Chairman BARDEN. Let me say to the gentleman that I do not think we have previously gone very far afield, and I think we have gone further afield this morning than we have since we started the hearing on the question of coverage. There is probably some room for some commonsense in there, and if you are speaking of the removal of a patient's shoulder you had better give a little thought as to how deep you are going to cut. You might take his heart out.

In this instance, I think, some discussion of the package which the gentleman says comes from the administration, and is expressing the policy of that department, I do not think it is out of order that the gentleman be permitted to proceed on that basis.

Now then, the committee, I think, can question it later. I must confess that maybe it is going a little far afield under the specific instructions of the committee. But I have never been a member of a committee or chairman of a committee that a department official was not given pretty good leeway in discussing the policy of the administration. That has been followed regardless of who happened to be in control of the administration.

Mr. FRELINGHUYSEN. I think the Secretary of Labor should be permitted to say what he wants about coverage as well as increase, but if we are going to get information such as Mr. Roosevelt has suggested, it seems to me a motion might be in order that we be permitted as a full committee to discuss this question of coverage as well as the rate of increase.

Chairman BARDEN. There are some hazards to take when a fellow is made chairman of a committee, and you will have to take that hazard with me and let me kind of hold it into the channel

Mr. ROOSEVELT. Would the gentleman from New Jersey yield for half a second?

Mr. FRELINGHUYSEN. I have yielded the floor. The Chairman is in full charge.

Mr. ROOSEVELT. If Mr. Kearns would yield his motion for a half minute, I want to make plain that the reason I asked the question is in relation to the dollar amount that we are considering, the administration's recommendation of 90 cents. The witness tells us that that 90 cent figure is based upon consideration of coverage. Therefore, I think it is important in order that we can decide whether 90 cents or $1 or $1.25 is correct that we know exactly what kind of coverage was considered in setting the administration's 90-cent figure. That is all of the information that I have asked for.

Mr. McCONNELL. Will the gentleman yield? There is just one difficulty in connection with that, and that is when you get into specific groups which should be covered, those groups in turn wish to state their position whether they wish to be covered or not to be covered. They insist on getting into the hearings.

Mr. ROOSEVELT. I am only asking what the witness used in arriving at his 90-cent figure and I am not asking whether that is right or wrong, and I want the witness to tell me what he used in getting to that 90-cent figure. He has stated how he arrived that there was a consideration of coverage. What coverage is involved? That is all I want to know.

Mr. McCONNELL. The administration has already stated over in the Senate certain types of extended coverage, and into the retail field and groups in interstate commerce. Of course that leads the retail

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groups to want to come in here and defend their position. We have been trying to keep that out of the House side, and I thought that was the majority choice. I am willing to go into complete coverage,

Mr. ROOSEVELT. I do not want to go into complete coverage. I want the witness to tell me what coverage he considered in arriving at the 90-cent figure.

Mr. KEARNS. Under my motion for regular order, I feel we should proceed that way, or amend Mr. Metcalf's motion.

Chairman BARDEN. The committee can do either one, but since it is up to me now, the regular order is demanded and ordered, and the gentleman will proceed with his statement.

I think this little experience has probably taught us that it is probably a better thing to let the witness make his statement and then ask him quesions. We can note any question we want to ask and we will save time. I think it will be a little fairer to the witness.

Mr. LARSON. I think now I will go right to the heart of the question of the minimum wage figure itself and sketch out very briefly how it was arrived at.

In 1949, about 1.3 million of the covered workers had earnings of less than 75 cents an hour. An approximately equivalent number are now being paid less than 90 cents. There is your starting point.

As to the increase in the cost of living which has taken place since 1949, the Department's Bureau of Labor Statistics, Consumer Price Index, shows that since that time the increase has been 13 percent. If you apply the 13 percent cost of living factor alone to the 75-cent figure, you get to about 85 cents today. That means that an increase to 90 cents would adjust it to this increase in cost of living. Then, it would permit some improvement in the position of the people affected by the minimum wage.

This we believe is an increase which the industries affected can successfully absorb.

As I stated a little while ago, in answer to a question from Congresswoman Green, the original rate set in 1938 and the 75-cent rate in 1949 were steps toward attaining a certain objective which is this minimum standard called for by the act necessary for the health. efficiency, and general well-being of workers. But this objective was limited by the second objective which is to eliminate these substandard conditions without substantially curtailing employment or earning power.

We think that although there will be substantial increases in the wage levels in some of the industries affected, it is now possible to increase the minimum wage rate appreciably without curtailment of employment or other adverse effects. This 15-cent increase will bring us closer to the goal of elimination of substandard conditions. Since an increase greater than this would require very serious adjustments in some industries, the rate of 90 cents is recommended.

This 90-cent minimum wage would result in increasing the wages of 1.3 million workers or about 5 percent nationwide of the 24 million workers subject to the act. About 1 million of these low-paid workers are employed in manufacturing. The remainder are scattered among various nonmanufacturing industries, subject to the act, such as banking and insurance, wholesale trade, and communications.

Whether a particular minimum wage will have harmful economic effects depends primarily on the size of its economic impact on low

wage industries and areas. A 90-cent rate (and these are really the crucial figures on this impact on industry-the ones I am going to give you now) a 90-cent rate would require wage increases for about 500,000 production workers in manufacturing industries in the South. It is about one-fifth of all such workers. A $1 minimum wage would require wage increases for over 700,000 workers, and a $1.25 rate would require increases for nearly 1.3 million or one-half of all such workers in the South. To select just a few out of this large wage distribution study that was made last summer, suggests the importance of setting a minimum wage within the ability of particular industries in lowwage regions to absorb.

We are very fortunate, I may say, in trying to proceed on a factual basis, to have two useful studies. Both of these, of course, will be before you. One is a careful and quite elaborate wage distribution study, on which these figures are based, showing by 5-cent breaks the number of people that would be affected by any minimum wage, starting from 75 cents, and all of the way up. That is by areas, and also by men and women, and also by the major industries involved. Starting from that wage distribution survey, which was made last summer, you can get a pretty accurate idea of exactly how great the absorption and the impact will be at any given level of the minimum

wage.

We are also fortunate to have a second study which bears very strongly on this question of the impact of minimum wage action. After the 75-cent increase was put in, the Department of Labor set out to study how successfully the industries involved absorbed this increase. We do not have to proceed on guesswork or speculation. This study is not as complete as we would have liked because of the intervention of the Korean war coming along about 6 months after the increase went into effect, but there is enough there so that you can proceed with considerable confidence on the strength of that study.

In that study on the effect of the 75-cent increase, the general conclusion, without going into details, was that the increase was successfully absorbed without too much dislocation. The 90-cent increase would we think have about the same impact on low-wage industries as the 75-cent wage did in 1949 and 1950. That is why we say we do not really have to guess, and we are trying to proceed on facts when it comes to this second mandate of the Congress that we must take into account the effect on earning power and employment.

Mr. ROOSEVELT. Could I ask a clarifying question on that point? Would the

Chairman BARDEN. It must have some bearing on the language. I hope the gentleman understands what I am trying to do.

Mr. ROOSEVELT. I am trying to understand in my mind, sir, the increase that you referred to in these studies was from 40 cents to 75 cents, is that right?

Mr. LARSON. Yes, sir.

Mr. ROOSEVELT. Or a 35-cent increase?

Mr. LARSON. That is right.

Mr. ROOSEVELT. And that was easily and properly absorbed, is that correct?

Mr. LARSON. I do not think I would say it was easily absorbed. There were some industries that had some difficult adjustments to

make, but I would say it is within the intent of Congress, and it did not violate the injunction not to curtail employment.

Mr. ROOSEVELT. That was a 35-cent increase?

Mr. LARSON. Yes.

Mr. ROOSEVELT. This increase suggested is a 15-cent increase, is that correct?

Mr. LARSON. That is correct.

Mr. ROOSEVELT. 1,300,000 were successfully applied to that figure in 1949?

Mr. LARSON. That is right.

Mr. ROOSEVELT. And an increase at this time over 500,000, you think would have sufficiently adverse affect that you would not recommend it, although 1,300,000 was the figure?

Mr. LARSON. It is 1,300,000, and it is 500,000 production workers in manufacturing industries in the South. We have two sets of figures, and perhaps I had better make this very clear, when you are using these tables that we are going to give you. We start out with a survey made by the Bureau of Labor Statistics by these 5-cent wage breaks of production workers in manufacturing. Now that is a completely solid piece of statistical work. Then starting from there, using a lot of other statistics that we have, and other facts at our disposal, we have broadened that out to give you a second set of tables which is the effect on everybody covered by the act. As to everybody covered by the act we believe that it will come to 1.3 million.

Mr. GWINN. Roughly, Mr. Larson, what groups were included other than manufacturing, in that other group that you referred to?

Mr. LARSON. They are banking and insurance, wholesale trade, communications, and various nonmanufacturing industries that are now subject to the act.

Chairman BARDEN. Will the gentleman proceed, please?

Mr. LARSON. This, then, is the general outline of the pattern that has been followed to arrive at this recommendation, based on these various studies of wage distribution and the ability of the economy and the industry affected to absorb the increase. In both cases we are trying to proceed on solid facts, and not speculation, because we have had experience with increasing minimum wages, and we have studies of the impact, and the effects, and the general conclusion is that this package or this combination is the best way to give effect to the most increase with the least harmful effects in the light of the third factor, which is the desirability of extension of coverage.

Now I have in my prepared statement a further passage here dealing with a couple of special suggestions for possible extension of coverage. I have submitted that written statement, and if the Chair wishes me to, I shall carry on with that.

Chairman BARDEN. All right, sir, just as you choose.

Mr. LARSON. On this question of extended coverage, let me make a very simple statement about the administration's position on this, so there would not be any mystery or confusion about it. Let us think of it in just two parts.

First of all, you have a very plain and simple statement by the President several times starting with the state of the Union message. Most recently it was in the May 31 press conference. He says that he would like to see coverage extended. In other words, it is a simple, affirmative, positive, unqualified statement that coverage should be

extended. In the most recent statement he said to the greatest extent that is feasible. Now that is point 1.

Point 2 is how about the details of this? When you come to the details of it, the President in his Economic Report and in his press conference on May 31 said the same thing, that the Congress is ín by far the best position to work out the very difficult problems of detail that you get into when you get into this admittedly very, very difficult problem of extension of coverage the existing coverage of the act as you know from looking through the language of the act is tremendously complicated. It is full of all kinds of interweaving exemptions and exceptions, and "ifs" and "buts," and so you have this twopart recommendation.

First, there is the affirmative recommendation that coverage be extended as far as practicable. Second, there is a recommendation to Congress that because it is in the best position to do so, and, of course, has the final responsibility, that it work out the details of how best this coverage can be extended. That is the dual recommendation.

Now, there are two areas of possible expanded coverage which I might talk about with a view that they be given special consideration. These are special suggestions. This is because these two seem to us to be areas where this kind of expansion of coverage could very well be considered.

Without any worry about the point that was mentioned earlier, about the interstate commerce problem, or the definition of commerce, we are talking about something here that is so clearly a part of interstate commerce that I do not think anyone would raise a question about it. This is one reason that these might be especially singled out for special attention. The areas which I am referring to are multistate enterprises, which, of course, have grown tremendously in past years. There are other businesses which engage to a major extent in commerce, or the production of goods for commerce. There does not seem to be any sound reason why the act should not be applied throughout these businesses. They are controlled on an interstate basis. This is the sort of thing I have in mind: Units of the vast interstate department-store chains, variety stores, grocery chains, nationwide motion picture theater chains, interstate hotel systems, and loan companies.

Now, these multistate enterprises, in any sense of the term, are not really local or intrastate in their most important characteristics. That is true whether you consider ownership or control or financing or management or personnel policy. Side by side with these, you will sometimes find the local "friendly corner merchant" in strong contrast with them. But these big interstate chains have an importance and a significance far out of proportion to their numbers.

You take the retail chains as an illustration of this. There are 1.4 million retail firms in the United States. But of these, 31,000, or only 2 percent, or a little over 2 percent, are these multistate enterprises, and yet this 2 percent in these interstate chains employs 34 percent of the industry's employees. I think that is a very important fact. By dealing with only these 31,000 enterprises, you are dealing with 34 percent of the industry's employees, and you are staying very clearly within the bounds of the interstate concept.

An establishment owned or directly controlled by an interstate chain is a unit of an enterprise whose operations are in the stream