Mr. LESINSKI. Mr. Kennedy?

Mr. KENNEDY. You do not think that Mrs. Public, whom you mentioned, should expect to get prices that are low because you pay a low wage? Do you not think that she should bear the burden of the price increase, so that you would pay a decent wage to the people who work in your stores?

Mr. NICHOLS. I think they are perfectly willing to pay that on a good, fair basis; but we have had quite a bit of inflation. The Government down here in Washington certainly has been talking about inflation, and it has been the aim, I believe, of everybody to get prices down to a reasonable level as the pipe lines begin to pile up. Part of your prices, of course, have been caused by shortages. There was not enough merchandise to go around. But if you will look over the past few weeks in the case where the pipe lines have been filled up, there has perhaps been a slight decrease in prices, and that is why the cost-ofliving index, according to the Bureau of Labor Statistics has been down rather consistently a little bit for the past 4 or 5 months. I am not saying that all prices in the country are going down, because I do not believe that they will. I think that there is a high cost of manufacturing today, and the prices cannot come down.

Mr. KENNEDY. If you give a person enough of a wage so that they can buy things, then there will be enough consumers with enough money to buy the goods to prevent your income from sliding off completely.

Mr. NICHOLS. Well, the best answer that I can give you on that is that retailing is the most competitive business in the world, and a free exchange of goods means a free enchange of competition among retailers, and they usually take care of the price situation pretty well. You can read that in the daily newspapers if you read the ads."

Mr. KENNEDY. And the wage situation, too, as well as the price situation?

Mr. NICHOLS. I think the wages are on more or less of a competitive basis today all over the country.

Mr. KENNEDY. That is all.

Mr. LESINSKI. Mr. Irving?

Mr. IRVING. I would just like to ask what you think about this: You said something a while ago about the small stores not being able to compete in the labor market. Do you think even without this law that the average small store can compete with the large store?

Mr. NICHOLS. I think the smaller stores have done a pretty good job in competing in the labor market with the larger stores, but that has not been on the basis of direct competition as much as it has been on the locale. Again, it comes back to the locality of the store and the area that it serves. For example, the store might be located in a suburban area, and it would draw its help from that particular area. Perhaps those people do not want to go downtown. Perhaps that store is paying a reasonably good wage, but the minute there would be a wide differential, the bigger stores would be favored because they are exempt under the act if they are under $300,000. The help would naturally gravitate to the larger stores.

Another reason for it is that the bigger stores, to hold their costs down, would have to get the best productive help that they could get, and they would go out and they would create a very competitive bid for the best help in the community, and they would have an edge.

I do not believe you can split an industry and divide it and come

out on it.

Mr. WIER. Could I make one more observation?

Mr. LESINSKI. Mr. Wier.

Mr. WIER. This is an observation concerning the district from which I come. You are probably familiar with it-Minneapolis, a city of about a half million people.

Mr. NICHOLS. I do not happen to be familiar with it. I know some of the stores up there, sir.

Mr. WIER. We have about 15 of the so-called major retail stores including Donaldsons, Dayton, Powers, Sears, Roebuck, and Montgomery Ward. Those are not organized. Mr. Hayes is the secretary of that retail organization.

Those stores all follow a uniform policy in wages, hours, closing nights, and so on and so forth.

The irony of it is that in Minneapolis we have a majority of the small retail stores organized and under contract, all of whom are getting more than this guaranteed wage here.

Now, as I figure out in Minneapolis, we operate on a 42-hour week. We give the clerks 1 day off and in return for that, most of our stores are either open on a Monday night or a Thursday night for 4 extra hours. So they work 42 hours, and if these stores were to conform to the 75-cent minimum, that would be a total wage of $31.50, which is 75 times 42.

There is little overtime involved in these stores, only at inventory and,we will say, 10 days previous to the holidays. Then they do work overtime.

So $31.50 a week for 42 hours is a wage that I think in the 15 stores that I have outlined would be comparable to the size of the store that you are speaking of at Youngstown. They are all major stores. I would venture to say that in Dayton's, which is the biggest one, where they have 4,500 employees-mostly sales-about one-third of those employees receive not less than $31.50. And I am referring to the new employees who start at $22.25, and then about every 3 months, they are increased up to a higher wage.

Those are unorganized stores. So I do not think the damage that has been debated here this afternoon would be so strenuous as to force any of these stores out of business, and the reason that I say that is that we have attempted in that city, and St. Paul and Duluth, our major cities, to organize these people in the bigger stores by pointing out the conditions that we have in the smaller stores, many of which would not come under this provision here.

But on the basis of the benefits that we have obtained by organization in the smaller stores, we try to sell the organization to the bigger stores, and within the last 4 or 5 years, may I say, the department stores of their own volition and by association of action have increased the benefits materially to keep the employees from becoming organization-minded.

They have done that pretty rapidly. As they have increased the vacations, they have increased sick leave and in some cases have paid bonuses. So of their own volition they have made a number of adjustments, voluntarily, that I think brings them up to this 75 cents, if you want to add them up. I do not foresee, and do not want to see,

any store in Minneapolis go out of business. Every one of them is putting on additions and expanding.

I agree with you that this $31.50 minimum wage is going to raise some little question of financing, but not to the extent of forcing any of them out of business. Sears, Roebuck pays generally more than this, and that is a big store. So most of the employees in our major retail field are getting at least $31.50 in the State of Minnesota.

Mr. NICHOLS. I did not state that the big stores would go out of business. I said the small ones.

Mr. WIER. We get better conditions out of the small ones than the big ones.

Mr. LESINSKI. Mr. Nichols, is it not a fact that the retail stores mark up their goods on a certain percentage basis? In other words, the approximate mark-up of the cost is about 40 percent?

Mr. NICHOLS. It varies, sir, on the types of merchandise. The mark-up of the merchandise at the present time, as I mentioned, is at a 12-year low. On the whole, according to the statistics available, that is a fact.

Mr. LESINSKI. I know, but the average would be approximately 40 percent.

Mr. NICHOLS. We do not mark on cost, sir. We mark on what we call the retail system of accounting.

Mr. LESINSKI. All right. Then let us take the question of sales: If a dress in 1939 sold at $12 and you add a 40-percent mark-up, that would be $4.80 gross profit. The same dress selling today at $30, on the same basis of mark-up, would be $12 gross profit. There is a difference in dollars and cents in income.

Mr. NICHOLS. There is always a difference in dollars and cents when you have taken two different costs and worked out a markup on them. Mr. LESINSKI. I realize that, yet in this mark-up there is a differential in dollars and cents.

Mr. NICHOLS. I think you will find, sir, that a dress that cost $10.75 in 1939 and was retailed at $16.95, which under the retail system of marking is a 37.5-percent mark-up-you will find that this $10.75-cost dress today is still marked $16.95.

Mr. LESINSKI. That is not the way our wives report to us.
Mr. NICHOLS. Now, wait a minute. Part of your-

Mr. LESINSKI (interposing). My wife used to be able to buy a dress for $15 and $20. Now they are $60 and $70. I was able to get a suit, a good suit, for about $40. They are $125 now.

Mr. NICHOLS. That is correct, sir. But there is a little thing that you have forgotten, that the cost of manufacturing a dress has gone up and if your wife wants to buy the same quality dress that she bought in 1939, at the present time perhaps the quality of that dress would be less if she paid the same price for it, but if she wants to maintain that quality she will have to pay more, because something was taken out of the quality of the dress to maintain it in the same price line.

Mr. LESINSKI. That is why I brought in the difference between a $12 dress and a $30 dress.

Mr. NICHOLS. That is being very quickly rectified, sir, because I think they are getting much better values for their money today than they did 2 years ago. The quality has increased, and the price level has not been-

Mr. NICHOLS. You cannot absorb it. It would have to be passed

on to the consumer.

Mr. GWINN. Assuming that the increase in wages has to be through I out the store, from the smallest to the largest earner-let us assume a 20-percent raise then the industry would be bankrupt three or four times over, would it not? If you could not absorb it out of your net and the increase of labor is 20 percent, where would that put the industry, assuming that it is 20 percent? It has been mentioned as a 20-percent rise in some areas. What would that do to retailers! Mr. NICHOLS. I stated in the brief, sir, that it would make some retailers nonexistent.

Mr. GWINN. How would any of them go about to absorb that increase in wage costs?

Mr. NICHOLS. Frankly, it cannot be absorbed. But if the cotton man that produces the cotton has to increase the ginning and the spinning and to get it woven into cloth, and then it goes to the manufacturer to be made into the dress, and there is a price increase along there; and then a wage increase or an increased cost of the manufac turer, right up to the retail level, it will have to be passed on to the consumer, and will result in higher prices.

Mr. GWINN. Assuming that it starts at the ginning mill and goes through the manufacturer and the wholesaler and then to the retailer. what percentage of the total retail price, roughly speaking, is labor cost?

Mr. NICHOLS. In some categories, a high percentage.

Mr. GWINN. About what?

Mr. NICHOLS. I would not say, because that is a pretty broad statement of the industry. I would not have any idea, sir.

Mr. GWINN. Does it amount in some categories to 70 percent of the total retail price?

Mr. NICHOLS. I believe there are some segments of merchandising where labor costs are 70 percent; yes, sir.

Mr. PLANT. In retailing it amounts to 50 percent or more of the margin of operation above the cost of the goods.

Mr. GWINN. Fifty percent in the store?

50

Mr. PLANT. In the store; not the labor increment in the part that comes in, but of the operating margin that the store operates on, percent or more goes to labor and wages.

Mr. GWINN. That is, within the store?

Mr. PLANT. Within the store.

Mr. GWINN. That is not counting the labor that goes into the manufacturing of the product?

Mr. NICHOLS. No, sir.

I believe Dr. Nystrom says 83 percent of it. I believe he has made that statement.

Mr. GWINN. Eighty-three percent of your retail price is in labor, beginning at the ginning mill and going through the manufacture and retail processes. So that any rise in the labor cost up to 20 percent all along the line would cause an enormous rise in prices to the consumer; would it not?

Mr. NICHOLS. Prices would be increased substantially.

Mr. GWINN. And the only real question that it seems to me we have left on this is that question. Are you correct when you say if you

raise the wages for the minimum group, you have automatically to raise the wages for all the groups?

Mr. NICHOLS. Yes, sir.

Mr. GWINN. That is in direct conflict with the testimony of the Secretary of Labor.

Mr. NICHOLS. Yes, sir.

Mr. GWINN. Did you yourself in all of your history raise the wages of the lower group and fail to raise them for all groups in your store! Mr. NICHOLS. No, sir. When we have raised wages, we have raised every group, sir.

Mr. GWINN. What is the difference between the minimum-wage group in your store and the next group, in terms of dollars, roughly? Mr. BAILEY. Mr. Chairman, will the gentleman yield at that point? Mr. GWINN. I yield, Mr. Bailey.

Mr. BAILEY. That question is rather leading, because the gentleman informed me he had no knowledge of what the pay was, even in his own store at Youngstown, Ohio.

Mr. GWINN. He had no knowledge of what?

Mr. BAILEY. Of what the hourly or weekly rate was.

Mr. GWINN. He gave you the weekly rate, did he not, Mr. Bailey? Mr. BAILEY. Approximately $24 to $30.

Mr. GWINN. Now, I am asking him to give me the difference between the lower group and the next group in weekly wage, if he remembers it.

Mr. NICHOLS. That is a hard question to answer because in certain classes or classifications or categories of merchandise different weekly rates of wages are paid, depending on the types of merchandise. It is predicated pretty much on the unit of sale.

Mr. GWINN. If the difference were $3 or $4 between them, and then you raise the minimum wage $3 or $4 a week, that would put that category up into the next category, or pretty close to it?

Mr. NICHOLS. That is correct.

Mr. GWINN. Is that the reason why you say that all must be raised, because the lower group would impinge upon the next group, and the next group upon the next?

Mr. NICHOLS. On the basis of experience; yes, sir.

Mr. GWINN. You say there is great irregularity as to hours and total time worked, and seasons, in great variety in the different States. Would you mind dwelling upon that just a little to bring out the variations of shopping habits and the effect of that on hours, and so forth?

Mr. NICHOLS. In some of your agricultural communities they have more than a 40-hour week sometimes, more than a 50-hour week, to take care of the needs of the people that they serve in those particular areas. And again it becomes a localized proposition on store hours to serve the needs of the consuming public. I mean, each community is different. What we might do in Youngstown, Ohio, would not be typical or applicable to Tucson, Ariz., at all. Or what New York might do might not be in conformity with what Pueblo, Colo., would want to do.

Mr. GWINN. If that is true, and stores would go out of business under this law, if they complied with the law, let us see what the fixing of prices does to us.