exercised forthwith, and the provisions of section 7 of said Act (relating to overtime compensation) shall be in full force and effect from and after the date of enactment of this Act.

(b) Except as otherwise specifically provided, nothing in this Act shall alter, affect, modify, or rescind any existing order, regulation, or interpretation of the Administrator of the Wage and Hour Division or of the Secretary of Labor, or any agreement entered into by the Administrator or the Secretary of Labor and any such order, regulation, interpretation, or agreement shall remain in full force and effect until amended, modified, or rescinded by the Secretary of Labor, pursuant to this Act.

(c) No amendment made by this Act shall affect any penalty or liability with respect to any act or omission occurring prior to the effective date of this Act; but, after the expiration of four years from such effective date, no action shall be instituted under section 16 (b) of the Fair Labor Standards Act of 1938 with respect to any liability accruing thereunder.

Senator THOMAS. The first witness will be our Secretary of Labor, Mr. Tobin.

STATEMENT OF HON. MAURICE J. TOBIN, THE SECRETARY OF LABOR, ACCOMPANIED BY WILLIAM R. McCOMB, ADMINISTRATOR, WAGE AND HOUR AND PUBLIC CONTACTS DIVISIONS; HARRY WEISS, DIRECTOR, WAGE DETERMINATIONS AND EXEMPTIONS BRANCH, WAGE AND HOUR DIVISION; AND WILLIAM S. TYSON, SOLICITOR OF LABOR, DEPARTMENT OF LABOR

Senator THOMAS. I should say that Senator Pepper is detained and there is a Democratic conference going on at this time, so that might keep the Democratic members away.

Mr. Secretary, we are ready to proceed at any time that you are. Secretary TOBIN. Mr. Chairman and members of the committee, I am very gratified at this opportunity to appear before this committee to present my views on S. 653, Senator Thomas' bill entitled the "Fair Labor Standards Act of 1949". This bill deals with what I consider to be one of the most vital issues facing the country today.

To those who view revision of the Fair Labor Standards Act as a purely domestic issue, this may appear to be too strong a statement in the light of the grave international problems that now exist. Even if we were experiencing the international stability that characterized the last half of the nineteenth century, it would still be of vital importance to revise the act, in the light of existing economic conditions, so as to maintain a healthy economy.

But it is precisely because of the present international picture that it becomes imperative to do everything in our power to assure the successful functioning of our economy and the happiness of our people. A society, like an individual, cannot be healthy, vital, confident, and strong when any component part is debilitated. This country cannot fully implement its foreign-aid commitments or vigorously pursue a foreign policy designed to strengthen the democratic forces abroad if our domestic policy suffers or condones widespread unemployment or substandard living conditions for millions of our workers.

The Fair Labor Standards Act is one of our most important instruments for preventing either of these from occurring. In placing a ceiling on straight-time hours and a floor under wages, the Congress manifested its intent to spread employment and maintain a minimum standard of living. Yet, in terms of today's economic conditions, the

act, as an economic tool to accomplish either of these objectives, is as outdated as a 1938 model tank or airplane is as an instrument of war in an atomic era.

When first enacted the Fair Labor Standards Act represented an advance in social legislation. The approach was cautious, but reasonably so, as the scope of Federal power to legislate in this field was still unclear and the ultimate impact of such legislation on our economy was unknown. Today, after years of experience, we know that the principles of the act are sound. Yet, virtually no changes have been made in the act since 1938 despite the tremendous changes in our economy since that time.

The time has come to stop regarding wage-and-hour legislation as an experiment. Rather, it should be viewed as a highly useful and valuable economic instrument for the maintenance of our free enterprise system. If the act is to continue as a vehicle of its declared policy, that is

to correct and, as rapidly as practicable, to eliminate labor conditions detrimental to the maintenance of the minimum standard of living necessary for health, efficiency, and general well-being of workers

constructive action must be taken to extend and modernize the act's application and administration. This must be the philosophical framework within which revision of this act is reviewed.

It is my purpose to outline for you in general terms the aims and objectives of the Department of Labor for the amendment of the wage-and-hour law. The Administrator of the Wage and Hour Division will discuss these objectives in greater detail in his testimony before this committee. I wish to recommend for your consideration five general steps for improving the present act:

1. Raise the minimum wage to 75 cents an hour and provide for industry-committee procedures to set higher rates wherever possibleup to a dollar an hour.

2. Extend the coverage of the act to activities affecting interstate commerce and at the same time straighten out and clarify along fair lines the many exemptions which are now in the act.

3. Strengthen the child-labor provisions.

4. Define the term "regular rate" for purposes of calculating overtime, thus giving to employers and workers a clear-cut guide and providing a solution to so-called overtime-on-overtime problems such as those recently raised in the longshore industry.

5. Improve the administration of the act by taking three needed steps. The first is to centralize the administrative functions in the Department of Labor by vesting them in the Secretary of Labor. Second, enable the Secretary to carry out the act's purposes in the most practical and effective manner by providing for rule-making authority under the act. Third, facilitate the collection of back wages due under the act by authorizing the Department of Labor to supervise wage payments and to sue in behalf of employees in case of default.

S. 653 would accomplish these objectives.

The President, in his economic report transmitted to Congress in January of this year, urged that the coverage of the act be broadened and the minimum wage increased to at least 75 cents an hour, with additional increases on an industry basis. The economic effect upon

industry of the adoption of a 75-cent minimum wage would be scarcely noticeable.

Senator DONNELL. May I interrupt you, Mr. Secretary? Do you think that is true in practically all industries, or do you think there are some industries in which it would be very noticeable?

Secretary TOBIN. We can take industry by industry at the termination of my statement, and I have experts in my Department who will be able to give the effect on any given industry.

Senator DONNELL. Will there be someone here to testify on the laundry industry?

Secretary TOBIN. I believe they can give you the answer on the laundry industry as well.

Senator DONNELL. Thank you.

Secretary TOBIN. We have estimated that only 1,500,000 workers now covered are receiving less than 75 cents an hour, and in even low-wage industries this minimum can undoubtedly be readily absorbed.

If we were concerned with establishing an adequate minimum wage to achieve what we generally regard as the American way of living, we would not today be talking in terms of an hourly wage of 75 cents. In advocating the adoption of such rate, I want it clearly understood in the record that I do not consider that rate to be an adequate minimum, I regard it merely as a starting point toward maintaining "the minimum standard of living necessary for the health, efficiency, and well-being of workers." It is simply a floor under wages. In view of the greater productivity of the workers today, the rise in the general level of income, and the increased cost of things the worker has to buy, it is clearly unconscionable for any employer to go below a 75-cent floor in paying his employee.

What has happened since 1938 is, I am sure, familiar to the members of the committee. This country has made its greatest strides in production. Its wealth has reached an all-time high. With these advances has come a sharp rise in living costs and, generally, an upward adjustment in earned incomes. Everything today is on a totally different scale from what it was 10 years ago. There is no need for me to labor on this point, familiar as we all are with the many grave difficulties encountered today by many families, even in the 3 to 5 thousand a year bracket, to make ends meet.

As is well known, 40 cents an hour was inadequate even in 1938. This was emphasized by the Senate Committee on Education and Labor in reporting the bill. In 1938, 40 cents an hour for a 40-week would have meant $832 a year, as compared with a bare subsistence budget defined by the WPA in 1935 of somewhat more than $900 required for a worker, his wife, and two children; that is, a typical industrial worker's family.

Today a minimum budget for a single worker is over $1,700 a year, including taxes, according to all State studies on this subject. Yet 75 cents an hour for 52 workweeks of 40 hours would bring home only a little more than $1,500 even before discounting social security and other wage deductions. Actually many workers do not work 52 weeks a year. The WPA emergency budget to which I have referred would probably cost today about $1,800. Adherence to that budget, mind you, over a long period, would admittedly endanger health.

It can thus be readily seen that with a 75-cent minimum wage we still will not assure workers a reasonable minimum. It seems perfectly clear to me that the act's declared policy contemplates a higher minimum wage for more workers as rapidly as the preservation of a sound economy permits. Either that, or the phrase "general well-being of workers" is meaningless. Therefore, I can only regard the 75-cent rate as a starting point for minimum wage revision.

Most industries, of course, pay far above 75 cents an hour. Average hourly earnings for production workers in manufacturing in February of 1949 were about $1.38 an hour. In view of these facts and the clear inadequacy of the 75-cent rate, the only way to carry out the original purpose of the act is again to provide for minimum wages to be raised on an industry basis, after the recommendations of tripartite industry committees, as rapidly as possible without substantially curtailing employment.

I favor the objective of a universal minimum rate of a dollar an hour, as proposed in S. 653. A dollar an hour would approach for the first time a realistic minimum wage necessary to health, safety, and general well-being. The wage earner working a 40-hour week around the year would receive a little over $2,000 at this rate.

There are four points I would like to emphasize about this industry committee proposal. First, there is nothing new about it. Exactly the same system was used successfully under the original act. Second, the rate would be lifted only in those industries and to those levels which would not bring substantial curtailment of employment. Third, if an industry rate should later prove to be too high during a depression, so that the rate is causing unemployment, I think that provision should be made for lowering it to the proper level. In no event, however, should the rate be permitted to go below 75 cents an hour. Fourth, this proposal is not a substitution for the collective bargaining process. Industry committees will not "fix" the wage rates for their industry. The rates determined by them to be minimal merely establish a floor for that particular industry, and under collective bargaining procedures the parties would be free to determine the rates to be paid, so long as they exceeded the minimum.

It is my sincere conviction that the act has beneficially affected millions of our workers, particularly those who are not favored by State laws or self-organization, most of our employers, and, as a consequence, the economy as a whole. It is time that its application be extended to additional millions of our employees as is proposed in S. 653. And, added child-labor coverage generally similar to that which would exist under the wage and hour provisions should be provided.

Often the basic issue involved in proposals to extend the coverage. of the Fair Labor Standards Act has become confused. We should not be misled by examples citing fringe cases. I reject the implication that there is anything essentially evil in entertaining the thought of extending the act to as many workers as possible. The basic issue is one of determining whether the act is beneficial to the welfare and maintenance of our free enterprise economy. If it is, and I think it is, then I can see no reason why it should not be applied as proposed in S. 653. I may add that the courts have held that the possible scope of coverage under the Constitution extends effectively well beyond the scope of the present act.

Senator DONNELL. Mr. Chairman, may I ask Mr. Tobin what particular cases he has in mind in that observation?

Secretary TOBIN. The constitutionality of the Fair Labor Standards Act of 1938, United States v. Darby Lumber Company. Senator DONNELL. I just want the citations.

Secretary TOBIN. I can quote this.

Senator PEPPER. Is it a short quotation?

Senator DONNELL. I didn't want the quotation unless the Senator does. I had in mind the particular decisions, if he can give the names. Senator PEPPER. Have you the citations?

Secretary TоBIN. Yes. 312 U. S. 100, U. S. v. Darby Lumber Company. On page 121, under Hearings of the Committee on Education and Labor, Eighty-first Congress, House bill 2033, volume I, at the bottom of page 121, memorandum to the Secretary from the Solicitor of the Department.

I offer that, Mr. Chairman, for the record.
Senator DONNELL. Thank you, sir.

Secretary TOBIN. There is every reason to eradicate in our interstate industries, as proposed in S. 653, the twin evils of unconscionably low wages and excessively long hours. Limitation of the act's application, as well as unnecessary exemptions from its provisions, are but licenses to unscrupulous employers to engage in the sweatshop practices of low pay and long hours. These festering sores on the body economic may well become the cancerous growths of widespread unemployment and substandard living conditions.

These sentiments are equally shared, I feel confident, by most of the Nation's employers. For 10 years part of our industrial community has been under the act's modest rules for a fair minimum wage, for regulating hours of work, and for preventing oppressive child labor. These rules have been outstandingly successful so far as they have gone. For this part of industry, unfair competition has been largely wiped out. For this part of the 40-hour week has become the standard and child labor has become an evil of the past.

Then there is another large part of the same general community for whom the labor costs, the wage rates, the hours of work, and the rules on child labor are whatever is required by the forces of competition. In this group are the workers who are not favored by State laws or self-organization. Yet their employers are frequently in the same competitive markets with those who must comply with the Fair Labor Standards Act.

I cannot escape the conclusion that what is good for one group of employers is equally good for those who compete with them. I am impressed with the fact that it is pretty hard for a fair employer to live by the rules and stay in business in bad times when his competitor is free to cut labor costs and undersell him. Moreover, the employers and employees who are not subject to the act are left to be the victims of the same type of vicious competition among themselves which helped to create the greatest depression in our history. The unpredictable economic effects of the act at the time it was initially enacted encouraged the acceptance of many exemptions. Events during the past 10 years, however, have shown that many of these exemptions create competitive inequalities and are not needed in their present form to prevent economic hardship or curtailment of

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