AMENDMENT OF THE FAIR LABOR STANDARDS ACT

THURSDAY, OCTOBER 18, 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 424-B, Senate Office Building, Senator James M. Tunnelĺ presiding.

Present: Senators Tunnell, Ellender, and Smith.

Also present: Charles Kramer, consultant to the committee.

Senator ELLENDER. Mr. Chairman, for the record, I received this morning a statement in the form of a petition from the Louisiana Syrup Association, and I would like to have that incorporated in the record if and when it is printed.

Senator TUNNELL. All right.

Is Mr. Foreman here?

(No response.)

Senator TUNNELL. Is Mr. Mitchell here?
Mr. MITCHELL. Yes, sir.

Senator TUNNELL. Áll right, Mr. Mitchell, you are next in line.

TESTIMONY OF BROADUS MITCHELL, RESEARCH DIRECTOR, INTERNATIONAL LADIES' GARMENT WORKERS' UNION, NEW YORK, N. Y.

Senator TUNNELL. Will you give your full name and position? Mr. MITCHELL. Broadus Mitchell. I am research director of the International Ladies' Garment Workers' Union, 1710 Broadway, New York.

Senator TUNNELL. All right. Now proceed in your own way. Mr. MITCHELL. The committee will have heard a great many statistics for and against the proposal for raising the minimum wage under the Fair Labor Standards Act to 65 cents an hour. The International Ladies' Garment Workers' Union in favoring this legislation does not propose to burden you with a rehearsal of familiar figures. Instead, we may be of service to the committee by recalling a part of history which bears directly on the important question you are considering.

Far and away, the chief economic development of our time is the change from scarcity to abundance. The fear of starvation which plagued mankind for countless centuries has changed within the last generation or two to the fear of surplus. This tremendous increase in the efficiency of production demands a change in economic thought. The so-called economic laws which were appropriate when we had

meager output no longer apply when we have called science and discovery to our assistance. Yet our economic ideas written into the books and sanctioned by tradition are revised only reluctantly. We still have too largely a body of economic thought which was prompted by scarcity. We need to embrace modern economic principles which belong to an economy of surplus.

The committee will permit me to recall a major episode in the intellectual history of the last century. The English masters of economic thought, fearing that population would outrun the food supply, groped toward a rule of wages which was clearly expressed by about 1825. You may remember the belief was that workers could not, as a class, permanently improve their standard of living. This was because there was only so much of economic capital set aside to be paid in wages. You arrived at the average wage by dividing the number of workers into this so-called wage fund. If the number of workers was temporarily small, the average wage might increase, but only for a short time, because then the birth rate would be stimulated, more children would reach maturity, the number of workers to be divided into this wage fund would be greater, and the average wage would fall. Similarly, there was no use for workers to form labor unions because, if one group of workers, through this means, succeeded in getting more for themselves, it simply meant less was left for others. This dismal doctrine held sway for about 50 years. Its best known advocate was the distinguished economic and political philosopher, John Stuart Mill, who was the teacher of Parliament and public. It was unquestioned that wages and profits were antithetical. They were like buckets in a well. If wages went up, profits went down; and the way to increase profits was to reduce wages. Since capital was held to be more essential to social progress, capital must be encouraged and conserved, and as little as possible dissipated in payments to workers. Wages, it was believed, were paid from capital. The relation between wages and profits was cut and dried, susceptible of very arithmetical demonstration. If workers got more, unless their numbers were diminished, it was self-evident that proprietors would get less, the accumulation of capital would be retarded, and the future of society would suffer.

About 1870 came a startling new view. Some practical men who had observed the workings of labor legislation and trade-unionism brought forward inescapable arguments against the old doctrine of wages. They saw that the standard of living of workers was improving; that unions were springing up on every hand, and were securing more for greater numbers of workers; that millions of immigrants could pour into a country like ours without more than temporarily threatening the level of wages. They urged their objections with such effect that even a man like John Stuart Mills recanted his old dogma and acknowledged that he had been mistaken for 50 years. Thus, it was nearly three-fourths of a century ago that able economists perceived a sympathic relation between wages of labor and profits of enterprise. They saw that the two could increase together. The prospect of a rising standard of living opened before the world. Our economic life was seen as dynamic-not static. It was no longer viewed as a pussy-in-the-corner game in which the safety of one was bound to be the peril of another; all could prosper together. It is essential to recognize that the American economy particularly

is flexible, susceptible of enormous beneficial changes. When statutory minimum wages were proposed in this country, many were laboring under the incubus of out-moded economic ideas. They wondered whether the industry of America could afford to pay minimum wages sufficient to support workers in merest decency. Budgets were drawn up to determine what would be necessary in food, clothing, shelter and a modicum of education and recreation to sustain workers in health. These budgets were very narrowly inspected, and all that could be omitted was dispensed with. They applied only to women workers. Economic objections to these budgets were reinforced by legal hostility so that the statutory minimum wage was for years suspended. Since then, we have moved forward in experience and thought. Instead of drawing up a budget which will enable the individual worker to exist, we realize the importance of a minimum wage high enough to permit the entire economy to function. We no longer talk about the number of calories, the allowance for laundry, the item for room rent, the pennies for newspaper, and so forth which make up the minimum requirement every week for the individual employee. We have shifted our emphasis from the problem of consumption to that of production. We are wondering how much purchasing power will be necessary to achieve and maintain full employment. We have come from individual health to social health. The true concern of lawmakers in establishing a minimum. wage is not only the security of the workers immediately affected, but also the well-being of the entire economy. In minimum wage legislation, we have passed from the limited authority of the state to the national responsibility of Congress.

Much of this change in purpose has come since the 40-cent minimum was established in the Fair Labor Standards Act. At that time, the clients were workers immediately affected. In the few years since then, taught by wartime miracles of production, we have learned the imperative importance of enlarging the general buying power.

I am pleading here for fairness to those who receive less among American workers; but I am pleading no less for fairness to the owners of American industry. Large purchasing power is the means by which our productive system can operate effectively. Mr. William H. Davis, recently director of the Office of Economic Stabilization, gave a press interview reported in the newspapers of September 5, 1945, in which, according to reports, he declared that real wages may be markedly increased, that is, money wages of workers may be raised without raising the cost of living or the general price level. This a modern and an enlightened view, all the more noteworthy because it was expressed by a public officer who for several years, under the stress of war conditions, was charged with the responsibility of restricting wage advances. The end of the war meant that an eager new consumer market must be substituted for the enormous demand that had previously existed. This demand, Mr. Davis proposed to furnish through additional buying power of American workers. Mr. Davis' doctrine was soon rejected by the President of the United States and the Secretary of Labor, and Mr. Davis was rebuked. I want to tell you that in my judgment Mr. Davis was right and his critics were and are wrong. I do not say this because I now have the honor to speak in the name of a great labor union; I say it as an economist who is in duty-bound to regard the welfare of the American people.

A study by the Brookings Institution, published in 1940, indicates that in general, output per man-hour increased in the 1930's more rapidly than total output of goods with a resultant decline in employment. Labor's gains from increased productivity were merely in the form of leisure; for, although the hourly rates of pay increased, weekly wages were lowered by shortening the workweek. The failure of production to increase as man,hour productivity increased resulted in slack employment and partial utilization of plant capacity. The potential benefits of increased efficiency have not been fully realized by either labor or capital. In other words, our increasing skill to turn out larger quantities of goods and services has to a consiberable extent been nullified. The possibilities have not fully materialized in national income.

In order to insure that output will expand as workers' productivity increases, it is necessary to pay labor a wage sufficient to maintain a level of purchasing power and consumption conducive to full production. Our return to a civilian economy has entailed losses in overtime and various bonus payments in addition to loss of jobs. Unemployment has risen and may continue to rise to still greater proportions. To compensate for these losses entailed by reconversion and maintain the purchasing power of our working population, we have to decide now between raising wages, and public spending on relief, public works, and so forth.

Today there is discussion about our national debt and its reduction. It seems wiser to limit our national debt by avoiding public spending on relief and public works, and to sustain purchasing power through an adequate minimum wage so that we will not suffer another depression with its loss of national income.

Average hourly earnings in the major branches of the women's apparel industry are already far above the proposed minimum as can be seen in table I. (See p. 584.) The highest-paid workers, those in the women's coat, suit, and dress industries, receive average hourly earnings of $1.56 and $1.14, respectively, and constitute 71.9 percent (an overwhelming majority) of the total employed in our industry. The lowest-paid workers-those in the cotton dress, uniform and apron industry-receiving 67.4 cents per hour, comprise only 18.7 percent of the total employment in the women's apparel industry.

The majority of garment workers are organized in the International Ladies' Garment Workers' Union, which has a membership of over 300,000. Examination of our prevailing union wage rates reveals that most wage scales are much higher than 65 cents, so that wage adjustments which may be necessitated by the proposed 65cent minimum are small. In New York City, where a majority of apparel workers are located, the guaranteed union minimum hourly rates in the dress industry range from 67 cents to $1.57, depending on craft. In the cloak industry in New York City, basic union rates range from 85 cents to $1.82 an hour depending on craft. Since the majority of apparel workers earn above 65 cents an hour, it follows that compensatory wage increases necessitated by wage differentials will be relatively small. The payment of less than 65 cents an hour to garment workers today (considering the small number involved) perpetuates labor conditions which constitute an unfair method of competition.

Labor is but one item in the price of the finished product. In the women's-apparel industry the percentage of wages to total value of product is comparatively small, varying from 14 percent in some branches to 20 percent in other branches as shown in table II. (See p. 584.) Improving equipment and plant efficiency can offset wage increases. The business acumen of management, its ability to stimulate and forecast consumer demand, are far more important factors than wage rates in determining the margin of profits in the women'sapparel industry. Moreover, the adjustments following on higher wage rates can be made without affecting the quality of the product. It is interesting to note that despite the rising level of wages from 1929 to 1939, the unit price per garment has declined as a whole over the period.

The data on prices and wages presented thus far show that a 65-cent minimum is necessary to prevent unfair competition, will not curtail employment, and will have but little effect on the wage structure in the women's-apparel industry. This is also borne out by actual experience with minimum wages under various State laws, the NRA codes, and the Fair Labor Standards Act.

If minimum wage legislation in the several States had a detrimental effect on industry, there would have been a migration of plants to areas without minimum wage laws or displacement of women and minors by workers to whom wage orders did not apply.

Summarizing the experience with State minimum wage legislation, the United States Department of Labor comments significantly:

In regard to women's employment, the usual experience has been that it continues to increase regardless of whether or not there is minimum-wage legislation, and in the State where the highest minimum was maintained over a long period of years women's employment increased considerably more than in the country as a whole. The constant changes in employment that are occurring are attributable to many factors not connected with the minimum wage and there is no evidence that such legislation has any general or controlling effect toward inducing the replacement of women by men.

Similar experiences in the apparel industry with minimum-wage orders are recorded for Rhode Island, Illinois, and New Jersey.

The introduction of minimum wage scales under the NRA codes did not limit employment or sales in our industry. While there were increases of 34.4 to 53.7 percent in wages paid in various branches of the garment industry, employment simultaneously increased from 2.4 to 18.5 percent. Over the 2-year period of 1933 to 1935, pay rolls in the women's-garment industry increased 62.5 percent, while employment increased 36 percent. Between 1933 and 1934, department-store sales in the various branches of women's apparel rose from 3 to 31 percent.

Data on employment and pay rolls in the women's apparel industry demonstrate that the FLSA had no injurious effect on the industry. As can be seen in table III, there were no over-all significant changes in either employment or pay rolls. Table IV shows that departmentstore sales of women's apparel increases. (See p. 585.)

From March 1940 to March 1941 some plants in the industry registered increases in employment while others showed declines, with no correlation between declines in employment and wage increases being shown (tables V through XI). Both high- and low-wage plants increased their employment of workers. The reverse is also true. In several instances, firms in the lower wage brackets which registered the largest wage bill increases also recorded the greatest gains in