we checked the radius, and we are confident that this definition for dairy products will work, and we suspect that it will pass the Supreme Court because the language is very clearly defined, and if Congress should act upon it the Administrator will not be in the position of trying to define what "area of production" is, and very few people in the wage-hour industry are familiar with these particular definitions. Dairy manufacturing industries, by and large, are industries of small towns. Milk processing must take place close to the farm because of the perishable nature of milk, and because of its great bulk which makes long hauls costly.

The location of dairy industries in small towns gives access to laborers whose cost of living is the lowest in the country. It is for this reason that conformance with a minimum wage standard would work an undue hardship on plants located in an "area of production." The minimum wage designed to give equal standards of living to urban and rural workers would necessarily be less for the latter than for the former.

A further problem in establishing minimum wages is the proximity of the dairy plants to the farms, the largest economic area of selfemployment in the Nation. Agriculture cannot afford the proposed scale of minimum wages for its employees, even at wartime prices. Many farmers would prefer to work for the minimum industrial wage if the opportunity were afforded. They might even prefer to become self-employed as operators of small creameries or cheese factories and accept a labor return less than the wage which they would be compelled by minimum-wage regulations to pay to such hired help as would be required. The absurdity of a smaller return for a proprietor than for his helper is apparent. Such conditions could be avoided by providing for the "area of production" exemption.

That the above contrast between self-employed and hired workers in the dairy industry is not unrealistic is shown by census data on the average size of butter and cheese establishments. Creameries in 1939 employed an average of only five workers per establishment. Cheese plants employed only one and nine-tenths wage earners per establishment. A study of Wisconsin creameries showed that nearly half of the creameries were less than one-fourth the size of the larger creameries. These would be one- and two-man plants. They handled one-seventh of the total milk received by creameries. Small creameries, being willing and able to operate at a lower labor cost than those who would be required to pay minimum wages, would tend to increase in numbers. These creameries, however, are generally inefficient by over-all standards.

Hence a shift of butter production to such plants would inevitably mean less money returned to producers for milk and cream. The situation with respect to cheese factories is even more acute with 98 percent of the Wisconsin plants handling less than 5,000,000 pounds of milk annually and only two-tenths of 1 percent handling more than 10,000,000 pounds. Where the partnership is used even larger plants could legally escape the law.

The existence of such opportunities for honest evasion of minimumwage regulations would work great hardships on the generally more efficient dairy plants engaged in processing the same commodities. Since dairy plants generally are located in an area of production conforming to our proposed definition, exemption of plants in such area would relieve this problem.

Because of the factors enumerated above-location of dairy plants in low-cost-of-living areas, proximity to population groups engaged in low-paid self-employment, and significant volume of self-employment the average hourly earnings in the butter industry, for example, are the lowest of any of 13 food groups for which hourly earnings are reported by the Bureau of Labor Statisticis.

In 1944 production workers in the butter industry received annual earnings, average hourly, of 70.9 cents. The next lowest average hourly wage was in the confectionary industry, in which the average wage was 72.3 cents. The average for all food industries was 84.9 cents, which exceeded earnings in the condensed- and evaporated-milk industry of 73.7 cents and in the ice-cream industry of 79.4 cents per hour, which exceeded the earnings in the canning and preserving industry by 2 cents per hour, but was 12.3 cents per hour below the average of all food industries. If wages of workers in the butter industry had been raised to the average level of all industries, which would have been substantially the effect of an applicable minimumwage regulation at that time, the cost of processing butter would have been increased about 61⁄2 percent.

Since butter already returns to producers the lowest average price per pound of butterfat of any of the dairy products, the effect of applying minimum-wage regulations would be to take money from the pockets of the lowest-income group of dairy farmers, either directly through lower price or indirectly through a curtailed market, or both.

It should be remembered, and I cannot emphasize this fact too highly, that income which farmer members of a cooperative receive comes from the prices which the cooperative is able to obtain for them. That is, the members. The greater the cost of operation, the lower the producer's income.

We contend that the statute of limitations in the bill should be reduced to 1 year. We feel that this gives all employees sufficient time in which to institute any suits necessary for the carrying out of the spirit of the act, and therefore recommend that on page 13, line 11, the word "five" be stricken and the word "one" be inserted.

I close by returning to the fundamental philosophy of minimumwage legislation.

That philosophy is that the best interests of the Nation are served by bolstering the incomes of the lowest-income groups.

In selecting industrial workers for special consideration under this law, care must be taken to avoid undesirable impacts upon lowincome groups which are not and cannot be protected by this law. Agriculture as a whole has formed a large part of the lowest-income group in the Nation for 25 years.

We are now facing the prospect of drastic declines in agricultural income within the next year. It would be unfortunate to enact this legislation in such form as to reduce further agricultural incomes. That closes my direct statement, sir.

Senator TUNNELL. As I understand, sir, you are not opposed to the theory of the wage-and-hour law.

Mr. HOLMAN. No, sir; we are not opposed to the theory.

We recognize that time changes and that some social legislation has to go on the statutes from time to time. We do think it should be safeguarded and we are in a position here where we would be hurt, and very drastically hurt, should the law, in its present form, be

passed without the reinclusion of the amendments in the form as we have suggested.

Senator ELLENDER. Mr. Holman, have you as yet been able to note any decrease in the price of dairy products since the war has ended?

Mr. HOLMAN. Yes, sir.

The beginning was just a week or two ago, when the Department of Agriculture lowered the price on dry skimmed milk 2 cents a pound. That is the equivalent of 20 cents a hundred pounds in terms of fluid milk going into New Orleans.

Senator ELLENDER. If there is no method by which we can maintain our present price structure, and this bill should go into effect as proposed, and without your amendments, how much would that increase the cost of producing dairy products? Can you give us an idea?

Mr. HOLMAN. It will have to be an off-hand thought here.

Our prices now for labor all the way from around 50 cents an hour up to as high as $1, and our wages for butter makers alone range from $176 to $200 a month.

At the present time in Minnesota, one of the great unions is attempting to organize all of our butter makers who normally are managers, as well as superintendents, of the plants, and who normally are on duty, like I work, all the days of their lives, because they have sense of responsibility, and the man in the community keeps an eye on the plant as long as he is awake and in the neighborhood.

If that butter maker at $176 is cut back to 40 hours, and then time and a half for all the work he has to put in, and you run that scale down the line, you would have a tremendous increase in the cost of production.

Senator ELLENDER. Do you think the industry can now absorb any portion of the costs proposed in this bill without hurting the producers of dairy products?

Mr. HOLMAN. Only the very minimum wage provision. They cannot absorb the provision for skilled workers.

There are some industries we know that could not get along on the new proposed wages. We could get along.

Our position is not that we are advocating, but we will go along with the group in agriculture that is most hurt by the minimum wage. That is our position. We support that group.

If it is cotton, or whatever it may be, or sugar, or something else, we will support it.

If it is a large and comprehensive group, what they can stand, will be our position.

Senator ELLENDER. They would be in the same fix as you are in, and unless they get prices to pay these additional wages their business would simply go by the wayside?

Mr. HOLMAN. They would be in a worse fix for this reason: Let us assume that butter has to take additional raps, and it probably may. Butter has already gone through an evolution whereby much of the butter formerly made from separated cream is now being made from whole milk that is moved into the creamery and there separated and used for whatever may be the best purpose.

If the butter industry cannot afford to pay the wages, those plants will transform into fluid milk plants, or some other kinds of plants that can pay and stand the wages.

We know that is a very different position from some industries that cannot convert like we can.

But damage would be experienced both by the people and the communities that had to shut up the dairy plants and move the milk another 200 miles to some other place in order to be handled—that is, shut up the butter plants or shut up the thousand little cheese fac tories which have been institutions of the neighborhoods for nearly 100 years, and turning that product into the great plants located miles and miles away.

Senator ELLENDER. Now, Mr. Holman, if these wages should go into effect as written in the bill, without exceptions, has technology in the production of milk products advanced so that you could reduce your cost of production by savings on labor?

That is, by doing the same work with less labor by using mechanization to save on the cost of production?

Mr. HOLMAN. Well, technology has advanced to the point where at the present time our very large combination dairy plants are able to operate comparatively cheaper than the more primitive plants, but following your question through as to how much can the large plant stand in the way of additional increased costs, that is problematical.

If the plant is owned by private capital they would probably go ahead and take it out of the price they pay the farmer.

Senator ELLENDER. The point I want to emphasize is simply this: If wages are so high that industries can't stand the increase, they would be prone to use machinery to do the work that would otherwise be done by man, and thereby cause unemployment. Isn't that inevitable?

Mr. HOLMAN. It is like asking how many men does it take to handle a Gray-Hensen or one of the other types of dryers.

We have dryers ranging from small ones, 15 feet square, up to as long as this particular room, and it does not appear to take much more labor to handle the large one than the little one.

Senator ELLENDER. And the output of the large one is probably several times that of the small one?

Mr. HOLMAN. The economic evolution would be forcing the dairy plant out of the hands of the small community and small capital, and would force the creation of great combination plants which would require millions of dollars of capital behind them and the industrialization at the expense of labor itself as well as the community.

Senator ELLENDER. That is the point I have been trying to emphasize, and I think that would apply to the dairy industry and would also apply to small industries, and other industries, as well.

Mr. HOLMAN. It could apply to other industries much more easily. For instance, I am told that rayon and nylon can now be put on the spindles and you go away and leave them and they don't break, whereas, you and I know what has to be done with the spindles in a textile mill.

As a boy I worked in a cotton mill.

Senator TUNNELL. The same argument applies as between a wheelbarrow and an automobile; doesn't it?

Mr. HOLMES. I think so. Line production is the logical end for many industries.

Senator SMITH. Mr. Holman, I gather from your testimony and that of other agricultural witnesses

Mr. HOLMAN. I am the farmer's hired man, sir.

Senator SMITH. You are really more concerned with the maximumhour provisions than the actual minimum-wage provision.

Mr. HOLMAN. Definitely, sir.

Senator SMITH. Agriculture is affected definitely by the maximum hour, if overtime means time and a half.

Mr. HOLMAN. But agriculture is also affected by the minimumwage provisions applicable to plants in the area of production.

Here is a plant in Mankato, Minn., or Green Lake, Wis., where my wife's mother lives, 500 inhabitants, and a creamery there.

Suppose that creamery has to pay 50 or 60 cents an hour for its lowest labor. All the labor on the farms will be affected by it and you can't hold a laborer on the farm.

Senator SMITH. You are only making that argument for the area you are speaking of?

Mr. HOLMAN. That is correct.

Senator SMITH. You don't make it Nation-wide for all industry? Mr. HOLMAN. That is right.

Senator TUNNELL. We thank you very much for your testimony Mr. Holman.

We will adjourn at this time until 2:30.

(Whereupon, at 12 noon, the hearing was recessed until 2:3 p. m. of the same day.)

AFTERNOON SESSION

Senator TUNNELL. Mr. Parmelee.

TESTIMONY OF JULIUS H. PARMELEE, DIRECTOR, BUREAU 0 RAILWAY ECONOMICS, ASSOCIATION OF AMERICA

RAILROADS

Senator TUNNELL. Mr. Parmelee, I believe you represent th railroads?

Mr. PARMELEE. Yes, sir.

Senator TUNNELL. Are you any relation to the fellow that form the transfer company?

Mr. PARMELEE. No, Senator; not that I know of. If I were probably would have more money.

Senator TUNNELL. It is the same name.

Mr. PARMELEE. Yes, sir.

Mr. Chairman, I am director of the bureau of railway economi of the Association of American Railroads. That association, as t committee doubtless knows, represents practically all of the larg or trunk-line railroads of the United States.

It had been our hope, Mr. Chairman, to have representatives railroads in different parts of the country appear before the committ because the railroads in different sections have somewhat differe problems.

However, in deference to the desire of the committee to speed the program, it was determined that I should be the only witness t the railroad industry.

Senator ELLENDER. Who determined that?