THE COMPANY'S POSITION AS AN EMPLOYER

In our community the company acts as the largest employers of part-time, nonpermanent and inexperienced workers. Unlike industry our employment needs and demands permits us to employ marginal and part-time workers who periodically enter the employment market to occasionally augment the family income to purchase nonessential extras. We can absorb these occasional workers due to the seasonable sales patterns of retailing. The employment of these in-andouters help to keep the cost of retail distribution down without creating a financial hardship to the temporary worker.

THE COMPANY'S WAGE PATTERN

Due to the inability of retailing to even out the spread of consumer demand throughout working day, week, month or year the average productivity of the retail employee fluctuates from zero to 100 plus per hour. The inability of retailing to regulate consumer demand it becomes an operation must to correlate the average retail employee's salary to the number of consumer dollars of merchandise sold. Rates of pay is based upon individual sales productivity over a given period just as industrial rates of pay is based upon product productivity. Unlike industry, retailing cannot control the hourly productivity of the great numbers of its employees. The rate of hourly productivity depends for the most part on the whims of the consumer, not in the slowing or the increasing of the speed of an assembly line. To tie the rates of retailing pay to an hourly rate is to confess to a total ignorance of the basic employment problem in retailing. To deliberately confuse retailing with the problems of industry is to perpetuate a great fraud for the selfish interest of the perpetuators.

EXTENSION OF LFSA AND ITS PROBABLE EFFECT ON PART-TIME EMPLOYMENT

The Labor Fair Standards Act was originally designed to treat with the labor problems confronting industry. If these standards are applied to retailing without qualifications, it is more than a probability that retailing will be forced to give up its important role as the largest employer of part-time, temporary and inexperienced workers. If this happens, a large body of useful workers will be eliminated from the Nation's work force, causing serious disruption in our economy. This elimination will be directly caused by retailing's inability to meet the unrealistic minimum wage that the extension of LFSA will cause.

EXTENSION OF LFSA AND ITS EFFECT ON CONSUMER PRICES

In face of the net profit of 1.4 percent, shown by our company, the additional payroll expense which the extension of LFSA will create must of necessity be passed on to the consumer public. Our company cannot absorb the increase. This additional cost will approximate an 8% percent increase in commodity prices. This increase will contribute a substantial addition to the inflationary force already threatening our entire economy.

INABILITY OF THE COMPANY TO ABSORB THE INCREASE IN PAYROLL COSTS

The proposed extension of the present LFSA to cover all or part of retailing will entail additional payroll costs. If this cost is not to be added to existing consumer prices, it is necessary that retailing shall be able to absorb the additional payroll costs.

To determine retailing's ability to absorb this additional cost it is essential to examine what retailing does with the consumer's dollar it receives and how much of this dollar is retained as profit. For this purpose the operating statement of my company is submitted for examination.

How the company spent the consumer dollar it received in 1956

The profit margin shown by retailing has during the past 10 years been reduced from 8.9 percent experienced in 1947 to 1.45 percent in 1956. The reduction of the profit margin during this period has been the result of cost absorption by retailing without a corresponding increase in consumer prices. The present profit margin allows for little or no further cost absorption.

Any increase in payroll costs must be passed on to the consumer in the form of retail price increase if retailing is to retain its economic health. During 1957, retailing will be faced with other increased operating costs in freight rates, local and State taxes, supplies and public utilities. The extension of LFSA would add a sizable percentage increase to operating costs far above retailing's ability to absorb.

COMPARABLE PAYROLL COSTS BEFORE AND AFTER EXTENSION OF LFSA

For purpose of illustration, the payroll costs shown below is based on my company's average weekly payroll showing average number of employees and employment classifications.

The store is opened 6 days and 1 night a week for a total of 56 hours. The employees' workweek is 44 hours, plus time and a half for any overtime. Under the proposed extension, the store hours will remain the same, the workweek will be 40 hours at a minimum of $1 an hour for the lowest classified employee, plus time and a half for overtime.

Proposed payroll under FLSA

60 salespeople at $46.50 (4 hours overtime). *12 assistant department managers at $69.. *12 department managers at $132.50_

*10 office employees at $46.50__

*6 maintenance-drivers-janitors at $69.

*15 part-time employees at $30_.

*20 miscellaneous employees (15 percent adjustment) –

Total payroll weekly FLSA_____

$2,790 828 1,584

465

414

450

2, 625

9, 156

NOTE. Since the extension of FLSA is not based upon increased individual prođuctivity but rather on involuntary and forced salary upgrading, it will be necessary for our company to upgrade all employees designated by (*). If this is not done our entire organization will be wrecked by selected salary upgrading. Under FLSA, the store will be forced to adjust all salaries by a minimum of 15 percent.

The additional payroll costs of $149,117.53 under FLSA will cause the following additional incidental payroll charges:

CONCLUSIONS TO BE DRAWN FROM THE INCREASED PAYROLL UNDER FLSA

The total additional charge to our payroll under the extension of FLSA would amount to the staggering total of $162,293.04, or more than three times our gross operating profit of $59,611.06 before taxes. If we were willing to operate our business on a break-even point, there would still remain an additional $102,681.98 that would have to be passed on to the consuming public in the form of price increases.

If the extension of FLSA should include our company, with retail sales of approximately $2 million, we would have to increase our prices by 82 percent just to cover the increased payroll costs. Unfortunately retailing is also faced with other increased operating costs. The ICC has already granted freight increases. State and local taxes promise a definite increase. Many public utilities have asked for rate increases.

Retailing cannot absorb further increases in operating expense and it is reasonable to predict that if retailing is further burdened with the extension of FLSA, retail prices will be raised in excess of 10 percent thus further reducing the purchasing power of the consumer dollar to the lowest depth in the history of the country.

SUMMARY AND CONCLUDING STATEMENTS CONCERNING THE PROPOSED EXTENSION OF FLSA TO INCLUDE RETAILING

It is the sincere hope of the writer that those charged with the responsibility of judging the economic wisdom of extending FLSA to cover retailing, large or small, located in large or small communities, shall carefully weigh the total effect such extension shall have on both our national economy and especially the individual consumer.

The following is offered to help in reaching a fair and honest conclusion: 1. The majority of people employed in retailing do not depend upon the wages or salaries paid by retailing as the sole financial support of their individual family unit. The earnings serve only to augment the family income, helping toward the purchase of nonessential extras.

2. The majority of people employed by retailing can be classed as inexperienced and unskilled, offering their services on a temporary or a part-time basis as serves their individual preference and personal convenience.

3. The rate of pay in retailing for the most part must of necessity be intimately related to sales productivity rather than on purely hourly rates, due to the inability of anyone to regulate and even consumer demand to secure a relative stable hour productivity throughout the work week, month and year.

4. The problem of hourly productivity in retailing is in no way similar to the regulated productivity possible in most of industry.

5. The proposed extension of FLSA and its corresponding increase in wage rates is in no way related to increased productivity and that the proposed extension is nothing more or less than a basic wage boost which lends itself to increasing the inflationary pressures threating our economy.

6. The pressure for the extension of FLSA does not come from retail employees, but instead the pressure is coming from industrial labor organizations and leaders unfamilar with the working conditions and problems of retailing. 7. The increased payroll costs, the extension of FLSA demands must be passed on to the consumer because of the inability of retailing to absorb this additional cost.

8. The corresponding increase in consumer goods will substantially raise the cost-of-living index, causing further and substantial raise in industrial wages which are by contract tied to this index.

9. The proposed extension of FLSA will serve only to increase the inflationary pressure which is dangerously threatening our present economy and economic wellbeing.

The extension of FLSA to cover retailing, large or small or both, will serve only to raise consumer prices without a corresponding increase in the productivity of retail workers, adding dangerous weight to inflation forces dangerously threatening our economy.

Mr. A. REGIS KELLEY. Statement of American Bankers Association.

(The statement is as follows:)

STATEMENT OF AMERICAN BANKERS ASSOCIATION ON PROPOSED AMENDMENTS TO THE FAIR LABOR STANDARDS ACT

The membership of the American Bankers Association consists of 98 percent of all the banks in the United States in number and represents better than 99 percent of the banking resources. Information released relating to these hearings indicate that the principal subject under consideration is the proposed extension of the coverage of the Fair Labor Standards Act. As most bank employees are now considered covered by the act, the proposed extension of coverage should not have a significant effect on our members.

However, a number of other amendments to the act, which are of interest to our members, have been introduced. This statement is directed to five proposals, specifically:

(1) The increase in the minimum wage;

(2) The $6,000 salary minimum for exempt employees;

(3) The payment of overtime on a daily basis;

(4) The inclusion of certain fringe benefits in the regular rate of pay for the purpose of computing overtime; and

(5) The 6-year statute of limitations.

The committee's attention is directed to the fact that banking is predominantly small business, being made up of thousands of small institutions. Of the approximately 14,300 banks, only 1,000 have deposits of over $25 million, another 3,800 have deposits between $5 million and $25 million, while approximately 9,500 banks have deposits of less than $5 million.

Banks range in size from those employing as few as 2 or 3 people, to those with thousands of employees. In fact, 95 percent of the banks have fewer than 100 employees.

Many of these banks are located in small rural towns. Data on the number of banks in communities of various sizes are not available for the Nation as a whole. However, some indication can be derived from surveys made by a few State bankers associations. In one State, out of 114 banks with total resources of less than $2 million in 1953, there were 52 banks located in towns of less than 1,000 population; and 35 in towns of 1,000 to 2,000 population.

In another State 160 out of 198 banks with total resources of less than $2 million were located in communities of less than 1,000 population.

Some people may brush aside the problems confronting small banks because they employ comparatively few people. It is true that the 9,500 banks with deposits of less than $5 million only employ about 75,000 of the 585,000 people in banking. But these 9,500 banks play a vital role in the functioning of the Nation's economy. In many areas they are the only source of financial service to the farmer and rural merchant.

MINIMUM WAGE

It was only 1 year ago that banks and other employees adjusted their salary scales to reflect the changes in salary levels created by the increase in the minimum wage from 75 cents to $1 per hour-a 33% percent increase. To start another series of adjustments by further increasing the minimum wage could have a serious effect on many banks. It must be borne in mind that an increase in the salary rate of the lowest paid employee requires corresponding increases in the pay of most other employees in order to maintain customary salary differentials.

The impact of these adjustments would be particularly serious on the 9,500 banks with deposits of less than $5 million which are located mainly in smaller communities. The small size of these banks places a practical limitation on their earnings. It has been difficult for some to adjust to the $1 minimum. The association feels that it would be unreasonable to ask them to adjust now to a higher level.

Banks, small and large, employ a majority of their permanent staffs directly from high schools. These boys and girls are inexperienced, yet the banks pay them full salary while they are being trained. Banks also provide employment for thousands of students during summer vacations. These summer replacements generally cannot operate the bookkeeping machines or teller windows, but are used to perform simple clerical tasks. If minimum-wage standards are set too high it could result in the employment of only those who already have acquired specialized training through secretarial or commercial schools and might deprive many of these youths of employment opportunities.

EXEMPT EMPLOYEES

The American Bankers Association does not favor including a minimum salary as one of the tests in determining the status of executive and administrative employees. It is illogical to say that one man is an executive while another individual carrying similar duties and responsibilities is not, solely because of an arbitrarily fixed salary requirement. The difficulty with a fixed salary limitation is that it is inflexible and does not adjust itself to fit the varying salary levels existing in the different sections of the country. It becomes even more difficult to apply in a business such as ours where the units range from banks of less than $500,000 in deposits, employing as few as 2 or 3 people, to billion dollar banks with thousands of employees.

We believe that the only true test of administrative and executive status is the occupational test based on duties performed and responsibilities carried. We have never been able to reconcile this belief with the action of the wage-hour Administrator incorporating a salary requirement in the regulation defining executive and administrative employees. By the same token, we wonder why it should now be proposed that Congress write a salary test into the law. We are opposed to such an arbitrary test for the reasons stated above.

DAILY OVERTIME

The payment of overtime on a daily basis may be practical in many industrial operations where production can be controlled, to a great extent, by the company. The fluctuations in banking operations are great and for the most part are beyond the control of the bank. Banking operations are not the type that can be controlled by a time clock. It is not the type of business in which a switch can be thrown on at 8 o'clcok or 9 o'clock in the morning and can be turned off at the same hour every afternoon and operations cease until the following day. Banking operations, from their very nature, must respond to the needs and demands of the public and must be flexible to meet those changing demands. It is almost impossible, in the case of certain banking operations, to tell in the morning when a bank opens how long that particular day the operations of the bank may require the services of certain employees. It frequently happens in the afternoon near the closing hour that important banking matters arise which require the presence and the efforts of employees beyond the time contemplated in the earlier hours of the day. On the other hand, on some days operations will require much shorter hours of work from employees than on other days. It is customary in banks that when each employee has performed his daily job he is free to leave.

Banks now pay their employees overtime for all hours worked beyond 40 hours in a workweek. It is felt that this accomplishes the purposes Congress had