toward developing an effective employment service to agriculture and toward securing an orderly and controlled movement of workers which will prevent surpluses and will fully utilize the labor supply by affording more continuous employment.

Plans are being put into operation for one experimental area organization in a number of Rocky Mountain and Pacific Coast States. The Area Farm Placement representatives will assist the individual States in strengthening their farm placement service by analyzing the problems of the State in order that the employment service may be organized effectively to recruit farm workers and direct them to employment in a series of peak-crop activities. He will coordinate and direct interstate movements of agricultural workers and will carry out essential studies relating to the agricultural-labor market which are vitally important for preseasonal planning, for discovering all possible sources of workers, and for developing methods to provide a controlled direction of seasonal agricultural workers. If operations in this area are successful, other similar areas will be established in other parts of the country.

All State employment services have been directed to cooperate with the agricultural labor subcommittee of the State land-use planning committee. In many States this subcommittee has recommended that farmers use the Employment Service exclusively in recruiting farm labor. These subcommittees lend every assistance to the Employment Service, which is the operating agency responsible for recruiting and placing agricultural workers, by making available information on the factors relating to the demand for and supply of agricultural workers, by cooperatively conducting studies on special problems, and by working with agricultural employers to bring about changes in hiring practices which will provide for the most effective utilization of farm labor. For example, it was found that workers in one State were getting only about 25 percent employment, while those doing similar work in an adjoining State were getting 75 percent employment because of arrangements made by the Employment Service with growers for joint use of workers. This made the labor supply three times as effective in the latter State. Such programs can be greatly implemented by the subcommittees.

The Farm Placement Service has two objectives in the immediate future. First, it seeks to tap all sources of workers by strengthening its organization and developing full cooperation with other governmental agencies such as Farm Security Administration, Work Projects Administration, and the Department of Agriculture. Second, it helps to attain more effective utilization of the labor supply, by influencing the movements of migratory labor to provide workers when and where they are needed, and by encouraging decasualization of employment to provide more continuous work and greater earnings.

EFFECTS OF DEFENSE ON THE SOCIAL-SECURITY PROGRAM

Unemployment compensation.-As a consequence of the increase in employment arising out of the defense program, the number of unemployment compensation benefit recipients has dropped sharply in recent months. Since January 1941 each month has witnessed a greater decline (compared with the corresponding month of the preceding year) in the average weekly number of claimants receiving benefits. The weekly average in January 1941 was 826,000, or 6 percent below the 1940 figure. By March the weekly number of claimants had dropped to 762,000 or 30 percent below the 1940 figure. The May figure of 659,000 was 45 percent below the corresponding month in 1940. From October 1940, when the effects of the defense program first became evident, through June 1941 the amount paid out in benefits ($289,000,000) was 22 percent less than in the corresponding period of the year before. Like the volume of claims, the amount of benefits paid has declined during the first half of 1941. Benefits paid in January 1941 were only 4 percent less than in January 1910. By March the difference was 29 percent, and by June, 43 percent. The monthly average of benefit disbursements for the first 6 months of 1941 was only $32,800,000 per month, as compared with $47,200,000 for the first half of 1940.

The largest decrease has occurred in the States along the Atlantic seaboard and in the Great Lakes region, where the industrial concentration is heaviest and where the bulk of the defense contracts has been awarded. Although some decrease may occur in the next few months, the volume of benefits will continue to be substantial, regardless of the high level of employment in manufacturing and construction. Labor turn-over, temporary lay-offs due to short

ages of materials or equipment, dislocation resulting from establishment of priorities on materials, and other fractional factors will result in a continued volume of short-term employment for large numbers of workers.

Approximately 38 cents were disbursed in benefits for each dollar collected during October 1940-May 1941, compared with 50 cents in the corresponding period of the preceding year. As a result of the excess of contributions of payments, funds available for benefits in the claims of May 1941 totaled $2,100,000,000, an increase of 22 percent over the balance at the end of September 1940. It should be recognized, however, that the growing fund represents a future obligation to millions of workers covered by the unemployment compensation laws. Much of the work in defense industries is of a highly unstable character. Construction projects, undertaken at great speed, generate a large volume of employment which terminates when the projects are completed. The great volume of employment in industries engaged in the manufacture of defense materials and the gigantic impetus provided to production and distribution by the defense program results in the accumulation of benefit rights for millions of workers. The reserves being accumulated today will supply the funds needed to meet these obligations after the termination of the emergency, when it may be expected that the volume of unemployment will result in claims in excess of the collections.

At the same time, it must be pointed out that the benefits provided by the State laws are even now inadequate to cover the risk of unemployment compensation. There is no doubt that the existing benefits must be made more nearly adequate if we are to achieve the objectives of unemployment insurance as a real first line of defense in meeting the ever-present problem of unemployment. In many States the waiting period is much too long. Frequently an unemployed worker does not receive his first payment until the fifth or sixth week of unemployment. The amount of benefits is also inadequate. The payments in some cases have been as low as $2 and $3 per week. But the most significant inadequacy of the present laws is the very short duration of benefits. Last year over one-half of all workers in the United States receiving benefits were still unemployed when they exhausted all their benefit rights. In one State over 80 percent of the workers exhausted their benefits. In some States the maximum duration of benefits has been 2 or 3 weeks for particular individuals. An individual may receive a few dollars per week for only a very few weeks after a 3-week waiting period and a further delay for administrative reasons. As a consequence of these inadequacies, workers whose loss of wages should be compensated by unemployment insurance are frequently forced to turn to relief agencies for assistance.

In addition to the inadequacy of the benefits under existing laws there is the fact that some 3,000,000 employees of smaller sized firms are entirely excluded from coverage. These same workers, however, are covered already under the Federal old-age and survivors insurance system. They should also be given the protection of unemployment insurance.

Maritime workers a group essential to the national-defense program-are another group already covered under the Federal old-age and survivors insurance system but excluded from unemployment insurance. There is no insuperable administrative difficulty involved in providing unemployment insurance benefits to maritime workers. Such coverage must and should be under a Federal system.

The financial situation with respect to the various State reserve funds is also very unsatisfactory. While the States have a total of over $2,000,000,000 in their reserve funds this figure does not disclose the great unevenness which exists from State to State. Some State funds are bulging with reserves; others are in a relatively poor situation. For example, in Maine the State reserve fund at the end of 1940 was equal to less than 1 year of the highest previous benefit disbursements; in Delaware the reserve was equal to over 8 years of the highest benefit payments.

This variation undoubtedly will be further accentuated by the increased employment under the national-defense program due to the concentration of defense employment in industrial areas. The result is likely to be that those States with heavy defense employment may have their unemployment insurance reserve funds go completely bankrupt as a result of post-defense unemploy ment while other State funds will have much more than enough to remain practically intact.

Consequently, immediate consideration must be given to ways and means of strengthening the present unemployment insurance system so that it will be

a safer and sounder program. The existing State-by-State program must be carefully reappraised in the light of recent experience and current developments to see wherein changes must be made to provide more adequate benefits, a safer financial system, and a simpler, more economical method of administration.

The increase in the volume of interstate migration creates a special problem with respect to unemployment insurance. By the terms of an interstate agree. ment, worked out with the aid of the Social Security Board, a worker who becomes unemployed in one State, may, under certain circumstances, file a claim against benefit rights which he may have accumulated in another State. In this way, workers who have satisfied all conditions for benefits, except residence, can continue their search for work wherever employment opportunities appear most favorable, and at the same time, continue to draw benefits to which they were entitled. The volume of such interstate claims, while less in 1941 than in 1940 because of the decline in unemployment, has decreased relatively very much less than the volume of local claims. Interstate claims in the period from January to May 1941 numbered 859,000, only 6 percent less than in the same period in 1940, while the volume of intrastate claims in the same months declined 32 percent. As a result, interstate claims, which accounted for only 4.6 percent of all claims in the first five months of 1940, accounted for 6.4 percent in the 1941 period. The relative increase in interstate claims reflects the increased interstate movement of covered workers.

On the other hand, under the Federal-State system, the eligibility of workers to receive benefits and the amount and duration of benefits paid are determined by the amount of employment and earnings in the State against which the claim is made. If during a given year a claimant has worked in more than one State, his earnings may be so divided that he is eligible for no benefits or for very small benefits in any one State, even though in the aggregate he may have worked and earned enough to qualify for substantial payments. Under existing laws no State permits an individual to pool benefit rights accumulated in two or more States. Since the problem of interstate mobility is becoming an increasingly important one, every effort must be made to work out some satisfactory method of fully protecting the rights of this group.

Federal old-age and survivors insurance.-Monthly benefits first became payable under the Federal old-age and survivors insurance program in January 1940. The rapid expansion of employment due to the defense program has resulted in larger contributions than originally estimated and less expenditures for benefits. Some 25,000 aged persons who already have applied for their insurance benefits have gone back to work and many others have not retired due to favorable employment opportunities at the present time.

The increased employment has resulted, however, in an increase in the number of persons covered by the system with the result that the insurance program is now incurring a tremendous liability for payments which will come due after the defense program stops and for many years thereafter.

Another one of the major problems which has arisen as a result of the defense program is due to the loss of protection which workers suffer when they leave employment covered by the insurance system to enter either the military service or Federal civilian employment. At the present time workers who leave their regular jobs to go into military service or into Government arsenals, or any other type of civilian employment under the Federal Government do not continue to build up their credits toward Federal old-age or survivors insurance. While it is true that some of the workers who go into the Federal service become subject to the Federal Civil Service Retirement Act, their contributions will be refunded to them when they leave the service at the end of the defense program. The result is that they will have lost the period while in Federal service in terms of credits toward their insurance benefits. This problem requires legislation for its solution and it is hoped that the appropriate committees of Congress will give early consideration to this matter.

Periods of increased industrial activity bring in many marginal workers into the labor market who are usually not employed or are unemployable during socalled normal times. Moreover, the increased industrial tempo frequently causes difficult problems of personal adjustment when business slackens or industrial processes change. These considerations indicate the necessity for giving further thought to the possibility of extending the present insurance system to cover the risk of disability.

The present law could easily and immediately be modified to include payment to individuals who become permanently and totally disabled. Every country in the world which has an old-age insurance system, with one exception, also

covers disability. There is a definite relationship between old age, death, and disability which justifies the existence of one common program for protection against these three hazards. All three risks materialize in a permanent departure of the worker from the labor market and the complete loss of wage income. Disability is concentrated at the upper ages and both death and disability occur frequently before the individual has an opportunity to retire from employment.

The addition of disability protection to our existing insurance program would do much to improve the program. Over one-fourth of all cases receiving State aid to dependent children at the present time are due to the disability of the father. Social insurance would provide a better mechanism for caring for the families of workers who become disabled.

The addition of disability insurance would greatly aid in meeting the problems which will arise in the post-defense period. There already exists a Nation-wide network of offices available to pay Federal old-age and survivors' insurance benefits. The administrative foundation exists for the extension of the system to meet the problem of disability. Congressional consideration of this matter at the present time would make it possible to have a going concern in operation at the cessation of the defense program.

Need for extended coverage. The increased mobility of workers to meet the expanding demand for labor has resulted in a greater number of shifts between covered and noncovered employment. Many thousands of rural agricultural workers have left the farms temporarily to take jobs on construction projects. At the same time, the increasing stringency in the market for farm labor will lead workers who, at certain times of the year, work in covered employment to accept employment in temporary seasonal jobs in agriculture. Because of the exclusions from unemployment compensation and old-age and survivors' insurance of many persons, particularly those engaged in agriculture and domestic service, workers who shift jobs receive credits for only part of their employment during the year. As a consequence, many workers who should be protected by unemployment benefits and who should be accumulating rights for old-age insurance will not be eligible. Consideration should be given, therefore, to the extension of social insurance to agricultural workers, who are, in many respects, more exposed to the hazards of insecurity than urban industrial and white-collar workers. Consideration should also be given to the coverage of as many other groups as possible.

Public assistance.-The Social Security Act provides for grants-in-aid to match. dollar for dollar, State funds for assistance to needy persons, 65 and over, to needy blind persons, and to dependent children. By definition the recipients of these forms of assistance are unemployable and not likely to benefit from increased employment opportunities, except to the extent that responsible relatives find it possible to provide for them out of increased earnings.

The increased volume of migration has implications also for the system of public assistance under the Social Security Act. The act permits, and the laws of most States provide, residence requirements which exclude from old-age assistance and aid to the blind, any person who has not resided in the State for 5 years during the 9 years immediately preceding his application for assistance and who has not resided in the State continuously for 1 year preceding. A few States have adopted more liberal requirements, but no State has entirely waived them. As a consequence, persons moving from State to State lose their rights to assistance and may not be able to reestablish them in their new residences for as much as 5 years. This may work a real hardship on people or families who move in search of employment and who may later find themselves stranded and in need of assistance. The Board believes that these residence requirements are unreasonably severe and should be liberalized in the Federal law by providing a maximum residence requirement of 1 year for old-age assistance and aid to the blind, following the precedent already established in the program of aid to dependent children.

Another problem arises in connection with the variation between States in the amount of public-assistance grants. In general, the States in which the volume of dependency is greatest are also those in which income and taxing capacity are least. As a consequence, old-age assistance payments, for example, vary from nearly $38 in California and $32 in Washington to less than $8 in South Carolina and Arkansas, compared to an average for the entire country of more than $20. Similar, though less extreme, variations occur in payments for aid to dependent children and aid to the blind. There seems to be little justification for these inequalities in the treatment of dependency. The Social Security Board

has recommended a change from the present system of uniform percentage grants to a system whereby the percentage of the total cost in each State that would be met through a Federal grant, would vary in accordance with the economic capacity of the State. Such a change would do much to aid the poorer States and to extend more adequate benefits to a larger number of needy people, particularly, if continued migration of younger and more productive workers in response to defense employment opportunities has the effect of reducing the base of tax support for matching grants in the poorer agricultural States.

At present, there is no provision in the Social Security Act for grants-in-aid from the Federal Government for general public assistance. The volume of such assistance, however, in the United States is still very great, amounting in March 1941 to nearly $30,000,000, paid to 1,200,000 cases. The variations between States in the average payment per case are extreme: From a little over $3 in Mississippi and $6 in North Carolina, Georgia, and Florida, to $37 in New York and $34 in Rhode Island, with an average of nearly $25 for the country as a whole. These payments are made to families who cannot qualify for one of the federally aided public-assistance categories but who are in need of public support. The relocation of population, which is taking place and will take place in increasing volume as a result of the defense program, has already left many families stranded as a result of their inability to find employment. Furthermore, after the passing of the emergency, other families will be left without support when defense production closes down. This will particularly affect the States to which large numbers of migrants have been attracted to employment in isolated communities where ordnance and explosives plants had been located. In order to forestall undue burdens on these States and unnecessary suffering on the part of families left without support, provision should be made through the Federal Social Security Act for matching grants to the States to assist them in carrying the burden of general public assistance.

Health security.-At the present there is a justifiable preoccupation with the development of the armed forces and with the manufacture of munitions, supplemented by the commencement of a coordinated program for defense, health, and welfare activities, especially for areas near cantonments and for industrial areas expanded or developed under the defense program. Along with this emergency phase, the strengthening of underlying measures for social security must go forward. I hope the Congress will give concerted and continued attention to the need for a comprehensive program designed to spread more evenly and more equitably the economic burden of ill-health, the most important gap in the present framework of social security. Through these next major steps in the protection of health and welfare, our Federal Government could complete the basic architecture of the defenses it began to build in 1935 for the economic and social security of individuals, families, and the Nation.

We find unhappy confirmation of inadequacies in our health services, reported 21⁄2 years ago by an interdepartmental committee, in the preliminary findings of the draft boards that approximately 40 percent of our young men have defects so serious as to prohibit or limit their participation in selective service and military training.

You, as well as we, are well aware that a pattern for health security has been laid out. Last year and this, Congress has had specific bills available for careful study, bills intended to enact sound programs to meet well-defined needs for new hospitals, clinics and sanatoria and for funds to encourage their effective use; for strengthened public health, maternal and child health services; for more adequate medical services for all the people; and for protection against disability.

Some sharp clashes have centered around the proposals for health insurance. There are those who say that such proposals lead inevitably to "socialized medicine," a vague phrase. "Socialized medicine" is something to which I am opposed if that phrase means a system which destroys the personal relationship between the patient and his doctor. What we are interested in is the destruction of an even more personal relationship-the personal and exclusive relationship between the patient and his disease. In that we and the doctor have a common aim. But this is largely beside the point, because there is no reason why a plan cannot be evolved which will preserve the patient's right to choose his doctor. Indeed, I believe it is possible to develop a plan which will make it possible for a great many patients to exercise that right for the first time. The present trouble about free choice of a doctor is that so many people have neither a choice nor a doctor.