Senator KING. T. V. A., and corporations of that character? Dr. THORP. Yes. Now, if one tries roughly to arrive at something in the form of a total, it is probably somewhere between 60 and 65 percent of the total volume of business in the country which is done by corporations. If you drop this Government item and regard only the rest, it makes very little difference. It still would be probably somewhere between 60 and 65 percent of the total activity. SIZE OF ENTERPRISES MEASURED BY EMPLOYEES Dr. THORP. The next aspect of business enterprises which I want to discuss is differences with reference to size. (The chart referred to was marked "Exhibit No. 56" and appears on this page. The statistical data on which this chart is based are included in the appendix on p. 229.) Dr. THORP. I am afraid I am going to have to ask you to use your imaginations and your understandings to the full to follow this chart. This is a chart entitled "Distribution of Employees and Employers, by Size of Business Concern." The basic data are from reports by employers to the Treasury Department in connection with their payments under the Social Security Act. Each employer, and for this purpose General Motors or The Great Atlantic & Pacific Tea Co. represents one employer, reported for the last half of 1937 the total number of names which appeared on his pay roll at some time during the 6 months. It is important to realize, therefore, that these figures are, one might say, somewhat padded all the way through. If, for example, a firm ordinarily had three employees but one of them had dropped out after 1 month and he had been replaced by another, there would have been four names appearing on the pay roll of that company during the 6 months' period, and therefore in our record here it would appear as a company with four employees. The only thing one can say is that probably turn-over appears all through the record and we just have to make allowances for it. This chart covers 1,730,000 employers. It does not include any farmers, railroads, nonprofit public services, etc., nor does it include the enterprises which had no employees; in this last group there are a vast number, both in retail trade and in the professions. Let us look at the extreme left of this exhibit for the moment. The numbers at the bottom of the chart refer to the number of names reported by the employer. For instance, here we start with the cases which reported one employee. The heavy black bar shows what percent those with one employee were of all employers; the shaded bar next to it shows what percent their employees were of all employees. The first solid bar indicates that 25 percent of all employers had one employee. Those employers, with three employees or less, constitute almost one-half of all the employing enterprises coming under the Social Security Act. The exact figure is 50.5 percent. They employed 4 percent of the workers, so that one can get from that simple comparison a picture of the degree to which our present economy is a small-scale economy in terms of enterprises. Senator KING. That would mean that more than 50 percent of all employers employed three or less. Dr. THORP. Yes. Representative REECE. It also indicates the degree to which our economy is affected by the welfare of those small employers. Dr. THORP. I think that is correct. The CHAIRMAN. What percentage of all employees did you say were employed by these 50.5 percent of employers? Dr. THORP. It is 50.5 percent who have 4 percent of the employees. The CHAIRMAN. In other words, enterprises employing 1, 2, or 3 persons, though they constitute slightly more than 50 percent of all employers, employ less than 5 percent of all the employees. Mr. OLIPHANT. Does that indicate the extent to which the American economy is a small enterprise economy? What is it in total dollar volume of business? Dr. THORP. It depends on your measure. This is a measure in terms of employees. If you had it in terms of volume of business, the results would be somewhat different. If you had it in terms of assets you would get another set of results. The CHAIRMAN. Dr. Thorp, suppose you go to the other end of that scale, now, just for the purposes of comparison, and give us the appropriate figure with respect to the percentage of employers employing 7, 8, and 9 persons, and the percentages of employees whom they employed. Do you have that there? Dr. THORP. Yes, I can give that, but I think we had better not stop with 7, 8, and 9. This exhibit 2 goes on to still other enterprises. The CHAIRMAN. Oh, yes. Dr. THORP. In order to get this evidence on the chart, we couldn't continue charting them, 9, 10, 11, 12. The CHAIRMAN. You will make it much more striking by coming to the other end. Dr. THORP. Once one gets to nine the chart shifts and we group the number of employees by tens. One therefore ought to take this whole first group and put it into a single column, as the first column to go with these nine-in other words, 1 to 9, and 10 to 19. If you did that, our black bar would have to go up to 76. The top of the chart is 16, so if you can just visualize where that black bar would go if it went up to 76, you can get this picture. Representative REECE. Does the number of employees in those small enterprises include the proprietor? Dr. THORP. No, sir; it does not include the proprietor. These are employees. The enterprises where there is only an employer, for instance, do not appear at all in this record. Senator KING. It won't include, then, the store conducted by a man and his family. Dr. THORP. That is right. Mr. OLIPHANT. Seventy-six percent of the firms employ what percent, when you add the figures? Dr. THORP. I will have to have the adding machine work on that. Mr. OLIPHANT. I am sorry; go ahead. LARGEST ENTERPRISES Dr. THORP. When one reaches the 100 point on the chart, we then group by hundreds, then concerns are grouped by thousands, and finally we have the cases of the enterprises which reported more than 10,000 per company as having been on their pay rolls during the 6 months' period. There are 195 enterprises in this last group with 10,000 employees or more. In terms of percentages, that is almost exactly one onehundredth of 1 percent. However, those 195 enterprises, being our largest employing enterprises, reported 12.3 percent of all the workers. If one goes through the chart looking at it, comparing two sized lines, it is somewhere in around this point, perhaps about 20 employees, that one notices that the number of employees is beginning to get higher than the number of enterprises in their share of the total. Before you reach that point the taller line is consistently the one representing percentage of employers. After that the taller line is consistently the one representing employees. Dr. THORP. The figure Mr. Oliphant asked for is 11 percent, the 76 percent of the employers in this 1 to 9 group employed 11 percent of the workers. Dr. LUBIN. Half the employers employ 4 percent of the workers. Three-fourths of the employers employ how many percent of the workers? Dr. THORP. Eleven percent. Dr. LUBIN. And one one-hundredth percent of the employers employ 12 percent; one one-hundredth percent of the employers of the country employ the same number of workers as the other threefourths do. Mr. DAVIS. Those small employers are also providing employment for themselves, and had they not done so, they would have had to seek employment somewhere else. Dr. THORP. They are providing employment for themselves and in many cases for their families, without compensation in a formal sense. Now we turn to a different measure of size. Representative REECE. May I ask if you have any figures to indicate the number of people employed by enterprises with a specified net income, say $100,000 annually? Dr. THORP. We have no such figures. I don't know where we could get them, unless we made some deduction from tax records which would provide the volume of wages paid. Representative REECE. I saw a statement sometime ago to the effect that about 75 percent of the employees were employed by concerns that had a net income of less than $50,000 a year, and I was wondering if that statement had any basis. Dr. THORP. I would be glad to see what could be done along that line. I don't have anything that I can introduce. As a matter of fact, this whole area is one on which we are working as hard as we can at the Department of Commerce, hoping we will be able to give you some more amplified and detailed information later. I am suggesting these today merely because they are available measures, and do indicate the scope of the problem at any rate, but I think our measures of it can be greatly improved as we work in the field, and we will keep in mind that particular type of measure that you suggest. The CHAIRMAN. The committee will stand in recess until 2 o'clock. (Whereupon, at 11:55 a. m., a recess was taken until 2 p. m. of the same day.) AFTERNOON SESSION The committee reconvened at 2 p. m. in the caucus room, Senate Office Building, on the expiration of the recess. TESTIMONY OF WILLARD L. THORP, ADVISER ON ECONOMIC STUDIES, DEPARTMENT OF COMMERCE, WASHINGTON, D. C.Resumed The CHAIRMAN. The meeting will please come to order. Dr. Thorp, will you resume from where you left off this morning? Dr. THORP. This morning we were talking about the character and behavior of individual enterprises. We had reached the point, after considering their legal structure, of examining them in terms of their size, and at the conclusion of the morning session I was discussing distribution of employees and employers by size of business concern. MEASURES OF CONCENTRATION BY EMPLOYEES Dr. THORP. There are one or two other aspects of exhibit No. 56 that I would like to point out especially for the committee. If we start with the largest enterprises and see how far down the line we have to go to get half of all the wage earners in the country, which come under the Social Security Act, we get down to employers having about 250 employees. In other words, the employment picture of the country is one in which half the employees are in enterprises where there are 250 or more employees. If we carry that on to include three-fourths of all the employees, we get down to employers having about 40 employees The CHAIRMAN (interposing). Dr. Thorp, why don't you make now the comparison between 50 percent of the employers and 50 percent of the employees? Balance one against the other. Dr. THORP. Fifty percent of the employers are in the group having one, two, or three employees. For 50 percent of the employees the dividing point is at 250 employees. In other words, 50 percent of the employees are in plants where 250 or more are employed, so that the two breaking points are three employees or 250 employees. The CHAIRMAN. What percentage of employers employ 250 persons or more? It will be just a matter of adding up those percentages, and then you will have the complete balance. Dr. THORP. The number of employers in that group is about 1 percent. The CHAIRMAN. In other words, nine-tenths of 1 percent of the employers employ 50 percent of the employees, but 50 percent of the employers employ only 4 percent of the employees. Dr. THORP. That is correct. Mr. OLIPHANT. That high degree of concentration of employment as indicated by your figures, as indicated by one one-hundredth of 1 percent leads me to ask whether you have any figures to indicate what that trend has been; whether or not the development of that concentration is something that is still proceeding or something that has leveled off. Dr. THORP. I am sorry to say that I haven't any figures that will show the trend from the point of view of employment. I think this is true, that if one thinks about the past, undoubtedly 50 years ago or 20 years ago there were not these large concerns. As to what the trend may be as of the last few years, I am not prepared to say, although that is one of the things in which we are very much interested and on which we hope to develop information for you. Senator KING. In order that my memory may be refreshed, these figures which you are giving now do not include the farmers and their employees. Dr. THORP. That is correct. Senator KING. There are more than 6,350,000 farms. Dr. THORP. Correct. Senator KING. To say nothing of the renters, amounting to more than one or two million. You do not include them and their employees? Dr. THORP. I think the renters are included in that six-million-odd farms, Senator. Senator KING. No, I think not; and it does not include the railroads. Senator KING. Nor public utilities. Dr. THORP. It includes public utilities. It does not include nonprofit organizations or public service enterprises. Senator KING. It doesn't include what might be denominated schools, religious organizations or charitable organizations or hospitals, and organizations of that character. Dr. THORP. That is right. Senator KING. And it does not include the several million Federal employees. Dr. THORP. No; nor does it include any employers who have no employees whatsoever. The total coverage is for 1,730,000 enterprises. The CHAIRMAN. Does that include most but not all manufacturers? Dr. THORP. That includes all manufacturers. Mr. HENDERSON. How many employees does it include? |