Special Message to the Congress Proposing Job Security Assistance Legislation

To the Congress of the United States:

Difficult as it may be to live by the old saw, a sunny day remains the best time to fix a leaky roof. That is why today--with civilian employment in the American economy at an all-time record high of 83.9 million workers, with a solid business expansion continuing, and with the rate of unemployment down to 5 percent and likely to decline still further this year--I am requesting prompt action by the Congress on several reforms in our unemployment insurance system.

The principles behind my proposals were originally advanced as part of my unemployment insurance package almost four years ago. Most of that package became law in August, 1970, when I signed the far-reaching Employment Security Amendments of 1970. At that time coverage was extended to some 6 million jobs which had never before been eligible for unemployment insurance; a much-needed provision for extended benefits triggered automatically at high unemployment levels was added to the system; and basic financial and administrative improvements were effected. In all, these were the most significant improvements ever made in our system of assistance for persons between jobs since that system was established in 1935.

Left unfulfilled in the 1970 legislation, however, were several important objectives on this Administration's agenda for working Americans. The Job Security Assistance Act of 1973, which we are proposing to the Congress today would meet those objectives by making three major changes in our unemployment insurance system:

--First, it would establish minimum benefit standards for the States, providing an adequate level of benefits to all workers who are covered by the system.

--It would also extend coverage for the first time to most farm employees.

--Finally, it would set up strong safeguards to preserve the neutrality of the unemployment insurance system during industrial disputes.

GUARANTEEING AN ADEQUATE LEVEL OF BENEFITS

A properly designed system of unemployment insurance should serve a dual purpose--both helping to tide individual workers financially over the periods when they are without a job, and stabilizing the economy as a whole by helping make up for wage losses which would otherwise cut consumer purchasing power and accelerate business downturns.

But effective performance of both of these functions depends on the provision of benefits which are adequate in relation to a worker's usual weekly wage. It is generally accepted that unemployment benefits are inadequate unless they are equal to at least half what workers would be earning if employed. Otherwise, families relying on the benefits will too often be unable to meet their basic, nondeferrable living expenses, and communities hit by unemployment will find that aggregate benefits are too little to have a significant counter-recessionary impact.

Under present Federal law, the setting of formulas to determine minimum and maximum benefit levels is largely the province of the individual States. On paper, most States do promise the unemployed worker a benefit equal to one-half his usual weekly wage. But many of them also place unrealistically low ceilings on maximum benefit amounts, rendering the guarantee meaningless for a large percentage of workers, especially family breadwinners. In fact, more than two-fifths of all workers now covered by the unemployment insurance system find their benefits limited by State ceilings at a level below the half-pay ostensibly guaranteed them.

In my July, 1969, unemployment insurance reform proposals to the Congress, I asked for action by the States themselves to remedy this serious deficiency. I suggested that the maximum benefit ceiling in each State be raised to at least two-thirds of the average wage of that State's covered workers. The goal was to provide at least four-fifths of the Nation's insured work force half-pay or better when unemployed.

While many States responded in part to this request, only four States, whose workers comprise less than 3 percent of the national covered work force, actually established the standard I had recommended. However, States comprising more than three-fifths of the national covered work force still have weekly benefit ceilings that are less than half their average weekly wage levels. Without denigrating the good-faith efforts of numerous legislatures to liberalize the benefit structure, we simply cannot be content with this situation any longer. The time has come for Federal action.

My proposed Job Security Assistance Act would therefore amend the Federal Unemployment Tax Act by adding a provision that every eligible insured worker, when unemployed, must be paid a benefit equal to at least 50 percent of his average weekly wage, up to a State maximum which shall be at least two-thirds of the average weekly wage of covered workers in the State.

The decentralization of our national unemployment insurance system is one of its greatest strengths. This decentralization permits more flexible adjustment to local needs and circumstances, and I believe that it should be preserved. I also believe, however, that the States have a responsibility to adhere to the basic principles of the system, and that it is up to the Federal Government to furnish such standards and guidelines as may be necessary to protect those principles. That is why I am now submitting to the Congress the same benefit reform recommendation that I urged the States to adopt in 1969.

Estimates indicate that this new requirement would result in an average increase of 15 percent in costs to State pooled unemployment insurance funds, which would, in turn, affect the costs of employers whose taxes support our unemployment compensation programs. To put this increase in perspective, however, we should note that unemployment insurance is one of the least expensive of all fringe benefits related to employment-accounting for less than a penny in each payroll dollar. Considering the enormous importance of this protection to unemployed workers and to economic stability in general, the relatively small cost of keeping it adequate and up to date is a very sound investment.

When the new Federal benefit standard goes into effect, our unemployment insurance system would begin delivering on its promise to working Americans in a way it has never delivered before. The special programs which in the past have substituted for inadequate State unemployment benefit payments--such as the special allowances provided under the Trade Expansion Act of 1962 for workers who lose their jobs because of foreign imports--would become unnecessary as unemployment benefits are raised to fairer levels.

Upon passage of the unemployment insurance reforms proposed today and of the trade proposals which I outlined to the Congress earlier this week, trade adjustment assistance would be gradually phased out and replaced with a temporary program of Federal supplements to bring up to an adequate level the State unemployment benefits for workers displaced by import trade. When State unemployment payments come up to the half-pay minimum I am seeking, the Federal supplement payments would be discontinued, since all workers would then be eligible under the liberalized State laws for benefits that are reasonably adequate in amount. Some would even be eligible for larger weekly benefits than they can now receive under the Trade Expansion Act adjustment assistance program.

The Job Security Assistance Act would thus make unemployment insurance protection more equitable for everyone, by assisting all workers evenhandedly regardless of the reason for their loss of job. Unemployment is just as costly to an individual and his family whether it results from trade, environmental 'constraints, fluctuations in government procurement, declines in business activity, or any other cause. The effect of my proposals would be to remove arbitrary distinctions among such causes in protecting workers who are involuntarily out of work.

UNEMPLOYMENT PROTECTION FOR THE FARMWORKER

Agriculture is America's oldest and largest industry--and increasingly it truly is an industry, not just an individual enterprise. A growing percentage of the people engaged in farming no longer are their own bosses but work as someone else's employees. Most of these employees earn relatively low wages, have only precarious job security, and have no termination pay .coming if they are laid off. Many are members of disadvantaged minority groups.

For all of these reasons, I consider it of urgent importance that we act at once to extend unemployment insurance coverage to as many agricultural employees as can feasibly be accommodated in the system.

Farmworkers were originally denied unemployment insurance protection on the ground that it was not administratively feasible to cover many thousands of family-operated farms which kept no payroll records. This objection has since been disproved, however, by the successful extension of income and Social Security taxes to a large number of such enterprises.

In 1970 the Congress postponed action on my recommendations for extending coverage to agricultural labor, directing instead that a study be made on the question. The study was undertaken by the Department of Labor in cooperation with land-grant universities and State employment security agencies, and the results are now in. They conclusively demonstrate the administrative and financial feasibility of extending unemployment insurance coverage to approximately 66,000 agricultural enterprises employing some 635,000 agricultural workers.

Accordingly, the Job Security Assistance Act which I am recommending to the Congress would modify the present agricultural labor exclusion provisions of the Federal Unemployment Tax Act, bringing under the unemployment system any farm operator who employs four or more workers in each of so weeks in a calendar year or who pays wages for agricultural labor of at least $5,000 in a calendar quarter. The change would take effect on January 1, 1975, thus allowing State legislatures time to make necessary adjustments in their unemployment compensation laws.

The criterion of payroll size was not included in my 1969 farm coverage proposal. Adding this test strengthens the bill by substantially increasing the number of farm jobs affected. The new bill also includes safeguards to help ensure that migrant workers--who especially need unemployment protection--will not be disqualified because of the special problems associated with record-keeping and tax collection in migrant employment.

The coverage definition I am proposing would provide needed protection to the employees of larger agricultural businesses without needlessly adding to the difficulties of small farm operations. It would achieve coverage for about two-thirds of all hired farm workers while affecting fewer than one in 14 farm employers.

In most States, coverage of the larger agricultural enterprises would be self-financing, with the contributions of these concerns meeting the full cost of benefit payments to their workers who become unemployed. Net increases in benefit costs to State pooled funds should be zero in most cases and negligible in all but two States. Even in these two instances, the net increases would amount to only 20 cents or less per $100 of taxable wages.

I know that many in the Congress share my concern that agricultural employees are too frequently excluded from the rights and protections afforded to workers in other industries, and I hope for prompt Congressional approval of this proposal so that we can begin rectifying the injustice. We cannot in good conscience defer this action any longer.

MAINTAINING NEUTRALITY IN INDUSTRIAL DISPUTES

As we move to establish a uniform Federal standard that would ensure adequate State benefit levels, we must also insist on strong safeguards to preserve the neutrality of the unemployment insurance system in industrial disputes. The unemployment tax which an employer is required to pay was never intended to supplement strike funds of those engaged in a dispute with the same employer. Neither, on the other hand, was the income protection which unemployed workers are guaranteed under the insurance system intended to be interrupted when an innocent bystander is put out of work by someone else's dispute.

I therefore propose that the Federal Unemployment Tax Act be amended to prohibit both the payment of unemployment insurance benefits to strikers and the practice of denying benefits to nonstrikers. A gray area does exist between the clear-cut extremes of strike participation and nonparticipation, where complex definitional problems can arise. Resolution of these problems can properly be left to the judgment of individual States. But to deal with the clear cases, it is appropriate for the Federal Government to set a uniform standard on which each State can elaborate. This the Job Security Assistance Act would do.

Our unemployment insurance system puts some of America's finest principles into action--including those of prudent provision during times of affluence for times of need; effective compassion for our fellow citizens; creative partnership between the Federal Government and the States; and supportive action by the public sector to help keep our private enterprise system stable, healthy, just, and humane.

The Congress can significantly improve the system's fidelity to each of these guiding principles by enacting the proposed Job Security Assistance Act of 1973. This legislation would bring genuine improvement in the lives of millions of those people on whom the Nation depends most heavily---our working men and women.

RICHARD NIXON

The White House,

April 12, 1973.