Mr. LUDLOW. For the Court of Claims, salaries, they suggest the possible reduction may be $40,000.

Mr. CHANDLER. For the Court of Claims the amount may be eliminated altogether.

Mr. LUDLOW. That is an elimination of the entire amount?

Mr. CHANDLER. That is right.

Mr. LUDLOW. And that is agreeable to you?

Mr. CHANDLER. That is agreeable to me.

Mr. LUDLOW. For miscellaneous items of expense "Salaries of clerks of courts," the amount submitted by the judiciary originally was $700,000 and it is proposed not to reduce that by $25,000. Is that correct?

Mr. CHANDLER. Yes; to $675,000.

Mr. LUDLOW. And for the probation system, United States courts the original amount was $227,000 and there is a proposed reduction of $2,000.

Mr. CHANDLER. That is right; to $225,000.

Mr. LUDLOW. For miscellaneous salaries the original submission was $155,000 and it is now proposed to reduce that in the amount of $70,000.

Mr. CHANDLER. To $85,000.

Mr. LUDLOW. And for the administrative office of the United States courts, salaries, $34,800, they propose to reduce that in the amount of $4,800 to $30,000.

Mr. CHANDLER. All of those reductions are agreeable to us.

Mr. LUDLOW. Why, in the original calculation, did you overshoot that way?

Mr. CHANDLER. We did not have the experience last November that we had when the Bureau of the Budget asked us a short time ago whether the amounts might not be reduced.

Mr. TABER. When these later figures were made up, would they be down as late as your disbursements for the end of February? Mr. BROWN. Through the end of January, sir.

Mr. TABER. And do your disbursements to the end of February indicate that anything more might be salvaged out of that?

Mr. BROWN. No, sir. We do not have the complete figures for February. You see, most of our disbursements are made in the field by the United States marshals who are located all over the country and it takes us 2 to 3 weeks to assemble that information; so we do not have the complete figures for February, but we do have the complete figures through the month of January 1946.

Mr. TABER. And that was under consideration at the time these subsequent figures were made?

Mr. BROWN. That is correct. That is what we based our revised estimates on-the figures through January 1946.

Mr. CHANDLER. I really would like to say we considered this matter pretty carefully with the Bureau of the Budget recently, and the amounts that we have indicated as reduced leave no margins above what is necessary for safety.

TUESDAY, MARCH 5, 1946.

OFFICE OF WAR MOBILIZATION AND RECONVERSION STATEMENTS OF ERIC A. JOHNSTON, MEMBER, ADVISORY BOARD; M. W. LATIMER, OFFICE OF WAR MOBILIZATION AND RECONVERSION; PHILIP ARNOW, BUREAU OF LABOR STATISTICS; B. T. MANDEL, SOCIAL SECURITY BOARD; AND J. N. W. McCLURE, BUDGET OFFICER, OFFICE OF WAR MOBILIZATION AND RECONVERSION

STUDY OF GUARANTEED ANNUAL WAGE PLANS

Mr. LUDLOW. Mr. Johnston, we have before us an estimate from the Bureau of the Budget, in House Document No. 442, for an additional amount to be added to the appropriation for salaries and expenses for the Office of War Mobilization and Reconversion for the fiscal year 1946 in the sum of $200,000. There was previously appropriated $3,955,400.

The purpose of this additional amount is to make a study of guaranteed annual wage plans. The study will be headed by a Director and a Deputy Director, and a portion of the work will be performed by the Bureau of Labor Statistics and the Social Security Board.

The estimate contemplates 75 positions from a Director at $10,000 to a CAF-2 clerk at $1,705, at a total cost of $225,318, and for miscellaneous expenses $24,682, with a total cost of $250,000, of which $50,000 will come from the appropriation presently available.

GENERAL STATEMENT

You have filed with the committee a very comprehensive statement which will be included in the record as your general statement. (The statement referred to is as follows:)

JUSTIFICATION OF BUDGET FOR STUDY OF GUARANTEED WAGE PLANS

A. GENERAL STATEMENT

INTRODUCTION

In his letter of March 20, 1945, to Justice Byrnes, the late President Roosevelt directed the Advisory Board of the Office of War Mobilization and Reconversion to make a comprehensive study of "the whole question of guaranteed wage plans and the possibility of their future development in American industries as an aid in the stabilization of employment and the regularization of production." The letter further specified that the experience of industry and labor with guaranteed wage plans be examined and that the facts be reported "for the adoption of guaranteed wage plans as may seem practicable and desirable."

As suggested in the President's letter, a major part of the study involves an analysis of specific experience with guaranteed wage plans in the United States, including, of course, not only those plans which are in operation currently, but those which have been discontinued.

It is not proposed to study all the guaranteed wage plans which are currently operating or which have been in effect in the past. There may be as many as 500 establishments in all which now have or have had guaranteed wage plans in effect, using the definition to be discussed below. To complete a thorough

study of the experience with and the results of such a large number of plans would cost far more than the amount here proposed to be allocated for the purpose. And it may well be that such a complete study will be unnecessary for several reasons. First, some of the plans were inaugurated too recently to have developed any significant experience. Second, in some cases the coverage is probably so small, both in absolute numbers and in relation to the number of workers in the guaranteeing establishments, as to make it improbable that study would produce very tangible results. Third, more than one employer may be covered by identical plans because they are based on union agreements with associations of employers, or on uniform or standard union agreements. Fourth, there is a high concentration of plans in a small number of industries and in certain localities. Thus preliminary figures indicate that about 40 percent of the plans are in establishments in wholesale and retail trade, while wholesale and retail trade and four manufacturing industries account for about 70 percent of all plans. Preliminary figures likewise show that over 25 percent of all plans are in New York City.

It is reasonable to suppose that the study of a properly selected sample would yield results about as valid as could be obtained from an analysis of the universe. If experience with the study indicates the contrary, and there is sufficient evidence that further analysis is needed, the sample can be expanded.

The official directive emphasized the connection between stabilization of employment and the regularization of production. The extent to which an employer is able to guarantee wages to his employees will, at least to some extent, depend on his ability to stabilize employment. Stability of employment, in turn, depends to a very considerable degree on the regularity of production. (The term "production" as used here includes rendition of services.) The degree of correlation between stability of employment and regularization of production is a matter which will require thorough investigation; but it is a reasonable hypothesis that an increase in the regularity of production will normally be reflected by a greater degree of stability of employment. Proceeding from this hypothesis, a second part of the study will deal with analyses of the ways in which production may be regularized.

The study will deal, further, with the relationships between employment and production. In general, an attempt will be made to answer five questions:

(1) What methods have been employed by industry to regularize production?

(2) To what extent can these methods feasibly be adopted by other industries or establishments, and what degree of regularity is possible of achievement?

(3) Given a particular degree of production regularity in a specific industry, what degree of employment stability may be expected to result?

(4) Given a particular degree of regularity in production, what further steps in relation to other operations, are needed to insure corresponding employment stability?

(5) What are the character and volume of costs involved in regularization and stabilization?

The initial study contemplates an examination of experience of outstanding establishments in four or five industries. A study of this magnitude will probably not be broad enough to indicate all the problems which must be solved if regularization is to be accomplished. It is possible, however, that the experience of establishments in a small groups of industries may be sufficient to warrant inferences with respect to other industries and differing situations. In view of this possibility, and in view of the reasonable certainty that any pilot study will make possible more satisfactory analyses in other fields, if such are found desirable, a modest initial approach to the problem is warranted.

Guaranteed wage plans will involve, ordinarily, some costs. The nature and volume of these costs, and the offsets to costs, will need to be analyzed. The subject is complex; and the initial studies will be largely exploratory, though some results in limited fields in the form of cost estimates may be possible.

The adoption of guaranteed wage plans may have extensive economic repercussions. This will be true not only of the guaranteed wage plans themselves but of such regularization measures as may be adopted. It will be important, first of all, to identify the various economic factors which are involved in the guaranteed wage plans and any accompanying arrangements, and second, to analyze the effects of those factors in order to determine their desirability. The fourth part of the study, therefore, will be an economic analysis of the effects

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of guaranteed wages. The ultimate purpose of this part of the study would be, of course, to aid in the formulation of recommendations with respect to extending the application of guaranteed wage plans.

Guaranteed wage plans are not the only measures likely to be tried either to stabilize employment or to accomplish other presumably desirable economic objectives. Some of these other programs may aid in the adoption of guaranteed wage plans, others may be a hindrance. It will be important to relate guaranteed wage plans to other economic programs by indicating the general economic atmosphere in which they might reasonably be expected to flourish.

In broad outline, therefore, the research phase of the guaranteed wage project may be divided into six parts, as follows:

I. An examination of the specific experience with guaranteed wage plans; II. An analysis of the methods and possibilities of regularizing production and stabilizing employment;

III. A measure of the cost of various types of wage guarantees;

IV. An economic analysis of guaranteed wages;

V. The relation of guaranteed wage plans to other economic measures intended to stabilize or increase the national income;

VI. Summary and recommendations.

I. ANALYSIS OF SPECIFIC EXPERIENCE WITH GUARANTEED WAGE PLANS For the purposes of this study, a guaranteed wage plan may be defined as a plan under which an employer guarantees a wage or employment to an individual worker for at least 3 months. To be included in the study a guaranty need not be for a full-time wage or full employment; nor is it necessary that every employee in the service of the employer be covered. The study, of course, will differentiate between types and periods of guaranties; and in case a guaranty is found which does not readily lend itself to classification in the terms in which the definition is phrased, the experience will be studied rather than discarded. It is intended, of course, to make the study as broad as possible in order to secure the maximum profit from experience.

Equivalents of guaranteed wages are to be found in a large area of the economy: Civil servants of the Federal Government; most employees of the States and of many of the counties and municipalities; most teachers; most corporation officials and a goodly part of the upper strata of corporate staffs; and many professional employees are among the more important categories of persons whose assurance of job tenure is in substance tantamount to a guaranteed wage. The aggregate numbers of persons whose work income is in effect guaranteed in one way or another undoubtedly runs to several million. But the study will not be primarily concerned with these groups. Rather the focus of attention will be on wage earners, white-collar or manual, in private employment who have no term of office, no contract, no tenure like a civil servant or a college professor, and whose work income is normally subject to stoppage whenever unfavorable winds begin to blow for their employers.

The study of selected guaranteed wage plans, within the range indicated above, will in general attempt to ascertain the terms of those plans, their significance, their results, and their applicability to industry generally. Although not all the plans will be analyzed in detail an effort will be made to secure a list of all the establishments in which plans have ever operated, the dates of operation, and a brief description of the plan. A series of specific questions will be formulated, some of which are as follows:

1. How widely have guaranteed wage plans been adopted?

2. Has their spread been regular?

3. How rapid has been their spread?

4. What protection do they offer employees?

5. Within the establishments having plans has there been any tendency to extend or limit the protection either as to the number covered or as to the terms of the guaranty?

6. What types of industry have thus far adopted guaranteed wage plans? 7. Within the industries having plans are there any characteristics which differentiate employers having plans from those which do not?

8. Do the companies maintaining guaranty plans tend to have other policies aimed to regularize production, or maintain good relations with employees, or reduce labor turnover?

9. Were the plans adopted as a consequence of other measures or were other related measures adopted in order to facilitate the operation of a guaranty plan?

10. Are there certain conditions which can be specified as essential to the operation of a plan?

11. What has been the cost of the plan?

12. What were the major factors of cost?

13. Have the plans resulted in any savings?

14. What was the nature of these savings?

15. Were there intangible benefits?

16. What was the nature of such intangible benefits?

17. Have guaranty plans tended to eliminate fluctuations in the number of workers employed?

18. Have guaranty plans tended to eliminate fluctuations in the volume of man-hours worked?

19. Has the volume of work per worker been stabilized by guaranty plans? 20. How have the annual earnings of employees under guaranty plans compared with those of other workers in the same establishment, in the same community, and in the same industry, before and after plans were established?

21. What benefits accrued to the community from the operation of the plan? 22. Are there certain terms of the plans themselves which are essential to operation?

23. Can there be specified any terms of plans which will produce failure? 24. Can there be specified certain conditions outside the plans which will make for success or failure?

25. What types of plans have produced more benefits than others?

26. Are these more advantageous plans susceptible of adoption in other industries?

27. Can the steps leading to adoption of plans be taken in other industries? The answers to many of these and other questions which will be formulated as the study progresses will, obviously, require a substantial volume of detailed data from each establishment selected for intensive study.

Recognizing that the problem of guaranteeing wages is in large measure related to either short- or long-term fluctuations in production or employment, the inquiry will seek to determine whether the measures taken by guaranteeing employers to cope with these fluctuations are applicable in other establishments and industries. The inquiry, therefore, will deal not only with the terms of the selected plans and their results, but also with numerous other factors relating to regularity of production and stability of employment. For this kind of analysis, the topics in the following list will be found relevant, although not all of them may be pertinent in each case, and others may be added as the study proceeds.

1. The plan's provisions:

(a) Original.

(b) Amendments to old provisions.

(c) New provisions.

2. History of plan:

(a) Factors leading to initial consideration.

(b) Preliminary study.

(c) Source of initiative.

(d) Major factors leading to adoption.

3. Character of industry.

4. Product:

(a) Type.

(b) Character of demand.

(c) Variability of demand.

5. Production or service processes:

(a) Types of raw materials or supplies used.

(b) Characteristics of such raw materials and supplies.

(c) Characteristics of the process of production or of furnishing service. (d) Types of required skills.

(e) Availability of required skill.

(f) Rate of technical changes in processes-past and prospective.

(g) Increasing, decreasing, or constant cost operation.