In 1950 we had the benefit of the Korean war and it was up to 113 percent or to $93.75.

In 1951 it settled back to 111 percent or to $92.49.

In 1952 it settled further to 107 percent or to $89.

In 1953 there was a little bulge, 111 percent, or to $92.21.

And in 1954 it was back to 109 percent or to $90.88.

Now, gentlemen, let me qualify this.

These are not industry figures. As you remember, I made mention in my statement that these are the figures of one mill. But I think we can well consider it as a pattern. However, I want it to be made clear that I am not attempting to give you an average.

Now, the progression of wages against this price pattern has been one of continual rise from 62 cents in 1948-if we use that as 100-it continually rises every year and reaches 137 percent in 1954, and recently it went up again and is now 140 percent.

Mr. ELLIOTT. In dollars and cents, what?

Mr. KELLOGG. In 1955.

Mr. ELLIOTT. I am talking about in dollars and cents.

Mr. KELLOGG. To 87 cents.

Mr. GWINN. Would the gentleman yield for a question there?
Mr. MCDOWELL. Yes.

Mr. GWINN. Have you got the comparable figure on profits in that company for those periods in percentages?

Mr. KELLOGG. Yes, sir.

Would you like it for the years I gave?

Mr. GWINN. Just briefly, yes; just to see whether or not profits absorbed that rise to some extent.

Mr. KELLOGG. The profit before taxes for 1948 was $13.27 per thousand feet which we will call 100 percent.

In 1949 it shrunk to 57 percent of that.

In 1950 it came back up a little to 73 percent of that.

Mr. ELLIOTT. Give us the dollars and cents, too.

Mr. KELLOGG. All right, we will cut out all percentages.

In 1948 it was $13.27; 1949, $7.62; 1950, $9.74; 1951, $7.31; 1952, $5.18; 1953, $3.82; and 1954, $4.73.

Profits per thousand feet can create a rather distorted picture unless you follow through with volume and turnover and all that. So I think that for your record, and to understand it, you should have these figures of return on the investment, which was a spectacular $20.24 in 1948. These are percentage figures on investment.

In 1949 it was 9.56 percent; 1950, 13.19 percent; 1951, 6.68 percent; 1952, 6.50; 1953, 3.91; and 1954, 4.64.

Mr. MCDOWELL. Did you say those figures are before taxes or after? Mr. KELLOGG. The profit per thousand was before taxes. The return on investment is after taxes.

Mr. MCDOWELL. What impact would you say Federal taxes had upon those declining profit percentage figures?

Mr. KELLOGG. Well, in ratio, very little, because this is a corporation. And I don't think the company which I illustrated paid any excess-profits tax. We have had this 52-percent tax for quite a while.

Mr. McDOWELL. You further indicated, Mr. Kellogg, I believe, that your particular industry would probably meet the minimum wage even if it were raised to a dollar or if it were left alone.

Mr. KELLOGG. I did, sir.

Mr. MCDOWELL. How long it would take, I assume you are referring to a reasonable time.

That must reflect also your optimism as to the ability of the industry to pay a dollar minimum wage in the future.

Mr. KELLOGG. I did not intimate or say what you have concluded with respect to our ability to meet a dollar minimum wage. I only made the statement, which I stick to and reaffirm, that our industry has never held back to any wage floor. We have moved ahead with wage rates as best we could with the whole economy of the industry, and in a good many cases this rate has been arrived at by bargaining with organized labor.

Now, I will speculate that in proportion to the economy and the price of lumber we could absorb a higher minimum. But this would bring into discussion many things that I don't know anything about such as the value of the dollar and all that. I could go a little bit further and say this, that if this industry could pay a dollar-but just as a sort of pushover proposition they were not doing it just because they were trying to exploit their labor and they wouldn't pay it-we would have to have a considerably better market for us to be able to do that. We cannot do it today.

The figures of this company are, I think, rather illustrative of what takes place with many of them.

One must bear in mind that we are a supply-and-demand industry. We do not set the price of our product. We never have and I don't think I will live to see the day when we will.

We cut down a tree and we don't know what is in it until we get it to the mill and cut it up. Then we have to market the lumber to the best of our ability. The buyer, when lumber is in short supply, runs our price up and sometimes actually he gives us more profit than we are honestly entitled to. On the other hand, he turns right around 6 months later and runs our price down to the point where our cost has nothing to do with the price he is willing to pay.

I do not think it would be an exaggeration to make the statement that if you were to draw a graph of the price of southern hardwood lumber-and I am going to limit it to that, and my own thinking is that it picks up a whole lot of other lumber-that you never would have a continually level line.

Maybe there would be periods of 6 to 8 months that there would not be too much of an upward movement or downward movement. That period would then be followed by a sharp dip or a sharp rise. Those are the conditions under which we operate, and, as you can readily see, they are not so simple.

One might calculate and say: "Well, all right, there is so many dollars a thousand and tomorrow morning we will put out a new price sheet and mail that to our customers."

The broker in New York City or Chicago or Los Angeles who gets us on the phone or wires us and wants a car of lumber is not a bit interested in our labor rates. He is only interested in our price as against quotations he is getting from everybody else. So you see that I could not sit here and honestly get too specific or too detailed as to just what happens.

I admit in 1948 we made more money than we were entitled to. And I think that held pretty well for all the industry. Of course, those false profits fooled a lot of men that are not economically located, and

that created an oversupply. And it shows right here in 1949 what happened, and the same thing happened in 1951.

In 1954 my own company could not market all of its production and we actually carried lumber over to this year. This year we are having a better volume but we are not having much of an increase in price.

Mr. McDOWELL. Mr. Kellogg, I want to thank you for your very direct answers and I am sure that you, as an executive in your company, have many problems in markeing. That is not particularly the problem of this committee now.

I only have one other question I wanted to ask and I am through. Could you not tell us again within this period from 1948 to now what the picture has been as to employment in the outward lumber industry in your area? Has it been increasing or decreasing?

Mr. KELLOGG. It has been decreasing.

Mr. MCDOWELL. Thank you.

Mr. KELLOGG. There are some fluctuations on these markets. Some of the smaller plants go up and down. But the overall picture for lumber employment in the South has been declining.

Mr. McDOWELL. Thank you, Mr. Chairman.

Mr. ELLIOTT. Mrs. Green?

Mrs. GREEN. Following that, how many weeks does the average person work during the year?

Mr. KELLOGG. In the larger plants, full employment.

Mrs. GREEN. In your plant?

Mr. KELLOGG. Full employment.

Mrs. GREEN. Fifty-two weeks all of them, is that right?

Mr. KELLOGG. Well, they get a vacation. Maybe 51 would be a more accurate statement in that most sawmills get into a sort of annual overhaul repair that usually knocks out about a week.

Mrs. GREEN. Lumbering is an important industry in my State, yet it is very seasonal.

Mr. KELLOGG. May I ask where?

Mrs. GREEN. Oregon. Certainly our people are employed just part of the year.

Mr. KELLOGG. Well, don't the larger mills run all year?

Mrs. GREEN. Some of them do. But with a great many of them. there is terrific unemployment during the wintertime. Of course, it is weather partly.

Mr. KELLOG. In answering your question, I was talking about the permanent, well set up, shall we say, reasonably managed operation. We have thousands of mills in both hardwood and pine that do operate seasonally. A great many of them work seasonally, alternating with crop work on the farm. So that I did want to be sure that we were talking about the same thing.

Mrs. GREEN. On page 5 you talk about the increase in the labor cost. And one of the other gentlemen said that the average person was receiving 88.9 cents an hour. Was that the figure which you quoted a moment ago?

Mr. KELLOGG. I do not think we should say the average person was receiving that.

Mrs. GREEN. The average hourly wage.

Mr. KELLOGG. The rate paid.

Mrs. GREEN. All right.

Mr. KELLOGG. May I be sure you get that picture. That is taking the base rates, which could not be less than 75 cents, and also taking all of the higher skilled ones.

Mrs. GREEN. I am at a loss to understand your statement, then, on page 5, that if this is increased to 90 cents, a 9-percent direct increase in labor cost would have resulted in a loss for over 50 percent of operators, or they would be operating without any profit.

Do you mean to say that a 1.1 cent increase would eliminate 50 percent of the operators?

Mr. KELLOGG. Definitely not. But I do not think that you are getting that one point from the right figures.

You have a minimum wage. The average wage does not tie in with this statement. If you hire 100 people and 75 of them are at one figure, then you start adding on up, you come out with this, I guess you would call it, a mean average. But that is your 88 cents. When you increase three-quarters of those

Mrs. GREEN. You would increase three-quarters of them?

Mr. KELLOGG. No, you would increase roughly a third. Of course, it depends on where you set the minimum.

Mrs. GREEN. All right, if you set it at 90 cents.

Mr. KELLOGG. At 90 cents you probably would increase two-thirds. Mrs. GREEN. Two-thirds of the workers are being paid less than 90

cents.

Mr. KELLOGG. That, I think, is a pretty fair statement.

Mrs. GREEN. And you feel that that is an accurate statement that over 50 percent of your operators then would be operating at a loss? Mr. KELLOGG. Definitely.

Mrs. GREEN. On page 13 you make rather a strong statement that the increase in cost will do three things: one, it will distort the economy; two, prevent free bargaining; and, three, it will be inflationary.

When Mr. Larson, the Assistant Secretary of Labor, was here the other day he made the statement that if the minimum wage were increased to 90 cents that the total impact on the total payroll of the country would be-it was either one-sixth or one-seventh of 1 percent. Do you think that that kind of an increase is going to be inflationary? Mr. KELLOGG. I am not competent to judge his percent. Mrs. GREEN. That was Department of Labor statistics.

Mr. KELLOGG. I have not always agreed with all the answers they come out with. I have tried to apply them to my business. I do not feel competent to criticize the validity of them.

Mrs. GREEN. Do you have any other figures that are better?

Mr. KELLOGG. No.

Mrs. GREEN. I thought if his figures were generally accepted at 90 cents, with an increase of one-sixth or one-seventh, that does not seem to me very inflationary.

If the minimum wage were increased to a dollar, I believe his testimony was that the total impact on the total payroll would be either 24 or 212 percent. In either case it would be questionable how inflationary that would be.

Mr. KELLOGG. To really pass an opinion, you would have to explain to me just what you mean by its being inflationary. We are prone to use that term rather carelessly. When one gets right down to a specific thing of raising a certain number of people in the country

so many cents an hour, just what do you mean when you say it will be a half of 1 percent inflationary?

Mrs. GREEN. That is your statement. You say that any increased cost will be inflationary. What do you mean by that?

Mr. KELLOGG. Because it will raise the price of lumber and will put a lot of people out of employment.

I think the State of Louisiana might be thought of as having the largest welfare program of any State in the Union. Raising the minimum wage will cause a lot of people to draw welfare from the State of Louisiana. That, in turn, is inflationary.

I don't think a dollar minimum will break me. I have no idea of going out of business. I think I can ride out 2 or 3 years of loss. It might be that 3 months after a new minimum is passed I might be enjoying big profits. But I will only do it at greatly increased prices in lumber. As we use the word "inflationary" it usually ties in with rising prices.

Mrs. GREEN. Then, do I understand you correctly that, as you use the word "inflationary" on page 13, you mean inflationary only in the lumber business in Louisiana?

Mr. KELLOGG. I will go broader than Louisiana and say it will be inflationary in the lumber business.

You

Mrs. GREEN. That is what you mean by that term on page 13? do not mean inflationary for the whole economy of the country? Mr. KELLOGG. I will have to plead guilty to that. When I used the word perhaps that was in my mind. But I will definitely state that it will be inflationary in the lumber business.

Mrs. GREEN. In reverse order, that is one of the things that you predict will happen. If we have an increase, the second one you say it will prevent free bargaining between employees and employers. In my State a raise to $1.25 will affect very, very few people. We are already well above that. And it has never prevented free bargaining. I am at a loss to find out how a raise in the minimum will prevent free bargaining.

Mr. KELLOGG. If you raised it to any figure above what is being paid now to any employees in the plant, the bargaining couldn't go beyond that.

Mrs. GREEN. Why, when is it a minimum?

Mr. KELLOGG. Because the economics of the lumber business are such that there just will not be any choice for the men to do that.

Now, as the economy of this thing moves up, what happens? I have tried to present this reasonably, and all of it ties in with the present lumber markets. What has happened? The postwar prosperity has died out. We are in years of a spectacular housing and building boom but our production and price are declining. We do not have an economic vision ahead of us. We cannot picture what the future holds.

Well, all right. Lumber will go up $10 a thousand because the aluminum and steel people

Mrs. GREEN. This is not bargaining, free bargaining here.

Mr. KELLOGG. I wanted to point this out: Take a dollar. My own unionman, the man who comes around and does the heavy negotiating for his people, will just come in with a smile on his face and say, "Well, there isn't much for us to talk about, is there?"