VIRGINIA

Greif Co., Staunton, Va.-Men's clothing manufacturers-300 employees.— This firm has a number of additional plants in other cities.

The firm paid substantial amou ts in restitution wages during the code period. When the workers protested violations of the code and attempted to organize in March 1935, the local city council, chamber of commerce, and others assisted in forming a company union and advised the workers against joining an outside union. The company-union members, under the tutelage of the management, protested against working with union members and struck against them. As a result about 35 people were thrown out of work. The firm was ordered by the National Labor Relations Board to reinstate these workers, but the firm appealed to the courts, and the workers are still out. These workers have been blacklisted ever since.

In August, after the N. R. A. was voided, the firm decreased wages by 25 percent. The company-union members then went to the chamber of commerce and asked them what they should do about it. The chamber of commerce informed them that they were being "neutral" in the dispute and the reduction was made permanent.

Flowers-Gordon, Ashland, Vo.-Shirt manufacturers-150 employees.-The workers of this company work 45 hours per week, 9 hours per day, 5 days per week, with half an hour for lunch. Piece rates have been reduced from 10 to 30 percent, and the maximum weekly earnings are $10, weekly earnings of some workers being as low as four to five dollars. The factory is heated by a wood stove, and sanitary conditions are very bad.

M. Freezer & Sons, Radford, Va.-Shirt manufacturers-500 employees.This firm has increased hours to 48 and wages to a point where they average about $7 per week.

OTHER STATES

M. Fine & Son, New Albany and Jeffersonville, Ind.—Shirt manufacturers— 1,000 employees.—The news reels and New York newspapers gave a spontaneous strike in these factories considerable publicity after the Indiana National Guard was called to the scene of the strike. The workers in these two factories walked out in protest against a 40-percent wage cut. After the people had been out 12 weeks the firm offered to take them back at a 20-percent reduction in pay, with a 45-hour week, and simultaneously announced that they were beginning the construction of a new plant in Vicksburg, Miss.

Piedmont Shirt Co., Greenville, S. C.-Manufacture shirts-150 employees.The same week that the N. R. A. decision was handed down, this firm increased hours to 48 and decreased piece rates by 25 percent.

Reade Manufacturing Co., La Follette, Tenn.-Shirt manufacturers-350 cmployees. This firm pays as little as $4.40 for 2 weeks' work, and working hours are up to 54 a week.

STATEMENT OF C. PARKER HOLT, EXECUTIVE VICE PRESIDENT, CATERPILLAR TRACTOR CO.

Mr. HOLT. Gentlemen of the committee, my name is C. Parker Holt, and I am executive vice president of the Caterpillar Tractor Co., and I also appear on behalf of the National Association of Manufacturers.

Our company, gentlemen, has been in years, together with its predecessors in the of road machinery, and of diesel engines. present time, is about 10,500 employees.

Mr. HEALEY. Where is your plant?

existence upward of 50 manufacture of tractors, Our employment, at the

Mr. HOLT. Our principal plant and offices are in Peoria, Ill., and we also have a plant in California.

I have prepared a written statement, and out of consideration for the committee I made it brief. I have touched rather lightly upon

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some points of importance. Feeling that the committee has had these points brought to their attention, it will not be necessary for me to dwell upon a lot of details. In reading this statement, however, I will be very glad to amplify it, or amplify any of these points, if any of you should care to interrupt me and ask me any questions.

The apparent purpose of this bill is to provide such conditions for the purchase of supplies and the making of contracts by the United States and its agencies that all persons employed in the production of such supplies or in the performance of such services for the United States will be paid not less than certain minimum rates of pay and employed not to exceed certain maximum hours. This end is to be achieved by the inclusion in all Government contracts of certain agreements as set forth in sections 1, 2, and 3 of the bill and by certain powers granted to the Secretary of Labor.

From previous testimony and statements before this committee, it is made to appear that the immediate objective of the bill is the general adherence to the labor standards which were set up under the codes of fair competition and which were in effect under the National Industrial Recovery Act prior to the decision of the Supreme Court in the Schechter case. This standard is further indicated by permissive item no. 3 in section 9 of the bill, which specifically refers to the prevailing total hours in the year 1934.

I wish to point out that the codes under the former N. I. R. A. were formulated in 1933, under heavy pressure, to speed up this work and during a time when very abnormal conditions existed, due to world-wide economic depression. The labor provisions, therefore, of codes effective under N. I. R. A. cannot be used as a criterion for hours and wages effective today or tomorrow, for if there have been departures from such standards previously effective, it may well be that such departures more accurately represent standards that should exist in certain industries in normal times rather than those arbitrarily fixed under the codes in 1933.

While the avowed purpose of the bill is to permit the Secretary of Labor to enforce a compliance to substantially the labor provisions under N. I. R. A., actually the powers granted by the bill to the Secretary of Labor are practically unlimited. This bill would constitute the Secretary of Labor an industrial dictator. However benevolent may be the purposes of the Department of Labor as at present constituted, it must not be forgotten that changes of personnel in any department do and must occur, and that the unlimited powers granted to a department or to an individual, while properly used today, may be frightfully abused 5, 10, or 20 years from now or

tomorrow.

This bill obviously would give the Department of Labor the power to deprive any department or agency of the United States Government of any possibility of securing supplies. However remote such a contingency may be, it would nevertheless be most unwise to concentrate such tremendous powers in the hands of one person or one Department.

Wages can be increased and hours of labor can be shortened only as general progress is made through invention, improved processes, production economies, and lower prices leading to increased consumption. This is proven by the history of the last 75 years. Even

during the last 35 years. hours have progressively been reduced by 50 percent, while hourly wage rates have been trebled. This progress will continue as a natural and orderly procedure in the future. provided our impatience does not lead us to interrupt it by a violent interference. This bill gives to the Secretary of Labor extraordinary power to interrupt such an orderly procedure by an attempt to accelerate a natural process faster than the underlying causes could develop it. The temptation to use this power would be almost irresistible.

Under provisions of section 2 of the bill, it would appear that if any person did not desire to adhere to the labor provisions specified by the Secretary of Labor, he could avoid doing so by simply refusing to bid on Government work. In practice it would not be feasible for a concern to produce goods for the Government under one set of conditions and to produce goods for general consumption under a different set of conditions. Insofar as section 1, therefore, is concerned, there would be a strong tendency for some concerns to withdraw entirely from the field of Government business, while there would be built up another class of concerns whose chief business would be the furnishing of supplies to the Government.

The natural result of such a duality would be that the Government would have to purchase its supplies at a very considerably higher price than the prices prevailing in the open market, inasmuch as the Government agencies would be deprived of the advantages of the keen competition that exists today. Those who framed this bill evidently foresaw this probable result and have endeavored to prevent it by the provisions of sections 2 and 3, which extend the obligations so as to cover all purchases by the principal contractor or by his subcontractors or by his sub-subcontractors.

This is done in the apparent hope that the magnitude of the purchases by the United States Government will make the standards set up by the Department of Labor permeate the country's entire industrial structure. In the attempt to make this less offensive to industry, there is the provision in section 2, which, under certain conditions, releases the principal contractor from the penalties of paragraphs 1 and 2, section 3, should a violation of a contract be made by a subcontractor. It should be noted, however, that the principal contractor is not released from the provisions of paragraphs 3 and 5 of section 3. It seems apparent that those who drew up paragraphs 3 and 4 of section 3 are not acquainted with the intricacies of modern production methods or the intimate relationship between different industries or parts of the same industry. Paragraph 3 provides that a subcontract can be canceled for violation and its principal contractor may make open market purchases at the expense of the party responsible for the violation. It is true that in many cases supplies could be readily obtained from other sources particularly if the supplies consisted of certain staple materials. However, in the great majority of cases where a subcontract was ordered canceled, such supplies could only be obtained after a long delay and in many other cases could not be obtained under any circumstances.

It is common practice to include in purchasing contracts by the United States Government definite delivery dates, with severe daily penalties for failure to meet such delivery dates. Every manufac

turer has certain sources of supply for his raw materials and for semifinished materials. Under the provisions of this bill, it might well be held that each of these sources of supply becomes a sub

contractor.

After the principal contract had been executed and while the contractor was engaged in actually producing the goods specified, he might be notified to cancel a subcontract existing with one of his important sources of supply. To develop another source of supply of the same quality of goods would, in most cases, utterly prevent him from fulfilling his contract with the Government within the time limit and therefore he would be subjected to heavy penalties as a result of such belated delivery.

In a great many cases, such a situation would make it impossible for the principal contractor to fulfill his contract at all. He might be estopped from buying a patented article or device absolutely essential to the fulfillment of his contract. Obviously such a patented device could not be secured elsewhere. Many manufacturers have spent years in developing a certain source of supply for certain essential materials or certain essential parts. To develop a new source of supply is a very costly undertaking and a substitute for a material that had become unobtainable might necessitate the complete redesign of that manufacturer's product. The hardship, therefore, that will be worked on manufacturers who are Government suppliers would be intolerable.

May I have your permission to supplement that statement? Would it be considered all right if I mention my own personal business? I ask that, because it is the business I am most familiar with.

Mr. HEALEY. Yes.

Mr. HOLT. In my own business, we have some 300 sources of supply. Of these 300, 50 would take us months to replace, and the others could be possibly duplicated; and of the 50, 10 would be absolutely irreplaceable. That is the condition in my industry. I cite those facts because I know them. I have no doubt that, in the other industries, in the iron and steel industries and machinery business, the same conditions obtain with practically every manufacturer.

If the provisions of this bill are as sweeping as some contend, that is, if they reach from principal contractor to subcontractor, from subcontractor to supplier and from supplier to other subcontractors, clear down to the miner who supplied the ore or the farmer who grew the flax, in such case no manufacturer would dare to bid upon Government work until he had made the complete survey of all of his suppliers and subcontractors to the lowest producing unit. It should be pointed out that many of the purchases made by the United States Government and its agencies are in the nature of emergencies. This is evidenced by the very large number of telegraphic invitations to bid which are sent out by various Government departments. These emergencies may be the result of floods, of dust storms, heavy snowstorms, or of other contingencies that cannot be foreseen extending even to possible international emergencies. In such cases, it is imperative for the Government to obtain its supplies with the least possible delay. Under the provisions of this bill, it would be impossible for the United States or its agencies to secure immediate deliveries on anything but the most simple articles. Would anyone

dare to bid until he had taken time to secure complete protection against all of the many contingencies arising under the proposed law and with which he is only too familiar after his experience with the National Industrial Recovery Act?

Assuming that the underlying tendency of this bill would be to make shorter hours and higher wages progressively to permeate all industries, it should be pointed out that not only would the United! tates and its agencies pay higher prices for such goods and services. but that every consumer in the United States would also have to pay higher prices. Prices artificially raised result in reduced consumption, which in turn can only mean reduced employment. The cost of the administration of the proposed law would be most excessive— this cost added to increased costs of Government supplies could only be met by greatly increased taxation-and the combination of increased taxation and artificially created higher prices would be too high a price to pay for the very doubtful benefit to be derived from the proposed law.

The world has made very considerable progress out of the depression, a progress in which the United States has also somewhat belatedly shared. This progress will be continued provided industry is not hampered by artificial obstacles such as would be set up should this bill be enacted into law. The restrictions specified in the bill would indeed be obstacles, but the uncertainties and the possibilities for evil also residing in the bill added to the many existing uncertaimies which confront us, would act as a further deterrent against the investing of new capital in new productive enterprises, which are so badly needed to take up further slack in employment.

There has been brought out before the subcommittee that there are extant in some degree certain so-called evils such as child labor, homework, the practices of bid brokers or bid peddlers, and it may well be possible that some such practices are pernicious in the extreme. However, Congress should be able to take steps to correct such practices, without at the same time fastening restrictive regulations upon industry in general.

My own industry does not employ child labor or convict labor; its products are manufactured entirely under good conditions in proper factories. We handle our Government contracts direct-not through bid brokers. I, therefore, wish to vigorously protest against any law that would hamstring the manufacturers in our industry in order to correct the alleged iniquities of the sweatshop or the bid peddler.

The proposed law would, in my opinion, work the greatest hardship upon the United States and its buying agencies. It would de troy public confidence so necessary now to complete recovery. It has in it the possibilities of the greatest injustice both to the laboring man and to the manufacturer.

Mr. HEALEY. Does that conclude your statement?

Mr. HOLT. Yes.

Mr. HEALEY. I want to ask you one question: Do you have any Government contracts?

Mr. HOLT. Yes.

Mr. HEALEY. And do they amount to a large proportion of the volume of your business?

Mr. HOLT. Yes, sir; it is business that we would like to have.