Mr. Nichols also asserted in his statement that "the Administrator had prepared and presented to the industry committee precisely the recommendations he wanted written out to the last comma." The fact is, however, that neither I nor any member of my staff exerted the slightest influence on the committee's judgment so far as the recommendation of any particular minimum was concerned. Apparently, Mr. Nichols was misled by the fact that in order to expedite the proceedings, the Divisions prepared in advance sample reports which incorporated the correct legal terminology but left blank spaces for the rate or rates which the committee might recommend. These sample reports, however, were equally appropriate for any minimum which might be voted and could not have influenced the committee in the exercise of its own independent judgment. Statement of Clyde S. Bailey and J. C. Crowley, Jr., Representing the United States Independent Telephone Association, October 9, 1945

Statement.-The association recommended that section 13 (a) (11) of the act be amended to extend the exemption of switchboard operators employed by public telephone exchanges with less than 500 stations to operators employed by exchanges having less than 1,000 stations. Without such amendment, the increase in labor costs because of the higher minimum wages will compel many of the independent companies to curtail their service, to convert as soon as possible to dial operation, and to increase rates for telephone service. The small independent exchanges operate principally in small communities where the cost of living is low, and the exemption is necessary to permit them to continue their present mode of operation.

Comment.-When the act was amended by the inclusion of section 13 (a) (11), in 1939, the Divisions recommended that the exemption be limited to operators of exchanges having less than 350 stations. Data obtained at that time indicated that such a limitation would provide exemption for those exchanges which would be impossibly or unreasonably burdened by the act. The relevant facts do not appear to have changed materially since that time.

There are 14,000 exchanges with less than 500 stations, 10,000 of which are independent exchanges. These 14,000 exchanges employ an average of two operators per exchange. Since there are 12,000 independent exchanges altogether, five-sixths of them are under the present exemption for exchanges with less than 500 stations. Exchanges with 500 to 1,000 stations are considerably larger than those with less than 500; the 1,600 exchanges with 500 to 1,000 stations employ an average of nine operators per exchange. Fifty percent of these exchanges are independently operated. A substantial number of small exchanges are operated as contract offices, in which the agent is often furnished with living quarters, heat, and light, and works on a part-time basis. No exchange with more than 500 stations is operated on a contract basis.

In view of the fact that many exchanges with less than 500 stations, which have been exempt from the act since 1939, have been changed over to the dial system, it appears that other factors may be more significant than wages in determining whether this action will be taken. It seems to me the industry should be able to submit objective evidence of its contentions, particularly in view of the fact that the same points were advanced in opposition to the 40-cent minimum wage. Information should be obtained as to the actual effects of adjusting to the 40-cent minimum.

Statement of R. B. Bowden, Representing the Grain and Feed Dealers National Association, on October 9, 1945

Statement.-Section 13 (a) (10) should be retained in the act for the grain handling industry.

Comment.-I have previously recommended to this committee that section 13 (a) (10) be eliminated from the act, and that section 7 (b) (3) be used to permit some exemption from the overtime provisions for industries that operate all year round but which have sharp fluctuations in the volume of commodities handled. Such a procedure would serve the needs of this industry, as shown by Mr. Bowden's statement that his chief concern "obviously is more with overtime than with the hourly rate before overtime." The industry would have to make some adjustment in off-season hours of business to avoid added costs in overtime pay, but these adjustments do not appear unmanageable. Other changes may be needed with respect to the working hours of many "second-men" and of those managers who do not qualify for overtime exemption as executives under Us

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present regulations (pt. 541), even during the busy season. These changes may cause some difficulty occasioned mainly because of traditional practice rather than the physical requirements of handling grain.

Statement of James W. Haley, Representing the National Coal Association, October 10, 1945

Statement. The association objected to the increase in the minimum wage, asserting that the higher minimum will put the coal industry at a competitive disadvantage with other fuels and that many "subproductive" workers who cannot earn 75 cents an hour because of physical disability, age, or lack of effort will become unemployed.

Comment. In view of the relatively high average hourly earnings in the industry, it is probable that the minor increases required to bring the earnings of all employees up to the minimum would have little effect on the selling price of coal. It is also probable that the number of workers whose production is “substandard" is comparatively small, and it may be expected that productivity will increase when hours of work are reduced to their normal peacetime level and older workers, who are in active employment because of the severe wartime labor shortage are replaced by younger men released from the armed forces. Statement.-The association recommended amendment of the act "to give automatic exemption to any employee who is employed on a guaranteed compen sation basis of $10 per day, $50 per week, or $225 per month." This action is urged on the ground that the act is fundamentally a "wage law."

Comment.-This view ignores the purposes of section 7 (a) of the act, to increase the cost per hour of employing workers more than 40 hours in a workweek, and thus to encourage the employment of more workers and also to give workers the benefit of a reasonable amount of leisure time. The work-spreading incentive of section 7 (a) will be of particular value during reconversion, when there will be an unavoidable decline in operations and employment from their high wartime levels.

There is at present provision in the act for the exemption of employees engaged in work of such a nature that the premium pay for overtime would have little work-sharing effect. Section 13 (a) (1) exempts employees who are engaged in bona fide administrative, executive, or professional capacities, as these terms are defined by the regulations of the Administrator. Regulations 541 contain these definitions, which at present include, among other criteria, a minimum salary of $30 a week for executive employees and of $200 a month for administrative and professional employees.

Statement. Another amendment proposed is one which would define "work time" to include "only time spent by employees in performing services for which they were employed." This amendment is intended "to avoid repetitions of the difficulties which have arisen in the coal mining industry concerning travel time."

Comment. This amendment is no longer necessary since the confusion with respect to travel time has been clarified by the Supreme Court. The court has made it clear that underground travel should be considered part of an employee's total working time. The industry has adjusted to this basis of compensation and there is no necessity or justice in reverting to the old practice under which employees spent hours in underground travel on behalf of his employer without any compensation.

Statement. The association recommended an amendment to provide that “any claim for liability under the act may be compromised, settled or released by agreement with the parties affected thereby, at any time.”

Comment. It seems obvious that adoption of this amendment would encourage the unscrupulous employer in the use of coercion and undue influence to obtain from their employees agreements or releases whereby they could avoid full payment of wages due under the act. In addition, the very employees whom the act is especially designed to protect would be placed in an unfavorable bargaining position and might lose much of the benefit to which the act entitles them because their employers would be in position to withhold full data concerning the amounts due, and in the normal case would be more fully informed concerning the provisions and interpretations of the act than would the employees. The amendment would not be consistent with the declared purpose of the act to eliminate labor conditions whose existence constitutes an unfair method of competition in commerce and interferes with the orderly and fair marketing of goods in commerce.

Statement of William T. Jobe, Representing the National Association of Ice Industries, October 10, 1945

Statement. One of the basic difficulties which the ice industry faces in adjusting to a higher minimum wage is the competition within the industry between firms subject to the act and those not covered because they are engaged in intrastate commerce. Approximately 42 percent of the 5,200 establishments in the association are engaged in the production of goods for interstate commerce, primarily through the sale of ice to railroads and other shippers. Few establishments engage solely in this type of business and they compete with noncovered firms for the local business of supplying ice to domestic, commercial, and industrial customers. The volume of interstate business performed by any one company may be as little as a fraction of 1 percent of its total business, with the general average at 7 or 8 percent.

Comments-The condition of the ice industry with respect to competition between intrastate and interstate producers emphasizes the need for a reconsideration of, the basis of coverage under the act as I proposed in my 1944 annual report to the Congress and in my testimony presented at the hearings on S. 1349. Since establishments subject to the act because of their interstate sales also engage in intrastate business, many of them are competing with noncovered firms for a major portion of their business. Coverage on an industry basis or in terms of firms competing in interstate commerce would obviously be more equitable in industries of this sort.

Statement-Mr. Jobe stated that ice producers who engage in some interstate business "do not know how much ice they may be allowed to supply the channels of interstate commerce and still not subject their total establishment to Coverage of the act. The Administrator has never taken a definite position on this question and the courts are miserably divided in their views."

Comment The general position of the Divisions on this question is set forth in Interpretative Bulletin No. 5, issued November 1939, which states that where an employee is engaged in the production of any goods for interstate commerce, the amount of the employer's business which is in interstate commerce, or the relationship which it bears to his total business is immaterial in determining whether the employee is covered by the act during any particular workweek. While a number of court decisions have sustained the Divisions in this position, some courts have applied the common-law maxim of de minimis no curat lex in interpreting the act, with varying determinations as to the amount of interstate commerce required. The Divisions, in following the rulings of the courts, have had to apply the coverage provisions of the act in accordance with the judicial districts involved until a definitive ruling is obtained. As Administrator, I have no authority under the terms of the act as it is presently written to issue a ruling on how much interstate commerce an employee must engage in to be covered, nor what proportion of his employer's business must be of an interstate nature. If such authority were delegated to the Administrator, so that an employer would be protected from criminal or civil liability when he follows the Administrator's rulings, the period during which a definitive court decision is sought would present no hardship.

Statement of Dr. Claudius T. Murchison, Representing the Cotton Textile Institute, October 10, 1945

Statement. The proposed bill, S. 1349, would seriously increase costs and prices in the cotton textile industry and is definitely inflationary. While the average hourly earnings in cotton textile mills was 69.2 cents in June 1945, a substantial number of mills employing a large number of workers have basic minimum wage rates below 55 cents. Increases in labor costs, which are the largest single item of operating expenses in cotton goods manufacturing, would have to be met by higher prices, since no significant increase in labor productivity may be expected in the near future. Cotton clothing accounts for about 20 percent of all clothing items in the BLS, cost-of-living index; increased textile prices would therefore substantially increase the cost of living.

Comments.-According to recent data supplied by the War Labor Board, not less than 70 percent of the employees in southern cotton mills are employed in plants having a basic minimum of 55 cents an hour and virtually all northern mills have plant minima of 55 cents or higher. A substantial number of northern mills have recently signed collective-bargaining agreements providing for a 65-cent minimum and it is anticipated that this rate will be shortly extended

the North. While it is true that productivity per man-hour in cotton goods manufacturing run only 0.3 higher in 1944 than in 1939, the increase in manhour productivity over the preceding 10-year period (1929-39) averaged nearly 5 percent per year. There seems every reason for believing this long-run trend. which was interrupted by the war, will reassert itself. Aside from the replace ment of worn or obsolete machinery, the return of experienced textile workers from the armed forces will unquestionably contribute toward the reestablishment, at a probably increased tempo, of this long-run trend.

In view of the favorable profit condition in the industry and the anticipated increase in productivity, it seems likely that a considerable proportion of the additional wage bill costs can be absorbed without price increases. Moreover, even with a significant price increase in cotton textiles, the cost of living would advance only slightly, since cotton items account for only 2 percent of entire budget expenditures. I refer you, in this connection, to the statement submitted to your committee on November 2, 1945, by Mr. Chester Bowles, Administrator of the Office of Price Administration. With respect to the textile industry, Mr. Bowles stated:

"Textiles is the other of the three industries [tobacco, lumber and timber, and textiles] which raise some question on the price front. Here 47 percent of the workers were earning, in June 1945, less than 65 cents an hour. To bring them up to this proposed minimum would cost $105,000,000 a year and would add 6 percent to the wage bill. The additional costs represent a little over 12 percent of the profits earned by this industry in 1944.

"How much of such an increase would, in a competitive market, be absorbed out of profits? Well, again I leave it to you to judge. Here are the facts to go on: If the entire wage increase were to be met out of profits-here we judge by a sample of 269 corporations-they would be reduced to a level 435 percent above the 1936-39 average before taxes, and at that level would provide a return of 22 percent on net worth. This is four times the prewar return.

"Now, the prewar return was nothing to brag about. The textile industry suffered more than many others from the inadequate employment and buying power that characterized our entire economy at that time. And I am hopeful that with good sense on the part of all of us, we shall never again see the textile industry or any other, for that matter, operating under such handicaps, nevertheless, I think that when the present shortages disappear and the textile industry gets competitive again, the present profit margins will be reduced. But there is certainly some room here for wage increases before profits are reduced to unreasonable levels.

"Not all parts of the textile industry, of course, would be affected the same way, and it is perfectly possible that some price increases would result. Let me point out, however, that even if the entire wage increase were passed on. it would require price increases averaging less than 1% percent at the manufacturing level. In the light of these facts I think we can agree that any price consequences from the increase of minimum wages in the textile industry would not be serious."

Statement. The fixing of occupational minimum rates distorts the intent and purpose of the Fair Labor Standards Act. Besides having inflationary effects, occupation wage fixing would introduce harmful rigidity in the wage structure and would give duties to the industry committee which they could not intelligently and efficiently administer. Moreover, it is unnecessary because increases in the minimum wage for unskilled workers automatically forces increases in wage rates above the minimum.

Comments. I have previously set forth to your committee my reasons for questioning the desirability of the occupational minimum-wage provisions of S. 1349. On the basis of our experience under the present act I do not agree. however, that the industry committees could not intelligently perform this function if provided with sufficient wage information. Nor do I agree that the fixing of occupational minima would necessarily be inflationary; its overall effects in connection with wage and price increases would probably not be greatly different from those resulting from a single minimum.

Statement of Charles W. Holman, Representing the National Cooperative Milk Producers Federation, October 12, 1945

Mr. Holman's chief concern, according to his statement, is the income of the farmer, particularly of the farmers who are members of cooperatives. He contends that the farmers' returns will be decreased if the overtime provisions of

S. 1349 are enacted but states that the association has no direct recommendation on minimum wages "provided incomes of dairy farmers are not reduced below their present levels."

Statement. The association proposes to restore section 7 (c), with the language italicized below added:

*"

"In the case of an employer engaged in the first processing of milk, whey, skimmed milk, or cream into dairy products: Provided, That the addition of any necessary ingredients or the transportation of such milk, whey, skimmed milk, or cream in any form between several plants of the employer shall not be deemed an interruption of first processing, * * * the provisions of subsection (a) shall not apply to any employees in any such place of employment; Comments. It is to be noted that this amendment restores section 7 (c), particularly the year-around exemption to such portions of the dairy, cotton, and sugar industries which meet the requirements of the section. The purpose of the added proviso apparently is to clarify the exemption in the case of such products as sweetened condensed milk and in the case of subcondenseries which partially condense milk at one plant for later completion of the process at another plant. The application of the exemption to these operations has been troublesome in the past. If section 7 (c) were to be retained I believe that the partial condensing of milk at one plant for later completion of the process at another plant should not defeat the exemption for the later operations. However, the proposed language is not very satisfactory, particularly the provision regarding ingredients. I am not suggesting a change in the language, since I believe the overtime problems of the industry can best be solved by clarification or revision of section 7 (b) (3), which, incidentally, is on an industry basis, and that the exemption in section 7 (c) should be eliminated.

Statement. The association argues for a year-round exemption from section 7 by stressing the point that the dairy industries do not show variations in employment commensurate with the variations in the quantities of products handled. In addition, it alleges that the industries require skilled work for nearly all operations and that the need for skilled workers precludes the indiscriminate hiring and firing of production employees. The association also argues that when occasional bad weather or other causes result in delayed delivery of milk, the workweek is lengthened by this delay and that frequently the workweek exceeds 40 hours as a result. "This is particularly true in the winter months."

Comment. The data used by the association showed the following average percentage increases in production, employment, and hours worked per week per employee in the peak month, as compared with the low month of the year:

It

According to these data it appears that the plants are operating well below capacity during the months of low production. There would appear to be no reason why these plants should have an exemption from the overtime requirements of the act during these months. The small output apparently can be produced in a much shorter workweek than the plants are presently open. appears, then that the association wants the employees in these industries to be denied the benefits of a shorter workweek for at least 6 months of the year because occasionally some overtime is required due to bad weather during the period of low production. I feel that these industries should perhaps be granted exemptions from section 7 for a 14-week period to handle peak operations but not all year round. As I indicated in my statement before the commiss