SCHEDULE II-PART A

Annual hourly rated labor cost where minimum hours are reduced to 37% and 35 hours per week for overtime purposes, accompanied with an increase in the minimum hourly rate upward to $1.25 per hour

Increased cots on number of persons affected by rate increase alone

Lowering the overtime requirements below 40 hours a week will mean that overtime will have to be paid to all 277 employees involved in the study for a proportionately greater number of hours depending on the extent to which nonovertime hours are reduced below 40 per week. This accounts for doubling the increased cost if the nonovertime hours are reduced to 35 hours per week (cost of $50,838.32 per annum) as against a reduction to 371⁄2 hours per week (cost of $25,419.16 per annum).

Schedule II not only shows the increase in cost resulting from reduction of hours not subject to overtime but also shows the effect of an increase in the minimum rate up toward $1.25 per hour. Schedule II (2) shows that if the minimum rate is raised to 90 cents an hour no additional costs will result. If the minimum rate is put at $1 it appears that 3 persons would be directly affected, giving rise to additional annual costs because of the rate increase alone of $391.56 on a 371⁄2-hour overtime basis and $782.28 on a 35-hour overtime basis. If the minimum rate is increased to $1.25 per hour, 66 persons would be directly involved, giving rise to additional annual costs because of such rate increase alone of $25,338.56 on a 371⁄2-hour basis and $27,166.34 on a 35-hour nonovertime basis.

II

It is common knowledge that employers cannot increase the rates of some employees without increasing the rates of all other employees within given rate structures where such increases are based on statutory mandate. For example, if minimum rates were increased to $1.25, an employer would find it necessary to increase all rates in order to maintain the equity of the original rate structure. Hence, all 277 employees of this particular employer would be affected, rather than only 66 whose rates would have to be raised to meet a statutory minimum of $1.25 per hour. Assuming that the same relative change would have to be made in rates above the new statutory minimum, we would have to multiply the figures of $25,338.56 (annual increase in cost for 66 employees on 371⁄2-hour nonovertime basis at $1.25 rate-schedule II (b)) and $27,166.36 (annual increase in cost for 66 employees on the basis of overtime over 40 hours at $1.25 straighttime rate) by 4, or the quotient arrived at by dividing 277 by 66. Because an employer might find it impossible to avoid increasing his entire rate structure in the same degree that minimum rates are increased, a minimum rate of $1.25 per hour could very well impose additional costs of $106,421.95 on a basis where overtime starts at 371⁄2 hours and $114,098.12 on a basis where overtime starts at 35 hours.

The foregoing figures would more accurately reflect the cost than would those set out in schedule II. The proposals before Congress have far-reaching effects.

Such costs will not be reflected by any corresponding degree of increased productivity. The result would be extremely inflationary if the same figures would approximate the national picture. If one assumes that labor costs approximating an increase of 11 percent to 13 percent could be added and passed on, it would mean a sharp increase in prices and would be self-defeating in the end.

However, all industries would not be affected alike. In the farm-supply business the immediate effect could be tragic. Margins are already low. Agricultural producers can hardly stand any increases in prices on commodities being purchased. The farmer and businesses supplying his needs could well be orphaned for a considerable period of time while presumably other parts of our economy could move along with a slight attack of inflationary dizziness.

It would appear that on the basis of the most elementary economics, that a reduction of hours for overtime purposes will do nothing but increase labor costs. One does not have to be a seasoned negotiator with unions to know that any reduction in hours cannot be made unless the take-home pay for the longer hours is granted for the reduced hours. Organized labor is apparently little interested in passing around the work which was the battle cry when the Fair Labor Standards Act was in the bill stage. The only purpose overtime requirements now serve is to increase take-home pay. The proposals before Congress would exaggerate the present problem because business is simply unable to gear itself to shorter hours. It should be remembered that overtime penalties were intended to cure unemployment, whereas during a period of normal employment, overtime payments are bound to be inflationary. No study has ever been made to ascertain how much of the inflation stemming from the Second World War can be attributed to overtime compensation. It would be, indeed, an unpopular thing to do. But the figures quoted in this letter give some indication of what could happen on a national scale.

Increasing the minimum hourly rate beyond 90 cents per hour will produce like results. What cannot be foreseen is the extent to which equity adjustments would enter into the picture if a minimum rate above 90 cents is adopted. But one thing is certain, if the minimum rate is increased above 90 cents per hour and the hours reduced for overtime purposes, a double effect is produced. Such a move could very well stimulate inflationary forces to such an extent that price levels could be seriously affected. As to some concerns, increase in the minimum rate above 75 cents per hour can produce the same effects as any rate above 90 cents per hour. It might end up that the persons intended to be benefited would end up with less than they had at the beginning.

It is obvious that employers who are affected by a proposed minimum rate of 90 cents per hour would experience trouble earlier than the above company. This merely underlines the fact that in all probability many small employers would be injured even to a greater extent much earlier than the present study indicates.

EXHIBIT B

A FARMER'S MARKETING AND SUPPLY ASSOCIATION IN A DOMINANTLY

AGRICULTURAL AREA

SCHEDULE 11-PART A

Annual hourly rated labor costs where minimum hours are reduced to 371⁄2: and 35 hours per week for overtime purposes, accompanied with an increase in the minimum hourly rate upward to $1.25 per hour

Mr. RIGGLE. I have just another paragraph of summary.

Mr. SMITH. Mr. Chairman ?

Chairman BARDEN. Mr. Smith.

Mr. SMITH. Does it not naturally follow that when we increase the minimum wage up to $1 or $1.25 that we automatically force farmers to become bigger operators and cut out many of the small family-size farms?

Mr. RIGGLE. I think that is one of the direct results. And all of the small institutions serving the farmer in the community have to follow the same pattern pretty largely.

Mr. SMITH. In other words, we have people that are advocating doing something to keep the farmer on the farm, and yet the Government at the same time passes a minimum wage that increases that wage which will automatically drive the small, inefficient farmer off the farm, and somebody else who has got the capital takes over his operation.

Mr. RIGGLE. We drive the small industries out of the rural areas at the same time so that the low-income farmers, the part-time farmers,

have to leave the farm and move to the city where the social problems are concentrated at the present time.

If the rural industries could be maintained out there by some incentives and you could maintain the present incentives of costs and wages and so forth, then there would be an opportunity for local employment for these low-income farmers.

Of course the Government at the present time is concerned with the problem of the low-income farmer who is generally a part-time farmer, and also a small operator because of his limitations one way or another, age, and so forth.

In summary, Mr. Chairman, the price-cost squeeze on farmers and rural communities is due largely to industrial labor costs reflected in the cost of farm equipment, farm supplies, and farm services, and in the cost of transportation and preparation for market, which comes out of the farmer's share of the consumer's dollar. Wage patterns now being set will be reflected in the increased cost of steel, tractors, trucks, electrically operated and other farm equipment. An increase in wages at this time will not appreciably increase the consumption of farm products, but will raise farm costs substantially.

An increased minimum wage is part of the present pattern which becomes the base for adjusting wage differentials upward. It is estimated that 1954 farm costs of about $22 billion would be increased by $2.5 billion through the reflection of industrial labor costs and direct costs, of which about $350 million would be in hired labor costs increased by competition with urban employers.

With the advent of the 75-cent rate in 1950 the average farm wage costs did move up in relative competition. Of such increased costs perhaps $250 million might find its way back to the farm in the farmer share of consumer expenditures, intensifying the price-cost squeeze by $2.25 billion.

We oppose any increase in the minimum wage at this time because experience shows it will be reflected through wage adjustments back to farmers and rural communities in increased costs and reduced net income.

Now there is an alternative to that. The farmer will get out of the tractor market and the machinery market in view of higher costs which are going to be reflected in the prices, and reduce his operations, reduce his income, and we would follow pretty much, I think, the procedure we had in the 1920's when the farmer was gradually squeezed out of the market and we had a very serious situation.

Mr. FRELINGHUYSEN. I am not sure I understand the meaning of the expression "thou" on that appendix, behind, for instance, "Hired hands."

Mr. RIGGLE. It is not dollars; it is thousand people.

Mr. FRELINGHUYSEN. How many thousand is that? 280,500?

Mr. RIGGLE. That would be 2,805,000.

Mr. FRELINGHUYSEN. The hired labor about it is $1 million?

Mr. RIGGLE. 1 billion.

It is one thousand and thirty-one million. That is 1 billion.

Mr. FRELINGHUYSEN. If that is the case then, in total expenditures it is the $21 billion in 1954?

Mr. RIGGLE. Where are you now?

Mr. FRELINGHUYSEN. Total expenditures under "Farm expense involving industrial labor costs."

Mr. RIGGLE. That is right. It is $21.863 million, or $21,863,000,000. Mr. FRELINGHUYSEN. That is all.

Mr. RIGGLE. This table in the appendix to my testimony reflects the increased costs and the decreased number of people on the farm, the increased capital required for machinery and new buildings with the new technology, and it reflects, of course, the increased number of acres that are necessary now to keep this machinery busy. It generally shows the effect of the stepping up of the economy on the farming business today.

Mr. FRELINGHUYSEN. I wonder if I could ask again a question as to the meaning about hired labor and hired hands. The figures that you provided us show that it is almost twice as expensive now to hire 23 percent less hired hands than were hired in 1940.

Mr. RIGGLE. That is right. Rather it is almost three times as costly.

Now the average farm income runs, as stated here, from farming operations, about $658 per capita. It runs about at the present time something like $2,300 per farm. That is the net income. But out of that net income has to come any capital expenditures. And if that net income is decreased very much more it is not only going to cut out the capital expenditures, that is, machinery, equipment, and new processes and even some of the operating expenses which have to do with putting on the fertilizer and insecticides, but it is going to begin a cut into the clothing market, the textile market and so forth of the family, in a lot of families.

Six hundred and fifty-eight dollars from farming operations per capita does not go very far when it has to be spread both over the farm capital needs and the family needs.

That is all I have, Mr. Chairman.

Chairman BARDEN. Mr. Riggle, of course, I think it can be truthfully said that the farm people are about as fairminded people as you will find in this country, and love to get along with people. And as a usual thing they get along with their neighbors. And as a usual thing that is the kind of territory where people attend funerals. They don't do much of that in the more concentrated areas.

But getting to the problem that is confronting the average farmer, we all know and accept the fact that farm prices, the price he gets for his commodity, have constantly been going down, and they are going down now. All records indicate that they are low and going lower, don't they?

Mr. RIGGLE. Yes.

Chairman BARDEN. There can be no question about that.

Now here is the predicament that he finds himself in: Ford and General Motors the other day fixed their guaranteed annual wage. They gave an increase. How is the farmer going to continue to pay the increased price for his tractor, for his motor plows and whatever kind he may have, the pickup truck, the trucks he must have on the farm, if the commodity that he is hauling in that pickup truck and plowing with that tractor is going down while the price of the tractor or the truck is going up?

Mr. RIGGLE. Well, it is a problem. At the present time what he is doing is he has borrowed again to where he was before the war practically in order to ease the thing along temporarily. But that is going to end.