producers. Consequently, these scale-down provisions would not be an equitable means of avoiding excess profits. The equitable and nondiscriminatory device for this purpose is a tax on the things themselves, namely, high net incomes and excess profits. HARRY L. BROWN, Acting Secretary. EXHIBIT IV. HAWAIIAN SUGAR PLANTERS' ASSOCIATION Mr. ERNEST W. GREENE, UNITED STATES DEPARTMENT OF AGRICULTURE, Vice President, Hawaiian Sugar Planters' Association, Washington, D. C. DEAR MR. GREENE: There are set forth below the data which you recently requested with respect to the 1944 Hawaiian sugarcane program. Except as indicated, this information is taken from the annual summary of the applications for payment submitted by Mr. King. Tonnage of sugar with respect to abandonment and deficiency. NOTE. Payment figures include amounts for abandonment and deficiency. DEAR SIR: This is the report of the special committee which you appointed to determine the effect which the provisions of House bill 3914 will have on the Hawaiian sugar industry, if the bill becomes law. Due to the fact that the bill is now in committee and an immediate answer is necessary, we do not have the time to investigate the problem thoroughly. We do, however, believe that we have arrived at a fair and reasonable estimate of the minimum effect of the provisions of the bill on pay-roll costs and the resultant increase in production cost per ton of raw sugar. A digest of the bill is attached hereto, and there is also attached our computations of the increased costs per ton of sugar due to the proposed establishment of minimum wage rates as shown in the computation. It should be clearly understood that the increased costs shown are the minimum. The bill exempts agricultural employment, but past experience shows that it will be necessary to treat all plantation employees similarly. Computed on this basis, all employees, if the bil becomes law, will receive an increase in pay per hour equal to the difference between the proposed minimum rates and the present minimum rate in effect of approximately 41 cents per hour. Our conclusions are as follows: 1. The minimum increase in total cost and per ton of sugar will be: 2. Based upon the above minimum increases in production costs, the fixed price of sugar and present or proposed governmental payments to foster production, a majority of the 34 Hawaiian sugar plantations with an aggregate net worth exceeding $150,000,000 will be unable to operate. Furthermore, it must be continually borne in mind that the plantations contribute very heavily to the taxes collected by the Territory, and if a number of plantations were to go out of business the remaining ones would have to bear an unproportionate share of such taxes, unfairly adding to their burden. The unemployment situation resulting from the liquidation of any number of plantations would be calamitous so far as the economic structure of the Territory as a whole is concerned and would force the liquidation of other related businesses. Respectfully submitted. R. G. A. CROWE, Chairman. HAWAIIAN SUGAR PLANTERS' ASSOCIATION, Hon. JOSEPH R. FARRINGTON, Delegate to Congress from Hawaii, Washington, D. C. DEAR DELEGATE FARRINGTON: During the war period 1941-45 Hawaiian sugar industry lost substantial numbers of its employees but nevertheless was able to turn in a better sugar production performance than almost any other domestic area. For the sugar industry there have been no war profits, as the same tight price ceiling clamped down on sugar returns in the case of beet sugar was applied in the case of cane sugar. All are familiar with how beet production has severely suffered due to the more attractive subsidies given to the production of other farm products, particularly beans and potatoes. This has not been the case with Hawaiian producers. Consequently, they have not acquired any appreciable fat on their corporate bodies as a result of war production. They face the coming transition period from war to peace with rising labor and material costs over which they have no control. Unless a substantially higher price for their sugar product is permitted, such increases in costs will soon jeopardize their staying in business. The present price for Hawaiian cane sugar plus Federal Government assistance by way of support and compliance payments is approximately 5 cents per pound. For next year increased support payments if authorized will raise this price by approximately one-half cent more. As a result of recent union contracts entered into, the estimated wage bill for the Hawaiian sugar industry for 1945 will come to around $40,000,000. Inasmuch as the wage bill constitutes approximately onehalf of the cost of producing sugar in Hawaii, one can readily see that the industry, with a production of an estimated 830,000 tons, is going to have a pretty close squeak after it pays all the heavy taxes it is subject to. It is understood that there is pending in Congress legislation for increasing the wage minimum under the Wage and Hour Act to 65 cents. It would have the effect in the Hawaiian sugar industry of raising the minimum wage 50 percent. This, on the face, would not appear too burdensome if it were not for the fact that when the minimum is increased all other and higher rates are proportionately increased. It is estimated that the industry's pay roll would accordingly jump from $40,000,000 to approximately $67,000,000 for 1946 under such a raise. Assuming that material and other costs proportionately increased, then it would create production costs of approximately $130,000,000, which on an 830,000-ton produc tion and approximately 5%1⁄2 cents per pound, would soon put the industry out of business, regardless of the fact that there is a great need for sugar both nationally and internationally. Consequently if there was such a minimum-wage increase it would require a price of at least 7 cents per pounds for the industry to keep in business and see daylight. Without such price increase or equivalent relief the result would be disastrous to the Hawaiian sugar industry. That agriculture in the Territory should thus be penalized after such a fine war record is difficult to understand. The sugar industry has long been the backbone of the economic life of the Territory. Not only does it make the most substantial tax contributions toward the support of Government but it also creates and maintain a higher standard of living and security for its employees than that afforded by any other large employer. As contrasted to the congested living conditions prevailing in urban areas, the sugar industry supplies its employees with perquisites that constitute a great saving in family costs in a way most conducive to the health and security of the employee and his family. These perquisites include housing, hospital and medical care for the employee and his family, water, fuel, and many indirect services such as recreational halls, social service, gardens, either with his home or in community plots, etc. Accordingly, it is felt by the sugar industry here that they have given to their employees something that no other industry has done on such a uniformly over-all program. In the administering of the present wage-and-hour minimum wage only nominal recognition is accorded the value of these perquisites to the sugar-industry employee. Some relief might be afforded the industry therefore, both now and in case of the proposed future increase of the minimum wage, if perquisites allowed as part of wages paid were put on a value to the employee basis rather than on the cost figure as originally paid by the employer basis. That is to say, that if in the Wage and Hour Act the section providing for the perquisite allowance could be amended so as to permit the perquisite allowance to be computed on the basis that it would cost the employee to furnish such perquisites for himself, then a more realistic recognition could be given to this form of compensation received by an employee when he works on an Hawaiian sugar plantation. Historically, the perquisite provision was set up at cost during those early days of 1934, 1935, and 1936, when building costs, taxes, and other costs were fairly under control and were not considered out of line with actual commodity prices, particularly the commodity price Hawaii is interested in, namely, sugar. At this time there has been complete dislocation and unbalancing of the relationship between commodity prices, particularly that of sugar, and all those values entering into the type of perquisites furnished by the local industry. Obviously, building costs and values today are far in excess of building costs of the middle 1930's. Replacement costs today generally reflect a 75 to 100 percent increase over the 1934-36 costs. It would hardly be fair to keep the agricultural perquisite measuring stick tied to the middle 1930's if cash wages payable by the employer are tied to the conditions and urban index costs of living existing in 1945. At present, plantation perquisites out here are universally computed at 6 cents per hour. Measured by what it would cost the employee in case he had to furnish these perquisites himself, there would be an increase to a figure somewhere between 15 and 20 cents per hour. In the consideration of the proposed increased minimum wage provision under the Wage and Hour Act, if the application of the perquisite allowance could be changed to a more realistic status as above proposed it would be extremely helpful in maintaining the Territory's major industry. Particularly would this be of help if a wage increase is decided upon with no provision made for a corresponding price increase, as it would then help to absorb some of the impact anticipated from such increase. Sincerely, HAWAIIAN SUGAR PLANTERS' ASSOCIATION, By P. E. SPALDING, President. STATEMENT OF CLARENCE J. BOURG, VICE PRESIDENT, AMERICAN SUGAR CANE LEAGUE, NEW ORLEANS, LA., TO THE COMMITTEE ON LABOR, UNITED STATES HOUSE OF REPRESENTATIVES It is our understanding that the current hearings are not confined to the provisions of any particular bill but are intended to cover the proposals contained in the several bills which have been referred to the Committee on Labor, the purposes of which are to amend the Fair Labor Standards Act. The interest of the American Sugar Cane League is in connection with the effect of the proposed changes upon the processors of sugarcane in Louisiana. Ours is a purely seasonal industry and the factories are operated during a limited period beginning in October of each year and extending into the month of January. As the size of the crop may vary each year, so does the actual length of the seasonal operations of the 66 processing plants engaged in converting sugarcane into sugar and byproducts. At the time of the original enactment of the Fair Labor Standards Act in 1938, the minimum wage being paid was 25 to 30 cents. The industry promptly went to the 30-cent minimum, and later, by action of the Labor Industry Advisory Committee, the minimum rate was increased to 40 cents. This substantial increase in the minimum likewise carried with it proportionate increases in the rates paid to the many skilled and experienced workers necessary to sugar processing. Because the processing operations are entirely seasonal and last from 75 to 120 days in each year, it has been very difficult to maintain experienced crews of workers with the proper skills. For the most part, the majority of members of the crew in a sugar plant follow other trades and work during the balance of the year, such as farmers, carpenters, and plumbers. The sugar plants are all located in rural communities so that crews cannot be easily obtained or organized. These conditions made it absolutely necessary, in most instances, to have the men employed in the plants work longer hours than are normal in factories which operate throughout the year. In fact, because the season is comparatively short, most of the men employed look forward to being able to work on long shifts, for the reason that they are able to improve their income at a time of the year when outdoor work is greatly reduced. The exemption contained in section 7 (c) of the act with regard to maximum hours has made it possible to continue the sugarcane processing operations during the war years when labor has been so scarce. It has permitted the industry in Louisiana to average 400,000 tons of sugar production during the war years, which represents increased production. It is essential to the continuation of maximum production that the section 7 (c) exemption shall be continued. The purely seasonal exemption provided under section 7 (b) (3) would jeopardize the saving of a large crop, since the harvest would extend beyond 14 weeks. More important is the fact that a 56-hour limitation could not be complied with due to the scarcity of experienced labor willing to work at a purely seasonal job, and because of the stringent control over prices and income exercised both by the USDA under the Sugar Act, and the OPA under the Price Control Act. As proof of the inability of sugarcane processors to operate successfully under the squeeze between minimum labor rates and strict control over price and income, a survey was conducted by the Louisiana State University covering the processing operations of 1944, and out of 29 raw-sugar factories surveyed, 19 lost an average of $15,914 during the 1944 crop season. The survey established the fact that a majority of the processors under the Fair Labor Standards Act of 1938 has demonstrated the complete necessity for continuing the section 7 (c) exemption. The experience has likewise demonstrated that any increase in the minimum-wage rate will have to be offset by a corresponding relinquishment) of Government controls over the price of sugar and over the income of producers. In view of the surveys conducted by the Louisiana State University since 1937 covering the cost and income of sugarcane processing in Louisiana, our organization requested a projection of the effect of proposed increases in minimum rates. We submit a statement an dtables prepared by Dr. J. Norman Efferson, economist of the Louisiana Agricultural Experiment Station at Louisiana State University. The statement explains each table and graphically indicates the reasons for our appearing in opposition to the proposed amendments. The cost studies show an average net loss in 1944 of $15,914 per mill, or 12 cents per 100 pounds of sugar. Tables 4, 5, and 6 indicate continuation and increase of losses should the minimum wages be increased to 65 cents, to 70 cents, and to 75 cents. Table 7 indicates what the losses would be per mill and per 100 pounds of sugar for hours worked in excess of the 56-hour week should the minimum rates be increased as proposed and should the section 7 (c) exemption be eliminated. We protest and oppose the delegation of power by Congress to so-called industry committees which would permit the establishment of classifications within any industry or which would authorize the Administrator, acting upon the recommendations of such an industry committee, to establish classifications within any industry or to establish different minimum-wage standards than those provided for by law specifically in the Fair Labor Standards Act. The American Sugar Cane League, for the reasons discussed above, urges that changes in the Fair Labor Standards Act should not be made until Government policies have been determined and put into effect with regard to postwar price and income adjustments within each industry. We ask that the exemptions as to maximum hours contained in section 7 (c) be continued and that the minimumwage rates in section 6 be not changed until the aforesaid price and income adjustments are made by the Federal Government. We submit the plea that Congress do not grant unfettered delegations of power to the Administrator or to industry committees which would have the effect of a threat of constant uncertainty and arbitrary action by which the processors in our industry could be denied uniform application of the law or equal protection under the law. CHANGES IN THE COSTS OF PRODUCING RAW SUGAR UNDER CERTAIN ADJUSTMENTS IN MINIMUM WAGE RATES IN LOUISIANA (By J. Norman Efferson, Louisiana Agricultural Experiment Station) Detailed studies of the costs and returns from the operations of raw sugar mills in Louisiana have been conducted by the Department of Agriculture Economics of the Louisiana Agricultural Experiment Station each year since 1937. The most recent year studied, the 1944 grinding season, has been used as the basis of estimating expected changes in costs and returns under certain adjustments in minimum wage rates. The 1944 season was used since it is the most recent one and more nearly represents current and expected future conditions as to costs and returns. The 29 mills included in the 1944 study represent about three-fourths of the total production of raw sugar in Louisiana in 1944. The percentage distribution of the total labor bill paid out to different wage classes of labor for most of the mills studied in 1944 is shown in table 1. Under 1944 conditions, the industry operated under a 40-cent minimum wage rate. The 1944 results indicate that about 14 percent of the labor in overhead costs was paid at the 40-to-44-cent rate, 64 percent of the procurement of cane labor, 56 percent of the labor for direct manufacture of sugar, 46 percent of the mill maintenance, and 11 percent of the selling costs. To summarize, 46 percent of all labor costs were paid out to workers at the 40-to-44-cent rate and about 75 percent of all labor was paid at less than 75 cents per hour. The actual labor costs for each wage rate class for the 29 mills studied in 1944 are shown in table 2. Of the total labor expense of about $91,000 per mill, $46 000 was paid at the 40-to-44-cent rate. The percentage increase in wage rates in each wage-rate class which would be caused by certain adjustments in wage rates are shown in table 3. In this computation, it is assumed that any increase in minimum wage rates would necessitate the same absolute change for each wage-rate class. The table indicates that workers paid at the rate of 40 cents in 1944 would receive an increase of 62.5 percent if the minimum rate were increased to 65 cents, would receive an increase of 75 percent if the minimum rate were increased to 70 cents, and would obtain an increase of 87.5 percent if the minimum rate was increased to 75 cents. Percentage increases for the other wage-rate classes are somewhat less than for the lowest group. Tables 4, 5, and 6 present an extension of these wage-rate increases into costs to be expected under the 65-, 70-, and 75-cent minimum wage-rate situations. In these tables, all costs other than labor are carried at the actual cost as determined from the 1914 cost study. Each table presents a comparison of results under 1944 actual cost conditions as compared to expected results under the wage-rate adjustment. In 1944, the 29 raw sugar mills studied had an average net loss of about $16,000 per mill, or $0.12 per hundred pounds of raw sugar produced. Under 1944 conditions, with a 65-cent minimum wage rate, the net income can be expected to average a net loss of $52,000 per mill, or $0.39 per hundred pounds of raw sugar. If the minimum wage rate is 70 cents, the loss will be $59,000 per mill, or $0.45 per hundred pounds of sugar, and if the minimum wage rate is 75 cents, the loss will average $66,000 per mill, or $0.50 per hundred pounds of sugar. 1 Louisiana Agricultural Experiment Station Bulletins Nos. 316 and 373, and Department of Agricultural Economics, Louisiana Agricultural Experiment Station Circulars Nos. 37 and 48. |