STATEMENT OF NATIONAL FEDERATION OF INDEPENDENT BUSINESS, GEORGE J. BURGER, VICE PRESIDENT, WASHINGTON, D. C. In lieu of personal appearance before your committee which is now holding hearings on numerous bills extending wage and hour coverage to include additional retail establishments, we request that this message be read into the record of the public hearings and made a permanent part of the hearings. As Members of Congress well know, the federation membership is comprised exclusively of independent business and professional men, all voting members, numbering approximately 100,000, which membership is located in all the 48 States. Small individually owned retail establishments are facing a struggle to exist due to the inroads of large corporate interests operating in the retail field. They are also plagued with increased taxation from local, State and national levels, which adds further to their inability to maintain their establishments. The truth of the matter is, as we review the situation from actual experience of owning and operating independent establishments, that any independent businessman owning and operating his own retail establishment must, as a first requisite, have the loyalty and goodwill of his employees. Otherwise he will speed his own destruction. It is our belief from close contacts with small independent business establishments that the successfully operated businesses have no need for Government intervention through regulations insofar as employer-employee relations are concerned, be they financial or harmonious working conditions within the establishment. We would urge your committee in its present study of wage and hour extended coverage to make a thorough survey of the administration of the present law to see that undue hardships are not created through improper interpretations at the local level and that when the rule is applied at the local level it should apply to all in an area in a particular business, and all such businesses should be so notified, and before any interpretation is placed as to whether a certain line of business comes under the wage and hour act there should be a common sense approach to what constitutes interstate business, in the full sense of the word. We thank you for your cooperation and again request that this message be read into and made a permanent part of the public hearings before your committee. GEORGE J. BUBGER, Vice President, National Federation of Independent Business, Room 704, Washington Building, Washington, D. C. STATEMENT OF THE OFFICERS OF THE NEW YORK CITY HOTEL AND CLUB EMPLOYEES UNION, LOCAL 6, AFL-CIO, NEW YORK, N. Y. This statement is submitted in behalf of the 27,000 members of this local organization. Approximately 23,000 of these members are employed in hotels, in the banquet, bar, dining room, kitchen, laundry and housekeeping departments. The other members are employed in the private membership clubs. We wish to make it clear at the outset that we are not seeking the extension of the law to cover these workers as a means to obtain for them by law a wage higher than the one now provided for by contract. It is not our function to engage in collective bargaining with the Government. Our members would not stand to benefit from extended coverage of the present Federal minimum wage of $1 per hour to the hotel industry. Like a substantial portion of the labor movement, our members derive the benefit of a strong and well-organized union. However, we do believe that our workers are entitled to the protection of the law in establishing for them a floor on their wages. Such protection would redound not just to them, but would have a sound effect on the economy as a whole. It would serve as a protective devise, a form of insurance against the tragic efforts of a recession. Such a floor is a necessity, not only for these New York City workers, but for all hotel workers in New York State. As of February, 1956, when the average weekly earnings of industrial workers in New York State was $77.39 per week for all manufacturing and $85.94 per week in the durable goods industries, the average weekly earnings for New York State hotel workers in all year round hotels was $50.91 per week. These workers are least able to withstand any kind of cutback in wages in the event of a recession and have the least savings to fall back on in periods of unemployment. Further, the overall New York State average of $50.91 per week does not adequately reflect the actual wage levels of the hotel workers outside of New York City. The average weekly earnings for New York City of hotel workers, 95 percent of whom are covered by union contracts for that period was $53.42 per week. To average the New York City figure with those of the rest of the State when over 50 percent of the workers in this industry in New York State work in New York City, tends to distort the State average considerably. The workers employed in the resort and seasonal hotels in New York State are considerably worse off. Incidentally, these workers are for the most part unorganized. There are according to the New York State Labor Department, approximately 50,000 workers employed in this section of the industry on July 1, 1953. (This is unfortunately the latest figure available and all data on wages and hours in the resort and seasonal hotels that follow are also of that date). The average hourly earnings of these 50,000 workers covered by the survey was 57 cents per hour. While the State labor department is now engaged in a survey to determine the more recent wages, the increase is not likely to be of a substantive amount if past experience may be considered a criterion. For example, between 1948 and 1953 the average hourly wage rose 6 cents per hour in the resorts and seasonal hotels. In any discussion of earnings in the hotel industry the question of tips arises and industry argues that average weekly earnings do not present a true picture because of the tips and also the lodging and meals provided. However, the same survey indicated that chambermaids "who received tips average 42 cents an hour in cash earnings, while those who did not average 77 cents; similarly, chambermaids who received meals and lodging had average cash earning of 39 cents, while those who received only meals had an average of 72 cents, and those who received neither average 79 cents." We have in New York State a minimum wage board that sets minimum rates for the hotel industry. We are certain from past experience that this system of industry wage boards is antiquated and operates inefficiently, at least with respect to our own industry. As a union, we have supported and still do, a statewide minimum wage applicable to all industries that are clearly engaged in intrastate commerce. To illustrate the inefficiency: at the present time a Federal minimum wage of $1 per hour is and has been in effect since March 1, for all of those industries engaged in interstate commerce. The minimum rate for New York City hotel workers in the nontipping classifications is still 75 cents per hour and for the remainder of the State 72 cents per hour. The cost-of-living figures do not bear out the need for a differential of 3 cents per hour between New York City and the rest of the State but historically that differential has existed and while labor pressure has succeeded in narrowing it, it is still with us. We do not know when the New York State minimum will be brought into line with the Federal minimum. Commissioner of Labor Isadore Lubin has been stating publicly since July 1955, that he intends to deconvene the hotel minimum wage board covering our industry, but thus far he has not done so. Our information is that the hotel industry board will not sit until this fall and with the months of hearings that will naturally follow, it is likely that the State minimum will be unchanged for at least another year. And while this lag persists, the chambermaid in a New York State resort area will still be entitled to only $24 per week and if she receives 3 meals a day and lodging, her employer need only pay her $12 per week. We submit that not only is this inefficient operation of State minimum wage boards, but also that the standards set by such boards are totally inadequate in providing workers with a decent or minimum standard of living. And, as always, it is the unorganized who are suffering the effects of such standards, and who are in turn jeopardizing the gains of those people who do belong to unions. One of the most frequent industry arguments against the coverage of the hotel industry by the Fair Labor Standards Act is that the wages that the industry would have to pay would price the cost of a hotel room and a restaurant meal beyond that which the average consumer could pay. This kind of an argument is patently absurd. Is a hotel to stay in business only if the workers subsidize the operation by being paid less than $40 per week? This at a time when the United States Labor Department says that the average city worker needs an average weekly wage of $82.90 per week to maintain a "modest but adequate living." The hotel industry, despite all protestations to the contrary can afford to pay decent wages. The twenty-fourth annual study by Horwath & Horwath, a wellknown firm of hotel accountants for the year 1955 indicated that "this year (1955) was one of the most remarkable in the recorded financial history of our country's hotels." The sales index number of the industry (the index is based on total sales, including room sales, restaurant sales, room rate and number of occupied rooms with 1929 as a base of 100) was 224 for the year 1955, the highest that it has ever been. The return to the hotel industry in profits for 1955 was 6.90 percent on the fair value of property. The hotel industry also claims that they cannot afford a minimum wage of $1 per hour because their room occupancy is down. When they say down, they mean the hotels aren't as filled as they were during the war years. But occupancy figures in themselves are meaningless, they must be considered along with room rates. The average rate of a hotel room in 1942 when the hotels were running 73.33 percent of occupancy was $3.53. In 1955 when the occupancy was 71.67 percent, the average rate of the hotel room had gone up to $7.50.1 The hotel industry also has claimed in the past that this is an industry that is purely local in nature and not subject to laws regulating interstate commerce. We submit that it is not a local industry, nor are the operations small ones employing handfuls of workers. The attached chart, exhibit A presents a breakdown of the numbers of establishments and workers in all-year-round hotels in New York City and in New York State. Again these figures are for 1953, the latest ones available from the New York State Department of Labor. The totals included in the survey represent according to the State labor department, 463 hotels employing 48,677 workers, or approximately 75 percent of the workers in this branch of the industry. Our argument, however, is directed to the fact that the hotel industry is in fact a part of interstate commerce and cannot be reasonably considered otherwise. The original exclusion of this industry from the act when it was first passed in 1939 was based, as Secretary of Labor James Mitchell pointed out in the hearings last year, on the idea that a uniform minimum wage rate might bring with it administrative and economic difficulties in some business. Secretary Mitchell further pointed out that the real test should be ownership and control. The hotel industry in New York City is not local in nature. The larger hotels in New York are neither owned nor controlled on a local basis. Basically, these are multistate enterprises with personnel policies, financing, and management formulated on a chain basis. The hotel industry in New York City is a kind of built-in monopoly. There has been no new hotel construction since the Carlton House was opened in 1951. And even now when the Hotel Association of New York has announced that $30 million will be spent this year for hotel expansion, the bulk of the money is not earmarked for new construction. Rather it will be spent for modernization that will result in even greater value of the existing hotel properties. Yet because of the volume of business that is done and because these are profitable operations, there is a great deal of changing of hands that goes on. When a hotel is sold it is almost without exception to already existing chains. When the exceptions do occur, as one did recently in the sale of the Lincoln Hotel, the hotel was acquired by William Zeckendorf, whose real-estate holdings are vast. Also in the past he has acquired hotels such as the Astor, which he in turn sold to the Sheraton Corp. There is nothing inherently wrong with this. It can undoubtedly result in greater efficiency in management and because of various tax provisions provide greater profits for the owners. What is wrong is that the workers employed in these hotels are still considered under law as working for local employers. We have a specific breakdown of the New York City hotels employing our union members-hotels that are part of chain operations on a multistate basis. There are over 10,000 workers in this one local union that fall into this category. See exhibit B. 1 Horwath & Horwath, Hotel Operations in 1955, operating ratios of 100 hotels located in 50 cities. Another argument to show that by and large hotels are engaged in interstate commerce is the recent suit by the United States Justice Department against the Hilton Corp. The suit charged the Hilton Corp. with being a monopoly, and was settled when the corporation sold the Roosevelt Hotel in New York City and other hotels in other cities. If the position of the AFL-CIO were adopted as outlined by President George Meany when he appeared before this committee and asked that all hotels be brought under the act that do an annual business of $500,000 or more, many of the other hotels in New York City would also be affected. For example, there are chains such as Spencer Taylor hotels that have seven hotels in New York City-The Madison, One Fifth Avenue, Beaux Arts, the Surrey, the Mayflower, Peter Cooper, and the Towers. These particular hotels employ another 700 of the members of our local union. (See attached exhibit C for a listing of chains operating only in New York State.) Another indication of the interstate nature of New York City hotel operations is the people who stop at the hotels. Certainly New York City, which in many ways is the hub of the world, is not just housing people from the State in the hotels. The New York Visitors Bureau estimates that an average of 13 million people every year spend at least 1 night in a New York City hotel. Some of them are the people who come in for the over 700 conventions which were held in New York City last year. There are others who come into New York to transact business in the garment and textile industries, in the advertising, shipping, television, and publishing industries. Space does not permit listing here the major corporations of this country that have their head offices in New York City. All of the people staying in these hotels are affecting, and are engaged in, interstate commerce. To sum up, we contend the workers in this industry are in need of Federal coverage if the purpose of the act that is "to correct and eliminate labor conditions detrimental to the maintenance of the minimum standard of living necessary for health, efficiency, and general well-being" is to be fulfilled. Further that the hotel industry is in a position to pay adequate wages and that the hotel industry is indeed one that is engaged in interstate commerce. We would appreciate the opportunity of appearing before your committee to amplify the information contained in this statement. EXHIBIT A Estimated number of establishments and workers and numbers included in the survey by size of establishment, all-year hotels, April 1953 EXHIBIT B Over 10,000 of the members of this local working in the hotels are employed in hotels that are part of chain operations. In New York City the following hotels are controlled by corporations that have hotels in States other than New York. Source: 1955-56 Directory of Hotel Systems published by the American Hotel Association Directory Corp. EXHIBIT C Hotels in New York City owned by hotel chains operating only in New York State. Source: 1955-56 Directory of Hotel Systems published by the American Hotel Association Directory Corp. |