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tioning management. The studies showed that tips considered along with cash wages provided most workers in the predominately tipped occupations at least $1 an hour. On this basis we have provided in the bill that tips may be considered as a part of wages to the extent that they are reported to the employer or turned over to him and returned to the employee.
3. Logging.–The bill would extend wage and hour protection to 87,000 workers by repealing section 13(a) (15) of the act—which exempts small logging operations involving not more than 12 employees from the act's minimum wage and overtime provisions.
Since this exemption was added to the law in 1949 many large pulp and paper companies which previously operated their own woods departments have for various reasons been contracting out their logging operations. This practice results in the denial of the act's protection to large numbers of workers, many of whom have very low annual earnings. They should have the full protection of the act, as they did from 1938 until 1949.
4. Farm processing.—Another group of workers whom the bill will help are those engaged in handling and processing farm products.
The 1961 amendments to the act directed the Department to make a study of "the complicated system of exemptions now available for the handling and processing of agricultural products under such act and particularly sections 7(b)(3), 7(c), and 13(a) (10)," and to make “recommendations for further legislation designed to simplify and remove the inequities in the application of such exemptions."
The Department has made a detailed study of these exemptions and the amendments in the bill are based on the results of this study.
Legislation in this area is long past due. The minimum wage and overtime exemptions applied to employees in the “area of production" under the section 13(a) (10) and related exemptions applicable to the processing of agricultural products and to some operations under section 7(c), are so complicated that employers and employees alike have found it difficult to ascertain their rights and responsibilities, despite extensive litigation.
The exemptions from the maximum hours provisions are also complex and frequently overlap. They apply on a number of different bases, and the extent of their application is limited by different terms. For some types of employment, an unlimited year-round overtime exemption is provided. For other operations, 28 weeks of exemption is provided-14 weeks unlimited and 14 weeks limited to 56 hours of the workweek. Since many processors of agricultural products are presently able to qualify for both the 7(b) (3) and 7(c) exemptions, their employees are not protected by the 40-hour workweek standard for a period of nearly 7 months in any year.
As a substitute for this hodgepodge the bill proposes to replace the area of production, country grain elevator, cotton ginning, and section 7(c) handling and processing exemptions with one 14-week partial overtime exemption, for entployment in industries found by the Secretary of Labor to be of a seasonal
A similar exemption would be provided on an industry basis for all operations covered by the deleted provisions (except livestock slaughtering) if the Secretary of Labor finds that the industry has recurring seasonal peaks of operation.
The net result will be to provide 124,000 employees with minimum wage and overtime protection. An additional 584,000 employees will be given greater overtime protection than they now have.
5. Transportation workers.—I turn now to those portions of the proposed bill which provide overtime protection only. The workers who will receive this protection are employees of air carriers, motor carriers, oil pipelines, and gasa line service stations. They may be classified under the general heading of transportation employees.
The present exemptions for air carriers, motor carriers, and oil pipeline personnel grew out of the belief that the hours of work in these industries would be subject to regulation by other Federal agencies. The purpose of the exemp tions was to avoid conflict of regulatory authority among Federal agencies.
In reality, the hours of work of many employees in these industries have not been regulated at all. For example, there is an overtime exemption for all eneployees for whom the Interstate Commerce Commission can prescribe maximum hours of service under the Motor Carrier Act, but this power has been used only for drivers. The result is many other types of workers have no hours protection at all.
The transportation workers under discussion are now covered by the minimum wage provisions of the act. All that the bill will do is extend overtime protection to these employees where it is reasonable. Thus, the bill would cover the ground personnel (but not flight personnel) of air carriers, and those employees of motor carriers who are not primarily involved in over-the-road transportation or subject to regulations issued by the ICC prescribing maximum hours of service.
One other group will be provided with overtime protection by the bill: the $6,000 employees of gasoline stations who now must receive the minimum wage, but are without overtime protection.
The 1961 amendments extended minimum wage protection to employees of gasoline service establishments having an annual gross volume of sales of not less than $250,000. However, those same amendments included an overtime exemption for “any employee of a gasoline service station.” The administration bill will repeal the 1961 overtime exemption.
Our studies show that gasoline station employees work longer hours than employees in any other retail line, and that their hours of work have actually been increasing. In June 1961, 44 percent of the workers in large gasoline service stations worked 44 hours or more a week. But June 1962, the proportion had increased to 58 percent.
Even more significantly, in June 1961 we found that 24 percent of the emplorees of gasoline service stations worked 49 hours or more a week. By June 1962 the proportion working such long hours had increased to 36 percent-which means that one out of every three employees was working 49 hours a week, or longer.
By providing that these employees receive premium pay for overtime work, the bill will undoubtedly reduce their workweeks. This will be true even if all orertime is not eliminated.
Gas station employees are relatively unskilled. Therefore, we can expect that the elimination of long workweeks among these employees will create jobs for a number of the unemployed.
THESE CHANGES WILL NOT REDUCE EMPLOYMENT
Every time Congress has increased the minimum wage or extended coverage under the statute the question has been raised whether this will reduce employment.
Each time the Department has made studies to measure the impact on employment and wages in industries and areas most affected. Each year the Department in its report to the Congress has included an evaluation of the changes in the law. Every time a change has been made, the evidence has shown that the economy has made a smooth adjustment and in many cases there were increases in employment.
This year we again surveyed the laundry, hotel, and restaurant industries, among others—so we could consider legislative proposals under present and future conditions.
We compared the impact of various minimum wage rates in these industries with the impact of a $i rate effective in September 1961 on employment in limited price variety stores—the lowest wage segment of covered retail trade. In our study of the effects of the $1 minimum wage on the covered segment of retail trade we found and reported to the Congress in January 1963 that the dire predictions did not materialize :
“Employment in covered retail trade increased between June 1961 and June 1942, and there were increases in all but one of the lines of business significantly affected by the amendments. (In covered drugstores employment did not change)."
There were some employment decreases in covered retail trade in nonmetropolitan areas of the South as a whole. But employment in covered retail trade as a whole in the South increased after extension of coverage, and workers earning less than $1 were raised to $1 an hour. On balance, there can be no question that the extension of coverage to employees of large retailers did not adversely affect employment in retail trade and there was a decided improvement in the sages of a low-wage segment of the economy.
Sow-in 1964—the administration is again proposing that the Congress extend the minimum wage coverage for low-wage workers; for employees of large enterprises at an initial rate of $1 an hour with additional increases and overtine standards spread over the years in a pattern approved by the Congress in the 1961 amendments.
A $1 an hour wage for laundry workers employed by million dollar enterprises would mean that about 12,000 laundry workers, or 16 percent of the 80,000 newly covered, would receive wage increases. To increase their wages to $1 an hour would increase the annual wage bill of covered laundry enterprises by 1.9 percent.
In restaurants, a minimum rate of $1 an hour applied to employees of large establishments of large enterprises would mean raises for about 53,000 restaurant workers out of the 180,000 newly covered. This would increase the annual wage bill of these large establishments by 6.5 percent. These increases would be reduced to the extent that tips are counted as part of wages.
In hotels a minimum rate of $1 an hour applied to employees of large establishments of large enterprises would mean raises for about 63,000 of the 190,000 hotel workers newly covered. This would mean an increase in the wage bill of such establishments of 7.8 percent, not counting tips.
Again, comparing this impact to the 1961 impact of $1 an hour for newly covered workers in variety stores, the effects of the present proposals would certainly be less. In fact, the percentage receiving increases would be less than the 37 percent required to receive wage increases in variety stores in order to be paid in compliance with the $1 minimum. Yet employment in limited price variety stores increased between June 1961 and June 1962 from 178.000) to 186,000. The increase in wage bill which was required to raise the pay of workers in variety stores earning less than $1 in June 1961 to $1 was 5.6 percent, much more, for example, than the wage bill increases required in laundries under this legislative proposal (1.9 percent).
These considerations lead to the fair conclusion that this bill will not reduce employment.
Conscience demands that this proposed action be taken. But what conscience demands is equally the dictate of national economic interest. It takes nothing away from the purpose to help people as human beings if we recognize that by doing so we will strengthen the economy.
Enactment of these amendments would add purchasing power to many thousands of low paid workers. Wage and Hour Division studies show that on the effective date of the amendments 12,000 laundry workers, 71,000 restaurant and food service workers, 63,000 hotel workers, and 1,000 small logging workers who are now paid less than $1 an hour would receive wage increases totaling $SO million per year.
These workers are now living at a subminimum level. Each dollar added to their low wages would be spent immediately for food, clothing and other essentials of living. This will benefit not only these low-wage workers and their families, but also business in general. More money will probably be spent for more goods. More jobs will probably be created to supply the increased demand for goods and the economy of the country will be promoted.
President Johnson recently reported to Congress the huge strides our economy has taken. The accomplishments are many and impressive: gross national product, average earnings in manufacturing, personal income, industrial production, total employment-all these have reached new, alltime highs.
Yet, thousands of individual Americans have been bypassed by the unparallelel economic progress which we have made as a nation.
The President recognizes this. He has said, "Americans today enjoy the highest standard of living in the history of mankind. But for nearly a fifth of our fellow citizens, this is a hollow achievement. They often live without hope. below minimum standards of decency."
There is no justification for that attitude which counts such a state of affairs inevitable, holding fast to the philosophy of “whatever is, is right,” tolerating the existence of a class of destitude Americans.
By itself H.R. 9824 can only attack part of the problem. This makes it no less indispensable to the whole program.
Secretary Wirtz. I shall proceed, then, simply to summarize the statement, but do not want to do so at the risk of
understatement of significance which we attach to this proposal.
There still remain gaps in the coverage of the Fair Labor Standards Act as amended, both with respect to its minimum wage and its overtime provisions, which we consider imperative be closed.
We are quite firm in our feeling, particularly on the basis of the studies which have been made, that there is no justification for these gaps to which we refer, that they reflect really special interest pressures which have been brought to bear on the situation. They are contributing to the poverty which we are now committed, as a people, to eliminate. And it is very important, as a matter of common national conscience, but equally as a matter of good business, to close these gaps.
So I testify with respect to them for a feeling of deep conviction about the human values that are involved here, and equally from a feeling of complete persuasion that what we are talking about is good business for the country.
The changes affect, as you have indicated in your opening statement, several different groups of employees. We are all sufficiently familiar with this act to realize that it has, since 1938, and in the course of its various amendments, grown in such a fashion that its amendment today becomes a fairly intricate piece of business, so that various different groups must be approached in various different fashions.
We can, at your pleasure, go into whatever details are necessary with respect to the technicalities of the amendment process, but I shall, in my summary, refer only to the results of the amendments. Those would include the following:
First, with respect to the laundry and drycleaning employees, the proposal in H.R. 9824 is such that it would provide both minimum wage and overtime protection for some 80,000 laundry employees. These would not be the employees of the small neighborhood laundries, with which we are familiar. The effect of the change would be limited to enterprises doing an annual gross volume of business of a million dollars or more.
The statement includes the results of studies which we made to show what the average earnings of these employees have been.
The result of the change in the statute would be that 32,000 laundry and cleaning employees will benefit directly from the minimum wage provisions of the bill.
With respect to hotels, motels, and restaurants, there is a somewhat different test of coverage applied.
Here, under H.R. 9824, there is a test of a million dollars, as far as the enterprise is concerned, and then with respect to the particular establishments, these revised provisions would apply only when there is a quarter of a million dollars of business involved.
This would mean the extension of the coverage of the act to some 444,000 workers in these industries. It would mean that a somewhat smaller number than that would, of course, be directly affected by the provisions.
But it is true here that a very high percentage of the employees are presently working at less than a dollar or a dollar and a quarter an hour, and so the direct effect would be to raise the wages of a quite substantial number of employees.
A word should be said here about the treatment of tips, because it has been a matter of a good deal of concern in connection with the development of this amendment.
The proposal is that tips will be included in the wages of the employees to the extent that they are recorded, reported, with the employers.
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The third extension of coverage relates to logging employees, and involves a change in present section 13(a) (15) of the act.
This change has a different history. There was a change made in the act in 1949, an exemption added, the result of which was to exempt logging operations involving 12 or fewer employees. The proposal in H.R. 9824 is to remove that exemption.
There have been developments in the industry, with the introduction of new equipment of one kind or another, which have had the effect, in our judgment, of taking out from under the coverage of the act large numbers that it was intended would be covered.
And so the proposal is to remove that exemption and apply the act to the logging industry without reference to the exemption of 12 or fewer. This would extend the coverage of the act to some 87,000 additional workers.
The fourth area affected here is the farm processing area, where there is a still different legislative pattern. It is one of an increasing degree of confusion and complexity in the administration of three provisions of the act as they presently stand.
It is very hard to apply section 7(b) (3), section 7(c), and section 13(a) (10) of the present act consistently without a resultant complication, which we think should be avoided.
Illustratively, under the act as it now stands, there are situations which can scarcely be distinguished from each other, and yet in some of them there will be a provision for a 14-week exception, in effect, unlimited, and in another a 14-week exception in which 56 hours may be worked during the week.
Summarizing the proposal, it is that sections 13(a) (10) and 7(c) be eliminated, and that section 7(b) (3) be revised in such a way as to clarify the extent of the farm processing exception.
The net result will be to provide 124,000 employees with minimum wage and overtime protection, and then an additional 584,00 employees will be given greater overtime protection than they now have.
The four groups to which I have referred so far are groups with respect to most of whom it is proposed to extend the minimum wage protection. There remains a fifth and final group, with respect to whom the proposal is to adjust the act so that the employees affected will be covered by the overtime provisions, but with no change as far as the minimum wage is concerned.
This is a group which may be referred to or identified in general terms as transportation workers. It includes a number who are in industries subject to the various transportation acts which we have on the books today.
In effect, what this does is to apply the overtime provisions to employees on railroads, airlines, and so on and so forth, that are not part of the actual transportation. Those we think should not be excepted but presently are. And I also should include those that are subject to the Motor Carrier Act.
Then there is another group here identified as the filling station employees or gasoline service station employees.
We feel quite strongly that of all the groups in the country, one which by every measure we know should be covered by the overtime provision is the filling station employees.