in the Consumers Price Index, the average hourly earnings and the corporate profits after taxes. Those three are together, for the same period.

Mr. KEARNS. Will the gentleman yield there for just a moment? I think that we ought to clarify one thing as long as Mr. Roosevelt brought it up.

We had a lot of companies that had an expansion program during the war, plant expansion, and I know one company that made $8 in dividends, but they only pay 50 cents a quarter, and take the other $6, by agreement of the stockholders, to pay off indebtedness or plant operations and improvement. Well, they have to have an agreement to only pay the 50 cents a quarter; is that not correct?

Mr. ROOSEVELT. I think you have brought out a very good point. Mr. KEARNS. They have taken that $6 that they could have paid in dividends and put it back in amortizing a debt on their plant facilities. Mr. ROOSEVELT. I thank the gentleman.

Mr. GWINN. Let us not be so easily satisfied. Let me clarify the clarification of the gentleman from California. It is also true that corporations paying the same dividends for a period that is all manufacturing corporations paying the same dividend on a 5-year average; 2 percent less are undoubtedy having to take their earnings and put them back into the expansion of the plant if they are going to expand; are they not?

That may be an explanation as to why. That is the most likely explanation as to why they do not increase, and cannot increase dividends.

Mr. METCALF. Will the gentleman yield to me? I think with this fast tax amortization, they are writing off an investment that should be written off over 30 to 50 years within 5 years, and that is where some of the profits are going, too, and that is where you get some of your figures. That is utilities.

Mr. KEARNS. They have that permission by law.

Mr. METCALF. But that would explain it. It would distort the picture a great deal, and it would show that a writeoff that should take place over a 50-year period is taking place in the 5-year period which you have presented to the witness.

Mr. GWINN. That might be true, but that would be so in war plants only.

Mr. METCALF. No; it is in utilities and many other agencies that have this fast tax amortization these days.

Mr. GWINN. How does that have a bearing on the fact that industry, in order to live, must induce capital just as much as it induces labor, and capital is unable, under the conditions we have been describing. to induce private capital to reinvest? It is falling off sharply, and borrowings are increasing sharply.

Mr. METCALF. I think the most eloquent answer to the question that you are presenting is the headline that apppears from day to day on the financial page of the paper-that the stock market reaches new high and that the people of America are investing more and more money and bidding more and more for these income-producing common stocks.

I think the health and the financial willingness of the people of America to invest their savings in industry is indicated by that more than any other one thing.

Mr. GWINN. How do you get any satisfaction out of the fact that the stockholders are not improving their position?

Mr. METCALF. They are certainly bidding for that stock.

Mr. GWINN. In terms of dividends-that is what we are talking about-they are getting it.

Mr. METCALF. I am not sure that they are not improving their position. In this 5 years in which you have presented this to the witness, I think that probably they have written off the whole capital investment, so that in the next 5 years their dividends may improve tremendously.

Mr. GWINN. If that was improving the position of the stockholder, and if that is true on that assumption, how do you account for the fact that private investors are investing less and less of their dollars back in those industries?

Mr. METCALF. I do not believe they are. I do not agree with that. 'They are investing more and more dollars back.

Mr. GWINN. The fact is that investments are falling off sharply and borrowings are rising sharply. It shows that the industry, the manufacturing industry that the witness has been describing, are finding that their stockholders that get this raw treatment are not putting their money back in the manufacturing business that you depend on.

Mr. SCHNITZLER. Maybe we ought to get them under some minimumdividend law of some kind.

Mr. MCDOWELL. Would the gentleman yield for a question there? I do not know whether the answer to your question is in this fact or not, but I had a report that came across my desk just a few days ago from the American Bankers' Association which showed that in the year of 1954 their net earnings increased 27 and a fraction percent in 1 year.

Now, I think it could be said that it is through the fiscal policies of the administration for the past 2 years that maybe the interest rates are too high, and the banks are making too much money, and they are freezing capital out of the manufacturing industry.

Mr. GWINN. I think we all know that business is more anxious to get money from the stockholder, who cannot foreclose on that business, than any place else.

Mr. McDOWELL. I would think that the activity in the stock market indicates that the public is certainly willing to invest money in stocks of corporations. If they stopped buying stocks, certainly the market would not continue to go up.

Mr. GWINN. Then we get into a lot of other factors, that is whether or not these increased wages are going to cause more inflation, and, therefore, they will profit by the rise in the price of stocks and commodities.

Finally, Mr. Schnitzler, the point that I wanted to be sure to make so that we all, including the public and including the press, and now if you will pardon me, including the witness, will get. is to quit entertaining this notion that manufacturing profits are increasingwhat word did you use-tremendously.

Mr. SCHNITZLER. Your statement is very unconvincing because here we have some more figures now from the Federal Trade Commission. It says manufacturing profits before taxes in the fourth quarter of

1949, at the time the 75-cent minimum wage was adopted by the Congress, were $3,545 million. In the fourth quarter of 1954, the latest figure available, they were $5,254 million. That is profits increased 30 percent. If 30 percent is not tremendous, I do not know what to call it.

Mr. GWINN. That is 1949?

Mr. SCHNITZLER. Yes, sir.

Mr. GWINN. Well, you would agree that to get a true picture of that, as well as a picture of rise in wages, you must cover a period?

Mr. SCHNITZLER. We are talking about the period from the time when Congress raised the minimum wage to 75 cents and the present when the $1.25 that has been advocated by the American Federation of Labor is being discussed. In this period profits in manufacturing are up 30 percent.

Mr. GWINN. You did not tell us so, and you did not give us the figures on which we can rely in your statement.

Mr. SCHNITZLER. Well, we took this other period from 1952 that we thought was the proper period to use in another part of our argument, but as you encourage figures, we start coming out with figures. Now, the thing that I did ask for the privilege of presenting to you,. if it is possible to include as a supplement to this statement, is a report developed by our research department.

Mr. GWINN. We would like to have it, and I am sure the chairman would agree to that. I would request him to ask that you do present those figures, having reference to this period under discussion in the testimony.

Chairman BARDEN. Let us not pass over that too lightly. If the gentleman desires to insert that information in the record, I will take care of it.

Mr. SCHNITZLER. At your request, Mr. Chairman.

Chairman BARDEN. The gentleman from New York has requested it, and as best I can, I am refereeing this hearing.

Mr. GWINN. I would like to have it in, because the gentleman so generously offered yesterday, and he offers again today to let us have it.

Mr. SCHNITZLER. That we will do.

Charman BARDEN. May I state that if it comes in early enough, we will try and get it somewhere near this point in the record. Without objection, it is so ordered.

(The information is as follows:)

SUPPLEMENTARY STATEMENT SUBMITTED BY WILLIAM F. SCHNITZLER, REGARDING TRENDS IN CORPORATE PROFITS

In my presentation to the committee on June 9, I mentioned corporate profits only once. I made this reference while discussing various economic aspects of a higher minimum wage.

I had made the point that many times in the past our economy has easily absorbed an increase in wages without receiving at the same time either an increase in prices or a decline in corporate profits. To cite one example, I showed how consumer prices had remained stable since the middle of 1952 to the present, a period when wages, as evidenced by average hourly earnings for factory workers, have been increasing, and when corporate profits have also been rising. In each case, prices, wages, and profits, the pertinent statistics were included as footnotes to my statement.

In the discussion before the committee on Friday, Congressman Gwinn did not. question the figures which I included in my statement, but raised another issue.

Specifically Congressman Gwinn contended that, starting with 1950 the profits of manufacturing corporations had been steadily declining while wages were increasing. He viewed this as indicating that an increase in the statutory minimum wage would further reduce corporate profits.

In support of his point of view, Congressman Gwinn made available the following pertinent statistics showing manufacturing profits :

While these figures are quite accurate, more complete data are necessary to place trends in corporate profits in the proper perspective. I am attaching, therefore, a more complete statistical picture of corporate profits in manufacturing industries, both before and after taxes, from 1939 to the present.

I am including annual figures from the United States Department of Commerce as well as quarterly data from 1949 obtained from the joint reports of the Federal Trade Commission and Securities and Exchange Commission.

From these figures, I believe the following conclusions are warranted:

1. There has been a tremendous increase in corporate profits both before and after taxes. The figures show that since 1939 profits before taxes for manufacturing concerns have more than quadrupled; profits after taxes have more than tripled.

2. For the period which I mentioned, 1952 to 1955, corporate profits after taxes in manufacturing have increased from $8.9 billion to $9.6 billion. These are the figures submitted by Congressman Gwinn.

3. There has been a decline in corporate taxes since 1950. However, the fact is that 1950 profits were abnormally high because the rapid rise in prices toward the end of the year created large inventory profits. If these are omitted, total profits after taxes for 1950 in manufacturing amounted to only slightly more than $9 billion, significantly below the 1954 total.

4. The trend from the year 1950 to the year 1954 cannot be used as a guide to judge the effects of the 75-cent minimum wage. This higher wage was enacted in the fall of 1949 and became effective January 1950. To judge the effect of the introduction of this minimum, it would be more proper to take as a base period the last quarter of 1949 (the period immediately prior to the introduction of the higher minimum) compared to the last quarter of 1954, the most recent period for which information is available. A comparison of these figures shows that profits before taxes have risen from $3.5 billion to $5.3 billion and profits after taxes have risen from $2.3 billion to $3.1 billion.

NOTE.-The estimates for the years 1949 and 1950 are not strictly comparable with the years 1951 through 1954 because they are based on the old sample.

Source: Federal Trade Commission and Securities and Exchange Commission.

Mr. KEARNS. Going back to those 1949 figures after the minimum wage raise, and you show the profits greater at that time, do you attribute any of that to productivity because of the increase?

Mr. SCHNITZLER. Yes; there has been tremendous increase in productivity from 1949 to 1955.

Mr. KEARNS. Then you would like to base your statement on increased earnings and have it relative to productivity among the employees once they receive the raise?

Mr. SCHNITZLER. Yes; I think that is an element.

Mr. GWINN. The gentleman does not imply, after all of this discussion, that there is increased earnings in the manufacturing industrv, do you?

Mr. KEARNS. He gave the increase, and that is why I brought the question up.

Mr. GWINN. I think the gentleman may suggest a question. Let us hear his figures again for 1949. Where are you reading from?

Mr. SCHNITZLER. Report of the Federal Trade Commission. Mr. GWINN. Federal Trade Commission. What date is that? Mr. SCHNITZLER. The regular quarterly report that they issue on corporate profits.

Mr. GWINN. What date was the report, please?

Mr. SCHNITZLER. This is extracted from their regular reports. It usually takes several months after each quarter before their report is prepared and sent out.

Mr. GWINN. Now, what does it say?

and

Mr. SCHNITZLER. Ít says that during the fourth quarter of 1949, we particularly selected this period because that was the time when Congress adopted this increase in the minimum wage to 75 cents, profits of manufacturing firms totaled $3,545,000,000.

Mr. GWINN. What quarter was that?

Mr. SCHNITZLER. Fourth quarter of 1949.

Mr. GWINN. Was that exclusively manufacturing?

Mr. SCHNITZLER. Manufacturing profits before taxes.

Mr. GWINN. Before taxes. Well, that is very different. Then you

divide that by two.

Now, what is the next statement you read?