cinnati, Ohio.; Associated Industries of Kentucky, Louisville, Ky.; Michigan Manufacturers Association, Detroit, Mich.; Minnesota Manufacturers Association, St. Paul, Minn.; Associated Industries of South Dakota, Sioux Falls, S. Dak.; Texas State Manufacturers Association, San Antonio, Tex.; Associated Industries of Cleveland, Cleveland, Ohio.

Mr. CHANDLER. There was one witness from Tennessee that I asked to come up and testify, but he could not do it. He has sent me a letter, which I want to put in the record.

Mr. HEALY. Very well.

(The letter referred to is as follows:)

SOUTHERN STATES INDUSTRIAL COUNCIL, INC.,
Nashville, Tenn., March 13, 1936.

Hon. ARTHUR D. HEALEY,

Chairman, Subcommittee, Judiciary Committee,

House of Representatives, Washington, D. C.

MY DEAR MR. HEALEY: The Southern States Industrial Council, representing a constituency of 12,000 Southern manufacturers, hereby registers its unqualified opposition to the Healey bill which has been substituted for the old Walsh bill, and seeks to set up Federal control of wages and hours in all industry. So far-reaching would be the effects of this bill that it is difficult in a short space of time to enumerate even the outstanding results of its operation. Since the shackles of misguided Federal regulation were broken by the invalidation of the N. R. A., Southern industry has improved extensively. In a survey which the council made in November, figures reported to us by a representative group of Southern manufacturers indicated that 92.7 percent of the manufacturing enterprises in the South have either held to the wages prescribed by the codes, or they have increased wages above code requirements. In those instances where decreases in wages have occurred, they are the result of a readjustment between skilled and unskilled workers, for under the N. R. A. the rates of many skilled workers were reduced to make it possible to pay the high minimum set for unskilled workers. In this same survey, 80.2 percent of the manufacturers reporting, stated that they had made no changes in the hours of work in their plants. We feel that this expression on the part of Southern manufacturers will reflect in large measure the position of the small manufacturers throughout the country, since in the South, 85 percent of the manufacturing plants employ 50 or less workers. As a rule, the large employers of labor have not lengthened hours nor have they reduced wages below N. R. A. levels. In most cases where changes have occurred, it has been in the smaller plants where it is difficult to adhere to uniform hours. The relatively few employees are often required to work slightly longer hours to take care of a rush in business, as it would obviously be inadvisable for a small plant to burden its overhead with a new crew of workmen to take care of a relatively small number of extra hours of work.

It was definitely proven by the N. R. A. that it was utterly impractical, if not impossible, for Federal Government to set up an agency which would fairly and justly prescribe the wage rates and hours to be applied in industry. The factors which determine such labor standards are too variable and their relation to the individual manufacturer is of such intense significance that any attempt to set such standards should most certainly be thought through carefully from every angle.

Another important element in such regulation is the human element which cannot be controlled by legislation. Under the N. R. A., we in the South learned that it was to our disadvantage to be regulated by our competitors in other sections. Less than 10 percent of all code authority members were from the South. Why wouldn't it be possible under this proposed piece of legislation to again place the South under the handicap of being regulated by its competitors? Obviously, the Secretary of Labor alone could not tackle this tremendous task of setting wage rates and hour standards. The work would have to be delegated to innumerable assistants, each of whom has

his own preconceived notions of what standards should be set. And, as under the N. R. A., it would be found that these administrators are subject to the influence of powerful groups. The South knows from bitter experience that decisions in these matters favor the more powerful elements.

Passage of this bill would mean that wages throughout the country would be leveled, and the differentials which now exist and which are so important to the continued development of industry in the agricultural sections of this country, would be eliminated. Economic factors have caused varying wages to be paid in different sections of the country. In the South before the N. R. A., wages were about 30 percent lower than in the North and East. However, the N. R. A. increased wages in the South until now the difference between the two sections is about 18 percent. A relief map made up by the N. R. A. during General Johnson's administration of that agency, showed very effectively that the South and other agricultural districts were the only sections in which wages were increased perceptibly. It is obvious that this meant an increase in the manufacturing cost of southern-made products, and the southern manufacturer found it more difficult to compete with manufacturers from other sections. To further level wages would be adding an entirely unjustified burden.

There are, indeed, many justifications for a wage differential, and to exhaust that subject within this short space of time would be impossible. However, the largest factor in establishing differentials is the matter of transportation costs. Is not the small southern manufacturer already at a tremendous disadvantage because of his great distance from the consuming centers of the country and because of the discriminatory freight rates? Not only are freight rates from point to point within the South approximately 30 percent higher than rates from point to point in the North; but, added to the relatively greater distance from market is the higher rate applied on goods moving from the South to eastern markets, as compared with goods moving from points within the North to those markets. A recent decision of the Interstate Commerce Commission, known as "I. & S. Docket No. 3636", and which becomes effective on April 8, further increases the rate from the South to these consuming centers as applied to textiles, thus literally excluding the southern manufacturer from certain important eastern and northern markets. In this connection, it is interesting to note that in the American Wool and Cotton Reporter of January 2, a story appears with the headline, Rate Decision Helps New England. Reference was to this recent decision by the Interstate Commerce Commission.

While, of course, this decision affects only textile manufacturers, yet the principles of law upon which this decision is based will henceforth be applied to all other commodities going from the South to the North, since what is true for one commodity will be equally true of another. There is no doubt that the South is fighting an uphill battle to expand its industrial opportunities and to make manufacturing profitable despite this tremendous handicap in the matter of freight rates and other natural disadvantages, such as greater difficulty in securing adequate credit facilities, the lack of ready capital, and a shortage of skilled workers.

Let us consider the transportation costs of two textile mills, one located in Atlanta, Ga., and the other in Boston, Mass. The market for textile products is principally in the thickly populated consuming centers of the country which are located primarily in the Eastern and Middle Western States. Therefore, in order to arrive at a fair picture in analyzing the transportation costs of these manufacturers, it is necessary to consider separately the Eastern and Middle Western areas.

To

Table I includes six typical eastern consuming centers and table II contains nine consuming centers ranging in location from western Pennsylvania to the Mississippi River, and will be designated as the middle western area. establish the fact of the importance of both of these areas as markets for Southern-made textiles, may we point out that in a recent traffic test, involving 400,000,000 pounds of cotton goods from more than 100 representative mills in Southern States, 70 percent of the movement was to Northern States, 19 percent to Southern States, and only 11 percent to States west of the Mississippi

River, and, in this connection, Northeastern States, including such typical centers as those shown in table I, consumed more than three times the movement to Central Western States.

In view of these facts, it is especially pertinent to note that at the present time it costs the Atlanta manufacturer in actual freight charges an average of 4.2 percent more to ship to the six eastern consuming centers indicated in table I, than it does the Boston manufacturer, due primarily to a greater distance from these markets. After April 8, when the recent decision of the Interstate Commerce Commission goes into effect, it will cost the Southern manufacturer in actual freight charges, 37.2 percent more, thus practically eliminating him from the Eastern market, where heretofore the large bulk of his manufactured products has been marketed.

Table II indicates the relative competitive positions of the Boston and Atlanta mills in the Middle Western market. Heretofore, the Atlanta manufacturer, despite the fact that his mile-per-mile rate was 14 percent greater, had a slight advantage in reaching these Middle Western markets due primarily to the fact that he was closer to these markets than was the Boston manufacturer. However, under this new ruling of the I. C. C., the Atlanta shipper will now be placed at a disadvantage in this market, too; for, instead of his former advantage, it will, after April 8, cost him nearly 5 percent more than it will the Boston shipper to reach these points.

There are many other factors involved in this matter of transportation costs, and what has been pointed out as true for the textile industry applies in greater or less degree to all other industries in the South. Such discrimination can only be relieved through long and tedious court procedure, hampered by the insistent demands for preferential treatment by majority interests in other sections.

If the Southern textile manufacturer is to be arbitrarily placed at a disadvantage in the Northern market in which 70 percent of his product must be marketed, because of concentration of population, it is not difficult to predict the eventual result. Because this transportation problem faces nearly all Southern manufacturers, it is inevitable that the South, comprised mainly of relatively small manufacturers, will quickly be eliminated, giving large Eastern and Northern manufacturers a virtual monopoly.

To impose further restrictions and regulations would place the Southern manufacturer in a straitjacket, by eliminating all flexibility in all factors which enter into the cost of production.

An interesting incident which bears out the contention that because we are in the minority we are discriminated against is this: Several silk mills in a Southern State were begging for silk-mill workers, but found that even though they had trained a large supply of these workers, there was still a shortage, and they could use a great many more if trained workers were available. To fill this demand, and thus give work to many unemployed, the vocational education department of the State set up a training school, provided for under the Smith-Hughes Act. The potential silk workers were greatly pleased at the prospect of securing employment, but it was not long before the Department of Labor at Washington investigated the matter, and complained that there was already a surplus of silk-mill workers in the Eastern States, and for that reason they saw no reason for training additional workers in another part of the country. It is obviously impossible to shift workers at will from one section of the country to another. But here again the southern worker was to be penalized because of the unfortunate situation in another part of the country. If this bill to regulate hours and wages on Government work became effective, one can readily see that it might be used to favor certain sections as compared with others, by regulating and directing Government purchases to those sections where for one reason or another industry may not be particularly profitable.

We have discovered that the proponents of bills to regulate industry often present as an argument for the bill, the myth that child labor is a great problem in this country. This bill is no exception in that it provides that no person under 16 years of age shall be employed by those furnishing supplies to the Government. We are not opposed to this clause, since we are firmly convinced that children under 16 years of age have no place in industry, but we do object to anyone who proposes such regulation as this bill intends, on the basis that it is necessary to eliminate child labor.

A study of the census returns for 1930 indicates that in the New England and Middle Atlantic States, 8 cut of every 1,000 children are employed in manufacturing. In 13 Southern States, only 5.8 children out of every 1,000 are employed in manufacturing. Repeatedly, the South has been pointed toward as the selfish and inhumane worker of children; and, we are indeed glad of the opportunity to point out the facts in this matter.

Industry learned from experience that it was not profitable to employ child labor, and during the past several years of continued unemployment, it has been possible to secure an abundance of adult labor.

It seems to us that the only excuse for the bill is to enable the Federal Government, through its various agencies, to secure the best price possible on any of its purchases. But, this bill, if passed, would tend to do exactly the opposite. It would undoubtedly tend to foster monopoly, if not actually creating monopoly conditions, under which the Government would find it practically impossible to secure competitive bids. Even now, the extensive red tape involved in filling Government orders has caused many manufacturers to discontinue bidding on Government work. They complain that not only is there too much red tape involved in the process of bidding, but when an order has been placed, it is inspected "to death", and inexperienced and inconsiderate Government inspectors impose standards unheard of in the trade. To add to this burden of red tape can do nothing but react against the Federal Government in its purchasing of supplies.

It would be impossible for the smaller manufacturers to bid on Government contracts, since the contingencies involved by the responsibility of informing subcontractors or suppliers of the agreement under the original contract, would place too great a burden on a manufacturer with limited capital. The proposed bill, while it does not hold the principal contractor directly liable for a breach or a violation by a subcontractor, throws a grave responsibility upon him to inform the subcontractor of the terms of the agreement. The bil indicates that the principal contractor is not liable for a violation by a subcontractor "provided he has given actual notice of such representations or agreements" to the subcontractor.

I have just been advised that the preliminary returns from an employment survey which the council conducts each month, covering 1,000 southern firms, indicates that employment in February of this year was 8.2 percent higher than it was a year ago. You will remember that in February of last year, the N. R. A. was still in effect and its depressing effects were being felt throughout industry. With the N. R. A. experience fresh in the minds of manufacturers and workers alike, the council sees no excuse for such a bill as the Healey bill, which has as its underlying motive the regulation of hours and wages and the ultimate leveling of wages throughout the country, even though such legislation be foisted upon industry and the worker under the guise of a bill to enable the Government to secure lower prices for the supplies which it needs. If industry continues to be harrassed by threats of Federal regulation, the future is indeed discouraging.

Very respectfully yours,

J. E. EDGERTON, President.

Mr. HEALEY. I think that we will have to require just one more session and, if it is possible, I wonder, Mr. Sumners, if we can have part of Tuesday so that we may complete our hearings?

The CHAIRMAN. How much time do you have to have?

Mr. HEALEY. Half a day.

(After further informal discussion as to the time for the next meeting, the hearings were recessed until Monday, Mar. 23, 1936, at 3 p. m.)