AMENDMENT OF THE FAIR LABOR STANDARDS ACT WEDNESDAY, SEPTEMBER 26, 1945 UNITED STATES SENATE, SUBCOMMITTEE OF THE COMMITTEE ON EDUCATION AND LABOR, Washington, D. C. The subcommittee met, pursuant to adjournment, at 10 a. m., in room 357, Senate Office Building, Senator James M. Tunnell presiding. Present: Senators Tunnell, Ellender, Guffey, La Follette, Aiken, Smith, Morse, and Myers. Senator TUNNELL. The meeting will please come to order. TESTIMONY OF A. F. HINRICHS-Resumed Senator TUNNELL. You were in the midst of your testimony yesterday, Mr. Hinrichs. You may proceed, if you will. Mr. HINRICHS. I had indicated yesterday that I was going to address myself first to the question of the adequacy of the living standards which would be afforded by even the 75-cent rate to a family depending upon the earnings of a single worker. I had concluded my testimony on that point, except insofar as the committee may have questions. I may say, in summary, that, insofar as I know, the evidence is conclusive on the subject that even the 75-cent rate will not produce an adequate minimum living standard at the present time, and that the inadequacy of the family living under conditions of the 65-cent rate is overwhelmingly demonstrated. The extent of that inadequacy is such that even were there to be a reversion to substantially lower price levels than now prevail-and I do not believe that that is going to happen-the standard of living afforded by the 75-cent wage would be a bare minimum. Senator ELLENDER. What period of time does the information cover to demonstrate that a minimum of 75 cents per hour is inadequate? Mr. HINRICHS. Those are materials which have been compiled at various times from 1935 to date. Senator ELLENDER. Are you able to say how much would have been required in 1935? Mr. HINRICHS. At that time it would probably have been in the neighborhood of $1,300 to $1,400. Senator ELLENDER. Were not all commodities at a very much lower price at that time as compared to the present? Mr. HINRICHS. They were at very much lower prices than they are now, yes. Senator ELLENDER. How much lower? Mr. HINRICHS. About 25-percent lower than they are today. The present level of commodity prices is about 32-percent higher than it was in 1935. Senator ELLENDER. You mean at the present time? Mr. HINRICHS. At the present time, yes. Senator ELLENDER. You mean that the living costs in 1933- Senator ELLENDER. Or 1935 were only 28 percent lower than they are today? Mr. HINRICHS. About 25 percent lower than they are today. Now, if you turn that figure the other way around it becomes a different figure, sir. They are now 32 percent higher than they were in 1935. Senator ELLENDER. You economists manipulate figures so I cannot follow you. Senator TUNNELL. It is not hard to follow, Senator. If you take the percentage on the lower base it is higher than it is if you take it on the higher base. Senator ELLENDER. I am asking particularly on the living cost, the cost of living. I think there is a big difference of opinion between the Labor Department figures and the CIO and A. F. of L. groups' figures as to the difference in the cost of living from 1941 to 1944 or 1945. Mr. HINRICHS. There is no question as to the fact that the CIO and other labor groups as well disagree with the figures of the Bureau of Labor Statistics. Our figures have been subjected to a good deal of searching analysis. I have a great deal of confidence in them. Those figures, however, relate very particularly to the changes in prices that affect the average wage-earning family. They are not compiled, and never have been compiled, from the point of view of showing the effect of changes in prices on the very lowest income groups of the country, such a group, for example, as would have been affected by a 40-cent minimum wage. The level of income back in 1934-35, to which our figures refer, was an income in the order of about $1,500. Senator ELLENDER. Now, Mr. Hinrichs, as I understand, you stated a while ago that the cost of living in 1933 was 28 or 33 percent-what figure did you use? Mr. HINRICHS. I used the figure showing that the current prices are about 32 percent higher than they were in 1935. May I give you some figures, Senator, that will clear up your point? Senator ELLENDER. I want to get something in my head first, if I can. You You say the prices of goods in 1935 were only 32 percent lower than they were in 1944, or whatever year you used. Mr. HINRICHS. May I give you some figures I think will clarify the question, Senator? Senator ELLENDER. Well, the thing I want clarified is this, if you do not mind: I have seen figures showing that the cost of living from 1941 to 1944, I think, increased 23 to 28 percent, as I recall them, and you now say that the increase in cost of living from 1935 to 1944 was only Mr. HINRICHS. 32 percent. Senator ELLENDER. Now, will you explain that to us? Mr. HINRICHS. Yes. Various dates have been used here. Let me just indicate for certain key dates what the figures for our index show. We base our index on the average level of prices through the period 1935-39. There was some fluctuation in those years, in some years higher and in some years lower. Taking that period 1935-39 and calling the prices in that period 100 percent we find that the lowest level of prices since the First World War came in June of 1933 at which time our index stood at 90.8. By 1935 prices had risen from that low of the depression; by March 1935 the index stood at 97.8. Senator ELLENDER. Now, in terms of cost of living, can you translate that into a stated percentage to demonstrate how much the cost of living increased? Mr. HINRICHS. That would mean that during that period prices had risen about 72 percent. The difference in points on the index for the two dates, 7 divided by 90.8 gives your answer of a 7.7 percent rise. Senator ELLENDER. Very well. Mr. HINRICHS. Now, between 1935 and 1939, as I say, there was a minor rise and a minor fall in prices. There was no substantial change in prices until the beginning of 1941. In January of 1941 our index stood at 100.8. Now, relative to the 1935 figure that I gave you, that means that there had been a further rise in the cost of living by January 1941 of about 3 percent. The rapid rise in prices occurred from 1941 to the spring of 1943, which was the time of the hold-the-line orders. By May of 1943, our index of prices stood at 125.1. That is roughly 25 percent higher than in January of 1941. After the hold-the-line order was issued and after certain subsidies with respect to food prices, prices on the average fell very slightly. I said that in May 1943 the index stood at 125.1. In February of 1944 the index stood just a little lower, 123.8. Since those early days of 1944 there has been a slow but on the whole rather persistent rise of prices, and the index for July 1945 stands at 129.4. That is at about 28 to 29 percent higher than the level of the index in January 1941. Now, that is the story as told by the figures of the Bureau of Labor Statistics. Senator ELLENDER. If the index was 90 in 1933, as you have indicated, and it is 129.4 now, or the last figures you have, would that mean a rise in the cost of living of 39.4 percent? Mr. HINRICHS. That will work out at an increase of about 44 percent from 1933 to 1945. Senator ELLENDER. If the increase is 44 percent, as you say, from 1933 to 1945, how much would it have required in 1933 to maintain the standard of living that you are now suggesting? Mr. HINRICHS. I am sorry, I will have to refer back to my testimony of yesterday, Senator. I said with reference to the amount that is required to maintain an adequate standard of living at the present time, that the Bureau of Labor Statistics cannot say how much more than $1,500 is required today. We are currently engaged in making a study of that subject with an appropriation made this last June. That study is under way. The results of that study cannot be made available for a number of months. I therefore have no way of tell ing you whether you are talking about $1,600 or $1,700 or $1,800 or $2,000, or $2,500. Senator ELLENDER. Let us take any figure you desire. Let us take $1,600, if you will. If it requires $1,600 under present conditions to maintain a family, as you have indicated, with the cost of living 44 percent less in 1933, how much would it have required in 1933 to maintain such a family? Mr. HINRICHS. I think it probably takes more than $1,600 at the present time. Senator ELLENDER. Take $3,000. I don't care what figure you take. What I want to put into the record, if I can, is how this cost of living formula is worked out for you. In other words, if the cost of living was 44 percent less in 1933 than it is now, I would like to have that decrease in the cost of living translated in what the living costs of a family, say, of four would have been at that time. Mr. HINRICHS. Yes. I said that prices today are about 44 percent higher than they were in 1933. Senator ELLENDER. That is right. Mr. HINRICHS. You have now asked me how much lower prices were in 1933 than they are today, and that involves simply turning the figures around. The answer is that prices can be described as being either 30 percent lower in 1933 than they are today, or that prices today are 44 percent higher than they were in the earlier period. Therefore, if you take the $1,600 figure that you suggested but which may be too low for a current figure, and deduct 30 percent from that you would come out with the figure of $1,120, if my arithmetic is correct. Senator ELLENDER. I thought you said the figure was 44 percent. That is that the cost of living in 1933 was 44 percent less than 1944 and not 30 percent. Mr. HINRICHS. Senator, I am sorry if I don't make myself clear. Let us start with the price of cotton. Cotton was 5 cents a pound in 1932, or lower; is that right? Senator ELLENDER. That is right; that is, for the raw material. Cotton prices today are about 300 percent higher than they were in 1932. Senator ELLENDER. Now, that is for the raw material. Mr. HINRICHS. I am trying to do the arithmetic. Senator ELLENDER. I say that is for the raw material. When you convert that into the cost of the shirt that I am wearing Mr. HINRICHS. Maybe we ought to strike that from the record. I did not want to talk about the price of cotton as such. Senator ELLENDER. No. You take raw cotton at 4 cents, and then you say today it is 300 percent higher, but that the price of 4-cent cotton was not properly reflected in the cost of the material that was made from it. Mr. HINRICHS. That illustration was selected in all innocence, Senator. I will change it to a cotton shirt that used to cost a dollar and it now costs $2. Senator ELLENDER. That is just an assumption on your part. Mr. HINRICHS. It is awfully close to the truth. That means that the price of shirts have increased 100 percent. Now, when you turn the question around and say how much less did shirts cost back in the good old days when you could pay a dollar for a shirt the answer is they cost 50 percent less than they cost today. That is, it is now $2, it was $1, and a dollar is 50 percent less than $2. That is what I am doing with the index figures that I was talking about. Senator ELLENDER. Using your own method, you have indicated the cost of living in 1933 was 44 percent less than it is now. Mr. HINRICHS. 30 percent, Senator. Senator ELLENDER. I am taking your own index. You gave us an index a while ago in 1933 that showed 90 under 100; is that true? Mr. HINRICHS. Yes. Senator ELLENDER. And today it is 29.4 over 100. 29.4 plus 10, what does that make? Mr. HINRICHS. That makes an increase in that period of― Mr. HINRICHS. I am sorry, 44 percent. If you divide 129 by 90 you will see that it comes out as 1.44. That means a 44 percent increase. Senator ELLENDER. I may be a little confused with figures. Senator TUNNELL. I think the Senator is basing his percentage on different things from the witness. Now, you take your shirt; there was a 100 percent increase in that shirt, and then it is a 50 percent reduction to get it back. It depends on which way you are going. Senator ELLENDER. I am not much at figures, I may be confused a little bit, but as I understood you to say-and if I am wrong, you may say so you said that the cost of living in 1933 was 44 percent less than it is now. Is that a true statement? Mr. HINRICHS. It was 30 percent less than it is today. Senator ELLENDER. What is the 44 percent figure that you gave a while ago? Mr. HINRICHS. The 44 percent figure answers the question how much higher is the cost of living today than it was back in this period when prices were very low. Senator ELLENDER. That is the very point I am making. Mr. HINRICHS. The 30 percent figure, Senator, is the one you want to use. Senator ELLENDER. Why not the 44? Mr. HINRICHS. Because that corresponds to the 100 percent increase in the price of the shirt. You see, we started with very low prices. Senator ELLENDER. I would rather apply it to the cost of living. That is the point that I want to try and develop if I can. Mr. HINRICHS. May I help you in just a second, sir, with a pencil? Senator ELLENDER. Surely. Besides me, you will have to convince 92 Senators aside from those present. Mr. HINRICHS. In 1933, we started with an index figure of roughly 90, and today the index is 129. To find out how much higher the prices are today than they were in 1933, we want to divide the present figure, which is 129-that corresponds to our $2 for the shirt-by the figure of 90, which is where he started from and which corresponds to the price of a dollar per shirt. When we divide 129 by 90 we find that we have a figure of 1.44. Now, that can be interpreted to mean a 44 percent increase in prices from the time when they were very low. |