PROPOSED AMENDMENTS TO THE FAIR LABOR STANDARDS ACT MONDAY, NOVEMBER 5, 1945 HOUSE OF REPRESENTATIVES, The committee met at 10: 30 a. m., Hon. Robert Ramspeck presiding. Mr. RAMSPECK. The committee will be in order. Our first witness is Mr. Murchison. We will be very glad to hear from you now, Mr. Murchison. STATEMENT OF CLAUDE T. MURCHISON, PRESIDENT, THE COTTONTEXTILE INSTITUTE, INC. Mr. MURCHISON. I am appearing here on behalf of the CottonTextile Institute, the central trade organization of the cotton spinning and weaving industry. Its membership includes 75 percent of the cotton spindles of the United States. This industry comprises about 1,200 mills engaged in spinning yarn and thread and weaving fabrics. Its products cover a wide variety of goods, ranging from heavy duck to fine voiles. Except for a few items such as bed sheets, pillow cases, and towels, the industry does not produce finished products for the consumer. It is rather a producer of primary materials which are subjected to further processing by the finishing and dyeing industries, which are considered as separate industries, and are then sold to a variety of industries which fabricate them into finished products for apparel, household, and industrial uses. IMPACT OF BILL ON THIS INDUSTRY In July 1945, the latest month for which data of the Bureau of Labor Statistics are available, this industry employed 409,000 workers. According to the BLS, the majority of the workers are semiskilled, these representing about 56.2 percent of the labor force. The remaining workers are skilled and unskilled in almost equal proportions. In the spinning division 76.3 percent are in the semiskilled group, 8.4 percent are skilled, and 15.3 percent are unskilled. In the weaving division, 46.5 percent are skilled, 28.5 percent are semiskilled, and 25 percent are unskilled. In July these workers received averge hourly earnings of 70.5 cents, and straight time hourly earnings, which exclude premium overtime pay, of 67.22 cents. In the same month straight time average hourly earnings in the South were 65.99 cents and 74.85 cents in the North. The narrow difference between average hourly earnings and straight time hourly earnings indicate the relative unimportance of overtime work in this industry. Although this industry has been operating under a mandatory 48-hour workweek, the majority of the workers did not choose to work 48 hours. In July average hours worked per week amounted to only 41.7 and at the peak of wartime cotton textile production, 1942, average hours per week amounted to only 40.8. Accordingly, the cut-back in take-home pay due to the elimination of overtime pay, to which the President referred in his address on wages, will be of much less significance than in munitions industries. With unskilled and semiskilled workers representing in excess of 75 percent of the labor force, it is clear from the straight time hourly earnings cited above, that the minimum rates in this bill would require a large upward adjustment in wage rates. For the first year the minimum rate of 65 cents would be only about 1 cent less than the July average straight time hourly earnings of all workers in the South. During the second year the legal minimum for unskilled workers would be almost 5 cents higher than the average of all workers for July; and for the third year the basic minimum would be 10 cents higher than the July average of all workers. Thus, the conclusion is inescapable that this bill, if enacted, would require an abrupt and radical upward adjustment of the industry's entire wage structure. This is so because (1) the proposed minimum rates are so much higher than the highest prevailing minimum for the bulk of the industry and (2) because of the provision in this bill granting to the industry committee the right to impose minimum wage rates for job classifications above the basic minimum. The percentage increase in wage rates that would be made necessary by the enactment of this bill would be quite uneven throughout the industry, because the July average hourly earnings of 70.5 cents are not based on a uniform basic minimum wage rate. The War Labor Board directive, of February 1945, was mandatory for only 48 mills and was later made permissive for all other mills. Many mills have voluntarily raised their basic rate to 55 cents with adjustments in rates above the minimum, but a substantial number of mills employing a large number of workers are still below the 55-cent rate. The proposed minimum of 65 cents for the first year after the enactment of this bill would, therefore, require an increase of 18 percent in the minimum rate for mills now paying the 55-cent rate and an increase of 30 percent for mills still paying the 50-cent minimum. At the end of the second year the mandatory increase in the basic minimum would be more than 36 percent for mills now paying 55 cents and 50 percent higher for mills now paying 50 cents. The increase in total labor costs would, however, be far greater than the amount necessary to meet minimum requirements. Substantial increases in the minimum automatically require some adjustment in rates above the minimum. In fact, this bill requires industry committees to recommend minimum rates for interrelated job classifications above the minimum in order to maintain "reasonable wage differentials." It is impossible to measure the effect on total labor cost of such secondary minima because this bill stipulates very general criteria not susceptible to scientific evaluation. COTTON TEXTILE INDUSTRY A HIGH LABOR COST INDUSTRY Although practically all the textile processes are highly mechanized, they require more labor per unit of output than the majority of industries. As a consequence, labor costs in this industry are relatively high. In 1939, according to the Census of Manufactures, when wages represented 16 percent of the value of product for all manufacturing industries, wages in this industry represented 25.1 percent of the value of product for the cotton-textile industry as a whole. For some cotton products labor costs represent more than 40 percent of the value of product. In the same year, according to the Census of Manufactures, in a list of 40 manufacturing industries, with ratios of wages to value of product ranging from a low of 2.5 percent to a high of 48.7 percent, the cotton-textile industry, with its ratio of 25.1 percent, was ninth from the top of the list. Accordingly, the large increase in wage rates will substantially increase costs in this industry. Such higher costs, it must be emphasized, cannot be absorbed in the present price structure of the industry nor could they be absorbed by any significant increase in the productivity of labor in the next few years. Unlike the spectacular increases in productivity in the purely wartime industries which were converted to a mass-production basis, this industry, already on such a basis, did not experience any revolutionary changes in technology. This industry has the same machinery today that it had in 1939, but because of the increased running time is in a less efficient condition. As is shown in table I, labor productivity at the end of 1944, according to the Bureau of Labor Statistics, was only 0.3 percent higher than in 1939 and unit labor costs, reflecting the higher wage rates and the dilution of our labor force, but not reflecting the last wage increase, were 61.2 percent higher than in 1939. This development, it should be pointed out, is not confined to this industry. On the contrary, it is a characteristic of many so-called civilian industries, in which the goods manufactured and processes employed during the war were substantially the same as in peacetime. TABLE I.-Productivity and unit labor cost in the cotton-textile industry, 1939-44 The decrease in labor productivity and the trend of increasing unit labor costs will not be reversed in the near future. There is nothing on the horizon which promises a great improvement in textile technology in the immediate future. The only increase in productivity in the near future must come primarily from the return of our experienced workers from war industries, better maintenance of existing equipment and replacement of our battered and worn equipment. The latter development will necessarily be slow, because of the small peacetime capacity of the textile machinery industry and the large accumulated demand, domestic and foreign, for such equipment. All increases in costs beyond the very narrow margin provided by these factors must be supported by higher prices for cotton textiles. PYRAMIDING OF INCREASES The increase in prices of cotton-textile products will not, of course, be limited to the increase in cotton yarn and fabric prices. As was indicated before, this industry produces few finished items, most of its products serving primarily as raw materials for other industries. In addition to the higher raw material costs for the cotton-textile finishing and apparel industries, as a result of the wage increases in this industry, these industries will also have higher labor costs. Thus, the effect of this bill will be to increase costs at every stage of the manufacturing and distribution structure. Since most of the knit goods and apparel trades have a high ratio of wages to value of products and as their wage structure is comparable to that of this industry, the impact of this bill on clothing prices will be heavy. Table II shows the importance of material and direct labor costs in a variety of cotton-textile products. It will be noted that raw material costs for these industries range from 31.1 percent to 58.5 percent and direct labor costs from 16.6 percent to more than 30 percent of the value of product. With such a large proportion of the total cost structure directly and indirectly affected by the provisions of this bill, the conclusion is inescapable that the enactment of this bill will result in a substantial increase in price for cotton textile products. TABLE II.-Labor and raw material costs for certain cotton products Source: U. S. Department of Agriculture, Marketing and Manufacturing Margins for Textiles, 1945. But the pressure upon prices of cotton textiles and textile products extend even beyond these points of direct impact. To the extent that this bill increases the prices of cotton textile products and other manufactured articles it will increase the prices of goods which farmers buy. Such increases will, under the law, require a recalculation and upward adjustment in the parity price of raw cotton and all other basic agricultural commodities. Since the Congress is committed to support the parity price of cotton through Government loans for a period of 2 years following the formal declaration of the cessation of hostilities, it is clear that the price of raw cotton must also increase. With cotton costs representing 50 percent of the total cost of production at the mill level, the effect of a further rise in the price of cotton on the costs of this industry are obvious. During the past year officials of the Office of Price Administration have repeatedly expressed alarm over the trend of prices of textiles and clothing. In February, Mr. Bowles stated that inflation in clothing prices ously than any other single factor. * threatens the stabilization line more seri Mr. Ney, his Deputy Administrator for Price, a month later stated that the main reason for the resumption of the climb in the cost of living and the principal danger of a further rise is to be found in the textile and clothing area. Since these warnings were issued the OPA has again and again postponed its long promised roll-back of clothing prices. Although original plans called for a 6- to 7-percent reduction in garment prices by this fall, prices have continued to rise. The enactment of this bill will force further increases in price. In short, this bill cannot be regarded as anything else but a powerful inflationary force. Just to give a little personal experience, on Saturday evening I was out shopping around, trying to find some shirts, just ordinary, plain shirts. During the war period I had not bought any. I walked into a little clothing shop on Sixth Avenue in New York, in a low-rent area. They had some plain shirts. The price was $12.95 apiece; shirts the value of which would have been less than $3.50 in 1939. That is what the situation has come to. It is really ghastly. Mr. WELCH. How much did it cost to produce those shirts in 1939? Mr. MURCHISON. That same shirt in 1939, as I say, could not have cost more than $3.50 at retail, which probably meant that the manufacturing cost Mr. WELCH. What did it cost the manufacturer to produce that same type of shirt that you bought recently? Mr. MURCHISON. I did not buy it. I told him to keep it. Mr. WELCH. The fact that you did not buy it is not the answer to the question. I would like to know, if it is possible to get the information, what it cost to produce that shirt in 1939. Mr. MURCHISON. I would say, in 1939, according to my best judgment, the cost of making that shirt would not have exceeded $2. That includes the material and the labor. Mr. WELCH. What did it cost to produce it in 1945? Mr. MURCHISON. I do not know. The whole thing looks pretty bad to me, Mr. Congressman. Mr. WELCH. That is not quite the answer. You should have a better idea of the difference in the cost of production as between 1939 and 1945. Mr. MURCHISON. Well, I can give you that very definitely when it comes to the cost of the fabric. Mr. WELCH. Well, approximately. |