Mr. NICHOLS. I also have with me Mr. George Plant, who is division. manager of the National Retail Dry Goods Association.

TESTIMONY OF CHARLES G. NICHOLS ON BEHALF OF THE NATIONAL RETAIL DRY GOODS ASSOCIATION, ACCOMPANIED BY GEORGE PLANT, DIVISION MANAGER, NATIONAL RETAIL DRY GOODS ASSOCIATION

Mr. NICHOLS. My name is Charles G. Nichols and I am president of the G. M. McKelvey Co., a department store located in Youngstown, Ohio. I am also chairman of the board of directors of the National Retail Dry Goods Association in whose behalf I appear before you. The National Retail Dry Goods Association is a voluntary trade organization whose members operate some 7,000 retail department and specialty stores located in every State in the Union.

My purpose here today is to state to this committee the attitude and opinions of the retail trade which we represent on the subject of the Fair Labor Standards Act of 1938 and the currently proposed amendments thereto. We particularly desire to call the attention of this committee to certain phases of the proposed amendments which have to do with the specific exemption for intrastate retailing and servicing which the Congress wrote into the act at the time of its passage. The retail exemption is contained in section 13 (a) (2) of the existing law which reads as follows:

Section 13 (a). The provisions of sections 6, minimum wage, and 7, maximum hours, shall not apply with respect to * * * (2) any employee engaged in retail or service establishment the greater part of whose selling or servicing is in intrastate commerce.

We wish to present argument for the retention of this exemption. In doing so, we wish to emphasize the fact that the National Retail Dry Goods Association has long been on record as believing that where circumstances make it desirable or necessary to have legislation establishing reasonable maximum hours of employment and minimum wages for the retail industry, such legislation because of the inherent local and intrastate nature of retailing is properly within the province of the States and not the Congress of the United States. That is the essence of my presentation today.

Among the proposed bills before Congress for the purpose of amending the Fair Labor Standards Act are some which would broaden the commerce clause in the present act to include retailing as an industry. These bills would emasculate the present exemption for intrastate retailing and servicing by limiting its application to those retail and service enterprises having neither more than three or four establishments nor doing an annual volume of sales of not more than $300,000 or $500,000 as the case may be.

The adoption of such legislation by the Congress would impose a system of discriminatory Federal control over retailing which not only is not necessary but would be, in our opinion, an invasion of the rights of the States to exercise control over business within the State. Rgardless of the size or sales volume, retailing is essentially a local enterprise. It caters to the people within its own particular local shopping area. Unlike practically all other forms of enterprise, retailing has no other function except to serve consumers within a

limited trading area. Consumers must be served in such manner, and at such shopping hours, as they themselves elect. This is just as true of the large retail business as it is of the smaller ones. Any attempt to discriminate between stores by size completely ignores the competitive nature of retailing.

I need not dwell on the fact that, unlike every other form of business, retailing in one form or another is to be found in every com munity and at every cross-roads-and even along the highwaysthrough the entire Nation, and always serving a limited local area. Retailing is the one form of enterprise which must be directly and immediately responsive to the needs of consumers. The magnitude of sales volume in itself does not determine whether or not a business enterprise is intrastate or interstate. The growth of a retail store to impressive sales volume merely reflects the extent to which the consuming public has liked its service and come to depend upon it for the satisfaction of its needs. Because the store has successfully discharged its function in no way detracts from its intrastate character, or justifies the Federal Government in assuming controls over it which rightly belong to the State.

To divide an industry such as retailing in this manner is not only unsound but discriminatory as well. It may frequently happen that a specialty shop concentrating on the sale of millinery, or some other single line of goods, may do an annual volume of three or four hundred thousand dollars, while a similar department in a department store next door to it may have a substantially lower sales volume. Yet under this proposal the department store would be discriminated against in competition by being held subject to regulations as to wages and hours. Such a division of the retail industry based upon units and volume would seriously affect and discriminate against even the smaller stores which these proposed amendments are designed to exempt.

Such provisions would promote rather than eliminate unfair methods of competition which is one of the declared purposes of the legislation proposed. Smaller stores must compete in the same labor market as nonexempt stores. They would have to provide the same wage schedules in order to get qualified help or be content with less skilled or substandard employees. Good workers will naturally gravitate to stores paying the higher minimums, and the enactment of the proposed volume controls might very well have the effect of making big concerns bigger and smaller concerns nonexistent.

When it originally enacted the wage-and-hour law, Congress definitely recognized the local and intrastate character of retailing by including a specific exemption for such businesses. If you will refer to the debate in Congress while the original legislation was under consideration, you will find it was definitely stated by various legislators urging its passage that retail establishments are absolutely out of the provisions of the bill, they are exempted. This exemption was not by indirection or implication. It was by the inclusion of a specific provision placed in the bill for that purpose to satisfy those legislators who recognized the intrastate character of such enterprises and, without this assurance, would have refused to enact the measure. Nothing which has transpired since that time has changed the local character

of these trades.

The business hours of retail stores-unlike those in industry-are dictated and controlled by the requirements of the stores' customers. In order to perform their economic function properly they must be ready to sell goods when the public wishes to buy. It should be recognized that the buying habits and needs of the public vary greatly in different areas and whatever the situation may be in a particular area, the stores must conform. This is amply attested by any analysis of store hours in different sections and even by variations by types of stores within the same area. These variations are dictated by consumers, the customers to whom the store sells. Most department stores are open 6 days per week. Their weekly open hours generally range from 48 to 52. Some open less than 48 hours but many stores, particularly in the medium-size and smaller cities find it necessary to remain open 55 to 58 hours per week. In many places it is necessary for such stores to keep open one, or more, evenings per week in order to provide adequate facilities for the public to do its shopping. This is especially true of suburban and neighborhood stores in larger cities and of stores in small and rural communities. Serving the population of a wide area of agricultural workers usually entails keeping open Saturday evenings, the time when farm families find it most convenient to do their shopping.

Naturally, the time which stores find it necessary to keep open has a direct bearing upon the work hours of their employees. In order to do business and serve the public properly, a store must be adequately staffed. The flow of customer traffic normally is uneven and frequently unpredictable, but the stores must be prepared to serve whenever called upon to supply the public's wants. Some stores because of their shorter open hours find it possible to establish an employee workweek of 40 hours and, in some cases, have a 5-day employees' workweek. The great majority of stores, however-and this is especially true of smaller stores-find it necessary to have longer workweeks for their people, because of the necessity to keep their stores open longer for public convenience.

Employee work schedules of 42, 44, and 46 hours are common to many department stores and specialty stores. These schedules exist for one reason only-the stores must meet the demands of the public. Here, I wish to point out that the great majority of all the products of agriculture and industry must pass through retail stores in order to reach consumers and provide the ultimate market without which agriculture and industry could not live. Retailing is essentially an activity of adjustment between producer and consumer and one of the most important factors which must be adjusted is timeliness. Only the consumer can determine that factor of what is timely. Unfortunately, while Congress can legislate on many subjects, it never has found a way to control the whims and the wishes of the buying public. Stores must adjust their operations to the requirement of that public and, if they should fail to do so, the agricultural and production industries, and all their employees, would suffer.

If, then, because of hasty action by Congress, legislation is enacted containing provisions which some Federal bureaucrat can torture into conferring upon himself authority to control all those important factors which concern the habits and needs of millions of individual citizens in their local communities, the result will be the establishment of conditions which do not properly integrate the people's desires

with the vital needs of agriculture and other industrial production. What will the result be?

Retail stores will adapt themselves to the circumstances which your legislation creates. The net result will be that you will have succeeded in increasing the cost of doing business, and this will be passed on to the public. Consumers are becoming increasingly priceconscious and considerably more selective in their buying. They are interested in better quality at lower prices, not in less quality at higher cost. According to the figures issued by the Bureau of Labor Statistics, the consumer price index has shown a continuous downward trend in living costs for the past 4 or 5 months. The imposition of the proposed minimum wage on retailing would have the effect of reversing this trend. Prices would have to rise to absorb the increased labor costs which would result. Knowing this public attitude, it seems incredible that you men in Congress should even consider seriously for one moment moving into these local situations to force substantially increased costs on local retailers who can do nothing other than pass them on to the public.

A Federal minimum hourly wage in itself will not accomplish the basic purpose of this proposed legislation: namely, the maintenance of a minimum standard of living necessary for health, efficiency, and general well-being of workers. It has meaning only when accompanied by adequate and continuous employment. Retailing is different from industry both in the nature of its employment and its wage structure. In industry, employment is predicated chiefly upon orders on hand and subject to seasonal lay-offs. Its flow of work and resultant employment opportunities are much less certain and less constant. Employment in retailing is continuous throughout the year and subject to added employment opportunities at peak seasons. The large majority of retail workers enjoy continuous employment 52 weeks a year. The wage structure of the retail industry is based upon weekly not hourly earnings. These are all factors which have a direct bearing upon real wages and continuous weekly income and thereby on the standards of living of the workers themselves.

It is because of these conditions and the inherent local interstate character of retailing that we believe that legislation controlling hours of work and minimum rates of pay, where necessary, properly come within the realm of State legislation and not the Federal Congress. State legislators are much closer to local conditions and are in a much better position to regulate hours and wages when necessary to maintain minimum living standards.

State minimum-wage legislation for retailing has existed for many years. Currently, more than half the States have enacted wage laws applying to intrastate business. Some 21 of these States have enacted hour-and-wage regulations applying specifically to retailing. These retail minimum-wage orders confirm the local character of the retail and service trades by the variations which they reflect as between one State and another in both working hours and minimum wage rates. Various State regulations within themselves also recognize and reflect prevailing variations in the cost of living by geographic areas and by size of communities and frequently by job requirements involved.

If a national minimum wage rate such as contemplated in these proposed measures is imposed upon the retail and service trades, it will

have a serious effect upon both stores and the public. Stores must, if they are to continue in business, pass on to the public the added cost of the goods they purchase from manufacturers and wholesalers. They must also reflect the added costs in their own operating expenses. This will have to be done primarily by increasing their price of goods sold to the public. But it will also affect and curtail retail employment. Any increase in minimum wages must be accompanied by comparable increase in employee productivity, if further inflation is to be avoided. Despite the fact that retail wages have increased considerably during the past few years, employee productivity as measured by transactions handled has decreased since 1945. This is confirmed in the report on Operating Results of Department and Specialty Stores in 1947, issued by the Harvard University Graduate School of Business Administration, which states, and I quote:

Transactions per total employees, after hitting a high of over 3,600 in 1945, dropped off to a point in 1947 slightly lower than the total figure of 1942. Likewise, the number of transactions for salespersons fell off from 9,200 in 1945 to less than 7,900 in 1947, a figure not greatly different from the 1938 and 1940 data.

Therefore, stores will find it necessary to eliminate the less-efficient and less-skilled individuals and to operate with fewer and more-productive employees. To meet shopping requirements, they will undoubtedly have to resort to the greater use of part-time employment. which will represent a substantial curtailment of income of those employees who have been used to working on a full-time basis.

In conclusion, I should like to reiterate that our association has consistently maintained that the regulation of hours and wages of retail and service establishments engaged chiefly in intrastate commerce properly is a matter of State legislation. Therefore, we strongly urge that the retail and service exemption as now provided in section 13 (a) (2) of the present act should be retained so that the employees of any retail or service establishment, the greater part of whose selling and servicing is intrastate in character, will be exempt from this legislation.

Thank you, Mr. Chairman.

Mr. KELLEY. Mr. Nichols, do you have any statistics to show what the minimum wage is in the industry per week?

Mr. NICHOLS. No; I do not have those, because when you are talking about the broad retail industry and the local character of it, I would not know what the minimum wage would be in North or South Carolina or New Mexico or Arizona or Minnesota. I think those could be obtained probably from the Bureau of Labor Statistics. I have never seen them, however.

Mr. KELLEY. Do you know whether or not the retail stores generally throughout the United States are organized and whether their wage rates and hours are arrived at through contract?

Mr. NICHOLS. In some localities they are, and in others they are not, sir.

Mr. KELLEY. Mr. Bailey?

Mr. BAILEY. Mr. Chairman, I would like to ask the gentleman, since he has stated that he is directly connected with a store in Youngstown, Ohio, if Ohio has a minimum-wage-and-hour law.

Mr. NICHOLS. It does not; no, sir.

Mr. BAILEY. I have another question.