ARDS AC! section V brings together some historically significant material which is now difficult to find. The third point discussed under each industry classification in section II compares the wage structure before and after enactment of a specific minimum-wage rate. It shows various, in some cases considerable, increase in average hourly earnings and corresponding upward movements of workers who were below the minimum at the effective date of the change. In southern sawmilling, for example, 69 percent of the workers were below the 75-cent minimum in 1950. The fourth and the fifth points under each industry classification in section II deal with the direct and the indirect effects of increased minimums. The data are not strictly comparable because they refer to different periods of time elapsing after changes in minimum wages. However, they allow the following general conclusions: (1) The immediate effect of statutory minimum wages is a narrowing of differentials and a concentration of workers who were below the minimum at or near the new statutory wage. (2) A certain amount of pressure arises immediately to maintain previously existing differentials. Some adjustments above the minimum may become imperative. (3) The indirect effects, however, are relatively small unless an economic situation arises which allows wage rates above the minimum to be increased. (4) Over a number of years, basic forces determining the wage pattern in American industry-forces not related to minimum-wage legislation-seem to have a tendency to restore old differentials. These findings suggest that indirect increases have to be considered in assessing the possible impact of an increase in the minimum wage. Point 6 in section II and section IV show the effects on employment, while point 7 in section II and section III concentrate on technological change and other factors determining man-hour productivity. These two points and sections are among the most important parts in appendix II. It is best to read them in conjunction with the points summarizing plant mortality and changes in certain managerial practices (points 10 and 11). The 1938-41 experience shows a net increase in employment, a result which is due to the increase of employment in the cotton-goods industry. The latter more than balanced a slight decline of employment in seamless hosiery. However, the trend is not too clear. The accesssion rate seems to have been higher, than the mortality rate of business establishments for the period 1938-40. The following generalizations, however, are well established-and confirmed by later experience: (1) There is a tendency for displacement of individual workers. In some cases the rate of separation has been higher for low paid than for higher paid workers and for older than for younger workers. (2) Though we do not have enough information to state that the rate of introduction of technological improvements increased substantially, the minimum wage resulted in considerable technological improvements and changes in management's policy which increased productivity, (3) the net curtailment of employment opportunities was small even if we consider only the sections of the industry which were hardest hit. (See interesting case history of workers in 27 cotton garment plants summarized in section II under "Men's cotton garment industry.") The 1950 experience which has been explored more systematically than the 1938-41 experience further supports the three major generalizations just made. Table 26 gives estimates of the maximum unemployment at least partially caused by the 75-cent minimum in 1950. It shows that the wage adjustments made at that time may have adversely affected up to 10,400 workers. But only a fraction of that small number could be attributed to difficulties of marginal firms. In southern sawmilling, for example, the decline was partially due to seasonal factors and to bad logging weather. Such factors must have played a role because the lowest wage regions showed a decline smaller than the industry average. The same is true of the fertilizer industry. In hand mandas turing of cigars, the mechanization process was definitely speeded up. An u closed number of the dismissed workers was certified as handicapped and re The decline of employment in oyster canning is due to a combination of f factors: (1) canning has been exempt prior to 1949; (2) it involves mainly hard labor; (3) in the 3 years immediately preceding the enactment of the minim wage, the number of canneries had increased from 32 to 52 because of the post boom; (4) however, sales and prices were falling when the 75-cent minimum wer into effect. Most people who read the detailed story of the 41 establishme with adjustment problems will agree with the conclusions drawn by the Wa and Hour Administration: "The experience of the establishments studied represents cases of major unfawr. able adjustments and are believed not to be typical of subject industries geners! *** even within as selected a group of firms as those surveyed, however, th adverse consequences of the 75-cent requirement were on the whole not very substantial." 5 TABLE 26.—Estimates of maximum unemployment at least partially caused 75-cent minimum in 1950 [Data based on survey of the low-wage industries listed below and of all adjustment problems reported t the Wage and Hour Division] Southern sawmills. Fertilizer.. Men's seamless hosiery, only seasonal. Wood furniture, no decline. Men's dress shirts and nightwear, no decline. Hand manufacture of cigars. Oyster canning__ Raw sugar, Louisiana, no exact data; "some jobs eliminated." 41 specific establishments with adjustment problems. Employees... Number of emplo 4,000 1,400 500-1.000 1,000 2,000-3,000 8,900-10, 400 Out of 21 million employees covered by the act and out of 1.3 million employees who received increases as a result of the 75-cent minimum. Data from Wage and Hour Division study, Results of the Minimum-Wage Increase of 1950. The total employment effect directly attributable to an increase of the minimum wage to 75 cents in 1950 was certainly smaller than the 8,900 to 10,400 workers listed in table 24. A summary of the effect of a minimum wage in dry-cleaning and dyeing industries in Ohio may well be used as a general comment on the employment effect of minimum wages all over the country: While the application of minimum-wage orders in service industries may serve as the immediate occasion for dismissal of a relatively few employees by some firms, the more deep-seated cause of such dismissal usually is found to be a gend ally bad business situation in the particular establishment that had required adjustment even before there were minimum-wage orders." Numerically even the 10,400 figure amounts to a decline in employment of le than 1 percent of the number of workers whose wages were adjusted because the hourly rate was below 75 cents in 1950. This percentage would be smaller if result of minimum wage legislation. And it is in the neighborhood of one-twentieth of 1 percent if based on the total number of workers who are effectively cov ered by minimum wage legislation. Point 8 and under section II summarize the available information on price changes, demand and profits, industry by industry. During 1938-41 there were slight increases in wholesale prices, but no general increases in retail prices. In 1950 the price level was, on the whole, stable up to the outbreak of the Korean war in June of 1950. The general qualifications applicable to the surveys as presented in point 12 of section II may be summarized as follows: (1) It is difficult to isolate one factor-the impact of the minimum wage-in a con3 Department of Labor, Wage and Hour and Public Contracts Division, Results of the Minimum Wage Increase of 1950, p. 15. U. S. Department of Labor, Bulletin of the Women's Bureau, No. 166, The Effect of Minimum-Wage Determinations in Service Industries, p. 5. stantly changing, dynamic economy. (2) The defense and war economy of the forties and the Korean war in 1950 had a significant impact on the economy. In both cases it was therefore not possible to follow the long-run impact of minimum wages. SECTION II EFFECTS OF MINIMUM WAGE LEGISLATION ON SELECTED INDUSTRIES I. Dry cleaning and dyeing industry; Ohio as compared with Indiana 1. Time period: Wage order Ohio, January 1935: 35 cents an hour; Indiana, no minimum wage. 2. Number of employees involved: Ohio, about 300 establishments, over 3,000 employees, about 60 percent women; Indiana, about 200 establishments, over 1,000 employees, over 50 percent women. 3. Wages before and after enactment of minimum-wage legislation: Almost one-half of the women workers earned less than 35 cents. Source: U. S. Department of Labor, Bulletin of the Women's Bureau No. 166, p. 34. 4. Direct increase in wages: No change in proportion wages formed of receipts. 5. Indirect increase in wages: Employees in the higher brackets received increases after a considerable time lag. 1935-37: 30 percent increase in earnings over 40 cents an hour. Total payroll increased 36 percent from 1934-37. 6. Employment: Number of employees incres ed by 11 percent in Ohio as compared to 24 percent in Indiana. Proportion of women employed did not change. Hours worked in Ohio shorter than in Indiana. 7. Technological change and productivity per man-hour: Improvement in operating and managerial efficiency. Fundamental changes in industrial cleaning process started before enactment of minimum wages. Trend in laborsaving equipment speeded up. 8. Demand and prices: Increase in dollar sales, 1934-37: 40 percent. 9. Profits: No figures. 10. Plant mortality: No figures. 11. Others: No figures. 12. General qualifications: Fundamental equipment and commercial readjustments were occurring in industry. II. Seamless hosiery 1. Time period: 1938-40; wage order, September 1939: 321⁄2 cents. 2. Number of employees involved: Approximately 62,000. 1939: 75.6 percent of average number of workers were in the South. 1940: 65.4 percent of total production was in North Carolina, Tennessee, and Georgia. 75 percent of working force female. 3. Wages before and after enactment of minimum-wage legislation: 1938 (1st 8 months). 1939 (1st 8 months). 1940 (1st 8 months). Average hourly earnings (cents) 37. 2 38.6 42. 4 NDARDS ACT lants accertia ustry, 1985-8 Employment displacement relatively greater in low-wage plants (particularly in the South). 1938-40: 15 percent decline in number of knitters. 7. Productivity per man-hour: Increase in the use of automatic machines and of transfer machines with elastic-top attachments. Rate of introduction "probably accelerated." Managerial performance stimulated. "Marvelous improvement in lighting.' 8. Demand prices: Wholesale price trend upward at time of wage order, yarn prices upward, price adjustment "moderate in nature." Maximum increases: 6.2 percent. No general increase in retail prices in the year following the effective date of wage order. 9. Profits: No figures. 10. Plant mortality: "Of the 97 plants surveyed in 1938, the Bureau found that 6 had gone out of business by 1940. These 6 plants had employed a total of 402 workers in 1938. Thus, 6.1 percent of the plants, employing 2.2 percent of the workers, had left the industry as represented by the plants that comprised the 1938 sample. This represents an annual plant mortality rate of about 3 percent, which is in no sense exceptional. As shown earlier more than 5 percent of the plants went out of business each year during the period 1937-38, and it was not until the very end of this period that the 25-cent statutory minimum went into effect. "Of the six plants that went out of business between 1938 and 1940, 2 were located in the North and 4 in the South. Relatively high average wages were being paid in two of these plants in 1938, and average earnings in the largest plant to leave the field were over 321⁄2 cents. "The rate at which new plants entered the industry is not definitely known for this period. It is known, however, that between May 1938 and January 1940 there was a net increase of 18, 9 in the North and 9 in the South. It thus appears that the accession rate exceeded the mortality rate, and that, despite the wage order, new enterprisers believed the industry continued to offer attractive opportunities." 1 11. Others: Some firms have introduced training of employees in connection with vocational schools. Elimination of most inefficient operators or transfer to other jobs, certification of handicapped workers, general improvement in employment technique. 1 Annual report, 1941, p. 21. |