Englishmen oppose the noncontributory plan demanded by the laborites and insist that the habit of thrift ought to be encouraged and enforced. It is unreasonable, they say, that industrious and economical laborers who from their savings help to bear the national and local fiscal burdens should be taxed in order to give pensions after the age of 65 to members of the lazy, wasteful, improvident, and dissolute class of the British proletariat, especially as no correspondent demand is made by the representatives of labor in Germany and France. Mr. JORDAN. I would like to state that the scheme which we have presented here, known as the Brown scheme, meets with less objection than any scheme which has thus far been suggested, particularly among the younger clerks. The scheme which had the tontine feature or the commingling of assets was particularly distasteful to the younger people, because they felt that they would be contributing for the retirement of the old. I can say that this retirement association has been in existence some eight years and that we have pretty thoroughly canvassed the civil-service employees of this country, and in branch organizations which have taken up this work in cities, big and little, and they are generally in favor of a scheme which secures to them a return of their money kept separate and distinct from that of anyone else. STATEMENT OF MR. JACOB W. STARR, REPRESENTING THE UNITED STATES CIVIL SERVICE RETIREMENT ASSOCIATION, WASHINGTON, D. C. Mr. STARR. In answer to the question of Mr. Allen, I would say that we have 140 different branches in the Philippines, Porto Rico, and all over the country, and consequently this matter has been canvassed thoroughly many times. I shall confine myself to some remarks on the cost of retirement as we have found it through our inquiries. There are 150,383 persons in the classified service of the Government, as shown by Bulletin No. 12, issued by the Bureau of the Census July 11, 1904. In tabulating the statistics you will notice that of that number 50,047, drawing a salary of $700 and less, were grouped in one body. (See p. 23.) Since the issuing of Bulletin No. 12 the United States Civil Service Retirement Association requested the segregation of the number and salaries that are involved in that group. Witness the following letter from the Director of the Census: DEPARTMENT OF COMMERCE AND LABOR, Mr. WALLACE W. HITE, Receiving $100 but less than $200 per annum Receiving $200 but less than $300 per annum 1,964 1,686 The CHAIRMAN. Are those employees in the classified service receiving less than $200 and $300 per annum? Mr. STARR. Yes, sir. Mr. KIMBALL. In what capacity do they labor? Mr. STARR. In various capacities; I do not know exactly. That is stated in Bulletin No. 12. I do not think, however, they give the occupation. Mr. ALLEN. In the classified service there are classified clerks and some classified laborers. A laborer can not be appointed in the Departments without being classified or skilled. Mr. STARR [reading]: Receiving $300 but less than $400 per annum. Total. 2,372 3, 101 2,916 28, 936 3, 114 44, 089 The CHAIRMAN. You would not include those of the laboring class, those receiving but $200? Mr. STARR. Those are permanent people, in the service all the time. They are in the competitive service. The CHAIRMAN. They do not come in the competitive service? Mr. STARR. Yes, sir; they have to stand a competitive examination. The CHAIRMAN. Are you sure of that? Mr. STARR. This information is from the Civil Service Commission and the Bureau of the Census. The CHAIRMAN. I think there must be some mistake about that. The Bureau of the Census has refrained from calculating the total amount paid annually to the civil service employees because it was believed the information in the possession of the office was not sufficiently accurate to justify such a computation, but, in compliance with your request, the computation has been made and the results are furnished in the following statement: The total amount paid in salaries to the employees of the Executive civil service was calculated by multiplying the number of employees in each group by the estimated average salary. In computing the total salaries separately for the employees in the District of Columbia it was found that, by taking for the average salary the minimum rate in all groups except the group of employees receiving less than $720, a total amount was obtained approximately the same as that given in the Official Register for 1903, and the same rates were therefore used for employees elsewhere than in the District of Columbia. By the segregation in $100 groups of the employees receiving less than $720, it was found that the average salary less than $720 is about $533. This average salary was therefore used for the less than $720 group in calculating the total salaries. In making the calculation no account was taken of the employees receiving less than $100; those whose salaries were not reported, or who received no compensation; piece workers, and 613 special agents paid on a per diem basis, who received compensation only for such time as they were actually employed. By this estimate, it appears that the annual salaries of the employees in the District of Columbia approximated $24,792,319, and of the employees engaged elsewhere than in the District $89,233,178, making a total of $114,025,497. That letter was signed and sent to us by the Director of the Census. The average salary of the Government employee in the District of Columbia, as shown by Bulletin No. 12, is $1,072. This amount is much larger than the average salary of the entire service, but it is the average salary taken into consideration in the calculations and preparation of the bills under consideration. The average annual salary of the entire classified civil service of the Government is $758.23, being $313.77 less than the average salary of those in the District of Columbia; consequently, the amount the Government will have to contribute will be lessened by an amount equal to as many times $313.23 as there are employees retired annually. The Keep Commission bill, which is the "Brown bill" amended, states that $3.57 of the salary of $100 per month will purchase the annuity of $900 when the employee is retired with fifty years of service, being 75 per cent of his annual salary of $1,200. We believe that this 3.57 per cent will be more than necessary, as the statements of the eminent actuaries the United States Civil Service Retirement Association employed to make the calculations to prove the feasibility, practicability, and absolute safety of the plan and provisions of bill H. R. 19375, being the bill drafted by our association and introduced by Mr. Fowler in the Fifty-ninth Congress. Mr. Walter C. Wright, of Boston, Mass., is a son of Mr. Elizur Wright, the foremost actuary of his day. Walter C. Wright was associated with his father in his business and is an actuary of great experience. Mr. Wright made a thorough analysis of the conditions of our bill and pronounced those conditions feasible. In his statement to our association, he says: A 5 per cent collection will, on the whole, be abundant to fulfill the proposal of the bill, which is that each annuity to be paid shall equal one-sixtieth of the average salary of the last ten years of service, for each year of service, not exceeding forty years, which would be 663 per cent in every case of forty or more years of service. Indeed, the probability is that an annual allowance of 5 per cent to produce annuities of 663 per cent of the average salary for the last ten years, after at least forty years of service, and proportionately less percentages after shorter terms of service, would prove superabundant on the whole and create some surplus. In a subsequent statement to our association, Mr. Wright says: I am so well satisfied that 5 per cent will prove the most popular contribution rate which could be fixed upon, and that it will prove sufficient for all purposes, that I have not considered any other rate. Mr. HARDY. Five per cent of the annual salary? Mr. STARR. Yes, sir. Mr. HARDY. That is a great deal more than the percentage spoken of by Mr. Goulden? Mr. STARR. Yes, sir; but we put the whole expense in the bill; clerk hire and everything else connected with it. Mr. HARDY. It is also greater than Mr. Brown suggested to this committee? Mr. STARR. Yes, sir. There is another thing I want to call your attention to, that our bill provided for persons who were disabled in the service. These bills provide only for retirement upon reaching the retiring age. Mr HARDY. They do provide for voluntary withdrawal. Mr. STARR. But they eliminate those injured or disabled in the service. I speak of that because it would reduce the cost, I think. Mr. HARDY. In case of disability? Mr. STARR. Yes, sir. Mr. HARDY. Would that be very difficult to arrange? Mr. STARR. No, sir; we could arrange it in the bill introduced and known as the Fowler bill. Mr. HARDY. Is it intended that the whole service shall pay the annuity and not the particular individual by his payments? Mr. STARR. No, sir. Mr. JORDAN. That is the commingling of assets. Mr. STARR. James Howard Gore, Ph. D., of George Washington University, Washington, D. C., and Fellow of the Actual Society, also consulting actuary of the Mutual Life, New York Life, and Equitable Life Insurance Association, of New York, the three largest and most successful in this country, says of our bill: I am convinced that the assessment proposed will be adequate and that it will be found that the machinery you suggest will be satisfactory. Mr. Gore was so well satisfied that a surplus would accrue that he strongly recommended to us the "adoption of a section to our bill that would increase the benefits or reduce the taxation after five years.' Mr. Miles N. Dawson, consulting actuary, New York City, basing his calculations upon the unofficial data we had collected prior to the issuing of Bulletin No. 12, finds that an assessment of 5.6 per cent will produce an annuity equal to one-sixtieth of his average annual salary for the ten years preceding retirement for every year of service rendered in any and all departments of the Government, plus a death benefit of $900 and a sick benefit of $6 per week. The calculations of Mr. Dawson are concurred in by Henry Moir, actuary, New York City. In a statement to the Committee on Reform in the Civil Service, House of Representatives, February 12, 1904, Maj. Gen. F. C. Ainsworth, the Adjutant-General in the Army of the United States, submitted a memorandum in which the estimated cost of retirement at 70 on one-half pay would not exceed 3.5 per cent of the active list. These figures are the result of calculations based upon known data respecting the active and retired service of the United States Army, and covering about forty-five years' experience. The CHAIRMAN. Do you mean that you advocate that bill in preference to the bill before us? Mr. STARR. No, sir; We have found here, first, the maximum cost, and second, the men are rather appalled at the amount of contributions fixed by the Keep bill or the Brown bill. I do not believe that it is going to cost nearly so much as they have stated, that is, on the part of the Government, because there is going to be separations from the service. These calculations have been based upon an average annual salary of $1,072, when it is $313.77 less than that, and that would make quite a difference in the cost. Mr. HARDY. Have you ever ascertained how much a man would pay on that 5 per cent or even 3 per cent basis, if he should enter the service at 20 years and retire at 70 years, whatever would be necessary to give him an annuity? Mr. STARR. We have never figured out just that amount. no other way of fixing it, but taking them all in. We saw Mr. HARDY. You would average the long service and pay for the short service? Mr. STARR. To a certain extent we did, but to offset that, retirement, when it is enforced, will cause promotion to be so much faster that many of these men by reason of these retirements will receive a promotion that will pay all they have to pay to give them a surplus which they would not receive as the service is now. Mr. HARDY. You have a sort of equal assessment at different ages? Mr. STARR. Yes, sir. Mr. HARDY. A man who enters at 60 years of age would pay no more assessment upon his salary than the man who enters at 20 years of age. That is a little contrary to the general insurance plan. Mr. FAUNCE. Can a man enter the service at 60 years of age? Mr. HOLCOMBE. He can, but it is unusual. Mr. STARR. I think the civil-service law limits it. The CHAIRMAN. No, sir; there is no law which limits it. Mr. HARDY. Your proposition is different from the ordinary insurance or annuity plan, which bases its assessment according to age? Mr. JORDAN. I understand Mr. Starr is not advocating that bill. His purpose is merely to point out the relative cost. The association is standing behind Mr. Brown's bill. Mr. FAUNCE. We were expected to bring in a bill which would be satisfactory to the retiring clerks and be without any cost to the Government. Not that we preferred that, but that was what we were requested to do, and we have been in a way hampered by that requirement. The CHAIRMAN. Requested by whom? Mr. FAUNCE. The organic law of our association required that. It was the general feeling of everybody, you gentlemen as well as the people outside, that any amount we might ask from the Government would be a very unpopular move for us to make. Therefore we concluded that we would not ask the Government for any money, but would make a direct assessment upon ourselves. However, since then the sentiment in the country has changed very much. Mr. BROWN. I would like to ask Mr. Starr if he refers to the figures that are embodied in the report submitted by the Keep Commission? Mr. STARR. Yes, sir. Mr. BROWN. Those figures are as nearly accurate as it is possible to make them. Mr. STARR. I would also invite your attention to the letter of Mr. Frank Scott, treasurer of the Grand Trunk Railway of Canada, which letter embodies a tabulated experience with the Grand Trunk Railway of twenty-eight years. This table shows you that after paying all expenses the Grand Trunk Railway of Canada Superannuation and Provident Fund Association has a surplus five times as great as all of their expenditures. This association is incorporated separate and apart from the railroad company and is controlled and operated by a board of directors appointed by the railway company and from its employees. The company makes a deduction of 2 per cent from all salaries of their employees and the railroad company adds a like sum, equaling 5 per cent. An official report of the Civil Service Commission, showing the number of separations from the service by death, resignation, and removal for the years 1898 to 1905, inclusive, as shown in the table submitted herewith, will show the number of separations from the service in the eight years to have been 60,994, an average of 7,624 plus, for each year. These persons, separated from the service by death, resignation, or removal, will never be placed on a retired list, consequently reducing the amount that is proposed to be contributed by the Government by the bills under consideration. Thus it will be seen |