STATEMENT OF W. A. CALVIN, SECRETARY-TREASURER OF THE METAL TRADES DEPARTMENT OF THE AMERICAN FEDERATION OF LABOR

Senator WALSH. You want to endorse the statements made by the other representatives of the American Federation of Labor?

Mr. CALVIN. Yes, sir; I want to endorse the statements made here this morning, and we emphasize, too, that we should like shipbuilding covered by the terms of the Walsh-Healey Act.

STATEMENT OF A. C. MOORE, PRESIDENT OF THE CHICAGO RAILWAY EQUIPMENT CO., CHICAGO, ILL.

Mr. MOORE. Mr. Chairman, my name is A. C. Moore, president of the Chicago Railway Equipment Co., Chicago, Ill. I am appearing here this morning on behalf of the National Association of Manufacturers. What I may say, therefore, is designed primarily to present the views of that association, supplemented by such observations of my own as seem pertinent.

From the time the Walsh-Healey Act was first proposed in 1935, the National Association of Manufacturers has been actively interested in efforts to establish wage-and-hour standards for persons entering into contracts with agencies of the Federal Government. This association opposed enactment of the present law, not because of any opposition to its humane objectives, but solely because we believed it contrary to sound business principles. I need not restate our reasons. Congress felt otherwise and the law was passed. I believe manufacturers have diligently tried to observe its letter and spirit, even though often confused about its meaning and critical of its "red tape." I know the same attitude would prevail if the amendments now before this committee should become law.

The amendments contained in the bill introduced by Senator Walsh have been carefully studied by a committee of the N. A. M. of which I am a member. We also reexamined our position and understanding of the present law in the light of its original purpose, its administration, and events which have transpired since its adoption in 1936. With your permission, Mr. Chairman, I would like to summarize the views of the association and then explain them in somewhat greater detail.

First. Inasmuch as Congress has enacted a general law regulating minimum wages, maximum hours, and the employment of minors, we no longer can understand any necessity for continuation of the WalshHealey Act. We therefore recommend its repeal.

Second. In the event repeal is not now feasible, we recommend additional amendments to bring the requirements of the act more in conformity with provisions of the Fair Labor Standards Act of 1938.

Third. The N. A. M. opposes any extension of the law such as we believe would be accomplished by certain amendments contained in the Walsh bill (S. 1032).

Fourth. If the statute is continued in effect, we recommend favorable consideration of the bill introduced by Senator Miller (S. 1541) proposing amendments to permit court review of wage determinations. Senator HILL. Under this bill, does the court pass on the facts?

You say the court review of wage determinations. Just how far does that go?

Mr. MOORE. I am not a lawyer. As I understand it, the court can review the record. I think the court probably would have to follow the determination of the facts made by the Department of Labor unless they found something wrong with the record. That would be my layman's opinion.

Senator HILL. That bill is not before this committee; it is before the Judiciary Committee.

Mr. MOORE. That is correct; yes.

I realize that these suggestions go far beyond the scope of the bills before this committee, and I may be entirely out of order. If not, I hope you will give serious consideration to these recommendations and the reasons which prompt them.

Businessmen who claim that excessive regulation is a deterrent to industrial development and progress are usually accused of crying "Wolf." Perhaps there has been too much of it. If so, perhaps it is because businessmen have learned through sad experience that their legitimate complaints usually go unheeded unless often repeated and sometimes exaggerated. On this occasion, however, there is no exaggeration. Industry today is subjected to multiple and conflicting regulation which is entirely devoid of common sense and without justification. I refer to the regulation of wages, hours, and working conditions by the Federal Government, not necessarily embodied in any single law, but conflicting and overlapping regulation caused by numerous laws dealing with the same subject.

When the Walsh-Healey Act was passed in 1936 there was no general law imposing minimum standards of wages and hours. The N. R. A. codes passed out of existence and the Walsh-Healey Act was ostensibly passed to prevent a break-down of existing standards approved under the Blue Eagle. Since that time Congress has in effect replaced the codes of wage-and-hour standards by enacting the Fair Labor Standards Act of 1938, with a definite scale of minimum wages to reach 40 cents an hour in 6 years and a 40-hour week in slightly over 2. That law applies to every worker engaged in commerce or engaged in producing goods which may be transported in interstate commerce or foreign commerce. That law applies to manufacturers, whether Government contractors or not, if the goods they produce may eventually cross State lines.

There is not to my knowledge any exemption from the wage-hour law if a manufacturer is operating under the Walsh-Healey Act; nor is a manufacturer complying with the Fair Labor Standards Act excused from compliance with the Walsh-Healey Act if he gets a Government contract amounting to more than $10,000. Today the standards of the wage-hour law may be required; tomorrow the standards of the Walsh-Healey Act may be superimposed. I will not take the time of the committee to point out the serious discrepancies between these two statutes. It is my understanding that another representative of the N. A. M. will be given an opportunity to appear to suggest clarification of these legal conflicts. To me, however, the practical effect is clear.

The Walsh-Healey Act purports to equalize competition among manufacturers bidding for Government contracts. Bidders observing high standards were presumably not to be penalized in competition

with those paying low wages and working employees long hours. While I believe there are other factors which have a more important and direct effect on prices quoted the Government, I am not now arguing with the theory underlying the act. Every businessman knows that he cannot successfully maintain double standards of pay and hours for his employees. He cannot shift from paying 25 cents an hour under the Wage-Hour Law to 35 cents or 50 cents when his employees are working on equipment to be sold to the Government. If the manufacturer decides to compete for Government business he must first make up his mind whether he can permanently raise his pay-roll cost on commercial business to the same degree it is raised in order to bid on Government work. His costs are increased all along the line and if his competitors do not seek Government business, their standards and labor costs are governed by the lower rates required by the Fair Labor Standards Act. While the Walsh-Healey Act may tend to equalize competition on Government business, it penalizes the contractor in commercial markets.

Discrepancies as to hours and overtime aggravate this condition. Under the Walsh-Healey Act we are required to pay overtime if the employee works more than 8 hours in a single day or in excess of 40 hours a week. Under the wage-hour law a man can be employed up to 44 hours a week without overtime pay and there is no limitation on the number of hours he can be employed in a single day. This conflict between the two laws referred to is not all. I have recently had called to my attention the serious probability that we are also subject to the so-called 8-hour law of 1912 and that this law requires an 8-hour day but does not permit overtime with or without overtime compensation.

This multiple and conflicting regulation is, in my judgment, ludicrous to the extreme; it is entirely unjustified and to me warrants immediate attention and correction. You gentlemen could contribute immeasurably to business confidence by taking affirmative steps to demonstrate that this condition will not be permitted to continue. You can make an important beginning by recognizing that the need for the Walsh-Healey Act expired when the Fair Labor Standards Act was signed and by using your efforts to have it repealed.

While this seems to us the realistic and sensible thing to do, there may be reasons why it cannot be done. I do not know. If it is not feasible, or if you gentlemen are not convinced of its wisdom, let me urge with equal force, if not conviction, that you do the next best thing; carry out the purpose of some of the amendments in the Walsh bill and bring the provisions of the Walsh-Healey Act into complete harmony with those of the Fair Labor Standards Act to the extent they now conflict.

It is my understanding that a start in this direction is already proposed with reference to child-labor standards and provisions dealing with authorized deductions from wages. We believe the bill should go further and substitute the definite minimum-wage and maximumhour standards of the wage-hour law for the uncertain standards of the Walsh-Healey Act.

Since Congress has determined that a 25-cent minimum wage should be the present standard for employees performing nongovernmental work, why should authority be given the Secretary of Labor

to require a higher level for those selling goods or equipment to the Government?

While I have not studied all the various minmum wages prescribed by the Secretary, it is my understanding that a "prevailing mimnium wage" in many instances is not necessarily an existing minimum wage in any sense of the term. It is generally an average wage received by the largest group of lower paid employees throughout a particular industry.

When the wage is determined by averaging, it necessarily means that the resulting wage will conform more closely with the rates paid by the larger companies with the greatest number of employees. When applied to a smaller employer, it normally requires some increase in hourly rates.

Of course the increase in the manufacturer's cost is not represented merely in the wage increases among lower paid employees. If the differential between this group and the more skilled and higher paid workers is narrowed, the pressure is immediately applied for comparable increases all along the line. Some of this added cost may be passed on to the Government through higher prices. Even this is not certain for there is still the necessity of meeting prices of larger competitors who were not forced to increase rates at all, or to a lesser extent. Obviously this competitive disadvantage is not confined to Government contracts. Wages increased to meet the requirements of the Walsh-Healey Act cannot be immediately reduced, and the result is that the handicap is carried over into competition for private business.

It is the penalizing effect of this on the smaller manufacturers that seems to me most unfair, and I am not surprised to learn that some of the Government departments have reported a reduction in the number bidding on particular contracts.

While this situation might be improved by some other method, it seems to me the most satisfactory solution is to eliminate this wage fixing authority and substitute the definite minimum wage standards now required under the Fair Labor Standards Act of 1938 and already observed in production for commercial purposes.

In the light of the views I have expressed toward the law as it now stands, it necessarily follows that we are opposed to any amendments extending its scope. I refer in particular to those provisions of the Walsh bill which, as I understand them, would extend the law to subcontractors and bring in contracts of $2,000 or more rather than $10,000 as now provided.

In connection with subcontractors, we believe it extremely unfair and burdensome to charge a principal contractor with responsibility for failure of any of his subcontractors to comply with these various stipulations. It is unfair because breach by a subcontractor would authorize cancelation of the principal contract, the withholding of amounts representing liquidated damages and possibly the blacklisting of the principal contractor-all for conduct over which he had no direct control.

There is another objection, which in my judgment is of even greater practical importance. In many manufacturing establishments it has required years of trial and error to obtain satisfactory and dependable sources for materials, parts, and even equipment.

The standard of a product does depend to a substantial degree upon success in developing such sources. Their continued availability is tremendously important to the manufacturer's ability to fulfill any contractual obligations he might enter into with any governmental agency. What assurance has he that these sources, subcontractors if you please, will willingly accept the conditions imposed by the Walsh-Healey Act and continue to furnish essential materials, parts, or equipment? In many instances their products are protected by patent and are not available from other sources. If they are unwilling to assume the burden of complying with the Walsh-Healey Act, these producers are barred from doing business with the Government. if this situation should exist on a wide scale, competition for Government contracts will inevitably diminish and in some instances the Government may even be unable to obtain essential supplies or equipment. While you gentlemen are better able to judge such matters, it would certainly seem to me that either of these consequences would be most unfortunate, particularly at the present moment when such tremendous sums are being expended for national defense.

Before concluding, I wish to comment briefly on the proposal to include contracts of $2,000 or more. I presume from the standpoint of reason and logic there should be no objection to this amendment. If the law is good policy, perhaps all contracts should be controlled by it. Nevertheless it seems to me there is a very sound and practical reason why the scope of the law should not be extended. I am not speaking now of the obvious administrative difficulties which would be involved in policing the larger number of contracts which would be covered by this law. I am referring to the effect of this amendment upon smaller manufacturers whose chief opportunity to sell their products to the Government arises in connection with smaller quantity purchases.

This condition is not due entirely to their smaller productive capacity which might not permit them to assume an obligation to supply large quantities to the Government and still meet the requirements of their regular customers. It is due also to the reluctance of their larger competitors to bother with contracts involving small quantities. Because of these facts, these smaller manufacturers are able to bid upon and obtain Government orders to carry them over slack periods and to avoid laying off their employees.

This is not an unusual condition. We all know it is rather common. What would be the effect upon these manufacturers if such contracts are hereafter to be awarded subject to the requirements of the WalshHealey Act? The increased cost of performance would nullify the advantages which have heretofore made such contracts attractive. Instead of breaking even, the probability is that they would suffer losses and consequently refrain from bidding in the future. The manufacturer loses the business, his employees lose the extra work, and the Government loses the benefit of his competition. And, in ninety-nine of a hundred instances, the manufacturer is already complying with wage-and-hour standards prescribed by the Fair Labor Standards Act. This fact alone should provide ample safeguard against observance of unduly low wages or excessive hours by manufacturers bidding only on contracts amounting to less than $10,000 in value.