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way. When the bill went into effect deductions would begin to be made from the employees' salaries. These deductions would be invested at interest, and when the employee retired the amount of money that he had contributed, plus interest, would be used to pension him. Many employees who were well advanced in years of course would not contribute enough to pay their entire pensions, and therefore the Government would have to make up the difference.
Now, the cost of pensioning those who would be retired at once and the difference between the amounts the employees would contribute and the amount necessary to pay their full pensions would be the first year, as I stated, about $3,000,000. Then it would gradually increase for 20 to 30 years up to about $6,000,000, and then run off to nothing, when the last person now in the Government service would have died.
The CHAIRMAN. Under that the charge to the employee would be 8 per cent of his salary!
Mr. BROWN. That would be the maximum amount withheld from the salary of the employee who is close to the age of retirement. The deduction would be whatever was necessary to provide for half pay at the time of retirement. That would mean that the employees just entering the service would pay something between 2 and 3 per cent, and that those at higher ages would pay larger percentages.
Senator WOLCOTT. Your percentage of 8 or 2 or 3, or whatever it might be, is determined by the length of service yet to be rendered?
Mr. Brown. Yet to be rendered; that is correct.
Senator WOLCOTT. If he has 20 years yet to serve before reaching the retirement age, he would pay 5 per cent!
? Mr. Brown. Something like that.
Senator Wolcott. But it might be a different percentage on account of interest to be compounded from time to time?
Mr. Brown. The principle is that you have to make whatever deduction is necessary to produce, with interest, a sum of money that will purchase the desired annuity at the time of retirement.
The CHAIRMAN. Mr. Brown, have you the facts of the English system in your mind as to retirement?
Mr. Brown. I prepared a report on the English system some years ago, as a Senate document—so long ago that I can not tell you the facts now without refreshing my memory. But they had had for half a century a straight pension. Up to about 1909, was it not, Dr. Jordan?
Dr. JORDAN. Nineteen hundred and nine.
Mr. Brown. In September, 1909, the pension was one-sixtieth of the salary for each year of service. The pension was available at a specific age, and persons leaving the service prior to that age from death or resignation got nothing. The employees complained bitterly about that, because they contended through their organizations that they were receiving a pay consisting of two items their immediate stipend from month to month and their deferred pay in the form of pensions and a good many cases were presented where men had died just short of their pension age or soon after the age of retirement and left dependents in destitute circumstances through the forfeiture of that deferred pay. So at the instance of the employees the scheme was modified, as I remember it, and now instead
of the employee receiving a pension equal to one-sixtieth of his salary for each year of service he receives a pension equal to oneeightieth of his salary for each year of service—a lesser amount-and in addition his estate receives at his death the equivalent of one year's pay. On leaving the service prior to the age of retirement he receives a benefit equal to 3 per cent of his total pay during his entire service. That 3 per cent return was intended to roughly equal the deductions from pay that would have been necessary to produce the pensions. It was estimated the new pensions of one-eightieth of salary, plus the returns and the death benefits, would cost about the same amount as the old pensions of one-sixtieth of salary. The employees undertook to show, and I think did prove, that those receiving pensions had a lower scale of pay than those who did not. In other words, the pension was taken into account by the administrative officers who fixed the salaries. To insure that the employees would not forfeit that difference, as they had under the original straight tontine scheme, the plan was modified as I have described.
Senator WOLCOTT. Just a moment. You say a straight tontine scheme. That is a sort of gamble, is it not, a deferred benefit? You get it if you live and lose it if you die. If you lose, the rest in the group get the benefit of your death. .
Mr. BROWN. Yes.
Mr. Brown. I believe that any plan which contemplated only an annuity from a given age for the remainder of life would be unsatisfactory to the employees for the same reasons that the English system was unsatisfactory--that those who resigned or died would lose—and it would be unsatisfactory to the Government, because it would make the removal of inefficient employees much more difficult than it is at the present time. I do not believe that any impediment should be placed in the way of people leaving the Government service. I think that if you tie the people to the service by a pension scheme you are likely to depress the salaries. I think that one of the indexes that govern Congress in fixing the pay is the number of resignations each year.
The CHAIRMAN. How many of them are there?
Mr. Brown. I can not answer that directly, Mr. Chairman. I inight add that last year Senator Pomerene introduced a resolution in the Senate directing the Bureau of Efficiency, of which I am the head, to collect statistics from the departments to determine the cost of various pension plans that were under consideration at that time. In cooperation with the Census Office we prepared a form of card inquiry and sent it to various departments. The cards were filled and returned to us, and the Census Oflice has been editing them. The editing is about finished. As soon as it is finished we will punch cards and make eleborate tables to give you gentlemen all the information possible with regard to the number of persons in the service, what they are doing, salaries, how many are eligible for retirement, and what the rate of separation is in the various services. Some of the services have very high rates of separation, and others have very low rates. That depends upon the attractiveness of the service and the rate of pay compared with that for similar work outside; that is, work requiring a similar degree of ability and experience. I might cite two extremes. Letter carriers in smail towns and nurses and internes in Government hospitals. The rate of separation in the Postal Service—that is, among the letter carriers in the smaller towns—I think will be shown by our statistics to be very low, because the rate of pay is perhaps better than it is in some other branches of the service, compared with the cost of living in those small towns and the degree of skill required to do the work. On the other hand, in the hospital service people come and go for the experience. That will all be shown in these tables.
The CHAIRMAN. Have you got an itemized statement of the cost of these various bills that have been introduced ?
Mr. Brown. Not yet, Mr. Chairman.
The CHAIRMAN. What it would cost under the various plans, the flat-rate plan and others; take any arbitrary figure you want, because we can figure it out; the cost of the Government taking the whole burden, and dividing the burden on any arbitrary proportion that may be made, also where the employee bears it, as I would like to have that, too, just to compare them.
Mr. Brown. I should like to add that the work of the Bureau of Efficiency has grown so rapidly in the last year, and so many additional duties have been imposed upon the bureau by Congress, that I have not been able to devote as much time to the work of calculating these pensions as I would like to; but finally, several months ago, I requested the Civil Service Commission to hold an examination for an actuary at the bureau to make these calculations. We were fortunate in securing the services of Mr. James B. Maddrill, of the Traveler's Insurance Co. of Hartford, an accomplished mathematician, who will be in Washington on the 25th of this month to devote his entire time to the work until it is finished.
The CHAIRMAN. We would like to have him come before us when we get to that stage where we can do it.
Mr. BROWN. The bureau is at the disposal of the committee at all times and will be glad to do the utmost to answer any questions.
The CHAIRMAN. Very well, sir; I thank you.
The CHAIRMAN. It is about time that we are obliged to go to the Senate. It has already been in session about an hour.
Mr. ALCORN. If the chairman will permit me I will say that there is a lady here who has come all the way from Chicago to attend this hearing, and she would like to be heard.
The CHAIRMAN. Certainly; we will hear her now, then.
STATEMENT OF MRS. FRANK R. HALLAS, PRESIDENT OF THE
WOMEN'S AUXILIARY OF THE CHICAGO POST-OFFICE CLERKS' UNION.
Mrs. Hallas. I am very glad of this opportunity to speak for the employees in Chicago. I am president of the women's auxiliary. I see this thing from the women's point of view, the wife of the postoffice clerk who has to make his salary cover all the expenses of the home. We feel very much that we should have this pension, and I have heard these conditions explained here to-day in Washington, D. C., with much interest, and I want to say that these conditions exist also all over the country, and there is that feeling that we must really have it; that the only thing we have to count on in our old age will be a pension of some sort.
Now, I want to say that the general opinion of people on the outside is that there is a pension of the Federal employees now; that they are already pensioned. The ordinary layman takes it for granted that we are pensioned, and I am sure the ordinary citizens of the United States want their employees pensioned. You talk to them, gentlemen, and they are very generally surprised when you tell them we are not. Most municipalities pension their employees. I know in the city of Chicago the teachers are pensioned; there is a system of pensions for the firemen, and a system of pensions for the policemen and for some of the other departments. In fact, I think most of the departments of the city of Chicago are pensioned. A great many of the States have pension systems, and a great many of the private corporations and private firms are pensioning their employees. And there are times when you are talking as the wife of an employee of the Government when you have to step back and say, "No; the Government does not do that for my husband; you are more fortunate to be working for a corporation.” So for your pride in your Government, not only for your personal feeling in the thing, these pensions should be provided. On this question of pensions I am speaking now for the auxiliary; the women employees of the Post Office are very much in favor of some system to provide for pensions.
Mr. ÅLCORN. There is one other speaker, Mr. Chairman, Mr. Neagle, law clerk of the Navy Department.
The CHAIRMAN. All right; you may proceed, Mr. Neagle. STATEMENT OF MR. PICKENS NEAGLE, LAW CLERK OF THE
Mr. NEAGLE. Secretary Daniels, in authorizing me to come up and be at the service of the committee, wanted the committee to understand that I brought with me no recommendation from him, no representation of his views; so anything I say is personal from me and my associates.
The Navy Department, when I went into the service, about 30 years ago, had 'in it a very large proportion of superannuated employees. They were probably largely veterans of the Civil War. When the new Navy began to grow--the building of the new Navythe people taken in were young men and a few young women, and for that reason there are perhaps not so many superannuated employees in the department to-day as there are in some other departments. There are probably 6 to 8 per cent of people that are beyond the retiring age in the Navy Department now, but I think it is without stretching it at all to say that a very large proportion of the employees in the department to-day are beyond 50 and within
The CHAIRMAN. How many are beyond 10?
Mr. NEAGLE. I should say, excluding those recently appointed on account of this emergency, the number would be 1,000, somewhere in that neighborhood. But as time goes along the number of superannuated employees in the Navy Department will be very much larger than it is now, because there were so many young men taken in at one time on account of the sudden starting up of the activities of the department.
So much has been said on this subject I feel a little bit of hesitancy in saying anything; but it seems to me fair to say that this matter of retirement depends for its merit on three factors that are Avery well known. One is that as men grow older somewhere along the course of life comes their mental deterioration, and when they do begin to wane, if a man is in the Government service, the Government becomes a loser by it, loses money on him; and it is true, as many people have said this morning, that compassion in the human heart will not allow men ruthlessly and shamelessly to be put out of their employment-old and helpless men and women.
Then there is another consideration. During this great war our minds have been saturated with the horrors of it and the destruction of everything pertaining to human life, increasing, of course, the number of dependents, affecting only Europe thus far. Now, that condition will overtake this country, too, and after the war the number of people dependent will be very much larger than to-day, and anything that leaves the Government in the position of being obliged—I mean the department heads of being obliged to discard employees that are old will be a much more serious matter at that time than now. For that reason it seems that now is the time for Congress to take this matter in hand and settle it. If the only way to settle it is to provide a pension scheme of some sort, as to whether or not that system should be based on a contributory or a flat-rate pension by the Government, there are many things to be considered on both sides of it. My own personal view is that it should be to some extent, at least, contributory, if not wholly so—that is, leaving out the immediate starting of it. After that is done, the questions that have been argued can be adjusted more satisfactorily. It seems to me that the only effective, sound way is to arrange or establish a prescribed, a fixed age, at which retirement must take place. As to whether there will be any such thing as political influence or personal influence in the matter, I would say that those considerations should not be allowed to delay the organizing of a scheme; it is a wise thing to get the plan started.
The CHAIRMAN. It is pretty hard to turn back all the conditions of time and experience of time when you say there must not be those kinds of influences.
Mr. NEAGLE. Well, with reference to your question a while ago as to whether there should be any partisanship in the board appointed to deal with these matters, I should say that the board should be nonpartisan, or, to use a better expression, double-partisan, and it should be an offense on the part of the board to take notice of a man's politics or inquire as to what a man's politics are; it should be a punishable offense. I believe the more dignity, the more formality that would surround the selection of the board would be an advantage to the Government in every way. I do not think it ought to be pos