AMENDMENT OF FAIR LABOR STANDARDS ACT OF 1938

MONDAY, JANUARY 21, 1946

UNITED STATES SENATE,

COMMITTEE ON EDUCATION AND LABOR,

Washington, D. C. The committee met, pursuant to recess, at 10 a. m., in the Committee Room, Capitol, Senator James E. Murray (chairman) presiding.

Present: Senators Murray (chairman), Thomas, Pepper, Ellender, La Follette, Taft, Ball, and Donnell.

Also present: John W. Snyder, Director, Office of War Mobilization and Reconversion; John Caskie Collet, Stabilization Administrator, Economic Stabilization Board, Office of War Mobilization and Reconversion; Charles S. Murphy, legislative counsel, United States Senate. The CHAIRMAN. Well, gentlemen, the hearing will come to order. I suppose the other Senators will be dropping in in a few moments, but we want to get along.

Mr. Snyder is the first witness this morning; and you may proceed, Mr. Snyder.

STATEMENT OF JOHN W. SNYDER, DIRECTOR, OFFICE OF WAR MOBILIZATION AND RECONVERSION

Mr. SNYDER. As I told you on the telephone, Senator, and I will explain to these other gentlemen, we are trying to have a meeting this morning, starting now-they are waiting for me to get back-on what to do about this meat strike, so I asked the Senator if I could present the administration's stand on this bill, and then have Judge Collet follow through with interrogations and the details of it.

The CHAIRMAN. You want to get back to the White House to attend that meeting?

Mr. SNYDER. Yes; if that is agreeable to you.

The CHAIRMAN. I think that is satisfactory to the committee.

Mr. SNYDER. What I am going to read to you here is what will appear in the President's message to Congress today, so it will clarify just exactly what the administration is endorsing in regard to the minimum wage.

Full employment and full production may be achieved only by maintaining a level of consumer income far higher than that of the prewar period. A high level of consumer income will maintain the market for the output of our mills, farms, and factories, which we have demonstrated during the war years that we can produce. One of the basic steps which the Congress can take to establish a high level of consumer income is to amend the Fair Labor Standards Act to raise substandard wages to a decent minimum and to extend similar protection to additional workers who are not covered by the present act.

Substandard wages are bad for business and for the farmer. Substandard wages provide only a substandard market for the goods and services produced by American industry and agriculture.

At the present time the Fair Labor Standards Act prescribes a minimum wage of 40 cents an hour for those workers who are covered by the act. The present minimum wage represents an annual income of about $800 to those continuously employed for 50 weeks-clearly a wholly inadequate budget for an American family. I am in full accord with the proposal now pending in the Congress that the statutory minimum be raised immediately to 65 cents an hour, with further increases to 70 cents after 1 year and to 75 cents after 2 years. I also favor the proposal that the industry committee procedure be used to set rates higher than 65 cents per hour during the 2-year interval before the 75-cent basic wage would otherwise become applicable.

The proposed minimum wage of 65 cents an hour would assure the worker an annual income of about $1,300 a year in steady employment. This amount is clearly a modest goal. After considering cost-of-living increases in recent years, it is little more than a 10-cent increase over the present legal minimum. In fact, if any large number of workers earn less than this amount, we will find it impossible to maintain the levels of purchasing power needed to sustain the stable prosperity which we desire. Raising the minimum to 75 cents an hour will provide the wage earner with an annual income of $1,500 if he is fully employed. The proposed higher minimum wage levels are feasible without involving serious price adjustments or serious geographic dislocations.

Today nearly one-fourth of our manufacturing wage earners or about 2,400,000 earn less than 65 cents an hour. Because wages in most industries have risen during the war, this is about the same as the proportion-17 percent-who were earning less than 40 cents an hour in 1941.

I also recommend that minimum wage protection be extended to several groups of workers not now covered. The need for a decent standard of living is by no means limited to those workers who happen to be covered by the act as it now stands. It is particularly vital at this period of readjustment in the national economy and readjustment in employment of labor to extend minimum wage protection as far as possible.

Lifting the basic minimum wage is necessary, it is justified as a matter of simple equity to workers, and it will prove not only feasible but also directly beneficial to the Nation's employers.

That will appear in the President's message which he sends to the Congress at 12 o'clock today.

Senator ELLENDER. Mr. Snyder, what is the necessity of having committees to adjust the wages over a period of 2 years if it is to be frozen at the end of 1 year at 70, and the next year at 75?

Mr. SNYDER. Well, in the previous period I understood many companies adjusted their wages up to the minimum immediately and didn't wait for the full time.

Senator ELLENDER. But you would have to have a law to do that. I am just wondering if it is the purpose of the President to have the full 75 cents imposed before the 2 years.

Mr. SNYDER. No; it isn't.

Senator THOMAS. Isn't that in the law as it is today?

Mr. SNYDER. Yes.

Senator ELLENDER. We had a period of 6 years fixed in the law in which to make the 40-cent minimum effective. I can well understand if you have a period of 6 or 7 years, that industry committees would be advisable..

Mr. SNYDER. In many of them, you know, they did work it out long before the 7-year period was up.

Senator ELLENDER. The act as it now reads provides for 65 cents immediately, 70 cents the second year, and 75 cents the third year. Mr. SNYDER. That is right.

Senator ELLENDEP. Mr. Snyder, are you in accord with the statement of the President that should the minimum wage be raised in

accordance with the bill now pending, that it will not materially affect the cost of living?

Mr. SNYDER. Well, the President's statement was based on a conversation with Administrator Bowles. I think you have had him up here, and he is better informed on that than I would be, Senator.

Senator ELLENDER. Mr. Bowles testified that if we should raise the minimum to 65 cents immediately, it would cause the price of lumber to rise 5 percent, and he didn't want to see that. Are you in accord with that view?

Mr. SNYDER. That is not the information that we had from him. Senator ELLENDER. That is the information in the record.

Mr. SNYDER. He gave us to understand he advised the President, rather, I didn't work on this particular item-but it is in the record that it would not cause any material change in prices in adjusting these wages.

Senator ELLENDER. Well, in all justice to you, I think that his position was that it would not materially cause the prices to rise if the minimum is fixed at 65 cents.

Mr. SNYDER. Yes.

Senator ELLENDER. But I don's believe that he had much to say as to the effect it would have if raised to 75 cents in 2 years. Mr. SNYDER. No; he didn't go into that.

Senator ELLENDER. You say you haven't made a study of that and you are not

Mr. SNYDER (interposing). I came up to present the Administration's recommendation. Judge Collet has gone into a more detailed study, and of course Mr. Bowles has, and we want the people who had made those studies to present the full picture.

Senator ELLENDER. And as to the effect on future costs of living, you yourself have not made a study of it and you are depending on what Mr. Bowles states?

Mr. SNYDER. Yes, and our Wage Stabilization Administrator, Judge Collet.

Senator ELLENDER. I see. That is all.

The CHAIRMAN. Thank you, Mr. Snyder.

Mr. SNYDER. Thank you very much.

The CHAIRMAN. The next witness will be Mr. Collet.

STATEMENT OF JOHN CASKIE COLLET, STABILIZATION ADMINISTRATOR, ECONOMIC STABILIZATION BOARD, OFFICE OF WAR MOBILIZATION AND RECONVERSION

Mr. COLLET. I have no prepared statement, Senator.

The CHAIRMAN. You merely wish to offer yourself for crossexamination or inquiry into any of the matters that are pertinent here?

Mr. COLLET. Yes.

The CHAIRMAN. Are there any questions?

Senator ELLENDER. I would like to ask the judge some of the questions I have just asked Mr. Snyder.

Are you in agreement with the statement just read by Mr. Snyder, that to raise the minimum as the bill provides, that is, 65 cents the first year to 75 the third year, will not materially affect the cost of living?

82129-46-pt. 2- -6

Mr. COLLET. Yes, Senator. May I explain the basis for that statement?

Senator ELLENDER. I wish you would, in full, please.

Mr. COLLET. Those expectations of that type are all based on suppositions of economists, as you understand. There will be some increase in some commodities resulting from an increase in the minimum wage to 65 cents an hour and 75 cents 2 years hence. The net effect on the general cost of living depends to a considerable extent upon the softening factors in other items of the cost of living. We don't like to contemplate a 5 percent increase in the cost of lumber, for instance. But viewing the general cost of living as a whole, we can contemplate that without an injurious effect upon the cost of living standards if there can be some reasonable expectation in the future of softening of prices because of decreases in prices of other commodities.

Senator ELLENDER. How can you expect to decrease the prices in the future if Congress freezes the minimum wage, as is contemplated? As the record shows, quite a few industries are not able to pay over 45 cents. We have any number of them. Of course, it is not general, but quite a few of them. And I am sure that you realize that if you take the lowest paid man in a factory-let's say the floor sweeperand raise him from 45 to 75 cents, or a 30-cent-per-hour raise, that you are going to be bound to increase the wages of those in the higher brackets; isn't that true?

Mr. COLLET. Yes. That has been the case, as I get the history of the War Labor Board's work. They didn't carry on through upon a progressive increase to each level

Senator ELLENDER (interposing). You mean the same progressive increase?

Mr. COLLET. Yes. I think they used the words "taper out". they tapered it out-but it did have an effect, Senator, I am sure, from what I know of the work of the War Labor Board.

Senator ELLENDER. Judge, if that be true, how can you say that the present price structure won't be breached?

Mr. COLLET. Here is what I am basing it on, expressing it a little differently than I did before. The wage increase, whether it be voluntary or whether it be by law, it seems to me must be predicated fundamentally upon the productivity of labor. If you hold the price at a given place and raise wages, the only means by which funds may be realized to pay that additional wage cost is out of additional productivity. So that when you say that the raising of a minimum standard will not injuriously or materially affect the cost of living, it must be, in order to be logical, predicated upon increased productivity. There has been a historical back ground for that which I expect you know as well as or better than I as to the figures-I don't try to carry the figures in mind-I expect your committee has been given those figures probably several times.

After the other war, there was a very definite increase in productivity. That resulted from various causes. Some of it was the result of better technique, better machinery, and things of that kind. It is difficult, if not impossible, to separate that kind of productivity from the increased efficiency of the individual workman. But it did increase very materially and fairly rapidly.

Part of that increase has continued on and enters into the 65-cent base, from 65 to 75, as a justification. Considerable of it does. There is, I think, ample ground to assume that there will be definite and substantial future increased productivity on the part of the workmen. You have to get it there, Senator.

Senator ELLENDER. But that will be attributable mostly to technological advances.

Mr. COLLET. Well, to some extent. You can hardly separate them. Senator ELLENDER. As I pointed out here, say in the sugar industry, because of higher wages and because of a scarcity of labor, some smart aleck out there invented a machine to cut sugar cane that is operated by 3 men and will do away with 67 employees.

Now if we pursue a course of that kind whereby we make labor costs high, can't you visualize that such a course may cause a lot of unemployment because of technological advances?

Mr. COLLET. Not necessarily.

(Off-the-record discussion.)

Senator ELLENDER. If that situation, Judge, is to extend to industry as a whole, I ask you again, can't you see that such advances may lead to unemployment if we make the minimum too high?

Mr. COLLET. Not necessarily, Senator, if you contemplate the spread of the base, so to speak, of the products which the wage earner may buy with your increased production. I stated it probably inaccurately. The more the technique improves, the greater the production the individual can bring about, the more different products as well as the larger quantity of the same product are made available and purchased generally.

Now if you extend the variety, the base, as well as the volumenaturally it will take, with improve technique, fewer people to produce the same amount-but if you extend the volume and the variety, you can retain the same number or possibly increase the number of individuals necessary to produce the increased volume. The theory of increased wages, progressively as the years go by, must inevitably, as I said awhile ago, be predicated upon increased productivity of the individual.

Senator ELLENDER. I don't think anybody questions that, Judge. The only thing is that some of us find it difficult to make that rise abrupt, as is sought to be done in this measure. As was pointed out during the course of these hearings, the unions themselves have never been able to establish the same wage level in all parts of the country. Mr. COLLET. That is right.

Senator ELLENDER. And here Congress is being asked to do it, don't you see?

Mr. COLLET. Yes.

Senator TAFT. Isn't the very theory of the minimum wage to force people to pay more than the work is worth? Isn't the fact that they are getting the minimum wage in many cases due to the fact they are not productive, they are doing the kind of jobs that are not productive? Isn't that largely the reason for low wages, and isn't that something that we are trying to correct, and can't we only correct it just to a certain extent?

Mr. COLLET. Senator, of course you know so much better than I what the purpose of the minimum wage law is, it is hardly appropriate