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Mr. PATTERSON. I am not advocating that you switch. And I would like to make this statement for the record. I introduced similar bills in California with the idea of ultimately getting people to realize that workers all over America need the same kind of treatment as to food, clothing, shelter, their bodies and souls, education, and health. I am very sincere about that.

I knew that my bill could not pass this Congress as it is constituted but I hope some day we will have a Congress that will pass such legisla

tion.

Mr. POTOFSKY. We are realists. We do not want pie in the sky. We want to get results for the American people and protection for industry. We believe this legislation is feasible and possible and beneficial to the country as a whole. There is no question of differentials at the present time. I know from experience in our own industry, with which we have been intimately connected for the last 30 years, that this will not affect their prices. It will be wholesome. You have not heard any of the clothing manufacturers associations complain about this. The cotton garment industry is a relatively newly organized industry, but you have not heard even from them any complaint about this. In other words, industry is mentally adjusted to the 65-cent minimum. We do not believe it would work a hardship and certainly would be beneficial and for the best interests of our country.

Mr. RAMSPECK. You said that you are a realist. I take that to mean that you want the most that you can get in a bill that would be passed by Congress.

Mr. POTOFSKY. Mr. Ramspeck, I would say that 65 cents is the rock bottom. Let us not try to trade from 65 cents down, because this is a matter of subsistence.

Mr. RAMSPECK. If you cannot get 65 cents, you would rather have something less, would you not?

Mr. POTOFSKY. Well, I want 65 cents, if you ask me, no less.

Mr. PATTERSON. I think low wages have been the cause of much crime. Take a man who is making $1,500 a year, which is not even 75 cents an hour, as your testimony indicates. You know that a family of four or five cannot live on $1,500 at present prices. I do not know how they can keep body and soul together. Some of them are driven to crime because of their low standard of living. It is a terrible situation and we ought to correct it. It is the basis of the strength of our democracy that we treat people as human beings.

I, also, want the farmer and industry to continue in business. But they said the same thing when we put the minimum up to 40 cents. They made the same arguments against that.

Mr. POTOFSKY. They made the same arguments when we introduced the 25 cent minimum. I think the records will prove that. It was 25 cents and then it was changed to 321⁄2 cents and then 40 cents and exactly the same arguments were made against it.

I remember one man testifying during the NRA days that the people on the Eastern Shore of Maryland were getting 3 or 4 cents an hour and when it was proposed to pay something like $11 a week he said, "By God! If you do that, you are going to put them all out of business." They were afraid at that time of an $11 per week minimum. What happened on the Eastern Shore? They have prospered.

And what is going to happen to the family that does not have $1,500 in a year to purchase all the things they need? I would like to refer you

to some testimony before the Senate committee on this very subject, where some women from Tennessee testified how they lived. The clothes on the backs of their children were donated by members of the family. They had doctors' bills that they could not pay. They actually did not get enough to live on.

Mr. PATTERSON. I can remember when I worked for 5 cents an hour in the canneries and they yelled when we struck for 72 cents an hour. We did not have enough to eat in those days. The cost of living has risen since then. I hope some day we can do something for the people of America and put no one out of the business. Business prospers when you have good wages.

Mr. RAMSPECK. If there are no further questions, thank you, Mr. Potofsky. The committee will recess until 10:30 Tuesday morning. Mr. POTOFSKY. Thank you, gentlemen.

(Whereupon the committee recessed until Tuesday, November 13, 1945, at 10:30 a. m.)

(The following matter was submitted for the record:)

STATEMENT OF DAIRY INDUSTRY COMMITTEE IN RE PENDING LEGISLATION TO AMEND FAIR LABOR STANDARDS ACT BEFORE THE HOUSE COMMITTEE ON LABOR

My name is Charles Fistere. I am executive secretary of the Dairy Industry Committee, with offices in the Barr Building, Washington, D. C.

This statement which was prepared under the direction of the manpower subcommittee is offered on behalf of the following constituent associations: American Butter Institute, National Cheese Institute, American Dry Milk Institute, Evaporated Milk Association, International Association of Ice Cream Manufacturers, International Association of Milk Dealers. After careful study of the provisions of H. R. 3914 and companion bills and their application to the dairy industry, the committee finds that there are several phases of the proposed legislation which are of vital concern to the dairy industry and which deserve the earnest consideration of your committee and Congress. These particular phases to which we address our attention specifically are

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1. Establishing a minimum wage of not less than 65 cents an hour.
2. Providing for wage differentials between job classifications.

3. Retention of "first processing" exemption.

4. Retention of "area of production" exemption.

The Dairy Industry Committee recognizes that the elimination of sweatshop conditions and the maintenance of consumer-purchasing power are desirable national objectives, both from social and economic viewpoints. Average wages as now paid by the dairy industry are considerably above the minimum set in pending legislation, if Bureau of Labor Statistics for 1944 with respect to particular segments of the dairy industry are a reliable indication. These statistics show that the average hourly earnings of workers in different types of dairy plants were as follows for 1944 and 1939:

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These figures indicate that the dairy industry has been increasing its average wage rate very materially within the last 5 years, with average hourly wage rates in the butter industry having increased almost 50 percent from 1939 to 1944. The average hourly earning for persons engaged in the fluid-milk industry is probably considerably higher than those shown for other segments of the dairy industry due to the very good returns received by persons engaged in retail and wholesale milk delivery.

However, it should be recognized that the average hourly earnings as reported by the Bureau of Labor Statistics is quite a different thing from the minimum wage rates set forth in the proposed legislation. The average hourly earnings reported by BIS represent gross pay, including overtime and wage rates earned for all job classifications. Therefore, average hourly earnings cited above are very different from minimum wages now paid by job classifications and by areas. Table I, showing minimum wage rates in effect in August 1944 as prescribed by Regional War Labor Board 7 for the State of Missouri, shows the great variation even within one State of minimum wages by job classification and as between rural and urban areas within a single State. Of course, variations from one section of the United States to the other would be proportionately magnified. Tabla I shows that for butter processing, alone, minimum wage rates vary from 83 to 40 cents an hour, depending upon the job classification and area. For the single job classification of butter wrapping the range is from 64 cents an hour in St. Louis to 40 cents an hour in rural areas within the State of Missouri.

Table II is an exhibit showing minimum and maximum wage rates by job classifications for the dairy industry in effect in the Dallas, Tex., region as set by the Eighth Regional War Labor Board as of December 16, 1944. This table indicates that the minimum wage rates for most job classifications listed are materially lower than the minimum rate proposed. Before approving the pending legislation, which obviously would have materially different effects on the dairy industry in various sections, we invite the attention of Congress to the following considerations:

MINIMUM WAGES

There are two principles with respect to minimum wages which should be recognized. One is the question of the desirability or practicability of establishing uniform minimum wages which would apply to various industries and all regions. The other ties in with the first in that it concerns the establishment of minimum wages without regard to the value productivity of the labor employed. The United States has a high average wage rate compared to many other countries due largely to the fact that man-hour production is relatively high because more capital, including equipment and labor-saving devices, is employed in the United States per man than in many other countries. Similarly, some industries employ a great deal more capital per man than do others because of the nature of the business. For instance, in June 1945 the average hourly earnings of persons employed in automobile manufacture was $1.27 while the average hourly earnings of those in the manufacture of food and kindred products was only 88 cents, and of those employed in cotton manufactures, 69 cents. These variations in no small measure are due to differences in the volume of capital investment per worker in the separate industries. Similarly, differences in labor supply, returns from competing industries and living costs account in part for regional wage differences even in the same industry.

Dairy processing plants are characterized by being located to a large extent in rural areas and drawing their raw product supplies from adjoining and restricted marketing areas. This results in a very high percentage of plants with small volume and resultant close operating margins. These factors tend to lower the rates which employers can pay employees. Correspondingly, dairy plants show a rather low rate of profits as compared to other industries. For instance, in March 1943 the Federal Trade Commission reported a study which showed a comparison of industrial corporate profits in 1940 for 93 industry groups. This report indicated that milk and milk products corporations, as a group, ranked sixty-sixth on the basis of returns on investment before taxes; eighty-sixth on the basis of net returns per dollar of sales; and fifty-fourth on the basis of administrative and general office expense as a percentage of sales.

On the other hand, as compared to other food groups, the dairy industry has a record of returning a relatively high percentage of the consumer's dollar to the farmer. The Bureau of Agricultural Economics publication, Marketing and Transportation Situation, shows that for August 1945 the farmer's share of the consumer's dollar for all foods in the "market basket" was 54 percent; while that for all dairy products was 58 percent; fluid milk, 61 percent; cheese (American), 67 percent; and butter, 84 percent.

Justice Robert H. Jackson, then Assistant Attorney General, in appearing in hearings on the Fair Labor Standards Act in 1937, recognized a uniform wage might cause inequities when he responded to a question asking:

"Why not set some such minimum wage in this bill which would act as a minimum until a fair minimum wage could be established by a vote?"

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Justice Jackson replied:

"Well, if you did that, you would run the risk of setting a minimum which would be in some particular cases a great hardship, and of having your right to fix a minimum tested in the courts under its most unfavorable aspect as a violation of due process."

Economic progress is marked by increased value productivity per man-hour. This increased productivity affords an opportunity for raising wages or lowering prices. This bill would raise minimum wages, maintain wage differentials, and enforce time and a half overpay apparently without regard to productivity per work hour or price changes. If wage policies are to be such that wages would be above levels that would clear the market, then we submit that we cannot have a high level of employment unless Government also steps in and controls prices, interest charges, depreciation, railroad and public utility rates, taxes, and raw-products prices.

Even if wage changes were based on changes in value productivity per work hour, to have a national wage policy that would allow increases in productivity to be absorbed entirely by wage increases rather than partially by price declines would mean that farmers and others not directly benefited by labor's wage increase would be sealed off from all advantages due to technological progress in industry. A policy that advances wages above value productivity levels would result, of course, in higher parity prices for farmers and a resultant demand for higher support of farm prices. This would largely obliterate the effects of wage increases on raising real income.

Salaries and wages in the fluid-milk industry represent some 20 percent of net sales when cost of raw products are included. This figure will vary somewhat up or down for other segments of the dairy industry. Any general raising of wage rates in the dairy industry would result in the additional labor cost having to be absorbed either in increased food prices or decreased returns to farmers. In this connection if the principal argument for increasing wages is to increase purchasing power, the objective is not gained and the national economy does not benefit if the action results in lowered purchasing power of farmers or increased food cost to consumers.

If the policy is to be one of raising wages without regard to increased productivity per work-hour so that the result would be increased prices, then obviously those industries engaged in producing for export or whose product is in competition with imports would be placed at a distinct disadvantage. This would soon lead to, (1) unemployment in these particular industries or, (2) the necessity of raising tariffs to protect these industries against such uneconomic practices.

FEDERAL ESTABLISHMENT OF WAGE DIFFERENTIALS

Section 2 (b) (2) of the proposed bill, which provides for the maintenance of fixed wage differentials between interrelated job classifications, seems to be a distinct departure from the original purpose of the Fair Labor Standards Act to eliminate sweatshop conditions. If the purpose of the act is to remove sweatshop conditions and to provide a livable minimum wage, then there seems to be little economic or social justification for the Federal Government attempting to establish fixed differentials for various job classifications. This is true because: (1) It would be next to administratively impossible to determine wage rates for the innumerable job classifications in hundreds of industries (in 1939 the Department of Labor and United States Employment Service issued part I of a Dictionary of Occupational Titles in which the definitions of occupations alone covered 1040 pages); (2) because the supply and demand for workers in various job classifications can best be regulated by wage rates determined through bargaining arrangements; and (3) because a raising of minimum wages to a level of 65 to 75 cents with concurrent raising of wage differentials by job classification would have such an indeterminate effect on the cost of producing various products that the entire economy would be disrupted, the reconversion program materially upset, and either many high-cost producers forced out of business or a general raising of prices which would tend to offset any gains in real income.

RETENTION OF "FIRST PROCESSING" EXEMPTION

Milk production is highly seasonal in character and milk products are highly perishable. Seasonal production is indicated by the fact that ordinarily total production of milk in June is about 50 percent higher than that in November.

The range in production of manufactured dairy products is materially greater since it is the surplus milk in the flush season that is turned to manufactured products. For instance, the average production for the months of June and November in the period 1937-41 of various products was as follows:

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The handling and processing of all these products requires trained and experienced personnel. The nature of milk means that workers in the industry are on a continuous "assembly line" handling highly perishable products which must be moved promptly and continuously. One day's production cannot wait to be processed until the following day because of both its perishability and the fact that neither the size of working force nor plant facilities will allow for the accumulation of 2 days' raw products. This means that in many instances breakdowns within a plant or transportation system require that the total working force be retained on the job until the entire day's production is moved through the "assembly line."

Both of these factors, seasonality and perishability, necessitate the employment of a great many more man-hours in the flush-production periods than in the winter months. The butter industry, for instance, utilizes approximately 33 percent more man-hours in June than in January. In June 1944 the average number of hours reported as being worked per week for various segments of the dairy industry were as follows: Butter, 48.2; ice cream, 46.3; and condensed and evaporated milk, 51.8. If the provision of exempting first processors of dairy products from paying time and a half overpay for time worked over 40 hours were removed as the pending legislation would do, then the dairy industry would be forced to increase selling prices, lower buying prices, or reduce the number of their regular employees during slack seasons and greatly increase the number of seasonal employees during flush periods in order to hold working time to the 40-hour limit. Therefore, we urge that the "first processing" exemption be retained for the purpose of both protecting farmers and consumers, and assisting in stabilizing a high level of continuous employment. Toward this purpose we commend the following amendment:

"On page 5, after line 14, add subsection (c) to read as follows:

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(c) In the case of an employer engaged in the first processing of milk, whey, skimmed milk, buttermilk, or cream into dairy products, provided, that the addition of any necessary ingredients or the transportation of such milk, whey, skimmed milk or cream in any form between several plants of the employer shall not be deemed an interruption of first processing, or in the ginning and compressing of cotton, or in the processing of cottonseed or in the processing of sugar beets, sugarcane, or maple sap into sugar (but not refined sugar) or into syrup, the provisions, of subsection (a) shall not apply to any employees in any such place of employment; and in the case of an employer engaged in the first processing of, or in canning or packing perishable or seasonable fresh fruits or vegetables or in the first processing, within the area of production (as defined by the Administrator), of any agricultural or horticultural commodity during seasonal operations, or in handling, slaughtering or dressing poultry or livestock, the provisions of subsection (a) during a period or periods of not more than 14 work weeks in the aggregate in any calendar year, shall not apply to his employees in any place of employment where he is so engaged.'"

RETENTION OF "AREA OF PRODUCTION" EXEMPTION

Section 13 (a) (10) of the 1938 Fair Labor Standards Act provided that neither the wage nor hour provisions of the act should apply with respect to-"any individual employed within the area of production (as defined by the Administrator), engaged in handling, packing, storing, ginning, compressing, pasteurizing, drying, preparing in their raw or natural state, or canning of agricultural

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