This rate has just been put into effect, 18 months after the committee recommending it was appointed. Thus, in the 15 years since 1941 handsewers on fabric gloves have received an advance of 71⁄2 cents. In the same period, 1 might add, the mainland minimum went up from 35 cents to 75 cents, an increase of 40 cents an hour. The average wages paid to mainland workers in the fabric glove industry rose from 48 cents to $1.25, a gain of 77 cents. The case of fabric gloves is one of the more extreme. But it illustrates dramatically the growing unfair competitive advantage to insular industry. Oddly enough, each time that increased minimums, however negligible, have been proposed, Puerto Rican employers have protested that they were being threatened with extinction. But the increases have not slowed their expansion. For example, in 1941, the first special industry committee for Puerto Rico raised the wages of handsewers on needlework from an average of around 22 cents an hour to a minimum of 122 cents. Every handsewer on the island benefited directly by this adjustment which increased the industry's wage bill by over 400 percent. In the case of other needleworkers, roughly one-half were affected by the adoption of the 20-cent minimum wage. The direct effect of this recommendation was to increase their wage bill by 13 percent. In the course of the 1940 committee proceedings, employers argued for a minimum wage somewhere between 3 and 4 cents an hour. They claimed that any increase to a higher minimum would drive industry from the island. But it did not take long to demonstrate the fallacy of this prediction. At the time this committee met in 1941, the insular needlework industry employed around 20,000 factory and home workers. Employment in 1942 was about the same as in 1941, approximately 20.000. By 1943, the number was about a third higher. Today, the producers of apparel and related products in Puerto Rico employ over 50,000 workers. As an apparel producing center, Puerto Rico is now surpassed only by New York, Pennsylvania, Massachusetts, New Jersey, California, and Illinois. By comparison, other important apparel producing States provide employment for many fewer workers. Here are some examples. In Georgia apparel employment is around 35,000, in Tennessee around 28,000, in North Carolina around 21,000, in Kentucky around 18,000, and in Alabama and Minnesota around 12,000 each. There is no question but that unfair competitive advantages offered by the low minimum wage standards in Puerto Rico spur insular industrial growth to the detriment of the mainland. Take the case of the brassiere industry. In 1948, the first brassiere factory, a branch of a mainland concern, opened in Puerto Rico. At that time its Puerto Rican workers were paid the legal minimum of 24 cents an hour. When the special industry committee met 2 years later, in 1950, there were 6 factories in operation employing some 600 workers. Higher minimum wage rates were opposed bitterly by the employer spokesmen. The original and the largest firm testified under oath that, if the minimum rate were raised by any amount, the company would abandon its Puerto Rican operations. Partly under the influence of this testimony, the committee recommended a minimum of only 33 cents and this rate was promulgated. There was no curtailment of employment. Instead, the leader in the fight against the higher minimum wage increased the number of its plants to 6 and expanded its employment from 350 workers in 1950 to over 1,300 in 1954, some 270 percent. And, of course, tthe higher minimum failed to stop other firms from opening branches in Puerto Rico. The total 1954 employment of over 3,000 workers in the industry reflected a 400-percent expansion over the 1950 levels. It is significant that, although workers in the Puerto Rican plants of the brassiere industry were paid approximately one-third the piece rates paid by the same companies to their mainland workers, the finished brassieres manufactured in Puerto Rico were sold on the continent at the same prices as those made in the States. Operations were highly profitable. Data collected by the Wage and Hour Division from the Puerto Rico Tax Department showed that the brassiere industry was netting a profit of 34 cents on the sales dollar, all tax free, free of Federal taxes and free of all the insular taxes. No such rate of profits has ever been known in the brassiere manufacturing industry on the mainland. Even in its most prosperous years during World War 11, mainland firms netted only 34 percent on sales. The special industry committee No. 15, which met last year, recommended a 55-cent minimum wage for the Puerto Rican brassiere industry. The committee's labor members favored a higher rate, but even the 55-cent minimum was fought as unreasonable. A major employer on the island threatened to transfer his operations to Japan just as in the past others had threatened to move their operations to the Philippines. But the threats were empty. The firm continues to operate on the island. It pays the higher minimum. Employment in the brassiere industry in Puerto Rico is now 4,000, a new high. They produce about a fifth of the total national output of brassieres. Expansion of this industry illustrates the effect of unfair competition. No comparable development has taken place in the States while shops in Puerto Rico expanded. This unfair competitive advantage would grow all the more severe if Congress, in raising the mainland minimum, fails to provide similar adjustments for Puerto Rico and the Virgin Islands. Bear in mind that the growth of Puerto Rican industry has significance for all mainland producers regardless of whether or not they operate under a union contract. Typically, we find an unorganized brassiere firm from Georgia expanding its operations not close to home but in Puerto Rico, opening one factory there in 1952 and another after the 55-cent minimum was recommended. A review of the current industrial developments in Puerto Rico furnishes additional examples of this kind. Those presently contemplating the opening of plants in Puerto Rico include two firms from Dallas, Tex., one a dress and the other an electronics manufacturer, a Mississippi paper mill, an Oklahoma City men's clothing firm, and a Charlotte, N. C., plaster and cement producer. Plainly, the unfair competitive advantage in favor of Puerto Rico becomes a distinct and increasingly severe threat to mainland employers in every industry and area. The situation is well illustrated by the observations of an employer who testified in proceedings before the industry committee No. 15. This employer had had experience in the production of knit goods both in Northern and Southern States. In answer to questions about the costs his firm would incur if it were to open a plant in the South, he replied, "But we wouldn't want to open a plant down there. * * *It would cost us too much to get started. It would be more logical to open it in Puerto Rico." The knit-goods industry is one of the newer ones in Puerto Rico. In 1949, it employed less than 200 people. By October 1954, employment had expanded to 1,355. In a recent article on the knit-goods industry of Puerto Rico, the mainland industrial representative of the insular government spells out the reason why. "In Puerto Rico," he tells mainland businessmen in an attempt to induce relocation, "you would spend about one-third to one-half of your current stateside cost per worker." He then continues-I quote, "As a knitwear manufacturer you can make a good profit in Puerto Rico, but equally important you can reinvest all of it because of the island's unique tax position. *** For the right knitwear producer, Puerto Rico offers an unusual opportunity to make and reinvest money." This article appeared in the Daily News Record on April 25, 1955, under the title: "Puerto Rico-Isle Where Knitters Grow." It seems to us that, in 1949, a serious error was committed by Congress. The mainland minimum was raised from 40 to 75 cents an hour. But Congress failed to provide for any corresponding adjustment in the then prevailing insular minimums. Those rates remained untouched, at least until new special industry committees were appointed and had a chance to review them. Some of these rates were actually not revised until 1953. Other rates, though revised, failed to narrow the wage differentials. Thus, the continued prevalence of the low substandard wage in Puerto Rico continued to preserve its unfair competitive edge. In addition, it forced the insular workers to suffer gross inequity. We cannot afford a repetition of this experience when the minimum wage is again raised on the mainland. We therefore recommend that Congress provide, by statute, that identical increases in cents per hour be applied to all the existing minimum wage rates in Puerto Rico. If the 75-cent minimum here is raised to $1.25 an hour, that is by 50 cents, all the existing legal minimum rates for Puerto Rico and the Virgin Island should also be increased by 50 cents an hour. The present differentials between the insular and the mainland minimums would thus be preserved. The differentials in average wages between the lowest wage plants on the mainland and competing establishments on the island would also remain sub stantially intact. Such a revision in the existing insular minimums would not lessen the differentials but it would at least prevent them from spreading. At the same time, industry committees should operate to bring these higher levels as close to the statutory rate as rapidly as is economically feasible. Industry committee procedures also need review. First, in our judgment, persons from the mainland should compose at least half of the industry committees' membership. This could be accomplished under the existing law by administrative action, particularly if Congress were to call upon the Department of Labor to do this. Secondly, provision should be made for more frequent review of the insular minimums. Thirdly, the whole procedure of minimum wage determination should be simplified to insure speedier results. The basic step in this program is, of course, the raising of the insular minimums by the same number of cents per hour as will be added to the 75-cent minimum. This is a needed guaranty against continuance of the trend which has permitted the wage gap between the islands and the mainland to grow. We believe that it would serve the interests both of the mainland and the insular economy. It would benefit the islands by raising the purchasing power of their people, an advance to which they have been long entitled. It is not amiss to note at this point that lower minimum-wage standards in Puerto Rico cannot be justified by differences in living costs. A recent study of the Bureau of Labor Statistics showed, that living costs in San Juan, P. R., were 18 percent higher than in Washington, D. C., and Washington is the highest priced city in the Nation. Nor is there any basis for a differential in the rates between the mainland and Puerto Rico in differences in transportation costs. Let me cite one authoritythe Puerto Rico Economic Development Administration. In its publication, Expand Your Industry in Puerto Rico, they say, and I quote, "Nationwide distribution is possible at less cost from Puerto Rico than between many major cities on the mainland using inland transportation." Its handbook, Facts for Businessmen, similarly concludes: "The island's location makes it an especially desirable site for manufacturers who want to reduce their transportation costs to east coast, west coast, or gulf coast markets." Nor is there any justification for differences in minimum wages in the relative productivity of workers. The mainland industrial representative of the Commonwealth of Puerto Rico, Mr. Waldenmare Bithorn, Jr., writes: "Puerto Rican workers have been found in one industrial study after another to possess an unusually high degree of manual dexterity and agility." The experience of our union, which has over 40,000 members of Puerto Rican origin who now live and work on the mainland, bears out this claim. The efficiency and earnings of these workers are on a par with those of other mainland garment workers. The wage advantage, of course, is compounded by other factors. Employers in Puerto Rico do not pay unemployment insurance taxes. They do not provide their employees witn paid holidays or the type of health, welfare, vacation, and retirement benefits which are becoming increasingly standard elsewhere in our Nation. Nor are they subject to Federal income taxes, either personal or corporate. An additional competitive advantage lies in the exemptions from Puerto Rican taxes granted to new industries. These exemptions apply to income tax, license fees, excise taxes, property taxes, and all other municipal taxes. Our union is fully cognizant of the fact if Puerto Rico is to develop its industry, it must be able to compete with the mainland. We realize that in some cases differentials between the minimum wages in Puerto Rico and the Virgin Islands and the mainland may even be justified. However, the islands should not be given the kind of unfair competitive advantage which plays havoc with the mainland industry and workers and which, in fact, deprives the insular workers of fair earnings. It is time that the backlog of inequities accumulated in the past 16 years be reduced. That is why we hope that Congress will provide an identical centper-hour increase in all insular minimums when the mainland minimum is raised. That is why we hope that Congress will reorganize industry committee composition and streamline and speed up the provedures leading to the issuance of final wage orders. Only in this fashion can Puerto Rico and the Virgin Islands be placed on a fairer competitive basis with the mainland. (The exhibits referred to are as follows:) EXHIBIT 1 Average hourly earnings, all manufacturing, United States mainland and Sources: United States: Bureau of Labor Statistics. Puerto Rico: Puerto Rico Department of Labor. Average hourly earnings, apparel and related products industry, United States mainland and Puerto Rico Sources: United States: Bureau of Labor Statistics. Puerto Rico: Puerto Rico Department of Labor. EXHIBIT 2 Increases in average hourly wages, apparel industries, United States mainland and Puerto Rico, 1939 and 1953 Sources: Data for the mainland: Bureau of Labor Statistics, U. S. Department of Labor. Data for Puerto Rico: For 1939 from the annual report of Puerto Rico Commissioner of Labor for 1938-39; for 1953 rom wage surveys made by the Wage and Hour Division, U. S. Department of Labor. EXHIBIT 3 Increases in average hourly wages, Puerto Rico and United States, Puerto Rico, 1939: Data in the Annual Report of the Commissioner of Labor, 1938-39, combined, on a weighted basis, to obtain averages for the various industries. October 1954: Puerto Rican Bureau of Labor Statistics, Employment, Hours, and Earnings in the Manufacturing Industries in Puerto Rico, October 1954. United States, 1939: U. S. Bureau of Labor Statistics, Handbook of Labor Statistics, 1941 edition, Bulletin No. 694, vol. II. October 1954: U. S. Bureau of Labor Statistics, Employment and Earnings, January 1955. EXHIBIT 4 Increases in average hourly earnings, Puerto Rico and United States NOTE. All industries for which comparisons could be made are included in this table. October 1954: Puerto Rico Bureau of Labor Statistics, Employment, Hours, and Earnings in the Manufacturing Industries in Puerto Rico, October 1954. United States, January 1950: U. S. Bureau of Labor Statistics, Employment, Hours, and Earnings, Historical Series. October 1954: U. S. Bureau of Labor Statistics, Employment and Earnings, January 1955. |