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Mr. DUFFY of New York. I mean as to that particular code, assuming that the plant did get a Government contract that would be affected by a code.

Mr. FRANK HEALY. We would take that plant just the same.

Mr. DUFFY of New York. It was merely a question of whether the plant had a Government contract, and not as to whether some division of the plant was employed on the Government contract.

Mr. FRANK HEALY. No, sir; the question asked us was whether there was a departure, or what departure there had been from the old code standard by persons or firms securing Government contracts. Mr. HEALEY. If there are no further questions, we thank you for your statement.

We will next hear Mr. Hinrichs, chief economist of the Bureau of Labor Statistics.

STATEMENT OF A. F. HINRICHS, CHIEF ECONOMIST OF THE
BUREAU OF LABOR STATISTICS

Mr. HINRICHS. Mr. Chairman and gentlemen of the committee, the bill which is now before your committee seeks to maintain reasonable standards of wages and hours of labor in establishments securing Government contracts. Since the Schechter decision there are many States in which no legal protection is afforded to standards as high as those prevailing under the codes of fair competition. A study of changes in wages, hours, and labor conditions since the N. R. A. indicates that the standards achieved under the codes have in many instances been lowered. To prevent the continued lowering of wages and the revival of child labor and long hours, I strongly urge the favorable consideration of this bill.

At present, the Government is compelled by law to purchase its supplies and deal with the lowest responsible bidder. Following the Schechter case and the abandonment of the N. R. A., the Comptroller General ruled that the Government in awarding its contracts must do so without giving any consideration to the conditions of labor prevailing among the bidders. Thus the law of Government contracts works to the advantage of the antisocial employer who is enabled to make low estimates and obtain Government contracts through the slashing of wages or by working his employees for excessive hours. He is even permitted to resort to the employment of child labor. By resorting to these practices such an employer undercuts those of his competitors who seek to deal justly with their employees. The Government then as at present, while urging the maintenance of labor standards, actually deals with those employers who have come to disregard the practice established by industry under the codes. The effect of such practices extends even beyond the contract in question and tends to establish low labor standards for the industry in general. An investigation of firms engaged on Government work supports the truth of these conclusions, that report having just been submitted to you.

I was prepared to review that material, but it seems to me, in the light of the evidence just presented, that will be unnecesary. I should like, however, to point out the fact that the tables which have been submitted bring out clearly and support the charges now being

communicated to the Bureau of Labor Statistics as to lengthening hours and lowering wages.

The tables which have been submitted bring out clearly the sort of changes which are going on in labor standards. The lengthening of hours and the lowering of wages is not universal. It is not the sort of movement which is well described by the kinds of average that are usually published. All manufacturers are not increasing hours and decreasing hourly earnings just a little bit. Rather the majority are holding fast to the labor standards that prevailed last spring, while some others have cut standards substantially.

the The third table that was submitted classified reports on the basis of the type of industry. For certain of these industrial groups number of establishments with incomplete returns was too large to allow of internal comparisons. But for eight groups the reports were relatively complete, and were numerous enough to be significant. It is important to note how differently the various industries have reacted to the maintenance of labor standards.

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70.9

74.4

80.9

91.0

96.3

Even this grouping is too crude to bring out the full differences between industries. Textiles contain, for example, cotton and wool in which standards are relatively well maintained; silk, where standards have broken down badly; and cotton garments, in which code standards have collapsed.

While the sample covered by this survey is relatively small, the results are quite consistent with other information available.

The bill before this committee seeks to meet the difficulties that have arisen since the Schechter case decision by making the maintenance of labor conditions a factor in awarding of contracts by the Government. It proposes to include in every contract for the purchase of supplies, of services, or of construction, by the Government, an agreement made by the contractor that he will comply with wage and hour provisions contained in the invitation for bids and that he will not employ child labor or convict labor in connection with the work. The bill creates in the Department of Labor a unit which is charged with the administration of the act. Minimum wages are fixed by the Secretary of Labor and inserted in the invitation for bids. The wages thus fixed must be reasonably commensurate with the value of the services rendered.

Previous administrative experience indicates the feasibility of maintaining labor standards by the device of voluntary agreements by contractors. It has been demonstrated that they will accept certain fair labor practices, including the establishment of a suitable

workday and the payment of a reasonable wage. Under N. R. A., to aid in effecting the purpose of that act, Executive Order 6646 was issued, which required grantees, borrowers, contractors, and subcontractors on Government contracts to certify that they were complying with the codes under which they operated. Within a narrower field there is a similar experience. Some years ago Congress received complaints of undercutting by contractors on public works. In the field of public construction it was found that contractors who paid the lowest wages had a great competitive advantage in obtaining the awards under the law which compelled giving contracts to the lowest responsible bidder. The Davis-Bacon Act was passed in 1931 to remedy this. Pursuant to that act every construction contract in excess of $5,000 contained a stipulation that laborers and mechanics were to receive not less than the prevailing rate of wages. And I may remind you that on August 30, 1935, Congress further strengthened this law by extending the prevailing wage principle to contracts in excess of $2,000 and by providing for the insertion of the prevailing rate as determined by the Secretary of Labor in the invitation for bids.

In this connection I might mention that almost every foreign nation has passed legislation regulating hours of labor and other conditions of employment. Many of the great industrial nations have had minimum-wage laws on their books for a number of years. In Great Britain, for example, the British Parliament passed a minimum wage law as early as 1909.

Mr. MICHENER. Right there, let me ask you a question. The real purpose of this legislation is to prevent indirectly what we were preventing directly under the N. R. A., is it not?

Mr. HINRICHS. I would not be qualified to pass judgment on the purpose which the committee might have in view.

Mr. MICHENER. I was talking about those who drafted the bill. You had something to do with the drafting of the bill, presumably, as the chief economist. Therefore, there are certain sections of the bill with which you are already familiar. You are more familiar with them than the committee.

Mr. HINRICHS. That was not true in my case, and I hope it is not with reference to the Department in general. My idea was, as I have watched this situation developing, that it would not seem to me that need be the prime purpose of the bill. The complaints which are received, "For heaven's sake, do something about the situation we are up against", which came in from manufacturers, were not all routed to a single agency. Of the complaints that are received, the Bureau of Labor Statistics handles only a small part of the total, and it does not seem worth while to tabulate those particular complaints. I can say that the type of complaint wherein they specified the question of Government contracts was one of the most frequent complaints. That was one of the most frequent complaints that came to my office, and they came from manufacturers saying that they were maintaining standards. They say, "We are maintaining standards; but here is the Government engaged in letting contracts to the lowest bidder, irrespective of the conditions under which the bid is made." They would ask, "Is there anything in the world that the Government can do?" Private industry is in the position at this time of knowing that any man who threatens to cut wages and lower the standards

of private industry, as on occasions has been done, is already a constant antisocial force in certain industries.

In some industries they are trying to see that the standards shall be maintained, but in the case of the Government contractor, as I see it, that situation is being thrown exactly into reverse. We put the whole moral force of the Government behind people who are engaged in trying to maintain standards. We give them a "God bless you", on any form of voluntary agreement that does not involve a violation of the antitrust legislation; but yet, in the thing that really counts, where money is to be paid, or when we come to make a large contract, that thing is not done at all. So it seems to me that in that one field of the Government engaging positively in making contributions to standards, a provision can be made which does not necessitate going out and doing indirectly what we are not allowed to do directly.

Mr. MICHENER. My question was prompted by the last two sentences that you read from your statement, in which you called attention to the fact that is this country we were not up to the standards of other countries. You were discussing the general subject.

You were discussing the subject of hours and wages, and you indicated in your statement that it was our purpose here to accomplish what has been done in other nations. It seems to me that you are using a Government contract as a vehicle to bring about a thing which you could not bring about otherwise. However, I am not discussing the merits of the question of whether or not it is a wise step, but my question was directed to the procedure.

That was

Mr. HINRICHS. I am not one to have raised that doubt. not the purpose for which those last sentences were inserted. What I would contend is that the matter of wages, hours, and working conditions is properly a concern of the Government, and the limit to which one may go is a matter of constitutional limitation and social policy within that broad field of interest. In the matter of hours and working conditions, it seems to me eminently fitting that the Government should concern itself with contracts other than those under consideration in connection with wages and hours.

Mr. MICHENER. I agree with you that something should be done; but I would have a doubt as to whether or not it is wise by act of Congress to give the Secretary of Labor or any other person the right to go about the country fixing hours of labor and wages, in her own discretion. I think that is an application of power that, whether it may be legal or not, is going in the wrong way.

Mr. DUFFEY of New York. It is to aid in the establishment of certain standards in business.

Mr. MICHENER. The formula is very incomplete, but full discretion is given.

Mr. DUFFEY of New York. You might be able to inform us how to prepare one in conformity with your ideas.

Mr. HINRICHS. I would say in that connection that the only standard to be established must have flexibility, and that, therefore, some executive discretion, subject to review, is imperative. I find it impossible to visualize the specifications of precise minimum wages or precise hours of labor, either with reference to industry in general or as a matter of legislative policy. Split into an infinite variety, one would want to work it out on an industry-by-industry basis.

May I add just one thing to the statement which I have made: I should like to call the attention of the committee to table 24 in the Report on Employment in Industries, dated November 1935, in which there is listed the value of material orders placed for construction projects financed by Federal funds that began the first program of November 15, 1935.

The total amount of such materials is slightly more than a billion and a quarter dollars, and in certain lines the orders are of overwhelming importance; as, for example, in the case of cement, with $154,000,000 worth; the iron and steel group as a whole, with $318,000,000, and so forth and so on. So far as I know, this information which is collected for construction by the Bureau of Labor Statistics, under executive order, is not collected in similar form for the other types of purchases, but the importance of those purchases is by no manner of means small.

Mr. HEALEY. Will you put that in the record?

Mr. HINRICHS. If I may, I will leave it for the record.
(The statement referred to is as follows:)

[From Employment and Pay Rolls]

November 1935, United States Department of Labor

TABLE 24.-Value of material orders placed on construction projects financed by Federal funds from the beginning of the programs to Nov. 15, 1935

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All materials.................

$1,226,923,619 $1,076,789,330 $46, 638, 601 $50, 551, 848 $24, 579, 751 $28, 364, 098

Textiles and their products..

1,526, 004

1,345, 671

Awnings, tents, canvas, etc...

227, 357

222, 695

100, 468
1, 286

Carpets and rugs..

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57,667

57, 667

Cordage and twine..

335, 297

278, 595

Cotton goods...

241, 973

152,947

7,788 86, 947

Felt goods...

177, 566

173,000

4, 447

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68, 082

46

Linoleum.

231, 775

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Sacks and bags.

14, 344

30, 281

29, 634

647

Upholstering materials, n. e. c.

128, 615

128, 128

487

Waste...

27,345

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1, 130

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56,668, 899

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175, 017
540, 541

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Lumber and timber products,

2,970
14

n. e. c...

54, 645, 228

Planing-mill products..

Window and door screens and

weatherstrip..

7,408, 372
103, 888

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Chemicals and allied products..

11, 922, 400

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Compressed and liquefied

392 3, 139

gases.

410, 529

Explosives..

6, 297, 214

Paints and varnishes...

3,787, 908

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See footnotes at end of table.

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