other costs since 1939. If we assume that the higher of the two figures cited above represent the present wage-cost ratio, the introduction of a 65-cent minimum would result in an increase in cost of about 3 percent for the industry as a whole; the increase in the South would amount to about 7 percent as compared with slightly less than 1 percent in the North. The wage and cost increase figures are shown in the tabulation below:

Basic lumber industry: Estimated percentage increase in wages and manufacturing costs of introduction of 65-cent minimum wage, by region

The fact should be emphasized that the above figures reflect the average effect by region of the introduction of a 65-cent minimum rate. For example, wages in some establishments in the North will be increased by more than 3 percent; the increase in other establishments will be less than this amount.

Prices and profits

Wartime price regulation made its appearance early in the lumber industry. The first lumber schedule was issued in August 1941, only 4 months after the establishment of the Office of Price Administration. When the General Maximum Price Regulation was issued in May 1942, prices of 75 percent of southern pine, Douglas fir, and western pine lumber were already controlled. These three varieties account for nearly 90 percent of the total output of softwoods in the United States.

The annual index of prices since August 1939 is shown in table 2. A sharp rise in prices began in August 1940, coincident with demands for lumber for military construction. The controls established in August 1941 halted the sharp upward rise for a time. Increases which occurred in 1943 and 1944 were largely caused by price increases permitted on southern pine lumber to encourage production. In September 1945 wholesale lumber prices were 66.3 percent above the 1939 level. Available materials on profits indicate that the large corporations in the lumber industry have shared in the general prosperity of manufacturing industry during the war years (table 3). These statistics are presented to indicate trends rather than actual profit returns for the industry since only 51 large companies are represented between 1939-42, 35 in 1943, and 25 in 1944. The profits of smaller mills are not indicated by these figures.

TABLE 2.-Composite index of wholesale lumber prices, 1939–44 and September 1925

• Report of Economics Branch, Wage and Hour Division, August 1943, p. 22.

156.9 170. 1 1720

TABLE 3.-Lumber and timber basic products: Net profits before and after taxes, and as a percent of net worth and sales, 1936-39 to 1944

Source: OPA Reports on Corporate Profits, 10, 11, 12. The industry definition includes certain branches not included in other tabulations.

PRODUCTION OUTLOOK

The end of the war found the industry in a favorable position, despite heavy cut-backs in military requirements for lumber. The industry does not face the problem of physical reconversion of its facilities to civilian output. The expected high level of construction should provide a ready market for the lumber industry operating at capacity for the next few years.

However, lumber stocks are at an all time low, and the relaxation of restraints on civilian construction have created demands far in excess of the immediate supply. If the manpower problems of the industry can be solved by spring of 1946 the shortage of lumber is not expected seriously to impede reconversion in the long run. Building up stocks and filling the channels of distribution, however, will contribute to a tight lumber situation for immediate construction. It is expected that sufficient lumber and other materials will be available for a construction program of $7,000,000,000 or more in 1946. Due to various production difficulties supplies of lumber in recent months have been below expectations. Workers are not returning to the industry as fast as had been hoped.

EXHIBIT 87

STATEMENT SUBMITTED BY ERNEST W. GREENE, VICE PRESIDENT, HAWAIIAN SUGAR PLANTERS' ASSOCIATION

This statement is made on behalf of the sugar producers of the Territory of Hawaii who supply, in normal years, about 14 percent of all of the sugar consumed in the United States.

We believe that the enactment of S. 1349 would work grave injury to the sugar industry in Hawaii, which is an important part of the domestic sugar industry. We believe it would result in a decrease in production of this essential commodity whereas the Government has stressed importance of the maximum possible production. We believe it would result in a decrease in employment, as it would unquestionably force some Hawaiian producers out of business.

When contracts between the sugar producers and the unions representing both mill and agricultural employees were announced on August 5, 1945, the union and employers issued a joint statement saying, in part:

“Only maximum cooperative effort and favorable prices will enable the industry to maintain and improve the wage schedules."

The wage schedules referred to provided, effective as of July 1, 1945, a flat increase of 7 cents per hour to all employees, making the present basic minimum virtually 47 cents per hour. They provided further (sec. 7 of contract) for a classification wage structure with a basic minimum rate of 43 cents per straighttime hour or 41 cents per straight-time hour, as the case may be, but without down-grading of any present employee, as follows:

"The classification wage structure will be submitted to the union with the rate of 432 cents per straight-time hour (inclusive of bonuses) on all islands except the island of Hawaii, where it shall be 41 cents (inclusive of bonuses) as the applicable rate for the basic labor grade under said classification rate structure and the union agrees that it will not attempt to change nor will it object to such basic labor grade rate for the duration of the within contract. It is also understood and agreed that said minima need not be the absolute minima. Where jobs exist that are in job content and requirements below the standard of the basic labor grade, rates for such jobs will be considered apart from the classification structure as sub-basic jobs."

When the uniform contracts between the sugar producers and locals of the International Longshoremen's and Warehousemen's Union, effective as of July 1, 1945, were signed, union officials joined with the employers in issuing a statement which said in part:

"The scope of this agreement, affecting 34 plantations and 20,000 plantation employees, including agricultural workers, is Territory-wide, and upon its embodi ment in individual contracts between the several plantations and their employees, at an added cost to the industry of about $5,000,000 a year, will present serious financial problems to some plantations.

"It will be one of the first and most extensive organization coverages ever accomplished for the employees of an agricultural industry.

"The conditions accepted and set forth in the contract form were arrived at through voluntary collective agreement after prolonged conferences between the committees representing management and the union with James P. Blaisdel. president of the Hawaii Employers' Council, conducting the negotiations on beha'! of the industry, and Montgomery E. Winn appearing as legal adviser to the counci

*

"With the execution of the present proposals there is an agreement to proces at once with plantation job classification studies for the purpose of discoverit; any inequalities that may exist in wage rates of comparable positions so the equalizing adjustments can be decided on while production proceeds withou interruption.

"Provision is made so that workers whose jobs rate higher classification will b given pay increases accordingly, and that in instances of lower classification there will be no reduction of pay for the workers presently employed in these jobs "Immediate benefits to follow the execution of the contracts will be added was and services to employees amounting to a total of about $5,000,000 a year.

"All workers affected will receive an over-all wage increase, including bonus of 7 cents an hour.

"The terms include vacations with pay, recognition of seniority, extended cover age of hospital and medical perquisites, and machinery for the expeditious ar amicable settlement of grievances.

"Parties to the negotiations recognize the responsibilities that rest upon be management and labor for the successful operation of contracts made under ! terms agreed upon and that strict observance of these conditions is an understor pledge in their acceptance.

"Only maximum cooperative effort and favorable prices will enable the industo maintain and improve the wage schedules.

"Thus it becomes the concern of labor equally with management to establ and preserve production conditions that will be beneficial to both."

(See exhibit 1 attached hereto.)

Sugar is produced in Hawaii on plantation farms located in rural distri where each farm must be a complete operating entity, often with costly sour of supply of irrigation water, and must contain the means of growing sugarea: harvesting it, transporting it to a sugar mill conveniently located on the fac and there processing the sugarcane into raw sugar. The Fair Labor Standar Act classifies the employees of such a plantation farm who work in the as industrial and covered, and those who work in the fields as agricultural a noncovered, but, as a matter of fact, the employees of such a plantation fa in Hawaii do not themselves recognize any such distinction. This appl especially to employees whose work is such that they are paid at or about 2 minimum rate, and any minimum wage or change therein applied to employe in the sugar mill has to be applied also to all other employees, including agricultural employees in the cane fields. Proportionate increases have to given to all wage earners. This has been the case in the past and it will e doubtedly be the case with any future changes.

Therefore, any change in the minimum wage required by the Fair Labor Standards Act will affect, in our case, a much larger group of employees than the act contemplates. It is mutually recognized by the employers and the unions that increases, other than increases due to the reclassification now in progress in conformity with the union agreement, are not warranted under present conditions unless the price of sugar is sufficient increased. The ceiling price of sugar, determined by the Office of Price Administration, has remained practically unchanged since early in the year 1942. Costs of producing and marketing sugar have radically increased during that period and are continuing to rise. The economic situation is worse now than it was last summer when the statement above referred to was made.

Production of sugar in Hawaii has decreased during the war years due to shortages of labor and farm machinery. Workers have left their employment in growing sugarcane and manufacturing sugar to enter war work and it has been impossible to obtain enough farm machinery to offset the loss of manpower by increased mechanization of operations. Meanwhile, all costs, including total payments to employees, have increased rapidly.

In the year 1939, 994,173 tons of raw sugar (96° equivalent) were produced, with a total area of 235,227 acres in sugarcane, a total of 37,438 men employed in the industry as an average for the entire year, and 10,731,770 man-days worked during the year by such employees, with a total pay roll for such employees of $27,075,521.

In the year 1944, 874,947 tons of raw sugar (96° equivalent) were produced, with a total area of 216,072 acres in sugarcane, a total of 22,543 men employed in the industry as an average for the entire year, and 7,062,227 man-days worked during the year by such employees, and a total pay roll of $34,469,025 for such employees.

The number of employees decreased by 40 percent and the total pay roll increased by 27 percent, respectively, for the year 1944 as compared with the year 1939. A further increase in total pay rolls, estimated by both the managements and the union at not less than $5,000,000, will occur in the year 1945 due to the provisions of the union contract above referred to. The total pay roll for 1945 will be approximately $40,000,000, an increase of 48 percent over the year 1939. In terms of labor cost per ton of raw sugar, the foregoing figures indicate:

The labor cost increased 72.8 percent, but the price increased only 25 percent. Other costs have shown a marked increase. Hawaiian sugar producers and all other domestic sugar producers have survived during the war solely because of the help received from the price-support and production-incentive programs of Commodity Credit Corporation. The program of CCC for producers of raw sugar in the Territory of Hawaii for the year 1945 (see exhibit II, attached hereto) provides payments at the rate of 55 cents per 100 pounds of raw sugar delivered ($11 per ton), subject to certain conditions, one of which requires that the proceeds of the program be treated as though they were part of the price or proceeds of sugar for purposes of payments to labor under the long-established and published bonus system in effect on all sugar-plantation farms in Hawaii. This means that employees will receive an extra 51⁄2 percent of earnings during the year 1945 in accordance with the provisions of the CCC program.

The conditional compliance payments made to sugar producers under the terms of the Sugar Act of 1937 are actually a part of the system of control over producers which was set up by that act. The sugar program is a self-financing arrangement under which the excise tax is taken out of the normal gross proceeds of the sale of sugar, and principally reduces the income of the raw-sugar producer, who then, upon compliance with certain conditions, receives the remainder of his normal proceeds in the form of the conditional-compliance payment. (See exhibit III, attached hereto.) The conditional payments are not gratuities as 78595-45-89

they are sometimes misrepresented to be. For the year 1944 the conditionalcompliance payments to Hawaiian producers, pursuant to the Sugar Act, amounted to an average of $9.37 per ton of raw sugar (46.85 cents per 100 pounds). (See exhibit IV, attached hereto.)

The Territorial legislature, in 1945, enacted the Hawaii wage and hour law (ch. 75, Revised Laws of Hawaii, as amended), effective July 1, 1945. It is among the very few State wage and hour acts covering agricultural workers, for whom it establishes a minimum wage (for employees of employers of 20 or more persons) of 40 cents per hour-an amount equal to the minimum wage under the Fair Labor Standards Act.

Further protection is given agricultural workers engaged in the production of sugarcane by the Sugar Act of 1937, as amended, which provides that the wages paid to such employees shall be not less than minimum wages determined by the Secretary of Agriculture to be fair and reasonable after investigation and public hearing. Workers on sugar-plantation farms are thus amply protected as to minimum-wage standards under Federal and Territorial laws.

Sugar producers in Hawaii, in common with all other domestic producers, face a period of reconversion and adjustment to peacetime conditions and the resump tion of a free market and free prices. It seems to be the consensus of opinion that sugar will continue in short supply for some time and, therefore, may be the last, or at least one of the last, commodities to be released from Government controls. It is doubtful whether anyone can now foresee the cost and price conditions under which sugar will be produced during the impending period of adjustment, but it seems safe to predict that it will be an extremely difficult time. We believe that wartime conditions have caused all the problems incident to increased costs with which sugar producers can hope to deal, and that the enactment of S. 1349, or similar legislation, should be deferred until the adjustment to peacetime conditions has indicated the conditions under which the domestic sugar industry will have to operate during the next few years.

The extra labor costs which would be imposed upon sugar producers by the enactment of S. 1349 for the first year when the minimum wage would be 65 cents per hour have been conservatively estimated at an aggregate increase in pay roll amounting to more than $12,000,000, or $14.12 per ton of raw sugar (70.6 cents per 100 pounds). The increase in cost might amount to as much as $17 per ton of sugar (85 cents per 100 pounds). The foregoing estimates are made on the assumption that approximately the amount of the increase in minimum wage required by legislation for employees covered by the Fair Labor Standards Act would have to be applied as a straight-time hourly increase to all employees, including employees engaged in agriculture. (See exhibit V, attached hereto. Sugar producers in Hawaii cannot survive under such an increase in costs as would be the consequence of the enactment of S. 1349, unless the price of sugar is correspondingly increased, with assurance that such higher prices will continue. The quantity of sugar produced in Hawaii in the year 1944 was only 12 percent less than in the year 1939, notwithstanding a loss of 40 percent in numbers of employees. Production was maintained by the unremitting work and ingenuity devoted by plantation managements to the maximum adaptation of such field machinery as was available to mechanization of the production, cultivation, and harvesting of sugarcane, and also by the loyalty and hard work of the employees who remained in the work of sugar production. Under the conditions of extreme labor shortage there is created, temporarily, a greatly increased output of sugar per man-day worked. This is not permanent because only part of the most essential tasks have been performed. Many things necessary to continued high produc tivity in cane fields have been omitted.

A tremendous backlog of unperformed maintenance and reconditioning work has been built up. It is impossible to maintain or increase production under such conditions. More manpower is urgently needed and must be employed as soon as available.

Therefore, it is impossible to foresee accurately at this time the situation with respect to wages, man-days, and labor cost per ton of sugar when it is possible to operate normally with adequate working forces and the benefit of steady prog ress in mechanization of field operations. Production will increase when such conditions come into being and many elements of cost will be changed thereby It would be well to await that time before enacting legislation on the lines of S. 1349.

The elimination of the exemptions with respect to the hours provisions of the act, now contained in section 7 (c), would throw a further burden of increased cost upon processors of sugarcane into raw sugar. The exemptions for the first