and the theater. It is deliberately interstate. It seeks not to be local. It wants to become national. It advertises nationally. It is generally part of a national chain.

Senator WITHERS. I want to ask this, speaking about the interstate aspect. If any part of that business is interstate, does it not bring the whole business under interstate?

Mr. BARKIN. Anything beyond insignificant proportions.

Senator WITHERS. Take a coal company where a part of the coal goes out of the State. It is engaged in interstate commerce all the way through because the coal may go out of the State.

Mr. BARKIN. That is right.

Senator WITHERS. You do not differentiate between what is sold in the State and what is sold out of the State. Would not that be true of the large merchant where he buys as a wholesaler and is selling as a retailer? It is, after all, a continuation of the same business. Mr. BARKIN. That is right.

Senator WITHERS. You do not separate them. After they become interstate, you do not divide the items that are interstate and those that are not interstate.

Mr. BARKIN. I do not think you should.

Senator WITHERS. That is right.

Mr. BARKIN. Under the present law they are divided. He can just pay to those employees touched by interstate goods, the minimum, and so segregate the operations. So with people working side by side, doing the same work on the same goods, one will get the benefit of the act and the other will not.

Senator THOMAS. If you take your argument there to its logical conclusion, that is, if it is bad for people to be in intrastate commerce because those in interstate commerce are better off, and they live side by side, ultimately will not the time come when there will be no intrastate commerce? It is coming to that fact, it seems to me.

Senator WITHERS. Yes, sir.

Senator THOMAS. Do you not think it is time to tax intrastate commerce out of business?

Mr. BARKIN. Do you not think, Senator, that is coming about not by virtue of the laws we are passing, but by virtue of the direction of the economy? Small business is becoming uneconomic.

Senator THOMAS. Yes. You talked about equality of interstate and intrastate commerce. Are you going to compare the intrastate commerce in the State of Texas with intrastate commerce in the State of Rhode Island, or are you going to compare intrastate in a State with a population like Nevada with a State that has a population like Rhode Island, again, or like New Jersey? You see, we have got to the place where our economy is actually running away with our law. Whenever that time comes something has to give, just as the State moneys gave when we passed the National Bank Act and taxed the State currencies out of existence, and incidents of that kind. Nobody today would stand up and accuse our Government of having done something wrong, and say that it interfered with States' rights in getting rid of the State bank notes in our country because it gave us two systems of money, one good, and the other bad. The way we were functioning we had to remedy those things.

Mr. BARKIN. Yes.

Senator THOMAS. I imagine that the struggle will have to go on for many more generations before the logical situation dawns upon us. But the struggle, it seems to me, ought to be less today than it was when we passed the Fair Labor Standards Act. And still it seems to be a little bit hotter, because Fair Labor Standards Act did set up certain standards which leave certain people, comparatively speaking, better off than they were before.

I think we are justified in taking this little bit of time, because there is no problem before us in labor relations quite as big as what constitutes interstate commerce, and what can be controlled and what cannot.

Mr. BARKIN. I think it is interesting. I think it is true that the people who state Congress has been expanding the commerce clause are overlooking the causes for the symptoms. What has happened is that interstate commerce has expanded.

The whole idea of thinking that commerce today is the same as it was before you had interstate mechanical transportation is just being silly about it.

Let me refer to the question which Senator Douglas raised about the small store. We have seen practically, as a postwar phenomena, the substitution of large chain men's clothing stores for the old haberdashery store and the clothing store owned locally, because we find that the manufacturers of men's clothing in their effort to assure themselves of outlets are now buying retail stores and setting up their own systems of direct distribution to the consumers of this country. That began before the war and has been accentuated since the war.

Obviously, there is a form of national competition which has come into being almost under our very eyes and has been accentuated in the postwar period. In every form of our system of service and distribution that has been accentuated.

I would just like to call your attention, members of the committee, to the fact that we have added to our statement a series of tables simply to provide your committee with obvious information on the profits of every single division of business enterprise. That is the last two pages, which are profit data and sales data for each division. of the industry, whether it is manufacturing or nonmanufacturing industry. And the return on stockholders' equity, and two sales in manufacturing industries. That is table No. 3. I think you might find that useful in examining the claims of hardship which might be paraded before you.

I have just received this since this statement was filed with you, but I shall get an extra copy so that I may submit the matter for the record. It is the full year's statement which the National City Bank has published which merely elaborates further on the fact that the profitably of these industries which are going to carry the 'major impact of this increase is fairly adequate to absorb the wage adjustments which may be required under this act.

Thank you.

Senator THOMAS. Thank you.

Mr. Jansen is our next witness.

Mr. Jansen, for the record, will you state your name and what other material you want to have appear in the record about you.

STATEMENT OF CARL B. JANSEN, PRESIDENT OF THE DRAVO CORP., PITTSBURGH, PA.; ACCOMPANIED BY JOHN W. WHITTLESEY, COUNSEL, REPRESENTING THE CHAMBER OF COMMERCE OF THE UNITED STATES

Mr. JANSEN. Thank you, Mr. Chairman. I am Carl B. Jansen, president of Dravo Corp., Pittsburgh, Pa. I am a member of the labor relations committee of the Chamber of Commerce of the United States, and it is on behalf of that organization that I appear here as a witness. I have with me Mr. John W. Whittlesey, who is counsel for the Chamber, specializing in labor relation matters.

We have presented to the committee previously our detailed brief of testimony which we request be included in the record.

Senator THOMAS (presiding). It will appear in the record at this point.

(The prepared statement submitted by Mr. Jansen is as follows:) STATEMENT OF CARL B. JANSEN, PRESIDENT OF THE DRAVO CORP., PITTSBURGH, PA., BEFORE A SUBCOMMITTEE OF THE SENATE LABOR AND PUBLIC WELFARE COMMITTEE ON BEHALF OF THE CHAMBER OF COMMERCE OF THE UNITED STATES I am a member of the labor relations committee of the Chamber of Commerce of the United States, and am appearing as a witness on behalf of that organization. The Chamber is a federation of some 3,080 local, State, and regional chambers of commerce, trade associations and other business groups. These members in turn collectively comprise over a million and a quarter American businessmen in all fields of activity, in every geographical section of the United States.

Predominately these individual businesses are small, and yet employees of a very large portion of them are considered within the jurisdiction of the WageHour Act.

I should like to discuss current problems under the Fair Labor Standards Act, with particular reference to various proposals to revise the act which are made in S. 653.

Proposals now before your committee to revise this law are sweeping in character. Broadly speaking, they may be put into four main categories, as follows: (1) Increase in the minimum wage payable under the act to 75 cents an hour. (2) Expansion in the general coverage and narrowing the exemptions provided in the present act.

(3) Definition of the "regular rate" of pay of an employee on the basis of which overtime compensation is to be computed.

(4) Making certain administrative and procedural changes, allegedly for purposes of clarifying the present enforcement structure.

Many of these proposals are hardy perennials. Others are novel and are brought forward for the first time. Many have not received adequate documentation, so there can be no really accurate assessment of their effects on industry generally.

Under such circumstances, we believe that hasty action on these proposals would have unfortunate effects on the economy. It is impossible to pass legislation which so vitally affects American business without being aware of exactly what situations it would create. Many of the difficulties which have arisen under the present wage-hour law have been created because of failure correctly to assess business realities. Such problems as portal-to-portal pay, overtime-on-overtime and expanded coverage, to the detriment of proper State legislation on these matters, could never have arisen had the potential pitfalls been fully considered. It is truly unfortunate that the proposals now before you do not realistically draw upon 10 years of experience under the present act, and are not adequately justified as to their necessity or desirability in the public interest.

MINIMUM WAGE

For example, let us take the proposals to increase the minimum wage. It has been urged on your committee that the statutory minimum should be instantly hoisted to 75 cents an hour. In addition, S. 653 provides that the ulti

mate goal should be a universal minimum wage of a dollar an hour, and would have you erect a system of industry committees to attain that goal. The reasons

can be summed up as follows:

(1) That such an increase is necessary to provide the American worker with a reasonable minimum standard of living;

(2) That a 75-cent minimum of today is the rough equivalent of the 40-cents minimum of 1938 which was then declared fair; and

(3) That such an increase can readily be absorbed by industry subject to the Wage-Hour Act.

National Chamber policy does not oppose some revision in the minimum wage if the following principles which we deem fundamental considerations, are adhered to:

1. The minimum should be set by statute rather than by administrative determination and should be uniform for all industries rather than variable between them on the basis of administrative adjustments.

2. It should be fixed at a minimum level which will guard against destroying job opportunities and minimize the inflationary effects that would be caused if it contributed to higher wages generally.

3. It should be a constant and not a fluctuating minimum wage standard, for long-range use, suitable for periods of both high and low level production.

4. Congress should appoint an impartial commission to study throughly and carefully the economic effects of any proposed revision to see whether they meet these above three tests, and to inquire what actual minimum figure will best serve the public interest in this vital matter.

Our position is based on the assumption that Congress is convinced that a minimum wage increase is desirable, but has not yet been furnished the material on which to base a valid conclusion.

Take this problem of what the cost of the minimum wage increase will be. It has been estimated that of the 22,600,000 workers now covered by the act, 1,500,000 or 7 percent now earn less than 75 cents an hour. It is, therefore, reasoned in the Wage-Hour Administrator's 1948 annual report that the effect on the national wage bill would be minor-a mere 1-percent increase.

But that is by no means the entire story. For one thing, the national wage bill last year was $122,000,000,000. One percent of that amount is $1,200,000,000 which is not a small figure at all. For another thing that percentage fails to take into account the direct increases that will be necessary all up the line in order to preserve existing wage differentials. Nor does it take into account the direct increases that will be necessary for an uncertain number of employees who would be brought under the act. Nor does it cover the cost to industry of the immense amount of administrative work that would be necessary to revise industry's wage structures.

Wage increases to maintain existing differentials would be almost inevitable if you raise the minimum. Employers could not avoid giving them and still stay on good terms with their employees. They could not properly conduct their labor relations against the lessened morale of the more highly paid employees who see lower-paid workers brought nearer their own wage level.

No mention is made of this economic fact by the proponents of this measure. Yet we have seen its occurrence time and again in recent bargaining negotiations. Wage raises granted to certain groups in any company through bargaining must be given to everyone else, in order to keep the wage relationships of various groups the same, as a matter of policy.

Such increases will not necessarily be accompanied by increases in productivity and so the labor costs of every employer will be increased. This is the chain reaction that will occur once you increase the minimum. It is folly to assume that the cost of raising the minimum wage will be limited to the direct effects for these

reasons.

The cost of raising the wages of everyone in the country is infinitely more than 1 percent of the Nation's wage bill. It simply cannot be measured accurately since there has been almost studied avoidance of discussion of that economic chain by proponents of the increase.

Yet, if

The proponents of the increase have not talked about the costs of raising the wages of those additional workers who would be brought under the act. coverage is extended as proposed in S. 653, it has been estimated that 5,000,000 more employees would be covered. If extended as proposed in the House wagehour bill (H. R. 3190), estimates run to 2,000,000 more covered workers. How much will it cost to raise their wages? Nobody knows, simply because no figures have ever been prepared on this highly important matter.

Then, too, it is said that industry can easily afford the added costs. Once again, there has been no adequate documentation of that statement. How many companies, in what industries, will have their costs raised so high that they can operate only at a loss? Many firms today are extremely worried about dangerously high break-even points, about rising costs and decreasing profits. Further decreases in sales may well mean red ink where there was black. So will an increase in costs. High break-even points .are safe only on continued large volume of business, and all economic signs today point the other way. If that is so, Congress by establishing such a high minimum wage is not helping the wage earner but ⚫harming him. Setting a rate so high that it would be unrealistic in a depression period would actually create more unemployment and thus not only intensify the depression but also retard recovery.

Big companies, especially those who already are paying more than the proposed minimum, may be able to afford an increase in wages. The effect of these cost increases will hurt most the small-business men (among whom are numbered thousands of war veterans encouraged to go into business for themselves by congressional legislation). Many of them would be unable to stand the effects; many of them might well be forced out of business. What you are doing, then, is loading much of the cost of minimum-wage increases on those least able to afford it, and eliminating, in effect, competition in many fields.

Some of these establishments that would be hit hard by this drastic increase in their labor costs would certainly seek to remain afloat by cutting down on such costs. Unable to afford to keep as many employees as before, some employers would be forced to let some of them go. To an unemployed man or woman, the statement that he or she ought to get 75 cents an hour is cold comfort indeed.

It does not seem that you are really correcting a gross injustice by cutting down on employment. You are creating one.

What might be a minimum wage suitable for an inflationary period might be something else again for a period of "disinflation" or "readjustment" or "recession." When you set a minimum statutory wage, vou are basically seeking to provide a minimum subsistence level below which people may not be employed. Above that floor, actual wages paid are to be set by economic forces and collective bargaining. But the floor itself should not be distorted into a device to raise wages or one to keep them unrealistically high. We fear that such effects would flow all too naturally from converting the floor into a staircase.

Finally, the "direct" costs of an increase in the minimum wage would not be spread evenly throughout industry. Some industries probably could absorb it. But others such as lumber, chemicals, food, apparel, tobacco, and leather could not do so easily.

The main argument for the increase to 75 cents is that it is necessary to provide a reasonable minimum standard of living. I think that in many instances it would prevent many marginal workers from having any standard of living at all, beyond what is provided in unemployment relief. It is entirely possible that the marginal worker might gain an initial advantage. But he would eventually come to occupy the same relative position in the economy that he did before. Wage increases mean price increases. That is economic fact. Price increases mean a decrease in a worker's real wages, although his monetary wages may have gone up.

Now we believe in high wages-high_real wages. We think that everyone should be given a chance to earn them. But high real wages cannot be achieved by legislating high monetary wages. They must, in order to increase the relative advantage of the wage earner, be based on increased productivity. Workers increase their real income, in our free-enterprise society, by increasing the value of their work to the community, not solely by taking more money from the community for their services.

Of course, we recognize that certain marginal workers need protection against substarvation wages. But there has been no study of exactly what figure is proper to provide that protection-a figure which at the same time does not so increase the costs of goods and services as to defeat its own purpose.

Likewise, the argument that a 75-cent minimum today is "roughly" the equivalent of 40 cents in 1938 does not ring true. If it is based on the rise in the cost of living since 1938, then the equivalent today of 40 cents in 1938 is 681⁄2 cents, based on Bureau of Labor Statistics figures.

But the 1938 act set 40 cents as a goal to be attained in 1945. In that case, the equivalent today of 40 cents in 1945 is 54 cents. And, if you want to compare the actual 1938 minimum with today's equivalent, you must compare 25 cents with 44 cents.

It simply does not make sense to say that the goal of 75 cents to be achieved at once is the same thing as the 1938 goal of 40 cents to be achieved in 7 years.