b. The degree of competition facing the products of the industry. As a rule, a product can be more readily increased in price without an excessive decline in sales when few if any satisfactory substitutes for it are available at a competitive price. It would be easier to raise the price of cigarettes than of lamb without losing sales, for example, because there are few adequate alternatives for cigarettes but many comparably priced meat and other food substitutes for lamb.

c. The degree of competition within the industry. The more competitive an industry, generally speaking, the less the capacity of individual firms to raise prices to consumers or lower prices to suppliers.

As might be expected, shortrun wage adjustments were greatest in the industries which in 1949 had the lowest average hourly earnings and the highest proportions of workers receiving less than 75 cents an hour. (As used in this chapter, the "short run" in each industry refers to the period between the last survey taken before January 25, 1950 and the first survey taken thereafter.) In the short run, average hourly earnings jumped 16 percent (11 cents) in Southern sawmilling, hardly at all in wood furniture. Substantial proportions of plant workers received raises from below to at least 75 cents an hour: threefifths of the labor force in Southern sawmilling, one-third in men's dress shirts and nightwear, onefifth in fertilizer, and from 38 percent in the regions by which data for men's seamless hosiery and

to

(Table 2)

The upward wage impact of the minimum was greater not only in the lower-paying industries but also in the lower-wage regions. In Southern sawmilling, the short-run increase in average earnings was 20 percent in the lowest-wage Southeast area, only 5 percent in the highest-wage Border States. In fertilizer manufacture, the 75-cent rate seemed to have had an effect in only the three lowest-wage regions, all in the South. By bringing pay levels in these three regions closer to those prevailing throughout the rest of the country, the minimum's influence in this industry narrowed percent wage spreads between Southern and non-Southern areas. In men's dress shirts and nightwear, the Southeast and Border States, important industry centers and representative of low-paying regions, experienced comparatively large earnings increases while the Middle Atlantic States, another important industry center and typical of the higher-wage regions, had a relatively small average-earnings increase of only 4 percent. In men's seamless hosiery and in wood furniture, the minimum had greater consequences for the lowerwage areas and operated to narrow the percent range in regional earnings levels.

The tendency for the 75-cent minimum to narrow percent wage differentials between lower- and higher-wage industries and regions was also evident in wage data classified by plant. In Southern sawmilling, one of the two industries which have data so classified, the lower the average plant wage in last quarter 1949, the larger the average-earnings

increase by March 1950. In men's dress shirts and nightwear, the other industry with data so classified, short-run percent wage-bill advances were larger in lowerwage nonunion plants than in higher-wage union ones and in lowerwage small-community establishments than in higher-wage largecommunity ones.

The shift of workers from below 75 cents an hour was accompanied by a marked employment concentration at or very near the 75-cent level. This was especially true in Southern sawmilling, fertilizer, and wood furniture, activities where time rates form the basic pay system. In these three industries, most of the workers whose hourly wages were raised from substandard levels went into the 75-79.9 cents earnings class; at and above 80 cents an hour, wage structures showed only minor short-run changes. Apparently employers in the three industries did what was directly necessary to satisfy the amended requirements of the Act and on the whole did not try to maintain wage spreads between low-, middle-, and high-wage occupations. These spreads were narrowed as a result of generally granting larger short-run percent pay increases to the lower-paid occupations.

In men's dress shirts and nightwear and in men's seamless hosiery, the situation was modified by the prevalence of the piece-rate mode of payment. The concentration of employment after January 25, 1950 at or near the 75-cent level was not so great in these lines because, when piece rates were raised so that slower workers could earn at least the 75-cent hourly wage, faster

workers already making 75 cents or more an hour at the old rates also were able to raise their average earnings. (There was no indication in the surveys of either of the two industries that the granting of make-up pay to those averaging hourly earnings below 75 cents was used as a method of meeting the statutory minimum.) But even in these industries as in the other three, lower-level earnings were increased relatively more than higher-level ones with a conser quent percent reduction in spreads between them.

The short-run indirect effect of the amended minimum on wages already equal to or higher than 75 cents an hour thus was not great, especially in the activities paying by time rate, even where the required direct impact was very substantial, as in Southern sawmilling. Another indirect effect of interest is that upon earnings of employees outside the wage requirements of the Fair Labor Standards Act. An investigation of this type effect was possible from separate wage data available in two industries, in Southern sawmilling for logging workers exempt under Section 13(a)(15) of the Act because employed by sawmills with 12 or fewer logging employees, and for fertilizer workers outside the Act because not engaged in interstate commerce. In the Southern sawmills, the short-run impact of the higher minimum was almost as great on exempt as on nonexempt wages, most firms increasing the pay of their exempt loggers along with the pay of their nonexempt savmill workers. In fertilizer manufacture, the 75-cent rate

evidently influenced noncovered wages since these rose along with covered ones, but the impact appeared less marked than in sawmilling. One possible reason for this disparity of indirect influence is the fact that exempt loggers and nonexempt sawmill workers were employed by the same mills whereas noncovered and covered fertilizer workers were employed by different operators in different plants. Personnel morale may suffer were an employer to differentiate in pay rates between employees simply because some are legally entitled to the minimum wage while others are not. To the extent this is an important factor, the minimum wage is more likely to affect the pay of nonsubject employees when they work in places which also have a substantial proportion of subject employees than when they work in plants where most of the labor force are outside the scope of the Act.

In summary, the short-run wage impact of the 1950 minimumrate increase was greater on lower than on middle or higher pay rates, and in lower-wage than in higherwage industries, regions, occupations, and plants. It therefore tended to narrow percent earnings differentials within industry, regional, and plant wage structures, and between industries, regions, occupations, and plants. Lower-wage units were everywhere brought closer to higher-wage ones, percentagewise. In Southern sawmilling and in fertilizer, two industries substantially subject to the Act, the indirect effects of the new minimum on nonsubject earnings were significant.

Although the preceding findings, and the more detailed analyses in Chapters 2-6, are expressed in percentages, the conclusions are for the most part also true if stated in cents-per-hour terms. As a result of short-run adjustments to the amended minimm, lower-wage units generally experienced larger money increments than did higher-wage units, and centsper-hour earnings differentials between them were contracted. However, the comparative gain of the low-wage units was not so large in cents as in percentages, since a given percent increase represents a smaller money amount on a low wage base than on a high wage one.

As noted earlier, the longerrun consequences of the 75-cent rate were obscured and greatly outweighed in importance by the economic pressures which developed after mid-1950 as a result of the Korean conflict. Field surveys made in October-November 1950 in three of the five selected industries showed continued rises in average hourly earnings after March 1950. Percent increases generally were larger in higherwage plants (such as union and large-community ones) than in lower-wage plants, and in higherwage regions than in lower-wage ones, thus reversing the short-run leveling pattern of the new minimum.

These increases had a mixed influence on industry and regional wage distributions. In men's seamless hosiery, percent pay advances were greater for the better-paid jobs, a reversal of the earlier short-run

compression of regional pay scales. On the other hand, in men's dress shirts and nightwear, a substantial proportion of pay raises between March and November 1950 were in uniform percent amounts and this tended to maintain percent spreads among occupational rates and within industry and regional wage structures. Pay advances in wood furniture between March and October 1950, because they were mostly in the form of uniform cents-per-hour amounts for all plant workers receiving the raise, had a contracting effect on percent differentials within regional wage distributions and among occupations.

In October-November 1950, earnings levels in lower-wage jobs, regions, and plants were generally closer percentagewise than in 1949 to those in higher-wage ones, primarily because of the compressing tendencies of the amended minimum d despite some opposite, widening influences after March 1950. The latter influences continued to make inroads into the results effected by the 75-cent rate, according to wage surveys in 1952 in the men's seamless hosiery and the wood furniture industries, and in April 1953 in Southern sawmilling. 1/ These inroads suggest that the advantages in relative position gained through minimum-wage legislation by lower-wage workers are soon

Except that the lowen-paying South em sawmills appeared to have rate structures in April 1953 about as concentrated as they had been in March 1950. Evidently in these mills earnings in the better paid jobs did not advance more than those in the pooren-paid ones be tween 1950 and 1953.

attenuated by factors favoring higher-wage workers, at least in times of inflationary pressures such as the 1950-53 period. This does not argue against a statutory minimum since without it the poorer-paid employee would probably be at an even greater comparative disadvantage than he now is. But it does call attention to the possible value of a more frequently adjusted minimum rate, designed to prevent the earnings of low-wage workers from falling behind the trend of other wage earnings in the economy, particularly when a sharp inflationary upturn raises pay rates to a higher sustained level.

As with short-run wage adjustments, the above findings on longer-run earnings movements, and their more detailed analyses in Chapters 2-6, are stated in percent terms. It may be noted that the comparative gain after March 1950 of the higher-wage units, with generally larger percent pay increases than the lower-wage units and with a consequent expansion of percent earnings differentials in their favor, would be even greater in cents-per-hour terms. This is because a given percent increase represents a larger money amount on a high wage base than on a low wage one.