when the money for wage floors flows from the Federal Treasury no less than when it is squeezed from the meager profits of a marginal

business.

Actually, these bills mean that we can be sure that the Federal Government acts justly in this area. I think President Kennedy made a step ahead in 1961, when he talked about the counterparts of the workers in the Federal service who receive the minimum wage. He said:

There is no justification that private employees indirectly working for the Federal Government should be paid less than the Federal Fair Labor Standards Act provides.

And I urge, therefore, that the committee favorably consider adding language to any service contract act that it recommends which would assure that employees on any Government service contract, irrespective of the contract amount, receive at least the minimum wage rate specified for employees covered under the Fair Labor Standards Act. Wage-rate information which may be identified with Government service contracts is not available, but the Bureau of Labor Statistics surveys of average earnings in selected areas do have and give us an insight to the extremely depressed wage levels paid by many of the contractors. In 1961, in cleaning services, less than a dollar and five cents an hour was paid to production workers in many areas. In Atlanta 74 percent of all production workers received less than this amount. In Dallas, the proportion was 65 percent, and in Baltimore, 45 percent.

In Atlanta, in 1963, average earnings of employees in laundry and cleaning services were 94 cents an hour. In Memphis, in 1963, 83 cents an hour, in Baltimore, $1.17 an hour.

Elevator operators in 1962 averaged 89 cents an hour in Atlanta, 79 cents an hour in Memphis, 94 cents in Miami, and $1.17 in Baltimore. Mr. THOMPSON. Would you repeat the Miami figure, please? Mrs. PETERSON. In Miami, it was 94 cents.

These bills would also direct an equalization in the income of the low-paid employees and the prevailing wage employees by requiring Government contractors to make provisions for fringe benefits. Many service contract employees do not belong to unions. They are one of the most disadvantaged segments of our people. These workers are among those whom President Johnson referred to in his state of the Union message as "living on the outskirts of hope."

These bills before you would bring Government service contractors into the circle of hope that other workers share. Since labor costs are the predominant factor in most service contracts, the odds on making a successful low bid for a contract are heavily stacked in favor of the contractor paying the lowest wage. Contractors who wish to maintain an enlightened wage policy may find it difficult, if not impossible, to compete for Government service contracts with those who pay wages to their employees at or below the subsistence level.

There is the possibility also that under the pressure of bid competition an ordinarily good contractor may reduce the wages of his employees in order to improve his chance of winning a Government contract bid. This action, of course, would further depress the wage rates when, as at present, a low-bid award policy on service contracts is coupled with a policy of no labor standards protection. The trend may well be in certain areas for wage rates to spiral downward.

Further, the quality of the work performed by the Government by exploited workers, may often be inferior. We all know that responsible work usually is accompanied by good morale. Certainly having service workers covered by these basic standards would mean a great deal. We don't have information at the present time on the number or dollar volume of service contracts which might be covered by these proposals. However, we believe that the economic and moral justification of labor standards protection for employees who are exploited through the medium of Federal funds is compelling without regard to the numbers involved. The fact that direct Federal contract expenditures will probably be increased does not argue against these bills.

The Federal Government can't afford to save money at the expense of those who are among the most unskilled, the weakest, and the poorest of our citizens. This result is directly contrary to one of our most frequently expressed ideals. Contributions to our Federal Treasury from the pockets of those living in the depths of poverty are too costly.

Further, the Federal Government can't develop the Nation's working resources to the fullest if it disregards the resources of any group of its workers. It can't effectively inspire responsible policies by labor and management if its procurement policies tend to promote in any way practices which it proscribes. The Federal Government should be a pace setter in labor standards, and these bills would enable it to fulfill this responsibility more adequately. (The statement referred to follows:)

STATEMENT OF ESTHER PETERSON, ASSISTANT SECRETARY OF LABOR

I welcome the opportunity to endorse the general objective of legislation providing labor standards for employees on Government services contracts.

The proposals before the committee would bring within the boundary of Government protection the one remaining substantial group of Federal contract employees who do not benefit from minimum wage determinations. They would also provide these employees with safety and health standards in their work. Under H.R. 6088, contractors would be required to pay wage rates not less than rates paid by the Federal contracting agency to its employees performing work, as the bill states, "of equivalent difficulty and responsibility"; under H.R. 1678, prevailing wages in the area, as determined by the Secretary of Labor. Under H.R. 6088, contractors would also be required to provide their employees with fringe benefits equivalent to those received by Government employees or pay their cash equivalent; under H.R. 1678, to pay the benefits prevailing in the area. Both bills require that contractors stipulate that their contracts will not be performed under unsafe or unsanitary working conditions within the contractor's control.

The Government now insists on minimum wage standards in private business under the FLSA, and prevailing wage standards in certain types of Government contracts. Wage protection has been given workers under the Davis-Bacon Act since 1931, under the Walsh-Healey Act since 1936, and the FLSA beginning in 1938. Yet, Government service contractors have complete freedom under their contracts to pay any wage rates for which they can obtain employees-no matter how low. The lack of protection for their employees is an obvious paradox. Like Janus, at the present time our Federal wage standards policy truly faces two different ways.

Our experience in administering these laws prove their need and effectiveness. The urgency for labor standards protection to cover other employees without adequate economic protections, is underlined by this experience.

The principle basic to the bills of requiring Government contracts to meet prescribed labor standards-is neither novel nor unique. Its rationale is simply that funds of the Federal Government shall not be used to finance contracts which undercut and depress the wage rate prevailing in a locality or upon which undesirable working conditions obtain. Contracts in this category are inevitably detrimental to the employees who are deprived of income; to competitive con

tractors who pay a fair wage; and to the economy as a whole which suffers from the reduced purchasing power of workers.

Positive provisions of law requiring labor standards are necessary, of course, because Government contracts must generally be awarded to the lowest responsible bidder. Labor standards may not be a factor in contract awards unless Congress so authorizes, as it has done in the Davis-Bacon and Walsh-Healey Acts. The Davis-Bacon Act and related laws require that employees on federally financed construction contracts be paid according to a predetermined wage rate schedule reflecting prevailing wage rates in project areas. Walsh-Healey provides comparable protections for employees on Federal supply contracts. That act also requires guarantees of safety and health standards. Under both laws, prevailing wage rates are examined to determine the standards which shall be applied on Federal contracts which come within their purview. The present proposals are analogous to the other Federal contract laws.

Like those laws, H.R. 1678 and H.R. 6088 would authorize the inclusion of labor standard obligations as a condition of contract award. The contracts affected would be service contracts, both negotiated and advertised, exceeding $10,000 under H.R. 1678, and $20,000 under H.R. 6088. Janitorial, custodial, cleaning services, and maintenance work, laundry, drycleaning, hauling, pest extermination, clothing and equipment repair are examples of service which are furnished under contracts to which these bills would apply.

The standards would be applicable to employees in jobs of the type for which wage rates under existing law are set by individual Government agency wage boards for its employees. These employees are, as you know, employees in trades, crafts or manual labor occupations, including supervisors, often referred to as "blue collar" workers, who are not subject to the classified grade rate under the Classification Act.

Some of the employees to which these bills would apply are entitled to the minimum wage of the Fair Labor Standards Act under the general test of employee coverage. While entitled to the minimum wage, many of these workers, however, receive much lower wage rates than those paid in their locality for comparable work. This condition these bills are designed to correct. They would lift the wage rates for workers indirectly performing work for the Government from a basement to a sidewalk level.

Other employees who would be beneficiaries of these bills are in the even sadder plight of being without any minimum wage protection. For example, laundry workers performing work for some Federal agencies are not protected by the Fair Labor Standards Act.

State laws do not afford an adequate degree of protection. Seventeen States have no minimum wage laws. Where they do exist the coverage is fragmentary. In the present state of the law, therefore, employees in the notoriously low paying services industries are subject to old fashioned sweatshop conditions when the money for their wages flows from the Federal Treasury no less than when it is squeezed from the meager profits of a marginal business.

The counterparts of these workers in Federal service, blue collar workers, are assured through a directive issued by President Kennedy in 1961 that their wage rates shall be at least the minimum specified under the Fair Labor Standards Act. There is no justification that private employees, indirectly working for the Federal Government, should be paid less. I urge, therefore, that the committee favorably consider adding language to any Service Contracts Act that it recommends which would assure that employees on any Government service contract, irrespective of the contract amount, receive at least the minimum wage rate specified for employees covered by the FLSA.

Wage rate information which may be identified with Government service contracts is not available. Through BLS surveys of average earnings in selected areas we do, however, gain insight into the extremely depressed level of wages paid by some of these contractors.

In contract cleaning services in 1961, less than $1.05 an hour was paid to production workers in many areas. In Atlanta, 74 percent of all production workers received less than this amount; in Dallas, the proportion was 65 percent; and in Baltimore 45 percent.

In Atlanta in 1963, average earnings of employees in laundry and cleaning services were $0.94 an hour; in Memphis $0.83 an hour; in Baltimore $1.17 an hour.

Elevator operators in 1962 averaged $0.89 an hour in Atlanta; $0.79 in Memphis; $0.94 in Miami; and $1.17 in Baltimore.

These bills would also direct an equalization in the income of the low-paid employee and the prevailing wage employee by requiring Government contractors to make provision for fringe benefits.

Many service contract employees do not belong to unions. They are one of the most disadvantaged segments of our people. These workers are among those whom President Johnson referred to in his state of the Union message as living on the "outskirts of hope." These bills before you would bring Government service contractors into the circle of hope other workers share.

Since labor costs are the predominant factor in most service contracts, the odds on making a successful low bid for a contract are heavily stacked in favor of the contractor paying the lowest wage. Contractors who wish to maintain an enlightened wage policy may find it difficult—if not impossible to compete for Government service contracts with those who pay wages to their employees at or below the subsistence level.

There is the possibility also that under the pressure of bid competition an ordinarily fair contractor may reduce the wages of employees in order to improve the chances that his bid will be accepted by the Federal Government. This action, of course, would further depress wage rates. When, as at present, a low bid award policy on service contracts is coupled with a policy of no labor standards protection, the trend may well be in certain areas for wage rates to spiral downward.

Further, the quality of the work performed for the Government by exploited workers often may be inferior. Responsible work usually is accompanied by good morale an attitude which cannot be expected from workers living at a bare subsistence level.

We do not have information at the present time on the number or dollar volume of service contracts which might be covered by these proposals. However, we believe that the economic and moral justification of labor standards protection for employees who are exploited through the medium of Federal funds is compelling, without regard to the numbers involved.

The fact that direct Federal contract expenditures will probably be increased does not argue against these bills. The Federal Government cannot afford to save money at the expense of those who are among the most unskilled, the weakest and the poorest of our citizens. This result is directly contrary to one of our most frequently expressed ideals. Contributions to our Treasury from the pockets of those living in the depths of poverty are too costly.

Further, the Federal Government cannot develop the Nation's working resources to the fullest if it disregards the resources of any group of its workers. It cannot effectively inspire responsible policies by labor and management if its procurement policies tend to promote in any way practices which it proscribes. The Federal Government should be a pace setter in labor standards. These bills would enable it to fulfill this responsibility more adequately.

Mr. O'HARA. Thank you, Mrs. Peterson. I appreciate your endorsement of the principle of these bills.

I noted, in your testimony, in your prepared statement--which without objection will be printed at the close of your testimony

Mrs. PETERSON. Please.

Mr. O'HARA (continuing). You indicate that in contract cleaning services in 1961, less than a dollar and five cents an hour was paid to production workers in many areas, and throughout the remainder of that paragraph, reference is made to production workers. In order to clarify any misunderstanding that might arise, would you likewell

Mrs. PETERSON. Well, I think this is to distinguish between executive and clerical. I am glad you called that to our attention. Those who are doing the work.

Mr. O'HARA. That is what I assumed, and I just wanted to make sure that the record is clear.

Mrs. PETERSON. Thank you; yes, that clarifies it.

Mr. O'HARA. Finally, one further comment on your testimony. This bill, or either of these bills, has rather limited objectives, in that in areas where the prevailing wages are lower than perhaps we might want it to be, this would not require that contractors pay any more than the prevailing wage, aside from the Executive order issued by President Kennedy in 1961, which you have referred to, if the prevail

ing wage were below the requirements of the Fair Labor Standards Act?

Mrs. PETERSON. That is true.

Mr. O'HARA. I merely say this to emphasize the fact this is in no sense a replacement for other legislation which I understand we will be receiving shortly which will remove some of the exemption areas under the Fair Labor Standards Act.

Mrs. PETERSON. That is a correct interpretation.

Mr. O'HARA. And I want to make sure, make clear that that necessity for that kind of legislation will be no less because of passage of this legislation.

Mrs. PETERSON. I would think not. The one supplements the other and supports the other.

Mr. O'HARA. Well, I appreciate having had your support, especially because I believe that you are so effective, and I know that having your support means a chance of getting this bill passed a lot better, and thank you again for appearing.

Mr. Thompson?

Mr. THOMPSON. Mr. O'Hara, isn't he wonderful? He leaves you speechless. He is the embodiment of the carnival man, but I happen to agree with him.

Mrs. PETERSON. I can interpret that a number of ways, you know. Mr. THOMPSON. This is very conservative legislation, as he took such pains to point out.

Mrs. PETERSON. I think it is, yes.

Mr. THOMPSON. And I am glad to see him moving in that direction. I will do whatever I can to support him.

Thank you very much, Mrs. Peterson, for coming in. It is always wonderful to see you.

Mrs. PETERSON. Thank you. I like coming up.

Mr. O'HARA. Hurry back and keep the price of bread down.

The meeting of the subcommitee will now recess at the call of the Chair.

(The Executive order referred to follows:)

THE WHITE HOUSE, Washington, June 22, 1961.

Memorandum for the heads of departments and agencies.
Subject: Minimum wages for Government employees.

In response to my urgent request, Congress has recently enacted legislation to raise minimum wages which must be paid by private employers in interstate commerce. Although this legislation specifically exempts the Federal Government as an employer, I believe that the social and economic reasons underlying this congressional action are equally compelling and applicable to wage earners employed by Federal departments and agencies.

In my view it is both desirable and in the public interest to establish the same minimum rates of $1.15 an hour, effective September 3, 1961, and $1.25 an hour, effective September 3, 1963, for all regular Federal employees paid from appropriated funds. I want to make clear these minimum rates should apply to Federal laundry workers, even though such workers in private employment are specifically exempted by the law.

These new minimum rates should be applied to Federal employees in the United States not later than the effective dates specified in the legislation. It is my wish that the head of each department and agency review this matter promptly and take appropriate action unless clearly prevented from doing so by law.

JOHN F. KENNEDY.

(Whereupon, at 11:17 a.m., the subcommittee adjourned subject to call of the Chair.)