$2.00 an hour and extend coverage to virtually all who work. The Secretary of Labor in his last report to Congress on minimum wage laws estimated that 6.6 million Americans work in small retail and service establishments. All of them, plus agricultural workers, all public employees and household help would be brought under the new minimum wage umbrella by H.R. 7130. Many of the overtime exemptions, now provided by law, would be repealed. H.R. 7130 A TROJAN HORSE Although H.R. 7130 may have been designed with good intentions to help raise the purchasing power of low-wage employees, it is a legislative Trojan horse. Rather than help low-wage, marginal and handicapped workmen, it would transfer them from the self-respect of a payroll to the embarrassment of the relief roll. This attempt to boost the minimum wage with the hope of making it an election issue in 1972 is aimed directly at the small businessman and his few employees. Although the bill's supporters talk of "minimum wage protection" for employees of small business, the bill harms the employees of small business and would put many small employers out of business and their employees out of work. Employees of big business and of those firms that may be able to withstand another Federal wage increase would receive higher money wages, but would suffer a loss in real wages, being required to pay greater taxes to support the cost of greater welfare. In the long run, no one gains by government "administered" wages. The so-called "free society" and "small business", often proclaimed by Congressmen as so dear to their legislative hearts, would be irreparably hurt by H.R. 7130. Under a cloak of "protection" the following small businesses are among those specifically singled out as targets: Retail and service establishments, small newspapers, small telephone exchanges, movie theaters, gasoline service stations, seasonal amusement or recreational establishments, restaurant and food service companies, fishing, and motels. The so-called "Mom and Pop" stores, be they a local "pizza palace" or a neighborhood cleaner, all would have Washington setting their wages. Once covered, their wage escalator ride would begin. The history of the minimum wage law reveals that the minimum wage continues to climb for those fortunate to cope with it and still remain in business. H.R. 7130 would mark the beginning of the end of the corner grocer or druggist as an employer. Many small firms, especially those operated by elderly prsons, would close, permitting their owners to retire and forcing their one or two marginal employees to try to find work. Statistics support the harm of broadening minimum wage coverage and in raising wage levels beyond the capacity to employ. The experience in Puerto Rico was a sad example of the business upheaval that can result from Federal wage fixing. States that do not have State minimum wage laws have more employment in low-earnings activities than States that supplement Federal wage fixing with their own wage laws. Other common results from forced minimums is that employers are compelled to find ways to get along without their least productive employees. Although this is difficult for large employers, it is even more difficult for small firms who may not have the financial capability or business potential to rearrange their work methods. Frequently their alternatives are limited to discharging the marginal workmen or closing their doors. Supporters of higher wage minimums assume the extra costs are always absorbed from profits. In some cases this may be possible for big business, but not easy for the small business. ORIGINAL FLSA AVOIDED LOCAL BUSINESSES H.R. 7130 is a complete departure and rejection of the original purpose of the first venture into government wage-fixing by the Federal Government. The original Fair Labor Standards Act of 1938 was limited to firms engaged in commerce. Its sponsors and supporters clearly indicated they had no intent of covering local firms, let alone the complete national coverage now proposed by H.R. 7130. Both the legislative history and the judicial interpretation of that history reflects this intent. When the Black-Connery bill, S. 2475, the bill that eventually was to mark the government's entry into the area of fixing wages, was being debated on the floor of the Senate in the summer of 1937, Senator Hugo Black (now Supreme Court Justice Black) explained its intent July 27, 1937: "I believe it was the prevailing sentiment of the Committee, if not the unanimous sentiment of the Committee, that businesses of a purely local type which serve a particular local community, and which do not send their products into the stream of interstate commerce, can better be regulated by the laws of the communities and of the states in which business units operate." This intent was confirmed in the Supreme Court decision that sustained the constitutionality of the Fair Labor Standards Act. Justice Stone in U.S. v. Darby Lumber Co., 321 U.S. 100 @ 109 (1941) explained the purpose of the then new law: "Its purpose, as we judicially know from the declaration of policy in Section 2(a) of the act, and the reports of congressional committees proposing legislation (legislative citations omitted) is to exclude from interstate commerce goods produced for the commerce and to prevent their production for interstate commerce, under conditions detrimental to the maintenance of minimum standards of living necessary for health and general well-being; and to prevent the use of interstate commerce as the means of competition in the distribution of goods so produced, and as the means of spreading and perpetuating such substandard labor conditions among the workers of the several states." A year later Justice Frankfurter in Kirschbaum v. Walling, 316 U.S. 517 @ 522 (1942) commented on the intent of Congress : "The history of the legislation leaves no doubt that Congress chose not to enter areas which it might have occupied. As passed by the House the bill applied to employers 'engaged in commerce in any industry affecting commerce' (legislative citations omitted). But the bill recommended by the conference applied only to employees 'engaged in commerce or in the production of goods for commerce' (citations omitted)." Justice Douglas' opinion in Walling v. Jacksonville Paper Co. 317 U.S. 564 @ 570 (1943) re-emphasizes this point. "We cannot be unmidful," he wrote "that Congress in enacting this statute plainly indicated its purpose to leave local business to the protection of the states." SUMMARY AND CONCLUSION The National Small Business Association re-emphasizes its opposition to further increases in the Federal minimum wage and the attempt by H.R. 7130 to extend coverage to the smallest of local business. Each increase in Federal wage levels deprives certain Americans of their right to work and to earn to what may be for some the maximum of their limited capacities. They become candidates for public welfare to be supported by those who receive the higher minimums. In other words, the taxes of the employed go to support those the law puts out of work. Federal wage-fixing, a policy of the Congress for 32 years, has yet to accomplish its purpose; if it were successful it would not be necessary to seek to continually raise minimums and expand coverage. Federal wage-fixing was a child of the depression-locked 1930s. The Fair Labor Standards Act was a sincere but unsuccessful attempt to relieve a period of great economic distress by a philosophy that depression and poverty can be ended by passing a law. The FLSA of 1938 was an idea to raise the then terribly poor standard of living. FLSA did not achieve its results 32 years ago, nor has each successive minimum boost been the economic bonanza its supporters promised. Today in the 1970s, Americans enjoy the highest standard of living in their history, but it is a standard that is shadowed by a growing inflation. Today's decade of the 70s is the economic opposite of the decade of the 30s, but minimum wage increases and extensions are again the least opportune at this period of the country's fiscal position. Legislation as H.R. 7130 would help to push the economy on a wild, wage-price rocket that could bring economic disaster to all business-particular to the small businessman. If the Congress is concerned about poverty, proposals to step up and expand minimum wage laws would result in greater poverty by curtailing employment opportunties and reducing living standards among the poorest of Americans. The slight benefit in increased wages to those marginal workers fortunate to remain among the employed would be greatly offset by the harm to the unskilled, the young, and the handicapped, the first victims of congressional tinkering with the laws of economics. The National Small Business Association urges this Subcommittee of the House Education and Labor Committee to reject H.R. 7130 and all other Federal wage-fixing proposals until some means can be found to stabilize the economy. INTERNATIONAL APPLE INSTITUTE, Hon. JOHN H. DENT, Chairman, General Subcommittee on Labor, Committee on Education and Labor, U.S. House of Representatives, Washington, D.C. DEAR CONGRESSMAN DENT: This association strongly opposes the amendments of the Fair Labor Standards Act contained in H.R. 7130, affecting the membership of the International Apple Institute and their employees. We request this letter be made part of the Hearing Record. The members of the International Apple Institute produce, pack, handle, process and/or sell practically the entire commercial apple crop and about seventy-five percent of the commercial winter pear crop. About 14,000 apple growers are included in our membership. For the purpose of brevity, we are limiting our views to the apple industry, but the same arguments apply to the winter pear industry. The International Apple Institute is the result of a merger of the National Apple Institute and the International Apple Association, which was consummated in June, 1970. The undersigned, in his former capacity as Executive Vice President of the International Apple Association, has been actively involved with the ramifications of the Fair Labor Standards Act (legislative and administrative) as they affected the apple and winter pear industries for over 20 years. The apple industry is "big business," worth $200 to $250 million at the grower level, and $750 to $1,000 million at the retail level. Its "health" has an impact on the nation's economy, and, naturally, that impact is substantially magnified in the apple producing states. Further, in passing, it is also worthy to note that, as far as we can ascertain, the views of the Administration concerning H.R. 7130 have not yet been presented to your Subcommittee. In our judgment, it is vital that the Subcommittee have those views before Committee action is taken. The International Apple Institute is primarily concerned with, and strongly opposed to, the proposed amendments that relate to: 1. The increase in the minimum wage paid to agricultural employees; and 2. The repeal of the limited seasonal overtime exemptions in Subsections (c) and (d) in Section 7 of the Act. INCREASED AGRICULTURAL MINIMUM WAGE For the past two seasons (1969-70 and 1970-71) the apple industry has experienced its own private serious depression. This is readily evidenced by the fact that returns to apple growers have been below 75% of "parity" in both years. ("Parity" being the relationship between the prices received by growers and the prices paid by growers. The increase in the cost of producing, packing, storing, processing, transporting and selling apples has been, unfortunately, phenomenal.) Despite exceptional efforts by this organization, and its state and regional members, to improve grower returns and increase consumer demand through self-financed promotion. public relations and educational programs, the apple grower, through this organization, has been forced to appeal to the USDA for surplus removal purchase programs in both 1969-70 and 1970–71. (For the record, the USDA purchased nearly $14.7 million worth of fresh apples and apple products in 1969-70, and $9.6 million in 1970-71.) Without this assistance, the position of the apple grower would be catastrophic. Even with this help, a substantial percentage of growers are faced with liquidation. One more year like 1969 or 1970, and their situation will be catastrophic. The job of producing, handling and marketing a crop of apples requires a tremendous amount of hard labor due to the perishable nature of the commodity, and the requirements of the market place. Further, it takes 10 years from the time the grower plants a tree before the production is sufficient for him to break even. The cost of producing, handling and marketing a crop of apples is substantial. For example, reliable economists at Washington State University report that growers in that state need an average f.o.b. return of $4.50 per packed box for all grades, sizes and varieties. We can assure you that many "ain't going to get it." Labor (hand and mechanized) is a major factor in these costs. Except for the minor exemption from the agricultural minimum wage in 13(a) (6) (i.e., farmers who have not employed more than 500 man-days of agricultural labor during any quarter in the preceding year), H.R. 7130 proposes to raise the agricultural minimum wage from the current $1.30 level to $2.00 per hour, a 53% increase in less than 21⁄2 years. In our judgment, such an increase would mean nothing short of disaster for apple and pear growers. H.R. 7130 would raise the "industrial" minimum wage, applicable to packers, processors and others, to $2.00 per hour, a 20% increase in less than 11⁄2 years. This, too, would have a serious adverse effect on our industry. You might say, "Well, just increase your selling price." For horiticultural commodities, such as ours, history and experience reveal this is extremely difficult and, at times, impossible to do. First, the grower is faced with the vagaries of weather and, therefore, is unable to "tailor" his production volume to meet market requirements. The grower can't shut off his "factory." His costs to produce a crop are practically the same in a poor "price year" as it is in a good one. Second, our commodity is extremely perishable. It continues to "live" and "breathe" after harvest. True, it can be held under very rigid and optimum cold and controlled atmosphere storage conditions up to 11 to 12 months. Its market and storage life depends on growing and harvesting conditions, the variety, the area in which it was produced, the stage of "maturity" when harvested, the "quality" of the storage conditions, etc. Not all fruit can be held for a long period. Some can be held only for a month or two at best. It must be moved to market while still in condition to give consumer satisfaction. This simply means there is constant, daily "pressure" to sell. With apples and pears, tomorrow may be too late. Couple this "pressure" with the fact that our major customers are large buyers (chains, voluntary and cooperative retail groups), one can easily understand why it is so difficult for the apple and pear grower and shipper to "pass on" increased costs to the consumer, except under the most favorable supply situations (short crops). Further, the more than 50% increase in the agricultural minimum wage could easily: 1. Increase the rate of decline in U.S. apple and pear exports; and 2. Encourage substantial imports, notably from France, Italy and Southern Hemisphere countries. Prior to World War II, the apple industry in this country exported over 20 million bushels of apples in some years. The War and the recovery period cut exports to zero. During the recovery period, our Government provided several temperate climate countries with "aid and assistance," some of it in the form of apple trees, technical know-how, equipment, etc. As a result, for example, France's fresh table apple production has increased from an average of 10.4 million bushels in 1935-39 to about 90 million bushels in recent years. Nevertheless, with the superior quality of our apples and our packaging, we were able to regain some of our export market. In 1965-66 we exported 6.7 million bushels (the post-War high). However, by 1968-69, due to "subsidized" and cheap French competition in our major export markets, and a continued "explosion" in world apple production, our exports slipped to 1.8 million bushels. In 1965-66 Great Britain, our historical major export market, took nearly 1.7 million bushels. In 1968-69 this slipped to less than 150,0000 bushels. A similar situation exists for Venezuela, previously our second most important offshore market. Prior to 1968, we "owned" 80% of that market. Severe, cheap French competition cut our share to 20% in 1968-69, and the situation has worsened. Will an agricultural minimum wage increase encourage imports? Very conceivably and, possibly, very substantially. The explosion in world apple production has forced many countries to seek additional markets at prices well below the U.S. grower's cost of production. France is the most notable example, but Southern Hemisphere countries are "in there pitching," as they are losing their historical European markets to increased domestic production. All are "looking" at the U.S.-"Big Daddy"-as a large, logical, and lucrative outlet. In fact, Australia will double her apple and pear exports to the U.S. this year. If we tried (or could) raise prices to cover the proposed increased minimums plus additional overtime created by the repeal of Section 7 (c) & (d), foreign apples and pears, produced and shipped for much less, would flood the U.S. market and drive domestic growers, packers and processors into bankruptcy. The U.S. Embassy in Brazil tells us that the French exporter is "given" a $1.00 per box subsidy on the ocean freight rate to Brazil, and our Brazilian members tell us an additional 40¢/bushel subsidy is given the French grower. Our members in Venezuela paint a similar picture. France has been delivering Golden Delicious to Great Britain at $2.75 to $3.60 per bushel carton. This is considerably below our f.o.b. cost. Golden Delicious is a preferred variety in the U.S. About 80% of France's production is Golden Delicious. The problem is evident. Considering the pressure in France to sell to any market at any price, we would not be surprised to see substantial shipments of this variety entering the U.S. in the near future, possibly this fall, at ruinous prices. The U.S. imposes no import duty on apples. Certainly, any factor that will increase our cost of doing business can only hurt our industry, our country's economy and our balance of payments. Growers cannot afford an increase in the agricultural minimum wage. Further, the "pyramiding" effect of the 20% increase in the "industrial" minimum level could have an equally harmful impact on the U.S. apple and pear growers and the agricultural worker. REPEAL OF THE LIMITED OVERTIME EXEMPTIONS IN 7 (C) & (D) The elimination of even these limited overtime exemptions would be most detrimental to the growers, shippers and processors. In light of what has been stated previously, it is logical to expect that the "harmful effects" will end up coming out of the growers' pocket which, in turn, will affect farm labor. We vigorously oppose the repeal of these subsections for the following reasons: 1. Our industry is seasonal in nature. This fact increases the absolute need of certain segments of our industry to perform functions that necessitate overtime, over which they have little or no control, during certain periods of the year. 2. Our commodity is perishable. Our fruit must be harvested, handled, marketed, stored and/or processed at optimum maturity. For example, harvested fruit left in the orchard, at an assembly point or on a packing house or storage platform, for just a 24 hour period has a storage "life" 10 to 30 days less than fruit moved into cold storage within 4 hours of harvest. The canner must process as much fruit as possible during the 2 month harvest period to maintain quality and to escape the considerable expense of moving the fruit in and out of storage. The demand for fresh packed fruit during the fall harvest period is heavy. Due to the perishability of our product, and the absolute need to maintain quality, neither the handler, the canner, the storer, nor the packer can adequately control or schedule supply to escape the real need to work overtime during this peak period. It should be recognized that many firms in these capacities handle more than one perishable horticultural commodity and, therefore, are faced with several peak periods, of the same or different magnitudes, during the year. 3. The peculiarities of our fresh market. As an industry, we do not have, nor can we afford, an excess in packing capacity to handle the peaks in demand that occur during the storage season (October 15-August 1). Therefore, we are forced to become involved with some |