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larger proportion of their incomes in the earlier period. The second observation is that despite the difference in the level of expenditures in the two periods, a given change in consumer incomes resulted in the same proportionate change in their expenditures for each of the two periods. For example, an increase of $10,000,000,000 in disposable income in either period resulted, on the average, in an increase of $8,000,000,000 in consumer expenditures, or an increase of $5,000,000,000 in income resulted in an increase of $4,000,000,000 in expenditures That the relation between absolute changes in consumer expenditures and absolute changes in disposable income has been stable in the 30-year period since 1910 is indeed striking. It persisted under widely varying conditionsin a world war, in the prosperous years of the twenties when many new products and industrial techniques were developed, in the great depression and in the subsequent recovery years. The continuity of the relation provides a highly valuable guide in appraising postwar trends in retail sales. On this basis retailers can determine what the effect of a change in the disposable income of individuals in the postwar years would be on total retail sales. For this purpose the line in chart 2 or the formula in footnote 3 provides the basis for the estimate.

It must be emphasized that this conclusion is applicable to a determination of the changes in total retail sales and not necessarily to the changes in the sales of any particular line of trade or of any individual firm. In appraising the sales prospects of particular firms or kinds of business, special developments applicable to the individual firm or business must also be taken into consideration. In order to determine total sales, however, retailers must know not only the change in sales corresponding to a change in disposable income, but also the level of sales which would correspond to a particular level of disposable income. The answer to this latter problem is more difficult to determine, since past experience has shown that in certain periods consumers have tended to alter the savings-income pattern. Will the level of consumer expenditures in relation to incomes tend to shift in the postwar years as was the case in the years following the First World War? Will the expenditure pattern be established at a higher level relative to that of the 1921-40 period?

While the answers to these questions cannot be given, several observations may be made on possible postwar trends. Despite the fact we do not know what the expenditure-income pattern is likely to be in the future, the close correlation between consumer expenditures and incomes in the period from 1921-40 provides the basis for the postwar outlook. Certain developments, however, might result in an upward shift in the relation with a corresponding lowering of the savings-expenditure ratio. New products may come forth which will "catch" with the masses of the population and result in wide repercussions on the nature and extent of consumer spending. This would be similar to the development in the twenties when the improvement of the automobile, and the development of all of the products and services associated with it, resulted in a shift in the level of consumption. In fact, the ratio of savings of individuals to their disposable income was reduced from an annual average of 16 percent, in the period 1910-20 to 9 percent in the period from 1921 to 1940.

A lifting of the expenditure line might also arise by the marketing of existing products in a cheaper and more attractive form. Example of this would be lower-priced automobiles or low-cost houses which would broaden the mar kets in the low income brackets. Finally, the savings-income pattern can be altered materially through Government policy with respect to social security and tax policies.

These considerations point up the uncertainties involved in the prospects for retail trade in the postwar years. The dominant factors will be the volume of consumer incomes and of employment which will prevail. Past experience in dicates the magnitude of the change in sales to be expected with a change in disposable income. In the absence of new developments tending to alter the savings-income pattern, the past relationship should prove a helpful guide in determining the level of expenditures corresponding to a given level of disposable income.

A fundamental question arises in connection with the problem of full employment. Is it necessary to get both a shift in the level of the expenditure

10 These results may be stated in more technical terms as follows: The level of relationship was translated by an expenditure of $5,000,000,000 from the first to the second period while the slope of the relationship remained the same.

income line of relation and a change in its 'slope in order to achieve and maintain full employment? This problem bears on the relation of business investment to consumer spending and saving. This aspect of the consumption problem requires further exploration.

USE OF SALES-INCOME RELATIONS

The following example illustrates the use of the sales-income relations in determining the probable post-war sales volume of a particular retail firm under given assumptions as to the disposable income of individuals. Let us select for purposes of illustration the sales of a leading mail-order house. Sales of this company are included in the department stores (including 'mail order) group. The relation of sales to disposable income for this group is shown in chart 4. The first step in the procedure is to determine the statistical formula representing the relationship on the basis of the experience from 1929 to 1941. Since in this period sales have shown a net growth aside from changes in income, a time factor is used in the relation to account for the element of growth. The straight-line relation which best approximates the sales of the department-store group is given by the following formula:"

Sales (millions of dollars)=299+53.04X disposable income of individuals (billions of dollars)+20.45X (year-1936).

This formula gives a very close approximation to sales for the period covered. The average error made for the entire period is only 2 percent with the maximum error of 9 percent occurring in 1933. The formula implies that all other things being equal, an increase of $1,000,000,000 in disposable income resulted in an increase of $53,000,000 in department-store sales and conversely. Also aside from the effect of income, sales have tended to increase on the average by about $20,000,000 per year.

If in some postwar year, say 1948, it were assumed that the level of disposable income would amount to $100,000,000,000 then the corresponding sales of department stores given by the formula would amount to about $5,850,000,000.12 The level of $100,000,000,000 of disposable income is above that which occurred in any peacetime year and is 37 percent above that of 1940. With the labor force which would prevail in 1948 even this amount of disposable income would be considerably below that which would be associated with full employment. The sales of department stores which could be expected at the $100,000,000,000 level of disposable income in 1948 would also be a peacetime record, although somewhat below the 1943 sales.

In order to apply these results to the sales of the particular mail-order firm, it is first necessary to determine the relation of the sales of the firm to sales of all department stores. Since 1929 the proportion of this firm's sales to total department store sales has increased steadily from 10 percent in that year to 19 percent in 1941. During 1942 and 1943, however, the ratio declined rather sharply. At this point, the company's experience and knowledge of its markets would be very helpful in deciding whether its proportion of total department store business would resume the trend established in the prewar years. If this proportion should amount to 20 percent, then sales of the firm in 1948 at a level of $100,000,000,000 disposal income could be expected to amount to $1,170,000,000. While this analysis applies most readily to firms having Nation-wide markets, similar methods can be used for those firms whose sales are localized. The problems are those of getting the essential information on sales and income for the areas covered by the firm.

APPENDIX

For the convenience of those who might be interested in calculating sales by kinds of business under different assumptions of disposable income of individuals and the year, the following list is given of the regression formulas derived from the sales data and income from 1929 to 1941. Sales by kinds of business for the period are published in the Survey of Current Business, November 1943, page 7. The disposable income of individuals is available in the Survey of Current Business, April 1944 since 1938 and May 1932 from 1929 to 1938. In the

11 The formula is obtained by the use of least squares, a procedure which is described in most textbooks on statistics. See M. Ezekiel, loc. cit.

This is computed from the formula above as follows: Sales (millions of dollars) = 299+53.04 × 100+20.45 X (1948-36)=299+5304+245=$5,848,000,000.

case of two kinds of business, namely feed and farm supply stores and farm implement dealers, sales were related to cash farm income (including Government payments) instead of disposable income since purchases at these stores were influenced by the purchasing power of farmers.

The relations giving the sales were obtained by the least square method. Each case was then examined from the point of view of whether shifts in the relation occurred in the period covered and whether the linear formula would require modification. In no instance was there any clear evidence for modifying the original formula.

One measure of the reliability of the formulas is the annual average percent error of the actual sales from sales calculated from the formulas. These are also shown in the table below. It may be noticed that the average error did not exceed 7 percent in any case and in 17 kinds of business the average error was less than 5 percent.

In each of the formulas & represents sales of the particular line of trade expressed in millions of dollars, t represents the year and is expressed in terms of deviations from 1936, I represents the disposable income of individuals expressed in billions of dollars, and C cash farm income, also in billions of dollars.

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1 Includes book stores, news dealers, stationery stores, cigar stores, florists, office equipment and supply dealers, and other minor retail outlets.

NOTE. S sales, I disposable income, t-year-1936, and C-cash farm income (incl. Government payments).

EXHIBIT 76

STATEMENT BY SOLOMON BARKIN, CHAIRMAN, CIO COMMITTEE ON S. 1349, REVISION OF WAGE AND HOUR LAW, ON BEHALF OF THE CONGRESS OF INDUSTRIAL ORGANIZATIONS, BEFORE THE SENATE COMMITTEE ON EDUCATION AND LABOR, ON THE PROPOSED REVISION OF THE WAGE AND HOUR LAW TO ESTABLISH A 65-CENT MINIMUM WAGE, OCTOBER 5, 1945.

REVISION OF THE WAGE AND HOUR LAW

The Congress of Industrial Organizations endorses the proposed bill for the revision of the wage and hour law. It regards this action as timely and impera. tive. Both sound economics and respect for humanity demand its passage.

No more than 4.0 million workers who come under the Fair Labor Standards Act are getting less than 65 cents an hour today.

The worker who must exist on substandard wages does not get enough food to eat; he cannot provide himself and his family with proper clothing; he lives in crowded slums because he cannot afford decent shelter; he gets sick more often and he gets less medical care than other groups in the community; he is a poor customer for the products of American industry; he is a poorer industrial producer because of his substandard living conditions; he is a liability to the community because he consumes a disproportionate share of public expenditure; his educational opportunities are severely limited; he cannot build a decent home relationship.

He is a substandard citizen because he earns substandard wages. His low wages give him no opportunity to improve himself or his family. This vicious and inhuman cycle can only be broken if we revise the wage and hour law upward to 65 cents an hour.

As the President of the United States has pointed out, the present act is obsolete. It is out of march with the times and no longer serves the original function of the bill, which was to advance sound minimum conditions of employment and to promote health, efficiency, and the general well-being of workers." The increased cost of living alone has negated the original aims of the bill. Effective underpinning of the American economy demands a rate more in consonance with our present wage levels. We have advanced beyond the goal established in the 1938 act. We must set our new levels in line with our greater sense of responsibility; in line with our new broad goals of providing full employment and a decent standard of living.

We cannot ignore the basic aims for which we fought the war. Our military soldiers made immeasurable sacrifices to assure the safety of our shores and our system and to preserve our democratic way of life. We told them they were fighting for the four freedoms. These four freedoms must not become empty, mocking phrases.

We must attain the basic freedom-freedom from want. Our international responsibilities demand that we proceed to its complete realization in this country. The passage of this bill can be a significant assurance to all that we truly will build a world of peace where our tremendous resources will be fully used and all people will be freed of the gnawing fear of want.

Will our returning heroes be rewarded with medals from the Government and 50-cent-an-hour jobs from industry? Our Government cannot forget its responsibility and promises. The soldier was assured a job with a decent wage. He must not be driven to accept low wage jobs and the miserable living conditions that go with such jobs. He has a right to a self-respecting income which will permit him to live at least on a minimum level of comfort and decency. If he does not get this chance to live like a human being, who will blame him if he begins to wonder whether or not his sacrifices were made in vain?

The industrial soldiers who labored long hours to produce the weapons of war must not be forced to accept the meager standards of low wage industries. Their devotion and sacrifice must not be forgotten in the mad rush for profit. The purposes for which we fought will be forgotten if workers are not assured earnings in private industry which will at least guarantee minimum subsistence wages. We urge your adoption of the proposed bill. No better evidence can be furnished to the American veterans and the industrial soldiers that this country is reconverting to a sound economy which will guarantee full employment and a living wage.

Not only must we free the industrial worker and the returning soldier from the fear of want and insecurity, but we must also free our economy from the glutted markets and rotting stores which pile up for lack of customers. The American worker must have decent wages if industry expects him to buy back the goods and services he produces. A low wage worker-and there are many millions of them in every branch of our economy--is a poor customer for the products of American industry, and the American customer is the primary market for our products. In the words of your subcommittee, the 65 cent proposal is "a practical first step toward assuring the mass purchasing power which will be essential to the achivement of full employment in the reconversion period." This subcom

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mittee also declared that the adoption of the 65 cents minimum was "desirable
from the standpoint of the immediate and long-range needs of the American
economy
(U. S. Senate, 1st sess. S. Con. Res. II, report from a
subcommittee to the Committee on Education and Labor, Substandard Wages,
July 1945).

The tremendous resources of our country can well provide decent wages for the American worker. The mighty productive machine which made dictators tremble can banish the poverty and misery that accompany low wages.

As your subcommittee recently reported, American industry is financially equipped to adopt the terms of the present bill. The profits of all sections of 1: industry-before and after taxes-have been fabulous during the past six years. Corporation treasuries are bursting with many billions of dollars in accumulated reserves, all of which cannot possibly be used for investment purposes. Hidden profits, expanded physical plant facilities and generous tax carry-back provisions also add to the ability of industry to pay the increased wages for which this bill will provide.

Industry needs a sound wage floor to prevent destructive competition. Managements should not compete at the expense of human blood and sweat. Sound competition is not based on lower and lower wages. Minimum wage guaranties will force management to compete on the basis of "who can run the most efficient plant," rather than "who can run the worst sweatshop."

A fully active free economy cannot survive in a country where significant sectors are subjected to low wages. Low wages create the need for governmental subsidies to individuals and to subordinate governmental authorities; they produce excessive local and unequal tax burdens; they discourage the development of retarded economic areas and limit the opportunities for the small and independent business; they prevent the development of the purchasing power necessary to a full economy.

The

The present bill providing for 65 cents as a national minimum wage is another step in the development of a satisfactory wage structure for American industry. The first was taken during the NRA period. The President's reemployment agreement of July 1933 prescribed a 40-cent minimum wage. NRA codes confirmed this minimum in many industries, though there were exceptions for other industries. The failure of private industry to maintain these standards voluntarily provided the immediate impetus for Federal legislation to fix the standards attained during the NRA period. The Fair Labor Standards Act of 1938 prescribed a 25-cent minimum for the first year, 30 cents for the 6 subsequent years and a 40-cent minimum rate thereafter. But it allowed for the establishment of minimum industry rates between 30 and 40 cents by individual industry committee determinations. The 40-cent minimum was achieved by June 1944 throughout that part of American industry covered by the Fair Labor Standards Act.

In fact, during recent years the War Labor Board found that these rates had become obsolete. It defined the substandard rate as 50 cents on November 17, 1943. On February 26, 1945, it revised the minimum to 55 cents and declared that it was only a tentative rate in the development toward a higher level.

The present act is, therefore, a progressive move toward the adoption of a rate which is adequate to sustain American workers. As our economy is advanc ing, we are nearing the time when no American worker should be receiving a wage rate which dooms him to substandard wage conditions.

The American worker wasted many years of his life looking for nonexistent jobs during the years of the great depression.

The American worker produced mountains of materials to help in the war against fascism.

The American worker traded in his overalls for a uniform to fight for freedom on many foreign shores.

This American worker does not ask for great riches or inordinate luxuries. He merely asks for the opportunity to raise his children as decent American citizens in healthy surroundings without the constant fear of want and the blight of poverty. He wants to get a little better acquainted with the muchvaunted American standard of living he reads so much about in the slick-paper magazines.

He asks for a decent job at decent wages.

The passage of these amendments to the Fair Labor Standards Act is an important step which will help the American worker achieve these modest aims. The Congress of the United States cannot and must not deny him this elementary justice.

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