Secretary TOBIN. I do know, and I have the statistics in our Department that will show clearly it is the exception for anyone to receive less. There are only 1,500,000 now brought under this law in the whole country who are today getting less than 75 cents an hour, out of a total population of 150,000,000 people.

Mr. McCONNELL. A raise of the minimum wage, unless adjustment is made in industry, will cause a raise of wages all along the line in order to keep certain differentials; is that not correct?

Secretary TOBIN. I am telling you that there are one and a half million people now under this law whose wages would be directly increased and it will probably affect a few on higher levels, but I certainly do not feel that that factor should prevent the establishment of the 75-cent-an-hour minimum wage.

Mr. McCONNELL. That would be correct if you can establish proof definite enough to show a 75-cent rate will not have an inflationary effect throughout the industry in America. That was generally demonstrated to us last year by a professor from Princeton who seemed to have the facts. I want to know if you have the facts.

Secretary TOBIN. In many of the industries 90 percent of your employees today are above this level. Even among shoe workers, nearly 90 percent are above this level, and there is hardly a group of employees in production in which 95 percent of them are not enjoying a wage that is higher than is recommended here, so that can have but a trifling effect on inflation.

Mr. McCONNELL. Have you statistics on this matter?

Mr. McCOMB. We have statistics; yes.

Secretary TOBIN. I will be delighted to furnish the committee with statistics that will show the effect this will have on the economy. Mr. McCONNELL. And you will show the conclusions you have derived from those statistics on the same sheet?

Secretary TOBIN. Yes, sir.

Mr. McCONNELL. I would like to have that inserted in the record. Mr. LESINSKI. Is there any objection? The Chair hears none. (The matter referred to above is as follows:)

Hon. JOHN LESINSKI,

DEPARTMENT OF LABOR,
OFFICE OF THE SECRETARY,
Washington, February 9, 1949.

Chairman, Committee on Education and Labor,

House of Representatives, Washington 25, D. C.

DEAR CONGRESSMAN LESINSKI: In the course of my testimony on January 27, 1949, on revision of the Fair Labor Standards Act, I indicated that I would have a statement prepared for the committee on the effect of a 75-cent minimum wage on the economy and on particular industries.

The attached statement was prepared at my request by the Bureau of Labor Statistics. The statement deals with the general effect of a 75-cent rate and with the effect of such a rate in certain industries. Detailed attention was given to wood furniture, since several questions relating to the furniture industry were raised at my appearance before your committee.

I trust that the committee will find this material helpful. If I can be of additional assistance, please let me know.

Sincerely yours,

(Enclosures.)

MAURICE J. TOBIN,
Secretary of Labor.

UNITED STATES DEPARTMENT OF LABOR,

BUREAU OF LABOR STATISTICS, Washington 25, D. C., February 2, 1949.

SUPPLEMENTARY INFORMATION IN RESPONSE TO QUESTIONS ASKED SECRETARY TOBIN ON ECONOMIC EFFECTS Of a 75-Cent MINIMUM RATE

This supplementary statement was prepared in response to certain questions raised during the course of Secretary Tobin's testimony on January 27, 1949, with respect to the effect of a 75-cent minimum wage on the American economy. The present brief analysis deals first with the impact of the proposed minimum on the economy as a whole; attention is then directed toward its effect on certain specific industries with unusual proportions of workers at relatively low rates of pay.

THE GENERAL EFFECT OF A 75-CENT MINIMUM

As of July 1947 the Bureau of Labor Statistics prepared careful estimates of the number of production workers in manufacturing at various wage-rate levels. These wage distributions related not only to manufacturing as a whole, but also to the major groups of manufacturing industries.' The complete Bureau of Labor Statistics release is attached as an appendix to the present statement.

In July 1947 approximately 10.4 percent of the workers in manufacturing were earning various amounts below 75 cents an hour at straight-time rates. Since that time, wages in manufacturing, and in industry generally, have increased substantially. As indicated below, straight-time average hourly earnings in manufacturing increased by 11.5 percent between July 1947 and November 1948, the latest date for which statistics are available. The increase in durable goods industries amounted to almost 11 percent; in nondurable goods to 11.8 percent. TABLE 1.-Straight-time average hourly earnings1 in manufacturing, July 1947 and November 1948

1 Gross average hourly earnings adjusted to exclude premium pay for overtime after 40 hours per week. 2 Preliminary.

Source: Bureau of Labor Statistics.

Wage increases of these magnitudes could not fail to affect the proportions of workers at various levels of wage rates. On the basis of wage changes since July 1947, the Bureau of Labor Statistics has made estimates as of November 1948 of the number of production workers in manufacturing now earning less than $1 an hour. These estimates are shown in table 2.

As table 2 indicates, the number of production workers in manufacturing below 75 cents an hour in November 1948 was approximately 875,000 out of a total of more than 13,000,000. In other words, about 6.6 percent of the manufacturing work force was earning less than the proposed minimum, as compared with 10.4 percent in July 1947. These workers, moreover, were spread over a comparatively wide range of industries.

To bring all of the workers now earning less than 75 cents an hour up to that level would increase the manufacturing wage bill by slightly more than one-half of 1 percent. In terms of the economy as a whole, an increase of this magnitude unequestionably could be absorbed without adverse effect on production or employment. Since wages constitute only one element in cost, the effect of the required increases to this low-wage group of workers on production costs would be significantly less than the effect on the wage bill alone. Living costs, even on

1 The wage distributions for manufacturing as a whole and for the relatively low-wage manufacturing industries were shown at pp. 2596 and 2598 of the hearings, Subcommittee No. 4 of the Committee on Education and Labor, House of Representatives (80th Cong., 1st sess.), vol. 4.

2 It should be noted that these data relate only to production workers in manufacturing: if other types of employees (such as office clerical workers) attached to manufacturing establishments were included the total number of workers under 75 cents would be somewhat larger. It is not believed, however, that the proportion would be materially altered. Between November 1947 and November 1948, to use a recent period, manufacturing pay rolls increased by about 7 percent or at the rate of more than 0.5 percent a month.

TABLE 2-Estimated distribution of production workers in manufacturing at hourly wage rates below $1, November 19481

These estimates are preliminary revisions of the more detailed wage distributions in manufacturing for July 19447. The July 1947 distributions were adjusted for levels under $1 an hour on the basis of wage changes the major manufacturing industry groups since July 1947. The estimates shown above should therefore be viewed as useful approximations. The Bureau during the past 2 years has been unable to undertake the detailed industry studies that would be required for more precise estimates.

Source: Bureau of Labor Statistics.

the extreme assumption that none of the required wage increase would be absorbed at some stage in the production process, or that there would be no counterbalancing gains in productive efficiency, would not be measurably affected. In this analysis of the general effect of a 75-cent rate, the situation in manufacturing, in the absence of other data, has been taken to represent the situation in all industry covered by the Fair Labor Standards Act.

THE EFFECT OF A 75-CENT MINIMUM ON SPECIFIC INDUSTRIES

In the preceding discussion, the general effect of a 75-cent rate was described. No account was taken of the fact that any change in the legal minimum wage rate will affect some industries more than others. This factor of differential impact must now be squarely faced. Some industries have virtually no employees at rates below 75 cents; in other industries, appreciable proportions of workers are below this level.

Fairly typical of the latter group of industries is wood furniture. The situation in this industry will repay specific examination. Such examination will throw light on the effect of a higher minimum wage on those industries to which attention is properly directed when advance in basic wage standards are under consideration.

In September 1948 the Bureau of Labor Statistics collected detailed information on wages in the wood-furniture industry in nine important production areas. The following table shows the areas covered, the number of production workers and the average wage rate in such area, and the proportion of workers in each area earning less than 75 cents an hour.

TABLE 3.-Wood-furniture industry-Number of workers, average hourly wage rate, and proportion of workers under 75 cents, selected areas, September 1948

In plants employing 21 or more workers, as estimated by Bureau of Labor Statistics.
Less than one-half of 1 percent.

Source: Bureau of Labor Statistics.

As table 3 indicates, the average wage rate among these nine areas varied from $1.43 in Los Angeles to 88 cents in the Winston-Salem-High Point area of North Carolina. It was $1.19 in Grand Rapids and $1.15 in Jamestown, N. Y. Among the nine areas, the proportion of workers earning less than 75 cents an hour ranged from practically zero in two of the area to 15 percent in the WinstonSalem-High Point area in North Carolina. The percentage was 9.3 in the important Morgantown-Lenoir area, 6.4 in Fitchburg-Gardner, and 6.0 in Jamestown. The distribution of workers at rates below 75 cents in the two North Carolina areas, where the effect of the proposed minimum would be most marked, is shown in table 4.

TABLE 4.-Wood-furniture industry-Distribution of workers at wage rates below 75 cents an hour, 2 areas, September 1948

1 In plants employing 21 or more workers, as estimated by Bureau of Labor Statistics. 2 Less than one-tenth of 1 percent.

Source: Bureau of Labor Statistics.

An analysis of the distributions in table 4 may be thus summarized:

1. More than one-half of the workers earning less than 75 cents an hour in both the Morganton-Lenoir area and the Winston-Salem-High Point area were within 5 cents of that level. In other words, relatively small increases would be required to raise more than half of the workers in each area up to the proposed 75-cent minimum.

2. Some or all of the very low-wage employees in this area (those below 65 cents an hour) were probably learners or handicapped workers. Special provisions are made for such workers under section 14 of the Fair Labor Standards Act.

3. To raise all of the workers now earning less than 75 cents an hour in the two areas up to that level would increase the wage bill in Winston-Salem-High Point by 1.3 percent; in Morganton-Lenoir by 0.7 percent.

4. Since the general level of wages (see table 3) in these two areas is lower by from 15 to 16 cents (when compared with Fitchburg-Gardner) to 54 to 55 cents (when compared with Los Angeles) than the general level of wages in other important wood furniture areas, the introduction of a 75-cent minimum clearly will not erase difference in wage levels among the areas. This is so, even on the assumption tha the higher minimum will have some effect on wages above the minimum. Experience indicates that such indirect effects are likely to be moderate. In the present instance, the fact that a large proportion of the workers who would be affected by a 75-cent rate are already within a few cents of that level would reduce the pressure for adjustments to the higher paid employees. It will be observed from table 3, moreover, that the average wage level in the Martinsville, Va., area is identical with that in Morganton-Lenoir and only 1 cent above Winston-Salem-High Point. The proportion of workers below 75 cents in Martinsville, however, is quite small. This would appear to indicate that an average wage level in this industry of 89 to 91 cents is compatible with a 75-cent minimum.

5. Wages constitute only one element in the total cost of producing goods. In the furniture industry, according to the 1939 Census of Manufacturers, wages

constituted about 25 percent of value of product. In terms of cost, therefore, the direct effect of a 75-cent minimum on the two areas in the wood-furniture industry most heavily affected would amount to less than one-half of 1 percent. Considerable attention has been devoted to the wood-furniture industry in an effort to bring the discussion of the effects of a 75-cent minimum down to earth. A 75-cent rate would raise the wages of many thousands of workers. If this were not true, the proposed minimum would be without significance. It would affect some industries more than others. As in wood furniture, its impact would be greater on some sections of a given industry than on others.

Few workers in the basic steel industry and in the metal-fabricating industries, including the nonferrous metals industries, would be affected. The steel minimum rates that prevail throughout the country, for example, are above $1. Firms in the rubber, chemical, paper, and transportation equipment industries are typically paying a minimum rate of more than 75 cents in all areas of the country. The cotton, rayon, and wool textile industries would be little affected in either the North or the South. Few workers would be affected in the electrical industry, in utilities, or in transportation.

On the other hand, some industries do have appreciable numbers of workers below 75 cents. The situation in wood furniture has been described in detail. Other industries in this category include seamless hosiery, southern lumber, fertilizer, tobacco, cotton garments.

The situation in each case is somewhat different. From available statistics, which are not generally as detailed as those cited above in wood furniture, some idea of the variation can be seen. In the men's seamless-hosiery industry, 31 percent of the workers in the Southeastern States and 29 percent of the workers in the Middle Atlantic States were being paid less than 75 cents an hour in October 1948, although the average wage in the Southeast-90 cents-was well above this level. In the fertilizer industry, which had a national average of 89 cents an hour, average wage levels varied by State, from $1.18 in Illinois and Massachusetts to 67 cents in Mississippi, 69 cents in Georgia and Alabama, and 72 cents in South Carolina. In the four Northern States cited, virtually no workers received less than 75 cents; in the Southern States, approximately two-thirds of the workers in each State were below this level. No recent data of a detailed character are available for the southern lumber industy, but it is likely that as many as half the workers in that industry are receiving less than 75 cents an hour; in contrast, the current union-scale minimum which prevails in the other major lumber region of the country-the Pacific Northwest-is above $1.40 an hour. Even in the southern segment of the industry, some groups of employers have been paying minimum levels of 60, 65, and even 75 cents an hour. Raising all workers in these relatively low-wage industries to the 75-cent minimum level will obviously raise the wage bill in these industries, but it does not follow that such increases will be fully carried into their cost and price structures. At least some of the increase in labor cost, and in some instances perhaps all of the increase, can be absorbed by increased operating efficiency,* or at various points in the sequence of production and distribution.

In any industry that would be affected by a higher minimum wage, some firms will be found operating at or above the proposed minimum. In terms of competitive conditions, the effect of a higher minimum is to increase in some measure the wages of low-wage firms relative to the wages already being paid by those who are at or above the new minimum. Ordinarily, differences in wages among firms will not be eliminated by a new minimum. Competition in the industry, however, will be on the basis of a somewhat higher standard of wages to which the lower-wage firms would have to adapt themselves. In this process, competitive survival will depend on a number of considerations, including the ability to operate on a level of efficiency permitting the maintenance of minimum-wage standards. The forces of competition will probably operate to restrain significant price advances. Where price advances do occur, this can be viewed as the price of establishing reasonable minimum-wage standards for American workers.

The figure for household furniture except upholstered was 25.6 percent; for office furniture. 25 percent.

Experience with minimum-wage legislation indicates that one effect of a higher minimum rate is to stimulate improvement in operating efficiency in the relatively low-wage firms that are most directly affected.