TABLE III.—Income per year and per capita of persons not on farms and on Source: U. S. Department of Agriculture, Bureau of Agricultural Economics. TABLE IV.-Labor required on farms: Estimated requirements in terms of manhours for crops, livestock, and other farm work, United States, 1939 and 19421944 TABLE IV.-Labor required on farms: Estimated requirements in terms of manhours for crops, livestock, and other farm work, United States, 1939 and 1942– 1944-Continued 1 Equivalent man-hours are in terms of the time required by average adult males to perform various farm tasks. Since many women, children, and older workers accomplish less in an hour than an average adult male, actual hours of work on many enterprises are in excess of those shown in this table. 2 Preliminary. 3 Includes the total labor requirements for all livestock enterprises, except for horses and mules. This kind of work, amounting to about 15 percent of the work needed for farming, includes labor spent on fencing, repairs to buildings, machinery and equipment, farm woods, pastures, general land mainte nance, farm business, and other miscellaneous work. Some of this work probably has been postponed during wartime because of the scarcity of labor. TABLE IV. LEGEND During the years covered the number of farms and the labor on farms was declining. For 1944, the United States Department of Agriculture placed the average number employed on farms at about 10 millions. These were divided: operators, 5.5; workers furnished by the farm family, the equivalent of 2.3; workers hired, 2.2. The United States Department of Labor carry a figure of approaching 14 millions. This covers all workers who worked for enough weeks to make a record and it is possible to reconcile this with the above, for in the Department of Agriculture data they translated the work done by women and the family and help which was substandard in ability to work, into a labor equivalent of an ablebodied worker, and by so doing arrived at a figure of 10 millions for 1944. On this basis, the hours per worker for the year were: 1939 1942 2, 045 1943_ 2, 116 2, 118 If the actual total number who worked on the farm at one time and another during the year was taken, the above average number of hours per person would be reduced. The annual factor of employment provided in the Fair Labor Standards Act, for industry, without payment of overtime, is 2,080 hours. The payment of an annual wage in monthly or weekly installments is a stabilizing force. The seasonal character of the work, the necessity to work when the work must be done, may bring long hours for certain periods. This is recognized. About one-third of the farms produce 80 percent of the total output. Onethird produce 15 percent, and these are an important source of children. Another third 5 percent. This latter group of nearly 2 millions also furnish some of the help which is hired. Some of the second and third group produce small acreages of berries and fruits requiring considerable hand labor and move such crops collectively, so that all costs of assembling and preparing such crops for sale and country point selling, performed for these producers will be paid for by these producers. PROPOSED AMENDMENTS TO THE FAIR LABOR STANDARDS ACT WEDNESDAY, OCTOBER 24, 1945 HOUSE OF REPRESENTATIVES, The committee met at 10:30 a. m., Hon. Augustine B. Kelley (Pennsylvania) presiding. Mr. KELLEY. The committee will please come to order. We have with us this morning as the first witness the Honorable Lewis B. Schwellenbach, Secretary of Labor. Mr. Secretary, when you are ready, proceed. STATEMENT OF THE HONORABLE LEWIS B. SCHWELLENBACH, SECRETARY OF LABOR Secretary SCHWELLENBACH. The various bills which are the subject. of the hearing before this committee raise many questions of general labor policy and of detailed technical nature. I shall discuss, in my testimony, a number of the major issues raised by the bills. I have brought with me Mr. Hinrichs, the Director of the Bureau of Labor Statistics and the Solicitor of the Department, who will answer any more specific questions that the members of the committee have, questions that you may propound to them. I favor the proposals in the current bills to increase the legal minimum wage to 65 cents an hour with an ultimate adjustment to 75 cents an hour. I believe that 65 cents an hour is necessary at this time in justice to that large group of low-paid wage earners who have never received sufficient income to maintain an American standard of living. When Congress enacted the Fair Labor Standards Act in 1938, it did not intend that a 40-cent minimum should represent the final goal in Federal minimum wage policy. That minimum represented, rather, a beginning toward the ultimate goal-"a minimum standard of living necessary for health, efficiency, and well-being of workers." It was recognized, even on the basis of the cost of living in 1938 that an annual income of $800, which full employment at a 40-cent rate would bring, did not achieve the objective of a minimum American standard of living. Since 1938 the country has proved its capacity to produce a national income far beyond prewar levels. The productivity per man-hour in manufacturing has greatly increased. Now is the time to take a further step in achieving for each worker a minimum American standard of living that will more adequately 'assure his health, efficiency, and general well-being. We all know that the cost of living has risen since the enactment of the Fair Labor Standards Act. This has an important bearing on the minimum wage question. It means that in terms of real wages even the inadequate goal of 40 cents an hour has not been achieved. At present the increase in prices and the cost of living have canceled out one of the objectives sought in the enactment of the 40cent minimum in 1938, in that it will not purchase the same goods and services that it would purchase in 1938. A substantial part of the proposed increase in the minimum wage is required, therefore, merely to reestablish the congressional objective of 1938. The remainder of the increase represents what I have described as an advance toward the goal of a minimum American Standard of living. The committee will probably receive detailed testimony on the question of the money amount required for a minimum budget. I doubt whether any of that testimony will show that 65 cents an hour, representing $26 for a standard workweek, and $1,300 for a year of work, will be sufficient to meet the mininum budget of the average workingman. The enactment of a 65-cent minimum wage law should prove beneficial not only to the low-paid workers but also to other economic groups in the Nation. A minimum standard of living supported by a guaranteed wage at the suggested level will strengthen every element in our economy by maintaining national purchasing power. We have learned that wages must be viewed not only as labor costs but also as an index of our purchasing power. The money received by wage earners through the operation of the minimum wage law will in the main be expended on such items as food and clothing. At low-income levels, a greater proportion of the budget is allocated to these necessary items of living. There will be numerous business enterprises, which will be affected by these expenditures. Retail stores and other agencies of disrtibution will be called upon to sell goods which would not otherwise have been bought; factories and other processing establishments will be required to manufacture these goods; and ultimately, the farms will have a larger demand for their cotton, wheat, and other products. These are the activities that make a sound economy. They are the backbone of our American principle of free enterprise. No one questions that. I believe that our experience with the present act justifies the assertion that a minimum wage law is a vital factor in their achievement. An increased minimum wage should also assist our system of free competitive enterprise in working out its true functions. We will not secure the most efficient production of goods and services by permitting competitors to outrival each other in wage cutting. Just as our law makes monopoly an illegal means of stifling competition, so should the law rule out the payment of substandard wages which cause unfair competition. Our high wage economy has shown that it can outproduce low wage economies by maintaining a higher degree of productive efficiency. Placing a floor under wages means that wage cutting must be replaced by a search for greater efficiency. The direction of our economic effort along these lines should produce more and better goods and services and stabilize our economy. I believe that we can take action to eliminate substandard wage conditions and to preserve purchasing power without destroying business or causing inflation. In judging the practicability of the proposal we must recognize that the increase in the legal minimum wage does not represent an equivalent increase in the actual wages paid by industry. There are many industries which pay the bulk of their workers above 65 cents an hour. These industries will not be substantially affected by an increase in the legal minimum to 65 cents an hour. Only a small percentage of substandard wage earners receive less than 50 cents an hour. For all practical purposes, therefore, the 65cent minimum will increase actual compensation of employeees of the low wage group by 1 to 15 cents depending on their present rate of pay. According to the estimates of the Bureau of Labor Statistics 4 out of 5 workers in manufacturing industry receive 65 cents an hour or more, and average wage rates in manufacturing would be increased 2 percent by increasing the legal minimum to 65 cents without increasing wage rates above that amount. The actual wage increases resulting from an increase in the legal minimum will not register a directly proportionate effect on costs of reduction or prices. In the first place labor is only a part of the total cost of production. In many industries the cost of materials, overhead, and other factors represents a greater portion of the total cost of production than labor. For example, in the industry which may have the largest increase in average wage rates, that is, 11 percent, the wage bill represents much less than 10 percent of the total industry product. The net effect on costs of production attributable to the increased legal minimum will therefore be fairly small. Secondly, the continuing improvement of technical processes and increases in efficiency of production will tend to absorb the increase in the hourly rate of pay. The proposal in a number of these bills to provide for the maintenance of reasonable wage differentials between interrelated job classifications, through use of the industry-committee procedure, raises a number of questions. One which occurs to me, for example, is whether the kind of industry committee which has been functioning under the Fair Labor Standards Act is properly qualified to handle the technical work of job analysis and classification. Another problem is the possible effect of the proposal upon established labor relations in well-organized plants and industries where collective bargaining is the method used for handling wage differentials. I am sure that this committee will wish to study these and other related questions. A number of the bills also propose to delete sections 13 (a) (10) and 7 (c) of the Fair Labor Standards Act which provide for the exemption of certain agricultural processing industries from minimum wage and overtime pay requirements. I am in favor of this proposal. The extension of the minimum wage requirements of the law to employees in agricultural processing industries is necessary for the reasons I have given with respect to the need for raising the minimum wage to 65 cents an hour. This segment of our wage-earning population is entitled, equally with all others, to attain a minimum Ameri |