Dr. LUBIN. A good many of them are.

Mr. MONRONEY. The savings would revert to the Government, and I do not think in any bargaining the fixed fee that the entrepreneur negotiates for goes to labor.

Dr. LUBIN. I agree with you fully. I am glad you brought that point out. Wherever you have a fixed-fee system that is true. On the other hand, if you talk to these manufacturers, as I have in the last 2 or 3 months, trying to get some sort of wage stabilization in the industry, they try to make you believe that almost everything they make is on a fixed-price basis. Now, there is a tremendous number of

contracts

Mr. MONRONEY. They try to make you believe that they are on a fixed-fee basis?

Dr. LUBIN. We know that many of them are on a fixed-price basis for a very large proportion of their products. I think one of the companies is entirely on a fixed-price basis. It varies by type of plane and varies by plant. I think, in terms of total, it will run into hundreds of millions where you have a fixed price rather than a fixed fee. Mr. MONRONEY. A hundred million on the fixed price. What would the relationship be to fixed fee?

Dr. LUBIN. I would not know.

Mr. MONRONEY. The figures for airplanes run into several billions, so a hundred million would represent a very small percentage.

Dr. LUBIN. It would be in the hundreds of millions. It is an appreciable factor. I know one firm, as I say, where everything is a fixed price. Those firms are growing by leaps and bounds. They have to take new people in who do not know their jobs. Once that has evened up and leveled down, their profits will increase.

Mr. MONRONEY. They will increase on the fixed prices rather than on the fixed fees. On the fixed fees their profits will revert to the Government.

Dr. LUBIN. Absolutely. As I say, you have got to face this question. Are we going to say to labor, "We are fixing what you can get," but to employers, "Yes; we are fixing your prices, but we are not fixing your profits"? As I say, I think we must clarify, in our own minds, that when you fix prices you are not fixing the profits of industry.

Now, the sixth point I would like to emphasize is that you already have wage ceilings in many industries. You have got voluntary agreements between workers and employers, many of which the Government has been a party to, which actually fix wages. These contracts vary in length of time, the large majority of them lasting for a year, although there are instances where some last for 2 years. Take the case of the shipbuilding industry. There are wage contracts in the shipbuilding industry, most of which do not expire until April 1942. In other words, labor has said, "We take this and no more for another year."

The Lockheed-Vega Co., one of the biggest airplane producers in this country, signed a contract just the other day which goes through September of 1942, and the people whom they employ have their wages fixed. There is a ceiling on them. In steel you made an agreement last April, and that sticks.

In other words wages are already fixed through collective agreements, but you have not yet fixed the prices of the things that

these people make. I think we must bear in mind that in reality wage rates have been set for fixed periods of time in certain agreements, and these agreements cover anywhere from 7 to 12 million workers, whereas the prices of the things that these people buy or the things they make have not been set.

Finally, I think one of the questions that this committee must consider very carefully-and it is the answer to the question that was just raised-is, how would you proceed to fix the ceiling on wages? How do you set the ceiling for various groups of workers?

Let me give you an illustration of some of the problems that you run into. In the machine-tool industry during the past year hourly earnings have gone up about 13 percent. In the tin-can industry they have gone up 72 percent. In electrical machinery they have gone up 31 percent. In shipbuilding they have gone up 22 percent.

I think probably the best picture of what that is like is this chart, showing changes over the past 2 years. The telephone and telegraph industry has gone up three-tenths of 1 percent; printing and publishing, 2 percent; electric light and power, 4 percent; up here in engines, 24 percent; cotton goods, 23. (See chart 137.)

Where are you going to fix the wage level?

Mr. MONRONEY. Would you include all that in the record?
Dr. LUBIN. I will certainly be glad to.

As a problem of practical administration, are you to say that people in the telephone and telegraph industry should get nothing more, “We are freezing you where you are," whereas these other workers have gotten a 24-percent increase? Are you going to say "The average has been 17 percent; therefore, you can go up to 17 percent"? Mr. PATMAN. And the others come down.

Dr. LUBIN. That is a question that you gentlemen will have to answer. It is a question that we have got to face, as a realistic problem of administration, that any administrator must face, if you do anything about this problem. In other words, should we let the wages that have not gone up to the average go up and, as Mr. Patman has said, bring the others down? What are you going to do about differentials? In the District of Columbia I am sure I can find 50 different wage rates for the same job in 50 different grocery stores. Are you going to say that they must all pay the same wage rate? Are you going to say to the X company, "You can't raise your wage above $30 a week. We fix it there"? Does that mean that all the other grocery stores who have workers must come up to that, or does it mean that workers in these stores have a right to go to their employers and say, "The Government says $30 is fair for these grocery stores. We are entitled to as much as the other fellow gets for the same job?"

In other words, the thing that I would like to point out, Mr. Chairman, is that when it comes to the question of wages we do not have a one-price system like you have for commodities. Two different men doing the same job get different prices for the same work. I might give you a few examples of what that picture is like. Let us take the case of the agricultural implements industry.

Mr. WILLIAMS. I could not hear that. Will you state that again? Dr. LUBIN. The thing I am trying to point out, Mr. Chairman, is that you do not have a one-price system in wages like you have in commodities. If zinc sells for so much in a given market, it sells for

Miss SUMNER. Yes; but the case that you took assumed an increasing demand. In other words, it assumed the case where competition was not driving down prices, did it not?

Dr. LUBIN. True.

Miss SUMNER. So that that really employs a case where you almost have a monopoly, or you have a case where competition is not driving down the price, or some other thing like that. In other words, we assumed ahead of time a case where your point of competition did not apply at all.

Dr. LUBIN. Of course, let us assume an ordinary firm that happens to be very efficient. They can produce a certain number of units per year cheaper than anybody else can. Now, they have two alternatives-lower their price-but they cannot meet the full marketMiss SUMNER. They what?

Dr. LUBIN. They cannot meet the complete demand of the market, because there is a limit to what they can produce in a year. Now, they can lower their price and get rid of what they produce. There is still a portion of that market that their competitors must take care of. Or they can leave the price where it is, charge the same thing that the competitor charges, for the moment, until they can increase their own capacity, and profit by that. That is what happens all the time.

Miss SUMNER. I am perfectly willing to agree that that particular kind of case would not enter into the hypothesis.

Dr. LUBIN. But I would like to go further and clarify the issue as you raised it, namely, your original question. In that instance should the worker in that efficient plant be entitled to come into the management and say, "We want higher wages. We know you can afford to pay them"?

Now, that raises a question. Do these workers play any part in that increased efficiency? Granted that it is better machinery, better management, better sales organization, I think you have got to admit that labor also is a factor in there. Perhaps it is contributing more per hour. How much it is responsible for nobody can measure. It cannot even be measured, I think, in engineering

Miss SUMNER. You must remember that I also assumed in my case that the workers in that industry were doing the same type of work as in a similar industry and getting the same wage.

Dr. LUBIN. They might be doing exactly the same thing.

Miss SUMNER. In other words, I was assuming a case where the skill of the worker itself or the working skill of the people in the factory had not increased the profits.

By the way, if the committee does not mind, I would like to ask you this question. In this period that you gave between 1937 and 1940, in which you said that the difference in the wage rate

Mr. PATMAN. Miss Sumner, before you get to that will you permit an observation on the point you raised?

Miss SUMNER. Yes.

Mr. PATMAN. It was on the question of a corporation and an individual. We will have to pay off this national debt in some way, and it will have to be paid in taxes. According to Dr. Lubin, if a concern makes large profits, labor will come in and will want a share of the profits.

I say that we have got to permit large profits to be made, so that taxes can be paid, so that we can pay off the national debt. You know our system is based upon profits. In other words, we do not levy a tax on land or tangible properties aggregating in value about $300,000,000,000. We do not levy taxes, even for national defense, on intangible properties aggregating in value about $400,000,000,000. The only taxes we levy, except, of course, the consumers' taxes-excise taxes-are levied upon profits.

A person in the West can own a million acres of land, and if he does not make a profit he does not pay a cent toward national defense. He can own a billion dollars worth of stocks and bonds, or any amount, and if he does not make a profit he pays not a penny for national defense. So our whole effort is to pay these taxes through profits.

If you take these enormous profits, as you say, and reduce the prices to the consumer so there will be no profits, we cannot pay any debts that way. Or, if you do like Dr. Lubin suggested, it might happen that wage earners come in and demand it and take it. We cannot collect taxes that way. So how are we going to pay taxes based upon a profit system unless we permit profits to be made? Miss SUMNER. If I want to ride my horse, I do not let him chase out of the pasture and down the road and hope to get him. I get him while he is right there. If you want to decrease the cost of your defense program and pay it, the trick in doing it is to decrease the cost while you are buying, and not put it in the pocket of somebody and let him wander all over the county and depend on getting it back later.

Mr. PATMAN. You are presuming everything goes to defense. That is not a correct assumption. Only about 15 percent, Mr. Mills here on the committee said, goes into defense. I do not know just what the percent is.

Miss SUMNER. I do not think it makes any difference whether it gets into the hands of the workers or the managements. In fact, I would rather see it get in the hands of the workers, for this reason: They will go and buy something that will make a lot of profits for a lot of people, whereas if you are letting one man out of a factory employing 5,000 people get it, I just have one chance out of 5,000 to get that money back.

Mr. FORD. Dr. Lubin, I appreciate that what you are trying to show is that the high prices existing now are not the result of increased labor costs, but I would like to ask you a question on another point. Have you worked out in your mind any possible way that we can administer a wage ceiling if we put one on?

Dr. LUBIN. Mr. Chairman, with your permission, before answering the question may I go on a little bit further with my testimony and come to that very point?

Mr. FORD. Very well.

Mr. WILLIAMS (presiding). You go ahead. We have interrupted you throughout, notwithstanding the fact that we agreed not to do it. We will not have more interruptions, as far as I am concerned.

Dr. LUBIN. Based upon past experience, at least experience to date, wage-rate increases have not been responsible for price increases, and in many instances price increases have already taken place which anticipated future wage increases, which means that wages could go