Drying up of the unemployed labor reserve means that we have got to build the labor force from now on primarily by bringing new workers into the labor force. We estimate that about 5,000,000 workers must enter the labor force by the end of 1943 if our goal of 62,500,000 persons in employment and the armed forces is to be reached.

Most of these new entrants will be women, because the great bulk of the employable male population will be either employed or in the armed forces. Women are not going to enter the labor market automatically. Unions must relax membership requirements and employers must plan to hire women on an unheard-of scale. The Government must plan for the care of children.

To man war industries, there must be extensive transfers from less essential to more essential industries. These transfers must be facilitated by protecting seniority rights. Travel expenses will have to be paid in some instances because expansion of many war centers has already drained near-by labor reserves. Where refusal of key workers to transfer impedes war production we must be prepared to require transfer.

A large proportion of the new entrants and of those who transfer are going to require training. About 13,500,000 workers must be given some job instruction between now and the end of 1943.

As we approach full employment, the turn-over problem is going to grow worse. We can expect continued movements out of essential industries with less favorable wages and working conditions. Increasing numbers of employers will find that their only source of labor to meet increased requirements is the work force of other employers. Piracy and aimless turn-over will become even more serious barriers to production unless we have some means of control.

Local area problems of housing, transportation, and community facilities will grow acute in an increasing number of areas. By next summer, there will be about 160 areas of acute labor shortage, as contrasted with about 66 at present.

THREE APPROACHES TO THE MANPOWER PROBLEM

In considering the methods of administering the manpower problem, it should be kept clearly in mind that there are not two alternatives, but three.

There is first of all a voluntary system. Only persuasion backed by education is used to obtain compliance from employers or workers. Second is a system of indirect sanctions. At its mildest this attempts to obtain cooperation by regulations and orders directed from procurement agencies to Government contractors and makes military duty, through the Selective Service System, a punishment for those who fail to take orders on the industrial and agricultural fronts. At its extreme, as some have advocated, it would make the rationing powers over gasoline and tires, and fuel oil, sugar and eventually meat and other necessities-weapons to force compliance through administrative action without statutory authorization.

Third is legislation, under which the objectives would be stated, the obligations and duties of every citizen explicitly set forth, and the essential safeguards spelled out.

It should be noted that under any of the three systems voluntary action will be the normal action. În Britain, where the person and

property of every citizen is at the command of the nation, the punitive powers under its acts have been used only 33 times.

Under a voluntary system recalcitrants may shirk with impunity. Under a system of indirect sanctions pressures may be so broad as to interfere with other objectives and strike the innocent with the guilty; being solely negative, indirect sanctions cannot reach certain types of activity. Under a national service act there would be an opportunity to administer with efficiency and precision.

CENTRALIZED POLICY DETERMINATION

Under any approach to the manpower problem, over-all planning. is meaningless without a successful operating organization at the local level. There are some decisions, some plans, and some policies that must be made in Washington. Decisions as to the relative size of the armed forces and the civilian labor force must be made at the top by civilian production and manpower authorities and the chiefs of staff of the Army and Navy.

This decision must be followed by determination of the individuals who are to enter the armed forces and those who are to remain in civilian life. Inductions at the rapid rate necessary to build a 7,500,000-man army within the time scheduled will place a most serious strain on the industrial manpower supply. To minimize the effect of these withdrawals on production, occupation must be the primary factor determining deferment.

Senator HILL. The British have made occupation a determining factor in the matter of determining deferment, haven't they?

Mr. McNUTT. Yes.

Senator HILL. Rather than dependency, or having a family, or anything of that kind?

Mr. McNUTT. That is right. The flow of manpower into the armed forces through voluntary enlistment prevents advance planning for replacement of men and defeats any plan for rationing skilled men between the armed forces and civilian employment. This gap could be closed by channeling all inductions through the Selective Service System. Such a change would, no doubt, necessitate the establishment of procedure whereby the armed forces could obtain required skilled men through special calls.

National policy decisions on manpower must be related not only to plans for expansion of the armed forces but also to every agency whose actions have a significant effect upon labor supply and demand. A close integration of manpower and production policy is prerequisite to the sound solution of manpower problems. The War Production Board and the War Manpower Commission are working together toward the common objective of maximum war production. Failure by the War Manpower Commission to recruit, train, and place labor at the points of greatest need will slow up the production program. Faulty scheduling of production or irregular flow of raw materials will waste labor time, require more men to produce a given output, and thus make the job of the War Manpower Commission harder. Detailed production plans determine when and where manpower will be required for industry. Mr. Nelson and I have a complete and mutual understanding of the relationship and respective responsibilities of the War Production Board and the War Manpower Commission.

In addition to production policies, the wage policies of the National War Labor Board are of direct interest to the War Manpower Commission because wages are one of the most important factors influencing the movement of labor. The basic objective of the War Manpower Commission in wage adjustments is to attain a wage structure that will induce, or at least facilitate, the desired volume of transfers to more essential jobs and will impede transfer to less essential jobs, insofar as such transfers are motivated by wage considerations. This does not imply a goal of wage-rate equality for comparable jobs in different establishments, and it does not ignore the fact that nonfinancial factors induce movements to and from essential industries. It does imply, however, that the War Manpower Commission has a strong interest in wage decision of the War Labor Board.

Price decisions, which directly affect the volume of production and hence the demand for labor in various lines of production, are also of vital importance in the formulation of manpower policies. Finally the housing and transportation difficulties in many war production centers mean that the War Manpower Commission has a direct interest in national housing and transportation policies.

VOLUNTARY ACTION

Any solution of the manpower problem must be based primarily upon the willingness of people to accept direction and discipline. The cooperation of free people will solve most of our labor market problems. It is inconceivable that we should place primary reliance upon any other method. Millions of people cannot be brought into employment, millions more transferred to war jobs, millions additional trained, unless they want to help win the war.

This voluntary response must be made as easy as possible by provision of specific consistent advice and advance planning. The details of such a program can be successfully drawn up and administered only by local people in local areas-but people who are intimately concerned with the problems of management and labor and are in daily contact with the kind of issues which arise in industry.

To achieve this result the War Manpower Commission is establishing in important war production areas committees, representative of management and labor, known as area War Manpower committees, whose function is primarily the coordination of local efforts to solve manpower problems. On October 14, I announced the appointment of directors for 10 local areas where labor market difficulties are acute.

The War Manpower Commission area director for Baltimore has done a remarkable job in about 2 months in bringing the energy and talents of local employers, labor, and government officials to bear on a very serious manpower problem. Steps have already been undertaken to recruit, train, and place large numbers of women workers, to utilize more effectively the labor force now employed in essential industries by reducing turn-over and absenteeism, to transfer skilled workers from nonessential to essential industries through the voluntary cooperation of management and labor groups, to secure the orderly in-migration of such workers as can be accommodated in available housing facilities. These steps are being given widespread publicity in the local press and are being carried out in close cooper

ation with labor and management organizations and with all related Government agencies. This pattern, modified as required by local circumstances, is serving as a guide to other localities.

INDIRECT CONTROL OVER MANPOWER

The War Manpower Commission has encountered several situations in which purely voluntary measures have been ineffective. At present, the Commission has no power to require action by workers or employers, but we have not hesitated to ask other agencies to apply sanctions where voluntary action has proved ineffective. In fact we have stretched the authority granted the Commission to the limit in solving special problems.

Our recent action in the nonferrous metal mining and lumber industries is a case in point. In recent months employees have been leaving these industries more rapidly than replacements could be recruited. Because of the vital importance of these industries to the war effort, I have deemed it necessary to take steps to prevent the transfer of production and maintenance workers from these industries to other employment.

This step has been taken in accordance with the pattern approved by the National Management Labor Policy Committee of the War Manpower Commission. The specific action was taken after consultation with managers and labor leaders in these affected industries who agreed to the details of the plan.

In accordance with this plan, the Army, Navy, Maritime Commission, and the Procurement Division of the Treasury have instructed their own establishments and their contractors to refuse employment to any persons who leave the nonferrous metals or logging industries since the issuance of the order, unless the worker has obtained from the United States Employment Service a certificate of separation. Such a certificate will be issued if the separation is in the best interest of the war effort or if refusal to grant it would result in hardship and injustice to the individual. Reports from the mines indicate a decline in the number of workers quitting to take jobs in other industries. On the other hand, we are finding it difficult in some States to recruit new workers for the mines.

We have asked the Selective Service System to exercise extreme care to reclassify as nonessential men deferred because of the essential nature of their jobs when they leave to take nonessential jobs. We have even requested the Selective Service System to reclassify copper miners who left the mines to take other essential work.

Public opinion and sound public policy both dictate that we must not stop short of compulsion when those who will not cooperate are blocking war production. Without legislation, the War Manpower Commission must continue to use these indirect pressures, or "sanctions," on a broader scale as our labor-market problems intensify. We have no other means of bringing the noncooperative minority into line.

So long as we operate under such a system, I foresee grave difficulties. When indirect sanctions are relied upon, any statement of the obligations of workers and employers cannot be concise and authoritative because it is merely a declaration of administrative intent rather than an expression of the will of the Nation through Congress.

It must be realized that indirect sanctions will be unevenly and in some cases inequitably applied. We must depend upon other agencies for the enforcement of our policies and directives. Moreover, the type and severity of sanctions available may in some cases be out of reasonable proportions to the offense. It would be unreasonable to commandeer a plant because an employer might be hoarding a few workers. Since the threat to apply extreme sanctions will be in many cases a transparent bluff, employers may be expected to ignore such threats. This system will have the further disadvantage of rendering difficult the consistent application of uniform national policies to local situations.

Since the power to induct men into the Army is the primary sanction applicable to individuals, and since local Selective Service boards retain a large degree of autonomy, reliance upon indirect sanctions will in effect place determination of large segments of manpower policy in the hands of 6,500 local Selective Service boards.

Finally, the indirect sanction method forces us to rely on the agency whose authority happens to afford the most effective sanctions. Aside from the administrative problems unsolved, I foresee a sharp public reaction against the use of indirect sanctions. We can do our best to see that employers' and workers' rights are safeguarded and that there is a clear-cut right of appeal. But when we place the power to coerce among several Government agencies, these safeguards of minimum rights cannot be uniformly protected.

NATIONAL SERVICE LEGISLATION

I.now turn to the legislation pending before this committee. The primary purpose of such legislation should be to spell out precisely what the Government expects of employers and workers in time of war. Since we know that sacrifices are going to be necessary, every individual has a right to know what these sacrifices may be.

The compulsory aspect of national service legislation can be grossly exaggerated. The power of compulsion is in essence a protection to the great majority who act voluntarily. They must be made to feel that when they act voluntarily the Government approves the action and is prepared to require compliance by the few who refuse to cooperate. Thus their sacrifice will not be jeopardized.

Any national service legislation must meet certain basic requirements. The benefits to be derived from such a law will be forthcoming only if the statute is drawn with an eye to the actual and anticipated labor market situation.

Careful review of these problems, experience in coping with them, and consultation with representatives of management and labor have led me to several conclusions as to the nature of a desirable national service act. In my opinion, the act must do more than grant sweeping authority to the President or to any administrative body.

While the statute should spell out what is expected of workers and employers, the safeguards provided to them, and the penalties for noncompliance, it should, on the other hand, leave broad powers of discretion to the administrative agency. A realistic view of the manpower problem plainly indicates that we cannot expect to write into any statute the explicit terms most appropriate to a multitude of local conditions.