of the Little Steel formula and the present, as the yardstick to determine the need of wage increases and substitutes the average straight time hourly earnings as the measuring rod. While under the new standard the increase is not so great, still it is worthy of note that upon the President's basis of comparison, the southern textile worker has still received a percentage increase in wage which is far greater than the increase in the cost of living; and also that the textile industry is more vulnerable to excessive wage increases than the other major industries of the United States. Respectfully, AMERICAN COTTON MANUFACTURERS ASSOCIATION, PROPOSED AMENDMENTS TO THE FAIR LABOR STANDARDS ACT TUESDAY, NOVEMBER 6, 1945 HOUSE OF REPRESENTATIVES, COMMITTEE ON LABOR, The committee met at 10:30 a. m., Hon. Robert Ramspeck pre siding. Mr. RAMSPECK. The committee will come to order. Is Mr. Ryan here? Mr. RYAN. Yes, sir. Mr. RAMSPECK. Please come around, Mr. Ryan. You are the Washington representative of the American Hotel Association? Mr. RYAN. Yes, sir. STATEMENT OF M. 0. RYAN, WASHINGTON REPRESENTATIVE, AMERICAN HOTEL ASSOCIATION, WASHINGTON, D. C. Mr. RYAN. Mr. Chairman, my name is M. O. Ryan. I am the Washington representative of the American Hotel Association. When we were originally billed before your committee Mr. Mortimer Cosby, president and manager of the Jefferson Hotel in Columbia, S. C., was prepared to represent us, and a brief statement was prepared for Mr. Cosby. It will take about 8 minutes to read. Mr. RAMSPECK. Go right ahead. Mr. RYAN. I am appearing as a witness for the American Hotel Association. The 1940 census reveals approximately 1,500,000 hotel rooms in the country. The industry today employs roughly 800,000 persons, which is 200,000 short of our actual requirements on the basis of present-day volume of business. May I acknowledge, at the outset, that hotels are not covered by the Fair Labor Standards Act. It might be argued that we would not be affected by the provisions of this bill. But it has been our experience that we compete in a crowded labor market with all other employers and are thus directly affected. Few industries have such a complex wage pattern as do hotels. The wide variety of job classifications under a hotel roof find us. engaging staff ranging from professional people, through the skilled artisan class, down to unskilled and even part-time and seasonal workers. Real wages vary from stock dividends and bonus on profits down to meals, tips, housing, uniforms, and so forth, in addition to cash wage. The whole program of wage controls, therefore, has been one of the most difficult of our wartime problems. Under wage and salary stabilization we were denied the right to reward key employees with sufficient pay to retain their services. The hotels of America do not, in any sense, oppose a declaration of 65 cents an hour as a desirable minimum wage toward which our domestic economy should aim-based on present costs of living. Your committee is cognizant of some of the problems which would ensue. Let me point out to you that we are among those industries which are now subject to cross pressures which cannot be reconciled. As long as rents for guest rooms are frozen, and menu prices are frozen, our maximum potential income is rigidly controlled, allowing only a rapidly narrowing gap within which additonal cost increases can be borne. I doubt that any native industry experienced a mortality rate equal to ours following the last war, when 85 percent of all hotels were either bankrupt or had to be refinanced. Right today, on the basis of increased operating costs, the industry would again be bankrupt were we to return to that level of occupancy formerly experienced. The break-even point in hotels has risen from an average of around 60 percent in 1940 to about 75 percent, and a great deal higher in some hotels. Before we decided to appear before your committee, the American Hotel Association canvassed the industry in every State in the Union to learn just what a 65 cents per hour minimum wage, with differentials up to 90 cents, would mean in terms of present operating costs. I present, for your information, a tabulation showing the actual figures for sample hotels in every State, and for all sizes of properties. These reveal that the 65-cent minimum, with differentials, would mean a pay roll increase averaging 21.7 percent. In one hotel, the figure rose to 128.6 percent. That is shown on the chart which I am presenting, Mr. Chairman. Small towns would be hit far harder than would larger centers, with the smaller hotels being more adversely affected than the larger ones. Price increases of 7 percent would be required if this added cost were indicated. Hotels generally are full today, and offer little chance for an increased volume of business out of which new and added costs could be absorbed. While it is true that this particular survey shows the actual records of only 85 hotels, studies of upwards of 300 hotels across the Nation by a national accounting firm substantiate these averages precisely. An example of the type of squeeze which is currently effective is the following: On September 4 the War Labor Board amended General Order 30 to provide that increases in wages up to 55 cents an hour could be made by employers without approval of WLB, even though such increases were later made the basis for an appeal to OPA for increased prices. But on September 20, when conferring with OPA officials, a task committee of the Hotel Industry Advisory Committee was told that a hotel could not be permitted to recover any of these added costs except by presenting an application for relief under the hardship provision of the regulations. When I explain that only two hotels, to our knowledge, have qualified for relief under this provision during the period of price controls, you will understand our concern. It isn't that hardship was not present in some cases, because some hotels have been forced into receivership when denied relief. The hardship provisions are too stringent, and in most cases the hotel would be bankrupt before it could qualify. We are for price control, when necessary, and we favor the highest wages our American business economy can possibly pay, but in the face of so inexorable a squeeze, we are truly distressed. May I interject there a description of the hardship clause in the restaurant menu price requirements of OPA. In order to be eligible for relief, that is, for an adjustment in your menu prices, you must prove, first, that you are going broke and have to close; second, that if you do close your present patrons will have to pay more for the same food they are now getting if they eat somewhere else. Frankly, I do not know of any instance where that requirement has been met. There are several fallacies known to the employers which we fear are sometimes overlooked in attempts to force wage levels higher.. First, a hotel owner who is financially able today to step up wage scales is taking a fearful risk when he does so. For this reason, he runs the risk of being frozen to the new and higher wage regardless of whether business a year or two hence would permit his maintenance of such wage level. Our information in this field comes direct from the War Labor Board. Also, tips received by employees should always be included in the minimum wage. The employer is constantly faced with liability for withholding and social-security taxes for employees who do not declare their tip receipts to management. Also, it is usually difficult to estimate these receipts. A very careful check was made recently in leading transient and residential hotels in a certain city, with the following receipts noted per week: Coffee shop and low-priced lunchrooms. Weekly tips $31. 06 53.25 66.40 85.40 Those are interesting figures, in view of the petitions that reached your committee the other day that tips be entirely ignored in connection with the minimum wage. And yet, whenever wage scales are mentioned, the basic cash wage paid waiters or waitresses, or other tip employees, is always the wage recited for that occupation. Throughout the war period there was no single directive from the War Labor Board to distinguish between tip and nontip employees, and it did cause a great deal of interdepartmental concern. We have instances where a bell captain or a bell boy declined to accept a job as assistant manager of a hotel because he was making so much money. We have sought comparative figures on wages for numerous job classifications in hotels from the United States Department of Labor and from other Government sources. But the Department of Labor's detailed figures for an industry do not run back prior to 1943. However, the records do reveal that the average female service employee in New York hotels has increased her hourly earnings more than 100 percent between 1935 and 1943. This is not uncommon in comparisons of unofficial figures from other sections of the Nation. We are grateful for this opportunity to reveal to your committee some of our reactions to the legislation now before you. |