Evening star., 1935-05-14
Validity of Pooling
Funds for Insurance

To the Editor of The Star:
In the leading editorial Of The
Star on Thursday, May o, under the
title "Of Doubtful Validity" you make
the following statement:
The States which have enacted un-
employment insurance laws TO con-
forra, as far as 1t is now possible TO
conform, with the principles Of the
national social security legislation
have adopted the so-called pooling
plan, under which employer con-
tributions are paid into q pool from
which unemployment benefits are
later to be drawn"
Let me call your attention to the
fact that the Utah unemployment
compensation law recently enacted is
OF the Wisconsin type, with individual
employer accounts. The unemploy-
ment compensation acts recently en-
acted in the States of New York and
Washington In anticipation of Fed
eral legislation provide for q State
pooled fund, but the New York law
provides that the industrial commits
sioner shall study the operation of the
~N~J oAAS AAA0iNAal doRCCGo the
sufnciency Of contributions thereun-
DER, and submit report of his find
ings and recommendations 10 the
Legislature not later than February.
1889. This provision is designed to
pave the way for ratings In the future
according TO the risk of unemploy-
ment in different industries if this is
thought to be necessary or desirable.
state workmen's compensation laws
with a State-pooled fund have been
upheld by the United States supreme
Court, as pointed out by Chief Jus
tice Hughes In the minority opinion
Of the railroad retirement case. The
analogy between workmen's compen-
sation and unemployment compensa-
ton would appear TO be much closer
than that between unemployment
compensation and old-age retirement
Since State workmen's compensat ton
laws with pooled funds have been
upheld, 1t would appear reasonable to
assume that the court would also hold
unemployment compensation pooled
funds likewise valid.
While it is true that the court dis
approved the pooling principle as ap-
piled to railroad retirement. pointing
out that solvent railroads would have
to carry the obligations of insolvent
or defunct ones, the court was very
careful to distinguish the pooling re-
quirement in this case from other
cases where it had been upheld, as. for
example, the workmen's compensation
cases and the deposit insurance of
State banks. The case, therefore, does
not necessarily indicate what the Su-
preme Court will hold In the future
on q State unemployment compensa-
ton law which provides for pooling OF
funds.
In your editorial you further state:
The pooling principle, as con-
tained in the District bill, was strongly
indorsed by the experts who advised
the President on the form Of social
security legislation. They contended
that this principle recognizes unem-
ployment as a community problem and
the protection against some Of the
evils Of unemployment as a community
responsibility.
May I call your attention to the fact
that the report Of the Presidents Com
mittee on Economic Security urged
that States be permitted to experiment
with different forms of unemployment
compensation and to adopt either a
State-pooled fund or the individual
employer-reserve type Of fund. There
are undoubted merits in both types of
plan. The State pooled fund plan
provides a maximum protection to
employees generally, while the indi-
vidual-employer reserve plan provides
the maximum incentive for stabiiza-
tion.
COMMITTEE ON ECONOMIC Sc
CURITY. EDWIN Z. WITTE, Ex-
ecutive Director.