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TABLE 1A.-Establishments, receipts, personnel, and pay roll by size based on volume of receipts, by kinds of business [Census of Business: 1939-service establishments-analysis by size based on volume of receipts, 1939]

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EXHIBIT 16

STATEMENT OF JACK GARRETT SCOTT, GENERAL COUNSEL THE NATIONAL ASSOCIATION OF MOTOR BUS OPERATORS BEFORE A SUBCOMMITTEE OF THE SENATE COMMITTEE ON EDUCATION AND LABOR RELATIVE TO S. 1349, тo AMEND THE FAIR LABOR STANDARD'S ACT

"My name is Jack Garrett Scott. I am general counsel of the National Association of Motor Bus Operators which is the only national trade association of the intercity motor bus industry. Including members of affiliated State associations, it represents approximately 650 common carriers of passengers by motor vehicle, all of whom are subject to regulation by Federal or State agencies, or both. The industry is predominantly one of small enterprises. Of the approximately 1,500 motor carriers of passengers subject to the provisions of the Interstate Commerce Act, only 220 had gross revenues of $100,000 or more in 1944, and only 145 in 1940, the last normal year for the bus business. The present number of class I carriers will undoubtedly shrink, now that the war is over, to or below the figure of 1940.

Our industry is opposed to the enactment of S. 1349 as it is now written. Our objections fall mainly into four categories, and my discussion will be so divided. These points have to do with the following: (1) The proposed progressive increase in minimum wage rates to 65, 70, and 75 cents per hour; (2) the proposal to remove the exemption from the provisions of section 7 from those employees of common carriers by motor vehicle subject to the jurisdiction of the Interstate Commerce Commission as to whom that Commission has not prescribed qualifications and maximum hours of service; (3) the proposal to establish job rates above the minimum for the purpose of maintaining wage differentials on the basis of variations in skills and the like; and (4) the establishment of a 5-year period of limitations for the institution of employee actions for unpaid minimum wages or overtime compensation and liquidated damages.

Preliminarily, the following additional facts concerning the industry may be of interest. It employs approximately 70,000 workers who are engaged in the task of providing intercity transportation of passengers by motorbus to and from practically every city, town, hamlet, and other community in America.

Unlike the local transit industry, which is totally exempt from the provisions of the Fair Labor Standards Act, the bus industry is subject to the minimumwage requirements of the Fair Labor Standards Act. Much of the testimony presented to this Committee has dealt with the probable effects of the proposed revisions in that act, as set forth in S. 1349, upon manufacturing industries. Because of the nature of its operations, the intercity bus industry occupies a somewhat unique position-one that differs markedly from the typical manufacturing operation.

One of the principal differences is that we are subject to the strictest and most comprehensive kind of governmental regulation. The price which we may charge for our service is under the exclusive control of the Interstate Commerce Commission and the several State utility or public service commissions. No increases in revenues, therefore, are possible without the approval of those bodies. But more important even than the matter of regulation, is the fact that our fares are subject to an economic price ceiling growing out of competition, above which we could not go if we would even if the regulatory agencies should give their approval.

In 1941, for example, the last normal year before wartime restrictions on gas, tires, and automobile manufacture, approximately 86 percent of all intercity passenger travel was by privately owned and operated passenger cars. The balance was divided up between the railroads and the buses, with a small frac tion of 1 percent going by air. With the elimination of wartime restrictions on private passenger travel, intercity travel by passenger car will undoubtedly jump back to or beyond its prewar levels. In addition to this, the motor bus industry will undoubtedly face greatly intensified competition from railroads and airlines. As a consequence it is impossible for use to raise our fares in order to obtain revenues necessary to meet added costs or for any other reason, if we expect to continue to attract traffic and to remain in business. We are faced with greatly decreased revenues without any doubt. Our present average operating costs per bus mile are greater in most instances than our total revenues per bus mile before the war. Even if there are no increases in labor costs, by reason of this bill or others of similar import or of labor's demands, we will be hard put to it to continue performance of this highly important transportation service and to provide employment for the industry's 70,000 workers.

INCREASES IN MINIMUM HOURLY RATES

The Committee has heard testimony by the Secretary of Labor and the Acting Commissioner of Labor Statistics which points out that, as of the summer of 1945, approximately 20 percent of the 12.2 million factory workers received less than 65 cents per hour. It is estimated further that application of this minimum would increase average wage rates in manufacturing industries by 2 percent.

The intercity bus industry is, of course, subject to the minimum wage provisions of the Fair Labor Standards Act and, while extensive data are not available, preliminary estimates suggest that the proportion of its workers receiving less than 65 cents per hour is roughly the same as that for manufacturing, i. e., about a fifth. It is probable that, so far as the intercity bus industry is conccerned, the estimate of a 2-percent increase in average wage rates if the 65-cent minimum were established is an understatement. Irrespective of the accuracy of this estimate, it constitutes, at least by implication, a conclusion that is grossly misleading.

A 2-percent average increase in wage rates would constitute a serious burden to comparatively few industries. But it is clearly impossible to raise the wage rate for janitors or men who wash buses from 55 to 65 cents per hour without making corresponding readjustments in the wage rates of mechanics and other types of workers. In order to maintain a reasonable balance between compensation and job requirements, it would be necessary to raise the rates of at least twice the number of workers directly affected by the new minimum. The actual proportion of workers who would receive raises as a result is therefore not less than 40 percent of the total and such data as are available indicate that it would be considerably higher. The end result would be an average increase in wage rates for the industry as a whole, far above the 2-percent figure based only on application of the proposed minimum.

Another important difference is found in the relative importance of labor costs. A total labor cost which amounts to as much as 25 percent of the total value added by a manufacturing industry is regarded as comparatively high. In many industries labor costs are well under 20 percent of total product value. In the intercity bus industry, however, labor costs are estimated at more than 35 percent of total costs and almost 30 percent of gross revenues. Thus the effect of increasing wages by equal amounts would constitute a far heavier burden on this industry than would be the case typically in manufacturing. Further, labor costs in the intercity bus industry have risen by more than 40 percent during the last 4 years. The industry has been able to absorb these increases as a result of higher revenues resulting from the war emergency. As I have stated, with the end of hostilities, the increased use of private automobiles, and competition from other forms of public transportation, have resulted in a decline in revenues which is expected to continue to a point where the industry's ability to meet labor costs, even at present wage levels, is subject to serious question.

It should not be inferred from the foregoing that this industry is opposed to any possible increase in the level of workers' earnings and in standards of living. This is not the case. The achievement of such a goal, however, depends upon the extent to which incomes can be raised without corresponding increases in the cost of living, and without destruction of the industry charged with the income increases. It is a demonstrable fact that the intercity bus industry cannot continue to render an adequate service essential to thousands of communities which have no other form of public transportation if labor costs increase appreciably and its revenues are limited to the predicted postwar level of bus passenger travel at existing rates.

It is possible that certain manufacturing idustries, as pointed out by the Secretary of Labor in his testimony before this committee, can raise wages without involving corresponding increases in prices. One possible method is increased productivity. For all practical purposes, this potentiality is not available to the bus industry. It is not possible to operate a bus with less than one driver. Basic service must be maintained even if the number of passengers per bus declines, and the cost of operating a half-loaded bus is not appreciably below that for a fully loaded vehicle. The cost and durability of equipment makes it impossible to substitute smaller buses for larger ones, or vice versa, at frequent intervals. In the interest of safety, and because of extensive regulation, substantial economies in repair and maintenance work are not possible. Small savings in improved efficiency and fuel consumption may be realized, but will be more than offset by reductions in revenue passengers per vehicle-mile. In short, the 78595-45- -58

trend of productivity, by comparison with the war period, will be downward in the bus industry.

Further, it is a foregone conclusion that the prices of some manufacturing commodities would be raised if S. 1349 in its present form is enacted, especially since the increases in labor costs would be considerably above the estimated 2 percent rise in average wages resulting from the 65-cent minimum alone. It is not our contention, however, that this is a dominant consideration if the price increases are not sufficient to offset the rise in earnings. It must be noted. on the other hand, that the minimum wage provisions are applicable to less than a fourth of the country's gainfully occupied individuals. The remaining threefourths or more would presumably be affected by any price increases but would receive higher earnings only as a result of competition among employers for workers. In view of the likelihood that the supply of labor will exceed the demand for some time to come, wage increases granted through competition for workers ought not to be counted upon.

These facts have an important bearing on the intercity bus industry. A large proportion of its business is providing transportation to those who cannot afford automobiles or other more expensive modes of travel. Even if the industry were permitted by regulatory bodies to raise its tariffs to cover increased labor costs, to do so would result in increasing the living costs of those in the lower income brackets, many of whom would not be affected by the 65cent minimum wage rate. Included in these groups are millions of farm workers, domestics, and employees in laundries, hotels, tailor shops and similar other industries many of whom are among the lowest paid and who are exempt from the provisions of the Fair Labor Standards Act. As already noted, this industry favors increases in earnings and standards of living but only when they are made available to a majority of the Nation's workers and not if they apply to a minority at the expense of another important segment of the popu lation.

MODIFICATION OF EXISTING EXEMPTION PROVISIONS

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The Fair Labor Standards Act, as it was enacted in 1938, contained a provision exempting from section 7 those employees "with respect to whom the Interstate Commerce Commission has power to establish qualifications and maximum hours of service pursuant to the provisions of section 204 of the Motor Carrier Act, 1935." Section 204 vested in the Commission power to "establish reasonable requirements with respect to qualifications and maximum hours of service of employees." There was nothing said or intimated in the statute that this provision covered less than all of the employees of motor carriers. Nevertheless, for reasons which seemed sufficient to a majority of the Commission, it was held that the provision applied only to those employees whose duties involved considerations of safety. This ruling was upheld by the Supreme Court by a 5-to-4 decision. And from that decision has flowed the gravest kind of inequities, uncertainties, unjustifiable controversy and expense, and unfairness to motor carriers. In the first place, there can be no sound reason advanced for the discrimination against motor carriers in favor of its competitors. The railroad exemption from section 7 applies to all railroad employees. It reads: "any employee of an employer subject to the provisions of part I of the Interstate Commerce Act." All employees of all local trolley or motor bus carriers are exempted from the application of both the minimum wage and overtime provisions regardless of the interstate character of their business. The latter is true also of air carrier employees. The motor carriers who could least afford it, were singled out and made to carry a financial burden which was not imposed upon those with whom they must compete. No reasonable or satisfactory explanation has ever been given to us by anyone for this patent unfairness.

In the light of that background it would seem obviously unjust to make eren weaker the already inadequate motor carrier exemption now contained in the Fair Labor Standards Act. The amendment proposed in section 7 of S. 1349 to section 13 (b) of the Fair Labor Standards Act would carry out in a statutory way what the Wage and Hour Administrator has for many years ontended for, a contention which has been flatly repudiated by the Supreme Curt. On the contrary, justice and equal treatment requires an amendment hich would pine motor carriers on an equal plane with other transportation cies. We recommend and strongly urge that section 13 (b) be amended read as Indime

b) The pylons of section 7 shall not apply with respect to (1) any doyen of rommon or contract carrier subject to any of the provisions of

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