BACKLOG OF COMPLAINTS

Even with improved operations, it would take our present staff about a year to catch up with the backlog of complaints now on hand, not to speak of the number which continue to come in at the rate of about 100 a day.

The appropriation recommended by the House committee will permit an expansion of the inspection staff from 123 to approximately 225-and that, by the way, is 1 inspector to 50,000 covered workerswith provision for necessary clerical help. Even with this increased staff, it would take at least 6 months to catch up with this backlog of work. Assuming that the backlog could be disposed of, our total operations with the larger staff will not handle more than 50 percent of the load if it continues at its present level.

CASES REFERRED TO JUSTICE DEPARTMENT

Seventeen cases had been referred to the Department of Justice for criminal prosecutions as of May 10, and 18 others have resulted in civil actions on the part of our legal branch. Out of 18 cases on which civil suits have been started, consent decrees have been entered in 14 cases. The other cases are pending. In no case yet has an injunction asked for been denied. Out of the 17 cases referred to the Department of Justice, 8 have resulted in grand-jury indictments or informations. In 6 cases the defendants pleaded guilty. The remaining 2 are pending.

In one sense we have had a perfect record, in that we have won every case which has been determined by the courts. In another sense however, our record has been a very poor one, in that we have not been able to bring to either criminal or civil action many more cases which constitute flagrant violations of the act. Our practice is to adjust minor violations of the law, but where we find a deliberate violation, it seems to us that failure to prosecute results in loss of respect for the law, and in gradual break-down among employers who have been in compliance, and in growing dissatisfaction among employees. There are at least 100 cases that appear to warrant immediate prosecution. Even with the funds recommended by the House committee, we cannot do more than nibble at the volume of cases on which proceedings should be started.

In planning for enforcement activity for next year, another factor must be considered:

COMMITTEES MAKING WAGE RECOMMENDATIONS

As industry orders become effective, setting higher minimum wage rates than the statutory minimum of 25 cents an hour, the employers in each industry for which such orders become effective will demand-and quite properly-that we give immediate 100 percent protection to complying employers against the few who will attempt to violate the act by paying less than the new minimum set under the order. At the present time, minimum-wage recommendations have been made by the cotton, rayon, and silk textile committee; the wool committee; the hosiery committee; and other wage recommendations may be expected in the near future from the apparel and the boot and shoe committees. This means that we should have an adequate, trained, and experienced staff of inspectors in the field ready to handle the additional load of inspections that may be expected to follow immediately upon the going into effect of each wage order. It should be emphasized that, while each of these industries is at some competitive disadvantage as compared with the violating few under the present minimum wage, if the minimum-wage level is raised, the competitive disadvantage resulting from violations is tremendously increased. Complying employers will have much greater difficulty in selling their products against the competition of the chiseler. If our inspection and litigation work should break down with respect to the industry for which a wage order had been set, there would be a quick request for relief; and the entire administration of the act, and even the act, itself, would come in for severe criticism.

ENFORCEMENT BY INSPECTION AND LITIGATION

This entire problem of enforcement by inspection and litigation is not "a movable feast." It cannot be done efficiently at some time or at another time set to suit a schedule of budgetary expenditures. If it is to be done efficiently and economically, it must be done with speed. Complaints should be investigated immediately upon receipt, inspection reports should be analyzed quickly. The legal branch should be able to prepare the cases for litigation without delay and then to file complaints without delay. Delay at any point means added expense.

Delayed complaints become stale. An inspection report delayed in transit through the central office, the legal branch or the Department of Justice, on its way to the court, becomes stale and must be brought up to date, thus involving a duplication of personnel, travel, and other expenses. All the while, complying competitors are at a disadvantage, and incentive is being given for a spread of violation of the act. To be effective, enforcement should be as quick to act on complaints as a fire department is to respond to an alarm. A bucket of enforcement delivered promptly is worth a thousand buckets given a few weeks later.

I would like to discuss with you another phase of our activities you which should be borne in mind in connection with the appropriations for the next fiscal year. The Fair Labor Standards Act provides for a minimum wage of 25 cents but sets up a goal for a 40-cent minimum wage and requires that this minimum wage be reached as rapidly as economically possible through the appointment of industry committees for each industry engaged in commerce. During the present fiscal year a total of seven industry committees have been appointed (cotton, rayon and silk textiles, wool, hosiery, apparel, boot and shoe, hat, and millinery) and three of the seven have already completed their deliberations except for the preparation of the final reports to the Administrator.

REQUESTS FOR APPOINTMENT OF COMMITTEES IN 59 INDUSTRIES

As in our other phases of work, we have proceeded slowly in the industry committees phase of our activities. Seven does not represent the total number of committees which could have been appointed during the present fiscal year. In fact, we have received requests for the appointment of committees in 59 industries. Almost as many of these requests (76 out of 158) come from employers or employer groups as from labor organizations. However, seven committees constitute the full amount that we could handle with our present resources. In order to appreciate this fact it is necessary to review the many steps needed in order to reach the objective for which the committees are established: Namely, recommendations of the highest minimum wage rate up to 40 cents an hour which will not curtail employment.

It is necessary, first of all, to analyze the competitive relations in the various industries and to study the overlapping of production activities in order to formulate a definition of the industry which will keep competitors under the same minimum wage order insofar as possible. Secondly, it is necessary to analyze regional distribution of the industry, types of products, extent of labor organizations, and relative wage levels in order to select committee members who will represent the various viewpoints in the industry.

ECONOMIC REPORTS PREPARED FOR COMMITTEES

After a committee has been appointed and has been convened, the Administrator is obligated to furnish the committee with necessary legal, economic and clerical assistance. The Fair Labor Standards Act requires that committees take into account certain basic factors in reaching a minimum wage recommendation. Before a committee can do its job intelligently it must have prepared for it an economic report which will present:

(a) A description of the industry, including the number, location, and size of firms, trend of employment, source and use of raw materials, marketing practices, trends in demand, capacity and, profitability. (b) Effect of possible wage orders on costs, prices, and demand. (e) The analysis of detailed wage data, productivity data, transportation costs, and living costs in order to inform the committee as to the possibility of wage classifications by area, branch, or occupation. It is on the basis of such information that the committee meets again to reach an agreement on a wage recommendation. Prior to reaching a recommendation, the committee must listen to the testimony of representatives from trade associations, trade unions, employers and consumer groups.

Now this may seem like slow and costly procedure and it is. However, it is my firm conviction that it is sound procedure in a democratic society to bring to bear on problems of this character the combined judgment of representatives of industry, labor, and the public, and to enlighten this judgment with objective data.

PLANS FOR APPOINTMENT OF NEW COMMITTEES

Our tentative plans for next year call for the appointment of 12 new committees. These committees will probably be selected from the following fields: Knited outerwear, knitted underwear, wood furniture, railroads, rubber (except tires), paper, gray iron foundries, cooking and heating appliances, electrical machinery, meat packing, radio parts, leather and tanning, soap, chemicals, tobacco, and metal If the 12 committees are to function effectively, it is necessary to provide adequate funds for the economic studies which must be made in order to prepare an intelligent basis for its deliberations. While the language of the appropriation bill passed by the House authorizes the Secretary of Labor to allot or transfer with the approval of the Director of the Bureau of the Budget funds from the Department appropriation to any Bureau of the Department to enable such agencies to perform services for the Wage and Hour Division, no specific provision has been made for such funds. Therefore, the amounts needed for wage studies by the Bureau of Labor Statistics in connection with our industry-committee program would require an additional appropriation. Section 11 (a) of the act requires that the Administrator utilize the bureaus and divisions of the Department of Labor for such investigations; with the approval of the Secretary of Labor we have relied on Dr. Lubin for this work. The division had estimated the need for $350,000 for this purpose. Without such funds our industry-committee program for the next fiscal year would have to be radically altered. If, alternatively, we attempted to take any sum in the neighborhood of $350,000 from the amount allowed for departmental expenses penses of the Division, that amount would be so reduced as to hamstring administration of the wage-and-hour sections of the act. Not only would any expansion of the departmental staff of the Division after July 1 be impossible, but we would have to reduce our present inadequate scale of operations.

APPROPRIATIONS FOR WAGE AND HOUR DIVISION

With these comments for background I should like to summarize our budgetary situation as of the present moment. The original appropriation for the Wage and Hour Division was $350,000. The Division's appropriation bill for this fiscal year provided a recommendation by the Director of the Bureau of the Budget for a total of $950,000 for the Wage and Hour Division. This was cut, as you know, by Congress to $850,000. There is before you Senate Document No. 64, an amendment to the Budget for the fiscal year 1940, which, if approved, would provide authority to use during the remainder of this fiscal year not exceeding $100,000 of the appropriation for 1940. This action is essential in order to maintain our operations at the present level. Unless such provision is made, it will be necessary to curtail our operations drastically until the appropriation for the next fiscal year is made available.

ACTION TAKEN BY HOUSE IN REDUCING APPROPRIATION

For the fiscal year 1939-40, the Director of the Budget recommended an appropriation of $3,350,000. This was reduced by the House to $3,173,630, a reduction of $176,370. In recommending this reduction, the House Appropriations Committee made the following significant statement:

It is frankly difficult at this time to make an intelligent appraisal of just what the monetary needs of this Division will be. New questions of interpretation and administration of the law are arising every day that alter the outlook and until a somewhat more stabilized period of operation has occurred, the appropriations must necessarily be predicated largely on elements of conjecture.

I endorse this statement heartily since I know that each month's operations bring new experiences and new problems that had not been anticipated. However, we know now that at least the full amount of the Budget recommended by the Bureau of the Budget, should be appropriated for 1939-40. As Administrator, I am compelled to state that anything less than this amount will make effective enforcement of the Fair Labor Standards Act utterly impossible. In addition, I must ask that some provision be made for the studies required for Industry Committee activities to enable that program to continue during the next fiscal year.

There should be further action if we are to have the ability to cope with circumstances as they arise. For example, the character of any amendments passed by the Congress this season may alter our administrative problems quite considerably and may well result in increased burdens not now anticipated. In view of the newness of this legislation and the lack of adequate experience under it, there should be a sufficient latitude to permit exercise of judgment as to the rate and volume of activities and expenditures. It is suggested that the appropriation bill contain necessary language to allow the Division to spend monthly, if necessary, and with the approval of the Director of the Bureau of the Budget, in excess of one-twelfth of the amount appropriated. This is necessary if permission is granted to spent $100,000 of next year's appropriation during the balance of this fiscal year.

RESPONSIBILITY TO EMPLOYERS AND EMPLOYEES

I should like to say, in conclusion, that in passing this act, Congress undertook a grave responsibility to employers and employees. By inference it assured them that employment in violation of the act would not be permitted and that goods produced in violation of the act would not be permitted to compete with goods produced in compliance with the standards set up in the act. Discharge of that responsibility cannot be a half, a quarter, or a two-thirds job. It must be 100 percent if employers are not to be competitively penalized for their virtue. Little leaks in the levee must be blocked quickly or they will grow much larger and the whole levee may wash out. The Fair Labor Standards Act is workable and is enforceable but it can fail. It can fail within the next few months or the next year if, because of lack of adequate personnel, we do not make violation so risky and 50 costly that compliance is universal.

I wish to read a table containing estimated cost of studies, as follows: