vided by section 13 (b) (1) of the Fair Labor Standards Act. No power or jurisdiction to determine the amount or percentage of work affecting safety of operation which must be performed by any employee in a workweek in order to bring him within the scope of the Fair Labor Standard Act exemption is claimed by the Commission. It is, further, our understanding that the Commission does not maintain that it has power to prescribe the qualifications which motor-carrier employees must possess while performing work which does not affect safety of operation of motor vehicles in interstate commerce or to prescribe the maximum number of hours that they may spend in work not affecting safety of operations.

Statement. Mr. Lawrence quoted criticism from one employer in the industry to the effect that our inspectors are browbeating or entrapping operators and trying to stimulate employee litigation.

Comments. I can only say that no rule of conduct for our inspectors has been more strictly laid down than that they are impartial fact finders whose job is merely to ascertain violations if they have occurred but not to lead employees to believe that they have been improperly compensated if such is not the case. Any activity of the sort described in the letter quoted in Mr. Lawrence's testimony is contrary to instruction and I should be more than glad to have the name of any inspector and the occasion on which he has allegedly so far departed from the confines of his job so that proper disciplinary action can be taken. Statement by Senator Ellender on the Effects of Increasing the Minimum Wage in the Southern Lumber Industry, October 2, 1945

Senator Ellender introduced into the record a statement purporting to show the rise in the price of lumber which would be occasioned by minimum wage rates higher than 40 cents. While it was stated that the estimates were based on cost figures of 190 sawmills in the South, an analysis of the figures given shows that the computations were made simply by applying the same percentage increase to the present ceiling price on lumber, presumably southern pine, as exists between a given minimum and 40 cents. Thus, the estimate of the total cost of lumber under a 50-cent minimum was exactly 25 percent higher than under the present 40-cent minimum, and the estimate under a 60-cent minimum was exactly 50 percent higher, et cetera.

Such a calculation fails to recognize certain basic economic facts. In the first place, labor costs are only one of a number of factors which enter into total costs of producing lumber. In 1942, for example, wages and salaries in a representative groups of southern pine mills were somewhat less than half of total produetion costs, and many of the other cost factors such as stumpage and depreciation would not be directly affected by an increase in the minimum. Furthermore, even the labor cost of producing lumber would not rise in direct proportion to the increase in the minimum since the vast majority of workers in the industry are currently receiving considerably more than 40 cents.

Based on a survey of the industry made by the Bureau of Labor Statistics as of August 1944, a 45-cent minimum would have required a direct labor cost increase of only seven-tenths of 1 percent for the basic lumber industry as a whole and only 12 percent for the lumber industry in the South. Thus, the rise in total costs of producing southern pine would be less than 1 percent and 122 percent as estimated in the statement submitted by Senator Ellender. Producers might well be able to absorb this small increase within the present ceiling price and thus cause no rise whatever in the price to the consumer. On the basis of the same study a 50-cent minimum wage would result in a direct labor cost increase of 4.7 percent in the southern lumber industry, 03 percent in the northern lumber industry, and less than one-tenth of 1 percent in the western lumber industry. The corresponding figures at a 55-cent minimum are 11.2 percent for the South, 1.1 percent for the North, and less than 0.1 percent for the West; at a 60-cent minimum, 18.9 percent, 2.4 percent, and less than 0.1 percent; at a 65-cent minimum, 27.3 percent, 4.9 percent, and less than 0.1 percent; at a 70-cent minimum, 36.1 percent, 8.4 percent, and less than 0.1 percent; and at a 75-cu minimum. 45 percent, 12.6 percent, and 0.1 percent. From these statisticpparent that even a 75-cent minimum would have virtually no effect mix of producing lumber in the West, while a 65cent minimum would else (ator rats, which represent less than half of total costs, only 4 to the Nort and 27.8 percent in the South. These percentages are instant by the tinutes contained in the statement introduced by Senarender That a minimum would raise the final selling price of Inml

As further comment on the possible effect of a 65-cent minimum in the lumber industry, I call your attention to the following excerpts from the statement presented to your committee on November 2, 1945, by Mr. Chester Bowles, Administrator of the Office of Price Administration:

"The lumber and timber industry has the next highest percentage (tobacco having the highest percentage) of workers employed at less than 65 cents an hour, namely, 54 percent. The introduction of a 65-cent minimum in this industry would increase pay rolls by $67,000,000 or 9 percent, plus a few other necessary adjustments to maintain the wage patterns. Here at first glance the possibility of absorbing the cost increase would seem somewhat more doubtful. For this increase amounts to 43 percent of the industry's 1944 profits. Yet, if we may judge by an OPA sample of 25 corporations in this industry, a reduction of 43 percent in profits would still leave them 690 percent before taxes above prewar levels and would yield a return of 10 percent on net worth, or seven times the prewar average. Prewar profits were admittedly low. But it's a dramatic example nevertheless.

"Now if, when the OPA is out of the picture, competition should operate to translate this increase in wage cost into an increase in manufacturers' prices to yield the additional $67,000,000, how much of a price increase would result? The answer is 5 percent. However, we should not forget that margins at wholesale and retail are in this field relatively wide. I can't say how much on balance would be passed on to the consumer, but certainly much less than the figure of 5 percent."

Statements Regarding the Effect of the Fair Labor Standards Act on Clothing Plants in Louisiana

I should like to take this opportunity to correct certain misimpressions which have apparently arisen in connection with the effect of the Fair Labor Standards Act on the clothing manufacturing industry in New Orleans. The assertions made during the course of the subcommittee hearings that several New Orleans firms in this industry were forced to close because of the minimum wages established under the act are not borne out by the record.

In 1938, the year in which the act became effective, there were operating in the city of New Orleans some 43 factories producing men's and women's apparel and allied products such as hosiery and neckwear. Additional plants were located. in the city of Shreveport. The information on file in the divisions indicates that six of these firms, all located in New Orleans, ceased operating from that time to the present date. We have attempted, so far as is possible, to learn the reasons for the closing of these plants. With respect to four, which I will discuss first, the following seems clear:

Plant A. This plant produced only for local consumption and its manufacturing operations were not subject to the provisions of the act.

Plant B. Bankruptcy was caused by limited capital and high cost of operation due to antiquated machinery.

Plant C. The widow of the owner liquidated the firm following the owner's death.

Plant D. This plant was operated as an adjunct to a wholesaling firm by a partnership conducted by a man and wife. There were no employees. The business was discontinued when the husband resumed his dental practice, which he still maintains.

It is obvious, therefore, that neither the passage nor the administration of the act was a real factor in the decision to close any of these four firms.

Such adverse criticism as has been made appears to revolve entirely around the closing of the two remaining firms, namely Leon Godchaux Clothing, Ltd., and Hirsch & Baer. Both firms were formerly engaged in the manufacture of wash suits in the city of New Orleans.

Information concerning the liquidation of Godchaux's manufacturing department first came to our attention in 1939. Claims that the Fair Labor Standards Act was responsible for this action were repeated from time to time in letters to the Division and in the course of industry committee proceedings. It is significant to note, however, that in an interview with a Division representative in 1941, Mr. Leon Godchaux denied this allegation. Quoting from our inspector, "Mr. Godchaux smiled and assured me that the requirements of the wage and hour law had absolutely nothing to do with his decision to discontinue his manufacturing operations."

Statements that the firm of Hirsch & Baer was forced out of business by the Fair Labor Standards Act are equally without foundation. In this instance, too, the claim has been repeated from time to time in the course of various activities of the Division. Both of the former partners of this firm, Mr. Morris Baer and Mr. Paul Hirsch, have categorically denied in statements to the Division that the Fair Labor Standards Act was the cause of the closing of their firm. In December of 1940 Mr. Baer stated the competitive situation in the industry [seersucker suits] and personal requirements were the primary reasons for the discontinuance of the operation of the firm of Hirsch & Baer. Similarly, the following is quoted from the inspector's notes of a conversation with Mr. Hirsch:

"My partner was 70 years old, had accumulated a nice income through investments upon money realized in the business we conducted and was anxious to retire. Likewise I was also thinking of retirement as I had also acquired a comfortable income from the source of our business. In 1940 Mr. Baer decided to retire; we therefore decided to liquidate the business. My decision not to reorganize or carry on alone was based on the fact that materials were becoming hard to. procure in 1940, and I did not feel that I could operate without an experienced partner such as Mr. Baer had been, thus I agreed to the liquidation. You have asked me specifically if the minimum wage had any bearing on our decision to liquidate. In answer I will say that we were paying a 40-cent minimum in 1940, and were anxious to increase it upward somewhat but were unable to do so because of the prices we were receiving for our product. I will emphatically state that the 40-cent minimum and overtime provisions of the Fair Labor Standards Act had no bearing on our liquidation and will further furnish any other information to this effect if you need it."

In further connection with the New Orleans situation, I think you will be interested in knowing that at least three new apparel plants opened in that city in the years following the passage of the act and that all of these plants have continued in operation.

We have found in our experience, almost without exception, that statements attempting to show that the act had an unfavorable effect on certain plants or industries were based on insufficient or inaccurate information. Even where some evidence is presented which might indicate that the act did have some effect there is no certainty that other and more basic reasons were more directly responsible, such as, for example, inefficiency of operations, lack of materials or workers, new conditions brought on by the war, the existence of such low wages previously as to make operations impossible under any decent standard. At any rate, so far as this particular situation is concerned, there is certainly not the slightest doubt that causes other than the Fair Labor Standards Act were controlling.

I am gratified, in a way, that this ghost of the past has again been revived, since it seems to me that the time has finally come to lay it once and for all.

STATEMENT ON MINIMUM WAGES BY CHESTER BOWLES, ADMINISTRATOR OF THE OFFICE OF PRICE ADMINISTRATION, TO THE SENATE COMMITTEE ON EDUCATION AND LABOR, NOVEMBER 2, 1945.

Your committee has requested my views on the proposed legislation which would raise minimum wages of all workers in interstate commerce to 65 cents an hour. In preparing this statement I have considered your request from three viewpoints.

First, in my capacity as Price Administrator, charged with the responsibility of holding down the cost of living and maintaining a stable level of prices. Second, as a Government official concerned with the future health of our economy and the achievement of high minimum level of security for all of our people.

Third, as a former busin

the profit system, and whe best hope for a sustained citizens.

Let me state clearly at wage for all workers in

who to fully familiar with the workings of

free-enterprise system offers the with prosperity for all of our

nion the 65 cents minimum osed in this bill, is wholly

reasonable. In fact, I believe it is imperative for the health of our economy that it be enacted into law.

The proposition underlying this bill is that any business operating across State lines must provide a wage scale that allows a decent minimum living. We long ago refused to allow a minority of businessmen to ignore safety in the construction of their plants. We long ago required them to guard their workers against accidents. We do not let industry ignore the public health in its sanitation systems. And in 1938 the Congress decided that it is against the public interest for business to operate on the sweat of exploited workers. Any employer so inefficient that he could stay in business only by paying sweatshop wages-like the employer who could stay in business only by operating an unsafe plant-was told that he did not belong in business.

This bill does not establish a new congressional policy. It merely reaffirms an established policy. In my view that policy cannot be reaffirmed too strongly. It is a national disgrace that today, when our national production and income are at peak peacetime levels, there should still be millions of Americans who exist on pitifully low wages-wages that mean malnutrition for the breadwinner's family, wages that eat steadily into the health and efficiency of the worker himself.

This bill is intended to take a major step toward removing that disgrace. It is unfortunate that it cannot cover a wider field. The levels which it establishes for 22 million workers in interstate commerce will by competition bring some improvement to 20,000,000 others in retail trade, laundries, restaurants, and other low-paid occupations. In my opinion, however, we must hasten the day when comparable protection is extended to every American worker without exception. The principle of the minimum wage has been established. The only question is its application to present conditions-how much the statutory minimum needs to be raised to fit conditions as they are today.

What is proposed by the bill is a revision of the minimum statutory wage level from 40 to 65 cents an hour aud, 2 years hence, to 75 cents an hour. Why is this revision called for?

In the first place, the 40-cent minimum was scarcely a living wage when it was established in 1938. To an employee working 40 hours a week, 52 weeks a year it gave only $832 a year. That's a miserable wage for a worker living alone. It's an impossible wage on which to ask a man to raise his family.

It was only because of the fact that wages actually as low as 10 cents an hour were then being paid in some areas that a minimum of 40 cents an hour was felt to be the most that could be accomplished by one stroke of legislation. 7 years it surely is time to reexamine the problem.

After

Furthermore, the economic developments during these 7 years would make it necessary to reconsider the satutory minimum even if it had been wholly satisfactory in the first instance. The real value of the statutory wage has been sharply reduced by higher living costs.

As a matter of fact, one-half of the proposed immediate increase is necessary to equal the increase in BLS index of consumer price entering the cost of living. Since 1938 the prices paid by moderate income families in our urban areas according the the official index have increased some 30 percent.

This increase has been largely halted since May 1943, and it's a vastly better record than that of World War No. I. However, let's remember that the prices measured by the index in 1938 were not the prices that submarginal workers paid.

Before the war they eked out a living at the bargain counter. They bought the clothing that had been passed over by other customers because of unattractiveness or unserviceability. They bought the foods which were a glut on the market or which were marked down just before the close of business to avoid spoilage. They lived in dilapidated dwellings without even a decent minimum of medical care. Moreover, even when these workers were not actually sick, they could not hope to buy enough of the protective foods to maintain health and efficiency. They couldn't buy enough milk, eggs, oranges, or meats. The result was a deterioration of health and vigor among the lowest third of our population-a result spread on the selective-service records of rejections of draftees for physical unfitness.

During the war all the bargains, the spoilage sales and the substandard prices disappeared. Demand was too great for any part of consumers' purchases to be made at bargain prices. Besides, as everybody knows, much standard merchandise in the low-price class has largely disappeared during the war. Thus, when we come to consider the rise in the cost of living for the low-paid workers, we cannot go by the Bureau of Labor Statistics cost of living index, which admittedly measures only the changes in prices for average income families.

Some people will say that while that was true during the war it won't be true much longer and that these bargain prices will return once more. In a peacetime economy there will always be bargains, of course. But let me remind such objectors that the bargain prices which enable millions to eke out an existence in 1939 were a development of the scarcity economy we had before the war, with its unemployment going hand in hand with its embarrassing surpluses. I earnestly hope that we have put such days behind us. In any event, I do not believe we should set minimums at levels so low that men can live on them only by buying left-overs.

An increase of 30 percent in the cost of living would call for a rise from the 40 cents prewar minimum to 53 cents, even if we assume 40 cents to have been adequate in the first place. If we take into account the disappearance of cheap. left-over merchandise, of spoilage sales in our food stores on which our substandard workers depended, a rate comparable to the present 40 cents would be close to the 65-cent proposal.

When we take these factors together—the inadequacy of the original level and the disproportionate rise in the cost of living for the lowest paid workers since the enactment of the original statute-we find, it seems to me, an emphatically convincing case for adoption of the revision now proposed.

But the case for the proposed revision does not rest entirely upon these considerations of a basic minimum of fair treatment for American workers. The proposed revision is good economics, too.

If there is anything that is clear from history, it is that wages, high-production. and good profits go hand in hand. High production makes possible high wages. It is equally true that high wages are essential to the movement of production to even higher levels, with sustained profits for management. It's common sense that the worker who has money for good food, for recreation, and for self-improvement is a more efficient, better satisfied worker than one without such advantages.

That is why the countries that have high wages are without exception the countries that have high labor productivity. In whatever countries, or in whatever sections of a country you go, where you find sweatshop wages, there you find that labor productivity is low, profits are low, and the living standards of employee and employer alike are low. It is the lesson of our economic history that low wages drag down the whole economy, and that good wages more than pay for themselves. There is no getting around this basic proposition.

The other half of the economic case for higher minimum wages is their essentialty in providing good markets. Everybody knows that today our main problem is the development of sufficient buying power to absorb the huge amount of goods we are capable of producing.

We have licked the old problems of production and we will lick the new ones as they come up. If production is to be sustained, business must have customers-good customers, millions of good customers. We all know, too, that there is no place where increased income is translated into purchasing power in the market faster or more completely than at the bottom end of the income scale. Every dollar paid out there in additional wages is a dollar that is going to be spent on the products of American factories and American farms.

Let me say that the farmer's stake in the proposed minimum wage of 65 cents is too easily overlooked. There are even those who say that the effort of this legislation would be to bid up the farmer's labor costs and thus injure his economic position.

In my opinion nothing could be further from the truth. The farmer's great problem is not the wages that he pays. for his hired help, but good markets for his products. The one thing this legislation can be depended upon to do is to expand the farmer's markets. The more purchasing power there is in the cities the greater are the markets for the farmer. That has always been true.

Income on the farm has followed with mathematical regularity the course of income in the cities. As city income rises, the demand for farm products and the income of the farmers rise with it. As city income falls, so do the demand for farm products and the income of farmers.

Moreover, the extra purchasing power which this legislation provides would be heavily concentrated on farm products. The average urban consumer devotes 40 percent of his purchases to food. But the low-income groups affected by this legislation must spend 50 percent and more of their income for food, and a heavy additional slice for clothing. The farmers would thus be a major beneficiary of the extra purchasing power which this legislation would put in the hands of low-paid workers.