only), and it is more thoroughly "implemented" statistically. T h e statistics were not by-products of administration—as is usually the case—but were the primary objectives of this "experiment," planned precisely to produce information. T h e story begins in 1947, the last year of the reconversion. T h e New York agency had contended for some time that the funds allotted by the Social Security Administration were inadequate for the proper control of claims and that as a result the program was suffering in so T h e figures include a 20 percent allowance for successful claimant appeals.

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public esteem. There was no denying the fact of widespread criticism at that time; and following an exchange of views regarding a reduction in the budget for July-December, 1947, the Bureau of Employment Security suggested a joint Federal-State experiment to help determine unit time required for satisfactory claims-taking and determination. The Bureau provided additional funds for this purpose. An experimental office was set up in Brooklyn, Local Office 5 3 7 . " For the first two years of its existence the office had as its general objective to improve claims operations in all their aspects. In the fall of 1949 the objective was narrowed to emphasize the investigation of claims and the elimination of claimants not entitled to benefits. More specifically, the objective of the office was to measure the effect of an increased staffing ratio on the number of disqualifications. The original experimental office was divided into a "test office" (Local Office 537) and a "control office" (Local Office 532). The two were in different parts of the same building. T h e claimants of the original office were divided between the two by what was hoped was random selection: those with social security numbers below 5,000 (last four digits) were assigned to the test office; above 5,000, to the control office. That the division resulted in reasonably similar industrial groups can be seen from Table 26. The sex composition of the two offices was also similar. Females made up 42.5 percent of the claimants in the test office and 43.2 percent in the control office. The slightly greater proportion in the latter was probably a reflection of its greater proportion of claimants from the apparel trades. If these differences had any effect on disqualifications, they tended to increase the number in the control office. In these otherwise similar offices the ratio of staff to claims differed greatly. Table 27 shows the ratios by week for each office. In the test office the ratio was always significantly greater than in the control office (which was staffed with the normal ratio of the regular New York city offices). During the first half of the period the difference was greater than it was later. From December through March the staffing ratio in the test office averaged 8.5 per 1,000 claims to 4.9 in the control office. From April through June the respective averages were 5.7 and 4.5. »1 A similar office was opened upstate also, in Syracuse.

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229

T h e additional personnel permitted the test office to: (1) allot more time to all operations pertaining to the examination of claims, but especially to the interviews accompanying the original claim and the first compensable week; (2) reinterview one fourth of the claimants each week and have them complete an availability questionnaire; (3) engage in some investigation in the field; 52 (4) check with the employer in every case of a late claim, that is, one filed subsequent to returning to work. The number of disqualifications (on all issues " ) assessed in the two offices differed noticeably. For the earlier part of the period the difference was greater than it was later. From December through March the disqualification rate averaged 20 for the test office, and only 9 for the other. From April through June the respective average rates were 12 and 9. For the first four months the rate in the test office was 1 1 7 percent greater; in the last three months it was only 41 percent greater. For that decreasing difference there are probably several causes. T h e decreasing difference in the staffing ratios, mentioned above, is the most obvious and important. Another may be found in the "backlog effect": the test office may have got rid of the accumulated backlog of abuses by its operations in the first four months. A third is to be found in the turn of the benefit year in May and June. At that time local offices are always abnormally busy with new and transitional claims, and regular investigative work suffers. Finally, it is possible that the personnel of the control office were stimulated to more than ordinary alertness as they became more aware of the competitive situation. Supervisors in the two offices thought they detected clear evidence of this. In the first four months of the experiment, when none of these obscuring factors were operative, the difference in disqualification rates between the two offices was great, much too great to be due to chance. T h e difference must be attributed to a difference in one or more of the four elements enumerated earlier in this chapter. Of the four, the first three are the least likely. There is no reason for thinking that the conditions of either the supply of labor or the demand for labor differed in the two offices. The composition of the claimant population was substantially the 52 T h e control office, like the other N e w York offices, had no assigned field investigator. 53 About one fifth of these were imposed on working violators; see T a b l e 29.

2jo

NONWORKING VIOLATORS

same in both. The control office had relatively more apparel workers and females, but this difference would have tended to decrease, not increase, the difference in disqualification rates between the offices. There is a greater possibility that the third element—a change in purpose—was operative. T h e norms adopted by the test office may have grown stricter than those used by the control office. T h e personnel of the former knew that they were a "test office," and presumably most of them knew that the object of the test was to see how many more disqualifications resulted from the heavier 64 staffing. In spite of instructions to the contrary, some of them may have unconsciously begun to decide against claimants in borderline cases which previously they had been accustomed to decide in favor of claimants. But the personnel of the control office also were aware of the competitive situation, and knew that a smaller number of disqualifications on their part would be used to show how many cases they were missing. The control office was as likely as the test office to lean in the direction of "toughness" in response to the competitive pressure. Certainly there were evidences among the personnel of the control office that they had become more alert under the stimulus of the danger of being "shown up" by the performance of the test office. But even if one were to grant, for the sake of argument, that the test office grew stricter than the control office, no conclusion would follow until these further questions were decided: Was the greater strictness according to the policy of the State? If so, was it because the State policy had changed with the inception of the experiment? Or was it because the office was now reflecting more faithfully than before an unchanged State policy? There is solid evidence that the policy of the test office was in accord with the State policy, more in accord with it than was the control office. That much seems clear. For the month of December, 1949, when the difference in the disqualifications between the two offices was as great as at any time, about a thousand of the determinations of each office were sent to Albany for review. The reviewers found more questionable decisions among the determinations of the control office than among those of the test office: 2 percent in the former; only 0.8 percent in the latter. A comment of the reviewers is enlightening: It was noted that in many instances where it was possible to verify statements with other sources such as employers or medical questionnaires, the " T h e quality of the staffing was not better than in the average office.

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231

office [532] did not pursue the investigation, as was done in local office 537. The claimants' statements were given more credence and the determinations were made accordingly. This may have been due to insufficiency of time and staff. This was the major point of difference in resolving the issues." In other words, the greater number of disqualifications of the test office came, not from interpreting the facts more strictly, but from having more facts to interpret. One measure of the correctness of the norms used by the offices is the history of appeals from their decisions. About 23 percent of all the disqualifications imposed by the test office and about 18 percent of those imposed by the control office were appealed to the Referee (December, 1949-June, 1950). By the end of July, 1950, about two thirds of these appeals had been decided. Table 28 summarizes the results of the decisions. There is little to indicate that the test office had been incorrectly severe. Although its proportion of modified and withdrawn cases is higher than that of the control office, its proportion of reversed cases is substantially lower. The net result is that its proportion of sustained cases is slightly higher: 59.4 percent for the test office and 58.9 percent for the control office.58 It would seem, therefore, that the difference in disqualification rates between the two offices must be attributed almost entirely to the fact that the test office knew more of the relevant facts pertaining to claimants than did the control office. If that was so, since the rate in the test office was double that of the control office, the results confirm strongly the general proposition that "investigation makes a difference." There remains the possibility that the State policy itself grew more strict after the inception of the experiment. Even if that happened, it would still remain true that the test office executed that policy more perfectly than did the control office. There is no positive evidence either that the State policy did change or that it did not. There is one rather strong argument from probability, however, that it did not. The New York Appeal Board is liberal, and it enjoys complete independence of the administrator. It is rather unlikely that the ad55 Typewritten report, files of New York Division of Placement and Unemployment Insurance. so If this same pattern marked the decisions on the rest of the appealed cases in the test office, a total of about 420 of its disqualifications were not upheld on appeal. That represents less than 1 percent of the total number of disqualifications it imposed.

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ministrator could have adopted policies contrary to those established previously without running into trouble with the Appeal Board. T h e change in the rate is the precise point of the argument here; but the size of the rate has considerable significance also. A b o u t 10 out of every 1,000 claims accepted by the control office were accepted only because the office did not have all the relevant facts. T h a t is, about 1 percent of all its claims were improper. It is reassuring to find that the proportion uncovered by even a thorough investigation is as small as that in normal times. In subscribing to that cheerful conclusion one should be aware of certain possible qualifications. For example: (1) T h e proportion of improper claims was at least 1 percent. Doubling the staff doubled the disqualifications. It is still unknown what increasing the staff further would have done. One member of the supervisory staff thought that as regards investigative work outside the office they had barely scratched the surface. And nothing approaching a complete audit of wages and benefits was made—even in covered employment, not to speak of uncovered employment, (a) Not all the disqualifications imposed on the claimants of the test office are necessarily included in Tables 27 and 29. T h e Counsel's Office in New York conducts industry audits of its own, as described in Chapter VII. Most of the disqualifications resulting from these audits would not appear in the records of the local offices. T h e likelihood that some of the claimants of the test office were thus included in the industry audits is the greater because such a large proportion of the claimants (41.6 percent) were from the clothing industry, in which the industry audits are chiefly made. (3) T h e Employment Service was not included in the experiment. It is significant that there is no difference between the two offices in the number of disqualifications imposed for "refusal of employment" (Table 29). (4) Much of the experiment was conducted in a period of recession, when disqualification rates tend to be lower than average. (5) There is no assurance that this 1 percent is a maximum or even a national average rate." New York is more liberal than the average State in the objectives it assigns to the program and it inclines more than the average State toward the "status" concept of unemployment insurance. It is less likely, therefore, to T h e only feature of the New York experiment which would make for a higherthan-average rate is the high proportion of claimants from the clothing industry. Industries characterized by piecework tend to produce more working violators than other industries.

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233

discover more cause for disqualification through more knowledge about the claimant. Some States would certainly produce a higher rate in an experiment like this. What the average rate for the country might be is hazardous to say. (6) Finally, this rate cannot be taken as representative of conditions in the reconversion period. All available evidence indicates that the number of improper claims in the reconversion period was considerably greater than it was in the later, more normal, period. It is unfortunate that even this New York study, statistically detailed though it is, does not permit one to follow disqualifications in terms of claimants. The proportion of claimants who were improper, that is, who were violators, cannot be calculated from the data of the experiment for any period longer than a week. For a week the proportion of improper claimants is the same (practically) as the proportion of improper claims. For any longer period the claimant proportion exceeds the claim proportion. 58 In general, the longer the period, the greater the excess will be. Some rough idea of what the claimant proportion might be for a year can be gathered from this comparison. In 1947 New York assessed about 108,000 disqualifications. These were about 0.8 percent of all claims filed, an even lower ratio than that of the control office in the later period. If we assume that this rate would have been doubled by closer investigation, as it was in the test office in 1949-50, the correct number of disqualifications in 1947 should have been 216,000. In 1947 in New York State there were 889,801 different claimants.59 On the assumption that each disqualification represents a different claimant, about 12 percent of all claimants were disqualified in the course of the year, whereas 24 percent should have been. Therefore, about 12 percent of the year's claimants were actual violators at some time or other during the year.80 All the reasons given above for thinking that the true rate is somewhat higher apply here also. But in this case there are two contrary and offsetting considerations. First, the assumption that each dis•>s Suppose that fifty-two different claimants each file two claims during the year, one a proper claim and the other an improper claim. If there is an even distribution of both kinds of claims over the year, then: (a) in any one week 50 percent of the claims and 50 percent of the claimants will be improper; (b) over the year 50 percent of the claims but 100 percent of the claimants will be improper. New allowed claims. 00 In 1947 less than 4 percent of all disqualifications were successfully appealed. An adjustment f o r this factor would decrease the final rate to about 1 1 . 5 percent. F o r the rough calculations of this section such a small adjustment is meaningless.

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qualification represents a different claimant is certainly not correct, because some claimants are disqualified more than once in the course of a year. Secondly, if the closer investigation had been extended to the whole State and had continued throughout the whole year, probably the high rate would not have continued. If it had not, the total number disqualified at the end of the year would have been less than double. T h e factors making for a lower rate probably outweigh the factors making for a higher rate in this case. The proper estimate, therefore, would seem to be something less than 12 percent—perhaps 10 percent. Only one part of the New York study focussed directly on claimants. That part followed the experience of the new " claimants of one month (October, 1949) to the end of their benefit year (June, 1950). By June, 17.2 percent of these claimants in the test office, and 11.7 percent in the control office had been disqualified. The 17.2 percent is less than the claimant rate estimate made above of 24 percent, and probably is closer to the true average rate. However, the 24 percent applied to a year's experience; the 17.2 percent applied to only nine months' experience. In three more months presumably more of the claimant group would have experienced disqualification. Moreover, the test office did not maintain its high staffing ratio over even the nine months. T h e disqualification rate varied among these October claimants by sex. In the test office 24.1 percent of the females" 2 were disqualified by June as compared with only 11.7 percent of the males. In the control office the respective rates were 14.0 and 6.8 percent. Females were 42 percent of all October claimants in the two offices, but they were 55 percent of the disqualified claimants. A record was also kept of the claimants who drew benefits some time after being disqualified and before the end of June. The data are interesting,"3 but of uncertain significance. Table 29 distributes the disqualifications according to the issue in•1 Those who filed valid original claims in Oct., 1949. «? Of the females in the test office who came from nonmanufacturing industries, S9.8 percent were disqualified. «s For example, 444 percent of all disqualified claimants in the test office and 45.1 percent in the control office received benefits after disqualification. They averaged 11.1 weeks of benefits in the test office and 9.8 weeks in the control office. Those who had been disqualified as voluntary quits drew benefits for longer than the average: 16.8 weeks in the test office, 11.5 weeks in the control office. More than half of these voluntary quit cases were males.

NONWORKING VIOLATORS

835

volved. For this chapter the most important issues are the last five, comprising more than 80 percent of the total disqualifications. Among these the chief issue is that of "availability and ability," comprising more than 40 percent of the total. More than twice as many disqualifications on this issue were imposed in the test office as were imposed in the control office. The great difference is understandable. The facts surrounding such cases are often very difficult to get, and it is here that having additional time for investigation makes a difference. The difficulty of getting the relevant facts surrounding availability is illustrated by one of the first cases which this writer observed in the test office. The claimant was a woman about twenty-five years old who worked as a sales clerk in her brother's hosiery store. Six months previously, in November, 1949, she had been married, but she continued to work. Three months after her marriage she stopped working. She said she had been laid off by her brother. That was in February, 1950. She filed her first claim for unemployment benefits two months later, in April, 1950. She gave as her reason for not filing earlier that she thought she could find other work soon. The claims-examiner, who was also a woman, suspected a condition of nonavailability due to pregnancy. The history fitted the common pattern: continuance of work after marriage until morning sickness made working too disagreeable; then a period of inactivity; then, with a feeling of returning well-being, the idea of declaring herself available for work—and for benefits—at least for a few months. Moreover, at one point in the interview the claimant allowed her coat to open, and the examiner noticed that she was wearing a maternity dress; also that she had an elastic bandage on her lower leg, and pregnant women frequently have trouble with the veins of their legs. All this the claimsexaminer explained afterward to the writer, who at this point in the interview was merely puzzled as to why the examiner was detaining the claimant so long and was asking so many questions. The claimant denied being pregnant, and since there was no way of establishing the fact one way or the other without a medical examination, the claims-examiner desisted from that line of inquiry. Moreover, even if the claimant was pregnant, it was possible that she was genuinely interested in securing some work for a few months and able to do it. It was necessary, therefore, to inquire into the other conditions relating to availability.84 « T h e r e was also the possibility that she had not been laid off, but had quit voluntarily

236

NONWORKING VIOLATORS

T h e claimant's job stipulations were as follows. She wanted a salary of $50 per week. T h e prevailing wage in her occupation at that time was between $35 and $40 weekly. Hence she was asking for the top wage in her occupation. She also stipulated that she would work only five days a week and that she would work only between the hours of 9:30 and 5:30. But in her occupation it was common for jobs to require at least two evenings of work a week and also work on Saturday, a big day for retail stores. T h e claimant's specifications excluded her, therefore, from a large section of possible openings. In view of these restrictions and in view of the fact that she had already been out of work for more than two months, it was reasonable to expect that the claimant was making a definite and measurable search for work. T h e rest of the interview proceeded on that assumption. T h e claimant had not been offered any jobs by ES, but the examiner checked want-ads in the daily paper. This was an especially time-consuming process. T h e examiner went through each job opening, and the claimant gave her reason for having been unable or unwilling to answer each particular advertisement. T h e claimant's answers were vague. For the most part it seemed that she was simply waiting for "something to turn up." Was she registered with any private employment agency? She was. But a telephone call to the agency failed to find her name listed. T h e claims-examiner, therefore, after ninety minutes, decided on a disqualification. T h e point here is not whether the disqualification was correct or whether the result was worth the effort, but merely that so much effort was required. It required ninety minutes of investigation to get a reasonably clear picture of the facts surrounding a claimant's availability and to document those facts so that they would stand up as legal evidence in case the claimant should appeal the decision. Another important issue relating to nonavailability is in T a b l e 29, "Refusal of employment." No significance attaches to the fact that the control office disqualified more on the issue than did the test office. These disqualifications depended on action by ES, and ES was not part of this experiment. T h a t is to say, ES had no additional staff with which to give the claimants from the test office special counseling and placement service. In New York City the ES offices are in separate because of pregnancy or other reasons. But because the employer was the claimant's brother the examiner did not think it worth while to inquire further into that possibility.

NONWORKING VIOLATORS

237

buildings from the U C offices, and the buildings are in different parts of the city. T h e disqualifications on the issues of "voluntary leaving" were larger by a third in the test office. T h e test office examined the claimant more carefully in the initial interview and spent more time checking back with previous employers. T h e disqualification for "voluntary leaving" can be a very complicated issue, and a good deal of time may be required for its decision, especially in a State which, like N e w York, recognizes "good cause" for leaving and understands "good cause" to include personal reasons. Moreover, the test office occasionally sent field investigators when a female worker quit voluntarily after a long period of employment to check the possibility that she quit to get married. A difference in statistical reporting may largely explain the difference in disqualifications on the issue "failure to report." In the test office more of these cases were sent to claims-examiners and thus got into the statistical record. In the control office more of these cases were handled at the claims counter, and in such a way that no claim was filed and hence no formal disqualification assessed. T h e uncertainty attaching to the difference in procedure makes it unsafe to draw conclusions regarding the effect of closer investigation on this issue. T h e difference between the two offices was greatest for the issue of "concurrent employment." It does not pertain directly to the matter of this chapter, but the experiment of the test office is so important in itself that all of its parts should be at least mentioned. T h e test office detected nearly seven times as many such violators as the control office did. T h e result is striking, but it should not be made the basis of a generalization. Certain peculiarities in the N e w York experience make its significance somewhat uncertain. Nearly all the discoveries were made in the same way and represented only one type of situation. W h e n a claimant returns to work, he may find it inconvenient to file his claim for the last week of unemployment on the assigned reporting day, and so he files at some later date. N e w York allowed six months for filing such a claim. 65 T h e test office used some of its additional personnel to investigate these late claims (most of them filed within a couple of weeks after going back to work) and f o u n d that many (10 percent) of them overlapped the week in which work was begun. Practically the whole of the difference between the two 65 L a t e r

reduced

to eight weeks.

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NONWORKING VIOLATORS

offices came from this one source. Even in the test office, therefore, there was nothing like a "complete audit" used to screen out working violators. The complicated New York day-base plan makes it likely that a larger-than-average proportion of claimants were guilty of this particular violation and that a smaller-than-average proportion of these violators were cheaters. Finally, as to the cost of conducting the whole experiment, the agency estimated that the test office was financially profitable rather than the reverse. During the seven months of its operation (December, 1949—June, 1950) it cost $45,812 more than the control office. But it paid out $ 1 3 1 , 6 1 8 less in benefits, and it imposed 22,662 more forfeit days 68 on cheaters, which represented a possible saving to the fund of another $130,000. The test office produced a theoretical "profit," therefore, of $215,806. How much of this was actually realized and how much of what was realized resulted from the operation of the office 67 cannot be measured exactly. It is worth noting that the difference in benefits paid out though a sizable sum in itself was small relative to the total amount of benefits. The test office paid out $4,417,667, and the control office $4,594,285. The smallness of the difference reflects the fact that though the disqualification rate in the test office was twice that of the other office, its rate was still not large. Even in the test office improper payments made up a very small proportion of total payments. Exhibit 6 represents a unique experiment. It is by all odds the best single answer to the question "What proportion of claims and claimants are, on the average, improper?" The results of the experiment would indicate that in normal times and in an office similar to the control office approximately 1 or 2 percent of the claimants who appear each week are violators and the claims they file are improper. In the course of a year, perhaps 10 percent of all the claimants will have become violators. T h e answer must not be thought of as either exact or certain. It is merely a general indication of the probable magnitude involved. There is even less certainty how representative 8« Days of otherwise compensable unemployment. T h e saving is realized, of course, only to the extent that the penalized claimant would otherwise have actually drawn these benefits. An actual allowance of half this possible saving is, perhaps, a generous allowance. An additional indication that investigation did make a difference is the smaller rate of exhaustions among claimants in the test office. In the test office an average of 8.3 percent of the active file became exhaustees each month; in the control office the percentage was 10.0.

NONWORKING VIOLATORS

s3g

it may be of the national situation. As applied to the reconversion period, the estimate would have to be raised somewhat and perhaps considerably. But at least it precludes the likelihood that anything like California's estimate of 20 percent 88 is correct. • » " F r o m the available evidence, this committee believes a conservative, informed guess would be that not less than 20 percent of the total unemployment insurance benefits paid in 1948 were obtained by fraud." Report of the California Senate Interim Committee on Employment Stabilization (Sacramento, California, June 23, 1949), p. 36.

C H A P T E R

IX

ADDITIONAL DATA ON NONWORKING VIOLATORS the study of the nonworking violator. It presents five disparate pieces of data. Like the data of the preceding chapter they do not enable one to make a precise judgment; but they are helpful for forming an impression. If one cannot do much with such data one can do nothing without them, for there are no others. They are only straws in the wind; but for the present one's judgment depends very much on observing such straws.

T H I S CHAPTER CONTINUES

DISQUALIFICATION

RATIOS FOR

B U F F A L O AND ROCHESTER

Buffalo paid proportionately more benefits than Rochester paid during the reconversion period, as described in Chapter V. A favorable view of the difference was taken in that chapter: Buffalo was less able to find jobs for people who wanted them. But Buffalo seems to have been less able, also, to find the people who did not want jobs. T h e different disqualification histories of the two cities requires some modification of the previous favorable judgment. Table 30 shows the nonavailability disqualifications assessed each month by the two cities and relates them to the average level of beneficiaries 1 in the month. Disqualifications were very much heavier in Rochester. For the first five months of the reconversion Rochester was disqualifying more claimants than was Buffalo even in absolute numbers. Its disqualification rate was still greater. Until the middle of 1946 its rate was five 1 Any base that was similar for both would suffice for the purpose of comparing the two. Beneficiaries have the double advantage over other possible bases that they are less subject to temporary accidental fluctuations and that they reflect better the difference made by disqualifying claimants early or late in their claim history.

ADDED DATA ON NONWORKING VIOLATORS

241

or six times that of Buffalo. Except for three months in 1947 (June, July, and August), its rate remained always higher, although the difference lessened steadily after the middle of 1946. Several other features of Table 30 are worth noting. For both cities the rates were lowest in the first part of the reconversion and highest in the last part. In this respect the change in Buffalo was merely greater than that in Rochester. In Buffalo there is a practically unbroken upward trend over two years: from the fall of 1945 to the fall of 1947. The operation of New York's uniform benefit year (beginning June 1) and uniform duration of six months is evident. In December, 1945, in Buffalo, the number of beneficiaries dropped by ten thousand—largely the exhaustees among the warworkers who were laid off or left their jobs after V E Day. (Reconversion began early in munitions centers such as Buffalo and Detroit.) An even greater drop occurred the next December: from 28,121 to 10,748. Some of these would have represented exhaustees among warworkers laid off after V J Day who began their "second round" of benefits in June, 1946. Note how the Buffalo disqualification rate doubled in December, 1946, as a result of these exhaustions. The absolute number of disqualifications was not larger, but even less than it was in November. The same number of interviewers, talking with about the same number of claimants—all they had time to interview—turned out about the same number of disqualifications, yet the rate doubled, merely because the long-duration claimants, whom the interviewers did not have time to see, dropped out of the claims-load. July, 1946, marks the beginning of what looks like a disqualification drive in Buffalo. From July through November the number of disqualifications kept mounting, while the number of beneficiaries kept dropping. July and August covered the period when jobs were becoming most plentiful, when the female second-rounders were still much in evidence, and when the newly introduced questionnaire in the R A program was demonstrating what might be done among longduration claimants by a careful reinterview. The general impression left by the table is that Buffalo missed many violators among its claimant population during the first year of reconversion. The industrial differences described in Chapter V do not seem adequate to explain why even the absolute number of its disqualifications was smaller than that of a city half its size; or why the

242

ADDED DATA ON NONWORKING VIOLATORS

absolute number of its disqualifications could be so much smaller earlier in the period, when the claims load was heavy, than later when the claims load was only a third of its original size. Unfortunately, it is not possible to compare the two cities for disqualifications in their R A program. New York did not keep any record of R A disqualifications on the issues of "able and available" and kept an obviously unreliable record of disqualifications on the issue of "refused suitable work." ABNORMAL CENSUS/CLAIMS

RATIO

The general survey of the reconversion made in Chapters IV and V produced evidence favorable to the period. There is, however, one general aspect of the period which bears a suspicious appearance. It is the way claimants for unemployment benefits exceeded the total number of the unemployed as estimated by the Bureau of the Census. The census and the claims series of the unemployed differ in both coverage and definition. T h e differences in coverage tend to make the census series larger than the claims series. The differences in definition generally, though not universally, work in the opposite direction. Since the differences in coverage are quantitatively more important, it is usual for the census series to be larger than the claims series.2 T h e only exception occurred during the reconversion period. There is some connection between heavy unemployment and a rise of the claims series toward the census series. During the recession of 1949-50 the gap between them diminished. But heavy unemployment cannot be the entire explanation. Unemployment in 1949-50 was much heavier than at any time in the reconversion period, 3 and yet the claims series remained considerably below the census series.4 It was only in the reconversion period that their positions were reversed. 2 T h e "usual" relationship is better illustrated by postwar ratios, such as those in Table 32, than by either war or prewar ratios. T h e war years produced an abnormally high census/claims ratio; the prewar years had very different, that is, more restricted, benefit provisions. s According to the Bureau of the Census, unemployment averaged 2.3 million in 1946, but 3.4 million in 1949. T h e average unemployment rate in 1946 was 3.9 percent; in 1949 it was 5.5 percent. * By month, January through December, 1949, in millions of unemployed, the respective series were as follows: Census: 2.7; 3.2; 3.2; 3.0; 3.3; 3.8; 4.1; 3.7; 3.4; 3.6; 3.4; 3.5 Claims: 2.2; 2.6; 2.7; 2.7; 2.6; 2.7; 2.8; 24; 2.1; 2.1; 2.0; 2.1

ADDED DATA ON NONWORKING VIOLATORS

243

The Fact T h e claims series began to exceed the census series for the first time in October, 1945. At the annual meeting of the Interstate Conference of Employment Security Agencies held in that month, Ewan Clague, then head of the Bureau of Employment Security, felt called to comment on the phenomenon. He pointed out som^of the difference« in definition between the two series, and concluded: As a result . . . the Census released for October an unemployment figure which happened to be somewhat lower than our current number of claims of all types. As strange as this relationship between the two figures might appear, it does not imply necessarily that our figure is too high or that of the Census too low. It shows rather that under the present conditions the two registrations follow closely each other but the gap between them is rather unstable.® T h e expectation implicit in this cheerful analysis that the October discrepancy would prove a freakish and passing irregularity was not realized. Instead, the "reverse gap" kept widening. T h e concern of the two bureaus involved deepened proportionately, and they held some joint meetings to prepare to meet the expected demand from the public for an explanation. T h e expected public reaction did not occur. T h e press made passing reference to the phenomenon when it first appeared, sagely enumerated some of the differences between the two series in method and definition, and then dropped the matter. T h e two bureaus concerned also dropped it.8 Table 31 presents the census/claims ratio over the period of the reconversion, and Table 32 carries it in condensed form a year further. They show the number of unemployed as estimated by the Census, in the census week each month, as a percentage of the number of claimants for unemployment benefits. Initial claimants are not included in the latter, because initial claims usually measure expected, not experienced, unemployment. If the expectation is realized, the 0 Proceedings, Ninth A n n u a l Meeting of the Interstate Conference of Employment Security Agencies (Oct., 1945), p. 15. • T h e r e are two articles discussing the relationship between the series in the Feb., 1950, issue of the Review of Economics and Statistics. But the real task of reconciling the two series has yet to be begun. A complete analysis would have to take into consideration seasonal and cyclical variations in the demand and supply of labor, by sex, with special attention given to geographical patterns along State lines (to be correlated with the differences between State UC laws).

244 ADDED DATA ON NONWORKING VIOLATORS unemployment actually experienced will give rise the next week to a continued claim. 7 T h e census series was less than the claims series for more than a year continuously in the totals (column 3). T h e negative difference began to show itself in October, 1945, reached a peak in April, 1946, when it amounted to more than a million, then gradually shrank until it disappeared in November, 1946. The same picture is given in column 4 in ratio form to facilitate comparisons over time and between subgroups. T h e negative quantities in column 3, or the ratios under 100 in column 4, are not a complete measure of the abnormality of the relationship. T h e normal relationship calls for the census series to be considerably larger. Hence, the relationship was abnormal for a longer period and to a greater extent than is indicated by the minus signs. The relationship steadily approached normality throughout the period, but it is probably safe to say that it had not fully returned to its usual behavior before the end of the period. Along with this change in the ratio over time there was a marked difference in the ratio as between subgroups. The reverse gap lasted longest among the veterans: from January, 1946, to June, 1947. For females it persisted for eleven months: from October, 1945, to September, 1946. For nonveteran males the period was much shorter: only the first four months of 1946. Similarly, the gap, while it existed, was largest for the veterans, next largest for the females, and smallest for the nonveteran males. There are two peculiarities, therefore, in the census/claims ratio during the reconversion period which call for explanation: first, the change in the ratios over time, with the claims series being actually larger than the census series in the earlier part of the period, but gradually returning to its normal position as the period progressed; and, secondly, the difference in the ratio as between subgroups, with the reverse gap being especially large for veterans and females. 1 Claims for unemployment benefits refer, therefore, to unemployment experienced in a previous period. T o make the "Insured Unemployment" series comparable with the M.R.L.F. series it was necessary to move the former forward by a week. For a description of the process see the B.E.S. publication Employment Security Activities for June, 1946, p. 7.

ADDED D A T A ON N O N W O R K I N G V I O L A T O R S Possible

Explanations

T h e possible factors of explanation are three: (1) T h e r e are differences in the object measured by the two series. Since what they try to measure, "unemployment," is not the same in all respects for both, it is clearly possible for a change in those respects in which they differ to affect one series more than the other and thus to change the ratio between them. (2) It is possible that the census series was in error. (3) It is possible that the claims series was in error. DIFFERENCES IN D E F I N I T I O N . Differences in coverage during the reconversion period at most lessened the numerical superiority of the census series. T h e y could not have made the claims series equal the census, let alone exceed it. Differences in definition, therefore, must bear the whole burden of explanation for the amount by which the claims series exceeded the census series—and, indeed, for something more, since differences in coverage should leave the claims series significantly less than the census. Certain peculiarities in the census definitions of "Employed" and "Not in the Labor Force" make it possible that some of those thus coded by the Census were eligible for unemployment benefits. A careful search 8 in the statistics of these peculiarities discovered little positive evidence that could be used to explain what had to be explained: the absolute excess of claims, the greater disproportion in the case of women and veterans, 9 and the fact that all the disproportions were greater earlier than later. For example, claimants for partial benefits would have entered into the claims series count of the unemployed, but not into that of the census series. Changes in them could change the relationship between the two series. But, as a matter of fact, partial claims were fewer, both absolutely and as a proportion of all claims, earlier in the reconversion period than they were later. T h e same was true of the census s Originally the detailed results of that search were included here; but preliminary readers of the manuscript were unanimous in voting for excision on the score that the details were more tedious than important. ® T h e difference between veterans and nonveterans is partly due to the higher proportion of the unemployed among veterans who were "covered," i.e., had entitlement to benefits. But that difference in coverage cannot entirely account for the difference in census/claims ratios. Coverage in the R A program was not twice as complete as coverage for males in the U C program; far from it. Yet the veteran ratio in T a b l e 31 is less than half the nonveteran ratio for six continuous months, A p r . to Sept., 1946. Something besides a difference in coverage caused this lower veteran ratio.

246

ADDED D A T A ON NONWORKING V I O L A T O R S

category "With a job but not at work," as can be seen from T a b l e 42, which gives the data for the only three groups in this category who might have been "unemployed" for purposes of unemployment benefits. T h e y were 11 percent of all unemployed perons in 1946, but 20 percent in 1947. However, both the census and the claims series are comparatively young, and the relationships between them are not yet well explored. T h e mere absence of evidence, therefore, is not conclusive. T h e Census may have coded some eligible claimants as being "not in the labor force." But if so, it was because of error on the part of the Census, not because of definitional differences. It is easier to be included in the labor force by census definition than by claims definition. 10 Again there is little positive evidence that such error was a significant explanation of the abnormal ratios. In the experimental studies 1 1 which the Census conducted specifically to determine "whether any substantial number of persons in the market for jobs are classified as outside the labor force by present procedures" the results were such as to weaken rather than strengthen the likelihood that significant numbers of eligible claimants were coded by the Census as out of the labor force. Consideration of the probabilities involved does not increase the likelihood, especially in connection with the two groups whose ratios were the most abnormal: the veterans and the females. It is certainly unlikely that veterans were a special object of this census error. T h e persons whose connection with the labor force is most easily missed are the persons in the penumbra of the labor market, persons whose labor-market status is doubtful even after all possible facts are known: the very old and the very young, housewives, students, and the ailing. But veterans are at the very core of the labor force: young males. Less obscurity should have attached to a veteran's labor-force status than to any other's. T r u e , in the early part of the reconversion period there were three groups among the veterans whose status was rather cloudy; but their CENSUS ERROR.

10 For the census enumerator the word of the person interviewed that he wants to work is normally final—no matter how unrealistic his job specifications may be or how small his efforts to find a job. 11 See Labor Force Memorandum No. 3, June, 1948; and Labor Force Memorandum No. 4, Feb., 1950.

ADDED D A T A ON N O N W O R K I N G V I O L A T O R S

»47

eligibility for benefits was equally uncertain. One group was not averse to a bit of vacation. T h e y registered, perforce, with ES, but rather hoped that nothing would turn up for a while. They made no real effort to locate a job for themselves, and even passed up openings about which they knew—and which they actually took later, after they had "stretched" a bit. It is understandable that they would have impressed the Census as being out of the labor market. T h e second group consisted of veterans who were waiting to go back to school. T h e jobs open to such temporary workers were, naturally enough, not the more desirable jobs. T h e difference between such jobs and the combination of leisure plus tax-free benefits was so small that they, too, preferred not to work. T h e y took no action themselves that was seriously calculated to disturb that preference—while still being dutifully registered with ES. 11 T h e third group consisted of veterans who were attending school, but stated that they were willing to leave school when a suitable job became available. A number may have been like the veteran in my seminar (in unemployment insurance) who explained to the class how he had drawn fifty-two weeks of unemployment benefits while attending school full-time. He was willing to drop out if ES should find him something that represented an extraordinary opportunity. He felt reasonably certain that ES would not present him with that decision, and he himself made no effort to find work. He planned his studies accordingly, using readjustment allowances for the first year instead of subsistence allowances, because he foresaw that he would need both to get through graduate school as well as college. He said he used the R A payments first because he calculated (correctly) that the subsistence allowance would be raised later. It is understandable how these three groups of veterans who were making no effort to find work themselves could have impressed the Census as being out of the labor market. Were they sufficiently in the market to be eligible for unemployment benefits? T h a t would have varied with the different States, of course. It is my impression that most of the agencies, if they had known the relevant facts in each case 12 Later in the period the agencies adopted more realistic "suitable" work standards for these student-veterans, especially after the Veterans Administration sent an explicit instruction reminding the State agencies that anyone wishing to work only until school commenced must expect to take less desirable jobs than were open to permanent workers. I was in State offices during the summers of both 1946 and 1947, and the difference that second summer in the application of the norm of suitable work for student-veterans was unmistakable.

248

ADDED DATA ON NONWORKING VIOLATORS

and had been able to prove them, would have disqualified the majority of such claimants. For a young, healthy male to depend entirely on ES to find him a job in a period when employment was rising rapidly and when ES was not accounting for a quarter of the jobs being filled—was (in most cases) to exhibit insufficient evidence of availability to satisfy the norms of the Readjustment Allowance program. 13 In the beginning some of the States may have been inclined to laxness in handling such R A claimants. Veterans were heroes and politically powerful; and besides it was Federal money that was being spent. But such an attitude was itself an abuse rather than official policy. Ray Adams, director of the R A program, reminded the States of that fact in July, 1946. Administrator's Decision RAR-U-222 restates the principles enunciated in many previous decisions that a claimant for readjustment allowances "must be ready, willing and able to accept any suitable work" and that mere registration at an employment office is not conclusive proof of either his availability for or willingness to work. This decision is well worth reading or re-reading as a comprehensive review of certain principles long recognized by this Service.14 Female claimants would have been more liable to miscoding by the census than would veterans. The group most likely to be miscoded were the "extra" workers displaced by the end of the war. These workers followed many different paths. Some, the greater number, dropped out of the labor force without filing a claim. Some dropped out, but filed claims nevertheless. The rest remained in the labor market. Of these, some searched for work and should not have been missed by the census question "Was N — looking for work last week?" The rest did not search. Of these, some were willing to take jobs less desirable than they had held during the war. They would not have been unemployed long; for such jobs existed in abundance from the very beginning of the reconversion period. The rest were willing to take only jobs as good as the ones they held during the war. They were of two types. One type intended to retire permanently from the labor market if no such jobs came their way. The other type intended to take, eventually, after their unemployment benefits were exhausted, one of the many jobs open all around them. In the meantime, they would 13 T h e Readjustment Allowance program adopted the norms of the various States for "suitable work," but retained the right to formulate its own norms of "availability." Veterans Administration, Readjustment Allowances, July, 1946, p. 2.

ADDED D A T A ON NONWORKING V I O L A T O R S

849

enjoy a rest, unmarred even by the search for work. A n example is the ex-corset-sewer mentioned in Chapter III. T h e last two types are the ones under discussion. W e need to know what proportion they were of all the female claimants and whether they were proper 15 claimants. T h e first we cannot know, but that will not matter if the answer to the second is in the negative. Undoubtedly, not all the States would have answered the second question in identical fashion, even if they had known all the relevant facts. Some would have said that such claimants were out of the labor force. Others would have said that they were in the labor market, but "voluntarily unemployed," inasmuch as they refused to take the only kind of jobs they were likely to get. Others might have raised no question about them at all, but would have paid them through to exhaustion. I am under the impression that most of the States would have given one of the first two answers. It was common to hear the administrators complain of their inability to distinguish these claimants, who they knew were there, from among the other (proper) female claimants. T h e administrators depended on exhaustions to wash most of these claimants out of the program eventually. T h e usual expression of opinion ran something like this: It is reasonable for warworkers to try to keep their better jobs. T h e y should have time to search, and it is proper for them to use unemployment benefits while they search. But they ought to search. Such jobs exist and are being filled in large numbers all around the country. Some of them are going to women. Women are not losing all their wartime gains, for example, in durable manufacturing. But there are not enough such jobs for all the "extra" workers. T h e claimants who insist on such jobs and yet do not search for them are doomed to failure in the competitive struggle for them. Registration with ES is not enough, and claimants know that. 16 If a claimant has so little expectation of obtaining such a job that she considers it not worth while to look for it in a period of rapidly rising employment, then she ought either to lower her job specifications or abandon her claim to be involuntarily unemployed. is It is possible that such claimants, if they w e r e v i o l a t o r s at all, w e r e i n n o c e n t l y so; b u t that is i r r e l e v a n t here. 1« I h a v e stood at claims c o u n t e r s in a l l parts of the c o u n t r y and asked c l a i m a n t s w h a t reliance they p l a c e d o n ES to find t h e m a job. It w o u l d be conservative to say that as m a n y as 10 percent of t h e m p l a c e d their m a i n reliance on ES, a n d they w e r e mostly the casual workers, the domestics, and the hard-to-place.

25o

ADDED D A T A ON NONWORKING V I O L A T O R S

It is my impression that no significant number of these claimants whose tenuous connection with the labor market may have escaped the census enumerator 1 T would have continued to be claimants with the full knowledge and consent of the agencies. A second possible source of census error is one inherent in its sample procedure. T h e census series is not an actual count of the unemployed, but an estimate based on a sample of 2 5,000 households. By a system of weights, the sample is expanded into a national total. It is possible that the weights failed to keep pace with the rapid changes of the period. Labor-force changes were unusually violent during the early part of the reconversion. T h e y were also concentrated geographically. These rapid and concentrated changes may not have been reflected accurately in the census sample.18 T h e possibility of such an error is real. O n the other hand, there is no positive evidence of it (other than the possible evidence of the ratios themselves). Certainly, if there was a sampling error peculiar to this period, it was remarkably systematic. It was always in one direction; the change over a certain period of time was regular, month after month; and the differences between the subgroups persisted. T h e census technicians feel confident that their measures were not distorted. 1 ' T h a t opinion has some value as coming from the persons closest to the measuring task. In the absence of any independent evidence of such an error, it is impossible to judge the degree of probability attaching to it. One can only recognize it, in a general way, as a possibility. ERROR IN THE CLAIMS SERIES. It is quite otherwise with the possibility of error in the claims series. A considerable amount of independent evidence exists by which to establish its solid probability. By error in the claims series is meant the inclusion of violators among the count of claimants. A l l working violators and most of the nonworking viola" Moreover, those w h o seriously considered registration with ES as an effort to find work would have answered in the affirmative the " A r e you looking for work?" question of the Census. Sampling variation is especially likely in the case of smaller categories, such as the unemployed category. 1® It is interesting to note that they had feared the opposite occurrence. T h e y had feared that respondents would give false answers to the census enumerators regarding their labor-force status in order to protect their status as claimants for unemployment benefits and that the census series would consequently be distorted until benefits were exhausted. See the similar expectation of the W a r Manpower Commission, p. 35.

ADDED DATA ON NONWORKING VIOLATORS

»51

tors have to be subtracted from the claims series to make it comparable with the census series. Antecedent probabilities.—First of all, there are the probabilities established by the materials of Chapters I I I and IV that there would be an unusual number of violators in the reconversion period. T h e abnormal number of violators would have come from the abnormal sections of the labor force: the ex-warworkers (especially women) and the veterans. Working violators would have come from persons beginning new jobs (and continuing to draw benefits for a few weeks without reporting their changed status); nonworking violators from persons temporarily (to make up for vacations missed during the war) or permanently (the aged, the housewives, the students) retiring from the labor market and from persons so unwilling to make realistic adjustments in their job goals as to be "voluntarily" unemployed. From the nature of the case, all of these would have been less numerous later in the period—after they began their job, finished their vacation, exhausted their benefits, and adjusted their expectations. The gap between benefits and wages was smaller in the earlier part of the period, and administrative defenses against violators were lower then—two more reasons why violators might have been more numerous earlier than later. T h e gap was smaller for women than for men. Women warworkers were eligible for maximum benefits to nearly the same extent as were men; but the wages available to women in postwar jobs were considerably lower than those available to men. The gap was smaller than average for many veterans: young unskilled veterans, veterans in agricultural sections, Negro veterans in the South, and Mexican veterans in the Southwest. actual developments of the period furActual developments.—The nish additional evidence. The six exhibits offered in the preceding chapter are positive indications that violators, especially of the nonworking variety, can be a significant proportion of claimants—even under conditions more favorable to claims control than in the early part of the reconversion period. The exhibits also indicate the likelihood that violators were disproportionately numerous among veteran claimants. That the same was true among female claimants is not shown by the exhibits; disqualification data are not available by sex. But the fourth part of this chapter contains some evidence to that effect.

252

ADDED D A T A ON N O N W O R K I N G V I O L A T O R S

Additional evidence is contained in this fact: changes in the census/ claims ratio moved roughly with changes in the disqualification rate for nonavailability. T h e excess of the claims series was greatest w h e n the disqualification rate was lowest. Monthly disqualification rates are not available on a national basis, but the quarterly rates of T a b l e 43 furnish material for a rough comparison with T a b l e 31. T h e third quarter of 1945 shows relatively high disqualification rates for both U C and R A , because it contains a large section of prewar experience. T h e census/claims ratio for this period is also high. 20 T h e fourth quarter of 1945 shows the disqualification rates cut in half. Normally, the fourth quarter has rates as high as or higher than the third, for there seems to be a seasonal pattern in disqualification rates, the months of high unemployment (at the beginning of the year) having a low rate, and the months of low unemployment (in the late fall) having a high disqualification rate. T h e census/claims ratio also dropped considerably: the average for the fourth quarter, for both men and women, is about half of the average for the third quarter. In 1946 the U C disqualification rate, after d r o p p i n g in the first quarter, rose steadily for the rest of the year. T h e census/claims ratio both for nonveteran males and for females also rose steadily from the first quarter through the fourth quarter. T h e R A disqualification rate did not become sizable until the third quarter. Most of the third-quarter rise probably came in the last m o n t h of the quarter, September, when the U C V - i began to be used. T h e sudden leap of the rate in the fourth quarter was certainly connected with its u s e . 2 1 — T h e census/claims ratio for veterans similarly changed in September and continued to increase through the fourth quarter. T h i s autumn rise in the ratio coincides with the return of the veterans to the schools; but that of itself should not have affected the ratio. Claimants who left the ranks of the genuinely unemployed to enter school represented a subtraction from both series. It should be noted how the rise in the ratio corresponds with the sudden drop in the census estimate of the n u m b e r of veterans w h o were neither in school nor in the labor force (see T a b l e 35, col. 2). 20 T h e ratio for August is so high because the census w e e k — t h e week containing the eighth of the month—was too early to reflect VJ Day. 21 Although the questionnaire was supposed to be introduced in August, the earliest States did not begin its use until September. Results would have been tabulated even later, so that they would not have been fully evident until the fourth quarter.

ADDED D A T A ON NONWORKING VIOLATORS

853

D u r i n g the year 1947 in U C the disqualification rate a p p r o a c h e d stabilization, if a l l o w a n c e is m a d e for the seasonal pattern. T h e rates f o r the last half of 1947 w e r e practically the same as f o r the last half of 1946. T h e census/claims ratio also approached stabilization, m o r e so for males than for females. For nonveteran males the ratios in the last q u a r t e r of 1947 averaged practically the same as the ratios for the last q u a r t e r of 1946. I n R A the disqualification rate c o n t i n u e d to c l i m b in 1947, a n d f r o m h a v i n g b e e n n o t a b l y lower than the U C rate, it became n o t a b l y higher. Either there was m o r e effort m a d e to find R A violators, or there were more to b e f o u n d , or both; p r o b a b l y both. T h e c o n t i n u e d use of the U C V - i f o r R A c l a i m a n t s — m o r e States i n t r o d u c e d its use in 1 9 4 7 — m u s t also have b e e n a c o n t r i b u t i n g cause. T h e questionnaire procedure was n o t used nearly so widely in the U C p r o g r a m . A l s o , there were t w o areas m o r e p r o d u c t i v e of violators in R A than in the U C p r o g r a m : a g r i c u l t u r e (veterans could d r a w R A benefits as u n e m p l o y e d f a r m w o r k e r s w h i l e employed in industry, and vice versa) and school (student veterans had benefit rights to m a n i p u l a t e , d u r i n g a n d b e t w e e n terms, n o t customarily h e l d by full-time students). In part, also, the later, h i g h e r rate was simply a reflection of the earlier, i n a d e q u a t e rate. T h e census/claims ratio for veterans f o l l o w e d the same pattern of c o n t i n u e d increase. In A p r i l , at the b e g i n n i n g of the second quarter, the ratio for the first time approached equality. T h e third quarter was h i g h e r than the second, and the f o u r t h higher than the third. It is n o t c o n t e n d e d that there was a simple causal nexus b e t w e e n changes in disqualifications and in the census/claims ratio. R a t h e r , it is likely that they b o t h reflected a c o m m o n set of conditions. T h e y rose and fell together for the same general reason, that normalcy was r e t u r n i n g to the labor market. B u t normalcy included, a m o n g other things, a g r o w i n g control over would-be violators. A formal

test.—In

e x p e r i m e n t a l studies

1946 the B u r e a u of the Census c o n d u c t e d two 22

designed precisely to test the hypothesis that

one cause of the c u r r e n t discrepancy between the census and the claims series was a substantial n u m b e r of persons d r a w i n g unemploym e n t benefits w h o were not in the labor market. O n e study was c o n d u c t e d in M a y for R A claimants, and one in September for U C claimants. T h e m e t h o d used in each study was the 22 N o t p u b l i s h e d .

254 added d a t a on n o n w o r k i n g v i o l a t o r s same: about a thousand claimants were included in the regular Monthly Report on the Labor Force sample of households. These households were then asked the regular questions by the census enumerators. The claimants thus investigated were classified as looking for work and not looking for work. The latter were further divided into three categories: those with a job but not working at it; those with a job and working at it; and those not in the labor force. The first category included only 5 percent of the R A claimants and 13 percent of the UC claimants who were not looking for work. That is, 95 percent and 87 percent, respectively, of the claimants who were not looking for work fell either into the category "Working" or into the category "Not in the Labor Force" and were therefore subject to suspicion. The claimants in the category "Working" were distributed according to the number of hours worked in the week for which they claimed benefits. In most cases the hours worked were enough to throw doubt on the workers' eligibility for benefits. Ninety-five percent of the working R A claimants and 91 percent of the working UC claimants worked more than fifteen hours during the week. (Sixty-six percent of each group worked more than thirty-five hours.) Claimants in the category "Not in the Labor Force" were classified according to their reasons for not looking for work. For R A claimants the classifications were: "resting—attending school—intending to enter school—temporarily incapacitated—permanently incapacitated or retired—intending to enter the labor force later—all others." For UC claimants the classifications were: "home housework—attending school—retired or unable to work—other." The "other" subdivision was not large. Only 8 percent of the R A claimants and 6 percent of UC claimants not looking for work had to be put in that vague group. Apparently the census enumerators obtained explicit reasons for most of the claimants as to why they were not looking for work. Of the R A claimants not looking for work, half were in the subdivision "resting," and another quarter in the two "school" subdivisions combined. Of the UC claimants not looking for work, two thirds were in the "home housework" subdivision, and another quarter in the subdivision "retired, unable to work." It seems likely, therefore, that most of those classified as "Working" and "Not in the Labor Force" were ineligible for benefits.

ADDED DATA ON NONWORKING VIOLATORS

*55

T h e proportion of test claimant* who fell into those two categories was large. If that same proportion was applicable to the general claimant population at the time of the test, the number was large enough to account for all of the excess of the claims series over the census series. Among the test group the proportion of claimants who were not looking for work was greatest among the women, was somewhat less among the veterans, and was very much less among the nonveteran males—a gradation which fits the characteristics of the census/ claims ratio in Table 31. The proportion who were working was largest for the nonveteran males,23 which could partly explain why the ratio for nonveteran males, also, was abnormally low for a time. It seems advisable to present the findings of the two studies in these general terms rather than to quote exact percentages. Figures give an impression of greater accuracy than can attach to a small test of this sort. As the Census Bureau itself cautioned, in the processed sheets containing the figures: In appraising the survey results, one should remember that the estimates are based on a small, and not necessarily representative, sample of claimants residing, for the most part, in large industrial or commercial areas. The results are, therefore, subject to very appreciable sampling variation as well as to variation arising from any bias that entered into the selection of cases. It is best to think of this survey as only another straw in the wind— but one which points clearly in the same direction as the others. ONE HUNDRED V E T E R A N S

Interviews with one hundred unemployed veterans were conducted by two researchers 24 between August, 1946, and February, 1947. The veterans were white males in New York City who were unemployed at the time of the interview and had experienced at least three months of unemployment since their discharge; veterans unable to work were excluded from the sample. The interviews sought to determine what relationship there was between the veteran's eligibility for R A and his job-seeking activities. Four patterns of behavior emerged. T h e first was the "Candy-Store Pattern"—so called because the veterans conforming to it characteristically used the neighborhood candy store and soda fountain as a 23 About the same proportions held for veterans and females. 2« Henry J . Meyer and Envin O. Smigel, "Job-Seeking and the Readjustment Allowance for Veterans," The American Journal of Sociology, L V I (Jan., 1951), 341-47.

256

ADDED DATA ON NONWORKING VIOLATORS

club or "hangout." These men did not know what kind of job they wanted and were no longer actively looking for one. Twenty-six of the hundred were characterized by this pattern. Their average age was twenty-one. Most (two thirds) of them felt that R A hindered their search for work. A typical comment was: "It's no damned good. A fellow doesn't want to go to work if he gets it. It makes me lazy." The second was the " T i m e Pattern"—so called because these veterans used R A chiefly to gain more time to search for the kind of job they wanted. They were older (average age, twenty-eight), knew specifically what they wanted, and were actively searching for it. Thirtyfour fitted this pattern, and almost all (92 percent) felt that R A had been helpful in their job-seeking efforts. A typical comment was: "This way I have a chance to gamble. I can pick my job. Without the R A I'd have to take any menial job offered." A third group fitted the "Young and Ambitious Pattern." Their average age was twenty-two. They were characterized equally by the intensity of their search for work and by the vagueness of their employment goals. They had taken and left more postwar jobs than those in any other pattern. Fourteen veterans were classified here. Half thought R A had been a help, and half thought it had been a hindrance. The fourth was the "Promise Pattern." Those who fitted it were young (average age, twenty-two) and had a comparatively high socioeconomic status. They had bona fide promises of jobs at high pay and assured futures, usually with relatives. They were vaguely dissatisfied with these opportunities, looked about desultorily for something better, and in the meantime used R A as spending money. Their families supported them. T h e R A functioned for the Promise-Pattern men, as it did for those of the Candy-Store Pattern, to postpone the inevitable acceptance of something they did not care for. A typical comment was: "I'll probably wind up taking my father's offer." Twelve of the veterans fitted this pattern. It would seem a conservative estimate that a quarter of all these veterans were nonworking violators who would have been disqualified by the agency if the agency had known all the relevant facts. The exact proportions have little significance in a sample as small as this and as select (made up of veterans with at least three months of unemployment in their background). T h e patterns, however, are useful.

ADDED DATA ON NONWORKING VIOLATORS

«57

T h e y make more precise one's understanding of the possible kinds of nonworking violators among R A claimants. THE FEMALE

VIOLATOR

T h i s section offers some evidence drawn from the postreconversion period to indicate that even in normal times the problem of the nonworking violator is predominantly (though far from exclusively) a problem of the female claimant. T h e evidence is confirmatory of the section on Abnormal Census/Claims Ratio earlier in this chapter and supplementary to Chapter VIII, which lacked data distributed by sex. It consists of four unrelated exhibits: some testimony of employers to the fact; some new (that is, postreconversion) census data which show the extent to which women move in and out of the labor force; an investigation of some Michigan exhaustees; and some details of another investigation which show concretely how violations come about and how difficult it is to detect them. Some Employers in New Jersey T h e New Jersey agency in 1949 sent out a letter to a list of its larger and more active employers telling them of the present writer's study of the problem of nonavailable claimants and inviting them to correspond with him on the subject. In chorus they replied that the problem was more female than male and that any solution would be difficult. There follow a few typical excerpts from the letters. From the P Company: As an employer of a large number of women, we find this a recurring problem. There is a certain small group continuously leaving ostensibly to return to the kitchen. A large portion of this group in a short time file claims for unemployment compensation. There is many times a strong doubt as to their real availability for work. We realize close policing of these claimants is both undesirable and impossible. By the same token, to have them collecting compensation (and figuring it in their weekly budget) is, to say the least, annoying. This especially when one is making a strong effort towards stable employment and a minimum merit rating. . . . The number of men who leave the labor market completely is negligible. From the B Company (having 17,000 women employees): The postwar period brought a large number of marriages and a high rate of voluntary quits. Although many of the women who married after VJ Day remained at work, many of them later resigned voluntarily because of pregnancy or other home conditions. Numerous benefit claims were filed by such individuals.

258

ADDED D A T A ON NONWORKING

VIOLATORS

Unemployment benefits paid to this Company's ex-employees in 1947 and 1948 have been identified in terms of individual cases as follows: —66 per cent to 68 per cent of those who received unemployment benefits had resigned voluntarily (without good cause attributable to this Company insofar as Company records are correct). —34 per cent of those who received unemployment compensation benefits separated involuntarily." Again I must say that this Company has not discovered any successful techniques to reduce materially the number of what we feel are serious abuses. From the R Company: T h e biggest problem in connection with the above groups [of nonavailable claimants] are those women who terminate their employment for reasons of pregnancy. . . . It was recently our experience to be involved in a case where a woman employee terminated her services in the fourth month of pregnancy. T h e reason given at the time of separation was it was her husband's wish that she remain at home and keep house. Shortly after her termination it became common talk in the office that this employee had terminated her services because of her pregnancy; in fact, a shower or two was given for her by her working companions. She made only one effort to find employment following her separation and yet when the appeal hearing was held, she maintained she was unaware of her pregnancy at the time of her termination and for two or three months thereafter. Despite these contradictory facts the Appeal Tribunal held in her favor. There are other examples which can be given to indicate the need for tightening of the regulations concerning unemployment benefits on pregnancy. • • • However, to return to the problem of techniques. I think there are few, if any techniques . . . which can be developed to reduce this number [of nonworking violators], for once they have left the services of a particular company, there is very little, if any control which can be exerted over the individual. [The writer was speaking of techniques to be used by the company.] The H Company: We employ about 1400 people, of whom approximately 1000 are women. Because of the fact that we prefer women, we have a fairly sizable turnover, and the majority of our employees who do resign leave the labor market completely. I would say that about seventy per cent of our resignations leave the labor market completely. [Just about the Census figure.] They leave because of marriage, pregnancy, or due to the fact that they have been working in order to send youngsters on through school, and feel they have completed their duty. Because we consider these are very legitimate reasons for resigning we " Note that these figures do not of themselves illuminate the problem of the nonworking violator. They would have to be taken in connection with some such data as that of Table 33 in order to have significance for the problem of this chapter.

ADDED DATA ON NONWORKING VIOLATORS

«59

feel there is no way in which the number could be reduced. We like to have that type of woman as an employee, and therefore, we accept this condition willingly. Many of them return for short-term employment at peak periods, referring to themselves as our "alumnae." If a former employee who has given me one of the reasons I have mentioned as the cause of termination applies for unemployment insurance, I contest the payment of benefits to the bitter end. Gross Changes in the Labor Force In April, 1949, the Bureau of the Census began to publish a monthly report entitled Gross Changes in the Labor Force.** It gives both the additions and the reductions relating to a given category, not merely the net result—hence the term "gross" changes. Its estimates are based on a comparison of the employment status of persons interviewed in both the current month and the preceding month. With this new report it became possible to follow changes in employment status for individuals. For the purpose of this chapter the most interesting revelation was the rate at which women, month after month, flowed out of the labor force. Nonagricultural workers who leave the labor force after separation from work are the chief source of nonworking violators. The extent to which this group is composed of women is shown in Table 33. The table shows, for both men and women, the number who were separated from nonagricultural employment between each of the survey dates, and of these the proportion who left the labor force.27 For example, of those who were employed in May, 1948, but not in June, the percentage who left the labor force after their separation from employment was 39.1 for men and 78.6 for women. That is, of every five women who separated from employment (voluntarily or involuntarily) between May and June, four of them dropped out of the labor market. The percentage for women varies, but it never is less than 75 and it averages above 80. The significance of the fact for this chapter is clear. If violations occur in some proportion to the opportunity for them, which seems to be the case,28 and if women produce relatively (and 28 T h e series was later extended back to May, 1948. 27 And also the proportion who found their way into agricultural employment; but these have relevance rather for working violators and for the problem of the effect of benefits on employment. 28 T h e proportion of liars among longshoremen, for example, or among needle workers, is presumably not greater than among other workers. T h e greater proportion

260

ADDED D A T A ON N O N W O R K I N G V I O L A T O R S

even absolutely) more potential nonworking violators, as T a b l e 33 indicates, then it is reasonable to expect them to produce relatively more actual violators. The Investigation

of Michigan

Exhaustees

A study " was made in 1950 of a representative sample 3 0 of Michigan exhaustees who had opened their claim in 1948 and exhausted it in the first three quarters of 1949. T h e y were each given a personal interview from six to twenty months following the exhaustion of their claim. T h e study concluded that about 53 percent of the exhaustees were clearly and securely attached to the labor force. Another 4 percent consisted of "young dependents," who still relied on the support of their parents. A b o u t 25 percent consisted of persons unlikely to be hired because they were handicapped, chiefly by age. Finally, there was the group which is of chief interest here. A b o u t 16 percent considered themselves out of the labor market, although probably acceptable to employers. Fifteen percent consisted of women; 1 percent, of men. T h e study estimated that between 7 and 8 percent of all benefits paid in Detroit during the fiscal year 1949 "may have been received by these people, chiefly women, who when interviewed said they did not look for work and who would not have been handicapped in such a search." 31 T h e Michigan agency objected to this conclusion on the ground that interviews held from six to twenty months after the date of exhaustion were an unreliable source of information regarding the labor-force status of the claimant preceding exhaustion. 32 Some of these findings receive confirmation from a Massachusetts study 33 of exhaustees conducted at about the same time. T h e proportion of those who left the labor market after exhaustion of benefits was 14.3 percent for men, 22.7 percent for all women, and 26.3 percent of working violators among them (Chapter VII) is due to the greater opportunity among them for lying profitably. 2» Ronald S. Johnson, A Study of People Who Have Exhausted Unemployment Benefits in an Active Labor Market (Ann Arbor, University of Michigan, 1951). so A b o u t 400 exhaustees out of a parent population of some 30,000. A l l exhaustees were about 14 percent of all claimants (about 20 percent of all claimants exclusive of those clearly unemployed only temporarily, that is, those who were certain to be recalled to their jobs within a week or two). 3 1 Johnson, op. cit., p. 13. 32 ibid., pp. 15-17. »» Massachusetts Division of Employment Security, Report on Unemployment Compensation Benefit Costs in Massachusetts (Boston, Commonwealth of Massachusetts, 1950). See especially pp. 51-52.

ADDED DATA ON NONWORKING VIOLATORS

261

for married women. T h e largest single group among those no longer seeking work was made up of workers 65 years of age and older; but the second largest group was in the go- to 24-year bracket, reflecting the withdrawal of women from the labor market after marriage. The Massachusetts study remarked regarding the female exhaustees: "There is no doubt that some of these women were actually out of the labor market while drawing benefits, yet there was no effective means of testing their availability." The Investigation

of the

"108"

Late in 1948 one of the large industrial States experimented with the procedure of "field investigation" as an approach to the problem of the nonworking violator. It selected for the test claimants registered with ES in its commercial office. It chose this group because, first, there was currently and there had been for the preceding three years a strong demand for this type of worker (typist, stenographer, office clerk); secondly, in this office the percentage of referrals that resulted in placements was three times as high for nonclaimants as for claimants;" and thirdly, practically all the applicants at this office were women—and the agency was under the impression that there were more problems of availability among the female labor force than among the male. T h e test continued throughout three weeks—the last week of November and the first two of December, 1948. The procedure was simple, though expensive. A claimant who was referred to a job during this period was instructed to return to the office the next day if no hire resulted and inform the office of that fact. When the claimant returned she was immediately interviewed by the special unit set up in the office for this one purpose. After getting her account of the job interview, a member of the unit visited the employer involved, the same day, and obtained his account of the same interview. A written report was then prepared incorporating the two accounts. The report also brought together the otherwise separate parts of the claimant's UC and ES history. Some of the claimants had been referred to jobs surprisingly often without a resulting hire. The report mentioned two "groups" of si F i f t y percent, as against 17 percent. Ohio f o u n d a similar difference in one sampling test. Not enough is known of the causes of the difference to justify any conclusion. More investigation would seem to be in order.

26i

ADDED DATA ON NONWORKING VIOLATORS

claimants (the basis of the grouping was not clear) of which one, consisting of twelve claimants, had been referred a total of 111 times, an average of 9 times apiece; and another, consisting of thirty claimants, had been referred a total of 172 times, an average of about 6 times apiece. T h e range in the first group was from 2 to 22 times; and in the second group from 2 to 17 times. 35 In the course of the three weeks 108 such reports were prepared. A complete record of the disqualifications assessed against the g r o u p w o u l d have been enlightening; but unfortunately no complete record was kept. T h e only information available was the following. By the end of the three weeks, 15 of the 108 had stopped filing for benefits; 7 had been disqualified; disqualifications were being considered in the case of 12 others; and with regard to another 12 ES had sent notices to U C containing possible disqualifying information. In summarizing its impression of the 108 cases the investigation unit reported that 10 seemed clearly available, 35 doubtfully so, and 63 clearly reluctant to return to work. T h e investigators would have had more detailed information, of course, than that contained in their reports. But on the basis of the reports, which I read, the above summary seemed unduly unfavorable to the claimants. T o give it much weight might be unwise. Seven of the 108 cases are presented very briefly below, arranged in what might be called a descending order of nonavailability. T h e y are offered as illustrations of the difficulty of obtaining the relevant facts regarding availability and of the need for field investigation to do so. 1) Case of Joan L (thirty-eight years old; married one year; no children).—She worked for seventeen years as a stenographer before marriage. In the year following her marriage she was in benefit status from March 24, 1948, to date (December 3, 1948). In that interval she had been interviewed by ES thirty times and had been referred to jobs five times. T h e first four referrals had been refused on the score of inadequate salary; the claimant asked a minimum of $55 weekly. T h e fifth, the s s It would be a mistake to ascribe the fruitless referrals entirely to claimant reluctance to return to work. It could also be due to inadequate registration and unsuitable referrals, and as a matter of fact evidence was found of both. It was interesting to note several cases in which claimants were rejected by the employer because they were "too good for the job," that is, they had earned more on their last j o b than was paid by the job under consideration and the employer was afraid that they would use him merely as a temporary stepping-stone to another job on their former level.

ADDED DATA ON NONWORKING VIOLATORS

163

one investigated, had been accepted." She returned with a detailed account of her interview with the employer and the reasons why she had not been hired. The investigator discovered that she had never reported to the employer. 2) Case of Frances E (twenty-nine years old; married; one child, of five months).—Before pregnancy had reached an advanced stage she had drawn more than twenty weeks of benefits. Pregnancy and the birth of her child occupied part of the interval before she returned to benefit status, September 15, 1948. Between then and this date (December 9, 1948) she had been referred six times. The last referral was to a secretarial job paying $45 weekly. She returned saying that the employer wanted a different kind of experience than hers, but that he said he would call her later and give her a definite answer. From the employer the investigator learned that he had offered to hire the applicant. She had been dubious about travel time, saying it took her one and one-half hours to reach his plant. He gave her travel instructions, told her to time herself going home, and to call him next morning if she wanted the job. She did not call. The investigator made the trip between the plant and the claimant's address. The travel time involved was about thirty-two minutes. 3) Case of Bessie G (forty-one years old; married, one child, sixteen years old).—She had been in benefit status from September 20, 1948, to date (November 28, 1948)." During that time she had been referred nine times. On the last referral, the one that fell within the period of the investigation, she reported that she had not contacted the employer because she found that his place of business was in a dangerous neighborhood and difficult to reach, requiring an eight-block walk from the bus. The investigator found the plant to be in the slum section of the city, but that working conditions were normal. There were wide, clean streets, with plenty of traffic, a large force of office girls in the neighborhood, and the distance from the bus was two blocks. 4) Case of Helen R (thirty-two years old; married; no children).— 30 Investigated because accepted—given the method according to which the investigation unit was operating. 3? In the previous benefit year, 1 9 4 7 - 4 8 , she began her claim at about the same time, Sept. 8, 1947, and continued in benefit status until J a n . u , 1948.

264

ADDED D A T A ON NONWORKING V I O L A T O R S

She had quit her last job early in August, 1948, to go on a vacation with her husband. She opened a claim for benefits August 27, 1948, and continued in benefit status to date (November 28, 1948). Had been interviewed fifteen times; referred six times. T h e last referral was to a $50 a week job. Claimant accepted the referral and went to see the employer. T h e investigator failed to record her version of the interview. T h e employer's version: claimant was not hired because she asked for $60 weekly; told him that her stenography was a bit weak because she had not practiced it in almost a year; and objected to the alley location of the firm. T h e investigator also visited the claimant's previous employer and learned that he had been sorry to lose her, because she had been a good stenographer; that she had worked for $50 per week; that she had often complained of the boring nature of the work and had mentioned her desire for something more exciting. 5) Case of Bee R (twenty-six years old; married; one child of eight months).—Pregnancy caused her to leave her last job ($50 per week) in January, 1948. In benefit status from September 29, 1948, to date (December 5,1948). She had been interviewed by ES ten times and referred four times. T h e last referral was to a job paying $40 to $45 per week. She accepted it, saw the employer, and reported that he told her he would call her later if she was selected to fill the job after he had interviewed other applicants. Before being referred to the job, she had assured the placement interviewer that her eight-month-old child presented no limitation on her availability. T h e investigator learned from the employer that the applicant mentioned that her baby might prevent her getting to work on time. T h e applicant had done poorly on the typing test also. Result: no hire. 6) Case of Florence B (no age given; married, one child of three months).—She had filed a claim February 2, 1948, but it was denied on the ground of voluntary quitting, with good cause S8 (probably her marriage). She filed again March 15, and her claim was accepted. She remained in benefit status until July 25, when she was disqualified as being "unable to work" (probably because pregnant). She reopened ** In New York this act carries no disqualification except as it may indicate a withdrawal from the labor market. Disqualification is removed by evidence of return to the labor market.

ADDED D A T A ON NONWORKING V I O L A T O R S

«65

her claim three months later, October 28, and remained in benefit status to date (November s i , 1948). She had been referred eight times. O n the last referral, the one investigated, she told the employer that she could not stay past quitting time (5:30) for even a little while or even infrequently because she had to relieve her mother promptly of the task of caring for her baby. Result: no hire, although otherwise satisfactory to the employer. 7) Case of Mary F (twenty-four years old; married; no children).— She had quit her job as stenographer June 25, 1948, because of pregnancy. After that there had been a miscarriage. She entered benefit status at an unnamed date, and up to the time of the investigation (December 2, 1948) had been interviewed by ES three times and referred once. T h e employer told the investigator that he had not hired this applicant because he wanted a permanent worker, and the applicant had announced that she intended to try to have another child shortly. In summary: at the end of the experiment the agency had convinced itself that women, especially married women, were a particularly thorny part of the problem of availability and that it was difficult to obtain the relevant facts without field investigation, which was too expensive to continue. T h e second conclusion is open to some question. Why is it necessary to use a special investigative unit to obtain information in such cases as the above? Why could not the regular placement interviewer sitting at his desk contact employers by phone and thus check the results of a referral? Does not ES continually do just that, as a matter of fact? T h e answer seems to be one of degree—that the ES interviewer cannot check the availability of claimants so frequently or so promptly or so thoroughly. Not so frequently (in the sense of "regularly") because when the interviewer becomes busy this sort of work is the first to be neglected; it is not his primary work. Not so promptly, because in the regular course of business the interviewer is likely to wait until sufficient time has elapsed for the postcard from the employer to arrive giving the result of the referral, and after that perhaps until the claimant comes in again or until contact is made with the employer again in some other connection. By that time the details of the case may be vague in the minds of both the interviewer and the employer. Not so thoroughly, because some facts can be ascertained (in a way

266

ADDED D A T A ON N O N W O R K I N G V I O L A T O R S

that will stand up on appeal) only by field work, such as the character of the neighborhood around the plant in Case 3, and the travel time in Case 2. More important, the interviewer is not directly interested in uncovering evidence of nonavailability; that is not his job. T h e claims-examiner is more likely to inquire into such details (as well as he can from his desk), but he gets the case even later than the placement interviewer (indeed much later), and he does not know the circumstances of the employer, the plant, the job offer, and the claimant's previous work history as intimately as does the placement interviewer. T h e matter of thorough investigation was particularly important in this State because the Appeal Board required strict proof of nonavailability before it would uphold a referee's decision on appeal. SOME

IMPRESSIONS

T h e nature of the problem of the nonworking violator—that it cannot be measured with mathematical exactness—excuses to some extent the listing of the following three groups of unproved impressions. First, administrators. A l l U C administrators to whom I have spoken are of the opinion that the number of nonworking violators exceeds that of the working violators. T h e y think, moreover, that a substantial proportion of the nonworking violators are knowingly so, that is, are cheaters. T h e y believe that the problem was more acute in the R A program than in U C , and more acute among women than among men, and more acute in the reconversion period than before it or afterward. O n the ES side, the placement interviewers were not so uniform in their impressions. Most of them felt that the nonworking violator represented a very small minority of the people they tried to place. T h e y were distinctly aware, however, that they were constantly meeting some applicants who seemed to be more interested in avoiding than in finding a job. In fact, ES personnel sometimes expressed impatience with having to waste time on persons who did not want jobs and blamed the annoyance on the ties that ES had with U C (until they recalled, with a smile, that without U C they might not have very many applicants of any kind). Placement interviewers whom I met in 1949, in three different States, were unanimous in stating that a change had come over applicants since unemployment had begun to

ADDED DATA ON NONWORKING VIOLATORS

g6j

mount: they were much easier to place, much more eager to take whatever jobs were available." The impression which the general public has of the problem is in one respect more significant than the impression of either UC or ES administrators. The public's opinion of the program is the rock upon which the program is built or broken. Chapter II contains some evidence, admittedly very fragmentary, of the general climate of opinion during the reconversion period. One would have to go back to the days of Prohibition, or of the W.P.A., or of the personal property tax in some jurisdictions, to find examples of an equally widespread impression of widespread abuse. And the impression, when analyzed, was found to relate chiefly to nonworking violators. >• A fact which has relevance, also, for Che following chapter.

C H A P T E R

X

RETARDATION OF T H E RECONVERSION of abuse was that unemployment benefits were reducing the supply of labor, thus lowering the level of employment and retarding the reconversion. The examination of the charge is best conducted in two steps: by a general analysis first, and then by a more detailed one. The first is based on the general description of the labor force given in Chapter IV; the second is based on a detailed labor-force chronology given in this chapter. The two constitute successive approximations to an adequate answer. T H E C O M M O N E S T CHARGE

GENERAL

ANALYSIS

Unemployment benefits could have reduced the supply of labor either by decreasing the number in the labor force or by increasing the number of the unemployed. If they did either, the effect was at least not so large as to be evident in the national aggregates. That much can be said at the outset. Labor-force-participation rates remained actually above normal during the reconversion period. Table 2 shows that in April, 1946, there were a million and a half more persons in the labor force than previous trends in the rates (between 1920 and 1940) would have led one to expect. A year later the excess was still almost as large, although its composition had changed. An outflow of females had been counterbalanced by an inflow of males (the veterans, of course). These higher total rates were achieved despite the lowered rates caused among some female groups by the abnormally high marriage and birth rates, and among some male groups by the abnormally large number of opportunities offered to veterans to go to school at public expense.

RETARDATION OF THE RECONVERSION

269

The data of Table 2 rest on estimates that are certainly subject to challenge. Trends based on such diverse periods as the 1920'$, the 1930's, and the 1940's are even more open to suspicion than are most data in this comparatively new field of labor-force statistics. However, they will support at least this conclusion: on the basis of what we presently know, or think we know, about labor-force propensities there is no evidence that unemployment benefits in this worst of periods diminished seriously the proportion of persons in the total labor force. As for the unemployment rate during the reconversion period—it could scarcely be called excessive by the norms our society has customarily used in judging the seriousness of unemployment. We are accustomed to admitting that a certain amount of unemployment is inevitable. There will always be some people just entering the labor force. There will always be some people quitting jobs—because of health or housing or necessary travel or a chance to get a better job. There will always be people laid off from jobs—because of shortages (of coal, gas, oil, transportation, power, parts, and so forth); because of labor disputes, machinery breakdowns, fires, bankruptcies; because of seasonal fluctuations in demand and shutdowns for model changeover and inventory; because of the introduction of new machines and methods, and the weeding out of less efficient workers. There will always be some of these separated workers who do not find new employment immediately—because the layoff is temporary and they know they will be recalled to their regular job shortly; or their characteristics do not fit the characteristics of the jobs that are open; or home ties, transportation expenses, and lack of housing make moving too difficult. There is a point beyond which unemployment can be further diminished only by sacrificing more freedom or more progress than the added employment is worth. The position of that point is a function of many of the most fundamental attitudes of society. It is too complex to be determined by any a priori chain of reasoning. It must be determined pragmatically—by the reaction of society (usually expressed through its statesmen and its social scientists) to an existing level of employment. The point of irreducible unemployment thus determined will not be precise. It will be an area rather than a point. And the area will not remain fixed. The definition of unemployment is itself subject to

2jo

RETARDATION OF T H E RECONVERSION 1

change. Even with an unchanged definition the area will vary. T h e acceptable rate of irreducible unemployment will not be as high in war as in peace. It was probably higher in the reconversion period, which was known to have abnormal difficulties, than it would be in a less disturbed period of similarly strong demand. It may be lower in the future than at present: improved techniques for measuring the labor force and following its activities may disclose that some unemployment previously held to be unavoidable is as a matter of fact easily controllable. It is possible that part of that "control" will take the form of tightening the program of unemployment benefits. The argument of this section is not destroyed by the above qualifications. For a given time and place and state of knowledge the minimum rate of unemployment is what the community says it is. With all its limitations, that social judgment still constitutes a significant norm for deciding when a level of unemployment is "excessive." It will not bear any great weight of argument; but it suffices for the conclusion that according to the best measure of unemployment which our society has at the present time and according to standards which our society has accepted up to the present time, unemployment in the reconversion period was not "excessive." T h e authors of an article entitled "Nature and Extent of Frictional Unemployment" 2 quote a number of estimates of what might be called a minimum rate of unemployment. They include Dr. Yntema's 2 - 5 percent, the National Planning Association's 2.5 percent, and Karl T . Schlotterbeck's 5 percent. T h e authors base their own figure of 3-4 percent on their estimates of unemployment in 1923 at 3.9 percent and unemployment in 1926 at 3.7 percent, and on their observation of a New York City experience during 1943. At the beginning of the year a 5 percent rate (which was considerably above the national average) supplied the newspapers with editorial targets and was considered justification for the appointment of a governmental committee to study the matter. By the end of the year severe labor shortages were being reported. At that time the unemployment rate was 2.5 percent. The authors conclude: Over the year New York City had progressed from a situation in which unemployment was regarded as a serious public problem to one in which 1 Clarence Long remarks: "Unemployment is a family name for a whole brood of concepts . . ." "The Concept of Unemployment," Quarterly Journal of Economics, XLV (Nov., 1930), »8. 2 Lester M. Pearlman and L. Eskin in the Monthly Labor Review, Jan., 1947, pp. 1-10.

R E T A R D A T I O N OF T H E RECONVERSION signs of a tight labor market probably in the second quarter, unemployment ceased to be an shortage had developed; at that was looking for work.*

271

were evident Thus, sometime in 1943, this area passed through a phase in which important problem and no serious labor time about 3.3 per cent of the labor force

O t h e r estimates could be given. For example, Morris Copeland's i n the American Economic Review (Supplement) for March, 1944; o r that of J. M . Clark in Financing High Level Employment, p. 64; or that of the C . E . D . research staff in Jobs and Markets, p. 107; or that of W . Woytinsky in Principles of Cost Estimates in Unemployment Insurance, p. 118. B u t they w o u l d fall within the same range. T h e fact that all of them are largely "guesstimates" and probably lean on one another does not destroy their value for the only purpose for which they are used here, namely, to demonstrate a rather general acceptance of the notion that even in ideal circumstances an unemployment rate of from 2 to 5 percent is to be expected. Circumstances were admittedly not ideal. It was a period marked by an unprecedented change in the kind of work to be done, an unprecedented shift in the workers to do it, and an unprecedented wave of strikes (see below). Something more than the m i n i m u m amount of unemployment was therefore to be e x p e c t e d — q u i t e apart from any effect of unemployment benefits. Y e t d u r i n g the reconversion period unemployment never exceeded the rates that our society has been accustomed to associate w i t h the prosperity phase of the business cycle. T h e annual average rate f o r 1946 was 3.9 percent; for 1947, 3.6 percent. A t its highest, in February and March, 1946, with employment at a seasonal low, with the veterans pouring back,* with the strikes at their worst, with the gap between wages and benefits abnormally small, and with conditions of administration abnormally favorable to persons w h o might prefer benefits to w o r k — t h e unemployment rate never quite reached 5 percent. T h e attitude of official and scholarly observers toward the level of unemployment was that of complacency. Professor Sumner H . Slich' Ibid., p. 9. * T h e reader should note, in T a b l e 34, the extent to which the veterans contribute to this m a x i m u m rate and recall that the veterans were an extraordinary and temporary element in the system of unemployment benefits. T h e regular labor force, including women, had a much lower unemployment rate.

272

R E T A R D A T I O N OF T H E RECONVERSION

ter, in an article for the New York Times Magazine, on November 25, 1945, entitled "Seven Surprises in Our Economic Picture," said: "Perhaps the biggest surprise of all has been the small amount of unemployment." T h e Survey of Current Business, in its review of 1946, remarked: "the absolute amount of unemployment was small and declining through most of 1946" (February, 1947, p. 15). The Monthly Labor Review, in an article entitled " T h e Labor Force in the First Year of Peace," stated: "Yet at no time during this period was unemployment a critical problem" (November, 1946, p. 669). T h e Wilmington News for J u n e 18, 1946, was typical of newspaper comment: ". . . the report of Robert C. Goodwin [director of U.S.E.S.] makes extremely pleasant reading. . . . T h e total of jobless . . . stands at 2,310,000. Even in times of so-called full employment the number of those seeking jobs at any given moment rarely drops below this figure." T h e first Economic Report of the President looking back over 1946 and ahead into 1947 concluded: " T h e purposes of the [Employment] Act [of 1946] would be substantially achieved if during 1947 we sustain employment at about the 1946 levels or slightly higher." T h e impression is inescapable that unemployment benefits, if they did increase unemployment in the reconversion period, did not do so to an extent that was socially serious. It is possible to argue against the census definition of unemployment, and the census method of measuring it. But the census data, with all their alleged or real defects, are the best data presently available, and are used almost universally. The opinions quoted above, for example, on the minimum level of unemployment are in terms of that kind of data. For the purpose of the argument of this section that is sufficient. It allows us to conclude that according to the norms generally used by our society there is little support for the charge that unemployment benefits seriously increased the number of the unemployed—even in the period when the influence of unemployment benefits in that direction must have been at its maximum. Is that all that can be said regarding the charge that benefits diminished the supply of labor? Can nothing be said for the possibility that benefits decreased employment significantly, even if not seriously? Is it not probable, a priori, that unemployment benefits always decrease the supply of labor—to some extent? 5 ° T h e action of ES, which is associated with UC, always has the effect of increasing

R E T A R D A T I O N OF T H E RECONVERSION

273

Unemployment benefits reduce the pressure to work. It is reasonable to expect that where there is less pressure to work there will be less (though possibly better) work done. T h e level of employment will be lower. Certainly, by increasing the pressure to work one could, in a period of generally adequate demand such as the reconversion period, raise the level of employment. If, to take a strong case, the suggestion of the Idaho Statesman 4 (to reinduct into the army those unemployed for 6 months) had been adopted during the reconversion period, the level of employment would undoubtedly have been somewhat higher. If the penalty for being unemployed had been increased to death by hanging, the level of employment would have been higher still. 7 Apart from this general a priori argument, certain concrete situations can be found where the probabilities point strongly toward the conclusion that unemployment benefits decrease employment. For example, the payment of benefits to the coal strikers of Pennsylvania (Chapter II) seems to have had that effect. It is almost certain that women warworkers, such as the ex-corset-sewer of Chapter II, would have returned to work sooner in the absence of benefits. Many a young veteran—everyone knows one or two—would have been in just a bit more of a hurry to find himself a job if he had not had that twentydollar inflow of spending money each week. It is also possible that claimants such as the shipyard workers of Washington (Chapter V) would have adjusted sooner to the changed situation of peacetime if they had been held to the same norm of availability as that of the Wisconsin shipyard workers (which is not the same thing as saying that they should have done so). T h e Wisconsin policy is indicated in the following excerpt from a letter written to me by a member of the Wisconsin agency. When the Superior Shipyards laid off the group of welders, riveters, et cetera, who had been recruited from the nearby countryside, they claimed that they were entitled to unemployment compensation benefits. About the same time, the farmers of this community were crying for help to employment; but that does not change the character of the action of U C . T h e most that can be said is that U C , by its requirement that claimants contact ES, deserves some of the credit for the effect achieved by ES. « Page 56, n. 47. 7 N o penalty would suffice to banish all unemployment, for demand never perfectly matches the supply of labor in place, time, and quality. But in the reconversion period there was always a substantial n u m b e r of the less desirable jobs available to many of the unemployed.

274 R E T A R D A T I O N OF T H E RECONVERSION harvest their crops and they couldn't see why the men who had formerly worked at the shipyards, but prior to that had been farm-hands or farm boys, were drawing benefits for being unemployed when there was a lot of work available. Mr. . . . and the head of the Employment Service in Milwaukee, along with various members of both staffs, had an informal meeting and agreed that depending on the skill and training of the various claimants that they were to be allowed from three to six weeks to find suitable employment, or employment for their so called highest skill. If they failed within this time, they were referred to farm work and refused benefits. Probabilities such as those sketched above carry with them no indication of the weight to be attached to them. Even if it be granted that unemployment benefits reduced the supply of labor somewhat, the crucial question remains: by how much? By a negligible amount? By an amount that although not serious might counsel some tightening of the law? Even if it be granted that unemployment was reasonably low and the labor-force-participation rate reasonably high, is it not possible that without unemployment benefits both would have shown an even better record? N o quantitatively exact answers can be given to such questions. B u t a more particular analysis of the developments of the reconversion labor market can help to approximate the answers more closely. T h e next section, therefore, presents a detailed chronological view of those developments as a supplement to the general view provided by Chapter IV. DETAILED ANALYSIS: LABOR-FORCE

Before

CHRONOLOGY

VJ Day

Reconversion had a kind of trial run during the two years preceding the actual end of the war. T h e war economy began to unwind as early as the end of 1943, when employment in "munitions" passed its peak and began its long decline. It proceeded far enough before VJ Day to contribute materially to the smoothness of the reconversion proper. T h e period was marked by the disparate characteristics of a considerable decline in employment in durable manufacturing and the absence of any proportionate rise in unemployment. T h e decline in employment is reflected clearly in Chart 1, which shows that "durable manufacturing" dropped by about two million between October, 1943, and VJ Day. T h i s represented a large adjust-

RETARDATION OF THE RECONVERSION

«75

ment in a vital sector of the economy. It was approximately half of the total adjustment to be made (before the series would turn up again) and it occurred among workers in the specifically war industries.* In view of the concentration of reconversion problems in these industries this large preliminary adjustment must be considered an important contribution to the remarkably quick recovery of employment after the VJ Day crisis. T h e absence of any proportionate rise in the number of the unemployed during the period is ascribable to two factors: first, to the continued growth of the armed forces during this same time; secondly, to the withdrawal from the labor force of the "extra" workers. Women, especially, were withdrawing, and especially in the period between V E and VJ Days, when, it is estimated, one million dropped out. 9 A survey of eighty-eight companies in 1944 came to this conclusion: Evidence supporting the thesis of a high rate of "evaporation" (i.e. leaving the labor market) is given in several instances of recent plant closings or temporary layoffs. In spite of the efforts of the United States Employment Service to hold these women in the market for other employment, many of them have failed to apply for other work.10 In this period the number of unemployed beneficiaries reflected the decline in employment even less than did the number of the unemployed, whereas after VJ Day beneficiaries reflected the decline more. After

VJ Day

T h e end of the war came suddenly, and almost as suddenly there came to an end (as Congress had promised) the nation's war-related activities. As a consequence, in the months following VJ Day the country had to execute the most extreme labor-force adjustments in its history. Large as the adjustments had been before VJ Day, they were still minor as compared with those which took place after final victory. Three vast and simultaneous changes took place: the withdrawal 8 This, for example, was the experience at the Willow R u n bomber plant. In July, 1943, it had 42,000 workers; in May, 1945, 11,000; in June, 1945, 5,000. J. F. Bober and Carrie Glasser, " W o r k and Wage Experience of Willow R u n Workers," Monthly Labor Review, L X I I (Dec., 1945), 1074. » Leonard Eskin, " T h e L a b o r Force in the First Year of Peace," Monthly Labor Review, L X I I I (Nov., 1946), 674. 10 Helen Baker, The Readjustment of Manpower in Industry during the Transition from War to Peace (Princeton, New Jersey, Industrial Relations Section, Department of Economics and Social Institutions, Princeton University, 1944), p. 46.

276

R E T A R D A T I O N OF T H E RECONVERSION

from the labor force of the emergency workers; the entrance into the labor force of the veterans; and the industrial and occupational reshuffling of the whole labor force. T h e rest of the chapter describes these changes in terms of their net effect on employment and unemployment. v j DAY TO THE END OF 1945. Employment.—The adjustments in employment in this period were distinguished by: (1) the selectivity of the declines which occurred; (2) the swiftness of those declines; (3) the evaporation and absorption of the released manpower. T h e decline in employment was confined to comparatively few industries. Chart i, and Table 43, show how almost the entire decline occurred in manufacturing, and within manufacturing was restricted to its "durables" component. As a matter of fact, only a fraction of the twenty major industries that comprise manufacturing were seriously affected, namely: ordnance, chemicals, rubber, machinery (including electrical), and transportation equipment (other than automobiles). 11 Covered employment in these industries dropped nearly three million in the last half of 1945 (while employment in other industries was increasing, so that total employment dropped less than 1.5 million in the same period). Also, within that small group of industries, it was the last named—transportation equipment—which accounted for nearly two thirds of the total decline; and about two thirds of that was concentrated not only industrially but also, as a consequence, geographically. Different States, and areas within States, had widely different reconversion problems. This geographical spottiness of the reconversion problem is almost certainly the main element in the differing claims-histories of the various States.12 Secondly, the decline was swift. In Chart 1 the line showing the manufacture of durables drops almost vertically during the first month after VJ Day and then declines very little more for the rest of the year. Most areas executed the first, negative step of reconversion quickly. Shipbuilding was the chief exception. A t the war's end there remained, beside the work on unfinished ships, the task of converting to peacetime use the Liberties and the Victories, and a great backlog of repair work for the Navy and for the merchant marine. T h e dis1 1 Bureau of Employment Security, 1946 Employment and Wages of Workers Covered by Unemployment Insurance Laws, Nov., 1949; processed. 1 2 It was an element never carefully explored by the journalistic and legislative investigators who ventured on interstate comparisons to prove their charges of abuse.

RETARDATION OF THE RECONVERSION

377

charge of warworkers from the shipyards, though considerable immediately after V J Day, was not completed until many months later. But for the country as a whole liquidation was swift. As may be seen in Table 43 the rates of discharges and layoffs quintupled in August, 1945, and were still high in September; but they were very much lower thereafter. The liquidation of the armed forces was also swift. The veterans returned at a faster rate than any of the planners mentioned in Chapter I had expected.13 Had they known what the actual rate was to be, their estimates of unemployment would have been still more pessimistic. About six million veterans were returned to civilian life between V J Day and the end of the year, a rate of more than a million a month. Fortunately, demobilization did not get into high gear until October, so that the shaken civilian economy had a breathing space of a month and a half in which to recover its balance before the veterans descended on it in force. A third feature of the period was the degree to which the released manpower was absorbed. Industries which formerly had been limited by lack of materials and labor expanded at once. Chart 1 shows the chief gainers: trade, nondurable manufactures, and service. Even construction increased counter-seasonally; and government, which had dropped 400,000 employees, replaced half of them over the holidays. Before the end of the year the trend in total employment was strongly upward. The extent to which veterans formed part of this increase in employment, and perhaps displaced civilian workers in the process, is discussed below. The rate of growth of employment in this period is better evaluated when seen against the background of the obstacles it encountered. The obstacles 14 to rapid expansion included the following: shortages of basic materials; lack of key workers; the many firms still reconverting buildings and tools; strikes; reluctance of workers to take poorer jobs than they held during the war. The monthly area labor-market reports of the United States Employment Service refer to the above obstacles continually. The following illustrations are taken from the December, 1945, issue of The 13 See, for example, the estimate in The Labor Market (War Manpower Commission), for Aug., 1945, back cover. 14 These were "added" obstacles that might be expected to bring unemployment above the minimum frictional unemployment caused by the "normal" obstacles of fires, floods, changing seasons, changing tastes, etc., etc.

878

R E T A R D A T I O N OF T H E RECONVERSION

Labor Market (published by the United States Employment Service in the Department of Labor) giving the situation as it stood in November. [Foundries.—] While the lack of adequate manpower was the most commonly reported deterrent in increasing output, shortages of coal 1 5 and pig iron were also frequently cited. . . . In some Michigan areas iron foundries were releasing labor, while in others active recruitment was taking place. . . . Low wages are still holding back recruitment. Many of the workers released from war industries have been slow to accept foundry employment. . . . The major portion of the labor demand is for unskilled workers. [But] some plants indicate that skilled and experienced foundry workers must be obtained before additional unskilled labor may be hired. [Construction.—] Stringencies continue in many construction materials —face and common brick, cast iron soil pipe, clay sewer pipe, structural tile, and roofing materials.

For one of the reasons see next item. [Structural clay products.—] The recent price increase awarded to brick and tile plants afforded some relief by enabling such firms to raise wages somewhat. Substantial manpower needs still persist, however. . . . Only 135 plants (less than 60 per cent of those reporting) had been able to achieve any net increase in employment since September 15. The majority of the need is for skilled workers. [Furniture.—] Because of the material shortages, manufacturers state generally that they have no current labor shortages of a serious nature. Additional workers will be required, however, as materials become available.

Compare with following item. [Logging camps and lumber mills.—] In the face of heavy reconversion demands, September output of lumber fell more sharply from the previous month than any month since December, 1941. . . . Recruiting has been hampered by the strike (60,000 in the Northwest) and by a lack of housing in both Oregon and Washington. . . . Considerable absenteeism occurred throughout the Northern Rocky Mountain and North Pacific States in October because of the hunting season. . . . Eastern finishing mills which use western lumber may have to wait for the end of the strike before they hire additional labor. [Cotton textiles.—] The expected post-VJ-Day increase in cotton textile employment failed to materialize. Despite the huge demand for cotton goods and the enlarged labor supply, total mid-October employment in the industry was unchanged from the June level of 470,000. Major reasons for 15

The bituminous coal strike began in September and ended in mid-October.

RETARDATION OF THE RECONVERSION

«79

the failure of employment to rise are: (1) several large mills have temporarily laid off workers while in the process of reconverting from military types of fabrics; (2) workers are still reluctant to accept textile employment because of the relatively low wage rates offered and poor working conditions; and (3) a good part of the job openings are for second and third shifts which are unpopular with workers. [Detroit.—] . . . the Detroit area remains one of substantial labor surplus. Reemployment of displaced workers has reportedly been hampered by reluctance of manufacturers to hire workers with seniority rights in other plants, more restrictive employer specifications with regard to sex and color, and low starting wage rates . . . hiring plans will probably be completely upset unless the strike at General Motors plants is settled in the near future. [San Francisco.—] Much of the current labor demand is for replacement of older and of women workers,1® reflecting a growing selectivity on the part of employers. [Wichita.—] . . . a 21,000 drop in aircraft employment during the month following the Japanese surrender. . . . Almost two thirds of the unemployed are women, while most of the current demand is for men. Many unemployed either refuse to fill available domestic service jobs due to wage differentials and less desirable working conditions, or are not qualified to accept highly skilled jobs. In spite of all obstacles, however, the necessary shifts in employment did gradually take place, as Chart 1 clearly shows. It also shows that total employment began to rise within two months after the end of the war. Unemployment.—The increase in unemployment was in no way proportionate to the decreases in employment and in the number of the armed forces. A glance at Chart 1 shows that unemployment rose relatively little to meet the twin falling lines of civilian employment and of the armed forces. T h e explanation lies partly in the three characteristics of employment described above and partly in the large number of civilian workers who left the labor force and of veterans who delayed entering it. T h e quickness with which the women, in particular, left the labor force is strikingly evident in Panel I of Chart 1. T h e extent to which veterans delayed their entrance into the labor market is indicated in i» That it was not only the women who were displaced is indicated in this brief report of the Ohio agency on its experience between mid-September and mid-November (1945): "Since the number of World War I I veterans employed increased 24,000, and total male employment increased only 20,000, it is apparent that approximately 4,000 male civilians were replaced by veterans during the two-month period" (Ohio State UC Agency, Analysis No. 23).

280

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T a b l e 35. T h e possibility that some of these w o m e n and "resting" veterans were claimants for benefits is discussed in Chapters V I I I and I X . T h e unemployment experience of veterans is treated later in this chapter. 1946. Employment.—The adjustment of war-affected industries was largely accomplished by the beginning of 1946. Even the most seriously affected industries were beginning to show employment gains. Shipbuilding was an exception. T h e n u m b e r of covered workers in that industry continued to decline throughout 1946, dropp i n g from 338,000 in December, 1945, to 186,000 in December, 1946. T h e pace of conversion in the war industries is approximately indicated by the behavior of the durable goods segment of manufacturing (see Chart 1). A f t e r its long decline from the latter part of 1943, it had started to join the upward procession of the other industries at the beginning of 1946. It tripped over the J a n u a r y - M a r c h strikes, and fell by another million before it could regain its feet. B u t then it climbed so rapidly that by June it was above that of the nondurable manufactures—which marked the third time the two had changed positions in this turbulent period of conversion and reconversion. T h e timing and the degree of recovery of durable manufactures is an important norm in j u d g i n g the reasonableness 17 of unemployed workers who wished to wait for reemployment in such industries. THE YEAR

In the meantime, the other industries also rose steadily. T h e line depicting total nonagricultural employment is an impressive skyrocket. Necessary readjustments a m o n g industries also continued to b e made d u r i n g 1946, with trade, services, and construction continuing to gain over the others. T h e r e was a reconversion wave of strikes which was not unexpected. T h e period of adjustment after the First W o r l d W a r also saw them. In fact, the strikes after the Second W o r l d W a r were, if anything, milder. T h e y were accompanied by less bitterness and physical violence, and they involved a smaller proportion of the labor force: about 15 percent in 1946, as compared with 21 percent in 1919. Nevertheless, they represented a perceptible drag on reconversion. Between VJ Day and the beginning of 1946 there were strikes in the basic industries of oil, coal, and lumber, as well as crippling strikes " T h a t is, from the viewpoint of society trying to decide, after the fact, whether the waiting did or did n o t accord with the needs of the reconversion economy.

RETARDATION OF THE RECONVERSION

281

among building service employees and longshoremen of New York City and among machinists and shipyard workers of San Francisco. 1 ' But the major strikes were in the auto and the steel industries. T h e General Motors strike, involving some 200,000 workers, lasted from the latter part of November into March, and for some affiliates, into April. The steel strike, involving about 750,000 ran from January 21 past the middle of February. February set an all-time record of man-days lost directly through strikes—twenty-three million. Then in the spring there was another strike in bituminous coal, April 1 through May, with a truce from May 13 to 25 (for an alleged effect of unemployment benefits during the truce see Chapter II), and one in anthracite coal, May 31 to June 7. At this time also occurred the first nation-wide tie-up of rail transportation, the two-day strike of May 23 and 24. T h e following excerpts from The Labor Market convey more concretely than the above summary the character of the period: it was still difficult to recruit workers for certain industries; men continued to displace women; veterans continued to displace nonveterans; and the various sectors of the economy continued to exhibit marked heterogeneity in their reconversion problems. RECRUITMENT

[Textiles.—] The influx of veterans into textile centers has failed to speed up cotton textile recruitment as rapidly as desired, principally because veterans and former war workers are still reluctant to accept lowwage textile jobs, many of which are on second and third shifts. [April] [Unfilled job openings in U.S.E.S. offices.—] Forty-two per cent of these jobs paid less than 65 cents an hour. [June] For veterans and warworkers such jobs could represent a financial loss as compared with benefits. [Jewelry.—] Employer efforts to recruit the needed labor through U.S.E.S. facilities, newspaper ads, gate hiring, and employee contacts have so far failed to do much more than replace quits. Low entry wage rates and disinclination of many women to take permanent jobs impede recruitment and intensify turnover. [July] [Cotton textiles.—] Despite the recent increase, rates in many plants is "Postwar Work Stoppages," Monthly Labor Review, L X I I I (Dec., 1946), 872-92. 19 A publication of the United States Employment Service, Department of Labor. All the references are to 1946; and to the month of publication—which means that the period covered by the report is the month or two previous.

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especially in the South, still are low, ranging from 35 cents to 60 cents for unskilled workers. [October] [Weavers.—] In Charlotte, N.C., there is a shortage of weavers, although the local supply equals the demand. However, this supply consists of veterans who are unwilling to accept the jobs and over-age women who are unacceptable. [November] DISPLACEMENT

[Aircraft.—] In 48 selected large plants employing 160,000 workers in mid-January, more than 4,000 veterans were hired during the previous month despite the net employment decline of nearly 2,000. This addition was accomplished at the expense of a reduction of 2,000 women and 4,000 male non-veterans. [March] [Pulp and paper.—] Employers are taking advantage of the situation to cull out over-age and other so-called "undesirable workers" and to replace women production workers with men. Where plants gave reasons for layoffs, displacements caused by the absorption of returning veterans were said to be largely responsible; two-thirds of the lay-offs were women, and another 10 per cent were considered over-age workers. [March] [Steel.—] In one large plant as women leave operations jobs, the job elements which had been arranged to utilize women during the war changed again so that women now can qualify for far fewer jobs. Another plant has laid off all married women. [May] [Contrast with Shoes below.] [Sftoej.—] Many more women were hired to replace those who quit to take up housekeeping duties. . . . Women now make up 53 per cent of the labor force . . . compared to an average of only 45 per cent in 1939, and employers wish to maintain this wartime ratio. [Aiay] [Nonfarm.—] In sharp contrast to the loss of 2.5 million women from non-farm employment between VJ Day and June, 1946, entries since then have exceeded withdrawals by more than half a million. Apparently a high demand for labor and the pressure of rising living costs are offsetting withdrawals accompanying high marriage and birth rates. [November] HETEROGENEITY

(besides the illustrations given above):

[Detroit.—] About 57,000 workers (90 per cent male) will be needed in the next few months. [April] [Buffalo.—] Labor needs are estimated at 2,900 workers (nearly all male) during the next four months. [April] [Boston.—] T h e total need is estimated at 13,000, of which only 4,000 jobs are for men. [April] [Providence.—] Male unemployment, resulting largely from returning servicemen and displaced workers, increased at a pace exceeding the absorption rate, pointing to a large male surplus for some months to come;

R E T A R D A T I O N OF T H E RECONVERSION

283

the female supply continued to decrease in the face of an unslackened female demand. [April] [Coal strike.—] Most of the (indirect) impact was limited to a few localities. In fact, a dozen areas accounted for more than three-fourths of the total lay-offs. Detroit was hardest hit, accounting for 62,000. . . . Pittsburgh was hit second hardest with 48,000 lay-offs. . . . Significantly, some of the largest cities in the country were hardly affected because of the nature of their industries and the source of their power. [May] [The South.—] The relatively greater employment displacement felt in the South since VJ Day was to be expected, since expanded manufacturing in this region—explosives, shipbuilding, aircraft, and the like— were largely of a temporary nature with poor reconversion possibilities. Thus, while according to latest Bureau of Labor Statistics estimates, the net decline for the Nation as a whole has been only about 15 per cent, southern States were harder hit: Oklahoma, 50 per cent; Florida, 30 per cent; Maryland and Texas, 25 per cent; Louisiana, 20 per cent. [August] Unemployment.—The increase in the unemployment rate at the beginning of 1946 (Table 34) was the result of normal seasonal factors, the continued demobilization of veterans, the return to the labor force of veterans (and perhaps of some warworkers) who had been resting (Table 35), and the strikes. Unemployment was at a maximum in February, at something less than 5 percent of the labor force, and by April the rate was declining. T h e slight rise in June was chiefly the result of the closing of school; the increase was concentrated in the age group 14-19 years old. In 1945 women had accounted for 40 percent of all unemployment, while averaging 35 percent of the civilian labor force. But in 1946 the proportions were reversed. Women accounted for only 21 percent of all unemployment, while averaging 29 percent of the civilian labor force. T h e female unemployment rate was consistently lower throughout 1946 than the total rate, and even compared favorably with the rate for nonveteran males 20 (Table 34). T h e sex difference itself differed according to local labor-market conditions. In areas where women normally made up a larger proportion of the labor force the difference in favor of women was at its maximum, while in some munitions centers the difference was even reversed. T h e following instances are taken from sample population surveys conducted by the Bureau of Census in a number of large cities in the fall of 1946: 21 20 Actually it was probably lower than the rate for all nonveteran males. T h e rate for the latter given in T a b l e 34 is only for the age-group 20-44, the most employable part of the labor force. 21 Census Series P-LF, numbers is, 7, 16, 10, in the order given.

S84

RETARDATION OF T H E RECONVERSION UNEMPLOYMENT RATE

Providence (Oct.) Boston (Nov.) San Diego (Oct.) Buffalo (Nov.)

"

Male

Female

7 9 7 5

3 3 11 10

I n Providence and Boston women normally comprise a larger proportion of the labor force (and a very much larger proportion of operatives) than in either San Diego or Buffalo. T h e difference in unemployment rates indicates that where the demand for a particular type of labor is strong unemployment will be low, sex and unemployment benefits to the contrary notwithstanding. T h e same series of Census surveys provided some information on race differences in unemployment rates. Examples of some of the larger differences are given below. T h e 1946 rates refer to October and November; the 1947 rates, to April and May. T h e 1940 figures, also from the Census, are added to show that the reconversion rates represented a return to a previous pattern. White

1946 Nonwhite

White

1947 Nonwhite

White

1940 Nonwhite

6 8 26 IO 12 17 6 6 16 12 IS 34 8 2 3 7 13 35 n.a. n.a. 4 7 «3 32 10 »3 4 14 3 33 n.a. n.a. 11 26 4 >5 n.a. n.a. 16 10 5 17 During the war years, when Negroes were admitted to jobs previously barred to them, the difference in unemployment rates probably lessened considerably. But the end of the war brought a r e t u r n to discriminatory hiring. In the offices in which I worked during 1946 and 1947, which were in many different parts of the country, I f o u n d a growing list of employers whose job orders specified "white only." T h e offices were reluctant to recognize such restrictions in filling job orders, b u t in practice they had to. Employment of veterans.—By March, 1946, ten million of the twelve million who were in the armed forces at the end of the war had been demobilized. T h e i r readjustment to civilian life was the outstanding feature of 1946, even overshadowing the continuing problems of the discharged warworkers. T h e general lines of the story of New York Philadelphia Chicago Detroit St. Louis New Orleans Charleston

22 Number of unemployed in the area as percentage of area labor force.

R E T A R D A T I O N OF T H E RECONVERSION

285

their gradual absorption in civilian employment can be followed in T a b l e 35. In November, 1945, less than 60 percent of the returned veterans were employed; by the end of 1946 more than 80 percent were employed. In the interval the rise was steady. Throughout seasonal fluctuations, strikes, and every other kind of disturbance the proportion continued to rise without notable interruption. It was the dominant movement of the period. T h e proportion who remained outside the labor force shows an equally continuous change in the opposite direction, dropping from 31.6 percent in November, 1945, to 13.0 percent by the end of 1946. During most of the year the veterans who were outside the labor force were not in school either. Presumably they were resting, marking time until ready to go back to work or until school should begin in the fall. Column 3 shows them piling up until January, 1946, after which they move gradually into the labor force, and Anally, with a leap, into the schools. Some idea of the rate at which different individuals among veterans made these adjustments is provided by a sampling study conducted in March, 1946, by the Bureau of Labor Statistics.23 A t that time 12 percent of the group sampled had neither worked nor attended school at any time following separation. Of the rest, one third were working or were in school within two weeks of separation, two thirds within thirty days, and five sixths within sixty days. About half of the "12 percent" group had been separated more than ninety days and also accounted for more than 30 percent of the unemployed veterans. T h e same sampling study found that about half (51 percent) of those who had jobs prior to entering service returned to their preservice employers at some time after their separation from the armed forces; that changes involving a shift from preservice type of work were largely compensatory, so that the distribution of the veterans among industries and occupations remained essentially the same after induction as before; that migration had resulted in 14 percent more veterans living in the West, California being the chief gainer; and that Negro veterans were earning an average of $35.10 a week in March, 1946, as compared to $47.35 for white veterans. T h e gap between the Readjustment Allowance payment and average wages was 23 "Readjustment of Veterans to Civilian Life," Monthly 1946), 716.

Labor Review, L X I I I (Nov.,

286

R E T A R D A T I O N OF T H E RECONVERSION

clearly much narrower for Negro than for white veterans and, of course, for those receiving less than the average wage than for those receiving more. T h e favored position of veterans in the competition for postwar jobs is clear in all four parts of T a b l e 36, which is derived from another study of veterans by the Bureau of Labor Statistics.24 T h e proportion of veterans in all manufacturing increased from 9.3 percent in December, 1945, to 18.4 percent in July, 1946. Both in wartime industry, such as transportation equipment, and in peacetime industry, such as textiles, the proportion of veterans doubled. It was this kind of competition which displaced warworkers, including women, had to meet. T a b l e 36 also indicates that more veterans went into the durablegoods industries than into the nondurable. T h i s is related to the fact, not shown in the table, that veterans gravitated to the industries paying the higher wages. T h e proportion of veterans to all employees was consistently low in apparel, tobacco, and leather, which are low-wage industry groups and traditionally employ large numbers of women. Veterans were taking over not only more jobs but also more of the better-paying jobs, a fact which must have increased the difficulty of finding "suitable work" to offer the displaced warworkers. Separation rates also bear witness to the superior position of veterans in the labor market. T h e higher involuntary rate for nonveterans indicates a process of displacement in favor of veterans. T h e higher voluntary rate for veterans indicates that the latter had stronger expectations of reemployment. Quit rates are always higher in prosperous periods than in depressed periods because workers are more confident that they can get other jobs. There were other reasons, also, for the higher quit rate among veterans. T h e veterans were new workers, and new workers typically have higher quit rates. It would be more appropriate, if the data were available, to compare their quit rate with that of new nonveteran employees rather than with that of all nonveterans. Furthermore, veterans had special problems of adjustment: old skills had been partially lost during the war; new skills had been (partially) learned; the younger veterans had been drafted before they had acquired a foothold in industry, and had returned without the industrial experience "Veterans Return to the Nation's Factories," Monthly Labor Review, LXIII (Dec., 1946), 924-34-

R E T A R D A T I O N OF T H E RECONVERSION

187

suitable for their years, and yet reluctant to start thus late at the bottom of the ladder; and finally, for some there was a considerable psychological difficulty just in making the transfer from the adventure of war to factory routine. Unemployment of veterans.—The unemployment rate of veterans ( T a b l e 35) behaved in general about as might have been expected. It was highest early in the year, when the demand for labor was seasonally low, w h e n the major strikes were in effect, when the supply of veterans was increasing at its m a x i m u m rate and they were still shopping about for the "best" job, and when the gap between benefits and wages had not yet widened. T h e r e a f t e r it declined steadily, although always remaining notably higher than the nonveteran rate ( T a b l e 34)T h e latter fact is to be explained partly by the continued demobilization of veterans throughout the period and partly by the reasons given above to explain the higher quit rate for veterans. Perhaps the most appropriate rate for purposes of comparison would be the rate of males who were former warworkers, who also had a major problem of readjustment. T h e i r unemployment rate seems to have been even higher than that of veterans. T h e sampling study of warworkers described in Chapter IV found that more than a fifth of such men were unemployed in the winter of 1945-46. T h e study mentioned in footnote 23 found that the unemployment rate was highest for the young veterans. Of those below 25 years of age 24 percent were unemployed, but only 14 percent of those above that age. Likewise, that 26 percent of the single veterans, but only 12 percent of the married were unemployed. Again, that 21 percent were unemployed among those w h o had not completed high school, as against 14 percent of those w h o had. T h e older, married, educated veterans would have had the double advantage of being better established industrially and of b e i n g more stable emotionally. THE YEAR 1947 T h i s last part of the reconversion period wore the double aspect that might have been expected of it. T h e difficulties of supply—shortage of materials, the necessity of retooling, the painful reallocation of a shaken labor force—began to moderate. But the first signs of a new difficulty, one from the side of demand, began to appear: slackening sales and falling new orders.

s 88

RETARDATION OF T H E RECONVERSION

T h e slackening of demand represented a return to more normal relationships. The industries which had minor problems of reconversion (mostly nondurables, and durables with peacetime uses, such as optical instruments and jewelry) captured a disproportionate part of the market in the first year after V J Day. They were helped not only by the abnormal war-deferred demand but also by the abnormal absence of competition from those products which because of greater production difficulties were slower in reaching the market. The proportion of "disposable income of individuals" spent on nondurables considerably exceeded the prewar relationship, while the proportion spent on durables was correspondingly low. But gradually both abnormal stimuli were withdrawn from nondurables: demand for nondurables decreased as the more pressing needs were met, while competition from durables increased as they began to reach the market in greater abundance. The changing fortunes of the two groups are exemplified in the following four cases.'5 The numbers represent percentage deviations of actual sales from what could have been expected on the basis of the prewar relationship between sales and the disposable income of individuals. 1 946 First Half

Jewelry Women's apparel Motor vehicles Household appliances and radios

+ 15 +51 —73 -25

'94* Second Half

1947 First Half

+ 1 +32 -57 - 3

— 3 +33 -5» + 5

In the first half of 1946 consumer expenditures on jewelry were 15 percent above "normal," in the second half only 1 percent above, and in the first half of 1947, 3 percent below. Over the same period expenditures on household appliances and radios went from 25 percent below normal to 5 percent above. These changes were part of the process of correcting the imbalances brought about by the war. They required mobility on the part of the labor force and involved necessary unemployment. In the second quarter of the year the whole economy, and not merely nondurables, experienced a period of hesitation. There was an interlude of fairly stable prices, and the expectation grew that they 25 Survey of Current Business (July, 1947), p. u .

R E T A R D A T I O N OF T H E RECONVERSION

S 8g

were about to decline. A "wait and see" attitude developed. It showed itself in declines in new construction contracts and total business inventory accumulation. 28 The expected price decline did not materialize. Events which tended to dispel the expectation were the coal wage settlement in July, the summer increases in the price of steel, the short corn crop at home and abroad with its effect on agricultural prices, the Marshall Plan with its promise of continued foreign demand, and the legislation permitting redemption of veterans' terminal leave bonds. 21 Although prices continued their upward advance instead of declining after the second quarter of 1947, the period bore the marks of increasing stability. Demand and supply were approaching a balance. Particularly was that true in the labor market. Few industries reported serious difficulty in securing the workers they needed, and an increasing number found they had more than they needed. T h e changed temper of the period is reflected in the following excerpts from The Labor Market for 1947, 28 selected, most of them, for direct comparison with those given earlier. [Textiles.—] Some easing in labor market conditions was indicated in a number of industries. . . . This condition was particularly evident in the textile industries, where widespread shortages had prevailed. In cotton textiles, increasing numbers of workers were reported to be applying at the gate in many areas. [February] Manufacturers of cotton, rayon and silk broad woven goods are feeling the effects of the buyers' market, and new soft spots are showing up. The situation contrasts sharply with a year ago when demand seemed insatiable and it was difficult to get enough workers into the mills to meet production commitments. Now most manufacturers are more concerned about lack of orders than about shortage of labor. [August-September] [Shoes.—] Shoe production is reflecting consumer resistance, and has declined substantially in recent months. [June] [Lumber.—] Labor supplies were generally adequate to meet demands. In the South and Northwest the bulk of firms were fully staffed and many were turning away job seekers. Some loggers were temporarily out of work but were expected to be hired in sawmills. . . . Absenteeism, which had been extremely troublesome throughout the war years, is no longer a problem. [April] 2« Ibid. (Feb., 1948), p . 2. 27 T h e o n e a n d o n e - q u a r t e r b i l l i o n d o l l a r s w o r t h of b o n d s c a s h e d d u r i n g t h e final f o u r m o n t h s of t h e y e a r w e r e a n i m p o r t a n t f a c t o r i n c o n s u m e r e x p e n d i t u r e s . 28 T h e p e r i o d t o w h i c h t h e e x c e r p t s r e f e r m a y b e p r e s u m e d t o b e a m o n t h o r t w o p r e c e d i n g t h e d a t e g i v e n , w h i c h is t h e d a t e of p u b l i c a t i o n .

2go

R E T A R D A T I O N OF T H E RECONVERSION

[Shipbuilding.—] T h e downtrend of employment . . . was halted temporarily in February. . . . Some 16,700 workers left the industry. . . . Some 18,000 were added. . . . [April] (Note the amount and the varied turnover even in this declining war industry: about 4 percent q u i t their jobs, about 4 percent were laid off, about 8 percent were hired. It was this sort of thing which made it difficult to decide that any given worker was unavailable for work if he wanted to wait until he could return to the industry despite the fact that the whole industry was declining.) [Foundries.—] Unlike previous months, recruitment is not generally considered a serious problem. In May, only 4 per cent of reporting establishments indicated labor shortages while 15 per cent indicated such shortages in March. Turnover, too, is less of a problem. [July] [Brick, tile, clay products.—] Although requirements for 1947 are 24 per cent greater in brick and 18 per cent in tile than 1946 output, the industry expects to meet its goal easily . . . the industry expects no great difficulty in filling its labor needs. [May] ( T h e expectation was fulfilled three months later): Despite the hot, heavy nature of much of the work on clay construction products, there have been virtually no recruitment problems. T h e labor supply is generally adequate, and often exceeds demand. Many plants report more than enough workers applying for the limited number of openings; others have long waiting lists of applicants. Even factors like occasional less favorable wage rates, poor transportation, and unattractive working conditions have not seriously hampered recruitment. [August] [Nonferrous products.—] T h e post-war boom demand for brass mill products, which appeared insatiable for 18 months after VJ Day, is now at an end. Brass manufacturers' anxiety over shortages of copper has shifted to fears regarding the cancellation of orders. . . . It is likely that the recent unprecedented peacetime rate of production which reached twice average prewar output eliminated a five-year accumulation of civilian demand in less than two years. [October] [Chemicals.—] Manufacturers of basic industrial chemicals . . . are operating full tilt with few impediments of any kind. Shortages of materials that were reported when the industry was surveyed a year ago have largely disappeared. Only rarely is there any difficulty in obtaining all the workers needed. [October] As was remarked above, 1947 wore a double aspect. A l t h o u g h it saw difficulties arising from the side of demand, it saw many improvements on the side of supply. R a w materials, in the aggregate, were approximately one fifth higher than in 1946, and except for steel were

RETARDATION OF THE RECONVERSION

sgi

not a major limitation on continuous full production. Steel remained in short supply throughout the year and prevented some further expansion of durables, especially automobiles. Strikes during 1947 were mild; man-days lost were less than one third the number lost in 1946. Workers were more willing to accept the less desirable jobs. And fewer veterans were resting (Table 35, col. 3). These improvements on the side of supply were combined in the second half of the year with a strengthened demand—whose causes were enumerated above. The net result was that employment during 1947 averaged fifty-eight million, an increase of 2.8 million over the 1946 average. Unemployment in 1947 averaged 2.1 million, which represented an unemployment rate of 3.6 percent. Both figures were lower than their 1946 counterparts: 2.3 million and 3.9 percent. The female rate of 3.2 percent (Table 34) continued to be lower than the total rate, but the difference was less than in 1946. The chief reason for that was the declining veteran rate. Where the veteran rate had been 9.2 in 1946, it was only 5.7 in 1947. The lower unemployment rates were achieved despite the addition of some 2.7 million workers to the labor force (about 2.5 million being veterans) and despite the hesitation of the economy in the middle of the year. Heterogeneity marked the scene, as always. The distribution of unemployment in the first quarter of 1947 among the three major regions of the country is shown in Table 37. This is a distribution of regions according to their unemployment rates, except for the first column. For example, of all the labor-market areas with an unemployment rate above 15 percent, 50.6 percent of them were in the West. That this was a disproportionate number is indicated by the first column: only 12.7 percent of all areas were in the West. The Middle Atlantic region also had a disproportionate share of "heavy" and "very heavy" unemployment. The table is in accord with the implications of Chart 3 that the concentration of war production on the coasts brought about a greater disturbance of the labor force in the coast States. Here is one more indication of the prime importance of the operation of economic factors—as compared with the operation of unemployment insurance—in determining the level of unemployment.

RETARDATION OF THE RECONVERSION CONCLUDING

ARGUMENTATION

T h e progress of reconversion, as just described, among the various industries and from month to month offers no clear evidence of having been retarded or distorted by lack of labor. T h e changes in employment took place according to a pattern clearly dictated by the needs of an economy changing from war to peace and at a rate which surpassed rather than disappointed general expectations. As for unemployment—it was found chiefly in those industries and areas which had to execute the largest changes and among those workers whose personal characteristics made reemployment peculiarly difficult. T h e history of the period inclines one to answer in the negative the question put earlier in this chapter, at the end of the general analysis: Would not the record of reconversion employment have been even better—significantly better—if there had been no unemployment benefits? or at least if disqualification policies had been stricter and benefits had been paid to fewer people? The history of the period clearly puts the burden of proof on anyone who answers the question in the affirmative. And the proof is difficult. T o show that the payment of benefits reduced or distorted the flow of labor, it is not enough to show, for example, that benefits were paid to claimants who actually were out of the labor market. It is necessary to show that such claimants would have come into the labor market if benefits had been denied them; that if they had come into the labor market they would have been hired; and that their hire would not have represented merely replacement of other workers. And it is necessary to show that the number of claimants fulfilling all these conditions was large enough to be significant—large enough, let us say, to be perceptible in national aggregates or at least large enough to make legislators prefer a somewhat less liberal program of unemployment benefits. T h e history of the period provides scant evidence to support that line of argument. It does not establish the contrary argument with certainty, either; but it does shift the weight of probability far over in that direction. It makes the following five propositions at least more meaningful than their opposites. 1. Only some of the claimants were possible subjects of disqualification; that is, not all payments were improper payments. Presumably, if we want a system of unemployment benefits at all, we shall

R E T A R D A T I O N OF T H E RECONVERSION

293

want to make some payments. These will be proper payments, by definition, and must be deducted from the total to arrive at the group that is under discussion. T h e concept that a person has of the purpose of unemployment insurance will be one factor determining the size of the deduction he is willing to make under this head. The "status" school will make a larger deduction than the "subsistence" school.29 T h e other factor will be his impression of the extent to which actual payments fulfilled that purpose—his understanding of such materials as those in Chapters V I - I X . Together these two factors will form his idea of the proportion of the claimant population remaining—the claimants who possibly should have been disqualified. For some persons only a small part of the total claimant population will be under discussion after this point; for others, a much larger part (for Fulton Lewis, Jr., 96 percent of it s o ); for still others, all of it, for not everyone agrees that unemployment insurance has some necessary function to perform. 2. Of those who possibly should have been disqualified, only some, probably a minority, 31 would have changed their attitude toward working if they had been denied benefits. Claimants subject to disqualification are the employed, those not in the labor force at all, and the "voluntarily" unemployed. Denying benefits to the first class, the employed, clearly would not have increased employment. 32 Among the second class, those not in the labor force, two groups can be distinguished. Some claimants retired from the labor market temporarily; some "permanently." Veterans were in the first group, along with warworkers who were regular members of the labor force. They wanted a vacation, long deferred, before taking up peacetime routines. Unemployment benefits cut the price of a vacation, but the value of a vacation at that time was so high that the full price would 20 Pages 54-57. so Page 56. 31 Massachusetts conducted an investigation of the claimants who exhausted their benefits d u r i n g the benefit year 1943-50. It found that 73.9 percent of the exhaustees remained unemployed f o r more than five weeks after benefit exhaustion, and 45.1 percent f o r more than 20 weeks. For such claimants benefits are not, apparently, the determining element in their unemployment. (Commonwealth of Massachusetts, Division of Employment Security, A Report on Unemployment Compensation Benefit Costs in Massachusetts, Aug., 1950, p. 48.) 32 E m p l o y m e n t might even have been decreased. Claimants have been known to refuse a week or two of f a r m work lest its acceptance entail loss of unemployment benefits. Stricter policing of the system might have diminished the amount of off-season work.

294 R E T A R D A T I O N OF T H E RECONVERSION not have been too much to pay and probably would have been paid. Some veterans (especially those who were going to school) and the "extra" warworkers (especially the women) were in the second group. T h e y were leaving the labor market to take up their "regular" occupations. In their case it is even less likely that the denial of benefits would have changed their actions: the young people who wanted to resume their schooling, the aged who wanted to resume the leisure of retirement, the women who wanted to make a home for their returned soldier husbands. Few of them were likely to have been deterred from going back to what they considered their normal way of life by the denial of unemployment benefits.33 As Clarence Long remarks: The outstanding peacetime characteristic of the labor force is its stability of size relative to the population . . . the propensity to be "in the labor force" seems one of the most stable elements in the labor market, varying hardly at all except in long, slow trends, requiring years to consummate. It may be that the peacetime propensity is based . . . upon deeply rooted habits, on the size and composition of families, on institutions of child care, education, and old age dependency, on the concentration of population, and on the structure and geography of industry.84 T h e third class were those who conceivably might have been adjudged "voluntarily" unemployed. T h e y were truly in the labor force, but were unwilling to take certain available jobs. T h e denial of unemployment benefits might have affected the actions of this class somewhat more. But probably not much more. " T h e job" is a large part of the life of a regular worker. He will not go into a job he thoroughly dislikes except under great pressure.35 Whether the denial of benefits usually constitutes sufficient pressure is at least debatable. A man out of work is already under pressure because of the loss of half or more of his regular earnings. If that is not sufficient to make him accept one of the open jobs, he probably has strong reasons for his stand. It is not certain that the additional pressure of the loss of bene8 3 As regards the w o m e n — a f t e r they had exhausted their benefits they did not return to the labor force. Note, in T a b l e 2, that the deficiency in the age groups 20-25 increases, rather than lessens, as the reconversion progresses. 84 Clarence D. Long, The Labor Force in Wartime America, Occasional Paper 14 (New York, National Bureau of Economic Research, Mar., 1944), pp. 23, 27. O n the current controversy over "additional" workers see the article by H. G. Heneman, Jr., "Measurement of Secondary Unemployment: an Evaluation of Woytinsky's Methods," Industrial and Labor Relations Review, III (July, 1950), 567-77. 8 5 If a worker does take a job he hates, two effects are likely to follow: he will work at somewhat less than his full efficiency, and he will j u m p the job at the first opportunity. In a period of strong demand for labor, such as that of the reconversion, the opportunity to j u m p would not be long in coming.

R E T A R D A T I O N OF T H E RECONVERSION

295

fits w o u l d change h i m before the sort of j o b he wanted appeared. Years ago, w h e n there were n o unemployment benefits, workers also "shopped a r o u n d " and went on strike. W h e n this problem was being discussed at the 1945 meeting of the Interstate Conference of Employment Security Agencies, Ewan C l a g u e , then director of the Bureau of Employment Security, took this stand: Employers paying pre-war wages, or comparatively low wages, have difficulty in hiring labor. They look at the benefit rolls and assume that the payment of benefits is preventing those workers from taking jobs. I do not believe that this is so—for unemployment compensation is not a vital factor in the worker's decision in a great many cases. . . . If a worker and his family have no resources and cannot possibly hold out any longer, then depriving him of benefits may force him to take any job whatever. But the great majority of the workers and their families are not in that position today. They can cash their bonds and live on family savings for some months at least. And they will do so rather than give up the eager hope they have of retaining some of their war-time increases in skills." Cases in w h i c h claimants fought disqualifications and appealed their case all the way u p to the highest administrative appeal body illustrate the "eager hope" Mr. C l a g u e described. T h e following California case 37 illustrates at the same time how the agency, also, can b e w r o n g in appraising a claimant's chances of securing satisfactory work. T h i s claimant had been disqualified and had appealed to the highest tribunal, which reversed the decision. T h e synopsis of the case reads: A claimant last employed as a shipyard welder at $1.20 an hour who refused referral to employment as a helper making binder clips at a beginning wage of 65 cents, alleging transportation difficulties, held not to have refused suitable employment, even though the distance and daily traveltime of half an hour at a cost of 14 cents were not unreasonable, considering that she had been claiming benefits only 16 days, that the job would neither utilize her acquired skills nor pay a wage reasonably commensurate with her previously demonstrated earning capacity, and that work paying nearer her former rate existed in the locality as evidenced by the fact that she obtained such employment 4 days later. If claimants did decide to use their savings and wait for a satisfactory job, as Mr. C l a g u e foresaw that they would, many of them may have f o u n d their jobs, as did the woman in the California case, before 38 Proceedings, Ninth Annual Meeting of the Interstate Conference of Employment Security Agencies, Oct. 23-24, 1945, p. 19. si Unemployment Compensation Interpretation Service, Benefit Series, Vol. I X (No. 6, June, 1946), 33.

2g6

R E T A R D A T I O N OF T H E RECONVERSION

their resources gave out. Employment in the manufacture of durables, for example, where the proportion of desirable jobs is larger, did pick up rather quickly. Before the middle of 1946 it had mounted again above nondurables (Chart 1). And women could hope to retain some of their own particular gains in it, as is indicated in Table 7 (item 4). 3. If all the claimants who were out of the labor market or who held to unrealistic standards of employment had been disqualified, only some of them, probably a minority, would have become active seekers of work and ready acceptors of undesirable jobs. Of this minority only some would then have been hired.38 Standards of employability rose with the end of the war. When "cost-plus" contracts came to a close, employers felt the pressure to improve the quality of their work force. They knew that millions of first-class workers were thrown on the market when the war plants closed and the veterans returned home. Each employer hoped to get his pick of these. Each employer saw no reason why out of millions he could not get a couple of dozen.38 For any one employer that was true; but it was not true for all employers collectively. Their more selective standards necessarily meant a lower level of total employment. In office after office of the Employment Service around the country I read the same story in the order box: employers specifying that they wanted white males between 20 and 30, with certain skills and a specified period of experience. Meanwhile the claimant box had become weighted with women, Negroes, the handicapped, the over-aged, and the young (minus skill and experience). It was a common experience to hear ES order-takers try to persuade an employer over the telephone to lower his specifications, explaining to him that the kind of 3» When the public clamor rose over the simultaneous existence of claimants and open jobs, a number of the States responded with material showing how poorly the claimants and the jobs matched. And the Bureau of Employment Security made a study of jobclaimant characteristics in the three cities of Trenton (New Jersey), Columbus (Ohio), and Atlanta (Georgia) in October, 1945. Much useful information was presented in these studies; but their value for the present purpose is greatly diminished by the fact that the " j o b " half of the comparison was confined to jobs in the files of the Employment Service—which never represented more than a small fraction of all available jobs. For that reason no use is made here of the material. a» T h e scramble for the more desirable workers was in progress even before the end of the war. This excerpt is from the July, 1945, report of the Syracuse (New York) local office to State headquarters: "Scattering claims showing small group layoffs of twentyfive to fifty from practically every plant in Syracuse. T h e firms still want more help, however. Apparently a device used for replacing women workers with veterans, and attempting to semi-pirate skilled labor."

RETARDATION OF THE RECONVERSION

«97

labor he was demanding simply was not available. In other words, some part of the unfilled demand for workers was spurious, in the sense that it was demand for the nonexistent. It was not the fault of unemployment benefits that such demands went unfilled; for the difficulty was not that claimants were unwilling, but that they were unable. Sometimes the opposite reason kept jobs and claimants from matching. A claimant could be too good for a job. A n employer, presumably looking for a permanent employee, would be unwilling to hire someone whom he could not expect to keep. 40 Employers would also be unwilling to take workers who had been temporarily laid off but were definitely attached to some other employer, with seniority rights and so forth, and were sure to go back to him when he called. This situation is so well recognized that some States have special regulations governing it. Missouri, for example, does not require such employees to be registered for work or even to come to the office to claim their checks. Some of the demand for labor in this period was spurious in the sense also that it was anticipated demand. A n employer would report a need for 5,000 more workers. O n investigation it would develop that he meant he would need more when his retooling was completed, or when materials became available (this especially in 1946), or if he could get the requisite additional key skilled workers, or if demand for his product continued to expand at its present rate. If each individual producer had expanded at the rate he thought he "would, i f — " there would not have been enough materials, workers, or buyers for the total product. In the case of some employers the contention that there were enough jobs for everybody drawing benefits came simply from a lack of information about the general labor market. T h e point is worth illustrating. T h e following is a part of a letter from the New Jersey Board of Review to the administrator of the New Jersey agency (February 6, 1946). Two hundred and nine appeals were filed by the N. . . Company. . . . This appeared to be in pursuance of a general policy of the company to appeal all benefit awards, without investigation of particular cases on the general ground that the employer believed that work was available in Trenton for all persons laid off. and unpublished d a t a o f the So

* Workers with s u f f i c i e n t wage c r e d i t s in 1945b

Estimated from average p o t e n t i a l duration of b e n e f i c i a r i e s with bene

f i t y e a r s ended in 1946. c

New allowed c l a i m s ,

d

F i r s t payments,

1946-

1946-

* Weeks conpensated,

1946.

' Exhaustions o f b e n e f i t s , '

1946-

Estimated from average a c t u a l d u r a t i o n o f exhaustees with

y e a r s ended in 1946-

358

benefit

TABLE 10 READJUSTMENT ALLOWANCE CLAIMANTS, BENEFICIARIES, EXHAUSTEES, WEEKS OF BENEFITS: RATIO OF ACTUAL TO POTENTIAL, UNITED STATES, CUMULATIVE FROM SEPTEMBER, 1 9 4 4 , THROUGH 1946 AND 1947 (Numbers i n n i l l i o n s )

1946

1947 Pe r c e n t - P e r c e n t age of age of

Percent- Percentage o f age of Item (1) P o t e n t i a l claimants* ( 2 ) P o t e n t i a l weeks of b e n e f i t s b (3) Actual

claimants'

(4) A c t u a l b e n e f i c i d aries ( 5 ) A c t u a l weeks of benefits'

Number

(1)

(2)

Number

12.8

13.8

640.0

690.0

(1)

6.5

50.0

7.7

55.8

5. 8

45.0

7.0

50.7

80.8

(6) E x h a u s t e e s '

0. 1

( 7 ) Exhaustees* weeks of b e n e f i t s 8

5.0

12.6

120.0

0.8

0.5 0.8

25.0

(2)

17.4 3.6 3.5

S o u r c e : V e t e r a n s A d m i n i s t r a t i o n , Readjustment Allowances, Vol. IV, No. 1. * Demobilized v e t e r a n s . A d j u s t e d f o r e s t i m a t e d i n e l i g i b i l i t y o f two p e r cent. ^ Based on e s t i m a t e d a v e r a g e e n t i t l e m e n t of 50 weeks. 0 New c l a i m s . ^ F i r s t payments. e Continued c l a i m s . ' E x h a u s t i o n s of b e n e f i t s . 8

Based on e s t i m a t e d a v e r a g e d u r a t i o n of 50 weeks.

359

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•

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0\

=) CT*

co

i / i w a

o

h V u t ; « S

C i o W i-t 1/5 m sc

o

.«

e co

co • in —1

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a. Total b. Manufacturing, durables. c. Manufacturing, transportation equipment' d. Women in c^ Not in labor force* a. Total b. Women c. Veterans Unemployed* a. Total b. Women c. Veterans Separation rate* a. Total b. Voluntary quit c. Discharge a»d l a y - o f f . . .

6,170

5,240

4,470

3,850

3,410

39,112 6,615

38,576 5,758

39,737 6,370

40,548 6,962

40,909 7,057

706 38

635 34

620 31

656 31

642 30

46,460 37, 320 2,170

46,890 37,520 2,160

46,440 37,270 2,000

45,840 37,020 1,840

45,630 36,980 1,690

2,300 530 840

2,650 510 1,060

2,700 510 1,210

2,330 460 990

2,310 420 930

6.8 4.3 2.3

6.3 3.9 2.2

6.6 4.2 2.2

6.3 4.3 1.8

6.3 4.2 1.9

CLAIMS HISTORY

Source of flow a. Veterans demobilixed*.. 8, 580 9,600 10,410 11,080 11,520 b. Covered eof>loyment, UC8. 27,975 27,602 28,628 29,311 29,785 c. Insured employment, UC*1. (In 1945: 34 million) Inflow: i n i t i a l claims u. UC 1,234,484 946,302 773, 587 979,816 1,119,122 b. RA 1,024,901 683,240 902,650 794,727 734,640 Stopper) flow a. Waiting-period claims, UC 585,127 671,838 556,432 509,795 516,273 b. Exhaustions (1) UC (monthly) 187,940 249 , 457 203. 376 210,567 201,496 (2) RA (monthly) 2,299 1,430 1,802 4,682 2,688 20,760 9,199 11,001 13,300 (3) RA (cumulative) 15,988 1 ( F i r s t quarter) c. Disqualifications ( Second quarte (1) UC 149,639 195,820 (2) RA 67,344 130,297 d. Disqualification ratio J (1) UC 7.3 11.6 (2) RA 3.9 5.6 Outflow a. Claims discontinued^ 985,518 1,027,803 1,026,222 479,573 978,541 (1) UC (2) RA 575,400 353,400 642,100 580, 800 596,600 b. Claimant turnover (1) UC 34.5 18.4 31.5 37.5 38.3 (2) RA 28.3 40.6 34.2 18.2 24.6 Net flow a. Beneficiaries" (1) UC 1,641,732 1,622, 386 1,591,801 1,402,362 1,314,932 971,525 1,406,344 1,735,464 1,864,697 1,810,784 (2) RA 2,613,257 3,028,730 3,327,265 3,266,059 3,125,716 (3) Sua b. Beneficiary ratio" 4.68 3.87 4.12 (1) UC 4.83 4.77 16.66 16.83 (2) RA 11.32 15.72 14.64

June

July

Aug.

1946 Sept.

Oct.

Nov.

Dec.

3,070

2,710

2,450

2,220

2,170

2,010

1,890

41,406 7,230

41,676 7,383

42,337 7,580

42,769 7,698

43,048 7,751

43,574 7,865

44,234 7,887

629 28

624 28

613 28

598 30

597 30

602 31

611 30

44,210 36,420 1,510

43,540 36,370 1,470

44,270 36,680 1,630

45,290 36,680 1,560

45,600 36,870 1,660

45,860 37,070 1,650

46,620 37,690 1,710

2,570 560 980

2,270 510 930

2,060 460 850

2,070 490 830

1,960 410 760

1,930 410 700

2,120 430 840

5.7 4.0 1.5

5.8 4.6 1.0

6.6

6.9 5.3 1.4

6.3 4.7 1.4

4.9 3.7 1.1

4.5 3.0 1.4

11,890 30 , 390

12,280 30,746

12,580 12,790 12,810 31,357 31,557 31,471 ( I n 1945: 34 m i l l i o n )

13,030 31,776

13,160 31,996

760,674 598, 230

698,541 653,789

541,263 599,877

580,300 447,087

681,592 410,862

620,076 402,717

908,668 580,138

479,201

474,175

333,290

320 , 371

386, 838

340,703

446,148

159,786 4,495 25,165

150,683 6,156 31,321

137,011 123,691 8,867 10,339 40,188 50,527 (Third ( f i a r t e r ) 195,885 228,314

123,359 16,156 66,683

5.3 1.1

131,298 88,029 24,894 18,452 110,029 85,135 (Fourth quarter) 184,461 241,904 18.8 18.8

15.5 10.7 945,217 614,800

755,719 699,900

646,319 670,400

626,989 77 4,600

603,319 705,900

644,035 563,300

745,444 512,100

39.2 25.8

36.3 28.9

36.3 28.9

37.4 36.9

36.8 40.7

39.9 39.4

42.2 35.4

1,174,138 1,749,785 2,923,923

1,107,789 1,780,272

2,888,061

978,001 1.725.644 2.703.645

862,776 1,445,493 2,308,269

776,444 1,171,382 2,947,826

700,074 868,556 1,568,630

774,968 956,927 1,731,895

3.45 14.71

3.26 14.49

2.88 13.72

2.54 11.30

2.29 9.14

2.06

2.28 7.27

6.66

TABLE 43 (Continued)

Feb.

Jan.

1947 Mar.

May

Apr.

LABOR-FORCE HISTORY

1. Armed Forces* 2- Nonagricultural employment^ a. Total b. Manufacturing, durables. c. Manufacturing, transportation equipment' d. Women in cA 3- Not in labor force* a. Total b. Wonen c. Veteran« 4. Unemployed* a. Total b. Wonen c. Veterans 5. Separation rate* a. Total b. Voluntary quit c. Discbarge and l a y - o f f . . .

1,720

1,620

1,570

1,530

1,470

43,063 7,949

43,169 8,030

43, 410 8,071

43,221 8,068

43,345 7,962

614 30

611 29

608 28

612

598

29

28

47,460 38,230 1,790

47,430 38,300 1,660

47,230 38,400 1,560

46,610 38,080 1,460

45, 570 37,320 1,380

2,400 450 900

2,490 480

2,420 520

1,000

2,330 480 850

1,960 540 640

4.9 3.5 1.3

4.5 3.2 1.2

4.9 3.5 1.3

5.2 3.7 1.4

5.4 3.5

860

1.8

CLAIMS HISTORY

6- Source of flow 13, 720 13,480 13,630 13,470 a. Veterana demobilized'... 13,390 31,805 31,790 31,648 31,556 b. Covered eoployment, UC'. 31,568 (In 1946: 36 million) c. Insured employment, UCh. 7. Inflow: i n i t i a l claims a. UC 1,010,573 731,442 738,881 1,020,028 1,166,141 372,828 b. RA 637,938 397,360 354,149 444,165 8. Stopped flow a. Waiting-period claims, 490,918 413,578 532, 642 467,754 UC 611,724 b. Exhaustions 107,671 122,124 119,100 (1) UC (monthly) 134,429 102,048 35,271 39,743 40,879 37,025 (2) RA (monthly) 40,650 303,338 227,177 268,056 187,704 (3) RA (cumulatiTf) 150,679 (Second quarter) ( F i r s t quarter) c. Disqualifications 1 186,040 172,824 (1) UC 185,999 192,580 (2) m d. Disqualification r a t i o J 14.9 14.4 (1) UC 18.4 13.5 ( 2 ) HA 9. Outflow a. Claims discontinued 760,522 843,052 1,117,411 702,878 (1) UC 788,047 524,300 542,300 527,100 465,300 (2) RA 404,800 b. Claimant turnover' 45.7 38.5 37.7 34.3 (1) UC 57.4 43.8 35.1 28.9 38.1 (2) RA 25.7 10. Net flow a. Beneficiaries" 949,971 856 , 308 939,068 986, 387 (1) UC 943,351 744,643 920, 969 (2) RA 1,246,045 1,032,383 1,0 40 , 87 0 (3) Sum 2,189 , 396 1,888,691 2,027,257 1,860,037 1,694,614 b. Beneficiary r a t i o 0 2.73 2.77 2.87 2.51 (1) X 2.75 6.89 5.55 7.85 7.76 (2) RA 9.41

June

July

1947 Sept.

AUG.

Oct.

NOT.

Dec.

1,398

1,371

1,352

1,346

1,327

1,294

1,280

43,816 8,050

43, 686 7,874

44,125 7,987

44,513 8,070

44,758 8,126

44,918 8.194

45,618 8,274

594 n.a.

527 n. a.

530 n. a.

540 n.a.

552 n. a.

578 n.a.

591 n.a.

43, 399 36,337 1,060

43,469 36,739 1,050

44,573 37,469 1,076

45,544 37,412 1,288

45,535 37,245 1,342

46,330 37,675 1,367

47,047 38,091 1,388

2,555 848 724

2,584 795 772

2,096 578 687

1,912 519 586

1,687 504 479

1,621 445 513

1, 643 404 536

4.7 3.1 1.5

4.6 3.1 1.4

5.3 4.0 1.2

5.9 4.5 1.3

5.0 3.6 1.3

4.0 2.7 1.2

3.7 2.3 1.3

13,818 32,192

13,866 32,175

13,918 13,994 13,954 32,642 32,871 32,913 (In 1946 : 36 a i l lion)

14,127 32,949

14,137 33,213

878,452 492,924

942,461 475,6 50

622,527 386,154

565,175 314,624

616,916 288,684

601,637 290,266

829,732 397,808

548, 309

596, 456

429,353

327,884

328,343

307,711

411,256

107,580 34,959 338,297

111,276 31,604 369,901

96,155 98,733 25,091 29 , 336 399.237 424,328 (Third quarter) 173,261 203,444

88,061 21,609 445,937

14.9 22.6

65,876 114,624 15,962 19,653 481,552 461,899 (Fourth quarter) 145,012 157,145 17.5 29.0

784,245 449,000

829, 571 445,000

773,393 422,500

682,041 501,900

581,222 397,900

634,911 314,000

636, 525 349,800

38.4

36.8

38.9 37.2

40.8 37.1

41.9 48.7

40.0 48.7

43.1 44.3

42.3 44.1

1,013,523 683,767 1,697,290

1,026,186 773,926 1,784,112

911,738 695,386 1,607,124

791,228 622,814 1,414,042

617,147 446,859 1,064,006

565,081 342,353 907,434

639,517 469,820 1,109,337

2.94 5.07

2.96 5.73

2.66 5.14

2.32 4. 60

1.84 3.29

1.70 2.51

1.90 3.44

NOTES TO TABLE 43 * In t h o u s a n d s . Bureau of C e n s u s . Wage a n d s a l a r y w o r k e r s . I n t h o u s a n d s . tics .

k

c

'

Bureau of Labor

Statis-

Except automobiles. Production workers only.

* Number o f p e r s o n s s e p a r a t e d p e r 100 p e r s o n s on t h e p a y r o l l i n t h e week e n d i n g n e a r e s t t h e 1 5 t h o f t h e m o n t h . B u r e a u o f L a b o r Statistics. ' M a l e v e t e r a n s o f t h e S e c o n d W o r l d War i n t h e c o n t i n e n t a l U n i t e d S t a t e s , c u m u l a t i v e ; i n t h o u s a n d s . Bureau of C e n s u s , e x c e p t f o r J u l y t o O c t o b e r , 1945i which a r e ay e s t i m a t e s . ' Workers i n covered employment in pay p e r i o d e n d i n g n e a r e s t 1 5 t h of t h e month; i n t h o u s a n d s . B u r e a u of Employment S e c u r i t y . ^ E s t i m a t e d n u m b e r o f w o r k e r s w i t h s u f f i c i e n t wage c r e d i t s . B u r e a u o f Employment S e c u r i t y . 1 N o n a v a i l a b i l i t y d i s q u a l i f i c a t i o n s : sum o f d i s q u a l i f i c a t i o n s on t h e i s s u e s * u n a b l e , " " u n a v a i l a b l e , " and " r e f u s e d s u i t a b l e w o r k . " B u r e a u o f Employment S e c u r i t y . J

R a t i o o f c l a i m s d e n i e d t o c l a i m s p a i d : d i s q u a l i f i c a t i o n s i n 8c p e r 1,000 weeks c o m p e n s a t e d . ^ C l a i m s which were d i s c o n t i n u e d d u r i n g 4 weeks in t h e m o n t h . E s t i m a t e d from weekly d a t a . * C l a i m s i n 9a a s p e r c e n t a g e o f a l l c l a i m a n t s i n t h e m o n t h . A c t u a l l y b e n e f i c i a r y - m o n t h s , i . e . , t h e weekly a v e r a g e of weeks c o m p e n s a t e d ; i n t h e c a s e o f UC, a f t e r J u n e , 1 9 4 6 , t h e n u m b e r o f w e e k s c o m p e n s a t e d i n week c o n t a i n i n g t h e 1 5 t h of t h e m o n t h . " R a t i o of 1 0 a ( 1 ) t o 6c, and of 1 0 a ( 2 ) to 6a. In p e r c e n t a g e s . A d j u s t e d f o r e x h a u s t i o n s i n RA. B

398

INDEX

INDEX Ability, issue of availability and, >35 Abuse: term, what embraced by, xi; purpose in investigating problem of, xii; period of maximum public interest in, xiii; course of investigation of, xiii; charges of, during reconversion, 38-63; survey of charges, 39-44; outstanding newspaper series on, 41; investigations by State legislatures, 43; analysis of charges, 44-61; classification (three categories) of improper claimants: employed, 45-46, not in labor force, 46-49, voluntarily unemployed, 49-51; norms of charges, 51-61; norm of law re types of Violators, chief disqualifications, 52 f.; norm of undesirable effects, 53-61; two schools of thought re unemployment benefits and correctness and correct interpretation of law governing, 54 S.; method of investigation of charges of, 61-63; specific and general investigations of charges of, 62; two factors responsible for amount of, 64, 154; at a maximum, 154-64; control of, by administrators, at a minimum, 154-58; job to be done on, 155 f.; means for doing job on, 156 f.; will to prevent, 157 f.; limits on maximum of, 164-68; evidence for limit of, 165-67; use of upper limit of, 167 f.; amount of abuse and provisions of law governing, 303-16; whole system not seriously indicted by amount of, 304; evidence and conclusions on, 308-16; need for, lack of, and methods of securing information on, 317-26; talk of success, a cause of spread of, 330; see also Violators Accession notices (preaudit), 197-99 "Actively seek work" requirement, 315?., 3*9 Adams, Ray, 150*1, 213; quoted, 42, 248 Administration, handicaps under which State agencies of, worked, 64-105; relations of Unemployment Compensation— with Employment Service, 69-72, 73, 81 ff., with Readjustment Allowances, 7» f.;

four independent masters in, 73 {.; machine of, in operation—five major steps, 74-105; 1948 fraud-detection questionnaire issued by, 103-5; control by, at a minimum, 154-58; causes of impaired ability of, 155-56; will to prevent abuse manifested by, 157; efforts to detect and deter working violators, 201-4, 330; elements of diligence in, 201; changing external pressures likely to change judgments of, 207; cases appealed against agency's first decision, 207»; agency's handling of "old" and initial claims, 2i7n; increase of problems of, if coverage had been extended to whole working population, 313; agencies' duty to supply information on abuse to, 317; social groups strengthening defenses of existing law of, 326-38 (see entries under Law); question whether greater expenditure by, results in actual economy, 330; system of penalties used by, in New York, 332; functions of labor unions in, 336; cases illustrating review made by Federal Bureau of Employment Security, 344-46; see also under subjects, e.g., Personnel; Referral; etc. Administrative Letter No. 36, Veterans Administration, 90 Administrator, change in knowledge of: basic element in decisions re availability, 210, in changes in disqualification rates, 213; impressions re violators, 266 Advisory Council on Social Security, 44, 96, 987» Advisory Council to the New York Department of Placement and Unemployment Insurance, excerpt from report, 54 Aged, 10771; claimants in Ohio, 143, in Washington, 14371 Age groups in labor force, 107 Agencies, see Administration Agricultural areas, claimants in, gi, 144; California's investigation in, 179, 202; difficulty of checking workers in, soon,

400

INDEX

A g r i c u l t u r a l areas ( C o n t i n u e d ) 202: m o r e R A t h a n U C v i o l a t o r s p r o d u c e d i n , «53; s e c u r i n g harvesters f o r , i n W i s c o n s i n , >73; w h y r e f u s a l o f shortt i m e w o r k in, >931 A i r c r a f t i n d u s t r y , 109, 179, 282; i n State o f W a s h i n g t o n , 136; in B u f f a l o , N . Y . , 140 A l a b a m a , 94, 203; i n v e s t i g a t i n g u n i t i n , 102 A l a s k a , 339 A l t m a n , R a l p h , 98» A h m e y e r , Dr., 18, 30«, 35; q u o t e d , 34, 300, 3»9 American Federation of Labor, proponents of K i l g o r e bills, i t , 13, 17, j o n , 31 f.; see also representatives of, e.g., W o l l , M a t thew A m e r i c a n L e g i o n : legislative activity b y , r e l a t i n g to u n e m p l o y m e n t benefits, 812; a n d O m n i b u s B i l l , 9, 11; efforts o f , in b e h a l f of 1952 l a w , 347 A p p a r e l , see G a r m e n t i n d u s t r y A p p e a l B o a r d : proof of n o n a v a i l a b i l i t y req u i r e d by, to u p h o l d referee's d e c i s i o n o n a p p e a l , 26; l i b e r a l i t y a n d i n d e p e n d e n c e o f , N e w Y o r k ' s , 231 A p p e a l s of c l a i m a n t s to h i g h e r a u t h o r i t i e s , 99 f.; e m p l o y e r s ' c o o p e r a t i o n o n , 333 A r k a n s a s , 160, 54cm; b e n e f i t y e a r i n , 31571 A t l a n t a , G a . , 75 A u d i t s : systematic, 171; d a t a f r o m , 176-99; p o s t a u d i t , 176-97, 199 f.; cost o f , 177, i88n; accession notices a n d p r e a u d i t , 197-99; b y C o u n s e l ' s Office, N . Y . , 232 A u t o m o t i v e c o m p a n i e s , orders p e r m i t t e d , 65 A v a i l a b i l i t y : difficult f o r U C to establish s t a n d a r d s o f , 84; n o r m s of, l a i d d o w n b y V e t e r a n s A d m i n i s t r a t i o n , 89; difficulty of p r o s e c u t i o n of, 208; e l e m e n t s e n t e r i n g i n t o decision on, 210 ff.; issue o f a b i l i t y a n d , 235; difficulty of o b t a i n i n g r e l e v a n t facts o n , 235, i l l u s t r a t i o n s of difficulty, 262 ff.; w o m e n a t h o r n y p a r t of p r o b l e m o f , 265; "actively seek w o r k " r e q u i r e m e n t f o r , 315 f.; q u e s t i o n n a i r e o n , 316, 328; effects of changes in provisions re d i s q u a l i fications a n d , 340 f.; see also N o n a v a i l a bility B a k e r , H e l e n , q u o t e d , 275 B a l t i m o r e , M d . : a g e n c y p e r s o n n e l , 68; p r o b l e m of f r a u d in, 198; share o f State's total c l a i m a n t l o a d i n , 220 Barden, Representative, quoted, 9» " B a t t l e o f t h e B u l g e , " 66

Benefits: w a g e - b e n e f i t r e l a t i o n s h i p , 23, 103, 12311., 160, 162, 186, 205; p a y m e n t s o f , r e f l e c t i n g u n w i n d i n g of w a r t i m e force, 134 f.; a n d n e e d f o r c h a n g e s i n b e n e f i t year, 156, 314, 315; chief c h a n g e s i n m a x i m a , 339; m a x i m u m a m o u n t a n d d u r a t i o n of, 339, 347; see also U n e m p l o y m e n t benefits system B e r n s t e i n , S a m u e l , 213 B i g g e , G e o r g e £., 24, j o 6 n ; q u o t e d , 16, 18 " B o n u s a p p r o a c h " to v e t e r a n p r o b l e m , 5 B o o k s a n d m a n u a l s , 85, 96, 97, 98 B o s t o n , Mass., 282, 284 B r a d l e y , O m a r N., 42 B r o o k l y n , N . Y . , e x p e r i m e n t a l office set u p i n , " t e s t " a n d " c o n t r o l " offices s u b d i visions a n d r e s u l t i n g d i f f e r e n c e s in disq u a l i f i c a t i o n rates, 183, 288 ff. B r y a n t , James, 213 B u d g e t B u r e a u , re f u n d s for States, 64 f..

66 B u f f a l o , N . Y . , 183, 282, 284; contrast of w a r - c o n n e c t e d claims in R o c h e s t e r a n d , •37-43; d i s q u a l i f i c a t i o n ratios for Rochester a n d , 240-42, 311 B u r e a u of . . . , see name of Bureau, e.g., E m p l o y m e n t Security, B u r e a u of Business, see I n d u s t r y a n d business C a l i f o r n i a , 43, 46, 67, 116, 160, 286, 3 1 1 , 3 I 2 > 339. 34°: i n v e s t i g a t i n g u n i t in, 102, 173; i n s t r u c t i o n re r e i n t e r v i e w i n g prog r a m in, i 5 2 n ; i n v e s t i g a t i o n o f agricult u r a l areas i n , 179, 202; instructions re cases i n v o l v i n g a v a i l a b i l i t y in, 208; " J o i n t R e i n t e r v i e w " e x p e r i m e n t and res u l t i n g d i s q u a l i f i c a t i o n rate in, 213, 22126; estimate re f r a u d u l a n t benefits in, 239; agency's w r o n g a p p r a i s a l of claimant's chances for w o r k , 295; e x p e r i e n c e of courts i n , 331 California Senate Interim Committee on E m p l o y m e n t Stabilization, excerpt from r e p o r t , 239« C a l l - i n p r o c e d u r e , 74 ff. Canada, 3151 C a t h e r w o o d , M . T . , 39 Census, B u r e a u of: d a t a re w o m e n , n 8 f . ; n u m b e r of u n e m p l o y e d e s t i m a t e d by, 24271; a b n o r m a l c e n s u s / c l a i m s ratio estim a t e d by, 242-55, 3 1 1 ; Gross Changes in the Labor Force r e p o r t s p u b l i s h e d by, 259; d a t a o f , o n u n e m p l o y m e n t , best and u n i v e r s a l l y used, 272; city surveys by, 283 f. C h a n g e , reasons f o r resistance to, 162 f.

INDEX Charleston, S.C., «84 Charlotte, N.C., 28a Cheaters (willful violators): term, 5»; difficult to estimate intent of, 170, 310; proportion of, a m o n g working violators, 186, 207, 310; penalty provisions governing, 187, 196; among nonworking violat o n , 266; prosecution of, in courts, 330 (see also Courts); standards of morality of. 337 Chemicals, xgo Chicago, 111., 284 Chutroo, Lillian, g6n Cincinnati, O., contrast between claimants of Youngstown and, 143 f. Cities: reports on three investigated, 75-86; penetration ratio in nineteen, 79; see also names, e.g., Baltimore Civic morality, 3 1 8 ! Clague, Ewan, quoted, 97, (43, 295 Claimants: and Kilgore bill, 16, 21, 37; attempts by, at a maximum, 159-61; disqualification in terms of, 233, 234; proportion of improper claims and, 238, 312; required actively to seek work, 315; talk by, of success in abuse a cause of spread of abuse, 330; improper, three classes of—employed, 46, not in labor force, 46-49, voluntarily unemployed, 4951; see also Violators Claims: review of, 99-103; appeals, 99 f.; reinterviews on, 101; war-connected, 13345; picture of, in most disturbed period of unemployment benefits, 166; two relevant facts surrounding, 205; n u m b e r filed in reconversion period, 206; proportion of improper claimants and, 238, 312; abnormal census/claims ratio, 24255. 3 " "Claims control," 201 Claims survey, general, 131-53 Claims-takers: States' request to raise classification of, 92n; personnel of, lowest paid and least trained, 93 Claims-taking: operation, 92-94; personnel, 68,93 Clark, Bennett Champ, 9; quoted, gn Clark, J. M., 271; quoted, 3060, 337 Clark Committee Hearings, 7 Classes, see Groups Clay products, 278, 290 Closer interview, see Interview, closer Coal mining industry: effect of unemployment benefits on, 61, 273, 301; strikes, 148, 273. 27871, 281, 283 Colmer Committee, 19, 28

401

Colorado, 4s, 34on; complete audit m a d e by, 200; benefit year of, 315ft Columbus, O., 75, 140» Common good, sole adequate norm, 51, 5* Communal vs. individualistic economy, xii, 5 Community, sense of, 318, 338 Complete general audit, 172, 186-97, 200 "Concurrent employment," disqualifications on issue of, 237 Conference on Post-war Readjustment of Civilian and Military Personnel, 6, 7 Connecticut, 34on; preaudits of Maryland and, 197, 203; benefit year of, 31571 Connelly, Edward F., 20 Construction, 278; changes in, 112, chart, 111 "Control" and "test" office experiment in N.Y., 227-39; c o a t ° f . (38 Copeland, Morris, 271 Corson, J o h n M., series on Rhode Island program, excerpts, 41, 49, 50 Cost of experiment with "control" and "test" offices, N.Y., 238 Cotton textiles, 278, 281 Counseling, New York's experiment in intensive, 218 f. Counsel's Office, New York, 232 Courts: claimant appeals to, 99 f., 333; extent of interest of, in fraudulent claimants, 104, 331 ff.; working violators subject to action by, 170, 17571, 182, 18671, 187, 190, 193, 196, 330; accession device more effective than criminal prosecutions by, 198; inadequacy of, for handling work of social programs, 332; employers' appeal rights and, 33; see also Law Coverage, changes during and after 1945 and classes not covered, 339 Cranberry pickers, 202 Cruikshank, Nelson H., 3071; quoted, 31, 3« Cunningham, Representative, 11 Curtiss-Wright Corporation, 14071 Dallas, Tex., 116 Danaher, Senator, quoted, 971 Davison, R. C., quoted, 31771 Delaware, 7571, 124, 136, 174, 199, 323, 336; complete general audit as used in Massachusetts and, 186-97, 200; cases of overpayment in, 188-90; penalty of one-year disqualification in, 189; comparison of working violators in Massachusetts and, 309 f.

402

INDEX

Delaware Unemployment Compensation Commission, decision by, 1x6 Depression, effects of unemployment benefits during, i6tn, 164 Detroit, Mich., 69»», 94, 179, »79, 18». »83, »84; percent of benefits paid in, 260 Detroit House of Correction, 18* Disabled American Veterans and opposition to Readjustment Allowances, 4 Dishonesty, norm of measurement of, 6in Disqualification: tightening of provisions of, 43; law applied to violators by means of, 5s f.; hypothetical and actual, defined and steps toward estimating, »05; on issue of availability and ability, 135; ratios for Buffalo and Rochester, 240-42; three classes of claimants subject to, 293; effects of changes in provisions re availability and, 340 f.; cases illustrating severe policy governing, 344-46 Disqualification rates produced by closer screening, 208 f., 2 13-39 Doughton, Representative, 12, ag Dough ton Committee: hearing, 29, 30, 33; and bill, 36 Doughton report, 24, 27 Downgrading of labor, 83, 86 Durable manufacturing, see Industry Eagan, John J., 40 Earnings, war and postwar changes in, 12227; see also under Wages Economic environment, relationship between claimant and, 206 Economic Report of the President, 272 "Economy Act" of 1933, 4 Edge, Walter E., quoted, 38, 60 Educators, social groups cooperating to control improper payments, 336, 337 f. Eligibility, difficulty in determining, 96 "Elimination" rate, figures on disqualification rate and, in R A and UC, 227 Emergency Unemployment Compensation Act of 1945, 29 Employed, the, simplest case of improper payment, 46 Employers: distribution of income between employees and, 58, 59; claims not subject to appeal of, 100; lack of interest in benefits program, 155, 157; participation in detection of working violators, 171, 177, 181, 186, 187, 191, 201; system of furnishing duplicate benefit checks to, 181, procedure not required under RA, 182; accession notice sent by, 197, 198; correspondence with agency re female

violators, 257 ff.; reports on office workers referred to, 261-65 passim; demands of, re workers wanted, and efforts of ES to obtain lower specifications, 296; demands of, for labor spurious when needs merely anticipated, 297; function of, 315; as policing agents, 315: need for cooperation of, to control improper payments, 333 ff.; influence on legislation, 335; plight of, in seasonal industry, 342 Employment: postwar changes in, 108-28 (see entries under Labor); occupational changes in, 113-16; status of working violators, 159; nonworking violators originating from movement out of, 159161; norm of, 163 f.; not covered, 202; chronology of adjustments in, 274-91; rise in standards of, 296; limiting benefits and level of, 301 Employment Act of 1946, 272 Employment Security, Bureau of, 15, 44, •54. »43. »95- 314". 3*«. 3*4- 33°"; extent of efforts to obtain funds for States', 64 f., 66; questionnaire on frauds issued by, 103-5, 169, 177, 198, 202, 320; reasons for apathy of, toward States' demands for funds to investigate, 322; reports on abuse, 326«, 327; handbook issued by, 33g; cases illustrating administrative review made by, 344-46 Employment Security Review, article in, re referral norms, 85n Employment Service: relations between State agencies of UC and, 67, 69-72, 73, 81 ff.; hindrances to effectiveness of, 69, 78 ff.; under Federal Government, 70, 84; registration of claimants with, 7478; referral and report procedure of, 7891; job-test, 78; insufficient suitable and desirable job offers, 78 ff.; penetration ratio in nineteen cities, 79; problems created by unavoidable walk-in placements by, 81; Manual of Operations, 85; differing attitudes of labor and management toward return of, to States, 86; peculiar status of, 156; effect of relation of, to Department of Labor, 157; split of, with UC, on objectives, 158; Division of Placement and Unemployment Insurance in re UCV-i program, 218; intensive counselling of, 218 f.; not included in New York's "control" and "test" office experiment, 232, 236; reliance of claimants upon, to find jobs, 248, 249m test of claimants registered in commercial office of, 261-66; comparison of duties of inter-

INDEX viewer a n d of special invettigator in,