the way of a minimum standard of living. I believe that all the factors make it desirable to set now a minimum wage standard of 75 cents an hour to be reached as soon as feasible. Even a wage earner employed full time throughout the year at 75 cents per hour would earn but $1,560 per year which would be no more than enough to provide a family of four with a minimum budget. Of the 33 cities surveyed by the Bureau of Labor Statistics in mid-1943, the minimum standard could be met by this amount in only 1. The more immediate minimum of 65 cents per hour would not meet that standard.

Basic wage rates have already risen by more than 40 percent since 1938 and further increases seem probable as the result of collective bargaining over the next few months. In view of this generally higher wage structure the proposed minima are not much more than enough to afford the same protection against competitive wage-cutting as that provided by the 1938 act.

As a matter of sound economics as well as equity and social justice, certain industries should not be allowed to exploit labor by paying wage rates far below these already being paid for equivalent abilities in other industries. The difference between the high wage and the low wage industries is still much more than can be justified by any real difference in the inherent abilities of the workers in those industries.

Similarly, I do not believe that when a worker moves from one part of the country to another the change in environment suddenly endows him with vast new abilities justifying a large increase in income. As a matter of fact, I have been impressed by our war experience which has demonstrated that, given the same tools, working and living conditions, and managerial supervision, there is little to choose between workers drawn from different geographic areas.

On the contrary, I suspect that the availibility of cheap labor tends to encourage the inefficient use of that labor. The resulting high costs are then used as an argument against raising wage rates. Experience under the 1938 act has demonstrated that raising the minimum wage has encouraged the use of labor-saving equipment and techniques, thereby at least partially offsetting the increase in costs. Effort should be directed toward encouraging and speeding up that process of adjustment rather than perpetuating a vicious circle of low wages and inefficient use of labor. It is time to take another step in that direction.

Our minimum wage policy must be considered also in relation to the overriding objective of full production and full employment. This country is capable of producing half again as much as our national output in the best prewar year. That productive capacity has been demonstrated during the war. The problem is one of markets. The development of mass markets for a capacity national output depends in considerable part on adequate buying power in the hands of the lower income groups.

This need for increased buying power is particularly acute in the areas where wage rates are low. A large part of the potential development of these areas lies in the increased production of goods and services for local consumption. Policies which tend to raise the level of income in those areas will encourage rather than retard expansion.

While endorsing the reasonableness and desirability of the proposed increases in the minimum wage, I am impressed with the fact that they will affect more people and will require greater adjustments of current wage rates than did the original 1938 act. It is particularly important, therefore, that the transition to the higher standards should be effected in a manner which will minimize the difficulties involved in these adjustments.

In 1938, there were very few employees in the covered industries getting less than the 25 cents per hour, which was the minimum for the first year of the act. About 5 percent were getting less than 30 cents per hour, which was the statutory minimum for the second through the seventh year and about 15 percent were receiving less than 40 cents.

At the present time about one out of five employees in the covered industries is getting less than the proposed minimum of 65 cents for the first year, about one out of four is getting less than the proposed minimum of 70 cents for the second year and about one out of three is getting less than the proposed minimum of 75 cents for the third year.

Chart V shows the distribution of wage rates in manufacturing by 10-cent intervals in the summer of 1945. The bulk of the employees covered by the act are in manufacturing. The three vertical lines show the proposed minima of 65, 70, and 75 cents for the first, second, and third years. A comparison of the

shaded areas with the total area under the curve will indicate to you the proportion of total wage earners in manufacturing that are affected.

The impact on particular industries or geographic areas is, of course, not derivable from this chart. Two-thirds of all the employees in the textile and tobacco industries are getting less than 75 cents an hour. Ninety percent of all the southern lumber workers fall below that minimum.

Also the number of persons affected is larger than the number getting less than the specified minimum. Supplementing the normal tendency toward upward adjustment of rates in the various skilled classifications in line with the mini mum for unskilled workers, five of the proposed bills specifically provides for maintaining reasonable differentials.

In October 1938, the average hourly earnings in manufacturing were 63 cents. The immediate minimum was thus about 40 percent of that average and the ultimate minimum was about two-thirds. At present, the average straight-time hourly earnings in manufacturing are about 90 cents, and the proposed minima of 65 cents and 75 cents are much closer to this average. This 90 cents is comparable to the data presented in chart I and is an average weighted by peacetime, rather than war-time, distribution of employment.

Chart V-DISTRIBUTION OF FACTORY WAGE EARNERS, SUMMER 1945 WITH REFERENCE TO MINIMUM WAGE PROPOSALS

While the proposed minima are higher relative to prevailing wage rates tha those in the original act, it is nonetheless true that the effect on aggregate wage costs of bringing those employees below the minimum up to this level would not be large. If all wage rates in manufacturing now below 65 cents were rais to that minimum, this would increase the total bill for wages and salaries manufacturing by about 2 percent. If all those under 75 cents were raised that level it would raise wage and salary costs by about 5 percent. While the are exceptions, I believe industry as a whole can adjust to an advance of this size without undue hardship.

It is clear, however, that in those industries where a substantial number the employees are getting less than the proposed minima the maintenance reasonable differentials would result in a more general wage increase. T would result from the normal process of collective bargaining as well as specific provisions of the bills with respect to these differentials. The effe of the minimum wage provisions in this direction should not, however, overstressed. It is my impression that on an over-all basis the general of wage rates will be determined by collective bargaining processes whose come will not be greatly affected by the precise level at which minimum wa are being set.

The fact that the bill would require substantial adjustments in a number of industries does not offset the strong arguments in favor of its enactment. I present these facts not as arguments against the proposed minima but rather as arguments in favor of retaining the flexibility of their enforcement provided in the original act.

The 1938 act allowed 7 years to reach the ultimate minimum of 40 cents per hour. The administrator and the industry committees were given the responsibility of determining how quickly this objective could be reached without substantially curtailing employment. While we can well afford to proceed faster in the present situation, I believe your committee should weigh carefully the data of those who regard the 2-year step-up as being too rapid. Perhaps the objections could be overcome by granting additional discretion, within reasonable limitations, to the Administrator and the industry committees to postpone the step-ups in those instances where adjustments cannot be worked out this promptly.

RELATION TO FOREIGN TRADE

I have been asked to discuss briefly the question of the possible effect of raising the minimum wage to 65 cents upon our export trade, since there has been some apprehension that our competitive position in foreign markets would be affected adversely by this measure. I believe that the facts clearly demon

strate that any effects of the 65 cents minimum wage upon our export trade would be of minor importance in the aggregate, and should not be a controlling factor in considering this proposed legislation. There are two aspects of our foreign trade position which leads to this conclusion.

The first of these is the general condition of our balance of payments which has prevailed for more than two decades, as shown in chart VI. During this period and right up to the beginning of the war, the top panel of this chart shows that the general tendency was for the foreign demand for dollars to be in excess of the supply available to foreign countries. In other words, the purchases by foreign countries in the United States were being limited by the amount of dollars which we supplied abroad. The competitive position of American goods was sufficiently strong so that there was a shortage of dollars abroad taking the interwar period as a whole.

What this means is that if the price of some of our goods were to rise in foreign markets within the range which might be induced by increasing the minimum wage, we would not expect a curtailment of our total exports, even though sales of some commodities might be reduced. Foreigners would continue to buy as much American goods in the aggregate as they can settle for.

I think it is apparent that in the postwar period which we now face, the shortage of dollars will be very much greater than it was before the war because of the destruction of productive capacity in other countries.

In the second place, a detailed analysis of the character of our export trade shows conclusively that it could not be significantly affected by raising the minimum wage for the reason that the overwhelming bulk of our exports of manufactured goods are produced by industries which are in the higher average wage

groups.

One of the major characteristics of our export trade is that the bulk of it comes from our high-wage industries. Only a small portion comes from lowwage industries. This fact is brought out in chart VII. Here we have added up all the exports from industries where wage costs might be affected by more than 2 percent by the raising of the minimum to 65 cents, and contrasted those exports with our foreign shipments of manufactured goods.

We have used the prewar trade distribution for this comparison, because the war trade was, of course, abnormal and financed in very considerable part by lend-lease arrangements. But it is significant that less than 1 percent of our exports came from the industries whose costs might be expected to rise by more than 2 percent. Hence, we suggest that this factor should not receive much weight in your deliberations.

In summary, I consider raising minimum wages to provide a minimum standard of living an integral part of our postwar economic program. If care is exercised to minimize the difficulty of the necessary adjustments, I believe that the benefits of the bill will accrue not only to the low wage groups immediately affected. It will also contribute to a higher and more efficient output and, therefore, to the improved economic position of workers, businessmen, and farmers in general.

1919 1920 1921 1922 1923 1924 1925 1926 1927 1928 1929 1930 1931 1932 1933 1934 1935 1936 1937 1930 00 SOURCE: THE UNITED STATES IN THE WORLD ECONOMY - UNITED STATES DEPARTMENT OF COMMERCE.

Hon. JAMES M. TUNNELL,

WAR SHIPPING ADMINISTRATION, Washington 25, D. C., September 27, 1945.

United States Senate, Washington, D. C.

DEAR SENATOR TUNNELL: The receipt is acknowledged of your letter of September 19, 1945, regarding hearings on S. 1349, a bill providing for the revision of the Fair Labor Standards Act of 1938.

I shall be glad to appear before your committee at any time that suits your convenience.

I have gone over S. 1349 and have had various discussions of the bill with members of our staff.

On the general principles of the bill, I do not feel that I am a competent witness.

When the Fair Labor Standards Act was passed, Congress exempted merchant seamen because the merchant seagoing profession is unique and should not be classified with professions ashore.

We feel that it is utterly impracticable to apply the 40-hour week to seagoing personnel as at sea practically the entire crew work a 56-hour week by standing sea watches of 4 hours on and 8 hours off.

We feel that nothing has happened since the act was passed to justify removal of merchant seamen from that exemption now.

With regard to the question of wages for the merchant marine, you are probably aware that the matter was gone into most thoroughly by the National War Labor Board in August 1945, at which time public hearings were held, briefs submitted, and decisions reached and promulgated by the National War Labor Board. Enclosures covering the action of the National War Labor Board are attached for your information and that of your committee.

It is my belief that I can add nothing to these data that would be helpful to your committee.

I shall await your further instructions.

Sincerely yours,

E. S. LAND, Administrator.