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I query you, is such legislation worthy of our great country and Government? As a citizen of that country I say it is not, and I say it when my own company is adhering fully to the labor provisions of my industry's old code and expects to continue.' I say it also because I believe that in the confusion of enforcement that the labor employed in the affected industries, as well as their employers, will bear the brunt of the proposed legislation to their own great disadvantage and to the high advantage of those who cannot be brought within the purview of the act. I plead with your committee to recommend against its passage.

The CHAIRMAN. The committee will recess, then, until 3 o'clock in this room.

(Accordingly, at 12:05 p. m. a recess was taken until 3 p. m.)

AFTER RECESS

(The recess having expired, the committee met and resumed its hearing on S. 3055 as follows:)

The CHAIRMAN. May I inquire what progress has been made by the opposition in arranging a schedule, and in arranging with reference to the person or persons whom you desire to be heard ?

Mr. FULBRIGHT. Mr. Chairman, some of the parties were not here when they recessed at noon, but Mr. O'Leary has a brief statement to make, and Mr. Edgerton, and I may desire to add something to them, because we found that one man could not cover so many angles of this bill, we could not very well reduce to a presentation by one person, unless we had had a lot of time to do so. If everyone will conserve the time of the committee as much as possible, it will not take long.

The CHAIRMAN. We would not like, if it can be avoided, to shut out somebody who neither himself nor through his elected representatives has an opportunity to speak.

Mr. FULBRIGHT. I will say there were several gentlemen who agreed not to make any statement, upon the assumption that their point of view would be covered by one of those who is going to make a presentation.

The CHAIRMAN. Let us see what you can do about covering all the points of view.

Mr. O'Leary, we will be very glad to hear you, now.

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STATEMENT OF JOHN W. O'LEARY, ARTHUR J. O'LEARY & SON CO.,

MANUFACTURERS OF IRON AND STEEL PRODUCTS; PRESIDENT
OF, AND APPEARING ON BEHALF OF THE MACHINERY & ALLIED
PRODUCTS INSTITUTE

The CHAIRMAN. State your full name and whom you represent, Mr. O'Leary, please.

Mr. O'LEARY. My name is John W. O'Leary. I am chairman of Arthur J. O'Leary & Sons Co., manufacturers of iron and steel products. I appear here on behalf of the Machinery and Allied Products Institute, of which I am president. The Machinery & Allied Products Institute is a federation of 57 trade associations, each of which represents manufacturers of machinery and allied products, such as steam engines, Diesel engines, locomotives, conveyors, machine tools, and so forth. The membership of these associations include about 1,000 manufacturers of capital goods. Employment and

capital ranges from small through medium to large corporations. The problems of these manufacturers during the depression have been many and difficult to overcome. During every depression new enterprise hesitates, existing ventures falter, and the demand for new durable goods diminishes. Prospective customers can choose to turn to existing services or to continuing the operation of existing machinery if the first cost of new equipment is considered to be too high. The replacement of obsolete facilities and the opening up of new ventures will be undertaken only in anticipation of a profit.

Production of durable goods decreased 63 percent as compared with a 17 percent reduction for nondurable, essentially consumers goods, from 1929 to November 1934. Production of durable goods decreased 45 percent as compared with an 18 percent reduction for nondurable goods, as between July 1933, the last precode month, and November 1934. This drastic decline in the production of durable goods has naturally caused a huge decline in employment in these industries.

Unemployment in the United States during the end of the year, as estimated by Col. Leonard P. Ayres, totaled 10,845,000.

The CHAIRMAN. We are really familiar with those figures.

Mr. O'LEARY. I am glad you are, Mr. Chairman. I have just taken a moment to illustrate this point.

The CHAIRMAN. All right. Go ahead.

Mr. O'LEARY. Of this total 1,385,000 or but 15 percent were found in consumers' goods industries; 4,586,000 or 42 percent were individuals normally employed in service industries, the bulk of whose reabsorption into productive employment concededly depends upon recovery in the durable goods industries.

The members of our institute operated under a code during N. R. A., the hour and wage provisions of which were such as to seriously hamper the development of recovery. Rigidity in hour provisions of codes has not been practicable in industries producing nonstandardized products manufactured to order. Only a small percentage of the products of the machinery industry can be built for inventory in advance of sale. Customers specifications are presented; designing, estimating, and production must follow. In the interest of recovery it is essential therefore that code provisions be flexible.

I am bringing in this code story, because it really bears on the action which your committee may take in connection with this bill, which is the fixing of code hours.

The CHAIRMAN. You did operate under a code, did you not?
Mr. O'LEARY. Yes, sir.
The CHAIRMAN. How did it work?

Mr. O'LEARY, It, in our judgment, retarded the progress of the industry during the whole period, and definitely raised the costs, and did not afford the flexibility which I have just spoken of. Flexibility is the need in a capital goods field.

In the servicing of other industries with the machinery which they require for their production delay in delivery may often create unemployment in the purchasing industry.

The industry has no problems of child labor, sweatshop, or minimum wage.

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average wage is much above the minimum called for by the code and those working at the minimum are a very small

percentage of the total employees. Even with 50 percent of 1928 volume, it faces a labor shortage in many localities because of its use and need of skilled labor.

Because we believe the passage of the Walsh bill will be a definite and severe retardant to recovery, we desire that your committee be informed of the destructive character of this legislation. N. R. A. codes were declared from the beginning to be experimental. Hours and wages and labor conditions were in most instances forced and not voluntary. Experience demonstrated need for adjustment and efforts were being made to effect such adjustments at the time the act was declared invalid. N. R. A. provided machinery for such adjustment. This bill practically does not but would perpetuate errors not in public interest.

Code provisions in effect on May 26, 1935, were to a large extent conflicting, overlapping, contradictory, and indefinite. By writing into all Government contracts and loans the wage and hour provisions of all applicable codes in effect on May 26, 1935, this act will introduce hopeless uncertainty. Few persons outside N. R. A. realize that on May 26, 1935, there were pending in N. R. A. hundreds of disputes arising out of N. R. A. code provisions so conflicting, overlapping, contradictory, and indefinite that under this act it will be impossible for prospective bidders to ascertain what hours and wages are applicable to the contracts and loans on which they are asked to bid, until after the contracts and loans have been made, and a dispute has arisen, and a hearing has been had, and evidence has been taken, and final determination has been announced by the agency administering this act.

Personnel approximating that of N. R. A. on May 26, 1935, will be needed in order to administer this act. This is obvious from what has been said above. Government contracts and loans call for work and materials in practically all of the hundreds of industries and trades for which N. R. A. codes were in effect on May 26, 1935. All N. R. A. records and data, and all N. R. A. officials who had knowledge of these codes as they existed on that day, may be needed in the hearings by which the agency administering this act must determine exactly which of the conflicting, overlapping, contradictory, an indefinite code provisions in effect on May 26, 1935, were applicable to the particular work and aterial that is the subject of the hearing. It is difficult to see how any considerable portion of the N. R. A. personnel as it existed on May 26, 1935, can be dispensed with if this act becomes law. Rather, it would appear that the force required for administration would be largely increased.

Furnishing of work and materials on Government contracts and loans will become monopoly of just a few companies who alone can comply with requirements of this act. To date the Government has profited from the fact that work and materials for commercial trade and for Government contracts and loans were all subject to the same N. R. A. code provisions. This has resulted in all the savings obtainable from a single uniform type of operation, whether for commercial trade or for Government contracts and loans.

The CHAIRMAN. Mr. O'Leary, are you going to discuss further, later, your statement that only a few concerns could comply with Government requirements?

Mr. O'LEARY. I will be very glad to discuss that.

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The CHAIRMAN. You have just made a statement which is very important.

Nr. O'LEARY. Yes. The statement is expanded somewhat, in just a moment.

The CHAIRMAN. Well, would it interfere with your course of presentation to discuss that point now?

Mr. O'LEARY. It comes right with us. If I may read on, I think you will get it all.

The CHAIRMAN. Very well.

Mr. O'LEARY. Under this act all this will be changed. Section 3 authorizes the President to require of every contractor, borrower, grantee, subcontractor, or supplier that in all of their operations until June 30, 1937— whether for the commercial trade or for Government contracts or loans thatthey shall pay not less than the minimum rates of pay and employ their employees not more than the maximum hours of labor

set forth in the proposal, invitation to bid, contract, or agreement.

This is a gamble that can be taken by no company which expects to compete for commercial trade at any time prior to June 30, 1937.

Senator Walsh. Pardon me, that section is not in the bill.
Mr. O'LEARY. It has been removed ?

Senator Walsh. It was in the original bill. It is not in the bill as it is reported.

Mr. O'LEARY. It does not provide for that section?

Senator Walsh. No; there is no provision requiring a contractor or a bidder to maintain any other labor conditions that he chooses, except on Government contracts. That was originally in the original bill. It is not in this bill.

Mr. O'LEARY. If that is the case, then I am misinformed on that particular point and will not expand it.

I quote here, very briefly, Mr. Chairman, a passage from a few letters received during the past week. They are typical of the feeling of our and your constituents, and those who must pay the bill for legislation enacted by the Congress, that bring out some of the troubles, and that is why I am repeating only paragraphs here and there. The first one is from a manufacturer in New England, and these come from every section of the country [reading]:

No employer in the country is more sympathetic toward decent labor standards than I am, but when it is said that the Government should be given the right to establish those standards under penalties that bear differently upon different units of industry, depending upon the importance to them of Government orders, then I say the time has come to call a halt. To make my position plain, suppose two companies A and B, the first disposing of its product entirely to the ultimate consumer of which the Government is not one, and it seldom is one, and B selling its goods to users who utilize them in the processes of making goods for the ult nate consumer, which users are nearly all involved either in selling directly to the Government and/or to others who sell to the Government. Under the Wash bill A could defy the Government labor standards with impunity; B, if it violated them in the slightest measure, could in many instances be put out of business. Do you think this is a fair bill for a just Government to impose upon the producers of this great country?

A bill giving the Government the right to bribe a private concern into doing something it wants done by giving it orders and to boycott it in case the bribe is not accepted, is a vicious, unjust, and despicable procedure for our Government to pursue.

Senator Walsh. I think that criticism applies to the same section. It is eliminated.

Mr. O'LEARY. The other one is [reading]: The question involved is not one of maintaning wages and reasonable hours. This has been practiced by the worth while industries for years and is a better of economic arrangement between the employer and the employee. Our company is paying wages considerably higher than those in the country and in fact, higher than the average wages in the neighborhood for our classification of work. We are working on a 40-hour week and intend to maintain that schedule provided it can be done—40 hours is the code hours-without wrecking the company financially and causing more than 1,000 people to lose their source of employment. In other words, since the expiration of the N. R. A. no changes whatsoever have been made in either wages or hours.

The CHAIRMAN. Mr. O'Leary, why would not that man like to have an arrangement that would prevent what is known as chiseling”? Why would not a man who tries to make those standards, like to have himself protected against competition from concerns. that do not maintain those standards?

Mr. O'LEARY. Because, in the first place, in this industry, it is very difficult to find the people that do not maintain that standard. During all of our experiences under the codes, I know of no complaint for noncompliance registered against this large number of manufacturers.

Mr. HEALEY. But those hours were not maintained before the codes?

Mr. O'LEARY. I beg pardon?

Mr. HEALEY. That was not the standard of hours in the industry before the codes?

Mr. O'LEARY. No, sir.

Mr. HEALEY. They were shortened to 40 hours after the code, after the N. R. A.

Mr. O'LEARY. As a matter of fact they were shorter than 40 hours, because the industry, as a whole, was under this depressed condition, in which it was only operating 15 to 20 percent. The problem of maximum hours is not difficult. The need for flexibility in hours was great, but the need for maximum hours is not a problem.

The CHAIRMAN. What hours are you working now? Mr. O'LEARY. Forty hours. The Chairman. What is the production? You said you had about. 15 percent.

Mr. O'LEARY. The production is now running to about 45 to 50 percent.

The CHAIRMAN. As you increase your production, do you increase the difficulties which would arise under this bill if it were law?

Mr. O'LEARY. Yes, sir; because, when we reach a point of 50 percent of production, we reach a point at which we must, on occasion, have a longer work week than we now presently have. We must have that flexibility. If, for instance, a motor company suddenly has an improvement, and it requires different machinery to take care of that, that must be built; the machinery must be built for that, within the seasonable time. Therefore, they must extend the hours somewhat during that period. As far as the employee is concerned, he is happy to have it, because he has had to work 25 hours, a good many weeks, and he is glad to get 45, if he can;

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