Senator ELLENDER. Back in 1938, when the industry committee raised the rate of pay from 30 to 322 or 372 cents. I pointed out here that of four concerns in New Orleans that made wearing apparel, two of them, I think it was, closed down. Now have you a record of any other industries having failed or closed throughout the country because of this increase in wages?

Mr. WALLING. I think it is a true statement to say that there were practically no wide-scale closings, or rather that there were no wide-scale closings and practically no individual closings of establishments which could be attributed directly to the operation of the Fair Labor Standards Act, or were claimed by the owners of those establishments to be directly attributable to that Act.

Senator ELLENDER. What about the two in New Orleans that I have pointed out here, and I got telegrams from them stating that that was the case?

Mr. WALLING. Well, I would be glad to consult the record on those particular two. I don't know which ones you are referring to but I do happen to recall that there were several establishments in New Orleans which closed down about that time, as there were in every garment center in the country, because the garment industry is one where long life is more rare than anywhere else. There is a very rapid turnover in establishments in the garment industry, and I happen to recall that one of those New Orleans firms expressly stated at the time they went out of business that it was not because of the operation of the Fair Labor Standards Act. I will be very glad if you will give me the names of the two in question to see if I can find out specifically about them.

Senator SMITH. I would like to ask that there also be put in there the extent to which price rises occurred which saved those concerns from being shut down, or whether, as you have implied in your remarks, that was absorbed some other way in industry. Which was the fact? It is very important, it seems to me.

Mr. WALLING. I think it would be difficult to obtain individual data from particular establishments on price increases, because they were not required to file their prices with any governmental agency or obtain permission to raise their prices. We could only find out, by consulting a particular firm, whether it did or did not increase its prices. I was speaking in general terms about industry price levels as distinguished from particular establishments.

Senator TUNNELL. Can you answer as to whether a particular industry or a particular firm or company can absorb this increase in wages unless you know something about what the profits of that industry or firm have been?

Mr. WALLING. I can only point, I think, to the record which has already been made, of the increases in the wage structure which have already been absorbed. For instance, in the case of the garment industry 200,000 employees were getting less than the minimum wage which was put into effect as the result of industry committee action. Beyond that I couldn't go without knowing a great many other economic factors which affect prices, besides wages, because we must remember that wages are only a part, and generally a relatively small part, of the total cost of production, and you can affect wages by making increases, with ating price levels in many cases more easily

than you can by making other types of adjustment in your cost of production, and the capacity of industries to absorb wage increases through increasing efficiency of production if for no other reason is quite extraordinary, as has been demonstrated by the record we have made in this wartime period.

Senator ELLENDER. Mr. Walling, I have heard that same statement made by many other witnesses, that the labor cost is a small part of the production cost. You have repeated that today.

Mr. WALLING. That is because it is true.

Senator ELLENDER. Well, you take raw iron from which steel is made, for instance, it is worth little, but it is the labor involved in getting it to the mills that makes its cost rise. In surface mining you have the labor of operating the dragline and the bulldozer and other mechanical devices. In deep pit or shaft mining, you have the labor of the miner with the pick, then transporting it through the tunnel and up the shaft. Then the labor of loading it onto railroad cars and off of railroad cars and onto barges or steamships. Then it goes from the barges to the mill. All of that requires labor costs, and that is where your great cost is. Even the railroads and steamship companies must hire and pay labor.

The same with farming. Take the cotton in the field. You certainly must consider the work that is attached in making the crop, planting it and cultivating it and harvesting it. I would say that labor in that instance is over 50 percent of the cost of producing the raw product.

Mr. WALLNG. Those figures are easily available for every industry. Senator ELLENDER. But I can't quite understand why you say that the labor is very small, when, as a matter of fact it is the major part of it.

Mr. WALLING. I am talking about the general level of industry, the labor cost which generally prevails throughout industrial operations. Now it varies, of course, from one extreme to another. There are certain industries where the labor cost is relatively high in terms of total cost of production. There are other industries where it is relatively low. It depends on the particular industry. My statement was made about industrial operations in a general way.

Senator SMITH. But if you make a general rule then you are bound to affect adversely the industry that has a very high percentage of labor cost. That is the thing that troubles me in trying to make a flat rule to cover them all.

Mr. WALLING. Obviously, and that is why I have been pointing out the particular industries which would be most directly affected, where the problem would be most acute, and we know pretty definitely which industries those are.

Senator ELLENDER. Well, I hope somebody makes a study of that and gives us all the information. Nobody has done so thus far, but many have advocated a specific sum as a minimum wage without having studied the problem through.

Senator SMITH. I think it is very essential information in order to arrive at a sound and scientific conclusion.

Senator TUNNELL. I don't think you will ever get the answer to the question as to whether a particular industry or a particular company can stand a rise or can absorb a rise in wages until you know what that company is now making.

Senator ELLENDER. But, Senator, what we are doing here, irrespective of what one company makes over another, is applying the same yardstick to all of them.

Mr. WALLING. I have frequently made the statement that minimum wage legislation has been a greater preventive of bankruptcy than almost any other provision that has been enacted into law, because in the first place it makes an employer conscious of his obligations, an orderly way of doing business, and of the need for looking at his labor costs and over-all cost of production to see whether he is operating at a profit or loss.

Senator TUNNELL. Let me suggest something to Senator Ellender in response to his statement that the same yardstick is being used. Unfortunately the corner grocer does use the same yardstick when he hands out the groceries, and the merchant uses the same yardstick. So that there is a similar standard, and if the fellow in one line doesn't get wages equal to another, when he goes to spend his money he is in competition with the person who is getting a higher rate.

Senator ELLENDER. Well of course, Senator, in the retail and wholesale operations, as I understand it, that is done on a percentage markup depending upon what the cost of the goods is; but in the manufacturing end I don't think the same formula prevails. You have the most efficient manufacturers of certain articles, and manufacturers of the same articles which are less efficient.

Mr. WALLING. But a direct incentive is given to the least or less efficient producer to take stock of his operating methods and introduce greater efficiency if he has to meet a flat minimum wage bill. Just a few years ago I was down in San Antonio and I talked with one of the pecan-shelling operators there who was particularly opposed to the Fair Labor Standards Act when it was pending, and who predicted dire ruin for the entire pecan-shelling industry if these minimum-wage provisions were ever written into the law. Following a meeting down there this man, one of the leading processors in the industry, came up to me and said:

I want to say to you that we all feel that we were wrong in our apprehension about the effect on our industry of these minimum wage provisions; it has been the best thing that ever happened to us. We are operating more efficiently, we have a more contented labor supply, we are turning out a much greater production per operator than ever before, and the industry is on a sounder and more profitable basis than it has ever been in its history, and we attribute it directly to the effect of the minimum-wage legislation.

That instance could be repeated over and over again in different parts of the country. There is no question but that once you have a minimum labor cost obligation to meet, you immediately take steps to make your production more efficient, if it begins to pinch, and that is bound to happen.

Senator ELLENDER. And of course in proportion to how much more you pay for your labor, the price that you are going to get for your goods will be increased to meet that initial cost?

Mr. WALLING. If you assume that you do not absorb that cost through greater efficiency of production.

Senator TUNNELL. Now, then, we are at page 25, I believe, of your testimony, Mr. Walling, and there are 35 pages in the statement which you have to present, I was wondering if there would be objection to your filing this in the pre which would save your coming back,

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or what do you prefer to do? It would probably take an additional 2 hours to finish your statement with what discussion there might be on it. What is your preference?

Mr. WALLING. As the committee pleases.

Senator TUNNELL. What do you think, Senator Ellender?

Senator ELLENDER. I have no objection to letting him put it in the record. Senator, and the reason I say that is that Mr. Walling, like previous witnesses, is not prepared to answer questions that I would like to propound on the economics of the subject, that is, the effect that such increases would have on our economy.

Senator TUNNELL. I think that is largely because you have asked him questions about matters outside his province.

Senator ELLENDER. The point is this, Senator, that we haven't had a witness yet who has thought this thing through, as to its effect on our economy and all those concerned. All Congressmen and Senators will desire to think it through, I hope. We have had Mr. Hinrichs spent a lot of time before us telling us of the beautiful effects that will accrue because of giving better wages, but when you ask him how it will affect other groups, he didn't know, and that is your answer.

Mr. WALLING. Senator Ellender, I want to make it clear that I will be glad to insert in the record the exact figures of how many people are going to be affected by these proposed increases. That is a matter of public information.

Senator ELLENDER. Well, Mr. Walling, I am sure you will agree with me, or at least you should

Mr. WALLING (interposing). You make it very difficult for me to disagree.

Senator ELLENDER (continuing). That the Fair Labor Standards Act has not had a fair trial because of the war. I would have liked to try the Fair Labor Standards Act under normal conditions, and I won't say I would like to see it tried under present conditions, that is, with the increase from 40 to 75 cents, because as I view it-I may be all wrong and I hope I am-it will cause, in my opinion, more unemployment than one can dream of. On the other hand, if prices are permitted to rise to meet the cost of increased wages, our economy will be doomed by an unprecedented spiral of inflation. God forbid that such will happen, because the farmer, the laboring man, the white collar workers, our pensioners and many others will be the greatest sufferers.

Senator TUNNELL. If it is satisfactory to Mr. Walling we will have the remainder of his statement incorporated in the record.

Mr. WALLING. Surely.

(The remainder of the statement is as follows:)

ESTABLISHMENT OF RATES FOR SKILLED JOB OCCUPATIONS

Section 5 of S. 1349 marks a departure from traditional minimum wage legislation by providing for the establishment through industry committee machinery, of minimum wage rates for skilled and semiskilled job classifications. As I read the language of the bill, it appears to me to be a mandatory provision, calling for the establishment of minimum wage rates for such occupations in all industries covered by the act. My first reaction is to question whether the purpose of the act-the elimination of labor conditions detrimental to the maintenance of minimum standards of living for health, efficiency, and general well-being of workers-justifies the establishment of wages above the minimum level. It seems to me this provision of the act goes beyond the basic purpose of minimum wage legislation and requires serious consideration.

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The objective sought by this provision is undoubtedly a sound one. I assume that its purpose is to insure that due recognition is given by employers to the skilled occupations as the minimum wage for unskilled workers is increased, or, in other words to prevent the minimum from becoming the maximum. Some years ago an argument commonly used against minimum wage legislation was that it would lead to a wage structure compressed tightly about the minimum rate. I believe that our experience with minimum wage legislation amply disproves this assertion. By and large, when minima under the act have been raised, there have been substantial increases granted to occupations in the higher brackets although not necessarily in exactly the same amount or proportion that the minimum has been increased. There have been some exceptions of course, one of which may have given rise to this provision. I believe the War Labor Board found, in a recent investigation of the textile industry, that there was a very substantial narrowing of differentials in certain establishments in the textile industry with the result that highly skilled workers in these establishments obtained very little more than the least skilled workers in the plant. I think, however, that taking industry as a whole this was a relatively rare

occurrence.

It has always been my belief that wages in the higher brackets should be fixed through collective bargaining and that governmental activity in the minimumwage field should be restricted to establishment of minimum wages required to reach a standard of living at a socially acceptable minimum level. In the light of this belief, this particular provision of the Pepper bill appears to me to be somewhat questionable. Aside from the basic question of the desirability of this type of wage fixing, I believe the provision, at least as presently written, would be extremely costly and difficult to administer. The collection of adequate information on the basis of which to set up job classifications for all industries and the information on rates actually being paid for all occupations would be quite a substantial task. Then too, there is lack of uniformity in occupational designations and even where the job is identically designated in different establishments, the job content may be quite different. Even more difficult would be the task of obtaining adequate information on transportation costs, costs of production, costs of living, which the committees would need under this provision in order to determine whether there should be geographical differentials in the skilled rates. This administrative burden could be minimized if the provision were made voluntary instead of mandatory so that such questions would be gone into only in those industries where the evidence indicated to the committee that there was serious danger of the minimum becoming the maximum. If the Congress should decide to experiment with this type of wage fixing, I would suggest: (1) That the provision be made voluntary; (2) that the committee be restricted in its authorization to minimum differentials for a few key occupations, which would tend to force the establishment or more or less appropriate rates for all other occupations; and (3) that the committee not be required to consider competitive conditions as affected by transportation, living, and production costs (which criteria, from a practical point of view, are almost impossible to apply) but rather to base their determinations on the differentials commonly found in the industries prior to minimum-wage action. My recommendations for voluntary action will give some recognition to a semblance of collective bargaining in the field where, as a permanent policy, the Government has not hitherto intervened to fix wages.

SUGGESTIONS FOR FURTHER AMENDMENT

S. 1349 provides for an amendment to section 16 (b) to provide that any action to recover liability under that section may be maintained at any time within 5 years from the accrual of such liability, in any court of competent jurisdiction. At the present time there is no statute of limitations in the act, and enforcement is governed by State statutes of limitation, wherever applicable. As I pointed out in my last annual report to Congress, the present situation is extremely unsatisfactory. Among other suggestions which I made was the addition of a reasonable statute of limitations. If this were done, varying State standards, which penalize some workers in the collection of wages legally due and give competitive advantage to violators in States with arbitrarily lowered statutes of limitations, will no longer prevail. An employee's ability to collect back wages dae him should not depend on the accident of geography.

In my testimonyfore the Bose Judiciary Committee on the Gwynne bill I suggested that 3 years would be reasonable statute of limitations. I believe