Senator TUNNELL. Thank you, gentlemen.

The next witness on my list is Dr. Claudius Murchison, the Cotton Textile Institute.

TESTIMONY OF CLAUDIUS T. MURCHISON, PRESIDENT, THE COTTON TEXTILE INSTITUTE, NEW YORK (ACCOMPANIED BY H. E. MICHL, ECONOMIST)

Mr. MURCHISON. My name is Claudius T. Murchison. I am president of the Cotton Textile Institute, whose main office is at 320 Broadway, New York City.

The Cotton Textile Institute is the central trade association of the spinning and weaving divisions of the cotton textile industry. The industry as a whole consists of about 1,200 manufacturing plants, employing currently about 413,000 people.

The institute embraces in its membership both southern and northern mills, and represents 75 percent of the cotton spindles of the United States.

At the outset, Mr. Chairman, I would like to take a few moments to describe the scope of this industry and its functions.

This industry is composed of about 1,200 mills engaged in spinning cotton yarn and thread and weaving fabrics. Its products cover a wide variety of goods, ranging from the heavy duck to fine voiles.

Except for a few items, such as bed sheets, pillow cases, and towels, the industry does not produce finished products for the ultimate consumer. It is rather a producer of raw materials which are subjected to further processing by the finishing and dyeing industries, which are considered to be separate industries, and are then sold to the various industries which fabricate them into finished products for the consumer for apparel, household, and industrial uses.

This industry presently employs 413,800 workers and in peacetime is one of the largest employers in the country.

According to the Bureau of Labor Statistics, the majority of the workers are semiskilled, representing about 56.2 percent of the labor force. The remaining workers are skilled and unskilled in almost equal proportions. These proportions vary considerably as between the spinning and weaving divisions. In the spinning division 76.3 percent are in the semiskilled group, 8.4 percent are skilled, and 15.3 percent are unskilled. In the weaving division, 46.5 percent are skilled, 28.5 percent are semiskilled, and 25.0 percent are unskilled. Cotton textile industry and the act of 1938: The cotton textile industry has as long an experience with minimum wage legislation as any manufacturing industry in the United States. It was the first industry for which an industry committee was appointed under the Fair Labor Standards Act of 1938.

After almost 9 months of careful deliberation the committee recommended a minimum wage of 32%1⁄2 cents, which became effective on Cctober 24, 1939. This rate was in force until June 30, 1941, when the minimum wage was raised to 371⁄2 cents. That rate prevailed until April 30, 1942, when it was increased to 40 cents, the highest mandatory rate permitted under the act.

Since then wage rates have continued to move up as the result of both directives issued by the War Labor Board and voluntary action.

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on the part of the mills. In August 1942, the Board ordered a 7%cent-per-hour increase for employees in 51 mills, and under wartime. pressures and a tightening labor market this rate spread generally throughout the industry. Early in 1944 cotton mills were given permission to raise the minimum to 50 cents, and on February 20, 1945, the War Labor Board issued a directive providing, among other things, a minimum wage rate of 55 cents for employees in 54 mills. This rate was later made permissive for all other mills.

Accordingly, since October 1939, when the first wage order became effective, to June 1945, the most recent date for which wage statistics are available, average hourly earnings increased from 38.5 cents to 69.2 cents, an increase of 30.7 cents, or expressed percentually, an increase of 80 percent.

Straight-time average hourly earnings, which exclude premium overtime pay, during the same period increased from 35.7 cents to 64.4 cents in the South, or 80 percent, and in the North from 44 cents to 74.1 cents, an increase of 80 percent. It should be emphasized that while these earnings are the highest in the history of the industry, they do not yet fully reflect the total increases resulting from the last WLB directive. Since June, more mills have increased their minimum wage rates to 55 cents and not all of the adjustments in rates above the minimum, ordered by the War Labor Board, have yet been made. These are still under negotiation and what the final effect will be on straight-time average hourly earnings is now impossible to say.

Compared with the increases proposed in this bill, the above increases were relatively small. The first wage order of 321⁄2 cents was only a 21⁄2-cent-per-hour increase, or 7.7 percent, above the prevailing statutory minimum and the industry was given 20 months to adjust itself to the new rate before it was raised to 37%1⁄2 cents. This rate was permitted to remain unchanged by law for almost a year. before it was again increased 6.7 percent to 40 cents.

Senator SMITH. Might I ask right there if there was a ceiling on prices at that time, or was there a lift in prices to absorb this wage? Mr. MURCHISON. During part of that period, the ceilings became generally effective throughout the industry in the spring of 1942. That is, ceilings were in effect during the entire period when increases were occurring.

Senator SMITH. Under the War Labor Board jurisdiction you absorbed the increase in the industry, except insofar as ceiling prices were concerned?

Mr. MURCHISON. Well, the ceilings have been increased, which I will point out later, giving the exact figures, because I do think that is a very important consideration.

Senator TUNNELL. I would like to get this clear in my own mind. The Fair Labor Standards Act was passed in 1938. Now, what was the provision with reference to wages?

Mr. MURCHISON. It provided a minimum statutory wage of 30 cents per hour, effective at once.

Senator ELLENDER. Twenty-five cents an hour?

Mr. MURCHISON. It was 25 cents.

Senator ELLENDER. And 30 cents the second year?

Mr. MURCHISON. Then it moved up to 30 the second year, and thereafter the increases occurred after hearings and on recommendation of industry committees.

Senator TUNNELL. Now, that was confined to the textile industry, was it?

Mr. MURCHISON. No, no. That was the practice generally for all industry.

Senator TUNNELL. I was under the impression it went to 40 cents more rapidly.

Senator ELLENDER. Senator, if you will permit me, as was just suggested, the minimum was fixed at 25 cents the first year, 30 cents the second year, and then a period of 6 years was provided in which to raise the minimum to 40 cents. But, as he pointed out, the advisory committees raised the 40-cent minimum before the 6 years expired to the amount indicated in this paper.

Senator TUNNELL. Yes. All right then, you may proceed.

Mr. MURCHISON. Timing of the increases: More important than the gradual increase in the rates was their timing. During the 2%1⁄2 years between the first wage order and the 40-cent wage order in 1942, the cotton textile industry, in common with all other industries, entered a new economic world.

Throughout most of 1939 this industry was struggling to work itself out of the depression of 1938, in which year it had sustained a deficit of more than $4,000,000. In October however, when the first wage order became effective-I mean the first wage order issued through the industry committee-the Second World War was already 2 months old. The consequences of this event to this and all other industries are so obvious that they need not be elaborated.

The general recovery of the American economy, the demand arising from our defense effort, lend-lease, and later our entrance into the war presented this industry with a condition unprecedented in its history.

In place of the overproduction which had been a chronic condition in this industry since 1926, the huge requirements of the military, our own and our allies, the expansion in civilian requirements, the short supply of competitive materials, textile and nontextile, foreign and domestic, created a demand for cotton textiles that was without limits. No longer was it necessary for this industry to concern itself with competition from Japanese cotton textiles or Indian jute and burlap; the inroads which the paper industry was making into our markets were brought to an abrupt halt; and the threats of the recently negotiated trade agreements were completely removed by the cessation of international trade.

As a result of these developments the chief problem in this industry since 1926-excess productive capacity-was temporarily liquidated. Whereas during the 4-year period 1936-39 hours run per average active spindle amounted to 3,872, in 1940 they amounted to 4,381, in 1941, 5,307, and in 1942 to 5,794.

Senator ELLENDER. Will you explain that to us?

Mr. MURCHISON. That is hours per spindle per year.

Senator ELLENDER. What does that mean?

Mr. MURCHISON. That means the number of hours which each spindle on the average operated.

Senator ELLENDER. How many spindles could a worker attend to? Mr. MURCHISON. I do not know.

Mr. MICHL. That varies considerably from plant to plant.

Mr. MURCHISON. It varies a great deal according to the type of yarn which is being produced. I do not know what the average would be.

Mr. MICHL. What the figure indicates, Senator, is the extent to which the productive capacity of the industry was being utilized; in other words, the number of hours that a spindle operated, increased greatly between 1931 and 1942, removing that idle capacity which has been chronic in this industry.

Senator SMITH. You had more shifts during that period?
Mr. MURCHISON. Yes.

Senator SMITH. Did the production per worker increase with an increase of his wage? Was he more productive because of his wage increase?

Mr. MURCHISON. Later on, Senator, I have the figures on that. Senator SMITH. I do not want to anticipate you. I just want you to have that question in mind.

Senator ELLENDER. The question I was going to ask you is this: If the spindles operated in 1936-39 were 3,872 in contrast to 5,307 in 1941, and 5,794 in 1942, was it necessary to employ more men in order to accomplish that?

Mr. MURCHISON. Oh, yes.

Senator ELLENDER. To what extent?

Mr. MURCHISON. The industry generally went on a three-shift basis.

Senator ELLENDER. Do you have in your statement the added employees?

Mr. MURCHISON. Yes; we do give that.

Senator ELLENDER. All right.

Mr. MURCHISON. The industry generally went on a three-shift basis. That meant operations 24 hours a day, 6 days a week in many cases. That was not absolutely the practice throughout the entire industry.

Capacity utilization based on 80 hours per week, increased to 133.2 percent, whereas in the 6 years prior to 1939 it reached the 90-percent figure only once and in 1 year was as low as 57.4 percent.

As against 7.5 billion yards produced in 1938, much of which was added to already high inventories, the industry produced 9 billion in 1939; 9.5 billion in 1940; and more than 11.3 billion in 1941; and almost 12.5 billion yards in 1942.

I might add that the 1943 production was almost as high as 1942. We did have in 1944 a downward tendency due to the increasing shortage of manpower. Now, those industry accomplishments were brought about without any addition to plant or equipment. We continued to use the same machinery we had at the beginning of the

The Government was not called upon to finance emergency construction projects to enlarge the capacity of the industry. From 1939 to the end of 1942, the number of workers increased from 394,000 to 510,000.

Under these conditions it was not difficult to pay higher wage rates. Under these conditions wages would have increased without minimum wage legislation. Indeed, it was no exaggeration to say that the wage orders after 1939 merely formalized by law what had already been established by most mills as prevailing practice. During the early part of the defense period and prior to the establishment of price

ceilings, the rapidly expanding market readily absorbed price increases for cotton textiles. After the establishment of price ceilings and until the spring of 1943, rising labor costs, resulting from the rising wage rates and decreasing efficiency, could be and were absorbed in part by the decrease in unit overhead costs. By the end of the year, however, increased costs could no longer be absorbed and to assure the cotton growers parity and to maintain the supply of cotton textiles, it was necessary for Congress to provide price relief for cotton mills in the legislation extending the Emergency Price Control Act. That had reference to the Bankhead amendment.

Further price relief had to be granted this year to meet the higher labor costs which resulted from the last directive of the War Labor Board.

Present wage structure: The June average hourly earnings of 69.2 cents are not based on a uniform basic minimum wage rate. As a result of the February 1944 War Labor Board directive, the 55-cent minimum was made mandatory for 48 mills and later permissive for all other mills. Many mills have voluntarily raised their basic rate to 55 cents with adjustments in wages above the minimum, but a substantial number of mills employing a large number of workers are still below the 55-cent rate.

Senator ELLENDER. Would you mind answering one question here? As I understand in early 1939, as your statement shows, the industry employed around 394,000 persons.

Mr. MURCHISON. That was a monthly average for that year. Senator ELLENDER. Yes. In 1942 it rose to an average of 510,000 persons.

Mr. MURCHISON. That is right.

Senator ELLENDER. Then with an average of 394,000 persons you produced 7%1⁄2 billion yards, and in 1942 121⁄2 billion yards.

Mr. MURCHISON. That is right.

Senator ELLENDER. In other words, as I see the picture, with 116,000 more people, or about 21 or 22 percent more employees, you produced almost 40 percent more yardage.

Mr. MURCHISON. That is right, Senator. That is because of the more regular working time.

Senator ELLENDER. Yes. Of course, that meant more profit to your industry, and therefore your ability to absorb a greater amount of the wage increase than you otherwise would be able to do if you did not have a sale for the full output of the mill; is that right?

Mr. MURCHISON. That is right. I might say that, in part, the great increase in yardage was due to the production on the average of heavier materials, taking coarser yarns which could be run through the spindles and looms more rapidly.

The proposed minimum of 65 cents for the first year after the enactment of this bill, would therefore require an increase of 18 percent in the minimum rate for mills now paying the 55-cent rate, and a considerably higher increase for mills with lower minima. How many

such mills there were we do not know, but those mills which are below the minimum of 55 cents at the present time, have only a very small percentage of their workers under the 55-cent rate. Those workers are usually those classified as yard workers, or sweepers in the mills. The increase for the former group would be more than four times as large as any increase made under the Fair Labor Standards Act