Senator CHAMBERLAIN. Before you pass to that, Mr. Dawson, you suggested awhile ago the impossibility and the impracticability of having different laws governing this subject in the different States. What, in your opinion, would be the effect of having such different laws upon the manufacturing plants, for instance, of the Territories and States?

Mr. DAWSON. I intended to refer to that question, Senator, a little later.

Senator CHAMBERLAIN. Just pass it, then; and do not let me interrupt you.

Mr. DAWSON. No; I will give a partial answer at this time and will ask you to permit me to refer to it again when I reach it in its proper order. The workmen's compensation act of New York applied to relatively few industries. New York was separated from Pennsylvania, where the lowest employers' liability rates are in effect, because of illiberal laws and strict construction by its courts, by the State of New Jersey. At this time a law has been passed in New Jersey similar to this workmen's compensation act of New York, but applied to many more industries, practically all the industries of the State, including domestic servants and farm servants. I do not know certainly what the rates will be in New Jersey; I have not ascertained; but I did ascertain, during the course of an investigation made for the United States Government, and the results of which you will find in the September, 1910, Bulletin of the Bureau of Laboran investigation as to the cost of employers' liability and workmen's compensation insurance in Canada, the different States of the United States, and in the different countries of Europe, in state insurance, private insurance through stock companies, and private insurance through mutual companies. You will find the rates there given under the different laws in different States.

In the course of that investigation I ascertained the rates charged in New York under the workmen's compensation act that has now been declared unconstitutional. Assuming that the law in New Jersey will produce the same rates, and it is the general impression among those who think they know that the rates will be higher and that the New York rates were too low, if anything, the following will take place: The workmen's compensation rate in New York for carpentry was 5 per cent of the pay roll. That included both workmen's compensation and employer's liability under the New York law. Take the Pennsylvania employer's liability law; there the rate is 1.13 of the pay roll-about one-quater. In stone quarries the rate in New York was 7 per cent of the pay roll; the rate in Pennsylvania was 1.35 per cent of the pay roll. The rate for housesmiths in New York was 6.25 per cent of the pay roll, in Pennsylvania 1.50. Tunneling in New York was 12 per cent of the pay roll; in Pennsylvania 4.68.

The rates I have given you for Pennsylvania are the so-called schedule rates. I am informed that these rates were frequently shaded. The rates I give you for New York show the tariff rates which, as I am informed, were lived up to and not infrequently a much larger rate charged. Thus, for instance, I gave you a rate of 6.25 for housesmiths, which means iron work on buildings, notwithstanding which the structural-iron workers of New York paid as high as 20 per cent of the pay roll, instead of 6.25. Now, I need not

say that there will be serious difficulty in the matter of interstate competition.

The CHAIRMAN. What, Mr. Dawson, is about the average rate in New York?

Mr. DAWSON. That is a very difficult question to answer, and I would not like to trust myself to give you an answer. My judgment is that the rates in New Jersey, as compared with those in Pennsylvania after the 1st of July, this year, when the new New Jersey law takes effect, will be from about four times as high as the Pennsylvania rates to as high as 10 or even 12 times.

The CHAIRMAN. And that difference is entirely based upon the fact, that in Pennsylvania the liability is limited to comparatively few of the accidents which happen, while in New Jersey it will include practically all.

Mr. DAWSON. It is a workmen's compensation act in New Jersey, and it is a complex one, one which I think fully justifies us in expecting pretty heavy rates.

The CHAIRMAN. That is the reason for the difference, as I have stated it!

Mr. DAWSON. That is the reason for the difference.

The CHAIRMAN. Is it your idea that with that difference the result would be to drive industry out of New Jersey into Pennsylvania? Mr. DAWSON. I do not say that they will be driven out; that is an extreme statement. I do say that they will be under serious competitive disadvantage.

Mr. BRANTLEY. Mr. Dawson, the Pennsylvania rates are perhaps the lowest?

Mr. DAWSON. They are the lowest in the United States.

Mr. HOLDER. Mr. Chairman, if I may be permitted here, I think there is a misapprehension about the inquiries made. I think the inquiries made of Mr. Dawson are upon the present basis and not on the contemplated basis.

Mr. DAWSON. It is on the basis contemplated by the workmen's act. The rates I give you are the New York rates, under the workmen's compensation act there. I think the New Jersey rates, as nearly as I have been able to learn, will be higher.

Mr. SABATH. Mr. Chairman, may I be permitted to ask the gentleman a question? Is it not a fact, Mr. Dawson, that only about 40 per cent of the premiums that have been collected have been received by those that were insured, or those that suffered injury, and 60 per cent was expended or remained with the various companies?

Mr. DAWSON. No; that is a terrible libel. The percentage of premiums that has been paid in claims has been 35 instead of 40, and the percentage of expenses in the year 1909 of the companies reporting to the New York department was 51 per cent. That means that 65 per cent of the premium was absorbed, so that 40 per cent is libelous and unfair.

Mr. SABATH. I have seen the point made.

Mr. DAWSON. I hope you catch the point of my sarcasm that you have overestimated the per cent paid in losses; it is only 35 per cent, not 40 per cent. These figures are very carefully made up, and I have them in detail.

I realize, gentlemen, that the discussion of whether this is for the general welfare will be more intensely interesting when I reach it

than the other part of the discussion. I also realize that in asking you to listen to what I have said that I may appear to be departing from the rule in effect laid down by yourselves that you only wish to discuss the constitutional question, and I only appear to do so for the reason that you must remember that I shall be advancing the thesis that the General Government has power to tax for the general welfare. After I have dealt with the more technical constitutional questions I still have the tremendous question, Can this be shown to be within the meaning of "general welfare" as used in the Constitution? Now, I have my brief arranged the other way; in my brief I have the facts showing it to be for the general welfare in front of the other, but I would like now to put it the other way in view of the manner in which you have been discussing the constitutional questions involved. Again, before doing so I wish to call your attention to the fact that in general, though not in particular, the same conclusions were arrived at by the learned attorney for the New York Central, the Vanderbilt lines, as by myself, entirely independently, namely, that not only is it constitutional to proceed in the matter of workmen's compensation under the power of taxation, but that in his opinion it was the only constitutional method by which you could attack the question. I think I am not betraying any confidence in making the open statement which he made in Philadelphia and which was a great surprise and gratification to me at the time, that the learned attorney for the National Association of Manufacturers, who has been giving very serious study to this matter for several years in connection with the committee of that association, has already arrived at similar conclusions, and his conclusions, as I understand it, are more accurately the same as mine, namely, that not only is that the way in which you can do it for railways, but also that it is the way in which you can solve this problem for all of us.

The National Association of Manufacturers set forth resolutions which, if they have not been put before you, I will ask the privilege of presenting to you, in which they call for action of this type, though not necessarily precisely the action which I shall present to you. They do call for compulsory insurance, nation-wide in its scope, and for the absolute backing of the Government and its solvency behind the compensation to be paid to the individual.

It therefore appears that two other attorneys, whose learning and standing we have great reason to respect, have, entirely independent of the study we have made of the subject, arrived at the same general conclusion. I will later call attention to the little difference between the view which Mr. Cary took day before yesterday and my own, for there was considerable misconception about the matter among the minds of the members of the commission, it seemed to me, when I came to look over the brief. As I sat down the other day, he congratulated me upon what I had said, and said that he had arrived at the same conclusion, but not in all particulars, I think, chiefly because he had not been looking at the entire question as I have.

What I have to propose to you is this: That it will be constitutional to provide for the compensation of all employees injured while at work in the form of an income during the continuance of their disability, and of all widows of employees in the form of an income during the continuance of their widowhood, and for all

orphans of employees during their minority, meaning thereby to age 16 or 18, instead of 21, and for all other persons dependent upon employees in the form of income to continue during their dependent condition by resorting to the taxing power of the Federal Government as granted by the Constitution and under the portion of that taxing power which authorizes the collection of taxes for the general welfare. It is also my proposition that this should be in the form of a tax based upon the hazard of the employment and collected upon the pay rolls.

It is also my proposition that actuarily-precisely as I explained it to be irrational and of no benefit for the Federal Government to colcollect, if it were paying these benefits, more than it needed from year to year that actuarily this should be a current cost system, under which the American people would be taxed through the employers (and their employees also, if contributions were exacted from them), and thereby the entire actual current net cost would pass into the price of the product and be paid by its consumer, and that not more than the current net cost should be so taxed, in order that we might not withdraw from the industries of the Nation enormous sums of money, to be carried in reserve at low rates of interest instead of being left to develop our industries; and for the further reason that the actuarial profession, to which I have the honor to belong, has no means to estimate accurately, from what information we possess, what reserve ought to be carried. It is my proposition, further, that this tax should for the general welfare of our people be collected and disbursed through democratic agencies, the same being associations created by force of the Federal law, composed of those who contribute to those taxes, and that the money should be disbursed by means of a simple system of courts of claims, constituted equally of representatives of the employers and the employees, who should, in the first instance, in my judgment-though I think it might not do any serious harm if we followed Germany in that matter and permitted, in case the employers only contribute, then only their representatives to decide whether the claim should be allowed and how much should be allowed, with free and inexpensive appeal to a similar summary court where issues may be heard as to disputes not satisfactorily settled in the first instance, these appeal courts in any event to be constituted equally of representatives of the two classes. From the technical standpoint of constitutional construction, gentlemen, it occurs to me that whether such a law as this would be constitutional falls under three heads:

First, Is the purpose constitutional, and may the funds be disbursed for that purpose?

Second, Is the form of the proposed tax constitutional?

And, third, Is the machinery for collecting and disbursing these funds constitutional?

I take it that there are no other serious constitutional questions except those embraced under the three heads which I have given. As to the first of them, and before passing to it, I may say that even should you conclude, which I do not believe it possible that you will, that the proposition that this could be extended to the entire people of our common country is not so fully established that you wish to follow it, I think you will find it constitutional for the purposes of the District and Territories, of interstate railways, and of the Gen

eral Government itself; and therefore, even if you should-as I do not think you can when you have fully gone into it-conclude that it was not available for the relief of all conditions, you may at the same time conclude that it is the way in which you may solve the special problems with which you have heretofore conceived yourselves to be charged.

First, Is the purpose constitutional, and may the funds be disbursed for this purpose? The Federal Constitution provides in regard to taxes (Art. I, sec. 8) that taxes may be laid and collected to pay the debts and provide for the common defense and general welfare of the United States.

Pay the debts and provide for the common defense and general welfare of the United States.

With the exception of moneys raised to pay debts which have been lawfully and constitutionally incurred and to support the Army and Navy of the United States and to make its fortifications and similar things, every dollar of the enormous fund that we collect annually is collected under the general-welfare provision. In the preamble of the Constitution the purposes of its establishment are mentioned as follows:

To form a more perfect union, establish justice

I am almost of the opinion we could sustain this under that alone, for, if anything has ever been brought forward that aims more nearly to establish justice in our community than this, I really do not know what it is

insure domestic tranquillity

Certainly a tremendous amount of argument in the courts, bitterness of feeling of employers charged with fault-that is the thing that rankles in most employers' hearts in this matter-of employees smarting under the bitterness of being deprived of existence for themselves and family without fault on their part-could it not be even under that head?

provide for the common defense

I would like to say just a word right there. It may seem a little prolix. In case we do not do the right thing in this country degeneracy of the human race is sure to take place. Take the record in Great Britain, for instance-and I am going to show a little later that Great Britain has not done the right thing in this matter, and is not doing it now, and yet that is the country to which nearly all eyes have been turned. They have been complaining there for years that the men whom they take into their army are smaller and weaker and less efficient. In Germany, where I hope to be able to show you that they have done the right thing in this way, they find longer life, larger stature, greater muscular strength, and better conditions. surrounding the people they recruit into their army year by year. This thing may mean something, even under that provision of our Constitution, gentlemen:

promote the general welfare

Actually one of the things, of the very limited number of things, for which the Federal Government was established

and secure the blessings of liberty to ourselves and our posterity.