for other areas wherever the Department of Defense has installations and the wages are lower than those of an adjoining or neighboring area. If the process starts through legislation the Congress could expect that similar bills for other areas would normally follow. Once a principle is set, it is hard to tell any American that he is not as deserving as someone else when similar conditions apply.

A most important point is the effect such legislation would have on wage rates in private industry. On a number of occasions the Department of Defense has received protests from employers and employer associations to the effect that rates established under our current system are too high and that they have been placed in an adverse position in dealing with their employees. On occasions local industry has protested the Navy's rates in Portsmouth as being too high. Legislation such as S. 2266 and H. R. 12448 would be violently objected to by private industry in those areas where the result would be to raise rates in Government installations above prevailing rates in private industrial establishments. Such legislation would be inflationary in all areas affected.

The additional cost of legislation, such as S. 2266, to the Department of Defense could be extremely high. In the Portsmouth area alone the payroll costs for the Department of the Navy would be increased by approximately $3,400,000 per year. Extension of this principle to the other military departments and to other areas would increase payroll costs drastically.

The Department of Defense is aware of the necessity for giving careful and constant attention to the appropriateness of its labor-market areas. This is particularly true in situations where, as in the Boston and Portsmouth areas, there are sizable differences in pay rates between adjoining areas.

The objective of the Department is to adhere to the principle of paying wages generally in line with wages prevailing in private industry, in keeping with the laws under which it operates. At the same time, the Departments wants to assure itself that its wages are fair and equitable to its employees, and that its pay policies do not hamper its ability to recruit and retain a competent work force. The Department of Defense considers that existing law provides sufficient flexibility to enable it to meet these objectives, and to adjust and readjust labor market area boundaries whenever found to be necessary or desirable. Admittedly, it is difficult to establish a formula which always produces results completely satisfactory to all employees concerned. However, the Department is convinced that legislation which affects a single area and which changes the basic locality rate principle so long and successfully used by the military departments is not the answer to this complex problem. The Department is therefore opposed to the enactment of S. 2266.

The Bureau of the Budget has advised that there is no objection to the submission of this report.

Sincerely yours,

ROBERT DECHERT.

Secretary JACKSON. That concludes my statement, Mr. Chairman. Mr. KILDAY. Thank you, Mr. Secretary.

Mr. Secretary, isn't the practical difficulty there that for a period of 22 years, out of 34, the wage rates have been the same at both shipyards? Doesn't it boil down to about that? For 12 they were different and for about 22 years they were the same?

Secretary JACKSON. Yes, sir, and that is equally true of other areas in New England, which are now disparate.

Mr. KILDAY. You could adjust this by administrative action, by making them the same area, could you not?

Secretary JACKSON. In that case, Mr. Chairman, this bill would not be directed to that end, as we read it. This is particularized in this case and gears Portsmouth rates to Boston, regardless of the survey made in the total area. So regardless of what would be found in Portsmouth or in a larger area, depending upon what the committee would find to be a proper area, it would gear it to a wage survey as found in Boston.

The trouble with the legislation, as we see it, is that it attacks a particular problem without considering the implications of it in two

directions: (1) the effect it will have to break down areas throughout the country, as well as in New England, and also it fails to take into consideration the fact that if you are going to enlarge your area, you can't have your cake and eat it, too. You have to take all of the mix of findings that you have in the entire area, rather than centralizing your criterion or control in one small area and then saying everything else shall adhere to that standard.

Mr. KILDAY. Any questions from other members of the committee? Mr. GAVIN. No.

Mr. KILDAY. Mr. Bates.

Mr. BATES. What was the situation before this was changed, Mr. Secretary? Was it on a weighted average basis with Boston?

Secretary JACKSON. I feel confident that that was the case, Mr. Bates, although I can't answer with certainty.

Could you answer that question, Admiral?

Admiral CRONIN. When it was one region, the samples were taken from the whole region; that is right, isn't it, Mr. Gardner? Mr. GARDNER. That is correct; yes, sir.

Mr. BLANDFORD. One question, Mr. Chairman.

Mr. KILDAY. Well, Mr. Hardy.

Mr. HARDY. Mr. Secretary, you have listed a number of samples of various trades that were taken from the Portsmouth area. What is the comparability in terms of volume of employment of these various trades in a shipyard and in private industry in the Portsmouth area? Secretary JACKSON. The volume of employment, sir?

Mr. HARDY. Well, you mentioned there were 220 samples of helpers, high lift truck operators, and a whole lot of these different things lumped together. Now, how does that 222 samples that you found to be the basis for establishing that wage compare with the number of persons employed in the shipyard performing those operations?

Secretary JACKSON. I will have to ask Mr. Gardner to give me the

statistics on that.

Mr. HARDY. The thing I am trying to understand is whether or not we have the tail wagging the dog.

Secretary JACKSON. Well, sir, the tail was to wag the dog in this sense, that if we are to get any survey at all as to what private industry is doing private industry is the bellwether for the setting of the wage rate of the Government establishment according to law.

Mr. HARDY. I understand that, but the Navy does have the administrative authority to make adjustments where you don't have a proper sample.

Secretary JACKSON. Well, isn't the question, Mr. Congressman, whether the work itself is essentially the same type of work? If. for example, a survey, as we did survey, something in the order of 26 industries, public utilities and transportation companies in this territory, we find that they have X number of a certain category and they are doing the same number of jobs as X squared number of employees in the naval shipyard, what difference does it make whether you are comparing the X with the X squared, so long as the work is comparable?

Mr. HARDY. I think it makes a great deal of difference, because your competitive situation doesn't necessarily reflect what a true wage ought to be.

Secretary JACKSON. Well, sir, if that be so, then it seems to me the Congress should not try to attack this on a one-shot deal this way, but make up its mind as to what are the proper criteria for creating wage surveys and comparability.

Mr. HARDY. I don't know whether it is necessarily a matter of comparability. But I think some of us have wondered for some time whether or not there ought to be some changes made in the present law that we are operating under.

Secretary JACKSON. I think that the implications of this legislation are so vast that we may find ourselves biting off more than we can chew here. Because we have a chart that will show that it is just as logical to tie Portsmouth to Portland as it is to tie Portsmouth to Boston. Equally so, it is quite as logical to tie Boston to the Narragansett area as it is to tie Portsmouth to Boston.

So as I say, the implications of this are tremendous.

Mr. HARDY. I am not talking at the moment about the desirability of tying it to anything, but I am talking about the question as to whether you are getting a proper yardstick if your sample in private industry is X and you have X square working in the navy yard. I am not at all sure that that gives you a proper comparability basis. Secretary JACKSON. Well, I am satisfied in my own mind, sir, although I could see that there could be differences of opinion.

Mr. HARDY. Well, if the vast number of the working force in any trade is employed in a Government yard, and having their wages fixed by a small fraction employed on the outside, why, you have a situation that sounds to me like it is untenable. And it looks like to me that maybe you should administratively spread your area to give you a better sample, so you wouldn't have the tail wagging the dog; and if you have the tail wagging the dog, I think the Navy better take another look and reevaluate the situation.

I have seen a little bit down in the Norfolk area. I have been struggling with this thing. I know how you operate.

Mr. BENNETT. Can we have the chart explained?

Mr. KILDAY. Yes, will you explain the chart, please?

Mr. GARDNER. This shows six areas that are representative of the Navy installations in the entire New England area.

Starting up here, where we have small employment, we have the Bangor, Maine, area. This is the second step rate for the machinists in that area. It is $2.18. As we come south, we have the BrunswickPortland-Bath, Maine area, where the machinists' second step rate is $2.21.

Then we come further south to the Portsmouth, N. H. area, where the second step machinists' rate is $2.19.

Then the next one further south is the Boston area, where the second step machinist rate is $2.50.

Then we drop down to the Narragansett Bay area-that is the area surrounding Providence, R. I., in general-and the rate for the second step machinist is $2.48.

Then next door to that is the area of New London, Conn., where the second step machinist rate is $2.48.

Secretary JACKSON. You made a mistake there, Mr. Gardner. The Narragansett is $2.31.

Mr. GARDNER. $2.31, I am sorry. New London, Conn., is $2.48.

Mr. BENNETT. You have naval shipyards in each one of those locations?

Mr. GARDNER. No. We have a naval shipyard located at Kittery. Maine, here, Portsmouth, and we have one at Boston. We do not have shipyards at any of these other areas.

Secretary JACKSON. What are the industrial activities at which you would use machinists in those areas?

Mr. GARDNER. I have a complete listing, if I may refer to it.

Mr. BENNETT. Well, what I was trying to get at: Does each one of those colored blocks represent a naval installation involving mechanics?

Mr. GARDNER. Yes, sir.

Mr. JACKSON. Yes, sir.

Mr. GARDNER. That is a labor-market area where there are naval employees used, some of which would be machinists.

For example, in the Brunswick-Portland area here, we have a fuel depot, we have a naval air station, and we have the supervisor-I am sorry, we have a fuel depot here. We have a naval air station here [indicating], and also we have a supervisor of shipbuilding.

Now, as we get into Boston, dropping down to Boston just for the moment, we have some 18 activities there, which run from hydrographic office, branch, on through naval ammunition depots, district public work office setups, supervisor of shipbuilding, and shipyards themselves. There are 18.

In Portsmouth we have the naval hospital, we have the Retraining Command, and we have the shipyard, itself. However, those are all located on the same compound, so they are centrally located.

As we get on down to the Narragansett Bay area, we have the construction battalion setup at Davisville, R. I. We have a torpedo station, where, of course, we use many of the mechanic type. We have a degaussing station. We have a naval base. We have a naval station. We have an underwater ordnance station. And there are several others.

As we get down into the New London area here, we have a submarine base, and we have a submarine scheduling activity. We have a supervisor of shipbuilding, and we have an underwater sound laboratory, among others.

There are mechanic trades being carried on in all of these, more in some than others. This would be the smallest setup, up here in Bangor, Maine.

Mr. KILDAY. Mr. Bates.

Mr. BATES. Mr. Secretary, what do you have to say concerning that excerpt which the counsel read concerning the Bureau of Ships letter and statement of 1950?

Secretary JACKSON. I am not familiar with it and heard it for the first time myself when it was read. Would you refresh my recollection?

Mr. BATES. Why don't I read it again?

The shipyard commander went on and said, "These data are far from sufficient to establish the upper base rate." Now, the Bureau of Ships of the Department of the Navy forwarded the shipyard commander's letter to the Office of Industrial Relations on September 29, 1950, with a statement supporting the position taken by the shipyard commander.

Now, the Bureau's estimated in part read as follows, and I quote: The Bureau believes that the Portsmouth Naval Shipyard is located in an area where the number of workers engaged in comparable trades are so small that the wage rates paid to such workers are inevitably determined by those paid in the shipyard. It is the opinion of the Bureau that this should be considered and set in the wage rates for the Portsmouth Naval Shipyard.

Secretary JACKSON. Well, I really don't have an intelligent opinion on that, Mr. Bates, because I don't know whether or not but I suspect it to be the case that industry has moved into the Portsmouth area to a certain extent since 1950. To what extent, I do not know.

Mr. BATES. Well, that would be a guess, I presume, on your part, Mr. Secretary.

Secretary JACKSON. That is right.

Mr. BATES. Because I noted here the communities which you have considered, including Haverhill, which is in my own district. You have eliminated Newburyport, which is closer than some of the others which you have mentioned. I don't know why that was omitted. But Haverhill today has approximately 2,500 less people than it had

in 1950.

Secretary JACKSON. I believe that we did include Newburyport, Mr. Bates.

Mr. BATES. You have Newbury.

Mr. BLANDFORD. Newburyport is in there, sir.
Admiral CRONIN. Newburyport is in there.
Mr. BLANDFORD. On page 5 of his statement.

Mr. BATES. Yes; I was reading this report in this record. Now has that new report been added?

Mr. GARDNER. I believe that Newbury, sir, should have been Newburyport at that time. The area has not been changed.

Mr. BATES. I see. So the original statement was incorrect when it listed Newbury?

Mr. GARDNER. That is correct; it should have said Newburyport. Mr. BATES. But Newburyport is included today?

Secretary JACKSON. Yes, sir.

Mr. BATES. Now, what is the difference, Mr. Secretary, between the rights of a classified worker to get consistent pay throughout the country and that of this type of people? What would the logical argument be based on?

Secretary JACKSON. Well, I suppose that I am not competent to answer that question, Mr. Bates, because that was a congressional decision that set up two different wage structures.

Mr. BATES. Well, I understand that. But do you think it is a good policy?

Secretary JACKSON. Given the advantages that the blue collar people get from the flexibility of their wages, I think it has a certain amount of inherent sense to it, although perhaps some of my civil service friends might question that.

Mr. BATES. I suspect they might. Now, as I said originally, the thing that did disturb me--I have had people come to me from the same community and one travels to Boston and the other travels to Portsmouth and they do the same kind of work, and still they get different rates. And that doesn't make sense to either one of them. And I couldn't explain it.

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