upon administrative officers removing inefficient old people from the service so long as no retiring allowance has been provided for them. The work of the Government offices must therefore continue to be retarded by the inefficiency of aged clerks until such time as a retirement law is put into operation. The commission feels, therefore, that it can not lay too great emphasis on the fact that, without a provision for retiring aged employees, it is idle to expect either thorough efficiency in the public service or the closest economy in the expenditure of salary appropriations.

NEED OF RETIREMENT PLAN NOTED BY CHIEF EXECUTIVE AND HEADS OF DEPARTMENTS.

For years past heads of departments and chiefs of bureaus have called attention in their annual reports to the need of a proper system of retiring the aged employees, and recently the matter has received the special attention of the Chief Executive.

The subject of superannuation in the public service has received the attention of President Taft in three annual messages to Congress. In his message to Congress in 1909, under the caption of "Reduction in the cost of governmental administration," he recommended legislation for the retirement of superannuated civil servants, coupling with it a recommendation for an increase of salaries. He said:

More than this, every reform directed toward improvement in the average efficiency of Government employees must depend on the ability of the executive to eliminate from the Government service those who are inefficient from any cause, and as the degree of efficiency in all the departments is much lessened by the retention of old employees who have outlived their energy and usefulness, it is indispensable to any proper system of economy that provision be made so that their separation from the service shall be easy and inevitable. It is impossible to make such provision unless there is adopted a plan of civil pensions.

Most of the great industrial organizations and many of the well-conducted railways of this country are coming to the conclusion that a system of pensions for old employees and the substitution therefor of younger and more energetic servants promotes both economy and efficiency of administration.

I am aware that there is a strong feeling in both Houses of Congress, and possibly in the country, against the establishment of civil pensions, and that this has, naturally, grown out of the heavy burden of military pensions, which it has always been the policy of our Government to assume; but I am strongly convinced that no other practical solution of the difficulties presented by the superannuation of civil servants can be found than that of a system of civil pensions.

The business and expenditures of the Government have expanded enormously since the Spanish War, but as the revenues have increased in nearly the same proportion as the expenditures until recently the attention of the public and of those responsible for the Government has not been fastened upon the question of reducing the cost of administration. We can not, in view of the advancing prices of living, hope to save money by a reduction in the standard of salaries paid. Indeed, if any change is made in that regard, an increase rather than a decrease will be necessary; and the only means of economy will be in reducing the number of employees and in obtaining a greater average of efficiency from those retained in the service.

In his next annual message to Congress (1910) President Taft went still further and recommended a definite plan the one discussed in this report and a definite bill, the Gillett bill (H. R. 22013), as the one, in his judgment, best calculated to solve satisfactorily the problem of superannuation in the civil service. He said:

It is impossible to proceed far in such an investigation without perceiving the need of a suitable means of eliminating from the service the superannuated. This can be done in one of two ways; either by straight civil pension or by some form of contributory plan.

Careful study of experiments made by foreign governments shows that three serious objections to the civil pension payable out of the Public Treasury may be brought against it by the taxpayer, the administrative officer, and the civil employee, respectively. A civil pension is bound to become an enormous, continuous, and increasing tax on the public exchequer; it is demoralizing to the service since it makes difficult the dismissal of incompetent employees after they have partly earned their pension; and it is disadvantageous to the main body of employees themselves since it is always taken into account in fixing salaries, and only the few who survive and remain in the service until pensionable age receive the value of their deferred pay. For this reason after a half century of experience under a most liberal pension system, the civil servants of England succeeded, about a year ago, in having the system so modified as to make it virtually a contributory plan with provision for refund of their theoretical contributions.

The experience of England and other countries shows that neither can a contributory plan be successful, human nature being what it is, which does not make provision for the return of contributions, with interest, in case of death or resignation before pensionable age, Followed to its logical conclusion this means that the simplest and most independent solution of the problem for both employee and the Government is a compulsory savings arrangement, the employee to set aside from his salary a sum sufficient, with the help of a liberal rate of interest from the Government, to purchase an adequate annuity for him on retirement, this accumulation to be inalienably his and claimable if he leaves the service before reaching the retirement age or by his heirs in case of his death. This is the principle upon which the Gillett bill now pending is drawn.

The Gillett bill, however, goes further, and provides that the Government shall contribute to the pension fund of those employees who are now so advanced in age that their personal contributions will not be sufficient to create their annuities before reaching the retirement age. In my judgment this provision should be amended so that the annuities of those employees shall be paid out of the salaries appropriated for the positions vacated by retirement, and that the difference between the annuities thus granted and the salaries may be used for the employment of efficient clerks at the lower grades. If the bill can be thus amended, I recommend its passage, as it will initiate a valuable system and ultimately result in a great saving in the public expenditures.

In the President's message to Congress, December 21, 1911, it was said:

I have already advocated, in my last annual message, the adoption of a civil-service retirement system, with a contributory feature to it so as to reduce to a minimum the cost to the Government of the pensions to be paid. After considerable reflection, I am very much opposed to a pension system that involves no contribution from the employees. I think the experience of other Governments justifies this view; but the crying necessity for some such contributory system, with possibly a preliminary governmental outlay, in order to cover the initial cost and to set the system going at once while the contributions are accumulating, is manifest on every side. Nothing will so much promote the economy and efficiency of the Government as such a system.

In his report for 1911 the Secretary of the Treasury expressed himself in favor of a retiring allowance for the superannuated, as follows: The executive departments are suffering extremely for want of a retirement law; and all improvements of the public service have to constantly meet the discouragements of this condition, while much improvement is by this condition discouraged even from a beginning. I appeal, therefore, to Congress again, as I have done each year, in behalf of such a law. Every consideration of humanity, economy, and efficiency that is conceivably related to the question calls for action at this session. The retirement system which I consider most in the interest of the clerks themselves is the contributory system; and that would cost the Government no money whatever— if that were thought to be desirable. That this system could be put into opération without increased expenditures, I believe is entirely true; and I think it could be adopted with the provision that each department should put it into operation without any cost to the Government; but it is at the same time a question whether that would be the best course to pursue. This contributory system, if adopted, would leave the claims of the clerks to revised or higher salaries unaffected. On the other hand, the so-called straight pension-the pension paid wholly by the Government-would take the place of any possible advance in salaries for, at any rate, a considerable period, notwithstanding the fact that under such a system comparatively few of the clerks would ever become beneficiaries.

However, some system of retiring allowance is so greatly needed as an aid to economy and efficiency that I would be glad to see any system adopted which could be put into effect immediately; for any system could be changed after experience showed its defects. (Annual Report of the Secretary of the Treasury, 1911, p. 7.)

In his report for 1911 the Secretary of War called attention to the need of a plan for the retirement of the aged employees as follows:

I am heartily in favor of some measure by which employees of the Federal Government may be retired and pensioned when they reach a condition of impaired usefulness after years of faithful service. In taking such action we should only be following the world-wide trend of national Governments and large business corporations, whether we find warrant for such action in humanitarian principles or considerations of a sound business policy, or both combined.

The purely monetary rewards and opportunities of the Government service ought not to be and never will be so great as those offered in the business and professional world elsewhere, and if the Government service is to be maintained upon a high and increasing level of proficiency it must meet the competition from other quarters by some compensating features that will attract the best talent to its service and retain it. While I am not prepared to express a decided conviction as between a straight-out Government pension and one to which the employee himself shall have contributed a portion, there is abundant proof that the Government, in effect, though indirectly, has for many years throughout its service maintained a pension system without retirement, and if it should now establish a pension system with retirement there is good reason to believe that in the long run it would not only suffer no pecuniary loss, but on the contrary would reap a substantial gain in the increased efficiency and improved morale of the service. (Annual Report of the Secretary of War, 1911, p. 33.)

In his report for 1911 the Postmaster General called attention to the need of a system of retiring the aged employees, as follows:

Almost without exception foreign nations provide for the pensioning of civil-service employees when they become superannuated. Large corporations in this country are rapidly adopting the same principle in the retirement of their aged employees. business grounds, if for no other reason, the Government should do likewise.

On

While the compensation of postal employees has been considerably increased during the last few years, it is hardly more than sufficient to meet necessary living expenses and consequently does not permit the putting aside of any considerable savings against old age. It is believed that a civil pension based on length of employment should be granted by the Government. Benefits to the service far outweighing the expense of such pensions would undoubtedly result. (Annual Report of the Postmaster General, 1911, p. 15.)

The Secretary of the Navy said in his annual report for 1911:

Not only should increased compensation be provided for the clerks, but legislation should be enacted looking to the establishment of some form of civil-service retirement. I am not prepared at this time to advocate any particular system, believing that this is a matter which should be determined by Congress after careful consideration; but unless some provision be made for the pensioning or retiring of superannuated civil employees the Government can never hope to secure the most efficient and satisfactory service.

There is no class of employees who are more deserving of increased compensation and retirement with reasonable pay than the employees of the Government. Very few of them are able to accumulate much, if anything, during their long years of service, and when old-age disability does come to them they must either be carried as a burden on the Government's rolls or thrown out on the world with no suitable provision for their last years.

But, aside from all sentimental considerations, I believe that civil-service retirement by the Government would be along the line of sound business management. Many railroads and industrial corporations have found it advisable to adopt such a system, and the practice is a growing one.

I earnestly recommend that suitable legislation be had in this matter. (Annual Report of the Secretary of the Navy, 1911, p. 18.)

In his last annual report (1911) the Secretary of the Interior treats of the subject as follows. He says:

I earnestly recommend the enactment of legislation authorizing the retirement of employees who, after long and faithful service, are disabled by age or infirmity from the efficient performance of their duties. The civil servants of the Government, like those in the military and naval service, are debarred from the chance of large gains, the hope of which is a constant stimulus to men in private business. Moreover, those of technical or superior administrative ability are and must continue to be paid smaller salaries than they would command in private employment. It is therefore impossible for them to acquire financial independence or make due provision for old age, either by way of profits or by way of savings from their salaries. Considerations of humanity and justice might well be urged against the dismissal of employees who have given the years of their strength to faithful and efficient public service and against their assignment to the lower grades of menial or clerical duties as an alternative to dismissal. But I prefer to put the matter on other and more selfish grounds. The Government simply can not afford not to retire these employees with due and honorable provision for their old age, and this for two reasons.

In the first place, many able and energetic men serve the Government at salaries far below the commercial standard for like services. They choose to do so because the public service satisfies their best and highest ideals of personal integrity and professional achievement. Such men are continually forced out of the service by the necessity of making due provision for themselves and their families before old age comes upon them. If the Government would insure them against this peril, it could continue to employ them at salaries far less than a private corporation would be compelled to pay. Every consideration of economy and sound business policy requires that their services should be retained on terms so favorable to the Government. The loss, taken in the mass, is irreparable, for the system operates as a survival of the

unfittest by continually drawing off the more energetic and abler men, leaving a larger and larger proportion of the inefficient in the public service. In the second place, the Government is paying much, if not most, of the cost of a proper retirement system through the inevitable relative inefficiency of the present plan. Not only are superannuated employees dropped to and retained in the lower grades because of sympathy yielding to personal or political pressure, but in the higher grades, from which the rank and file of the service inevitably derives its spirit and tone, there is a tendency to retain men who have lost the alertness and enthusiasm essential to the highest efficiency of their own work, and still more essential for inspiring in and requiring of their subordinates such alertness and enthusiasm. Not only do they thus fail to make the positive contribution to the general efficiency of the service which is due from men in their position, but they have a negative effect in the same direction by blocking the avenues of promotion and legitimate ambition. The men below them not only fail to receive the proper stimulus of precept and example, but are at the same time deprived of the hope of promotion which ought to be the reward of efficient service.

This condition is now becoming apparent. It has been delayed by the fact that the widespread application of the principle of permanency in the public service goes back less than one generation, and by the further fact that the industrial and social problems of recent years have forced the Government into new fields of activity and thus compelled the organization of new bureaus and departments. These new administrative units have been largely recruited from young men who are still in the prime of life. Many of the older bureaus and departments have from similar causes largely increased their personnel, recruiting them chiefly from young men. This sudden expansion of governmental activities has postponed and mitigated the worst evils inherent in the present system; but sudden expansion can not continue indefinitely. We must face and provide for normal conditions of growth. Under such conditions general efficiency in the public service is impossible without due provision for the retirement of aged employees. This is attested by the experience and practice of foreign governments, which have long had a permanent civil service, and by that of large railroad and commercial corporations in our own country. (Annual Report of the Secretary of the Interior, 1911, p. 17.)

In his annual report for 1911 the Secretary of Commerce and Labor points with emphasis to the need of a suitable provision for the retirement of the aged employees. He said:

Superannuation in the civil service and the proposed retirement of employees who have passed their age of greatest usefulness have attracted much attention. Considerable discussion of the subject has appeared in the public press, and many Government officials in reporting on conditions affecting the personnel of their respective departments or offices have laid more or less stress on the evils of superannuation in the service and the necessity of providing, as has been done by a number of countries and private business concerns, some equitable scheme of retirement of those who are no longer able to render a fair degree of service, but who would be left without adequate means of support if dismissed. Many difficulties, of course, may be expected to attend the passage of any law looking to the retirement on pay of superannuated employees in the civil service, whether such retirement is accompanied by annuities paid outright by the Government or whether it is made possible by contribution in whole or in part by the employees themselves.

Incomplete reports recently received from the bureaus show that there are 72 employees of this department who are more or less superannuated; that the aggregate of their salaries is $73,385; and that their average age is 70 years. Perhaps a greater amount of superannuation and consequent loss to the Government may be found in the older departments and offices. As this department last year reported its opinion on the subject of superannuation, it is unnecessary to again point out the advantage and 45700°-12-3