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What Congress intended the term "locality" to mean when it wrote "locality" into the Walsh-Healey Act and whether the Secretary of Labor has carried out the intention of Congress, is now being studied by the Circuit Court of Appeals of the United States sitting at Washington, D. C. The decision of this court will have marked influence on the method used in determining wage rates for industries affected by the Walsh-Healey Act; its decision will affect the speed with which such rates may be applied in the future.

The fact remains that, to date, largely because wage determinations have not been reached and applied, the act has had but slight trial.

Therefore the Machinery and Allied Products Institute holds that the country has not had sufficient experience to decide whether the act in its present form is practicable and reasonable to employers and employees; and consequently we believe no one can offer substantial evidence that the act should be further extended as proposed in S. 1032.

The amendment by which the present exemption of contracts up to $10,000 in amount would be reduced to $2,000 and the amendment by which all subcontractors of amounts exceeding $2,000 would be brought within the scope of the act (subcontractors now being exempt from wage-and-hour provisions) contemplates an extension of the act which would be broad indeed. It amounts to an attempt to control most of business and industry and to police it unnecessarily. If it doesn't amount to this, then it means an increase of monopoly and the complete elimination of the small unit from bidding on Government work.

As we understand it, the original aim of the legislation now known as the Walsh-Healey Act was to require employers selling the Government supplies in amounts of $10,000 and more, to pay fair wages, work employees reasonable hours, and otherwise operate their plants under those conditions believed by business and the public generally to be desirable and possible for all employers to follow. Similar objectives were accomplished for employees retained by employers not selling in these amounts to the Government by the passage of the Fair Labor Standards Act.

Since the Walsh-Healey Act and the Fair Labor Standards Act are now effective it would appear that the proponents of S. 1032 wish to go quite beyond the original intention of the Walsh-Healey Act to the point where Congress tells the individual who sells the Government that he must not only pay a fair wage but that over and above such a rate, he will pay the wage the Government wishes to specify for him. In our opinion, if such a procedure were adopted, it would only mean that the Federal Government no longer was satisfied rationally to regulate business but that it had moved into an area in which Government attempted absolute control of the entire wage structure of business, in an attempt to raise purchasing power by increasing wage rates.

The Machinery and Allied Products Institute holds it to be a demonstrated fact that purchasing power cannot be increased by artificial raising of wage rates. We urge against this type of national economic planning and this intrusion upon free enterprise for we cannot over-emphasize that in our judgment the real interests of those now unemployed and those still employed but facing shortened hours and reduced incomes, demand that there be full encouragement to private enterprise to develop and extend our economic frontiers through which, and only through which, can come full employment of our working force, an enlarged national production and the larger real purchasing power which can be achieved only by having more goods and services to divide among the people.

Apart from this economic fallacy which underlies attempts at such economic national planning, however, we believe that this is no time to saddle industry with more punitive and restrictive regulation or control and it is no time to extend administrative law. Such actions will decrease, not increase, employment; they will reduce, not enlarge, the earning capacity of the Nation's workers as a whole.

II. THE AMENDED ACT WOULD DECREASE THE NUMBER OF COMPETITIVE BIDS

If the Walsh-Healey Act is amended as proposed it is inevitable that it will force the reluctant discontinuance of competitive bidding on the part of many companies now in position so to bid. This means depriving their employees of work which they need and are entitled to share. It means also depriving the Federal Government of competitive prices which sharpen free competition and enterprise, and lessen monopoly. We believe certain major purchasing departments of the Government will confirm these statements.

Specifically, the following are some of the factors which would (1) make it impossible for many companies, especially smaller companies, to bid competitively; and (2) raise such uncertainties and questions of future liability as to discourage many reputable companies from offering competitive bids:

(a) Flexibility in hours worked is a necessity of companies engaged in the capital-goods industries, and it is an essential of the smaller of such companies. Continuous processes, work which cannot be dropped when the whistle blows, a large proportion of made-to-order work on customer order, much of it subject to delivery deadline, make it necessary that capital-goods companies have flexibility of hours. Due to their more limited equipment, small manufacturers need such flexibility even more than the large manufacturers. Also, it should be remembered that the small manufacturers customarily and necessarily rely upon fewer key employees. If these smaller organizations are placed in a position where they cannot bid their workers will suffer the consequences, monopoly will be increased and the Government will not only pay higher prices for its supplies but its national-defense program will be definitely hurt.

(b) To place upon contractors the responsibility of compliance by subcontractors with the provisions of the act and with any and all rules and regulations in force and effect, is a procedure from which reputable employers, contractors, and subcontractors alike, will shrink. These employers will be placed in competitive disadvantage with the unreliable minority which will take a chance for the profit in prospect.

Such a provision favors large business and discriminates against small business. Because of their comparatively limited volume, small businesses have less occasion to use subcontractors and therefore to know them and feel assured in relying upon them to the extent which the act as proposed to be amended would demand. Large businesses, however, have more frequent dealings with subcontractors, also have more responsible subcontractors at their call; they have opportunity to know more intimately their out-of-town subcontractors and they can in consequence undertake with much greater impunity the responsibility here being discussed. It is seen therefore that this bill either intentionally or unwittingly has developed the most extreme discrimination possible to apply against the small businesses of the country. Do not we all agree that Congress should aid the growth and do nothing to hinder the development of the small concern?

3. EMPLOYMENT OF MINORS OF WORKING AGE IS FURTHER COMPLICATED BY THIS

LEGISLATION

The proposal to lower the minimum age at which females may be employed from 18 to 16 years presumably is calculated to assist many able and needing work to obtain it. But to qualify this provision by one permitting the Secretary of Labor to deny employment to both boys and girls under 18 in occupations she declares to be hazardous or injurious to health, injects an uncertainty for employee and for employer which would not exist were such occupations instead definitely identified in the statute, and if necessary added to from time to time, not by sudden regulation of bureaucracy, but by congressional enactment.

The long and lengthening list of occupations classified from time to time by Government agents as hazardous or injurious to health gives no assurance but that such a provision may and likely will be administered by the Department of Labor through methods similar to those which have in the past enormously reduced the number of young apprentices and learners permitted in business and industry. In such case this amendment will be unavailing to the youth of the land under 18 years of age, old enough to work, needing work and capable of earning a living. Such a provision merely provides another uncertainty for employer and employee. Here again Congress needs constructively to aid, not destructively to hinder, the opportunity of youth of America.

We trust the subcommittee will not approve S. 1032.
Respectfully submitted.

W. J. KELLY, President.

Senator HILL. The next witness is Walter J. Petersen, representing the Pacific American Steamship Association.

STATEMENT OF WALTER J.

PETERSEN, REPRESENTING THE

PACIFIC AMERICAN STEAMSHIP ASSOCIATION

Mr. PETERSEN. My name is Walter J. Petersen, and I represent the Pacific American Steamship Association of the Pacific coast and the Ship Owners' Association of the Pacific coast that comprise practically all of the American flag tonnage of the Pacific.

We are not appearing in opposition to the bill in any sense of the word, but our appearance is to call the attention of the committee to something that I do not believe the committee ever intended, and I will just read this memorandum, if you please, Senator.

Senator HILL. Very well.

Mr. PETERSEN. In relation to S. 1032, and the companion bill by Representative Healey, H. R. 3331, the associations which I represent in general have no objection to the bills, but we are a little bit uncertain as to the implications that are set up in section 7 of the bill, subparagraph (b), which reads as follows:

"Supplies" shall be deemed to include materials, articles, vessels, equipment (including floating equipment), and services of any form, excepting professional, which are required to be furnished under the contract or subcontract.

We are directing the attention of the committee to the words "services of any form." It is possible that "services of any form" might be construed to include the carriage of the United States mails; and if that were so, vessels that carry United States mails would be subject to all of the provisions contained in the amended law, which it would seem to us is not the purpose of the authors of this legislation. Many of our ships are carrying the United States mail.

For example, the 8-hour day and the 40-hour week could not be carried into effect for reasons that are laid down in the maritime statutes, and the present law itself (Public Law No. 846, 74th Cong., 49 Stat. 2036), provides, in the last sentence of section 9, the following language:

Nothing in this act shall be construed to apply to carriage of freight or personnel by vessel, airplane, bus, truck, express, or railway line where published tariff rates are in effect or to common carriers subject to the Communications Act of 1934.

These exemptions indicate that the authors of this law presumed that the law itself, in its general application, should not be construed to apply to vessels, airplanes, busses, trucks, and so forth. Therefore, we are suggesting as a matter of safeguard, that the last sentence of section 9 of the act be amended as follows:

After the word "carriage," insert the words "of the United States mails," so that the sentence would read as follows:

Nothing in this act shall be construed to apply to carriage of the United States mails, freight, or personnel by vessel, airplane, bus, truck, express, or railway line where published tariff rates are in effect or to common carriers subject to the Communications Act of 1934.

With this amendment, operators of vessels would be entirely content with the provisions of the bill.

That is all we have to say. We do not think it was intended to apply.

Senator HILL. But you want to make it clear?

Mr. PETERSEN. We want to make it clear that "services" would include the way we understand the term "services"-would include the United States mails, and it would put us with vessels that carry the United States mails, under the Labor Department, and further than that it would be in opposition to the maritime statutes now in effect in relation to it.

That is all I have to say.

Senator HILL. Thank you very much. We are glad to have had

you.

Mr. PETERSEN. Thank you for the opportunity.

Senator HILL. The next witness is Mr. Norman Draper, director of the Institute of American Meat Packers.

(No response.)

Senator HILL. Mr. D. S. Wolcott, vice president, Lukens Steel Co. (No response.)

Senator HILL. Mr. O. M. Kile, Washington representative, Sears, Roebuck & Co.

(No response.)

Senator HILL. There is no other witness here, according to my list, who wishes to testify. Is there anybody else who wishes to testify, in the room?

(No response.)

Senator HILL. Mr. Walling, you may make any statement now that you wish to make.

STATEMENT OF L. METCALFE WALLING Resumed

Mr. WALLING. Mr. Chairman, there are just a few points that I want to mention in addition to what I testified to on Saturday.

In the first place, my attention has been called to a resolution of the House and Senate of the State of Wisconsin, which I think ought to be called to the attention of the committee, suggesting amendment and clarification and strengthening of the Walsh-Healey Act, and memorializing Congress that that be done. I would like to place that in the record.

Senator HILL. We will place that in the record. (It is as follows:)

LEGISLATURE OF WISCONSIN, ASSEMBLY JOINT RESOLUTION 40

JOINT RESOLUTION Memorializing Congress to amend the Walsh-Healey Act so as to provide more stringent conditions for the purchase of supplies and the making of contracts by the United States Whereas the Walsh-Healey Act provides in part that all Government specifications and contracts involving the purchase of $10,000 or more of supplies must contain provisions for the payment of a prevailing rate of wages to be determined by the Secretary of Labor and that employees of contractors must not work more than 8 hours in any day or 40 hours to any week; and

Whereas such act is designed to obtain social benefits from a public policy based on the limitation of expenditure of Government funds to contractors who apply fair labor conditions and that decent and general labor standards may be applied on governmental projects regardless of geographical location; and

Whereas operation under such act indicates that somewhat more than 10 percent of the total Government purchases are made thereunder and that industry has capitulated to the principles thereof; and

Whereas the Walsh-Healey Act by definition has not included manufacturers who now supply the Government through dealers, subcontractors, service contractors, and by its limitations to contracts of $10,000 or more and the indefinite prevailing wage rate has thereby permitted circumvention and evasion of the terms thereof; and

Whereas the differential in wages permitted in various States under the prevailing wage rate has made it both impractical and impossible for the industries of Wisconsin paying a fair wage rate to competitively and successfully bid on Government contracts; and

Whereas it is manifestly unjust that the industry of a State maintaining a respectable wage rate in conformity with the policy of the act should be penalized by losing contracts, thereby creating local unemployment to industries of other States unscrupulously availing themselves of technical loopholes; and

Whereas Federal Labor Union, No. 18456, of Kenosha, Wis., through its committee, has given much time and study to the subject and respectfully urges the Congress of the United States to enact legislation that will place the industry of

the entire country on an equal and commensurate wage plane, include the regular dealers in supplies to be manufactured, subcontractors, and service contractors, and define more minutely and rigorously the minimum wages to be paid under the prevailing rate to persons employed in similar work in the particular or similar industries of the country: Now, therefore, be it

Resolved by the senate (the assembly concurring), That this legislature respectfully petitions and urges the Congress of the United States to enact necessary legislation to impose more stringent and rigorous conditions to prevent evasion and circumvention of the Walsh-Healey Act in the purchase of supplies and the making of contracts by the United States; be it further

Resolved, That properly attested copies of this resolution be sent to the President of the United States, to both Houses of Congress, and to each Wisconsin Member thereof.

Mr. WALLING. I should like also to file with the committee, as you requested me on Saturday, a list of the contracts which have been awarded to the Army and the Navy. There has been some testimony here this morning and also last week as to the hampering effect of the Walsh-Healey Act on the ability of the various agencies of the Government, particularly the Army and the Navy, in connection with the national-defense program, to make purchases, and I should like to offer to the committee these two compilations of contracts.

Three thousand six hundred and forty contracts have been made by the Navy, and 2,635 by the Army valued at $459,000,000 and $139,000,000, respectively, a total of 6,275 contracts awarded by the Army and the Navy out of a total awarded by all agencies of the Government of 13,950 as of today. These Army and Navy awards are valued at just $500,000 short of $600,000,000, as compared with only a total of $945,000,000 for all of the agencies of the Government as a whole, indicating that the Army and the Navy are responsible for I think about 60 percent of the total purchases by value which all of the contracting agencies of the Government are making, and indicating I think particularly in view of the nature and type of the companies on these lists, that there is no difficulty on the part of the departments of the Government charged with preserving national defense to make all of the purchases which they need under the act.

I might also say that I conferred subsequently to the hearing with Commander Ring, of the Navy, and I checked our records and found that the last request for an exemption filed with the Labor Department with the Navy was in August 1937, just a little less than 2 years ago, and since that time no situation has been brought to our attention where the Navy has requested exemption from any of the provisions of the act.

I would like to speak also of one or two matters that have been referred to in the testimony here, because I think they indicate a misunderstanding of the present provisions of the act on the part of some of the witnesses.

The Comptroller General has issued a ruling recently, as was testified this morning, which indicated that certain, at least, of the supply ply contracts of the Government should be issued subject to the 8-hour law of 1912. The Department of Labor has taken this matter up with the Comptroller General and has suggested the possibility of a reconsideration, as it is our view that the Walsh-Healey Act being later in date has to the extent that there is any inconsistency between its provisions and the 8-hour law of 1912, invalidated the former or repealed the former to this extent. However, in view of the fact that there seems to be some question about that, we have recommended

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