The Secretary of Labor would be under pressure from those who believe in the trickle-down theory of prosperity to use section 8 (f) to dig the pit of economic depression, human ill health, inefficiency, and discontent deeper and deeper.

Implicit in section 8 (f) is the assumption that labor is a commodity and article of commerce, a doctrine that has been denied again and again by the American people and their elected representatives and the courts.

In a period of depression every cut in minimum wage rates made by the Federal Government would cut the volume of money in the hands of the lowest-paid wage earners who, even at the present time, are spending it at least as fast as it is paid to them, as is shown by the quotations made above from the testimony of Mr. Keyserling. Business men, manufacturers, and farmers whould be harmed directly as the volume of money received and spend by these low-income millions was cut by Federal action.

During World War II human sensibilities were outraged by the Japanese use of kamikaze pilots, flyers who were locked in small planes and ordered to dash their craft and themselves to death on the decks of American ships. Section 8 (f) would bomb our markets and our economy at a time when it was most vulnerable, incidentally sacrificing, if not the lives, the health, welfare, and general well-being of the workers who, in periods of depression, would be strapped, by economic necessity, to stay with jobs despite cuts in minimum wages that would be reflected in cuts in the entire wage structure in the affected industry and, indirectly, in other industries. No good would be accomplished and incalculable damage would be done both to the economy, to business, to industry, and to wage earners.

Because section 8 (f) is, in our judgment, a proposal for economic self-mutilation during a period of depression when the full protection of the Hour-Wage Act would be most needed, we strongly urge that this committee omit from any bill recommended to the House section 8 (f) or any similar provision.

Mr. Chairman, the third point is the point that we have discussed briefly at the beginning of this hearing, relative to farms, and I do not think it is necessary to repeat that.

I should now like, if it is agreeable to the committee, to submit for the record a recent article pointing out that retail prices have lagged now for some months behind drops in farm prices. I would like to quote one paragraph:

Any way you look at it, recent retail price cuts in no way come near the farm and wholesale drops. The quotation for flour at the mill has fallen 22 percent since last February 1. But a pound of flour that was 8% cents at the grocer's a reir ago is still 8 cents today. And a loaf of bread today costs the same 14 to 16 eet is that you paid for it in February 1948.

This is an authoritative analysis of the price structure, from the farm through to the consumer in the retail store. I think it may be of interest and relevant to the matter.

Mr. LESINSKI. Without objection, it may be made a part of the record.

(The article referred to is as follows:)

RETAIL PRICE CUTS LAG BEHIND FARM PRICE DROP; DISTRIBUTORS PROFITING

(By Sidney Margolius)

Wage earners are failing to get the benefits of today's lower prices of farm products to a significantly large and costly extent.

That the advantages of the mark-downs in meat-on-the-hoof and grain-at-themill are disappearing en route to consumers is revealed by a comparison of the sharp drop in farm prices with the much smaller drop in wholesalers' prices for the processed foods, and the even smaller reduction at retail counters.

While steers, hogs, grains, eggs, cottonseed oil and other leading farm crops have come down an average of 27 percent since last summer's peaks, wholesalers have reduced their charges just 10 percent in that same period, while retailers' average prices have been shaded a mere 5 percent.

Since it is 7 months since farm prices started to topple, the refusal of consumer prices to budge more than a trifle can no longer be attributed to the usual lag between wholesale and retail prices. This lag is usually 2 to 3 months, and in the case of many important foods, far less. A change in the price of eggs, for example, is usually reflected in the price at the store in a few days. A movement in the quotation for livestock at the wholesale markets is normally reflected at the butcher's counter in 1 to 4 weeks.

Even if you follow prices back a whole year, you'll find that the average prices of 12 important commodities, including the grains, livestock, eggs, cottonseed oil and other staples, have come down 17 percent. But the cost of a family's food bill for a week is still the same as a year ago—a few cents more in fact-as shown by the food cost chart on this page.

Any way' you look at it, retail price cuts in no way come near the farm and wholesale drops. The quotation for flour at the mill has fallen 22 percent since last February 1. But a pound of flour that was 8% cents at the grocer's a year ago is still 8 cents today. And a loaf of bread today costs the same 14 to 16 cents that you paid for it in February 1948.

Even more revealing are some of the meat prices. Commercial-grade fresh beef has come down 16 percent at wholesale since a year ago; steers sold for 19 percent less on February 1 on the Chicago market than a year ago. But a pound of chopped beef in New York last week was typically priced at 59 cents, reported that city's department of markets, 4 cents more than February 1, 1948. Chief defense of food processors and grocers for the failure of retail prices to noticeably recede is that the cost of the raw food is only a small part of the cost of the package you buy at the store. Salaries, wages, transportation, storage, packaging, and other costs have not come down, the defense argues.

As against this defense, there's the record of what happened when farm prices started to skyrocket after OPA controls were removed in 1946. The increases were quickly reflected in wholesale and retail prices and attributed to higher farm prices. Profits on raw food materials in inventory helped lift corporation profits after taxes from $9,000,000,000 in 1945 to $17,000,000,000 in 1947 and $20,000,000,000 in 1948.

Now, the disparity between farm and retail price cuts is not only helping food manufacturers and distributors to show a loss on their present inventory to balance the 1946-48 profit, but it's giving them an opportunity to make a new inventory profit on the price decline too. Because the public has become accustomed to certain expensive charges, middlemen can take their time about marking down price tags.

FOOD-COST SCORE CARD

This list includes most-but not all the foods a family might buy for a week. in correct proportions in which they would buy them, to determine just how much the cost of eating has come down since last year. Meat and produce prices are those found typical by the New York markets department; others are supermarket prices, and lower than average. The comparative costs shown by this table may be considered representative of the national trend because, while New York prices may vary from the national average, they do follow the general ups and downs.

The farmers' share of the typical consumer dollar spent for a typical market basket has dropped from 54 cents in 1946 to 53 cents in 1947 and 52 cents in 1948, and the distributors', processors', and retailers' take from our dollar has increased correspondingly, it is proved in this chart which Leon Keyserling of the President's Council of Economic Advisers, told a congressional committee last week.

Mr. SIFTON. That completes my statement, sir.

Mr. LESINSKI. Thank you.

Mr. Kennedy.

Mr. KENNEDY. Mr. Sifton, I appreciate your statement, but I want to give you an example of what is happening. I will give you the example and then ask you to tell me what you think.

This involves the hotel business. In Cambridge, Mass., there are two hotels, the Commander Hotel and Continental Hotel.

The Commander Hotel used to do about $400,000 worth of busi ness, but the present owner and his wife are very hard-working people, and they now have an annual income of over $600,000.

In other words, they would come under it, whereas the Continental, across the street, makes about $475,000, so that they would not come under it.

Mr. SIFTON. I am sorry, sir, come under what?

Mr. KENNEDY. Come under this minimum-wage bill. The Continental Hotel is under $500,000, so it does not come under this Wages and Hours Act.

THE FARMER'S SHARE OF THE CONSUMER'S DOLLAR

SPENT FOR A TYPICAL "MARKET BASKET OF FOOD

PERCENT OF

RETAIL VALUE

100

COUNCIL OF ECONOMIC ADVISERS

Mr. SIFTON. Well, sir, I had interpreted that definition as applying to retail business, and I do not know that it would cover or include hotels.

Mr. KENNEDY. Hotels are mentioned in the line where it says "retail, service establishments, and hotels." That is in this bill; it was not in the 1938 bill.

Mr. SIFTON. I would not be able to say whether hotels are in or out or affecting interstate commerce.

Mr. KENNEDY. Under the definition it is assumed that they are. But, Mr. Sifton, let me just go ahead and give you the situation. so that you will see what it does to this hotel. I quote from a letter that I have, which will show you the situation regarding the Colamander Hotel:

From time immemorial there has been the custom in the hotel business to pay two classifications of wages, the one applicable to the so-called tip or service employees, and the other nontip or nonservice employees. The wate of the former is necessarily lower because of the special advantage of additional remuneration in gratuities. These thoughts should be before you and your committee for any decisions you may make regarding the above. To point out to you how it would operate on us, may I state that this hotel is seme residential-240 rooms, 86 transient and the remainder 1-, 2-, and 3-room side. Our total pay roll for last year, exclusilve of officers' salaries, was $240,00 and employing from 115 to 125 weekly, dependent upon the demands of the business. If this bill were to become effective it work out as follows:

(1) Total cash wage increases, tip employees, raised to 75 cents, is $it weekly on a 6-day week.

(2) Total cash weekly amount, nontip employees, raised from lowest classifi cation to 75 cents, is $403 weekly.

(3 and 4) Assuming workweek reduced from 48 to 40 hours, increased weekly cost of pay roll, workmen's compensation; Federal old-age benefits; State at! Federal unemployment tax is $1,104, or increase of 20 percent. Assuming employees on our staff for 6 days, increased cost for sixth day, including pay ro and various pay-roll tax, is $1,519 per week, or increase of 30 percent.

Therefore, figuring on the safe side, total pay roll of $240,000 would be increases! $81,000, and this is without reference to customary overtime which would entail an additional 5 percent. Our auditors have not submitted to us the figures for December, but our November figures show a total pay roll of $20,580, which repre sents the ratio of 38 percent of the dollar to total net sales, whereas if the above bill were enacted, it would entail a 14-percent increase or a ratio of 42.4 percent of total wages to the total income. Both of these figures are abnormally high, for under normal conditions the percentage of wage to the intake dollar should not be more than one-third, or 33 percent. In addition to the foregoing, if wages are jacked up, legally there should be an additional percentage of 1 to 2 percent entailed because of pay-roll and other taxes.

This hotel is too small to absorb additional business to provide for such was increases, and competition would not permit a raising of our rates; in addition to this, if the $500,000 gross annual business differential should prevail, it would mean that our waitresses now reeciving $15 weekly would have to be paid $%while our nearest competition would not have to make any additional increas due to the fact that its business, as we are informed, does not gross $300OR annually. For several months past permanent and transient rooms, food, and beverage business, has fallen off alarmingly with no sign of early reviva Remember, the hotel is a nonstop business and cannot adjust itself to meet sze wage proposed increases as industrial and commercial activities where manage ment may close down to meet fluctuating conditions.

In other words, this hotel feels that if the waitresses were increased from the $15 a week that they are now getting to $39, which would be an increase of $85,000, he feels that such an increase in a hotel that grosses $625,000 would practically put him out of business. You must remember that most of his rooms or apartments probably will have rent control. At the same time the hotel across the street which has