Secretary WIRTZ. I apologize for my answer to your earlier question, but you will appreciate our position in the Department where with an Administrator identified with responsibility by law, also a Solicitor with responsibilities, and the Secretary, that is the reason I hesitated on your earlier question. I apologize for it.

Mr. DANIELS. Perhaps you can submit the answer to the question when you forward the information on this other data that has been requested.

Suppose Mr. X owns five buildings in the State of New Jersey, each of which buildings is exclusively used for the operation of restaurants. Collectively, the income of these five restaurants exceeds $200,000 a year, and $250,000 of out-of-State goods are received each year.

Now, in order to avoid coverage under this act, he decides to just operate one, and closes down the other four, and thereafter leases each of these buildings to four different individuals, who, in turn, reopen and operate a restaurant.

Now, would the rent he receives be taken into consideration in determining whether or not he is covered? Or would the income of these four separate enterprises be considered in the income?

Secretary WIRTZ. I am advised, Mr. Daniels, that this is within an area where we are in a position to give you a firm answer. I will ask Mr. Lundquist to respond.

Mr. LUNDQUIST. Certainly we would look at the enterprise initially. You spoke of an enterprise with five establishments. Now, if that enterprise changes its form of operation, and the man suddenly decides that he is not going to be in the restaurant business except for one particular establishment, he has, in fact, changed his form of operation, and the question then would arise with respect to whether the leasing of those buildings is an operation that is still closely related under unified operation and a related activity to the running of a

restaurant.

There, again, we would have to have an analysis of all of the facts. If he still has his own employees, in the restaurant, or if you say he has completely gotten out of the restaurant business, there would be a variation.

Mr. DANIELS. Except for one operation.

Mr. LUNDQUIST. For that one operation, we would still look to the enterprise, and in addition, of course, in the restaurant business, as in all of the retail and service industries, he could claim the $250,000 establishment exemption, because the enterprise coverage is a broad one, and then within that enterprise he could have individual establishments exempt.

Mr. DANIELS. Thank you, sir.

No further questions.

Mr. ROOSEVELT. Mr. Martin?

Mr. MARTIN. Thank you, Mr. Chairman.

Mr. Secretary, are you aware of the fact that hotels today, throughout the country, are operating at the least net profit in the last 25 years?

Secretary WIRTZ. I am not familiar with that information.

Mr. MARTIN. Is it not a fact that if a business operates without any net return on its investment, management is going to look very carefully at its operating expenses and attempt to reduce expenses, in an attempt to correct that financial situation?

Secretary WIRTZ. I should think they would.

Mr. MARTIN. Do you not feel, then, that with the hotel industry in the economic situation in which they find themselves today, any increase in labor costs, and this is a substantial operating expense in the hotel industry, because it is a service industry, will cause management to look over its expenses quite thoroughly and perhaps reduce the total number of employees that they have on the payroll?

Secretary WIRTZ. Mr. Martin, I would say quite candidly that I just do not have the figures on net of the hotel operation. I would be surprised if it was at the lowest level it has ever been. But I accept your statement on it.

I can answer your question only in the terms in which it was put. To whatever extent there is pressure on the net position of any operation, they are bound to look closely at costs.

Now, our information is that this change will not lead to lesser employment in the hotel industry.

Mr. MARTIN. If a business is operating on thin ice, where they are, say, just breaking even, and not realizing a net return on investment, the management is bound to look at their operating expenses and attempt to reduce its operating expenses. The first thing management will review is the payroll, if it involves a substantial number of employees. Is that not correct?

Secretary WIRTZ. That is correct, surely.

Mr. MARTIN. Therefore, with that situation existing, is there not a good possibility that the enactment if this law will result in less employment in this area?

Secretary WIRTZ. I would just have to repeat that without command of the figures on net, I could agree or disagree only in terms of broad propositions, and the only thing that I could say is that I would agree that where any enterprise is on a thin-ice basis, there would be a tendency to tighten up.

I cannot go to your conclusion that there will be lesser employment of hotel employees, because I do not believe it is a fact.

Mr. MARTIN. At the hearings held in Chicago in December, we were advised that the hotels in Springfield, Ill., have a collective bargaining agreement with the Hotel & Restaurant Employees and Bartenders International Union.

That agreement, freely entered into, provides for wages of approximately 82 cents an hour. A union representative stated at the Chicago hearings last December, that the union could have picketed for a higher wage, but did not want to put the hotel out of business.

Now, Mr. Secretary do you favor Government interference in the right of labor and management to bargain freely?

Mr. ROOSEVELT. Mr. Secretary, that is a loaded question.

Secretary WIRTZ. Oh, I hesitate to answer shortly, but it is a fair question, and so I answer it at the length which it requires.

I was born with the same instinct with which everybody else is, to dislike Government participation in everything where it is unnecessary, and I still have that feeling very, very strongly.

Mr. MARTIN. I wish you would take that position with respect to this legislation, Mr. Secretary.

Secretary WIRTZ. I am impressed in my present job with the fact that I spend about 99 percent of my time dealing with problems which

involve the requests of one private interest or another for some kind of interference in their particular situation, although they would oppose it in general.

I answer in terms specifically and illustratively of a case which a number of us are familiar with, namely, the strike on the Chicago Northwestern Railroad of 18 months ago.

We received 3,600 telegrams, which we subsequently reviewed. Our conclusion is that at least 96 percent of them came from people who would oppose Government interference in labor disputes. But, of course, all 100 percent wanted interference in this particular case.

They came from the chambers of commerce, from business, along the Northwestern. They said there was a situation here in which Government must interfere.

I mean to answer, in complete sincerity, and I hope helpfulness, Mr. Martin: I agree with the general proposition which your question raises, that there should be as little Government interference as possible, that that government is best which governs least; that it should be a government of laws, rather than of men.

With all of those general propositions, I agree completely. But if the question is in terms of specific, and the question is whether the minimum wage, which has been enacted and has been in the laws for 25 years, and has become the subject of wholehearted, unanimous, almost, approbation in this country, should be extended, to bring wages in the hotel industry up to a dollar, I say, "Yes."

Mr. MARTIN. If labor and management agree that a rate above the bargained rate will put a firm out of business, are you not contributing to increased unemployment by enforcing a higher statutory rate? Secretary WIRTZ. Well, I am trying to answer the questions honestly.

If they are right-you say they agree-if they are right, that an increase in a minimum wage will put a hotel out of business, then it must follow that there would be a reduction of employment in that particular situation; if they are right.

Mr. MARTIN. Could it conceivably happen?

Secretary WIRTZ. You say, "Could it conceivably happen?" Of course. We simply have to make whatever is the best business calculation of what we have before us.

Mr. MARTIN. Let's go back to the problem of tipped employees.

Your information indicates the value of tips received and accounted for, turned over by the employee to the employer, shall be included in the definition of wage.

How do you intend to administer that provision of the bill?
Secretary WIRTZ. In several ways; two in particular.

One would be to proceed along the lines of the previous discussion, and to count in as wages those things which are either turned over to or reported to and identified to the employer. That would be one. We recognize the difficulties in that approach.

As an alternative approach, we would proceed as a number of States have in their administration of similar provisions, to identify on the basis of hearings what an appropriate wage or gratuity figure or percentage would be in certain situations, and to add that to the cash wages which are paid.

Illustratively, again, so that if there were a cash wage of 90 cents in a particular situation, and if we had made an administrative determination that, as a matter of practice, there should be a 15-cent item added, we would treat it is $1.05 in that situation.

So, in general, my answer would be that we would proceed by taking into account the reporting of gratuities to the employer, and second, we would proceed on the basis of administrative determinations as to appropriate rules of thumb for adding gratuities to cash wages. Mr. MARTIN. In making this survey in 1961 with regard to tips, you consulted only management, did you not?

I believe Mr. Lundquist made that statement.

Mr. LUNDQUIST. That is right, Mr. Martin. When you say "consulted," we consult with all parties involved, but in accepting the data, we used management-oriented data.

Secretary WIRTZ. Which was the only available data at that time, as I understand.

Mr. MARTIN. In other words, you went into the hotel or restaurant and asked the management: "How much do you think your waiters and waitresses are receiving in tips per day?"

Is that what you did?

Mr. LUNDQUIST. This was done through the Department of Labor, yes.

Mr. MARTIN. How would management be in a position to know how much those tips would run?

Mr. LUNDQUIST. I am not so sure that anyone would be totally cognizant, other than perhaps individual employees. But on balance, we considered this the best possible approach at that time. Not that the representatives of labor would not disagree. They probably would disagree. And it was an administrative judgment that for this purpose we would accept the management-oriented data.

Mr. MARTIN. I understand that the Internal Revenue Service has been meeting from time to time with management with respect to this problem. Has your Department consulted with the IRS as to what they have accomplished in this field by these studies?

Mr. LUNDQUIST. We have had informal consultations, but no formalized transmission of data and material.

Mr. MARTIN. What information have you received from IRS in these informal discussions?

Mr. LUNDQUIST. When you say "informal," we are as cognizant of their working as you have indicated this morning, but we have not had any tables or data sheets that would establish these facts.

Mr. MARTIN. How does that information compare with the information that you secured in your own 1961 survey?

Mr. LUNDQUIST. We have no comparisons.

Mr. MARTIN. So you do not know whether the IRS figures are the same as you came up with in 1961, or whether their figures are higher or lower?

Mr. LUNDQUIST. We do not, no.

Mr. MARTIN. Mr. Secretary, in the last paragraph of your statement, you say that by itself, H.R. 9824 can only attack part of the problem. If this bill is going to attack only part of the problem, what is your method for attacking the balance of the problem that you say exists in this field? Do you need more legislation?

Secretary WIRTZ. The reference is to the poverty problem as a whole, and I assume, from what advice there has been, that there will be further Presidential communication with respect to the outlines of an attack on the poverty situation, and would with your permission like to defer any broader statement I might have pending the delivery of that message.

Mr. MARTIN. In about 10 days you are scheduled to appear again before our subcommittee and Mr. Holland's subcommittee with respect to the double time bill H.R. 9802.

The provisions of this bill, H.R. 9824, would apply the overtime provisions of the bill to those workers in the transportation industry that are now presently exempt from such provisions. H.R. 9802 will provide double time, instead of time and a half for overtime. Will that not serve to compound the problem?

Secretary WIRTZ. I should rather prefer to discuss that matter as the separate matter it is, but would like to anticipate by saying that the proposal with respect to changes in the penalty rate is based very much on an analysis of the industry-by-industry situation, and I think will not complicate it in any way.

Mr. MARTIN. Do you have any plans, Mr. Secretary, to recommend to the Congress enactment of further amendments to the Fair Labor Standards Act which would increase the coverage of that act, particularly in the retail field?

Secretary WIRTZ. No, we do not.

Mr. MARTIN. You do not anticipate making any other request of the Congress.

That is all, Mr. Chairman.

Mr. ROOSEVELT. Mr. Bell?

Mr. BELL. Mr. Secretary, in the hotel, restaurant, and related enterprises, would it be possible for you to devise a definite formula, say on a national-regional basis-this somewhat goes to Mr. Martin's question-giving credit for, say, board and room, meals, tips, and then establish a definite, across-the-board setoff against the minimum wage, so that all affected would know where they stand?

to.

Secretary WIRTZ. Yes, sir; we think we could, and would expect

Mr. BELL. I note that in your remarks on page 5 of your statement, you indicated that the rise in wages in hotels and restaurants and so forth was quite low. Were you thinking in that area, were you including in that wage calculation, possible tips and so forth?

I came a little late, so perhaps this question has been asked.
Secretary WIRTZ. It did not come up.

Now, if the question is, Mr. Bell, as to whether tips are included in those figures on page 5, they are not. But I asked for permission to supplement the record by giving whatever information is available to us in those terms.

Most of the employees listed on that page are not tipped employees, but the tables should be expanded to include whatever information we have with respect to the effect of tips on it, and we are going to do so.

Mr. BELL. This next question might be directed to Mr. Lundquist. Mr. Lundquist, do you actually think that you could get a pretty accurate picture, nationwide, on tips, we will say, particularly in hotels