TABLE III.-Raw sugar, blackstrap and sugarcane price comparisons

2 From Production and Marketing Administration Official Price Determinations.

TABLE IV.—Inches of rainfall at Youngsville, Lafayette Parish, La., during the cane growing and cane harvesting seasons each year from 1938 through 1948

NOTE. The growing season in Louisiana is Apr. 1 through Sept. 30. The harvesting season in Louisiana is Oct. 1 through Dec. 31.

Senator PEPPER. Now, you were speaking for companies and proprietors who grow and process sugarcane?

Mr. FOSTER. That is right.

Senator PEPPER. Are they regarded at the present time as subject to the Fair Labor Standards Act?

Mr. FOSTER. They are exempt from this overtime, and all, now. They have the minimum wage, but they are exempt from the overtime.

Senator PEPPER. On the theory that they are seasonal?

Mr. FOSTER. They are seasonal. We have only about 70 days in which to get the cane in before the freeze, sir.

Senator PEPPER. Seventy days?

Mr. FOSTER. You are correct; about 70 days.

Senator PEPPER. Well, now, I was wondering how many, if any, are exempt from both the wage sections and the hour sections of the act where they are in the area of production. Do you know whether there are many mills exempt under that language or not?

Mr. FOSTER. No; Mr. Berg, our counsel, might know.

Mr. BERG. None are exempt.

Senator PEPPER. None are exempt?

Mr. BERG. No, sir.

Senator PEPPER. Under that area of production, you pay the minimum wage?

Mr. BERG. Yes, definitely.

Senator PEPPER. You are getting the hourly exemption?

Mr. BERG. Yes, sir.

Senator PEPPER. Do you require more than a 14-week?

Mr. FOSTER. No, I do not believe we do, Senator. It would have to be a very, very abnormal crop to require more than 14 weeks.

Senator PEPPER. So, the language of S. 653 would cover you in giving you 14 weeks' exemption from the hourly provisions, the overtime provisions of the act?

Mr. FOSTER. Yes, sir.

Senator PEPPER. Your season is about the same as that in Florida, or longer?

Mr. FOSTER. No, sir; our season starts about the middle of October, Senator, and goes until the 1st or 15th of January.

Senator PEPPER. I think our season starts

Mr. FOSTER. In January, doesn't it?

Senator PEPPER. Yes, later.

Mr. FOSTER. Yes, you start about the time we finish, but we both have the same hazards.

Senator PEPPER. You are paying the minimum wages?

Mr. FOSTER. Yes, sir.

Senator PEPPER. Well, of course, I suppose you do not have in Louisiana quite as large proprietors as some of our larger ones?

Mr. FOSTER. No, sir; we have quite a lot of small mills, sir. Our mill we just sold is a small mill grinding 42,000 tons, as I stated in here. We have a lot of small mills. One reason I am here to plead our case is that they are falling by the roadside.

Senator PEPPER. The reason I asked that question is that we were discussing here on previous occasions whether or not we could apply this minimum wage law and maximum law to agriculture, itself, in respect to large farm operations. Have you any opinion you would care to express on that?

Mr. FOSTER. I just do not believe they could stand it. You see, our form of operations right now is that the wages are set by the Secretary of Agriculture under the Sugar Act, and that applies to our field labor. In other words, the Government sets down our field operation.

Senator PEPPER. There is no minimum wage prescribed?

Mr. FOSTER. No, but we cannot go below.

Senator PEPPER. He simply fixes the wage?

Mr. FOSTER. He fixes the rate for the sugar industry under the Sugar Act.

Senator PEPPER. But you still have to pay this minimum wage, do you not?

Mr. FOSTER. Yes, sir.

Senator PEPPER. Under the Fair Labor Standards Act?

Mr. FOSTER. That is correct, sir.

Senator PEPPER. So he can't fix the wage less than 75 cents an hour? Oh, that is only in the processing I beg your pardon. But he fixes the wage for the field?

Mr. FOSTER. That is correct.

Senator PEPPER. Would you mind telling us what that wage is in Louisiana?

Mr. FOSTER. It varies. In other words, it is about 45 cents for tractor drivers, and a man who operates a can harvester gets around 50 cents, and cane cutters, women, around 49 cents. There is quite a variance there, but I will say that in most cases, most of us pay quite a bit more than the minimum. We must pay it, because it is hard to get people, skilled operators, on these things for less than that.

Senator PEPPER. You think the industry could not, in the processing part of it, apply this maximum hour law?

Mr. FOSTER. I do not think so.

Senator PEPPER. With overtime over 40 hours a week?

Mr. FOSTER. I do not think it could, Senator, because this report of Dr. Efferson shows very clearly where the factories made a very small profit, something like $20,000 on each factory for the last 5 years. That report was based on a lot of high-priced war sugar, and sugar has dropped quite a bit in 1948, this last crop, and molasses has dropped from 26 cents to 6 cents, and I just do not see how we could absorb any higher wages than what we have.

Senator PEPPER. What would you say to the suggestion that you shouldn't begin to pay overtime in this processing of sugar cane until the workweek exceeded 48 hours?

Mr. FOSTER. I frankly think, Senator, that the overtime I just do not think we can absorb any overtime, the way we work.

Senator PEPPER. What maximum hours are worked now?

Mr. FOSTER. Well, we work two shifts in most of these sugar houses, 12-hour shifts, and they usually work 6 days a week, more or less.

As Mr. Green said they did in Hawaii, work 6 days a week, and the seventh day they clean up the factory, so it would be around 72 hours they would work. We just simply haven't got the labor.

Senator PEPPER. Do the same men work in cleaning up the factory? Mr. FOSTER. Some of them do, yes, sir; and on Sunday, for instance, they will clean up-they will boil out and clean up on Sunday. In a lot of cases we go right ahead and pay right on through, but do not use a lot of the crew.

Senator PEPPER. That runs the hours of the workweek by those workers up rather high, doesn't it?

Mr. FOSTER. Yes, sir; it does.

Senator PEPPER. All right. Thank you very much.

(The prepared statement of Dr. J. Norman Efferson, submitted by Mr. Foster is as follows:)

STATEMENT BY DR. J. NORMAN EFFERSON, ECONOMIST FOR THE LOUISIANA AGRICULTURAL EXPERIMENT STATION, BATON ROUGE, LA.

The purpose of this report is to present for the review and study of the members of this committee and analysis of the changes in costs and returns in manufacturing raw sugar from sugarcane in Louisiana to be expected under each of the commonly proposed changes (S. 653) in the Fair Labor Standards Act.

Detailed studies of the costs and returns from the operation of raw sugar mills in Louisiana have been conducted by the Louisiana Agricultural Experiment Station each year since 1937. My responsibility has been to conduct these studies since that time.

Throughout this 12-year period, from 25 to 50 mills were contacted each year, and detailed audits were made of all records for the purpose of compiling average costs and returns for the industry as a whole. The sample of mills studied throughout this period represents about three-fourths of the total volume of production of raw sugar in the State. Detailed results of these studies have been published by the Louisiana Agricultural Experiment Station for each year from 1937 through

1947.

As the presently existent 40-cent minimum wage, with exemptions from the payment of premium wages over a 40-hour workweek, have been in effect since late in in 1942, the significant data bearing on the subject of the effect of certain adjustments in wage rates apply to the results from 1943 to date. Because of the fact that the costs and returns from the production of saw sugar in Louisiana vary greatly from year to year, due to differences in climatic conditions and price levels, the results of any one year are likely to be misleading, if not observed

in connection with results for a longer period of time. Therefore, the 5-year average, 1943-47, has been used in this analysis of the probable effect of certain adjustments in wage rates on costs and returns. Results for the 1948 season are not available yet. But preliminary indications point to an unprofitable season; thus the 1943-47 average presents a more favorable picture than for 1948.

For the 5-year period, 1943 through 1947, total costs of production of raw sugar averaged about $650,000 per mill, per year; $7.50 per ton of cane; or $4.80 per hundred pounds of sugar manufactured. Net income, after all costs, averaged about $20,000 per mill, per year; 24 cents per ton of cane; or 15 cents per hundred pounds of sugar manufactured. In view of the fact that the average capital investment per mill amounted to around $500,000 for this purpose the average net income amounts to 4 percent on the investment.

These average returns are relative low in comparison with returns from many other types of manufacturing industries for the same period of time. During this recent period, the industry operated under a 40-cent minimum wage. Of the average labor cost in producing raw sugar in these mills, about one-half was paid to workers at the 40-cent rate and about three-fourths was paid at less than 75 cents per hour. Stated in terms of the total cost per mill, the total labor expense averaged about $100,000 per mill, per year, of which $45 000 was paid at the 40cent rate and about $75,000 was paid at less than 75 cents per hour. In terms of labor payments for the different items of cost, about 75 percent of the total labor expense was paid for services during the grinding season for the procurement of sugarcane, manufacture of sugar, marketing and overhead maintenance while 25 percent was off-season labor cost.

In view of the fact that overtime exemptions under the Fair Labor Standards Act now prevail during the grinding season for these mills, these facts indicate that about three-fourths of the total labor expenses would be affected by any changes in the minimum wage or the exemptions.

With the detailed data that is available concerning the acutal wages paid and and the returns per mill, it is possible to compute what average earnings are likely to be if the proposed changes are made in the Fair Labor Standards Act. The first of these major changes now under discussion is an increase in the minimum wage from 40 cents to some higher level. If the minimum wage in the Louisiana sugarcane industry is increased from 40 to 60 cents, the total labor costs will be increased from $100,000 per mill per year to $135,000, or a net increase of about $35,000 per mill per year, based on the 1943-47 experience.

If the minimum wage is increased from 40 to 75 cents, the labor costs will be increased from an average of $100,000 per mill per year, to about $150,000, or an increase of about $50,000 per mill per year.

Average earnings of these mills in the past 5-year period were only $20,000 per per year; therefore, an increase in the minimum wage up to 75 cents an hour indicates that annual earnings in the future will be a minus quantity approximating a loss of $30,000 per mill per year. This will mean a prospective loss of 6 percent per year on the investment in comparison with the previous 5 years earnings of 4 percent on the investment. These changes would occur with the increase in the minimum wage, but with all of the presently existing exemptions from overtime pay for this seasonal industry still being maintained. If other adjustments are made in the overtime pay exemptions, the losses will be even greater.

In addition to the currently suggested changes in the minimum wage, certain changes in the overtime pay exemptions in the Fair Labor Standards Act have been proposed. The changes suggested have been the elimination of one or both of the section 7 (c) and section 7 (b) (3) exemptions under the act. The elimination of the section 7 (c) exemption with the retention of the section 7 (b) (3) exemption would require Louisiana raw-sugar mill operators to pay overtime wages in excess of 56 hours per workweek during the grinding season, in place of the present situation in which no premium wages are required to be paid.

The elimination of both the section 7 (c) and section 7 (b) (3) exemptions would require Louisiana raw-sugar mill operators to pay overtime wages in excess of 40 hours per workweek during the grinding season in place of the present situation in which no premium wages are required to be paid. The section 7 (c) exemption is a complete exemption from the maximum hours provisions of the act for the sugar industry, among others. The section 7 (b) (3) exemption is the exemption provided for industries of a seasonal nature, but limited to 14 weeks.

During the past 5 years, the usual workweek of the raw-sugar mill employee in Louisiana during the grinding season has been 84 hours. Practically all the mills operate two 12-hour shift, 7 days a week, in the brief 80- to 90-day harvesting season. The efficiency of raw-sugar production and the practical problem of

processing the crop, when it is mature enough to have a sufficient quantity of sugar but before adverse weather conditions cause losses, makes it necessary that the mills operate continuously day and night during the harvesting season. Because of these practical physical problems, the raw-sugar mills in Louisiana will have to continue to maintain their policy of operating continuously 24 hours a day, every day, during the grinding season, regardless of changes in the overtime pay provisions.

In addition, the shortage of available labor in the region, aggravated by the intense competition by the farmers and millers, has made it impossible to reduce the workweek by adding a third shift. Also, even if common labor were available, three shifts would not be practical because the skilled and semiskilled labor needed is not available due to the fact that the industry operates only during a brief

season.

As a result of this situation, the only adjustment possible to meet increased labor costs, if overtime pay exemptions are removed, would be to pay the full overtime required.

Since the presently existing overtime pay exemptions do not apply in the offseason operations of raw-sugar mills in Louisiana, changes in these exemptions would not affect all labor costs but would affect the labor cost during the grinding season, which is 75 percent of the total labor cost of the year.

Under the present 40-cent minimum wage, if the Louisiana raw sugar mill operators were required to pay overtime rates for all hours in excess of 56 per workweek, the overtime pay for the 84-hour week they now work would cause the expense for labor to be increased about $10,000 per mill per year. If the minimum wage is 75 cents and overtime pay of time and a half for 28 hours of the 84-hour week were charged, the labor cost would be increased about $16,000 per mill per year. The range and possible cost under this overtime pay situation varies from a 40-cent minimum and complete exemptions from overtime pay to a 75-cent minimum and an overtime pay charged for all work in excess of 40 hours. If the latter were to become the effective standard, the total labor cost per mill would be about double the current expense.

The final effect of these possible changes in labor costs would show up in net earnings as follows:

Current net earnings for the most recent 5-year period averaged $20,000 per mill or 4 percent on their investment. If the 40-cent minimum is maintained and the processors are required to pay overtime in excess of 56 hours, the return of earnings would have been $10,000 per year or 2 percent on their investment. If the present 40-cent minimum were maintained and the processors were required to pay overtime in excess of a 40-hour week, average earnings would be about $4,000 per year or less than 1 percent on their investment.

If a 75-cent minimum wage is established and all of the present overtime exemptions are maintained, the average earnings per mill are indicated to be a loss of $35,000 per year. Under a 75-cent minimum wage, and overtime pay required in excess of 56 hours, the indicated loss per mill, per year, is $50,000, which is a loss of 10 percent per year on their investment. Under a 75-cent minimum wage and overtime pay required in excess of 40 hours, the indicated average loss per mill per year is about $60,000 or 12 percent of the investment.

Fixed minimum wages and rigid overtime pay requirements tend to work to the disadvantage of industries using low-quality unskilled labor such as the Louisiana raw-sugar industry. A possible result of too high a level of wage rates is the abandonment of industries such as this one and the creation of unemployment rather than the improvement of the position of labor. Because of this fact,

differences in the quality of labor and in cost of living in different regions of the country should be considered in establishing minimum wage rates, and the industry advisory committees should be required to consider these variations in making their recommendations.

These facts indicate quite clearly that the Louisiana sugar industry has not been an extremely profitable industry in the last 5 years and that if it is required to make any substantial adjustments in wage rates along the line of increased minimums or the loss of overtime pay exemptions, substantial losses can be expected in the near future. The only possibility for offsetting these losses would be to establish and maintain the price of sugar under the Sugar Act sufficiently higher than the current price to offset increased labor costs.

Senator PEPPER. At this point I wish to insert in the record a statement of Mr. R. B. Bowden, executive vice president, Grain and Feed Dealers National Association, St. Louis, Mo.

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